So in the previous post some of the problems of this housing bubble (caveat: I see them as problems anyway) as it relates to Marin were pointed out. But that post only touched on a small fraction of the problems this housing bubble has created IMO. In fact, in case you haven't noticed, the ills of this housing bubble have been investigated during the course of the entire life span of this blog! For those of you who have been wondering what my motivation is, well, that would be it.So the next step is: What are the solutions? What has been suggested on other blogs? Here is a partial list of things that I have seen:
- "Further relaxed lending standards". No good. That only propagates the problem.
- "40-, 50-, 100-year loan terms". No good. That only propagates the problem.
- "Restrain the Fed from irresponsibly pumping the system with liquidity". Not bad, but the Fed had to do that for some arguably good reasons. But there are other blogs where people are far more knowledgeable about those sorts of things and have far better thoughts on the subject. At a minimum I refer you to here and here.
- "Regulate realtors". Given that buyers take so seriously what they say I think regulation would not be such a bad idea. But doing so won't address the main problem in my opinion.
- "Replace realtor commissions with a flat fee". That only makes good sense to me, but it does not address the core problem.
- "Regulate lenders and/or make them again financially accountable for the loans they make". That seems to me to be a very sensible idea but it doesn't go far enough.
Financial bubbles will always exist and I doubt that they can be completely eliminated. But I think there are some steps that could be followed to limit the extent of speculation in an asset that is as important to people's lives as housing. Here are some just as a start; I am sure the intelligent readership who grace this blog can add to the list (this list is not intended to be interpreted as being specific to Marin, it is general to real estate in California; Marin has it's own issues):
- Eliminate the mortgage interest tax deduction for all properties other than the primary residence.
- Eliminate the Proposition 13 assessment freeze on houses other than the primary residence.
- Houses other than the primary residence should be subject to capital gains tax just like anything else.
50 comments:
Make realtors car salesmen. The word you are looking for is disintermediation. Who the heck needs a realtor anymore? Maybe 5%?
I think a flat fee for the real estate agents is also a start. Would keep them from being too self serving and force them to actually be knowledgable.
Step up mortgage fraud investigations and make sure that the brokers have to pass some standard test for good lending practices in order to qualify to sell off the loan... otherwise they have to risk their own exposure and liability for their shoddy practices.
thos are some thoughts off the top of my head.
oh and as for those "vacation" homes... do you LOVE how so many of these people in our local area bought those "vacation" homes just across town?
oh and as for those "vacation" homes... do you LOVE how so many of these people in our local area bought those "vacation" homes just across town?
What's the implication here, Athena?
the implication is that "vacation" home is hardly a cover for flat out speculation based on the magical thinking belief that real estate only goes up and you can't lose.
you don't go on vacation across town.
Those are simple solutions = the best kind.
So, how do we implement?
peterbob said:
"I know that the bubble will pop in time (at least within a decade!). I hope that we don't lose sight of the long term problems as well."
Fat chance! If I were betting, NFW for Marin on the long term part.
Conversely, in a few short years, the bubble is a memory.
Rules and regulations usually cover the basics. If you go too far, your system will be rigid and people will be forced ro cheat anyway.
In essence, you can't regulate ethics.
Obviously there has been a breakdown in morals in America and laws will not correct the situation. You can try to enforce it using fear but it has been shown time and time again that such a strategy does not work. When millions of people are cheating, it just becomes acceptable.
When asked about their belief in meritocracy, many if not most have become cynical... it sure seems that you just have to be at the right place at the right time to roll in the dough. Just look for the next bubble is many investors' mantra.
Everyone is to blame for this situation because I firmly believe that when you expose any large group to a particular set of variables or experiences, the group will react in a predetermined way.
In this case it was low rates and the comfort that this would last long enough to make a quick buck.
I still think that the biggest culprit is Greenspan and the Fed. Obvioulsy 1% was way too low for way too long.
Now the question should be whether or not he assessed human nature when making his decisions. Did he make an honest mistake or did he deliberately manipulate Americans into falling into the real estate trap?
Credit spreads got so thin that everything could get securitized. If the market had not felt so safe, lending institutions would have had more difficulty securitizing their loans and the excess could have been better contained.
Humankind's historic road is littered with bubbles. Civilization has gone from one bubble to the next. America fought for its independance over taxation. I don't know if anything can be done about them.
Deluded people who make stupid and risky decisions make me angry but at the end of the day, there will always be many of them no matter what we do.
Usually things don't change until you reach a tipping point... when people have nothing left to lose.
Maybe this real estate bubble is the culmination of 2-3 decades of excess. Maybe it's the straw that will brake the camel's back and force America to clean up its act.
