Berkeley CSUA MOTD:Entry 36812
Berkeley CSUA MOTD
2022/01/20 [General] UID:1000 Activity:popular

2005/3/22-23 [Reference/RealEstate] UID:36812 Activity:high
3/22    Are you ready for the Bay Area housing crash?
           Good, I can't wait. I missed out while everyone around me is buying
           a second home or a vacation home in Arizona and all they can say
           is how stupid I am for not buying something.       -frugal saver
           \_ In some parts of the country the market has been stagnant.
              Likewise, when it is stagnant in the Bay Area it might be
              hot somewhere else. I personally would not buy right now,
              but it was certainly smart to have bought a few years back.
              When prices fall, what do I (as a homeowner) care?
           \_ Well you are and you aren't. It's like the dot com boom... you
              were right if you thought it was stupid... but you also missed
              out on the boom. Still unlikely to see a real drop in prices
              in bay area for a couple years I think, there's no recession
              here and tons of demand.
              here and tons of demand. But it does look a lot like 2000 in that
              a) prices seem ridiculous but keep rising, leading to b) ordinary
              people hyped up about house appreciation gains and speculating,
              just like every Joe was buying Cisco back in the day with no
              regard for investment principles.
              I look at the low interest rates like a money faucet the fed
              turned on, that seems to mostly go into housing because it's
              easy to do and touted as low risk. Ordinary folks don't normally
              buy a ton of stocks on margin etc., nor do they have the savvy
              to borrow to start successful businesses. So if the housing
              market is like a money balloon filled from low interest rates,
              the question is when it would deflate... I have the feeling that
              it won't really deflate here due to low housing supply. Then
              again a lot can happen in a couple years.
        \_ Rather than being like nweaver (maybe Sour Grapes Housing Guy
           is really nweaver), and pretending like predicting for 4 years
           that prices will at some point stop going up is clever, why don't
           you do something useful and tell us when the turn-around will
           happen, and how much it will drop?  Because home values are up
           probably 50% since you started posting this crap.  -tom
           \_ You want to start a crash pool?
              \_ No, I want Sour Grapes Housing Guy to give a real prediction,
                 rather than going on for the next N years about how a drop
                 in housing price is imminent, and then saying "see I told
                 you so!" after one happens, while ignoring the fact that
                 prices rose 100% during the time he was predicting a
                 crash.  -tom
                 \_ tom is just following the common strategy of Wall Street
                    stock analysts.
                   \_ You lead an impoverished life indeed.
                 \_ The Sour Grapes Housing Guy is just following the common
                    strategy of Wall Street stock analysts.
           \_ I would also like to know when the nadir will be reached so that
              I can buy at that moment. +/- a year is fine. Thanks!
              \_ Home prices will start to fall in Q4 of 2005 and reach
                 a nadir on Nov 17, 2007. -Swami the Magnificent
                 \_ Wow, well if you're right we'll give you respect and
                    accolades.  If you're wrong, I'll personally hire four
                    large white supremacists to come to your house and sodomize
                    you until you squeal like a pig.  Whaddya say?
                    \_ Swami the Magnificent is above your petty threats.
                       \_ Hey, if you're confident enough to bet your
                          prediction against being gang-sodomized by big angry
                          white supremacists, then I'm going out to buy some
                          popcorn for the show.
                          \_ I think Swami swings that way already.
        \_ has some interesting points, but much of it is ruined by the
           crackpot sensationalist exaggeration.  Many of the points are
           assuming the crash has already started/happened, which is blatantly
           \_ Yeah, he starts off ok but if you've looked at buying something
              lately you'll know prices are higher than ever. And he makes
              crazy statements like this: "under current conditions, a renter
              would be able to live in a house for 30 years, then buy that
              house outright with the saved principle payments, and have an
              extra $227,200 of savings on top of that".
              \_ I think he is correct. An average home in Noe Valley costs
                 $1M. You can rent the same house for ~$2800/mo. PITI on
                 a $1M house are ~$7k/mo, which if you are in the 40%
                 overall bracket come out to ~5800. This means you save
                 a $1M house are ~$7k/mo, which if you are in the 37%
                 overall bracket comes out to ~4800. This means you save
                 $2k/mo by renting. $2k/mo invested in 6% bond for 30
                 years has got to be worth over $1M. Let me do the math
                 and get back to you. -motd thought leader
                 Okay, it is more like pay off the $1M house and have $1M
                 left over. But this makes the unsupportable assumption
                 that the house will not appreciate in value in 30 years.
