fatcool said:Any of these Krap can bring down California home prices would be ideal. We will get a chance of the lifetime to move there.
California home prices are up just because investors put more money there hoping 100% returns.
If investors feel their is no much appreciation they start selling homes because California rent is not in par with home prices. Rent is cheaper and investors take the loss on rent to gain from the appreciation. If no appreciation then we have more homes in the market.Umm, the California housing market is a little more complicated than that.

First, it is not one market, it is many, many, many markets all with different property characteristics, inventories, buyers, and trends.

Second, the prices are up, in places where the prices are up, because people have paid what they thought homes were worth. There were very few gunpoint housing sales last quarter, even in the wild west of California.

Third, the primary drivers in real estate prices seem to be location and local economies. Desireable climates and communities always have high demand. Strong economies maintain strong prices. Other areas surrounding major metropolitan centers are currently setting records in foreclosures as they are suffering from boom whiplash.

Fourth, California has a construction regulatory burden and cost of construction that is nothing less than shocking. This partially comes from seismic standards and overprotective legislators, partially from a warped construction industry, and partially from the high cost of living. For example if you want to improve your child's life by putting in a window in their room for light and ventilation you can't just put in a window. You need permits, you may need an energy survey, you may need Design Review. You cannot put in a window like the ones that have been functioning perfectly fine in your house for 50 or 100 years or more. Instead you need a double or triple pane, low E window and most likely it needs to be made of tempered glass. Things like this make simple construction and home improvement tasks cost five to ten times more than they should cost (with dubious benefits in return).

New homes in urban areas cost over $200 per square foot, and remodeling/additions cost $300 to $450 per square foot. If you do the math on a 2500 square foot home you will find that there IS something real causing high prices here, something beyond the kind of "investors put more money there hoping 100% returns" speculation you claim.

Housing prices (whether rental or purchase) are ultimately determined by local demand and necessity for shelter. The population of CA is growing. If new construction stops, rents will be the next thing that skyrocket and then people will wish they had their housing expenses fixed and predictable (through ownership). I speak from personal experience on that as I have been through many cycles of rent spikes when my salary only inched higher and never seemed to compensate for the higher cost of living. In the old days a renter would have to choose between a long term lease or month-to-month contract. Intelligent landlords these days don't offer long term leases; why would they when rents are only going up?

Some areas in CA will decline as jobs and population shift, and others will remain steady.

But it's a little more complicated than saying a bunch of spastic greedy speculators made all the prices go real high.

At least try to be reasonable.

Comparing real estate (might very well go up in value, might very well maintain value, might very well drop in value to a point) to a depreciating commodity (TV) is pure ignorance. The TV will not go up in value regardless of what happens. It's like comparing buying a home and buying a car.


gobucs007 said:jayK said:IMHO, if you find a house you like, and you can afford it, you should buy it. Get a fixed mortgage and hold on to the house long-term, and eventually you'll come out ahead, even if you buy at the top of a boom.

yea this is something the FWers would do...there's a 50" plasma tv 'on sale'at bestbuy on saturday for 2k, below the 4k msrp. they know it will go on sale tomorrow or in a week for 1500 but they can 'afford' to put it on their credit card at fixed rate, so as long as they keep that tv for 6 years, what's another 500 plus interest on that 500?

i dont think you're going to talk many FWFers into this

gobucs007 said:jayK said:IMHO, if you find a house you like, and you can afford it, you should buy it. Get a fixed mortgage and hold on to the house long-term, and eventually you'll come out ahead, even if you buy at the top of a boom.

yea this is something the FWers would do...there's a 50" plasma tv 'on sale'at bestbuy on saturday for 2k, below the 4k msrp. they know it will go on sale tomorrow or in a week for 1500 but they can 'afford' to put it on their credit card at fixed rate, so as long as they keep that tv for 6 years, what's another 500 plus interest on that 500?

i dont think you're going to talk many FWFers into thisSurely you recognize a home is a little different and more of a necessity than an electronic entertainment device? Right?

You know the difference between "real property" and "personal property", right?

You need a roof over your head today regardless of what others speculate might take place in the future. You can choose to rent or buy a home, or sponge off your parents. One of the three options allows YOU to control and predict a little bit of the future.

Some people think that is desireable and not quite the same thing as getting a new TV.

