Absolutely distorted. There's no really active lending above $417K. Its the chicken vs egg.... does lending cause sales? Or will above $500K cash buyers magically materialize?
$100k downpayments are affordable if you can sell your existing home that you've owned since 1996. $133k per year, I think, is merely a good strippers wage.
2003 or 2004 prices is still not enough. Need to get down to 1998 - 1999 housing prices ( sellers still deluded ) for US economy to get back on solid rails ( not fake ones like we see in financial services ).
a DataQuick Exec was interviewed yesterday on the Larry Mantle show KPCC-FM (you can stream the show)
The DQ guys made a couple of great points....foreclosure and short sales are driving the market sales....mortgage money is hard to come by so completing a sale takes longer....the sellers not in foreclosure are the "offbeat" kind of folks who have to sell because of a divorce, cash need, other than mtg payment, illness, job relo, etc.
the average guys, who wants to move up, retire out of the area, downsize, upsize are not in this market as a buyer and/or a seller.....
my moving sales (or, lack thereo) sure reflect his comments.....
The oversupply of housing in California could be solved by simply refraining from fighting brushfires. That would also provide significant budget savings.
From here on, I think the economy will be dragged down by weak capital spending, in addition to all the other drags. Weak capital spending was the hallmark of the 2001 downturn.
The canary in the coalmine for capital spending is telecom equipment. Yesterday, Credit Suisse downgraded five major players in the industry group.
Other analysts have been downgrading telecom stocks over the past month. With 23 cos. reporting so far, sector earnings are down 7% YOY. 11 of the 23 companies have negative earnings.
$485,000 @ 6.25% means $2526 a month in interest. Including property tax, that's about $3000 a month. With tax deduction, it may already be lower than rent for some areas.
Want to see some real carnage, do a redfin search for south Oakland. There are homes there that have dropped %75 in value. Not surprising for such an unlivable neighborhood, but still pretty amazing to see.
The "uncles" in the blogosphere are starting to multiply: Uncle Festus here, Uncle Long Hair on other econ blogs, Bobsuruncle at La Times.
Wachovia... wasn't that the bank that was assisting organized crime to bilk senior citizens out of their savings by permitting the processing of fictitious "checks by phone"? Same wachovia that was undercutting other fnma dus lenders by up to 20 bips on cre loans?
Announce investigations or conduct raids now, at the peak of the fear... to what... push it over the edge?
More strange doings tonight surrounding the failure and federal takeover of IndyMac: some rival banks are refusing to honor cashier's checks written by IndyMac -- even though those checks are backed by the federal government
Winston,in Sebastopol a $2k a month house still sells for $1MM.Our high end is only down about 20% or so,so far.I am seeing a few homes that were $600k selling for $300k,and half our sales last month were short sales or foreclosures.I expect a rebound when the Raiders win the Super Bowl,and I am optimistic,they haven't lost a game this month.
Abolish: My wife opened an account at Wells on Tuesday. The new account person said they wouldn't take a check from Indy and a few others. I mentioned it, but I think people thought I was bullshitting.
rich-It really surprises me that a reasonably smart person like you (I say that even though I often disagree with you) would quote analysts. The best investments I have ever made were doing the opposite of what analysts said.
Speed writes:
So, to buy an average home in SF you need $100,000 down and make $133,000/yr.
Speed | 07.17.08 - 3:08 pm | #
A couple in which both people have professional jobs better be making more than $133,000 in SF. Let's assume they both make $75,000. Even after California's ridiculous income tax rates, they will have somewhere between $7,000 and $8,000 in take home pay, assuming they both max out their 401k accounts. Renting and living sanely for 5 years will have them up over the $100,000 needed for the downpayment, even in a high cost of living city like SF.
"Even after California's ridiculous income tax rates, they will have somewhere between $7,000 and $8,000 in take home pay, assuming they both max out their 401k accounts"
That is before paying social security and medicare. More like $6000-$6500 a month.
"Google, based in Mountain View, California, fell $2.16 to $533.44 before the announcement at 4 p.m. New York time in Nasdaq Stock Market trading. The shares dropped to $483.81 in after- hours trading."
ISLAMABAD, July 17 (Xinhua) -- A number of investors staged protests in southern Pakistan's Karachi as the Karachi Stock Exchange (KSE)-100 index closed at 10,213 after falling 279 points on Thursday.
Wiped out by the stock market crash, angry protestors broke windows and damaged banks and brokerage houses in bourses.
I don't think so. There's an apartment complex very close to that house, and it's renting its 2-br at $1840 and 3-br at $2325. This townhome renting for $2050 is not unrealistic at all.
Back on topic...anecdotal evidence of South Bay Area decline.