"Maybe this real estate bubble is the culmination of 2-3 decades of excess."
Danielle, great observation. Just look at consumer spending habits in relation to income--when did these excesses ramp up? I recall a graph on the savings rate vs. credit debt, and this problem has brewed since the early 80s. Is it any coincidence that at the same time we saw a flood of high-end retail goods? Back then my neighbors were lusting after Rolexes, $1K+ bicycles, and new BMWs. Problem was: a lot of this was going on credit, which has continued to this day. So when credit implodes someday, what happens to our celebrated retail-based economy?
Thanks for the mention!
I envy your comment tally.
Cole @ The Boy in the Big Housing Bubble
Stop the NIMBYism and step up to the plate. People want to live here, so let's build some houses.
And BTW, the lack of water to support additional people here is really a non-issue. Let's built a massive desalinization plant, and produce water that costs several times what it costs now. Yes it's costly, but what the hell. We all have to dig a little deeper in to our pockets so as to help Dick and Jane from Brooklyn to move here and grab their little slice of the good life. There's a law somewhere that says that, right?
And this issue of more cars on the road is of no concern to me. Let's make the taxpayer ante up some more cash to build more roads. After all, all those people that we want to move here really can't enjoy their Marin experience without a couple of SUV's, and we really can't expect them to sit in traffic, can we?
Basically, the needs of the people who want to move here are FAR more important than the needs of the current residents, so the people of Marin just need to suck it up, open up their wallets, and quit whining.
The internet is rapidly making realtors obsolete: 10 years from now, nobody will even understand how realtors got 6%!
You have the right idea, but don't carry it to the logical conclusion:
1. Eliminate the mortgage interest tax deduction for all properties other than the primary residence.
Just eliminate it entirely. What does this tax break accomplish?
2. Eliminate the Proposition 13 assessment freeze on houses other than the primary residence.
Eliminate it for everything. You want to live in a hot area? Pay for it. Simple.
3. Houses other than the primary residence should be subject to capital gains tax just like anything else.
Tax the primary residence too: why should anyone get windfall profits for just living in a house? Worse, bigger house means bigger profits.
There, problem mostly solved.
Basically, the needs of the people who want to move here are FAR more important than the needs of the current residents, so the people of Marin just need to suck it up, open up their wallets, and quit whining.
Why don't you just build a wall around the county, topped with machine-gun turrets and concertina wire, declare Marin an independent nation, forbid anyone who does not already live here entry, and be done with it?
You, however, can stay there. If no one can come in, no one can come out, either.
Basically, the needs of the people who want to move here are FAR more important than the needs of the current residents, so the people of Marin just need to suck it up, open up their wallets, and quit whining.
That is just SO Marin. It is just so sick. Marin's selfishness and arrogance has no limit. It completely lacks a vision of the bigger picture and of what is going on around it. This thread is really bringing that out..good job marinite.
gorobei -
I agree, I didn't go far enough. The problem is I doubt going any further would be palatable.
The truth is that I think the core problem is that people think they should be able to make money from their houses including their primary residence. That's the problem and it is rather odd. I think all forms of speculation in houses should be eliminated. I think the mentality of thinking of a house as something you can sell at a profit later should be eliminated. A house is just something we live in; something we use. Just like a car. When we buy a car we don't negotiate a purchase price based on the expectation that when we are all done with it we can sell it for a profit. The same should go for houses IMO.
In theory I don't agree that we should just build more houses so as to increase supply and so help reduce prices (so this Marin no-growth issue that Marinites are so wedded to is ironic in a way). The only reason why I entertain building more houses is that is the primary way given the system that is currently in place to lower prices. It's a flawed system so any solution based on it is likely to be flawed as well. It's flawed because houses and living near one's family are basic human needs that follow from hundreds of thousands of years of evolutionary programming and so I would argue are socio-biological rights.
For me it is not about allowing more people to live here than can be sustained. The only people who will move here would be in a one-to-one relation with those people who are willing to leave and sell their house so as to move on.
Basically, the needs of the people who want to move here are FAR more important than the needs of the current residents, so the people of Marin just need to suck it up, open up their wallets, and quit whining.
That is just SO Marin. It is just so sick. Marin's selfishness and arrogance has no limit. It completely lacks a vision of the bigger picture and of what is going on around it. This thread is really bringing that out..good job marinite.
Yep - and notice how the entire county is considered the personal property of the homeowners (the "current residents" in this commenter's words). This effectively excludes, not only outsiders who want to move in, but natives who are stuck renting because what was middle-class-affordable when their parents were young is no longer middle-class-affordable. So, the prevailing attitude is: accept your lot in life and keep renting, or else f**k off to Sonoma County.
