SF beats NY: Few in Bay Area qualify in housing rescue plan
Few in Bay Area qualify in housing rescue plan
(02-22) 17:57 PST — More than 90 percent of Bay Area mortgage holders cannot qualify for the low-cost refinances included in President Obama’s housing rescue package, according to an analysis of loan data from real estate service Zillow.com.That is the smallest percentage of people eligible for the refinances anywhere in the country, Zillow said.
“The Bay Area is being hit by the fact that it’s high-priced, and therefore the loans that were made around the peak years were not conforming (meaning they were above $417,000), and secondly, that (the housing market) has gone into such sharp decline that many homes are underwater by more than 5 percent,” said Stan Humphries, vice president of data and analytics for Zillow in Seattle.
…
Out of 117 metropolitan areas reviewed by Zillow, the Bay Area regions ranked at the bottom in terms of what percentage of mortgages would qualify – behind such pricey areas as Honolulu and New York, and also behind such foreclosure capitals as Stockton, Las Vegas and Florida.
Hurray! We, the Real Bay Area beats NY! Awesome!
I was hoping for this, and finally it came true! Awesome news all around!
Let’s bust out the champagne! (From Napa?)
February 23rd, 2009 at 11:07 am
Is this really a surprise to anyone that this plan does not apply to the BA?
The only thing that will help homeowners that bought during the bubble will be principal reduction. Unfortunately for the taxpayer, I think the government will implement a second housing rescue plan after the first one is shown to be ineffective that will include a principal reduction component for first-time home owners. Let’s just hope the plan isn’t widespread and helps the flippers and “investors”.
February 23rd, 2009 at 12:01 pm
It’s all a way to channel taxpayer money, through F*ckedBorrowers, to the credit card companies, car loan companies, and banks.
February 23rd, 2009 at 12:18 pm
I doubt a wide spread PR movement. The banks are even more delusional that many of today’s organic sellers. Banks will risk 20-40% of Santa Clara county walking before they make real concessions.
The benefit to most bubble buyers with a future foreclosure is that they are going to be as common as Camerys. Since there are not enough buyers at any price, I wouldn’t be surprised to see a foreclosure forgiveness program for those who bought between 2003-07 and walked. If at least de facto foreclosure forgiveness by many lenders. It’s already happening in the rental market.
February 23rd, 2009 at 12:34 pm
CB: That’s a great point. Walking away will have less stigma when it’s common.
February 23rd, 2009 at 12:58 pm
I bet there are many people who bought between 2003-2007 and put money down feel like suckers about now.
February 23rd, 2009 at 1:07 pm
I want to see a principal-reduction program that takes money right back from the flippers and crooked mortgage brokers who caused this snafu. Tax real-estate profits at 95% retroactively for the past five years.
February 23rd, 2009 at 1:14 pm
sonarrat – why not just force anyone who moved up in the last five years into bankruptcy? Cut out the middle man. I guess that way you could at least recover a little cash from the ones who were smart enough to sell without buying another place. If they haven’t lost that money in the stock market since then.
Tough crowd here today.
February 23rd, 2009 at 1:16 pm
OUCH – Microsoft asks laid-off employees to give back some of the money they got after discovering a glitch that caused MSFT to overpay severance:
http://www.google.com/hostednews/ap/article/ALeqM5hvfL0sYDKOlh4NGbr6sX0Xhp5MGQD96HFCBG1
February 23rd, 2009 at 1:43 pm
I bet there are many people who bought between 2003-2007 and put money down feel like suckers about now.
If you compare returns on a RBA house to any other investment during this period, RBA wins by a mile. The only alternative with comparable gain is gold, which has zero utility value to the typical investor.
February 23rd, 2009 at 1:45 pm
Microsoft asks laid-off employees to give back some of the money they got after discovering a glitch that caused MSFT to overpay severance
What if I say I already spent it on dinner?
February 23rd, 2009 at 2:28 pm
If you compare returns on a RBA house to any other investment during this period you’re hosed unless you have one of 50 houses in 94301.
February 23rd, 2009 at 2:32 pm
#11,
Why don’t you ask madhaus if her house is worth more than it was in 2003? So far, only the 15% icing on the cake (that was there only briefly) is shaved off.