Rents are likely to go up. Mortgage rates are likely to go up. Sale prices may go up or go down. For some people in phases of their lives where their careers are predictable, they are raising families, or they want to control their own property, they may want to buy now. If they find a house that suits their needs, they should buy.

Who are you to tell them they shouldn't? What guarantees about the future are you willing to provide to a homeseeker, even a FWFer, in order to convince them not to buy a home that suits their needs?

gludlow said:NorCalSci said:But it's a little more complicated than saying a bunch of spastic greedy speculators made all the prices go real high.

I would agree with you that it is a little more complicated, but all the things you mentioned haven't changed significantly in the past 5 years to account for the MAJOR run-up in housing prices. The only thing that has changed (and correct me if I'm wrong) is that people believe that the houses are worth more, and real estate speculation has become a major investment strategy. That means that if those factors go away, prices will go down.

Now, if Arnold passed a new "you can't build a new house for less than $1.2mil" bill in 2002, that blows my point out of the water. But do energy efficient windows make a $200k house in the midwest a $1.2mil house in California?Things have changed significantly in the past five years. Everything costs more, building materials (the same materials) cost more, building codes are more restrictive, permits and fees are higher, there are significant barriers to entry in the construction industry, labor costs are significantly higher as nobody on a construction job works for minimum wage, even the port-a-potties cost more.

Why do YOU think construction costs are so high in California? Shingle speculators have bid up the cost of roofing materials?

How much per square foot will our high construction costs be decreased once all the "speculation" stops?

Really think about it, and try to figure out how much room there is to decrease the costs of homes here. If costs are not going to decrease, exactly how much profit is there to eliminate in new housing prices? Do you think once all the speculation stops, all new 2000 square foot houses are going to sell for the national average?

As for existing homes, exactly what percentage of families that own California homes are "speculators" who are about to "quit the business" by dumping their homes and opening hair salons and tire shops?

fatcool said:I have never seen builders build without market analysis. Basically job market drive the house prices. Not the builder inventory.
Even the Bank make a report before giving a loan to the builder.
Perhaps your home area is devoid of the numerous "specu-velopers" that dominate the DC metro area. Not only do they not conduct any formal analysis (or have such capability), but they often re-use the same plans to build a veritable cookie-cutter neighborhood to avoid paying architect's fees for good design.

That's my perspective of the so-called builder. The lender is entirely different. I have never met anyone from my mortgage company or bank. The loan officers that originiated my construction financing and mortgage loans live two time zones away. Other than the appraisal I paid to have done, I doubt they have any more knowledge of my market than I do.

efficacyman said:revheck said:Here's my question: Most folks on this forum will argue that it's pointless to try to time the stock market, since even professionals
cant do it consistently. So one should just buy into an index fund and wait long term.

But is the same true of the housing market? If, for whatever reason, you want to own a home, does it make sense to try to find the bottom? Should you just buy and hold regardless of the current market? Is there an optimum strategy, or even a reasonable one?


Edit: I posted before seeing Little Nicky's comment. He may be right, I'm not sure.

No the same is NOT true of housing market. The market is illiquid (transaction costs are 4-6%) and the assets are not true commodities. The location (school districts, police station, fire department), neighbors, etc. All factor into the price. Each piece of real estate is different from the next and its relatively hard to buy and sell (and time consuming), therefore there can be real discrepancies between the sale price and "theoretically correct market price".

Yeah, but do you know how to find these discrepancies? Is there any reasonable strategy to time the market that is guaranteed better than throwing darts or flipping a coin?

jack07002 said:http://patrick.net/housing/contrib/housing_projection.html

interesting Shiller graph-he sees housing bottoming out in 2011..but before we get there it looks like alot of pain along the way for median prices and sales.The shiller Graph to me is one of the best well done snapshots of how the past and present housing sector/real estate market is doing.

I could see 2011 as the bottom point in terms of this real estate downturn,and a gradual upswing beginning to happen sometime in 2011.You figure with the biggest number of subprimes still to come over the next 2 to 3 years..I think this thing has a while to go.

Schiller does a nice job,he does it all by the book when he thinks the recovery will be=based on stats.He does it all by past history and downturns and how long they lasted,based on past figures and history etc...I am looking myself at buying in 2011.

