Home prices still too high. (San Francisco, Oakland: sales, rent, house)

[bayarea-girl]

Oh-------------------Bayareahillbilly, home prices are still too high and need to come down in CA! Everyone is and will be affected by this economy, there is just no way of getting around it. If I lived in a $1million dollar area (and I do, but don't own) I would not want to face the reality that my home that I bought for a $1 million dollars is now worth half and I need to sell my place because my job is about to lay me off even though the intentions were to stay in it for 20 years or so.

Most people in CA just can not afford a home over $500K let a lone $1 million dollars. People don't have the 20% down payment to get the loans for these expenseive properties and if they did they aren't spending it on a house at this point. Prices have to come down in order for the average joe to be able to afford to buy a home that won't brake the bank. Some of these homes that use to cost so much money weren't even in the best of places and the houses should have never been so high in the first place.

CA is still way over priced.

[Ultrarunner]

Originally Posted by bayarea-girl

Oh-------------------Bayareahillbilly, home prices are still too high and need to come down in CA! Everyone is and will be affected by this economy, there is just no way of getting around it. If I lived in a $1million dollar area (and I do, but don't own) I would not want to face the reality that my home that I bought for a $1 million dollars is now worth half and I need to sell my place because my job is about to lay me off even though the intentions were to stay in it for 20 years or so.

Most people in CA just can not afford a home over $500K let a lone $1 million dollars. People don't have the 20% down payment to get the loans for these expensive properties and if they did they aren't spending it on a house at this point. Prices have to come down in order for the average Joe to be able to afford to buy a home that won't brake the bank. Some of these homes that use to cost so much money weren't even in the best of places and the houses should have never been so high in the first place.

CA is still way over priced.

If you're waiting for prices of million dollar homes to come down where the average Joe to be able to buy a home that won't break the bank... I'm afraid you will never see that day... and if you do, it only means that no one wants these homes at any price.

Now, if you were waiting for prices to fall, then now may be the best time in years to buy... unbelievable selection of inventory.... no more writing offers on the front lawn competing with several other buyers.

Homes in the Bay Area under a 100k... yes there are even close in like Oakland.

You can't overcome supply and demand... whether real or manipulated. Homes sold for the prices they did because people were willing to buy.

People are buying now... you would be surprised at home many transactions today are as-is and for cash... and no... I've never been a Real Estate Agent or Broker...

[bayarea-girl]

Ultrarunner, there were homes in Oakland that were going for well over $500 and up and were complete fixers and were around 1000 sq feet that should have been really priced at no more than $280K. In other parts of the bay area condos were going for $800K. A friend of mine just bought a condo for $400K and I thought that it was too high. Condos shouldn't be priced so high in today's market.

In my area of Walnut Creek and surrounding areas homes use to go for well over $1 million dollars and today it is much less. When I see foreclosed homes still asking for $1 million dollars I just shake my head because they shouldn't go for that much. What for? Who can afford them? Not many people. That is why these homes have been sitting on the market for close to a year.

It is the best time to buy to help the economy but not a good time to buy in terms of affordability. People "the average Joe" will not be able to get the financing to even get one of these big loans and won't have the 20% down for some of these over priced homes. $700K is still too high to buy of a house IMHO. Prices have a way to go in terms of affordability and because unemployment will continue to happen at such large numbers I don't see prices stabilizing and or going up any time soon. Also, if people aren't being laid off they are asking to either have their hours reduced or get paid less. Those that have been laid off and can get another job have to rebuild what they have lost while being unemployed and when they get rehired they are getting paid less. Which means people can afford less home.

When I use to live in So. CA and then moved to the bay homes were reasonably priced too. There were no bidding wars and there was plenty of inventory. People didn't have to break their back to own a home. IMHO homes need to go back to the value they were at before all the crazy 15-20% appreciation was going on.

So IMHO it is not the best time to buy.

[Ultrarunner]

The Bay Area has always been a different market compared to Southern CA.

My point is... saying home prices are or shouldn't be this high will not make prices lower.

I'm not an economist... but I've been buying and selling East Bay Real Estate for almost 30 years...

Sales prices are a reflection of real world supply and demand... asking prices are not. Homes always sell in any market if it is priced to sell... and that may be the governing factor... "Priced to Sell"

The market today is very similar to the market when I first started buying back in 1982... almost everyone told me I was foolish... even my father and grandparents... they said the homes I thought were a bargain were priced so low because "No one wants them at any price"

I didn't listen... if I could buy a home, move into it and make improvements and then rent it with the rent covering my expenses... I bought it...

A few years later, my family and friends that thought I had made a big mistake buying property in the worst market since the depression all of a sudden began to respect my acute business savvy

I did have help... I worked after school and weekends at a business that catered to a lot of well off and some very rich customers... the business supplied parts and restoration services for Antique Cars. Most of the customers took a liking to me and I would learn how they became interested in Antique Cars and how could they afford it... especially in such a bad economy with 12% unemployment.

The insight I gained was like a private course to financial success... almost all started with nothing... only one silver spoon in the group... in other words they were self made men.

Most owned their own business with a few CEO types from PG&E and Banks in the mix. Almost all owned income property... for some it was their business property that their business leased from with the others owning residential and commercial income property.

Their collective advice to me was to BUY Bay Area Income Property

I listened and bought my first home while still in school and never looked back.

