You know you're in a bubble when....

[cho oyu]

Quote:

Originally Posted by achiral I challenge you to provide any statistical or widespread information (anecdotal information is NOT valid) that suggests housing prices in the overall bay area have increased year-over-year.

Quote:

Originally Posted by honobob 366 Lovell Ave (Mill Valley): closed on 8/09/07 for $4,500,000 (2.4% over asking) ∙ 220 Danvers: closed escrow on 8/08/07 for $2,050,000 (3.5% over asking) ∙ 7 Cameo Way: closed escrow on 8/22/07 for $1,550,000 (3.7% over asking) ∙ 801 Teresita Boulevard: closed escrow on 8/29/07 for $950,000 (6.1% over asking) ∙ 741 Noe: closed escrow on 8/20/07 for $1,057,000 (6.9% over asking) ∙ 610 Rhode Island: closed escrow on 8/30/07 for $2,551,000 (10.9% over asking)

:confused:

an·ec·do·tal /ˈænɪkˌdoʊtl, ˌænɪkˈdoʊtl/ Pronunciation Key - Show Spelled Pronunciation[an-ik-doht-l, an-ik-doht-l] Pronunciation Key - Show IPA Pronunciation –adjective
3.based on personal observation, case study reports, or random investigations rather than systematic scientific evaluation: anecdotal evidence.

sta·tis·tics /stəˈtɪstɪks/ Pronunciation Key - Show Spelled Pronunciation[stuh-tis-tiks] Pronunciation Key - Show IPA Pronunciation –noun 1.(used with a singular verb) the science that deals with the collection, classification, analysis, and interpretation of numerical facts or data, and that, by use of mathematical theories of probability, imposes order and regularity on aggregates of more or less disparate elements.

[honobob]

Real estate in the SF Bay Area seems to be holding up.

Sales are down but prices are steady or up slightly from a year ago. According to Zillow my house is up about $20k in the last year. Nearby sales support that.

Some houses (maybe 25% or so) are still selling for more than the asking price. As an example according to some marketing info from one of the local agents a 1450 sq ft., 3bd, 2bath house recently listed for $712k and sold for $792k.

MB

[honobob]

San Francisco sale and resale of condominiums

I posted this on 6/25/2007 the above post was made by MB on the same date.


Purchased Resold

5/05 $820K 9/06 $940K +$120K
3/05 $613.5K 10/06 $750K +$136.5
5/05 $765K 12/06 $870K +105K
5/05 $785K 2/07 $880K +95K

These are the resales that I looked up a couple of months ago. The market here and in Honolulu is still very HOT! Not a bad return for buying in 05 when many here were predicting the end of appreciation in California.

Doesn't look very good for anyone that sold in 05 and didn't reinvest. Of course, to many this will support bailing now fer sure! I've had 21 years of 11% yearly appreciation on my purchase price in Ca and 9% in Honolulu for 29 years.

[haha]

You have had great results. Congratulations!

Ha

[honobob]

Quote:

Originally Posted by haha You have had great results. Congratulations! Ha

If that was meant for me then thanks Ha. But I'm not trying to prove I'm a captain of industry with rapier business wit. I much prefer being known for my stunning handsome good looks and sculpted body. I'm just trying to point out that anyone/anytime/maybe not anywhere can do quite well in real estate with a little business sense. And you can't base your decisions on what everyone else is saying and old business cliches. Nothing wrong with listening to both sides but you can't come into the argument with your mind made up.

It's too good a day to be inside. I'm taking the dogs for a walk. Everybody have a great day!!