February 23rd, 2009 at 4:49 pm
I bet there are many people who bought between 2003-2007 and put money down feel like suckers about now.
I know several. Three in fact. All are under water and one has lost his job.
But hey. It’s Silly-con valley. All smiles and optimism here.
February 23rd, 2009 at 5:11 pm
nomadic, palo alto, menlo park and los altos, all did extremely well 2003-2008, assuming you sold in 2008. in fact, some of the weakest properties in these areas performed best, as folks rushed to purchase RBA at any cost.
I am not anticipating a mass wave of foreclosures, and most of these recent buyers will have no reason to sell. but, for folks still holding who think they will need to get out, they get more screwed every day you wait for the market to turn. I’m pretty convinced we are heading back to 2001 prices – or lower (inflation adjusted).
February 23rd, 2009 at 5:22 pm
#14 – that’s a big assumption (that they sold – and don’t forget the 6% back-end transaction cost). I agree with the second part of your post. Anyone who holds will have to stay for a decade to recoup what is being lost every day.
February 23rd, 2009 at 5:24 pm
STEVE: Good points.
Entry level PA has begun its price decline.
http://johnfyten.com/articlesmidrange.html
February 23rd, 2009 at 5:31 pm
zanon, palo alto price reductions are across the board, and once the spring bounce doesn’t, they will accelerate. buying psychology has turned; eventually sellers will recognize this too.
February 23rd, 2009 at 6:04 pm
If you compare returns on a RBA house to any other investment during this period, RBA wins by a mile. The only alternative with comparable gain is gold, which has zero utility value to the typical investor.
Oh, not true at all! You can sell the gold and buy whatever you want. I also made a tidy sum by betting that the bubble would pop. (Shorts and put options are wonderful things). You can invest in the downside of anything, just like you can invest in the upside.
The key is, you have to rationally think about what the market is doing, and not just hope that your house gets more expensive.
February 23rd, 2009 at 6:06 pm
Zanon,
That’s a very good article. I agree with his observations and sentiments, much of which I’ve shared here previously. Here’re some excerpts I think are particuarly well written:
So why buy a home in such uncertain times? I could tell you something theoretical that sounds suspiciously like a bumper-sticker slogan—”Uncertainty is the buyer’s best friend”—but that’s a tough sell, because buyers always prefer certainty and most won’t make a move without it. Ironically, certainty is a false friend to the buyer because it turns a buyer’s market into a seller’s market, but conventional wisdom and native caution require that the buyer wait until Yahoo! Real Estate says homebuying is socially acceptable again.
I could also tell you that I put my 2008 IRA contribution into November 2008′s extremely uncertain stock market instead of spring 2009′s possibly slightly less extremely uncertain stock market, not because I know more about the stock market than the next guy but because real estate has taught me that markets over-react, going down as well as up. Yes, maybe I’ll take a beating in the short run, but I’m in for the long haul, and I’ll be there to enjoy the run-up when Yahoo! Finance says stock buying is socially acceptable again.
Yes, friends, I could tell you all that but, instead, I’ll simply point to the average sales price trend line on the chart, especially to the low point in late 2001. Those of you who weren’t in the local real estate market then, and perhaps weren’t even in the area, will be blissfully unaware of the overwhelming feeling prevalent in Silicon Valley that the good times were over, for a long time and possibly forever, and that the bad times stretched before us like a vast and limitless Sahara of bust. Yes, most of us fell into the trap of thinking that the tech bust was different—just as the tech boom had been different—because, like the boom, it would never end. You might think the transitory nature of the just-ended boom would have taught us a lesson, but the famous last words of every bust as well as boom are always this time it’s different!
So in 2001 most of us punished ourselves with the grim realization that the Valley had really bought it this time, and years and years of it. Yet by late 2001, just when things looked their darkest, homes began selling briskly for the first time that year. Why? Because by then enough sellers had finally convinced themselves that this time it’s different! just as enough buyers had finally convinced themselves no it’s not! or even if it is, at these prices I don’t care! Because, as any agent who holds an open house in a midrange neighborhood can tell you, most people like these neighborhoods and many would like to put down roots in them.