                 \_ Also the unsupportable assumption that your rent won't
                    go up in 30 years.  -tom
                    \_ Yeah, there are other varibles too, like the fact
                       that the mortgage deduction is worth less as you
                       pay off the loan. But I think those two probably
                       cancel each other out. SF has rent control, so
                       rents can't go up *that* much. -mtl
                             \-SF doesnt have that serious rent control
                               if you move in today.
                               \_ You are obviously not a landlord in SF.
                                  \_Yes the annual permitted rent increase
                                    may be small, but I think something like
                                    stuff built in the last 25 yrs is not
                                    covered. Some people are highly protected
                                    but overall, it's not as onerous as
                                    Berkeley or as it used to be.
                                  \_ Please kill yourself, fucker.
                       \_ What rent are you paying now compared to 15 or 30
                          years ago?  -tom
                          \_ 15 yrs ago, my family rented a 4br house in
                             Cupertino for $1k/mo.
                          \_ If I had gotten the maximum allowed annual rent
                             increase according to law, my rents would have
                             gone up 45% since 1989.
                             \_ but what if you had moved?  -tom
                 \_ In 30 years $1M is not a whole lot.  But the $1M house
                    could worth $10M n 30 years.
                    \_ At a very conservative 3% yearly appreciation rate,
                       the home is worth more than $2M. -mtl
                 \_ You'd have almost exactly $2M.
        \_ "Even a broken clock is right twice a day." Brilliant.
        \_ "It's a house. Wherever one lives is a home, be it apartment,
            condo, or house. Calling a house a 'home' is a manipulation of
            your emotions for profit. "  This guy probably never owned a house.
        \_ "This winter's sales volume in Santa Clara County is only 44%
            of what it was last summer, the worst ratio in at least 10 years.
            Prices are already down every month for Nov, Dec, Jan, and Feb."
            1) Sales volume means nothing.  (Could be low supply)
            2) Winter months volume are typically lower than summer months
               for obvious reasons (holidays, weather, etc).
            3) Where did he get the numbers that prices are down every month?
               From what I've seen, prices have gone up.
            \_ I think he was comparing the ratio, not pointing at lower volume
               itself. I don't know where this data is though.
2022/01/20 [General] UID:1000 Activity:popular

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2013/8/1-10/28 [Reference/RealEstate] UID:54722 Activity:nil
8/1     Suppose your house is already paid off and you retire at 65.
        How much expense does one expect to spend a year, in the Bay
        Area? Property tax will be about $10K/year for a modest $850K
        home. What about other stuff?
        \_ I think at age 65, health insurance is the next biggest expense.
        \_ I am thinking that we can have a nice middle class
2013/7/31-9/16 [Reference/RealEstate, Finance/Investment] UID:54720 Activity:nil
7[31    Suppose you have a few hundred thousand dollars in the bank earning
        minimum interest rate and you're not sure whether you're going to
        buy a house in 1-5 years. Should one put that money in a more
        risky place like Vanguard ETFs and index funds, given that the
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        \_ I have a very similar problem, in that I have a bunch of cash
2013/3/21-5/18 [Reference/RealEstate] UID:54634 Activity:nil
3/21    Holy crap is Bay Area real estate on fire right now. I keep
        getting outbid by hundreds of thousands of dollars on places.
        \_ does more home-owners mean fewer people will be renting,
           driving the demand for rental down?          -poor renter
           \_ I am kind of doubting that, but it might work.
        \_ what is the zip code that you're bidding on?
2013/3/11-4/16 [Reference/RealEstate] UID:54622 Activity:nil
3/10    I'm trying to help my parents, in their mortgage there's an
        "escrow" amount. What exactly is this? From reading Google,
        the loan company uses the escrow account to pay for home
        insurance, but they've been paying home insurance themselves.
        I'm really confused on what this fee is.
        \_ Without an escrow account, you write checks to your insurance
2013/2/19-3/26 [Reference/RealEstate] UID:54610 Activity:nil
2/19    I just realized that my real estate broker has a PhD in plant
        molecular cell biology from an Ivy League school in the mid 70s.