We just moved into the Almaden area of San Jose. My wife was talking to the owner of a house that's listed for sale a few houses down. She is taking it off the market because she hasn't received any offers near what she expected.
She only put it up for sale because her "other house" in Morgan Hill (far South Bay) failed to sell anywhere near what she expected. Now she's decided to just sell the Morgan Hill house for a loss and keep the Almaden house.
Why is so much data centered on CA exactly? I mean I know it's a major state and financial heavyweight, but the MA/NY/NJ/PA/MD/NoVA corridoer doesn't get nearly as much housing press it seems. Numbers wise that is.
Does CA just require better reporting or something?
I still can't talk my friend out of buying one of those condo's in Walnut Creek. Rents will continue to drop but some people love wasting down payments.
I told here to send a check to me as it would accomplish the same thing for her.
Funny how I have not rec'd any reply since then.....
That reflects my experience with rents as well. Lower priced areas have a more reasonable rent/buy ratio. I rent a place in Menlo Park for $3K/mo that Zillow claims is worth 1.6M. How people justify the prices around here I cannot fathom.
"She only put it up for sale because her "other house" . . . failed to sell"
Lot of Boomers out there with a lot of second houses. What is it costing to heat those things? Do these people even have any retirement money? Make no mistake, this crash is going to be long and devastating.
Yes, our neighbor's expectations were likely out of whack (although we didn't get any numbers, and I haven't researched it).
But that's the problem isn't it? Most sellers have unrealistic expectations. They will probably lower them just in time for their reduced expectations to become too high as well (due to job losses and more distressed inventory).
I'd like to think that too however they start out with new accounting changes (specific to C) that will be designed to show it better than it really is.
Look what JPM reported as "earnings" and where'd it go?
These banks need to raise more capital and the MM will drive up the share price so that they can bait the next sucker who thinks it's formed a bottom.
I reiterate about San Jose Mt View Sunnyvale area rents. They are falling faster than Tech Stocks. The smartest Google Employees are renters talked to many of them. They are nervous about the prospects of the company because they keep hiring and there is no cost control.
@I rent a place in Menlo Park for $3K/mo that Zillow claims is worth 1.6M. How people justify the prices around here I cannot fathom.
Yeah, things are so out of whack there (a recent - poss. NYT - article about the wealth in the area stated something like "with $10 million, you're nobody here). The parents of a close friend actually put up a "not for sale" sign on their house in Menlo Park (they lived there for 30+ years, before all the money flowed in).
Barley writes:
And, you dont really need a car in SanFran - you can walk everywhere (well, almost) so you can have more disposable income for things like housing.
Barley | 07.17.08 - 3:52 pm | #
"I reiterate about San Jose Mt View Sunnyvale area rents. They are falling faster than Tech Stocks."
I really don't feel it, especially if you're talking about large complexes owned by big companies. There was a big drop in 2001, but in the past 2 years it's been going up. Not to 2000 level yet, but compared now to 2003 or 04 and you're looking at 10 to 20% difference.
Comparing Citi to JPM is like comparing fried chicken to duck confit. JPM and WFC will continue to do relatively well in the consumer space, Citi on the other hand is another zombie. Here is why:
1 - Overall economic drag (mortgage book, dead consumer, credit card defaults, international contraction, etc) - not citi specific
2 - EVEN IF business picks up, they are too fragmented to and disorganized to really capitalise on the uptick. They are running outdated business and IT systems that seriously limit their ability to grow
3 - Employee moral is at an all time low. Most Sr. Managers have decided to use up as much vacation as possible and the offices are like a ghost town. So I've heard from a friend.
4 - No REAL cuts. Job and cost cuts have been to "projected" budgets - not real dollar saves. They've let go like 10,000 people - which is nothing with a work force of 350,000... On top of that - check the job boards - CITI is hiring!
This beast will not change it's ways until it is beaten into submission.
What accounting changes have been put in place? I was not aware.
The big complexes may not be down much but the individual home rent have gone down esp from five, six years ago from what I have seen. I rather follow the longer term trend
Funny how San Jose rents are off of their inflated 2000 highs but the home prices have more than doubled. Anyone see a disconnect here.
The riskiest assets we had, our CDOs, weren't even on our balance sheet,'' Merrill Chief Executive Officer John Thain said on a June 11 conference call with investors. Merrill would have to provide $15 billion in financing for CDOs and related obligations under asevere stress scenario,'' according to a Merrill regulatory filing published in May.
Funny how San Jose rents are off of their inflated 2000 highs but the home prices have more than doubled. Anyone see a disconnect here.