February 23rd, 2009 at 6:08 pm
mtv-renter says,
>>Oh, not true at all! You can sell the gold and buy whatever you want.
The point here is, while your money is in gold, you cannot do anything with it. To the contrary, while your money is in real estate, you can live in it. One has zero utility value; the other has 100% utility.
February 23rd, 2009 at 6:18 pm
RE, your advice used to be, “buy now because prices are continuing to rise.” Now it is, “buy now, because prices will soon rise.” You seem to be overlooking the fact that prices can indeed move in another direction.
Obviously, the market will eventually recover (in nominal terms), but there was a huge difference between buying in 1990 and 1994. In the Pasa Robles thread there was a 1989 Los Altos buyer who is barely break even in inflation adjust terms 20 years later. Similarly, had I followed your advice on your Dec Ramona recommendation, I would have overpaid by 22%. (Had that property been offered in August, a buyer could have overpaid by an astonishing 41%.)
Our economic downturn is just getting started. Sure I may mistime the bottom, but I suggest that prospecitve sellers (you know who you are and so do your neighbors even since you parked that storage pod in fron to your advice) better heed that advice and get out while they still can.
February 23rd, 2009 at 6:19 pm
The author of the link in #16 has quite an interesting write-up on Palo Alto. Some excerpts:
- Palo Alto is a tough place for buyers, even in a normal market. In a hot market, Palo Alto rockets off and reaches a higher orbit. Palo Alto is one of the two or three most competitive real estate markets on the Peninsula, itself an extremely competitive market. So what does “extremely competitive” mean in plain English? It means that “I’d like to live in Palo Alto as long as I don’t pay too much” loses every time to the one buyer in five, ten or twenty whose mantra is “whatever it takes, I’m going to buy in Palo Alto”. Whether real estate is hot or cold, the harsh reality is that buying in Palo Alto has become like getting into a top university: it takes an exceptional drive and willingness to sacrifice that, by definition, only a few people have. That’s what “extremely competitive” means: many are called, few are chosen.
February 23rd, 2009 at 6:58 pm
the author of link 16 is one of the best agents in the area. his description of palo alto mania was quite accurate in the springs of 06, 07 and 08. Given that there are 60 PA homes that have reduced their prices, and 112 that have been listed for 30+ days (and are not pending), I suspect he would revise his opinion on the current level of competition. A 200+ unit inventory isn’t the normal state of affairs, just as an inability to fill a freshman class isn’t the mark of a great college.
February 23rd, 2009 at 7:33 pm
johnf is a great agent – however, see his discussion on possible housing boom in 2003/4 on his site. he said there was no bubble, just like all other agents there, so he is not god, in case you were wondering.
#19: his comments on uncertainty is BS. the value of house is function of the house as well as the value of dollar, the later is higher in days of uncertainty (that’s why there is deflation!). so both buyer and seller will agree on lower $ these days. so uncertainty is no one’s friend or foe, its just another variable.
he just confirmed the widely held view on this forum – ALL markets will correct, slowly but surely. low end corrected quickly due to higher mobility and foreclosure, high end will follow too. — so says master of obvious!
February 23rd, 2009 at 8:22 pm
sv_nembie, great points.
it is interesting how few agents are willing to discuss 90-94. I lived in palo alto then, and I’m pretty sure it hasn’t gotten any more special. I wonder how john would explain what happened to prices?
February 23rd, 2009 at 8:32 pm
John’s an realtor, and he’s been in this game for a long time.
Pity the current housing situation is utterly unprecedented in the US. (Japan went through this in the 80s and is still going through falling RE prices, 25 years later)
February 23rd, 2009 at 9:14 pm
zanon – Nice to see you quote this realtor’s articles. I brought attention to his website a couple of times a few months ago, and I continue to think his work on local neighborhoods especially Eichlers is well worth the read – even though he seems happier publishing articles about people’s mindsets on a weekly basis…
February 23rd, 2009 at 9:28 pm
Here is another one to watch: 245 Mt. Hamilton in Los Altos. This one was listed a month ago for $1.749M. True walking distance (about 3 long blocks) from downtown Los Altos, a street with many nice homes, 4 bdrm 2.5 bath, 10K sq.ft lot. On the negative side, Mt Hamilton cuts through from Los Altos Ave. all the way to San Antonio so it’s a bit of a busier street and this place had a funky backyard that was all cement patio and somewhat oddly shaped. Still, it’s a far cry from Paso Robles from a location standpoint and just re-listed for $1.649 after 28 days on the market.
