Discussions With The Sheeple On Declining Prices
Readers suggested a topic on the talk about falling house prices. “Discussions with the Sheeple on declining home prices are… interesting. I was talking to an incredibly bright coworker yesterday who is convinced that real estate prices are only going down in really undesirable areas. So he is looking to take a corporate transfer to ‘fly over country.’ If he goes, he’ll pull a staff of about forty too.”
“My favorite quote, ‘I’m ready to buy a million dollar house, but I want a million dollar house, not a shack!’ (Yes, he can afford it too.)”
“Basically, coworkers cannot see declining prices in nice areas. All they can see is the ‘wishing prices’ and the fact they cannot afford. So they’re giving up. They truly believe the NAR propaganda that ‘this time its different’ or ‘its different here’ and are instead planning to vote with their feet.”
“I don’t know how it is at your work places, but for our offices in California and around DC, its all we can do to stop a stampede. Attrition is bad. New sites that are being opened up in ‘fly over country’ fill up in hours; I’m talking thousands of positions too!”
“Note: Attrition is retirements as well as young engineers ‘giving up’ on bubble markets. Both want cheaper housing (with the retirees expecting a nice cash payout).”
“We’re hitting the irrational downside. Note: We truly won’t have panic until late this year (probably the fall), but you can feel the emotions building. Its maybe 5% of the workforce looking to bolt today. By the fall it will be 10%.”
A reply, “I believe this gets to the core of the faulty logic used by nearly every RE koolade drinker. It implies a level of entitlement at any cost. I’m not sure why anyone would want to tie up a million in a friggin shack but they do.”
“And they do it in places where NOBODY could ever afford to buy it if it had to be dumped in a hurry. I see this phenomenon everywhere. A big monstrosity of architectural puke splattered against a landscape of 3/2 ranchers.”
Another said, “Even with price declines accelerating, we’re still at least a few years from prices falling back in line with incomes. For those that have lived in high housing cost areas for a decade, at some point you just want to say ’screw it, it’s time to leave.’”
“Even if you can eventually afford something decent in 3 to 5 years, you’ll be able to buy something far better in that other place. Is there enough else about the higher housing cost area versus the lower housing cost area to justify staying?”
“If you look at how people are voting with their feet, I’d have to say the answer is ‘no’ for many people. The exodus of the California middle class didn’t begin with the latest bubble. This bubble just provided the latest shove out the door. Some who left earlier might come back if prices fall enough, but I don’t think that will offset the number of those continuing to leave.”
One added, “Some of stay because we have little choice: we don’t want to abandon family and friends. It just stinks that we were born and raised in areas that have now become unaffordable thanks to the Bubble. So, we wait, renting… and waiting… and waiting…”
One already left, “I used to work at Raytheon (formerly Hughes) in El Segundo and Fullerton. I quit Raytheon in El Segundo because I couldn’t take the drive and I couldn’t afford to move closer. I then went to work at another aerospace company in OC because I could afford to live close, but had to rent.”
“Then last year my b/f and I managed to swing a transfer to SE Arizona, where we are much happier and better off financially. The only bad thing is that my b/f insisted on buying a house (against my advice) so I am worried that he is going to have some problems when we have to move at the end of the program in about 4 years.”
One had this, “I curiously surfed the LA craigslist Real Estate For Sale last night for nostalgia purposes. $500,000 for a 1 bed/1 bath 1970s apartment conversion in West LA was not uncommon. I bought a 1200sqft 2 bed/2 bath in 1999 for $200,000. I thought that was a lot back then.”
“My work could easily force me back to LA some day, but there is no chance of me buying anything for more than $250 a square foot (in 2008 $s).”
“And if everyone here is not aware, California’s state tax quickly reaches 9%. With California having high income taxes, high real estate, higher than average fuel costs, bankrupt state, crap schools, ever-increasing congestion, etc, fly over country starts to look pretty good.”
One suggested. “Except Colorado. Colorado really sucks. Just about anywhere is better. Really! It is. Try Idaho, or something.”
One from DC. “I work in Northern Virginia near DC, and I have noticed some of the same things you have. I haven’t seen it much in my office, but that’s because a lot of my coworkers have kids in elementary or high school and don’t want to move them. The desire to move among them is certainly there.”
“Among those who are single, married but don’t have kids yet, or have kids that are grown up, they have bolted or I suspect are planning to bolt. A lot of this probably has to do with the idea that no matter who becomes President next year, there will have to be some cuts in defense spending.”