Rents went up so fast before and during 2000 it was crazy. It was only natural for rents to fall quickly and then slowly climbed out of bottom. House prices went up like crazy before 2007, and now it should also be natural for house prices to fall quickly and then slowly climb out of bottom. The price/rent ratio or mortgage/rent ratio is improving across the Bay Area, except maybe the worst/best areas, depending on your point of view. (Worst ratio and best schools and living environment)
My wife is grumpy about the fact that our former home in a nice Los Gatos neighborhood (where we sold our house in 2005, at my urging) has not declined in value. It might be up a bit, in fact.
So whenever I try to cheer her up with a report of how well our investments are doing, she says, "Great, let's buy a damned house".
Beware the disgruntled-spouse-renter effect on the housing market. There might be some distressed purchases if we dont see prices drop more, and soon!
In Morgan Hill (far South Bay), there was a brand-new 3600sf custom home on a nice lot, on the market for $1.3mil ($7500/mo-ish PITI). No buyers. It is now on the rental market for $3500/month.
Our own home cost $1.22mil in 2005. PITI $7000. It has easily lost 25-30% of its value. We put 20% down but are totally under water. Similar homes rent for $3500-3600/mo.
What person in his/her right mind would buy under these circumstances? It didn't seem so crazy when the market was going up. We were drunk on the kool-aid. Nasty hangover now, though.
Oh those Sunnyvale posts got me to comment.
My rents in Sunnyvale. All for the same place. 1 bedroom apartment.
2002 - $1275
2003 - $1150 Short lease.
2003/4 - $1075
2004/5 - $1050 I asked for a decrease. Got the $25 reduction.
2005/6 - $1130
2006/7 - $1260
2007/8 - $1420
2008/9 - $1460 What they wanted. I moved.
Also, those areas in Milpitas.
Sometime in the early 90's, the EPA was out there taking some measurements of the soil.
Don't think they found anything but they were fully suited up which scared a few people.
I'm not going to fight about whether Fremont or Milpitas are better places to live. It's like arguing whether the 7th or 8th circle of hell is worse - either way you're in hell.
Winston,
You missed the great smells in the south bay. None of you were in the area when the tomato canneries were in operation. A late summer heat wave combined with low tide in the bay and yowweeeeeeee! It was vomit inducing.
The big sewage plant that SJ had to put in fixed that problem. The real fixer was when the canneries moved to the central valley towns.
A funny problem that the clean up of the city sewage plants caused is the lack of salinity in the south bay The natural condition of the lower bay is very salty, notice the salt evap ponds. The buildup of cities and the importation of water was like diverting a new clean river into the south bay.
I rent in Palo Alto for $3.7K, and going by recent sales (much worse homes going for $1.3 million!) I would estimate it is easily $1.5+ million. I don't even want to think about what the mortgage on that would be.
Pssst, Nanook: we don't heat houses in California!
Seriously, where I live in Southern California--about eight miles from the coast--I pay perhaps $60 tops to heat a minimally insulated 67 year old house for a month during the deepest darkest part of winter. Maybe this year it'll move up to $90 due to the price run-up. Maybe. There's a piece of the reason for the giant price differential.
second
first?
motion seconded, do we put it to a vote?
Absolutely distorted. There's no really active lending above $417K. Its the chicken vs egg.... does lending cause sales? Or will above $500K cash buyers magically materialize?
Last month foreclosure resales made up 28.7 percent of all Bay Area resales, up from 27.6 percent in May and 3.5 percent a year ago.
So what percentage of foreclosures as sales in a market is necessary to significantly adversely effect it? More than 3%? 5%? 10%?
I think we had this discussion a year ago but I don't remember the consensus, if any.
So, to buy an average home in SF you need $100,000 down and make $133,000/yr.
Darn near affordable!
$100k downpayments are affordable if you can sell your existing home that you've owned since 1996. $133k per year, I think, is merely a good strippers wage.
"Stairstep Spring," right on schedule.
OT: It appears that there's some speculation going on with oil and gold. Hoodathunkit?
Oh, and, if you don't have a HELOC. Strike that, it is not affordable.
Elvis,
How do you know what a stripper makes? Uh, never mind.
I talking copper stripping, perv.
Speed writes:
So, to buy an average home in SF you need $100,000 down and make $133,000/yr.
Average fireman pay after 5 years, $80K plus OT. Take 2 and you're well above the average income needed.... almost to stripper's pay.
2003 or 2004 prices is still not enough. Need to get down to 1998 - 1999 housing prices ( sellers still deluded ) for US economy to get back on solid rails ( not fake ones like we see in financial services ).
a DataQuick Exec was interviewed yesterday on the Larry Mantle show KPCC-FM (you can stream the show)
The DQ guys made a couple of great points....foreclosure and short sales are driving the market sales....mortgage money is hard to come by so completing a sale takes longer....the sellers not in foreclosure are the "offbeat" kind of folks who have to sell because of a divorce, cash need, other than mtg payment, illness, job relo, etc.
the average guys, who wants to move up, retire out of the area, downsize, upsize are not in this market as a buyer and/or a seller.....
my moving sales (or, lack thereo) sure reflect his comments.....
