Median Homes for the Bay Under $300K (middle-class, foreclosure)

[ImRandy]

Originally Posted by clongirl

...do you honestly think that they feel great and relieved about overpaying by 500k even though it's their "forever" home?

If they bought the home they wanted and could afford I'm pretty confident they aren't thinking about it at all or at least very little. We bought in December, is it worth less now? Yes. Do I really care? No. We bought a house we're happy with and can afford and most importantly intend to stay in. The market value of the house only matters when we go to sell it. Since we're probably a decade or more away from that it's not even worth thinking about.

Now if we bought a house we really couldn't afford and were gambling on refinancing then yes, we would probably be freaking out.

[PeixeGato]

Originally Posted by ImRandy

If they bought the home they wanted and could afford I'm pretty confident they aren't thinking about it at all or at least very little.

Wouldn't this depend more on their individual personalities than the amount of money they have in the bank or whether or not they could "afford" the house they bought? We're talking about emotions here, so each person reacts differently, regardless of how much money they have.

[clongirl]

You need to realize also that most people with wealth had a lot of wealth via stockmarket..I know that most people have lost +- 40%..many companies are also not matching their 401ks anymore either. I know we lost a bundle of our investments/retirement accts just like most of the population.

My brother is "upside down" on his mortgage in "forever" house in Sacramento (no, it's not Piedmont or Palo Alto) but the feelings are pretty much the same for all people that have overpaid. It's not a feeling that sits well, whether you intend on selling in 20yrs or not (life circumstances change and life cannot always be certain) .. Plus, you just don't know how long you will be overpaying on that house..We don't know for a fact that that house will ever be worth what you paid..even in 20 yrs. Of course we all hope that there will be a recovery, but it's not gonna happen for a very long time imo.

[hsw]

Fairly meaningless data as too few actual transactions in past 6 mos in desirable parts of SF Peninsula to know what prices are

Everyone knows there's now effectively no bid for >>$2MM houses on Peninsula or City; question is whether prices will be ?40-50% lower than peak '07, early '08 prices when sales start happening

Upscale SiliconValley suburbs are a tougher mkt to figure out in terms of price vs median income data as many affluent engineers and executives have relatively modest salaries but have periodic windfalls from stock or options sales, and many choose to buy houses with cash for primary long-term shelter, not as a quick flip trade

Also, many affluent in SV are fairly conservative financially, so some who can easily afford to buy with cash will simply rent as they wait for prices to correct (upscale housing tends to deflate long after the stock market)....

S&P 500 is at levels last seen in '97 or so....no reason why housing prices in elite suburbs around PA won't correct to similar levels....but housing often takes ~5yrs to bottom (recall '89 peak in CA only bottomed in '94 at some 40% cheaper)....and early '90s didn't have a serious credit crisis of today's magnitude

[Ultrarunner]

Originally Posted by clongirl

I totally disagree with you Ultrarunner..A house IS NOT an investment.. It's a just a place to live, just like a car is something to drive. I hate to say it but you sound like a real estate agent or broker (are you?)! This is why people stretched (even when they didn't have the money/income). This is the same mantra that brainwashed the entire Bay Area..the entire country.."better buy now, or you'll be priced out forever", "real estate only goes up!" is what they said for well over ten years! It's the same line that was pumped up the whole housing bubble to begin with.

I don't care if it's Palo Alto or Orinda, San Francisco, or even Piedmont. The same fundamentals of economics still holds true. Median income=median home price. Are you aware that incomes haven't risen to keep up with the house prices? Those fundamentals were skewed because the banks (well we all know what they did by now!) The economy affects people that make 50k a year, the exact same way as it affects the guy that makes a million a year. If you overpaid, overspent, ran up the credit cards, and your job is on the chopping board, then the problem is the same for both.

Not that long ago, San Francisco was the place where prices would never go down..well, now they are. Then it was San Mateo or other areas in the South Bay/Peninsula..well prices are coming down there too. The problems are just beginning in these places..and I'll bet you that it'll happen in Piedmont as well. No place is immune.

Nobody is doubting that Piedmont is nice but that 3 million dollar house might only be worth 2 million in a year's time. Why would a "smart, wealthy" person with all this cash take such a ridiculous risk when perhaps the house might not be worth what they paid in a year's time? I know some VPs in the Palo Alto area that are very worried about the status of their jobs..what makes Piedmont immune to the same problems the rest of the country is facing?

