September 2, 2012

CNBC: You’re Doing It Wrong in the RBA

Yesterday, we took a look at a CNBC piece on the difficulty of finding a million dollar home in the Real Bay Area, and how badly they missed the real story.  Two days later they tried again, and ran this piece (below) on Friday.  Not even close but no cigar, CNBC. More like in Lodi with little to smoke. 

Take a gander at this piece, clearly written to complement their first article, and discuss whether your like their housing examples or Burbed’s examples.  (Hint: the correct answer is CNBC.  That is if by “correct” we really mean “completely wrong.”)  They had the right idea, but they just couldn’t find the listings that show how awesome the RBA is.

What $2 Million Buys You in Silicon Valley

By Robert Frank and Paul O’ Donnell | CNBC – Fri, Aug 31, 2012 11:21 AM EDT

120901-cnbc-2-saratogaSilicon Valley’s dynamic, tech-based economy has inflated home prices in the area for more than two decades. But lately, thanks to a rash of IPO’s and the mobility of global wealth, relatively modest properties in the suburban towns south of San Francisco have been going for mansion-like prices.

Sales of homes for $1 million or more doubled in the towns south of San Francisco in the past year, passing Beverly Hills and Miami, where the sumptuous palaces snapped up by the rich look more the part.

The current boom is not the result of an avalanche of tech start-ups. Instead, the Valley has been flooded by employees of established companies like Facebook and Google, who enjoyed a personal “liquidity event” when their companies went public in the past few years.

This article is basically the other article, sentences scrambled around, and a few pictures of presentable homes to go with.  There is one and only reason we alert you to this article, and that’s the wretched hive of scum and villainy called the comments.  It’s the usual “Silicon Valley has fine dining, beach, mountains, biking all close by, and the weather is fantastic” versus “Are you kidding, I can buy a house like that for $105K here in East Fumbuck, Nebraska!”

Yes, but then you have to live in a house in East Fumbuck, Nebraska.


Comments (34) -- Posted by: madhaus @ 5:05 am

34 Responses to “CNBC: You’re Doing It Wrong in the RBA”

  1. waiting_for_the_fall Says:

    More tech companies are allowing employees to work remotely and only come in person one week a quarter, or less.
    How are the RBA home prices going to stand up to people living in Fumbuck but working remotely at Google?

  2. Real Estater Says:

    Still waiting for the fall? Good luck!

  3. Real Estater Says:

    The reader comments on that site offers some great responses to those who have been on the wrong side of the real estate fence. Right on!

    >>The valley rocks people. I’ve traveled all over the world and I can tell you this: if you’re a professional in the high tech space, whether in engineering or management, marketing, etc, there is no better place to be.

    >>I live in a rented house near Apple, Cupertino. I can afford to rent the house at 3100 but can’t buy it as it is 1million+. The property tax is like 1k per month alone, but I don’t pay, owner pay it. It is not overpriced. I feel it is underpriced as there were many takers for this house and I had to outsmart others.

    >>According to Zillow the last house (1601 Shirley Ave) Just sold for $2,457,000. The $1,975,000 price was a lowball just to bring in the punters!

    >>who the hell wants to live in Nebraska….Supply and demand folks.

    >> can’t believe people would compared SV with Texas. I’ve been to DFW in June and Houston in July. I wouldn’t wish Texas summers upon my worst enemy. 95F every day, with freak thunderstorms. You can’t be outside for even 60 seconds. Your utility bills are $400-1000 per month depending on how big your house is, and you need to replace the Central AC every 5-6 years because they wear out so fast. Homeowners insurance is very high due to the inclement weather, and anything made of wood rots really fast — like your house. Texas is a miserable dump.

    >>If you need a mortgage to buy any of this, your chances of getting your offer accepted goes way down in this market. Some people do have $2 million cash. Lots of cash-only quick close offers.

    >>LOL @ all the jealousy here. I bought my Saratoga house in 1999 for $625k, and people said it was overpriced. Today it’s worth $1.45MM. Well suckers, have fun in that 100F weather in your $150k Houston house. Or swimming in your flooded out $80k Louisiana house that’s now worth $1. Or paying $500/month in electricity for your $175k Phoenix house that has appreciated 0% in 10 years. (I paid $45 for electricity this last month.)

  4. Real Estater Says:

    Note about the last comment: Another example of RBA price doubling every 10 years on the average.