February 23rd, 2009 at 9:39 pm
re#22 – I think this part of the link is most interesting:
Part of the considerable Palo Alto mystique is the claim that it’s a better investment than its neighbors. Buyers and agents say it gains value faster in a hot market and holds its value better in a declining market. Unfortunately, the numbers going back to 1992 say they’re only half right: Palo Alto takes off faster and harder in a hot market, but it comes down just as hard and fast when the market slumps. It’s called “reversion to the mean”, but apparently most people only remember the thrilling ride up. That’s a useful insight into market psychology but not into the Palo Alto market. Until they find oil in every Palo Alto backyard, buy here because it’s a wonderful place, not because it’s a bullet-proof investment.
It might answer your question in #25.
February 23rd, 2009 at 10:31 pm
DreamT: I think it was your earlier post who introduced me to him! Yes, I like his stuff. Don’t agree with it all, but I do like it.
Nomadic: Right. John does not claim that PA prices never go down, just that it always trades at a premium to surrounding areas.
Losaltosrenter: Not a bad house. Sold in 06 for $1.6M. (increasing property tax by 20%). On the market 2-3 years later. A flip, or did someone just get fired? Good luck getting it to rent for the $8K the mortgage payment is though. Comparable houses are available for $3K-$4K.
At $1.649M, it’s just up 49K in 3 years — that may cover closing costs.
February 23rd, 2009 at 11:00 pm
Steve says,
>>RE, your advice used to be, “buy now because prices are continuing to rise.” Now it is, “buy now, because prices will soon rise.” You seem to be overlooking the fact that prices can indeed move in another direction.
My position has always been to buy for the long term, and ignore short term fluctuations. What has changed?
>>had I followed your advice on your Dec Ramona recommendation, I would have overpaid by 22%.
What??? I advised you that it’s a very good property in a choice part of town. I did not tell you to offer a particular price. What stopped you from offering a price that is satisfactory to you? You could’ve been the one living in that house right now if you had done what the buyer of that house did, instead of talking about it here as sour grapes.
>> but I suggest that prospecitve sellers (you know who you are and so do your neighbors even since you parked that storage pod in fron to your advice) better heed that advice and get out while they still can.
With history as a guide, this is the time to double up rather than withdraw.
February 23rd, 2009 at 11:11 pm
there are no sour grapes here. had I liked it I would have bought it. we talk about it because it is prima facia RBA and one of the few data points to guage the current state of the market. that, and it sold for a 2001-2002 price.
February 23rd, 2009 at 11:15 pm
My position has always been to buy for the long term, and ignore short term fluctuations. What has changed?
maybe that you fail to follow your own advice? your posts about your search for a second house discuss market (and interest rate) timing constantly. if you believed what you write you should be scrambling to get in fast, before the spring buyers, emboldened by “consensus” economic predictions, flood back.
February 23rd, 2009 at 11:17 pm
A novel idea being lobbied in Japan: Use government funds to buy up stocks to bolster the stock market. What’s next? Government buy up houses?
February 23rd, 2009 at 11:17 pm
Steve, I’m gonna let you in on a little secret. Real Estater is full of it.
February 23rd, 2009 at 11:23 pm
First time I’ve seen “well written” used as a euphemism for “shamelessly bullish.”
February 23rd, 2009 at 11:27 pm
Steve says,
>>maybe that you fail to follow your own advice? your posts about your search for a second house discuss market (and interest rate) timing constantly.
I bought my current home 6 years ago, when you were also looking. Who is the one failing to act here? I also intend to live in my home forever. The value of my home is almost 4X the median value in the county, so it’s like I’ve already bought 4 homes.