Wait until unemployment in the sunshine state really begins to shoot up. That should get us to 1998 prices pretty quickly...say one more year.
" copper stripping "
Hmmm, I could think of all kinds of interesting things to go with that one.
S&P target= 1300.
anti-calculatedrisk writes:
S&P target= 1300
Wanna bet on that?
Hi CR,
"3$" -> "3%"
Average fireman pay after 5 years, $80K plus OT. Take 2 and you're well above the average income
Okay, that can work in San Francisco but what about all the other cities?
Wachovia Securities gets surprise inspection.
- NY Times
(via Atrios)
And, you dont really need a car in SanFran - you can walk everywhere (well, almost) so you can have more disposable income for things like housing.
Ah, mentioned in earlier thread. So much reading, so little time...
The oversupply of housing in California could be solved by simply refraining from fighting brushfires. That would also provide significant budget savings.
I went hunting, came back with some
Kill.
Plays on timber exports PCL,DEL,POPE
plays on cement being cheaper than
asphalt MCEM,MVCO
plays on infrastructure AMN,NWPX,PMFG,GRC
Plays on farmland BWEL,LMNR,CVGW,
for full analysis(math included)
of each stock
subscribe to "positive paterns"
PO box 310, Turners, Missouri 65765
As a Bay Area resident, please allow me to say:
WOOHOO!!!!!!!!!! Only another 30% or so for prices to drop before they line up with rents!!!
I now return you to your regularly scheduled programming.
OT
From here on, I think the economy will be dragged down by weak capital spending, in addition to all the other drags. Weak capital spending was the hallmark of the 2001 downturn.
The canary in the coalmine for capital spending is telecom equipment. Yesterday, Credit Suisse downgraded five major players in the industry group.
Wi-LAN Inc. (T.WIN) Message Board - Msg: 24762631
Other analysts have been downgrading telecom stocks over the past month. With 23 cos. reporting so far, sector earnings are down 7% YOY. 11 of the 23 companies have negative earnings.
The Wall Street Journal Online - WSJ.com Log In
scroll down to the very last industry group.
Don't forget: as telecom equip. goes, so goes biz capX. It's a very negative sign for the economy.
$485,000 @ 6.25% means $2526 a month in interest. Including property tax, that's about $3000 a month. With tax deduction, it may already be lower than rent for some areas.
Where are the bottom-callers?
Hellooooo....? You there?
Rich,
do not forget that most analysts
are incompetent. So many downgrades
may Be, may be, a contrarian signal.
I am buying telecom now and will hedge
it with a short in small-caps.
Pricedout:
The places with 3k a month rents don't have $485K houses. A $485k house right now would rent for around $2k/month.
Winston, that $3k is pre-tax expenses. Depends on your tax bracket, it could mean close to $2k a month after tax savings.
Want to see some real carnage, do a redfin search for south Oakland. There are homes there that have dropped %75 in value. Not surprising for such an unlivable neighborhood, but still pretty amazing to see.
Treasury needs to start buying these homes in unlimited numbers. We can price them according to our own models.
C'mon Hank.... who's your buddy?
Blackrock is up and ML sold a piece of itself off, so the bulls are running amok. Who cares about the iceberg to our starboard, party on.
The "uncles" in the blogosphere are starting to multiply: Uncle Festus here, Uncle Long Hair on other econ blogs, Bobsuruncle at La Times.
Wachovia... wasn't that the bank that was assisting organized crime to bilk senior citizens out of their savings by permitting the processing of fictitious "checks by phone"? Same wachovia that was undercutting other fnma dus lenders by up to 20 bips on cre loans?
Announce investigations or conduct raids now, at the peak of the fear... to what... push it over the edge?
WaMu wary of IndyMac cashier's checks | L.A. Land | Los Angeles Times
More strange doings tonight surrounding the failure and federal takeover of IndyMac: some rival banks are refusing to honor cashier's checks written by IndyMac -- even though those checks are backed by the federal government
Winston,in Sebastopol a $2k a month house still sells for $1MM.Our high end is only down about 20% or so,so far.I am seeing a few homes that were $600k selling for $300k,and half our sales last month were short sales or foreclosures.I expect a rebound when the Raiders win the Super Bowl,and I am optimistic,they haven't lost a game this month.
Abolish: My wife opened an account at Wells on Tuesday. The new account person said they wouldn't take a check from Indy and a few others. I mentioned it, but I think people thought I was bullshitting.