[Martha]

Quote:

Originally Posted by honobob 366 Lovell Ave (Mill Valley): closed on 8/09/07 for $4,500,000 (2.4% over asking) ∙ 220 Danvers: closed escrow on 8/08/07 for $2,050,000 (3.5% over asking) ∙ 7 Cameo Way: closed escrow on 8/22/07 for $1,550,000 (3.7% over asking) ∙ 801 Teresita Boulevard: closed escrow on 8/29/07 for $950,000 (6.1% over asking) ∙ 741 Noe: closed escrow on 8/20/07 for $1,057,000 (6.9% over asking) ∙ 610 Rhode Island: closed escrow on 8/30/07 for $2,551,000 (10.9% over asking)

These results are consistent with the info in this article: Home prices rise in July even as sales fall to 12-year low

The protracted waiting game between home buyers and sellers continued in July, as Bay Area real estate sales slowed to a 12-year low while prices edged up, according to a report released on Wednesday.
A total of 4,990 existing single-family homes changed hands in the nine-county Bay Area in July, according to DataQuick Information Systems of La Jolla (San Diego County). That was down 13 percent from 5,721 home sales in July 2006.
The median price was $738,500, up 7 percent from $688,955 a year ago.
The median rose because a greater proportion of expensive homes were sold, said Andrew LePage, an analyst at DataQuick. Tighter lending standards after the subprime loan debacle have knocked many entry-level buyers out of the market because they lack down payments, good credit or solid income proof. "If you yank out a bunch of low-cost sales, then guess what happens to the median?" he said.
"The higher you go up the price ladder, the more stable (the market) appears, with the big caveat that things could change, even if temporarily, in August because of the credit crunch," LePage said


Micromarkets may stay stable or increase, but as a whole there is a popped or popping bubble. And everybody but bob knows it.

[Spanky]

That's great house (366 Lovell Ave -- Mill Valley) with a beautiful view. I can never afford to live in SF. It's simply too expensive. Price of homes in SF may return to a more reasonable level if mortgage rate escalates or income level falls. It seems that people in the Bay Area are still making above average salary and thus afford the exorbitant cost of housing. Someday this may change.

[twaddle]

Quote:

Originally Posted by Spanky That's great house (366 Lovell Ave -- Mill Valley) with a beautiful view. I can never afford to live in SF. It's simply too expensive. Price of homes in SF may return to a more reasonable level if mortgage rate escalates or income level falls. It seems that people in the Bay Area are still making above average salary and thus afford the exorbitant cost of housing. Someday this may change.

At $4.5M, I suspect mortgage rates aren't much of a factor. The house is nice, but it's just a house. For $4.5M, I want the Taj Mahal. I don't care if the money came from a Google options windfall -- that value proposition still seems criminally insane to me.

[Nords]

Quote:

Originally Posted by twaddle For $4.5M, I want the Taj Mahal. I don't care if the money came from a Google options windfall -- that value proposition still seems criminally insane to me.

When we bought our dream house (June 2000) our offer was accepted the day before the realtor listed it on a website. By the end of the week we had to vacate all our contingencies to keep the deal. In retrospect that was the year that Hawaii real estate bottomed out and started screaming back up.

I think an awful lot of Silicon Valley options were converted into Hawaii real estate between 2000-2002. I still see a lot of SV names around here, especially on Maui & Kauai. I'd have a hard time evaluating the value of Google options until they'd been exercised, the stock sold, and the taxes paid.

Of course we could always use the "Ken Lay method": borrow against the company stock and pay back the margin calls with more of it...

[honobob]

Quote:

Originally Posted by Martha Micromarkets may stay stable or increase, but as a whole there is a popped or popping bubble. And everybody but bob knows it.

Martha, Maybe only me, MB and the buyers of some 180,000 homes in the last 36 months of said bubble (5000 X 36mo.) You seem to ignore the resale properties that I've posted twice. If it makes you feel better that there is a bubble popping 2,000 miles away from you then fine, POP. Feel better? Equity envy, the new road rage?

[laurence]

Quote:

Originally Posted by honobob Martha, Maybe only me, MB and the buyers of some 180,000 homes in the last 36 months of said bubble (5000 X 36mo.) You seem to ignore the resale properties that I've posted twice. If it makes you feel better that there is a bubble popping 2,000 miles away from you then fine, POP. Feel better? Equity envy, the new road rage?