I never said I’m timing the market. I only said I didn’t want to buy before seeing Obama’s housing plan. There was talk of a 4% interest rate at the time, so it was perfectly reasonable for me to see how things would turn out. These are all factors due to government interventions instead of market forces.
February 23rd, 2009 at 11:29 pm
“First time I’ve seen “well written” used as a euphemism for “shamelessly bullish.””
Really? I could have sworn its been done here before…
February 23rd, 2009 at 11:43 pm
I bought my current home 6 years ago, when you were also looking.
I think that’s fantastic. If people had adopted this philosphy instead of becoming specuvestors our real estate market and economy would be much healthier.
I bought 13 years ago, and while I was not in a position back then to buy the house I wanted to spend the rest of my life in, I’m not sorry I didn’t trade up in 04 or 05.
February 24th, 2009 at 12:14 am
>>I think that’s fantastic. If people had adopted this philosphy instead of becoming specuvestors our real estate market and economy would be much healthier.
Well, one of the reasons I plan to stay in this home is because I cannot find a better investment on a perpetual basis than owning this home.
February 24th, 2009 at 9:25 am
Johnf does bring up many decent points, and is certainly more informative than your average realtor site, but it seems clear to me in reading his writing that he’s still giving you ‘the sell’, regardless of your best interest.
He’s pretty honest, but overlooks a couple of things:
1) He compares it to the ’01 market downturn, and we’ve gone on at length here on why this one should be much worse for housing. It’s a national housing-led recession…
2) He implies that a moving say 5% or 15% down in price to 2005 comps (where he now values homes when asked) is just a little slice off the top for sellers, and that pent up demand will quickly pick up these homes, and further implies that means things will be hunky dory in the future. Well, to that I put up #17 – steve has nailed it, and when the psychology turns, you can get a sharp turn, and it’ll be a bloodbath. Maybe, maybe not, but he doesn’t want to admit it’s a possibility, just like he doesn’t talk about the 90-94 downturn.
Only comparing to the last mild/brief recession is deceptive. This is far worse and everyone knows it, so I smell something fishy.
Look, he knows that some people ‘have’ to buy every year, just like some people ‘have’ to sell. He makes commission no matter what, as long as there is a transaction. He is just trying to make desperate buyers feel better about buying, even though they’re probably catching falling knives this year – all of them. And he wants SOME sales this year to have an income…
Actually, that’s just fine – there’s nothing wrong with providing some comfort to folks who just aren’t getting a very good deal this year, and frankly may be underwater for a few years, but if they can ignore Zillow after their purchase, then can live peacefully in a neighborhood they like.
But it doesn’t mean I can’t confidently stand here and say those buyers overpaid.
I think the buyers should only be putting out low-ball offers at 2001 pricing and force the correction to occur NOW, instead of waiting a few years for it (or overpaying). Lock in lower property taxes and mortgage payments now.
As he says, though – it depends on who blinks first.
February 24th, 2009 at 10:27 am
A. Lewis: He’s spinning alright, but he also has some data, and his spin is easy to ignore. It’s not like he’s *just* spin
February 24th, 2009 at 10:33 am
#41: also in 2001, people earned more in the valley. houses were still priced low. so, although economy went bad, house_price/income was not too high. now, this multiple has gone way past the average. on top of that economy is much worse than 2001 recession. so, you have double beating.
February 24th, 2009 at 10:48 am
#42 – absolutely agree – didn’t mean to come off shrill again. He sure sounds preferable to 90% of the realtors out there, so let me give him some respect.
Just for addressing the issue at all, big props.
February 24th, 2009 at 12:09 pm
Okay, is 94087 still RBA or not? I just made the mistake of visiting my house on Zillow. Holy housing bubble pop, Batman! According to the Big Z, I’ve lost another $70K in equity while I was busy taking out the recycling! How many flat-screen TVs is that? Talk about monthly equity burn, this is an equity cogeneration plant! My house is losing value even faster than the whole zip code! The graph for 2009 looks like some sort of quadruple diamond run that only a BASE jumper would love.
Seriously, according to Zillow, my house is back to January 2007 pricing, and nowhere to go but down. Remember, the cheaper areas are heading toward 2001 pricing. The mid to high areas are now following, and the high ones, well, they’re next.
