Next housing dip? (San Francisco, Oxnard: home, to buy, luxury)

[HappyinCali]

Here is a post I make every time this topic comes up

Look, the market is not going to keep going up indefinitely. It will correct and then it will start going up. The way it has been since the 50s. Here are some facts

- the reason 2008-2010 was so jarring is because it happens extremely rarely. It hadn't happened in decades. Yet people keep referring to it as if that's the standard. The standard recession is much more shallow and less impactful.
- San Francisco is cheap on a variety of metrics when compared to cities like Tokyo, Hong Kong, NYC, London, Sinapore, Paris etc. Global buyers looking for a place to park cash still find SF attractive. LA even more so.
- Bay Area RE is not driven by 25 year olds working at VC financed companies. It is driven by wealthy foreign investors and people who are mid-level execs working at big tech. If you think that Apple, Google and Facebook will not be around then I LOL @ you

Finally,

the vast majority who say that will buy when "the bubble bursts" won't. The "bubble" will not burst when the economy is doing well. And when the economy tanks, and you see your friends and family start getting laid off, everyone will be too worried about being next and the last thing you will do is drop a major % of your savings on a house that's going down in value.

That's how human nature is. That's why you couldn't give stocks or houses away in 2008-2010

[HappyinCali]

And on other thing I have posted before

If you look at cities like HK, Singapore and London as far as prices per Sq ft and as a multiple of Median Income, both SF and LA have a lot more room to go.

SF, specifically is driven up by very strong demand which is met by utterly restrictive building policies. The city is tens of thousands housing units short, due to policies that restrict building heights and limited land. i.e. SF is 7x7 sq. miles and you are only allowed to build up in 1 area of the city. It is not massive demand that has driven prices up. It is lack of supply.

If you analyze the previous bubble, the way things unraveled are

- Bad borrowers were given mortgages they couldn't handle
- Houses were being bought with zero downpayment
- This created a lot of demand for existing housing, so people started building even more houses
- As these bad borrowers became unable to keep up with their payments they started listing their houses, so they could get out
- Since these buyers were no longer looking to buy, sales started to flatten out
- At the same time all these newly built houses became available, flooding the market with even more houses competing for now fewer buyers
- Then foreclosures started to occur and EVEN MORE supply appeared chasing even less demand, which lead to prices crashing


So here we are now.

What's different this time
- Credit requirements are very strict. My wife and I have amazing incomes and work history, but when we bought 2 years ago, we couldn't out less than 20% and we had to jump through a lot of hoops
- There is a lot less leverage on family balance sheets
- The subprime borrower currently does not exist
- The people buying the houses are usually qualified and have big incomes
- despite what fargobound's personal opinion is, SF and LA ARE considered world cities with proximity to world class universities such as UCLA, Stanford, Cal, Pomona, Cal Tech etc. all places that the Chinese aristocracy wants to send their children. They are buying houses and they have a LOT of money
- In cities like SF, there is just very little new supply coming in


What's NOT different this time
- SF is very levered to tech and healthcare. If Tech falters, which it definitely will at some point, (although the magnitude is unclear) prices in SF will come down. How much, I don’t know. However, tech will rebound. All the technology of the future will be built in SV, there is zero doubt about that. If you think about it, the tech “bubble” in the bay area has never burst. Since the 60s, it has only grown
- LA counts even more on Chinese money, because unlike SF, which is the most educated city in America, LA county is actually very uneducated with a lot of poor immigrants and blue collar workers
- If tech falters, LA will get hit much harder than SF, because it lacks critical mass
- Also, areas that are most susceptible to price tanking will be areas like OC, where new construction is more available
- San Diego, Inland Empire and less desirable suburbs of LA will get hammered first and harder, just like last time

Anyway, that's just my $0.02. Like everyone else on this thread, I am guessing, but I have tried to put some thought in my guessing

[04kL4nD]

I think you're vastly underestimating how broke so many people are right now. Wages are stagnant. Savings are low. Household debt is at the highest it's been since 2007 and a lot of it is due to credit card debt (already over $1T) and student loans which are becoming even harder to pay back. The US is currently dealing with two disastrous hurricanes and all it would take is another natural disaster in CA (earthquake, return of the drought, failing of a major dam) to really screw things up here locally. Tech is not as infallible as you're suggesting either, and unless the US does something about skyrocketing health care costs soon, that whole industry could take a tumble as well.

Optimism can't change the fact that the US is in an extremely volatile state right now because of a radical shift in government policy and aims. I am very worried for CA and the rest of the country and you should be too.