Shouting "11% gains over 20 years!" 10 times - the new male compensation? I think I liked the red sports car better! Maybe you'd get a better reception if you tried a little less smarmy in your face patronizing and sarcasm. I've never noticed this board to be a place for pissing contests, I don't know why your trying. Even your attempt to goad me with your "sorry about your loss plus carrying cost and inflation...." was laughable, my house is my home D00D, it's where my kids grow up, I'm not a speculator like yourself.

Frankly, I'm having trouble figuring out what you are selling. If you want to make the statement that people can profit in a difficult market - fine, totally believable. But right now you are coming across like a late night infomercial telling seniors to cash out their pensions for real estate! Or GOLD! GOLD! GOLD! Follow the green arrows and you can't lose!

I'm also curious as to why you are still at it. If you've made such major moolah for 20 years+, why not cash out and retire? I mean, this is an early retirement board.

Tone down the retorhic and qualify your statements. Nobody here is closed to a new good idea. How do you go about finding gems that are selling for below market value then turn around and sell them for an vast increase over the average?

[honobob]

Quote:

Originally Posted by laurencewill Meanwhile, we poor simpletons are seeing our neighbors sell their houses for 10%+ less than what they were selling for a year ago, both in San Diego and in San Fran (friends there).

Umm....still can't find support for that statement? Maybe just put me on your ignore list. Although from your last post it seems that you really haven't read and/or comprehended my posts anyway. I've always said I buy at market and hold. Tons of people have done the same with the exact same results or better. Guess that makes us all Captains of Industry. Clever of you to try to lump me in with infomercials/seniors/pensions/gold. I'm surprised you didn't blab that I cavort with known homo sapiens, although you did get in the little red corvette image.

You seem so quick to accept the bad news without question and challenge any positive information or ideas. Does that help you accept your own failures or limited way of thinking? Unfortunately your behavior is not uncommon here when there is any challenge to the group think. Weren't you on the OAP and Andy H welcoming committee? My reception is fine, your's seems a little fuzzy.

I state facts and my opinion and am willing to provide support. You resort to attacks and name calling.

[laurence]

Quote:

Originally Posted by honobob Umm....still can't find support for that statement? Maybe just put me on your ignore list. Although from your last post it seems that you really haven't read and/or comprehended my posts anyway. I've always said I buy at market and hold. Tons of people have done the same with the exact same results or better. Guess that makes us all Captains of Industry. Clever of you to try to lump me in with infomercials/seniors/pensions/gold. I'm surprised you didn't blab that I cavort with known homo sapiens, although you did get in the little red corvette image. You seem so quick to accept the bad news without question and challenge any positive information or ideas. Does that help you accept your own failures or limited way of thinking? Unfortunately your behavior is not uncommon here when there is any challenge to the group think. Weren't you on the OAP and Andy H welcoming committee? My reception is fine, your's seems a little fuzzy. I state facts and my opinion and am willing to provide support. You resort to attacks and name calling.

Funny, my coworkers like to call me bubble boy for being too optimistic about the economy. I have friends that think I'm both too conservative and too liberal. I feel pretty comfortable with that.

So you say you are a buy and hold on real estate. No problem with that. I'm holding my home as well, long term real estate is a winner, no doubt. In fact, hey, despite the recent non-correction, I'm still up 11% per annum over the last six years on my house.

As far as failings, I've got plenty, but they've got nothing to do with my path to FIRE. Fortunately, DW still likes me the way I am.

Good luck with your real estate ventures, I really do hope you make a boatload. I'm just pointing out that your posts come off abrasive, and you seem blind to that though able to pick up on the same in responses to yours.

[Nords]

Based on her observations, spouse is working on a few new real-estate-bubble indicators.