  5. Real Estater Says:

    By the way, the sample homes shown all look like really attractive deals. There will surely be competition for these homes. 1 to 2 million range is where everybody is at these days. Over 2 million is where the crowd starts dropping off.

  6. waiting_for_the_fall Says:

    How’s that FB stock doing for you? Any more hot stock tips?

  7. JSims Says:

    Well since no job is secure these days and the ability to be mobile is critical to financial survival, I view most real estate as an alligator. If I lost my job tomorrow, at least I could pick up and move to Texas or Florida if I needed work.

  8. Mole Man Says:

    What is interesting to me is that some time ago San Francisco proper was considered a luxury destination with prices higher by expectation. Now the peninsula is about as expensive with not respite in sight. Though there is more land even in the relatively flat bay side areas of San Mateo County, that land has been allocated to single family homes on lots of around 5k square feet each with restrictive rules about the kind of setbacks needed to build even a small second floor. As a result units are still being built in San Francisco because there are plenty of lots with room for more floors, but San Mateo County is locked down. This illustrates dramatically how home values are actually home costs caused by the interaction of strong demand with limitations such as zoning and other development rules.

  9. Real Estater Says:

    #6. You need to keep up.

  10. waiting_for_the_fall Says:


  11. Real Estater Says:

    Remember when people were laughing when I invested in Tracy? It has turned out to be one of the best moves ever made. Check out the chatter on Trulia. Tracy market is super hot right now.

  12. nomadic Says:

    All but one of those responses are from brokers, so of course it’s hot. The other comment is an FHA buyer. ’nuff said.

  13. Alvin Dizon Says:

    There are various references to consider online but the eagerness to find the most reliable is needed for there are scams and frauds willing to do everything for money sake.

    Hi there, “Alvin.” You seem lost. This is a long, long way from Bangkok, where your URL is. Oops, I mean was. –ed.

  14. madhaus Says:

    Zillow home value index for Tracy, CA.

    Oct 2002: $309K
    Oct 2003: $343K
    Nov 2004: $457K
    Nov 2005: $571K
    Nov 2006: $515K
    Nov 2007: $413K
    Nov 2008: $255K
    Sep 2009: $221K
    Nov 2010: $237K
    Nov 2011: $225K

    May 2012: $228K (most recent index)

    So yeah, you can call the latest price movement “super hot” if you don’t mind that it’s increased to, um, 1996 pricing. From 1994 pricing.

    Taking a look at the graphs on Altos Research suggest that the July spike (10%) is drifting back down, like it did on the Peninsula. Note that the MAI, which determines buyers vs sellers market, has returned to buyers. It was only a sellers market for all of 3 weeks (in May). Also the inventory collapsed last November and hasn’t gone up during the selling season at all.

  15. Alex Says:

    Faux Estater spewing BS again.

  16. Real Estater Says:


    Have you ever been out there? One well known guy here has shown as all kinds of graphs. Has it meant anything?

    Rather than sitting in front of your computer, go check out reality and report back to us.

    This is a familiar pattern by now. I report something. People are in denial. Eventually, reality catches up to them. You should know better.

  17. madhaus Says:

    Of course I’ve been out there. It’s a place to pass through as quickly as possible. I was familiar with a particular house on Tennis Lane.

  18. SEA Says:

    You know how this works: The RBA expands and contracts as necessary to take care of everything.

    RE suggests buying in Tracy, so the RBA must expand to include Tracy.

    As always, make sure you are “too close” to the RBA, and not just “close,” because close is only good enough in horseshoes and hand grenades.

  19. Real Estater Says:

    The beauty of Tracy is that it is not RBA, yet it is within an hour drive to RBA. As we know, investments in RBA is bursting at the seams. As a result, any overflow will go to the outskirts. Unlike Stockton, Tracy is not a dump. It is actually cleaner than East Bay. You can buy a very nice property there, and be cash flow positive on day 1.

  20. Real Estater Says:

    >>It’s a place to pass through as quickly as possible.

    The less aware will readily pass by opportunities as quickly as possible.

  21. waiting_for_the_fall Says:

    We are advised to buy FB, 1 month later, the price drops $5/share.
    Now we are being advised to buy in Tracy.
    Is there a way to short housing prices in Tracy?

  22. Real Estater Says:

    Correction: You were not advised to buy FB. You were advised to wait for the fall.

  23. SEA Says:

    Wait for the fall? No more “now is the best time to buy?”

    What is happening here?