Sounded unbelievable to me too...but it happened.
Show of hands... who would want to be long financials at market close tomorrow? LOL
rich-It really surprises me that a reasonably smart person like you (I say that even though I often disagree with you) would quote analysts. The best investments I have ever made were doing the opposite of what analysts said.
IT,I am using both of mine to find a bottom,but so far all I have turned up is a copy of DOW 25,000.
sidenote
The writers for the "Daily Show" read this blog and NY Times as well.
Laugh all ye want laddies, butcha won' be a' laughin' come august.
Is that when the comedy writers go on strike?
I'm pretty sure in South Bay, a $2K rent house sells for $600K max.
btw - "sippin" is a perma bull troll who said prices in Sacramento would not go down. He was a regular on Landers Sac Town blog.
who would want to be long financials at market close tomorrow? LOL
my BAC calls are now paid for, having liquidated 40% of the position this morning. I'll stay long, though of course being LEAPS it's kinda cheating.
Laugh all ye want laddies, butcha won' be a' laughin' come august.
Uncle Billy Loves Bjork | Homepage | 07.17.08 - 4:07 pm | #
Bush will be impeached? No more jokes left?
GOOG missed.
Down goes Frazier! Down goes Frazier!
Speed writes:
So, to buy an average home in SF you need $100,000 down and make $133,000/yr.
Speed | 07.17.08 - 3:08 pm | #
A couple in which both people have professional jobs better be making more than $133,000 in SF. Let's assume they both make $75,000. Even after California's ridiculous income tax rates, they will have somewhere between $7,000 and $8,000 in take home pay, assuming they both max out their 401k accounts. Renting and living sanely for 5 years will have them up over the $100,000 needed for the downpayment, even in a high cost of living city like SF.
GOOG diving AH!!
Troy - I trusted my gut, bought a Canadian bank at 10 year lows on Tuesday. Made $4000 in two days. Got out 1 hour ago.
Example:
$2050/2br-2.5bath
craigslist | Page Not Found
Sold in April for $512K
Milpitas, CA 95035 | MLS# 80780418
Interesting Times writes:
Troy - I trusted my gut, bought a Canadian bank at 10 year lows on Tuesday. Made $4000 in two days. Got out 1 hour ago.
Congrats!
BB - It wasn't easy. Thanks.
re: August and Comedy Writers
I was thinking more that August is when they will start getting paid with stuff other than money.
This two day rally is officially over
Why is the rally over? is it ML?
GOOG tanking should make Bay areas homes go down even more...(staying on-topic)
I love how B'Berg just ignored the huge miss on GooG....currently down over 10%..they are focusing on IBM of course...
Oh and MER misses huge and the AH share price doesn't budge......
Is it any wonder the "up" button got pushed three days after oil started to drop...
Ciao
MS
But GOOG is the new economy. Oh, yes, the new economy blows.
"Even after California's ridiculous income tax rates, they will have somewhere between $7,000 and $8,000 in take home pay, assuming they both max out their 401k accounts"
That is before paying social security and medicare. More like $6000-$6500 a month.
GOOG tanking should make Bay areas homes go down even more...(staying on-topic)
Agree a lot of funny money chasing crappy condos around here.
I love how B'Berg just ignored the huge miss on GooG....currently down over 10%..they are focusing on IBM of course...
They keep a bucket of gloss around there.
MER missed!
crispy and cole: Neither of you is funny. What would you do if the ! key got stuck?
AOC:
ELN: Summary for ELAN CP PLC ADR- Yahoo! Finance
TIMBER!!
By the way, GOOG's "miss" was about a 30% increase y-o-y. Any of you do that well?
In rich's defense, analysts have a bullish tendency. So when even they are downgrade a sector, I consider it more noteworthy than when they upgrade.
AOC - then buy up some GOOG!!
Aheadofthecurve
25% close.
Take two: So when they downgrade a sector, I consider it more noteworthy than when they upgrade.
AOC - 20% in two days? Good enough?
crispy and cole
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1
happy now?
YES!!!!
Google Declines as Profit Trails Analysts' Estimates (Update1) - Bloomberg.com
"Google, based in Mountain View, California, fell $2.16 to $533.44 before the announcement at 4 p.m. New York time in Nasdaq Stock Market trading. The shares dropped to $483.81 in after- hours trading."
I wonder how GOOG opens up tomorrow morning.
By the way, GOOG's "miss" was about a 30% increase y-o-y. Any of you do that well?
JPM's "beat" was a 50% decrease yoy, wasn't it?
MSFT missed Down goes Joe Lewis?
pricedout:
$2050/month for that place is optimistic by about 10%.