Last year the HGTV shows like "My House Is Worth What?!?", "House Hunters", and the "sell my house" bunch were all filled with "Woo hoo!" or "Better put in that offer before it's too late". Today the shows are loaded with phrases like "Well, it's not as much as you'd expect" and "It's been on the market for a few months". There are so many abandoned homes in Hemet, CA that the town is paying an exterminator to treat the swimming pools for mosquito larvae (West Nile fears).

Certain parts of the real estate market are too crowded with amateurs. Remember "Flip This House" with Richard Davis & Trademark Properties? Now his group has moved over to "The Real Estate Pros" (while FTH continues with others). They've all elevated their drama level to talk about how many more candidate homes are out there but how challenging it is to outbid their rivals and turn the homes around before the market drops even further.

One of the best TV indicators of an overheated real estate market is a new show called "Property Ladder"... almost as entertaining a train wreck as the whackos on "Bite Buy Me". The hostess finds house-flippers who shouldn't even have graduated from high-school math class, let alone tweak Excel spreadsheets or apply for mortgages or buy distressed properties. They make the most unrealistic assumptions, have the worst social & handyman skills, and display zero ability at time management. Each show ends in disarray & despair and I'm not sure that any of them have actually even flipped a house yet. I can't decide which ones are my favorite losers-- the guy who budgeted $300 for an entire kitchen of cabinets, the guy who set his prices & rehab schedules using both feng shui AND numerology, or their spouses & partners.

Finally there's the "garage sale indicator". Last year's sales were hosted by sellers with attitudes like "Just take it with you 'cause we don't want to!" and "We're movin' on up... to the east side!" (Kahala). They were more interested in clearing out their appliances because they were going to buy entire new stainless-steel matching sets for their shiny new kitchens.

Today's attitude is more about the money. The sellers aren't happy about moving, there's not as much quality or selection, and the negotiations aren't very rewarding... almost as if these people are having trouble with their variable-rate mortgages, need the money, and are moving back in with the folks.

[Caroline]

FWIW...

I sold my No. Cal. tract house (4/2 SF) in late May for $400. It's located 40 non-rush-hour minutes from San Francisco. The top comparable sold in 2006 for $456.

That doesn't take into account my house being in tip-top shape with new everything and a clear pest report.

There are a lot of very similar houses for sale in that neighborhood -- some folks are still asking for something closer to the $450 number. They've been asking for 9-12 months now...

[tryan]

Nords, good post.

Quote:

Remember "Flip This House" with Richard Davis & Trademark Properties?

Was always tempted to follow-up (via on-line registry of deeds) to see if his finished work sold anywhere near the "projected sale price". Always noted: realtor fees, closing costs and taxes are mysteriously missing from the "math" used to show the "projected profit". At a minimum, short term capitol gains at the federal level are a killer ... then there's state taxes (which might also deter a short term sale).

[Nords]

Quote:

Originally Posted by tryan Was always tempted to follow-up (via on-line registry of deeds) to see if his finished work sold anywhere near the "projected sale price". Always noted: realtor fees, closing costs and taxes are mysteriously missing from the "math" used to show the "projected profit". At a minimum, short term capitol gains at the federal level are a killer ... then there's state taxes (which might also deter a short term sale).

I think he'd actually come off pretty good from a "Whatever Happened..." episode. (Unlike the recent frantic manipulation of the "Biggest Loser" alumni or Dr. Phil's reviews.) For starters, Trademark is a corporation and not a self-employed business so he probably has a much more favorable tax structure. Next, he rolls all those costs into the flip total (which I agree is frustrating) and I'm sure those guys are bartering each other to death.

He bought one foreclosure where the former owner wouldn't move out. They bribed him into a hotel, hauled out dumpsters of trash, garbage, & pet waste, and rehabbed the home but he let himself be conned into keeping the former owner as a tenant. A year later, of course, the scamster had paid zero rent and Davis spent an entire episode kicking himself in the assets while they evicted the guy, rehabbed the home all over again, and sold it.