Anytime is a good time to buy property if you can make the numbers work... I only bought when income covered my expenses... the problem back in the 80's and like it is today is/was there are so many homes meeting my criteria... it was hard to choose. I bought homes in Castro Valley, Pleasant Hill and Pittsburg in addition to Oakland.

A few of these wealthy friends, now in their 80's are actively buying homes today... one is a retired builder and he said for the price of a lot, I'm getting a home for Free.

Part of the problem in building new homes is the exorbitant fees charged for building permits, impact fees, the cost to bring in water, gas, electricity and sewer service... I don't think these fees will ever go down...

It's easy to have 50 to 60k in pre construction costs not counting the cost of the home or lot... so when you can buy a home for 70k in Contra Costa County and rent it out for $1300 mo... how much cheaper can you really expect for it to be before it's affordable?

[Tallysmom]

Here's the thing -- and this is why this whole subject gets to me. Back in 1987, when we started looking at houses, all our friends used the same arguments with us to convince us NOT to buy.

Prices were too high, not sustainable, yada yada...all the same stuff everyone is saying here and now... but I was fed up with paying rent to some old bat who made our lives miserable. I was tired of listening to my neighbors fight and then when I turned up my tv so I could hear it over their fighting, *I* got the phone call from the old bat, because my screaming neighbors could just hear my tv. And nothing was ever done to them. (I did call the cops once, cause I thought one of them had finally gotten physical)

There was so much crap from renting.... we bought a house. In retrospect, should have looked longer -- should have paid more attention to the neighborhood (although we didn't do badly on that, it's just never regentrified and never will), and should have bought a little larger house.

AND -- We didn't use our house like an ATM. I think as time goes by, time will show the massive pulling out of equity will have been the biggest mistake most homeowners will have done. (My stars -- I think that may have a grammtically correct statement!)

We got a HELOC for a small remodel, and we refi'ed after and at the time got a 5/1 ARM, because in five years we would have been able to sell our house and retire at 50.

How? Because as rents were going up, our house payment stayed the same, allowing us to stuff more money into our retirement accounts. Our friends basically had to hand their pay raises to their landlords. A few of them are STILL renting after 22 years.

Here we are at 50. And since the stock market tanked along with real estate, we're staying put. We might refi again... at historical lows, as they like to say. At those historical lows, our payment will be around 500 bucks. It's 642.50 now.

Five hundred dollar house payment. Pretty much what we were paying when we bought our house.

You know, back when housing was WAY overpriced and we were crazy to even think about buying. Oh, yeah -- we had little money down -- the owner of the house carried back a mortgage, which we paid off in a year after we refinanced when I got a job at Bay View. I got an employee rate from them that was too good to pass up.

So essentially we used creative financing.

[Ultrarunner]

^^^
Exactly!!!

[clongirl]

Prices must ultimately reflect the income of the area. Sure, there will always be really wealthy people around and can pay mostly cash..I'm not talking about gazillionaires..just people that must go to work every day (whether plumber or lawyer).

The banks have stopped allowing someone making even 200k a year to borrow more than they can comfortable pay back every month. So no, million dollar homes are not going to suddenly plummet to 500k..it's all about the incomes of the people moving into the area...but that 3 million dollar home in Orinda might only go for 1.5 now. The 500k house in Brentwood might be going for 230k now.

It doesn't matter whether we are talking about a place like Brentwood vs. a place like Orinda. The median house prices must be affordable to to person making the median salary...whether the median salary is 40k a yr or 400k a year. It was the lax lending standards that allowed people to stretch way beyond their means...allowing someone to pay 10x their income for a house. All those shady loans that allowed some unemployed dude without a down payment to buy..gone.

Those days are now over because the banks don't have it to lend..the banks must now scrutinize who they are lending to. We're not near the bottom..how could we be? I'd say 2/3 of the way or so until the economy picks up, prices continue to decline to reflect people's earnings etc. I've also been reading about how the banks have been holding onto foreclosures so as not to flood the market and appear even worse!

We'll all have to come back here in a year to discuss our findings and see how things have fared. Compare what we know now, to we will discover!

[bayarea-girl]

Exactly, Clongirl!!!!!!!!!!!!

Ultrarunner, I was not trying to compare So. CA home prices to the bay. What I was saying is that the entire CA housing market is overpriced.

Also, I never said or made the impression that because I want home prices to go down that they magically will. That doesn't make any sense. I am being very practical about things and am using factors of logic (I don't mean to sound insulting at all). Unemployment numbers are high, companies are cutting back, jobs are going outside of the US, people are making less and are paying more for health insurance, we are in a recession, the housing market has crashed, etc. That alone tells me that home values will continue to go down.

In this country people are not savers and are in high levels of debt. Years ago there was a time where the numbers could work for people because they lived within their means, that is not the case today.

[jaynetarzana]

I know some venture capitalists who are selling their personal jets and laying off their pilots/flight attendants, unloading properties, cutting back on business and personal expenses any way they can. If people at these income levels are feeling the pinch, that has to tell you something. These people are worth so much money they can't even fly on the same plane as their fellow associates. Yet they are concerned about the economy and say they would never buy in this market. These are people who have made their fortunes using their good business sense.

[mysticaltyger]

Originally Posted by iTsLiKeAnEgG

Our idea isn't warped. If something that normally costs $800k can be bought for $400k then it is a steal. Price can vary drastically by location but thats the price we pay for living where we want to live. I doubt many of us would consider $400k chump change, but we also have realistic ideas of what our market provides.

It's like AKgirl said, relative to incomes, prices are still quite high.