[HappyinCali]

Originally Posted by 04kL4nD

I think you're vastly underestimating how broke so many people are right now. Wages are stagnant. Savings are low. Household debt is at the highest it's been since 2007 and a lot of it is due to credit card debt (already over $1T) and student loans which are becoming even harder to pay back. The US is currently dealing with two disastrous hurricanes and all it would take is another natural disaster in CA (earthquake, return of the drought, failing of a major dam) to really screw things up here locally. Tech is not as infallible as you're suggesting either, and unless the US does something about skyrocketing health care costs soon, that whole industry could take a tumble as well.

Optimism can't change the fact that the US is in an extremely volatile state right now because of a radical shift in government policy and aims. I am very worried for CA and the rest of the country and you should be too.

We always overstate the current problems. There are absolutely pretty bad things happening in the country right now and a lot of people are in bad financial situations.

However, think about virtually almost any decade in the 20th century. In the 70s, we had massive hyper inflation, gas lines, war in Vietnam with tens of thousands draftees getting blown up every year, Soviet Union, Race riots.

My Goodness. Can you imagine, if inflation was 30%+ today and you couldn't get gas? And China invaded Taiwan? And half of the boys in your HS class were in Afghanistan? The internet would literally explode. People would be dying of sheer angst on the streets. Pearls will be cluched by the BILLIONS! The interest rates were 20%!!! The Great Inflation Of The 1970s

Yet, here we are... Can you imagine how bleak and hopeless things looked back then?

We literally live in the best times in modern World History, currently. Name one period of 40 years where there was more peace, less crime, less poverty in the the history of mankind. The 1980s through today have been amazing. It might not seem like it, because you are bombarded daily by DEATH AND BOMBS AND POVERTY AND REFUGEES headlines, but if you think the world has ever been nicer than now... come on.

Name one decade in America you would rather live in, if you were a gay minority? Name one decade you would rather live in, if you were ANY minority in the US?
Name one decade you would rather live in, if you were in the majority of the developing world? Name one decade you would rather live in, if you were a Chinese city dweller?

[Perma Bear]

Originally Posted by HappyinCali

We always overstate the current problems. There are absolutely pretty bad things happening in the country right now and a lot of people are in bad financial situations.

However, think about virtually almost any decade in the 20th century. In the 70s, we had massive hyper inflation, gas lines, war in Vietnam with tens of thousands draftees getting blown up every year, Soviet Union, Race riots.

My Goodness. Can you imagine, if inflation was 30%+ today and you couldn't get gas? And China invaded Taiwan? And half of the boys in your HS class were in Afghanistan? The internet would literally explode. People would be dying of sheer angst on the streets. Pearls will be cluched by the BILLIONS! The interest rates were 20%!!! The Great Inflation Of The 1970s

Yet, here we are... Can you imagine how bleak and hopeless things looked back then?

We literally live in the best times in modern World History, currently. Name one period of 40 years where there was more peace, less crime, less poverty in the the history of mankind. The 1980s through today have been amazing. It might not seem like it, because you are bombarded daily by DEATH AND BOMBS AND POVERTY AND REFUGEES headlines, but if you think the world has ever been nicer than now... come on.

Name one decade in America you would rather live in, if you were a gay minority? Name one decade you would rather live in, if you were ANY minority in the US?
Name one decade you would rather live in, if you were in the majority of the developing world? Name one decade you would rather live in, if you were a Chinese city dweller?

I'd rather live in the 40s-50s where I could afford to actually own a house adjusted for inflation even if I hadn't polio.

[HappyinCali]

Originally Posted by Perma Bear

I'd rather live in the 40s-50s where I could afford to actually own a house adjusted for inflation even if I hadn't polio.

Sure. If you were a white male and hadnt been killed in WW2

[Perma Bear]

Originally Posted by HappyinCali

Sure. If you were a white male and hadnt been killed in WW2

Considering most white males didn't die in ww2 (less than 2% or so) I'd say the odds were good. Of course I'm Chinese so take that with a grain of salt. Better than the odds of owning a home while being 25 with 162k.

[bmw335xi]

People falling into human nature is why most people arent wealthy. It's why most people who actively invest or trade stocks will lose money. Most people let their emotions get the best of them whether it is making them scared to buy when everyone is selling or vice versa. That's how I got my money (dont want to say wealth as I'm not a multi-millionaire, but for my age I'm much better off than most seniors). Crashes will happen, if you understand that, you won't be hiding when you should be looking for opportunities.

[silverkris]

Originally Posted by HappyinCali

Sure. If you were a white male and hadnt been killed in WW2

And since the Perma Bear is Asian, he probably couldn't buy into a lot of neighborhoods thanks to race covenants in many areas back then.

[bmw335xi]

Originally Posted by silverkris

And since the Perma Bear is Asian, he probably couldn't buy into a lot of neighborhoods thanks to race covenants in many areas back then.

Perma Bear is NOT Asian... we discussed types of Asian cuisine in a different thread and he didn't even know what Hot Pot was... any Asian regardless of Japanese, Korean, Thai, Cambodian, Chinese, etc would know that.