Lewis=Louis
How about 75% in one week.....
but I am not one to gloat so if you ask I'll tell.
Ciao
MS
How about 75% in one week.....
but I am not one to gloat so if you ask I'll tell.
What was the trade?
75% on $100?
Summary:
MSFT missed
MER missed
GOOG missed
IBM beat
LEH Jan 20 Puts....
Ciao
MS
LEH Jan 20 Puts....
Word but you would have had to have bought them months ago.
Go look it up Speed.....before you get cute...
Ciao
MS
ISLAMABAD, July 17 (Xinhua) -- A number of investors staged protests in southern Pakistan's Karachi as the Karachi Stock Exchange (KSE)-100 index closed at 10,213 after falling 279 points on Thursday.
Wiped out by the stock market crash, angry protestors broke windows and damaged banks and brokerage houses in bourses.
Winston,
I don't think so. There's an apartment complex very close to that house, and it's renting its 2-br at $1840 and 3-br at $2325. This townhome renting for $2050 is not unrealistic at all.
craigslist | Page Not Found
MER to sell FDS. Financial Data Services, not the vinegar and water solution.
Wiped out by the stock market crash, angry protestors broke windows and damaged banks and brokerage houses in bourses.
Damn good thing wall st has shatter proof glass ceilings.
Back on topic...anecdotal evidence of South Bay Area decline.
We just moved into the Almaden area of San Jose. My wife was talking to the owner of a house that's listed for sale a few houses down. She is taking it off the market because she hasn't received any offers near what she expected.
She only put it up for sale because her "other house" in Morgan Hill (far South Bay) failed to sell anywhere near what she expected. Now she's decided to just sell the Morgan Hill house for a loss and keep the Almaden house.
crispy&cole: Summary:
MSFT missed
MER missed
GOOG missed
IBM beat
You left out that tomorrow is expirations too.
Gonna be a good day.
ot really Tim.....
If you wanted say 200% then yes months ago....
I still have some that were bought in early march....those sit tight.
Ciao
MS
ShortCourage
I heard rents in the San Jose area never recovered from the Tech Crash. I imagine that they will begin to fall even more now.
"Wiped out by the stock market crash, angry protestors broke windows and damaged banks and brokerage houses in bourses."
Barbarians. Why can't they just go home and beat their wives like civilized people do?
Re: SJC. I hear it's different there.
I suspect that the reaming will be terrible and fierce when it arrives.
Also, regarding the price-vs-rent numbers, we just left a rental in Los Gatos where we were paying $2700/month.
The owner booted us in order to sell it, list price about $1.2M.
Very out of whack, still.
Short Courage,
I strongly suspect your neighbor's expectation is out of whack.
and by early march I mean March 3-4 not the week of ahem...."the lows"...
Ciao
MS
If you wanted say 200% then yes months ago....
Yeah I meant May or so...Sorry
Why is so much data centered on CA exactly? I mean I know it's a major state and financial heavyweight, but the MA/NY/NJ/PA/MD/NoVA corridoer doesn't get nearly as much housing press it seems. Numbers wise that is.
Does CA just require better reporting or something?
I heard rents in the San Jose area never recovered from the Tech Crash.
Only because the rent numbers were seriously stupid during Y2K. And I mean REALLY REALLY stupid.
@Does CA just require better reporting or something?
CR lives in CA.
I still can't talk my friend out of buying one of those condo's in Walnut Creek. Rents will continue to drop but some people love wasting down payments.
I told here to send a check to me as it would accomplish the same thing for her.
Funny how I have not rec'd any reply since then.....
Ciao
MS
CR lives in CA.
West coast BIAS!!!! No one ever pays attention to us poor NYC metro people. It's a national conspiracy I tell you.
Citi Citi Citi....
That will be the nail in the coffin of this rally. Tomorrow morning at 8
ShortCourage,
That reflects my experience with rents as well. Lower priced areas have a more reasonable rent/buy ratio. I rent a place in Menlo Park for $3K/mo that Zillow claims is worth 1.6M. How people justify the prices around here I cannot fathom.
CALculated Risk
California is the spear tip of America, dude.
It all starts here. Fast food, gangsta rap, hula hoops, and housing crashes. Our state bird should be the canary.
"She only put it up for sale because her "other house" . . . failed to sell"
Lot of Boomers out there with a lot of second houses. What is it costing to heat those things? Do these people even have any retirement money? Make no mistake, this crash is going to be long and devastating.
pricedOut,
Yes, our neighbor's expectations were likely out of whack (although we didn't get any numbers, and I haven't researched it).
But that's the problem isn't it? Most sellers have unrealistic expectations. They will probably lower them just in time for their reduced expectations to become too high as well (due to job losses and more distressed inventory).