No, I've never been a Real Estate Broker or Agent... I did take the test once and passed it on a dare because I was tired of people in the business telling me how hard it was... but no... I never sent in the money to get my license.

By investment, the family in Piedmont I referred to specifically said he was "Investing" in his families future and that is why he sold his beautiful home in Kensington for his Piedmont Fixer.

As I mentioned, he and his wife put tremendous value on Piedmont's excellent public schools and very low crime rate. They bought now because their oldest child will start school next year and they wanted to be settled. They were planning on having their children attend Head-Royce School in Oakland... tuition per child for the 2008-2009 school year (USD):

Lower School (K-5): $19,400
Middle School (6-8): $21,600
Upper School (9-12): $27,000

http://www.headroyce.org/page.cfm?p=1610

Piedmont has Zero registered sex offenders, Zero rapes and Zero assaults per City-Data.com stats for 2007

I work in the field of Medical Engineering and surrounded by Doctors and Registered Nurses... neither group has seen any significant income declines... Several of the Doctors are actually expanding their practices and have multiple locations because they are very good at what they do... Of course anything is possible, but the fundamental economics of Medical Professionals continues to be very strong.

The reason smart wealthy people are willing to invest a lot of their cash in a home that my be worth less next year is because they have factored in the cost of educating their children in top notch schools from Kindergarten through High School... you know the saying... Location, Location, Location... you've got to live somewhere. Desirable Real Estate has historically done well. Check any online Real Estate Listing site and you will be hard pressed to find more than 25 or so listings for zip 94620

I live in Oakland and the only two families in my neighborhood with small children both sold in the last two years solely because they wanted better schools for their children and didn't want to spend big money on private tuition... one moved to Piedmont and the other to Orinda... Lafayette and Moraga didn't make the grade as far as they were concerned and crime was a non-issue.

Investment means different things to different people... providing top notch schools for your kids is an investment in their future... but, you're right... anything can happen along the way... I would never advise anyone to "Stretch" or buy beyond their means... the least I've ever put down on a property was 20%... People I've seen get into trouble almost universally bought with no money down or they used their home as an ATM. The home across the street was refied 6 times in 8 years... they lost it when they couldn't refi anymore.

Whether your home increases or decreases in value really doesn't have much impact unless you plan on selling or refinancing.

I've lived through several Bay Area Real Estate cycles of boom and bust and Real Estate has always come back... All of my properties are still worth more than I paid except the last one which is close to even... when prices got crazy, I decided to opt-out.

My tenants benefit from having a stable Landlord and I benefit by having almost zero turn-over... When everyone was raising rents, I didn't... I'm looking at everything long term and the only area I've had real losses has been my company sponsored 401k... if only I could have put that money into income producing Real Estate for the long haul.

PS... just for the record... I've also never sold a car for less than I paid for it... true, I've only bought one new vehicle in my life and still have it... and all of my other cars were bought used... I drive them for a few years and sell them for more than I paid... and yes... some are investments like my 1905 Curved Dash Oldsmobile or my 1938 Bantam 60 Roadster.

[iluvcj]

Well I hope the prices stay relatively low so when I finish school I can finally afford a house for my family

[PeixeGato]

I don't see how prices are going to rebound until you clear up the excess supply with a steady and consistent increase in demand. Of course, to get that, you need a stable job market, available credit market, and good consumer confidence. We don't have any of that right now. I think the rate of decline will definitely decrease, but it will be quite a while until we see any across-the-board increases (i.e. increases in places other than "the peninsula", Berkeley, and SF proper).

[City Boy]

Why would somebody with a Higher Interest rate than the current one, not want to take advantage and refinance to the low rates now? It's about saving money and common sense. Rates haven't been this low in over a decade.

[Ultrarunner]

Only reason I can think for not wanting to is because they only have a short time remaining before selling or paying off the loan.

Lots of reasons for being unable... mostly related to a person's finances and/or property no longer meets underwriting guidelines...

[Tallysmom]

Another reason is if you don't owe a lot on your home, you're not going to save much of anything by refi-ing. And you're likely not going to recoup your costs for doing so.