“Even beyond that, you still have the high cost of living, the second worst traffic in the nation, an inability to do something as basic as get transit to the region’s major airport (Dulles), etc., etc. In other words a lot of people aren’t frustrated with their job, but with living here.”
One had this question, “There’s nothing irrational about people moving away from CA and DC in order to have more reasonably priced housing & stay employed. This should have happened quite a while ago. Question is, what took them so long to wake up?”
Another had this tale, “In early ‘01 schoolmate, sold his home in LQ (la quinta) and moved to Iowa. He emailed me that even though prices were still going up in CA, he bought his home outright and put the rest in savings. I was jealous for a second. And proud that he got out.”
The Star Tribune. “Realtor Greg Bauman started worrying about the health of the Twin Cities real estate market when prospective buyers began calling him from California to bid on homes based solely on Internet listings.”
“It seemed odd to Bauman that buyers would skip the step of actually visiting the properties. The phenomenon was yet another sign that speculation in residential real estate was out of control.”
“For existing homeowners, this week’s news that the median sale price dropped 12.5 percent in February to $195,060 was sobering, especially versus a median of $225,000 in 2006.”
“Back when those California cyber speculators were calling Bauman, homeowners and potential buyers were riding a wave of median increases of 8 or 9 percent a year.”
“Before the housing bubble inflated, most homeowners were content with modest annual increases of 3 percent or so in the value of their homes. History suggests that those days will return, but not before we see more foreclosures and additional pressure on prices. Many of those will be first-time buyers who will benefit from newly increased FHA loan limits and low interest rates.”
“The upside to falling prices is that some buyers who were priced out of the market during the frenzy of speculation will now be able to find larger, affordable homes as prices fall.”
“‘When you combine that with downward pressure on prices, the housing affordability index starts to pop,’ said Kevin Knudsen, president of the Minneapolis Area Association of Realtors.”
“Before the housing bubble inflated, most homeowners were content with modest annual increases of 3 percent or so in the value of their homes. History suggests that those days will return, but not before we see more foreclosures and additional pressure on prices. Many of those will be first-time buyers who will benefit from newly increased FHA loan limits and low interest rates.”
“The upside to falling prices is that some buyers who were priced out of the market during the frenzy of speculation will now be able to find larger, affordable homes as prices fall.”
“‘When you combine that with downward pressure on prices, the housing affordability index starts to pop,’ said Kevin Knudsen, president of the Minneapolis Area Association of Realtors.” are… interesting. I was talking to an incredibly bright coworker yesterday who is convinced that real estate prices are only going down in really undesirable areas. So he is looking to take a corporate transfer to ‘fly over country.’ If he goes, he’ll pull a staff of about forty too.”"My favorite quote, ‘I’m ready to buy a million dollar house, but I want a million dollar house, not a shack!’ (Yes, he can afford it too.)”
“Basically, coworkers cannot see declining prices in nice areas. All they can see is the ‘wishing prices’ and the fact they cannot afford. So they’re giving up. They truly believe the NAR propaganda that ‘this time its different’ or ‘its different here’ and are instead planning to vote with their feet.”
“I don’t know how it is at your work places, but for our offices in California and around DC, its all we can do to stop a stampede. Attrition is bad. New sites that are being opened up in ‘fly over country’ fill up in hours; I’m talking thousands of positions too!”
“Note: Attrition is retirements as well as young engineers ‘giving up’ on bubble markets. Both want cheaper housing (with the retirees expecting a nice cash payout).”
“We’re hitting the irrational downside. Note: We truly won’t have panic until late this year (probably the fall), but you can feel the emotions building. Its maybe 5% of the workforce looking to bolt today. By the fall it will be 10%.”
A reply, “I believe this gets to the core of the faulty logic used by nearly every RE koolade drinker. It implies a level of entitlement at any cost. I’m not sure why anyone would want to tie up a million in a friggin shack but they do.”
“And they do it in places where NOBODY could ever afford to buy it if it had to be dumped in a hurry. I see this phenomenon everywhere. A big monstrosity of architectural puke splattered against a landscape of 3/2 ranchers.”
Another said, “Even with price declines accelerating, we’re still at least a few years from prices falling back in line with incomes. For those that have lived in high housing cost areas for a decade, at some point you just want to say ’screw it, it’s time to leave.’”