As 94087/CUSD goes, Palo Alto will follow. I said it last May and I’ll say it again.
February 24th, 2009 at 12:19 pm
>>my house is back to January 2007 pricing
That’s terrific news considering the Dow is at Jan 1997 pricing.
February 24th, 2009 at 12:33 pm
# 9 If you compare returns on a RBA house to any other investment during this period, RBA wins by a mile. The only alternative with comparable gain is gold, which has zero utility value to the typical investor.
If I put 20% down on 1 mil home in 2005, and today the home is worth 800K this is winning by a mile?
February 24th, 2009 at 3:41 pm
If I cherry pick the best buy low and sell high points for any asset class, it will outperform all or almost all other asset classes, because I was cherry-picking. The ’03-’07 period for RBA real estate is the single largest 3 year gain in it’s history.
The potential returns from day-trading are almost as good as the potential returns if you pick the correct number on the roulette wheel every time!
Again – I suggest Vegas instead of E-trade, because you’ll have more fun while losing money, and you’ll support the hardworking folks in Vegas.
I like blackjack because you can play for a solid hour, get some free drinks, and the house odds are only about 52%/48% in their favor. Decently priced entertainment if you like that sort of thing.
Poker at home with friends is even better.
February 24th, 2009 at 8:01 pm
Only one more day before “Operation Austin”. The closer I get to pushing the button and getting out of here the more I realize how dumb it is to consider buying a house here.Its ridiculous and I’m amazed 50% of the residents here haven’t jumped ship.The quality of life here is awful. I should’ve done it sooner. I’m sure people like RE will be here for a long time waiting for their homes to “pay off”. That’s fine. I will be living life on better terms and doing so sooner. I will relay my experiences after I get back.
February 24th, 2009 at 8:25 pm
bob, I like austin — great bbq, fun music scene, friendly girls — but, seriously, SF and the RBA are better places to live (assuming you have the jack).
I could make an argument for Chicago and Seattle, weather excluded, however that is too big a caveat. perhaps global warming will help out here. NYC is better by many metrics, but the cache required for a proper lifestyle dwarfs what is needed to scrape by here.
best of luck with the operation, and if you are up for a 50 mile drive to lexington, perhaps you can report back on the best BBQ in Texas.
February 24th, 2009 at 9:44 pm
Bob,
It’s not that standard of life here is bad; it’s how you live your life that’s bad. You choose to live in a less than stellar town, and commute to the other side of the Bay for work. If you do the same in Austin, life wouldn’t seem any better.
February 25th, 2009 at 7:54 am
With optimal strategy, the house advantage at blackjack under Vegas rules is only about 0.4%. (In other words, you should expect to lose $4 for every $1000 you bet.) And that’s if you don’t count cards.
Me, I prefer video poker (0.5% house advantage for a 6/9 Jacks or Better pay schedule), but you’re more likely to come out ahead in the short run at blackjack.
February 25th, 2009 at 7:58 am
How many diamonds is simply skiing off a cliff? Some of the runs at Snowbird are so perilously close to vertical that it seems to me that to add another diamond would require free fall under a downdraft.
February 25th, 2009 at 3:19 pm
Austin has one of the highest rental vacancy rates in the country at nearly 16%:
http://www.cnbc.com/id/29350086?slide=2
No investor is going to buy there.
February 25th, 2009 at 3:26 pm
Austin Texas has one of the highest rental vacancy rates in the country at nearly 16%:
http://www.cnbc.com/id/29350086/site/14081545?slide=2
Does anybody want to invest there?
February 25th, 2009 at 3:43 pm
Prof, get down with craps. It’s the only way to roll.
February 25th, 2009 at 3:55 pm
steve: Although the line bet with double odds is also pretty good (0.6% house advantage), I prefer games that require more strategy. Also, casino comps are far more attractive with video poker, relative to the expected loss: at most casinos, video poker is lumped in with slot machines, which range up to 10% house advantage even at high denominations.
February 25th, 2009 at 3:57 pm
Because, you know, nobody buys houses to actually live in anymore….