  24. Tom Stone Says:

    It’s interesting to see the differences in Bay Area Markets. I’m in the unreal Bay Area (Sonoma County) and $2MM gets you something very nice here these days. Of course, we do have all those tourists guzzling wine at the tasting rooms and then driving…

  25. herpderp Says:

    Yeah, because renting in the Bay Area is such a great deal:

    Unless you just won the IPO lottery, eventually you’ll be priced out. Either you’ll realize that you’re paying $36,000 a year for the privilege of not buying a house in the RBA, and take that money somewhere where there’s decent weather, jobs, and houses you can buy for less than your entire lifetime’s salary.

    People who live in the RBA have trained themselves to think that the extremely high cost of living is worth it for things like sunshine and lots of tech jobs to jump around. The RBA is not meant for families or people who want to settle down. If you haven’t hit the IPO lottery, you’ll eventually get tired of renting from insane homeowners who have to rent out their old house in order to move up to the next one. You’ll get tired of moving every year because the Avalon apartment complex charges a king’s ransom for a shitty-build apartment, and you’ll get tired of living out of boxes. You’ll get tired of your spare money going to security deposits and “pet rent” that you’ll never see again.

    I could have dedicated my life and my paychecks to a mortgage, requiring my entire income and part of my spouse’s (DINK required in the RBA) to pay for each month. I decided it wasn’t worth it. There will always be people like RE, with enough blinders on they could probably be tied up to a carriage and told to prance ’round London and they’d do it.

    You know what, if your reaction to “I have a good mortgage and I live outside Seattle,” and yours is, “Yeah but then you’d have to live outside Seattle,” I ask of you only this: You think living in Tracy and commuting to a stereotypical Bay Area job is better? Really?

  26. herpderp Says:

    19: You fucking crack me up. I’ll be expecting the announcement of your imminent move to Tracy any day now.

  27. very amused Says:

    Housing in the Bay Area: pay more money or pay more commute time. Get a work-from-home dealie with limited face-time, then you can live in Tracy. Roast in summer, tule fog in winter. Housing win! Big, anonymous apartment complexes in MV with annual rent hikes and mucho petty theft? More win!

    Outside Seattle? I am very amused.

  28. herpderp Says:

    Oh, I know, but I can’t really call Redmond “Seattle” any more than I can call Mountain View “San Francisco”. I’m sure you understand.

  29. Sanjay Says:

    I moved here from Seattle last year, and I’m glad I made the move. Everyone knows about the depressing weather over there, but for me the it’s about job prospects for a young person. If you lose your job in Seattle, you are done with. I don’t need to live in a fancy place, so the old 4-plex apartment I’m in suits me just fine. My rent is fairly affordable at $1800. People like to whine because they can’t afford a luxury lifestyle. Nothing is free in life. When they choose to leave, they are trading something for something else. To me, the potential to hit it big is enough reason to stick around. Lots of people have made it happen.

  30. Sunny(vale) Kim Says:

    Someone is in dire need of socks, even in this summer weather.

  31. Crissa Says:

    There is no beauty in Tracy. Less clear days than any other near-Bay Area location except Pacifica. And at least there’s actual beauty there.

    Neighbor across the street that got out at 650 bought a house in Sacramento free and clear with the profit from his house sale here. Better than losing it to the bank… Supposedly they were going to take it this August, so just under the wire.

    I don’t envy him in the least, even if he still has a home appraised for more than mine.

  32. herpderp Says:

    Hmm. The weather in Seattle isn’t terribly unlike the BA: warm dry summers, cold wet winters. The scenic beauty can’t be beat. I took a day-trip down to Mount Rainier last weekend to look at the autumn wildflowers.

    There’s Microsoft, Amazon, as well as offices of places like Google up here. I found a better job that pays more than I was making in the Bay Area, with no state income taxes so I don’t get burned by AMT – again. My mortgage for a third-acre corner lot is less than I was paying in rent for a similar-sized condo that sat right on ECR in Mountain View.

    Add to that, people up here aren’t complete dooshnozzles obsessed with their sports cars and stock options, and I find it a very nice place to live.

  33. Dewane Says:

    Phnom Penh Temple sez: There’s the diff my friend: calling September “autumn”. I’m glad you like where you are, however when somebody slams another place too much, it comes across as bitterness and envy, rather than glad that they live where they live. I live in Oakland and love it up there, but I’ve long given up trying to explain the reasons why.

  34. nomadic Says:

    C’mon Dewane, I bet you like dooshnozzles obsessed with their sports cars and stock options just like everyone else down here in the bay area. 😉

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