Long way down from here, IMHO.
Actually the rents were really high in San Jose in 2000 but incomes were also high then.
The rent-income ratio has not changed much when comparing 2000 to 2008.
On the other hand house prices have doubled since 2000 while rents are flat. The price-rent ratio has doubled.
Are these bank runs having any effect on people buying homes and getting credit?
How people justify the prices around here I cannot fathom.
The MP -> LG axis is pretty much the "end-goal" of the housing ladder, as far as weather, culture, security, amenities, etc. go.
As I like saying, thanks to Prop 13 anyone's who's bought 1850-1998 is sitting pretty.
Citi-
I'd like to think that too however they start out with new accounting changes (specific to C) that will be designed to show it better than it really is.
Look what JPM reported as "earnings" and where'd it go?
These banks need to raise more capital and the MM will drive up the share price so that they can bait the next sucker who thinks it's formed a bottom.
Ciao
MS
BTW, I didn't mention it, but this neighbor with the two houses is a Realtor.
Our state bird should be the canary.
Ca got Walmart last.
I reiterate about San Jose Mt View Sunnyvale area rents. They are falling faster than Tech Stocks. The smartest Google Employees are renters talked to many of them. They are nervous about the prospects of the company because they keep hiring and there is no cost control.
I heard rents in the San Jose area never recovered from the Tech Crash.
I rent here and gotta say they're about the same. Wages are/were a bit higher though.
@I rent a place in Menlo Park for $3K/mo that Zillow claims is worth 1.6M. How people justify the prices around here I cannot fathom.
Yeah, things are so out of whack there (a recent - poss. NYT - article about the wealth in the area stated something like "with $10 million, you're nobody here). The parents of a close friend actually put up a "not for sale" sign on their house in Menlo Park (they lived there for 30+ years, before all the money flowed in).
BTW nice little cushion they got over the last two days isn't it.
At least in a casino I can get drinks and cigarettes and look at the people.
This is becoming a joke.....wait...it IS a joke.
Ciao
MS
Barley writes:
And, you dont really need a car in SanFran - you can walk everywhere (well, almost) so you can have more disposable income for things like housing.
Barley | 07.17.08 - 3:52 pm | #
And strippers - don't leave out the strippers.
"I reiterate about San Jose Mt View Sunnyvale area rents. They are falling faster than Tech Stocks."
I really don't feel it, especially if you're talking about large complexes owned by big companies. There was a big drop in 2001, but in the past 2 years it's been going up. Not to 2000 level yet, but compared now to 2003 or 04 and you're looking at 10 to 20% difference.
My experience in Sunnyvale
2006 -- $1320
2007 -- $1470
2008 -- $1590
2009 -- ?
Comparing Citi to JPM is like comparing fried chicken to duck confit. JPM and WFC will continue to do relatively well in the consumer space, Citi on the other hand is another zombie. Here is why:
1 - Overall economic drag (mortgage book, dead consumer, credit card defaults, international contraction, etc) - not citi specific
2 - EVEN IF business picks up, they are too fragmented to and disorganized to really capitalise on the uptick. They are running outdated business and IT systems that seriously limit their ability to grow
3 - Employee moral is at an all time low. Most Sr. Managers have decided to use up as much vacation as possible and the offices are like a ghost town. So I've heard from a friend.
4 - No REAL cuts. Job and cost cuts have been to "projected" budgets - not real dollar saves. They've let go like 10,000 people - which is nothing with a work force of 350,000... On top of that - check the job boards - CITI is hiring!
This beast will not change it's ways until it is beaten into submission.
What accounting changes have been put in place? I was not aware.
speaking of Sunnyvale, there's a BBQ burger at Armado Willy's that has my name on it. Adios and enjoy your OPEX Friday!
The big complexes may not be down much but the individual home rent have gone down esp from five, six years ago from what I have seen. I rather follow the longer term trend
Funny how San Jose rents are off of their inflated 2000 highs but the home prices have more than doubled. Anyone see a disconnect here.
Oh yea - don't forget the 1.1 trillion in off balance sheets holdings for Citi. That alone sends Enron like shivers up my spine.
Moody's just cut MER to A2.
The riskiest assets we had, our CDOs, weren't even on our balance sheet,'' Merrill Chief Executive Officer John Thain said on a June 11 conference call with investors. Merrill would have to provide $15 billion in financing for CDOs and related obligations under asevere stress scenario,'' according to a Merrill regulatory filing published in May.
Moody's just cut MER to A2.
Damned if the do and damned if they don't . Should not have sold off core assets bu t if they didn't wouldn't have enough capital. All wells...
I've searched the rental market recently. The rents are up relatively what they were 5 years ago, definitely not down.