        Now she has to deal with a bunch of young dot-comers, and they're
        pain in the ass.                        -Only a BS in EEC$
        \_ My agent used to be a hardware engineer.  He switched to real estate
           when he got laid off during the 80's.  Now he's doing very well.
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Speculators now account for 25% of all purchases, and an additional 13% a re vacation houses, making market very likely to go into free-fall when they all sell. This winter's sales volume in Santa Clara County is only 44% of what it w as last summer, the worst ratio in at least 10 years. Prices are already down every month for Nov, Dec, Jan, and Feb. When rates go from 5% to 7%, that's a 4 0% increase in the amount of interest a buyer has to pay. This means a big hit to the finances of many owners every time interest rates go up, and this will only get worse as more adjustable rate mortgages (ARMs) get adjusted upward. com on 13 Jan 2005: "There is a double whammy inherent in these ARMs," said Frank Nothaft, chief economist for Freddie Mac "At the end of fixed-rate period you face a hike in interest rates and you have to start paying principal. There is more default risk in these interest-only ARMs than in a fully amortizing product." More than 300,000 jobs are gone from Bay Area in th e last 4 years. It's worse than Detroit car problems or Houston's oil bust. People without jobs do not buy houses and owners without jobs may lose the house they are in. Even the threat of losing a job inhibits house purchases. html we hear that "demand for labor that salaries have in fact returned to 1997 and 1998 levels." Local incomes are nowhere near what they need to be to sustain current house prices. The Financial Accounting Standards Board issu ed final guidelines that will force companies to deduct billions of dollars of employee stock options from profits starting in mid-2005. This will greatly reduce the amount of money that local technology employees will get, and that in turn will depress housing prices even more. San Francisco continues to lose population at the fa stest rate of any city in the US and most of those are professional jobs. The problem is not only the dot-com crash, but also outsourcing technical jobs to India, which continues at a frantic pace as corporations realize they can pay an Indian only 20% of what they must pay a similarly qualified employee in the Bay Area. Fewer people in the Bay Area means less demand for housing. The NASDAQ at about 2000 is still only 40% of the 5000 it was at the peak of the recent stock market bubble. The crash in the NASDAQ probably hit the Bay Area harder than anywhere else because of all the stock held by employees of tech companies. That money would have gone into housing, but is now gone. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss, he's bankrupt in the real world. Even a small price decline will bankrupt buyers with small equity. Buyers foolish enough to buy with no money down are already bankrupt, but still unaware of the fact. The rest of the economy shows little inflation, but h ousing inflation has been very high. This disconnect makes houses more expensive in terms of real work. There is no increasing salary to pay off the ever higher interest, so the only way to do it is more work. Many buyers will have to postpone retirement due to overpaying for their house. We are already reaping the consequences of poo r lending. Foreclosures are at the highest rate they've been in 40 years, about 1,500 per quarter in Santa Clara county. There are only about 4,500 sales in the quarter, so on average, about one third of house sales are ending in foreclosure. According to the California Associatio n of Realtors, the percentage of Bay Area buyers who could afford a median-price home in the region plunged from 20 percent in July 2003 to 14 percent in July 2004. Lightbulbs going on in many brains in the Bay Area: "Hey, I can just go to New Mexico or Oregon, buy a gorgeous house outright, and comfortably retire on the rest of the price difference. My neighbors just did it, so I'll have friends there too." The number of houses bought for pure speculat ion is increasing. It is now possible to buy a house with 103% financing, the extra 3% to cover closing costs, with no money down. All this is on the unwise assumption that housing will rise ever higher, covering interest payments through appreciation. Even the National Association of Home Builders admits that "Investor-driven price appreciation looms over some housing markets." Trouble at Fannie Mae and Freddie Mac They are now being forced to t ighten up sloppy lending. This means they are not going to keep buying very low-quality loans from banks, and the total money available for buying houses is falling. The best summary explanation, from Business Week: "Today's housing pr ices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. Real estate related businesses d on't make money if buyers do not buy. These businesses have a large fina ncial interest in misleading the public about house prices. They do not care about the potential bankruptcy of borrowers, so they will lend far beyond what buyers can afford. Banks sell most loans to Fannie Mae or Freddie Mac, but that is going to end