That isn't Schiller. It's someone who took Schiller's historical data and extrapolated into the future. If these were equity prices, Burton Malkiel would tell you this kind of technical chartist hocus-pocus is nonsense, because future price patterns are not correlated with the past. But is that true of housing prices...? Does anybody really know, or are you all just guessing?

ClaimsGuy said:NorCalSci do you see home prices falling at all and if so how by how much?It depends where you are. In my neighborhood (S.F. East Bay) entry level homes seem to be settling but higher end homes are stable or slightly up. You see it in the time on the market statistics as well, $500,000 homes are on the market longer than $800,000 homes. Entry level buyers are more picky and I don't blame them.

It seems like the Sacramento area has had significant decreases, and some areas near L.A. are down.

I have friends who are shopping for a house. I think when they find one they like, in a good school district, they will buy it. The "investment" aspect is just one part of the equation for most families. People buy homes because they want a home, they want to set down roots, they want to start a family, etc.

The other consideration is interest rates. The economy is humming and while at the beginning of the year there was speculation rates would be cut, that hasn't happened and it is unlikely to happen. Thus, interest rates are creeping up. To new buyers it puts them in a fix. They can wait, hoping prices will go down, but then buying the same house for less money in a couple of years may cost them the same amount or more if rates go up!

I wouldn't buy a house with near-term expectations of gain, but I think if people find a house they like, and they can afford it, and they are in it for the long term, they should do it. There is virtue and value in stability, and most people who buy their first home are very happy about it.

There is risk in buying and there is risk in waiting.

There is risk.

jack07002 said:revheck said:jack07002 said:http://patrick.net/housing/contrib/housing_projection.html

interesting Shiller graph-he sees housing bottoming out in 2011..but before we get there it looks like alot of pain along the way for median prices and sales.The shiller Graph to me is one of the best well done snapshots of how the past and present housing sector/real estate market is doing.

I could see 2011 as the bottom point in terms of this real estate downturn,and a gradual upswing beginning to happen sometime in 2011.You figure with the biggest number of subprimes still to come over the next 2 to 3 years..I think this thing has a while to go.

Schiller does a nice job,he does it all by the book when he thinks the recovery will be=based on stats.He does it all by past history and downturns and how long they lasted,based on past figures and history etc...I am looking myself at buying in 2011.

That isn't Schiller. It's someone who took Schiller's historical data and extrapolated into the future. If these were equity prices, Burton Malkiel would tell you this kind of technical chartist hocus-pocus is nonsense, because future price patterns are not correlated with the past. But is that true of housing prices...? Does anybody really know, or are you all just guessing?

well timing any market never works,but I figure(my own view and opionion) that 4 years from now at least the tornodo amount of subprimes loans will have been reset.No one knows where interest rates will 4 years from now-but I think if any of us want to buy a home in the future we have to set a timeframe of when we think housing will bottom and we will buy.Mine is 2011(based on all the reading and research I've done when I think bottom wil be)of course events over the next 4 years could happen and change that date.Would you mind elaborating on why you are going to buy a house in 2011? What things are important to you about owning a home?

For me, if it was just the investment aspect I would be spending a lot of money on strip malls and apartments right now, and I would never consider buying a single family house. Find the most depressed area of Southern Michigan, Northern Ohio or Indiana and buy, buy, buy... You could own part of a town.

And if yo wanted to get out...it seems that income generating assets are more liquid than equity generating assets...

For other people there are many other benefits to owning their home besides wondering what its value is or eventually will be.

dhobi said:If you search Fortune magazine archives, you will find Shiller talking about real-estate bubble in 2002.

Article from April 2002

Quote:
According to data from Case Weiss Shiller, home prices in San Francisco have been dropping precipitously. In the first quarter of 2001 the average price of a single-family home there rose 4%, but by the end of the year had fallen 7%. "We're seeing a bubble bursting right now in San Francisco," says Robert Shiller, an economics professor at Yale University and partner at Case Weiss Shiller. "We've never seen such a sharp drop, and we're expecting it to fall even more."That article's timing seems to be during the dot com decline in which the Bay Area was hit very hard. This is how the San Francisco bubble proceeded to "burst":

(Median Home Prices for San Francisco)

2002 +9%
2003 +7%
2004 +15%
2005 +12%

So much for flatulent predictions...