Davis has said many times that he flips as fast as he can and leaves money on the table. He's minimizing his carrying costs and he's giving the buyer a large equity incentive by selling at a below-market price. He's also counting on being an early investor-- if he flips the first house in a bad neighborhood then he'll make more money from additional flips during the subsequent gentrification. The show probably helps their profits too.

Don't get me wrong, he reminds me a lot of Ted Turner from his "Mouth of the South" days. He's also way too deceptive on how he handles permits & fees. But he works very hard at his image and at maintaining good community relations, something that "professional" flippers (are there any besides him?) would do well to emulate. (At least Trademark can deduct it from their marketing budget.) Note how "Flip This House" was busted on their deceptive documentary tactics during the very next season after Trademark left the show.

The only routinely successful flipper I've read about, aside from all the hype and testosterone, was a woman who bought houses and lived in them while she was rehabbing them days, nights, & weekends. (She also worked a succession of real-estate and admin temp jobs.) She was able to keep rolling over her cap gains in the 1970s-1990s, and since 1997 she's been exploiting the tax-free cap gains deduction by staying in the homes for two years before selling. She had an entire chapter in her book about how to pick up and move every 18-36 months, and her son must've attended a dozen schools before graduation. OTOH he probably learned more at Mom's Trade Apprentice Hall than he ever picked up at school...

[haha]

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Originally Posted by Nords The only routinely successful flipper I've read about, aside from all the hype and testosterone, was a woman who bought houses and lived in them while she was rehabbing them days, nights, & weekends. (She also worked a succession of real-estate and admin temp jobs.) She was able to keep rolling over her cap gains in the 1970s-1990s, and since 1997 she's been exploiting the tax-free cap gains deduction by staying in the homes for two years before selling. She had an entire chapter in her book about how to pick up and move every 18-36 months, and her son must've attended a dozen schools before graduation. OTOH he probably learned more at Mom's Trade Apprentice Hall than he ever picked up at school...

Nords, could you give the name of the book? Or her name?

Thanks, ha

[Nords]

Quote:

Originally Posted by haha Nords, could you give the name of the book? Or her name?

I'm afraid that an hour later my best answer is "I wish I could". I read the book in the late '90s or early 2000s, before I started logging them, and I don't remember her as much as her method. Google & Amazon are absolutely no help for my current vague keywords.

Maybe a reader in the Bay Area can help out. IIRC she started in the late 1970s by moving into an unfinished home and finishing it in exchange for her rent or her down payment. She kept that up for the next 25 years by buying Bay Area homes in need of rehabbing and living in them while she did the work. She talked about figuring out how to set up a family space among all the renovations, sleeping on the diningroom table, how to get used to washing dishes in the bathtub while the kitchen was torn apart, and how to move every 18-36 months. I think she started doing this with her husband but later ended up divorced and raising her son in the various rehabbed homes they moved through.

What struck me about her method was:
- Very low carrying costs since the house was also her home.
- Able to get low down payments & very attractive rates since the mortgage was for a primary residence.
- Always onsite to keep an eye on the contractors and to work around the edges. She'd borrow their tools on Friday and have them ready for them on Monday.
- Never had to pay taxes because she always rolled profits up into a bigger home (especially Victorians).
- Fancied herself a designer who would create "stunning" rooms as part of the rehab. I remember we thought the rooms were indeed very striking but very hard to live in.
- Essentially moved every 18-36 months to various parts of the Bay Area.

The reason her book resonated so much with us was that we were also moving every 18-36 months for the Navy... her moving tips were every bit as good as her real-estate experience.

[eridanus]

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Originally Posted by honobob Justin That data is for the SF metropolitan area that probably includes 9 counties in the Bay Area. Some of these sales would be more that 2 hours from SF. It would also include alot of new home sales. I'm on record that subsequent sales in new developments are often lower than the first sales. I reccomend not buying in new developments.

Someone may have already posted this, but the Shiller data does NOT include new home sales. It's only for re-sales of existing housing.