as Fannie Mae shrinks. It is now much cheaper to rent a house in the San Francisco Bay Area than it is to own that same house. This is true even with the deductibility of mortgage interest figured in. Assume 6% interest ($3000 per month), $2000 closing costs, and a buyer loses $770 more per month buying than renting. Renting is a loss of course, but buying is a bigger loss. Remember that buyers don't deduct interest from income tax; Interest is paid in real pre-tax dollars that buyers suffered to earn. That money is really entirely gone, even if the buyer didn't pay income tax on those dollars before spending them. If a buyer gets an income tax refund, that's just because he overpaid his taxes, giving the government an interest-free loan. Under current conditions, a renter would be able to live in a house for 30 years, then buy that house outright with the saved principle payments, and have an extra $277,200 of savings on top of that: ($770 x 12 x 30). The renter comes out way ahead of the owner, and this doesn't even count the huge losses the owner will suffer as housing falls year after year for the next decade or more, just as in Japan. Another way to look at it is that except for the rich, everyone either rents a house or rents money to buy a house. Owners with a mortgage seem to be renting their house from the bank, but there's an important difference. The bank takes no risk, the same as real renters take no risk. It's the owners who bear all the risk of falling house prices, and all the costs of repairs. Prices are going down, which just adds insult to the monthly injury of crushing mortgage payments. House prices do not fall to zero, but even a fall of only 10% completely wipes out everyone who has only 10% equity in their house. This means that house price crashes are actually worse than stock crashes. Most people have most of their money in their house, and that money is highly leveraged. Renters in this market end up with much more money, while living in the same quality house as an owner. At the end of 30 years under our current conditions, a renter who saved and invested would have enough principle on hand to buy the same house outright and would have an extra $277,200 of accumulated interest savings, and would have lived in an equivalent house all that time. Owners frequently end up with nothing because they lose the house to foreclosure. Supply is increasing rapidly as building continues, and demand is falling as the population of the Bay Area decreases and the salaries of those who remain decreases. Prices have been driven by low interest rates and increasingly risky loans. The dramatic drop in rents and widespread rental vacancies prove that demand for housing is actually much lower now than a few years ago. gov site has data for Santa Clara County for the years 2000-2003 which shows that the number of housing units went up at the same time that the population decreased: year units people 2000 58086...
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Printable version US interest rates climb to 275% Federal Reserve Chairman Alan Greenspan The Fed is still talking about "moderate" interest rate increases US interest rates have continued to climb as the Federal Reserve raised i ts benchmark borrowing cost by a quarter of a percentage point to 275%. The increase is the seventh time the Fed has tweaked rates since last Jun e Despite saying that inflationary pressures had increased, the Fed said it would keep its "measured" pace of interest rate increases. Analysts had voiced concerns that price pressures may prompt the Fed to t ake a more aggressive stance on future hikes. "The statement was a big surprise," said Alan Ruskin, director of researc h at 4Cast in New York. "There were a couple of clears signs that the Fe d is more worried about inflation and inflation pressure." Between the lines Fed watchers have been poring over the text of the central bank's stateme nt, looking for clues as to the state of the economy and future policy. They point to the stronger language about the inflation risks and say tha t the Fed is preparing the market for further interest rate increases. In its statement the Federal Open Market Committee, which sets US interes t rates, said that "though longer-term inflation expectations remain wel l-contained, pressures on inflation have picked up in recent months and pricing power is more evident". "The rise in energy prices, however, has not notably fed through to core consumer prices," it added. Analysts have said that the Fed's neutral zone, where it can keep the eco nomy growing without speeding inflation, is somewhere between 3% and 5%. Getting better The US, as with many countries across the globe, has been faced with surg ing commodity and crude oil prices at a time when its economy has been e merging from slowdown. Low borrowing costs had been a key aid to that economic recovery and the Fed was forced to slash its interest rate to 1%, its lowest level since the late 1950s. Since those low levels, the economy has started to create jobs and is sho wing signs, albeit sporadically, of being robust. "They left in the 'measured' word," said Brian Reynolds, an strategist at MS Howells & Co. "That is a disappointment to those who thought they might ease the pace o f tightening."