“Even if you can eventually afford something decent in 3 to 5 years, you’ll be able to buy something far better in that other place. Is there enough else about the higher housing cost area versus the lower housing cost area to justify staying?”
“If you look at how people are voting with their feet, I’d have to say the answer is ‘no’ for many people. The exodus of the California middle class didn’t begin with the latest bubble. This bubble just provided the latest shove out the door. Some who left earlier might come back if prices fall enough, but I don’t think that will offset the number of those continuing to leave.”
One added, “Some of stay because we have little choice: we don’t want to abandon family and friends. It just stinks that we were born and raised in areas that have now become unaffordable thanks to the Bubble. So, we wait, renting… and waiting… and waiting…”
One already left, “I used to work at Raytheon (formerly Hughes) in El Segundo and Fullerton. I quit Raytheon in El Segundo because I couldn’t take the drive and I couldn’t afford to move closer. I then went to work at another aerospace company in OC because I could afford to live close, but had to rent.”
“Then last year my b/f and I managed to swing a transfer to SE Arizona, where we are much happier and better off financially. The only bad thing is that my b/f insisted on buying a house (against my advice) so I am worried that he is going to have some problems when we have to move at the end of the program in about 4 years.”
One had this, “I curiously surfed the LA craigslist Real Estate For Sale last night for nostalgia purposes. $500,000 for a 1 bed/1 bath 1970s apartment conversion in West LA was not uncommon. I bought a 1200sqft 2 bed/2 bath in 1999 for $200,000. I thought that was a lot back then.”
“My work could easily force me back to LA some day, but there is no chance of me buying anything for more than $250 a square foot (in 2008 $s).”
“And if everyone here is not aware, California’s state tax quickly reaches 9%. With California having high income taxes, high real estate, higher than average fuel costs, bankrupt state, crap schools, ever-increasing congestion, etc, fly over country starts to look pretty good.”
One suggested. “Except Colorado. Colorado really sucks. Just about anywhere is better. Really! It is. Try Idaho, or something.”
One from DC. “I work in Northern Virginia near DC, and I have noticed some of the same things you have. I haven’t seen it much in my office, but that’s because a lot of my coworkers have kids in elementary or high school and don’t want to move them. The desire to move among them is certainly there.”
“Among those who are single, married but don’t have kids yet, or have kids that are grown up, they have bolted or I suspect are planning to bolt. A lot of this probably has to do with the idea that no matter who becomes President next year, there will have to be some cuts in defense spending.”
“Even beyond that, you still have the high cost of living, the second worst traffic in the nation, an inability to do something as basic as get transit to the region’s major airport (Dulles), etc., etc. In other words a lot of people aren’t frustrated with their job, but with living here.”
One had this question, “There’s nothing irrational about people moving away from CA and DC in order to have more reasonably priced housing & stay employed. This should have happened quite a while ago. Question is, what took them so long to wake up?”
Another had this tale, “In early ‘01 schoolmate, sold his home in LQ (la quinta) and moved to Iowa. He emailed me that even though prices were still going up in CA, he bought his home outright and put the rest in savings. I was jealous for a second. And proud that he got out.”
The Star Tribune. “Realtor Greg Bauman started worrying about the health of the Twin Cities real estate market when prospective buyers began calling him from California to bid on homes based solely on Internet listings.”
“It seemed odd to Bauman that buyers would skip the step of actually visiting the properties. The phenomenon was yet another sign that speculation in residential real estate was out of control.”
“For existing homeowners, this week’s news that the median sale price dropped 12.5 percent in February to $195,060 was sobering, especially versus a median of $225,000 in 2006.”
“Back when those California cyber speculators were calling Bauman, homeowners and potential buyers were riding a wave of median increases of 8 or 9 percent a year.”
“Before the housing bubble inflated, most homeowners were content with modest annual increases of 3 percent or so in the value of their homes. History suggests that those days will return, but not before we see more foreclosures and additional pressure on prices. Many of those will be first-time buyers who will benefit from newly increased FHA loan limits and low interest rates.”
“The upside to falling prices is that some buyers who were priced out of the market during the frenzy of speculation will now be able to find larger, affordable homes as prices fall.”
“‘When you combine that with downward pressure on prices, the housing affordability index starts to pop,’ said Kevin Knudsen, president of the Minneapolis Area Association of Realtors.”