Many rental units have been sold and converted into MacMansions. The absolute number of available units were down.
Sure, the rents didn't rise as much as the house prices, but I don't see rents dropping anywhere.
Funny how San Jose rents are off of their inflated 2000 highs but the home prices have more than doubled. Anyone see a disconnect here.
Rents went up so fast before and during 2000 it was crazy. It was only natural for rents to fall quickly and then slowly climbed out of bottom. House prices went up like crazy before 2007, and now it should also be natural for house prices to fall quickly and then slowly climb out of bottom. The price/rent ratio or mortgage/rent ratio is improving across the Bay Area, except maybe the worst/best areas, depending on your point of view. (Worst ratio and best schools and living environment)
With MSFT struggling and their stock tanking do they have the ammunition to do a big buyout now?
MSFT has about $35 Billion in CASH
MSFT has about $35 Billion in CASH
It was over 60 billion 4 years ago. Down from last years 45 billion. Operations are using more and more cash all with slowing growth.
Keep forgetting that MSFT is also started paying dividends. MSFT is dangerously become IBM in the 1980's. What the hell is it?
It's a good thing for MSFT that Jerry Yang has an Ellison-sized ego.
My experience in Fremont (it's like Milpitas without the smell):
2007: $1675
2008: $1675
2009: $1750 (at least that's what the letter they sent says they're going to ask for.
I'd rather live with the occasional smell than the daily traffic jam on 880 at Mission Blvd.
One more personal anecdote:
My wife is grumpy about the fact that our former home in a nice Los Gatos neighborhood (where we sold our house in 2005, at my urging) has not declined in value. It might be up a bit, in fact.
So whenever I try to cheer her up with a report of how well our investments are doing, she says, "Great, let's buy a damned house".
Beware the disgruntled-spouse-renter effect on the housing market. There might be some distressed purchases if we dont see prices drop more, and soon!
RE Rent vs Buy
In Morgan Hill (far South Bay), there was a brand-new 3600sf custom home on a nice lot, on the market for $1.3mil ($7500/mo-ish PITI). No buyers. It is now on the rental market for $3500/month.
Our own home cost $1.22mil in 2005. PITI $7000. It has easily lost 25-30% of its value. We put 20% down but are totally under water. Similar homes rent for $3500-3600/mo.
What person in his/her right mind would buy under these circumstances? It didn't seem so crazy when the market was going up. We were drunk on the kool-aid. Nasty hangover now, though.
oh brother,
at least you have the courage to admit it, unlike most who bought at the peak.
Oh those Sunnyvale posts got me to comment.
My rents in Sunnyvale. All for the same place. 1 bedroom apartment.
2002 - $1275
2003 - $1150 Short lease.
2003/4 - $1075
2004/5 - $1050 I asked for a decrease. Got the $25 reduction.
2005/6 - $1130
2006/7 - $1260
2007/8 - $1420
2008/9 - $1460 What they wanted. I moved.
Also, those areas in Milpitas.
Sometime in the early 90's, the EPA was out there taking some measurements of the soil.
Don't think they found anything but they were fully suited up which scared a few people.
I'm not going to fight about whether Fremont or Milpitas are better places to live. It's like arguing whether the 7th or 8th circle of hell is worse - either way you're in hell.
Winston,
You missed the great smells in the south bay. None of you were in the area when the tomato canneries were in operation. A late summer heat wave combined with low tide in the bay and yowweeeeeeee! It was vomit inducing.
The big sewage plant that SJ had to put in fixed that problem. The real fixer was when the canneries moved to the central valley towns.
A funny problem that the clean up of the city sewage plants caused is the lack of salinity in the south bay The natural condition of the lower bay is very salty, notice the salt evap ponds. The buildup of cities and the importation of water was like diverting a new clean river into the south bay.
I rent in Palo Alto for $3.7K, and going by recent sales (much worse homes going for $1.3 million!) I would estimate it is easily $1.5+ million. I don't even want to think about what the mortgage on that would be.
... my previous landlord tried raising the rent in Palo Alto, and we found a nicer house for lower rent. That house stayed unrented 3 months.
More anecdotal evidence:
Sold home in 2005 in SJ, renting house (1 Mil) in Fremont:
2005-07: 2500 (unchanged)
Pssst, Nanook: we don't heat houses in California!
Seriously, where I live in Southern California--about eight miles from the coast--I pay perhaps $60 tops to heat a minimally insulated 67 year old house for a month during the deepest darkest part of winter. Maybe this year it'll move up to $90 due to the price run-up. Maybe. There's a piece of the reason for the giant price differential.
Winston,
Excel 2007 is much better than 2003. There's no arguing that. Thanks for the heads up many months ago.
lama,
Glad to help out.