Any chance real estate market will crash? (San Jose: best neighborhood, for rent)

[sonarrat]

Originally Posted by bobby_guz_man

The days of standalone 1 and 2-story single-family home sitting on 6-7,000 sq ft lot is dead here in the Valley, as far as I'm concerned.

As it should be. The typical American Dream SFR is a monstrous waste of resources. Unfortunately, there isn't much of a middle ground between them and modern sardine cans.

[capoeira]

Originally Posted by vrhunski

Those 2-3% population increase are those who are looking for place to stay. Lets say you have 100,000 people who are looking for apartments and then you get next year more 100,000 people who come from USA or overseas to bay area that mean 50% gain. I think gain will be 20-25% year over year for next 5 years.

That might be true but it could also go down 50% too. First it is just a matter of time before the Bay area has a major earthquake. Major quakes on the Hayward fault occur about every 140 years and the last major one on the Hayward fault was in 1868. The Bay area is overdue!

USGS Release: The Hayward Fault: America’s Most Dangerous? (3/20/2008 1:00:00 PM)

http://www.eerinc.org/wp-content/upl...Area_V17-2.pdf

Its just a matter of time before the next recession hits and that will also negatively affect prices. Some people think the fed has outlawed recessions but that type of delusional thinking will soon be exposed. Mortgage rates are currently artificially depressed and when they return to more historical norms housing will be negatively affected.

The Bay area is so overpriced that even if prices went down 50% it still would be too high compared to most places in the USA.

Hayward Fault is our deadliest - a 'tectonic time bomb' - SFGate

Investing in Bay area real estate is a bigger gamble than speculating in commodity futures options!

[zitsky]

Originally Posted by sonarrat

As it should be. The typical American Dream SFR is a monstrous waste of resources. Unfortunately, there isn't much of a middle ground between them and modern sardine cans.

I agree there needs to be greater density, but not everyone is willing to live in a high rise apartment building. What I find wasteful is tearing down an older house just to build something bigger and newer on the same spot.

[nagleepark]

Originally Posted by sonarrat

As it should be. The typical American Dream SFR is a monstrous waste of resources. Unfortunately, there isn't much of a middle ground between them and modern sardine cans.

Originally Posted by zitsky

I agree there needs to be greater density, but not everyone is willing to live in a high rise apartment building. What I find wasteful is tearing down an older house just to build something bigger and newer on the same spot.

Doesn't capitalism say that, as long as you pay for the resources that you waste, you can waste as many resources as you like?

Nothing immoral about many people wanting an American Dream SFR; the price has simply outgrown the budget of many people and higher density housing is still within their budget.

To builders, it's just more profitable/easier/safer to sell 500 sardine can units to 500 people than to build 1 mansion and find 1 rich guy to buy it.

(My reply isn't entirely serious.)

[wsugrad03]

I've been lurking around the housing market for a while now and going to see open houses. I have to say I'm simply appalled at the housing selection and prices. Most areas are at or way above their 2007 peak. When a working couple earning in the top 3% can't get a foothold into the housing market, you know you're in a housing bubble. Last time I felt this way was in 2006/7 and my instincts were right.

However, like others have mentioned, I don't really see a sudden correction anytime soon. Interest rates won't be going up for another year, and the bull market is still here, although it's showing signs of losing steam. SV housing tends to mirror the stock market, because most buyers purchase their home with stock options and RSU's. That's what drives the insane bidding wars. When you take the equity away from the stock markets, buyers become mere mortals and have to rely on their cash on hand and housing returns to a sane market.

There's been a tech bubble for sure in the past recent years. Maybe it's sustainable, but looking at the burn rate of cash from these startups, I doubt it. As soon as the market turns bear, many of these startups will perish. Another factor that will lower the cost of housing is interest rates, although I think these actually take a back seat to the stock market IMO. An extra point added to interest rates requires an additional 10% of income to offset the increase. So once rates to go back up to 5-6%, prices will either have to fall 10-20% or incomes will have to rise. My bet is on prices dropping.

I simply wouldn't touch housing market with a 10 foot pole right now. We were looking at a total tear down 2/2 condo in mountain view as a rental investment for 660k. It was bid up to over 800k. Fahgitaboutit. I'm just going to sit on the fence and keep saving. It's economically better for me to buy than rent so I can have the tax shield, but nothing is sexy about buying at the peak. You're always financially better off saving and buying when the market is in a trough even if rates are higher in the future.

[sonarrat]

Originally Posted by nagleepark

Doesn't capitalism say that, as long as you pay for the resources that you waste, you can waste as many resources as you like?

Nothing immoral about many people wanting an American Dream SFR; the price has simply outgrown the budget of many people and higher density housing is still within their budget.

To builders, it's just more profitable/easier/safer to sell 500 sardine can units to 500 people than to build 1 mansion and find 1 rich guy to buy it.

(My reply isn't entirely serious.)

The people may have the money, but I don't believe it is their choice to use as much water and power as they do.. or to endure the long commutes that come with the kind of sprawly development pattern that has happened out here. If it is possible to live in equal comfort without using as many resources, I'm sure just about everyone will choose to do so.

You also have other benefits to multi-family residences such as trash collection.. no need for the truck to stop at the curb for every individual family, just empty a dumpster or two into the truck and off you go. This can be done with the "postage stamp" SFR's quite easily.

[zitsky]

Originally Posted by wsugrad03

I simply wouldn't touch housing market with a 10 foot pole right now. We were looking at a total tear down 2/2 condo in mountain view as a rental investment for 660k. It was bid up to over 800k. Fahgitaboutit. I'm just going to sit on the fence and keep saving. It's economically better for me to buy than rent so I can have the tax shield, but nothing is sexy about buying at the peak. You're always financially better off saving and buying when the market is in a trough even if rates are higher in the future.

Do you mean condo or single family home? How can a condo be a tear down? Maybe you mean a gut and remodel? Back in 2000 you could buy a single family home for that price.

[wsugrad03]

Originally Posted by zitsky

Do you mean condo or single family home? How can a condo be a tear down? Maybe you mean a gut and remodel? Back in 2000 you could buy a single family home for that price.

I mean gut and remodel. Definitely can't tear down a condo.

[skris4]

Originally Posted by wsugrad03

I simply wouldn't touch housing market with a 10 foot pole right now. We were looking at a total tear down 2/2 condo in mountain view as a rental investment for 660k. It was bid up to over 800k. Fahgitaboutit. I'm just going to sit on the fence and keep saving. It's economically better for me to buy than rent so I can have the tax shield, but nothing is sexy about buying at the peak. You're always financially better off saving and buying when the market is in a trough even if rates are higher in the future.

Some markets are more competitive right now so we bought in a SFH in a decent place several months back. Our home will sell for 50k more now. The rate of increase is not sustainable. That said, there is no indication that this is the peak. Peak prices may well be several years in the future.

[garvan]

better look really hard at the cost/availability of quake insurance, and if you can't get/afford it, stay the hell out of CA real estate. Remember, at the end of the day, a home is just a place to lay your head. If things get bad, expensive housing is the first thing people will dump. I wouldn't give you 200k for any house, anywhere, no matter the size, cause the basic premise is insane.