LOL... Marinites USED to be able to say f@ck off to Sonoma County with you then... but our prices are right up there with marin's prices now, and we are no more affordable.
Back in 2000 our prices were half of marin's.... but not now... now it is F@Ck off to Ukiah or Lake County...
Basically, the needs of the people who want to move here are FAR more important than the needs of the current residents, so the people of Marin just need to suck it up, open up their wallets, and quit whining.
This is great scarcasism, but please anon- where in the country or world would this not be the case? I mean, the fact that you are here just proves that someone let you in or at least built a road to your POS. Now that you have yours, you don't want to share. Greedy nut.
Back in 2000 our prices were half of marin's.... but not now
While they are no bargain, Sonoma County's median prices and average prices are about half the price of Marin County.
Our government is spending several hundred billion dollars of our tax dollars to impose democracy in other countries (such as Iraq). Americans just love to wave the flag and tell everybody how this is the land of the free, and how the US is run by the people and for the people.
Except of course when its YOUR ox that is being gored. Then democracy and the American way isn't so good. And the discussion here is a PERFECT example of this phenomenon.
The voters of Marin have repeatedly, time and time again, over several decades, decided that open space takes priority over development. In fact, to the best of my knowledge, the voters of Marin have never nixed a bond measure or tax that would protect more open space. The voters of Marin have made their views crystal clear on this point.
Yet, despite that, the pro-growth folks here treat that fact as nothing more that a minor historical footnote, a non-issue, meaningless. Funny how that is, isn't it.
Go ahead, flame away. Call me a nut, call me whatever you want. But before you start slandering me, just answer one little question:
Tell me precisely how you intend to subvert the will of the people, and impose your vision of "houses for everybody" on this county.
Really, I want to know the answer to this. I eagerly await your responses.
It's flawed because houses and living near one's family are basic human needs that follow from hundreds of thousands of years of evolutionary programming and so I would argue are socio-biological rights.
Couldn't agree with you more. So let's make a deal: I'll drop my opposion to more houses being built, so long as (a) they are affordable, and (b) the non-home owning, long term residents of Marin (and their offspring) get first option to buy them.
Completely unworkable? Yes. Illegal and unconstitutional? Most likely. But, it sounds like the perfect solution to me, and it would seem to satisfy all of your concerns.
What do you think?
"Call me a nut"
Okay
Berkekey hills homes were once 'vacation homes' look at them now: isolated prisons. I go running up there and I only greet the mailman. Those poor people. Was that ethnicity not allowed to live in the city at one time? We know who lived in SOMA, J-town, China Town, and North Beach, and the mission, and Daly city, but what is up with that, yo?
"but what is up with that, yo?"
Are you the same nut or a different nut?
The voters of Marin have repeatedly, time and time again, over several decades, decided that open space takes priority over development. In fact, to the best of my knowledge, the voters of Marin have never nixed a bond measure or tax that would protect more open space. The voters of Marin have made their views crystal clear on this point.
Yet, despite that, the pro-growth folks here treat that fact as nothing more that a minor historical footnote, a non-issue, meaningless. Funny how that is, isn't it.
Fine; but I'm afraid your triumphalism and complacency aren't going to serve you very well in the future. Times change. People change. And like it or not, places change as a result. The blowback from Marin's little experiment with exclusionary environmentalism, begun in the 60s, is starting to make itself felt now. The generation that started it, and have benefitted the most from it, are entering their retirement years; they won't be calling the shots here forever. Now there are a lot of pissed-off people out there; the existence of this blog and others like it is evidence of that. You may be able to sit there today and smugly claim that you have won all your elections in the past, but that's no guarantee you're going to keep on winning them in the future. You want to rub our noses in it? Fine, you've just given us more reason to want to fight you harder. Someday the "will of the people" just may go in a direction you will not like. Tick tock, tick tock.
Berkekey hills homes were once 'vacation homes' look at them now: isolated prisons. I go running up there and I only greet the mailman. Those poor people. Was that ethnicity not allowed to live in the city at one time? We know who lived in SOMA, J-town, China Town, and North Beach, and the mission, and Daly city, but what is up with that, yo?
Umm...what are you talking about?
From my seat in Montreal, I can safely say I'm unbiased...
What is so wrong with protecting your area? Generally speaking most municipalities are greedy and lack foresight, get overdeveloped and deteriorate. The first thing to go is green space, ironically the single most important assets that makes an area retain its value. Since governments are always broke, it is much easier to protect green space than to later expropriate.
I think Marinites should be commended on their hard stance. History has shown that the masses will win. Just look at Hong Kong... Not enough space, just build up!
In my eyes, the writing is on the wall. California will get built up. Strong advocates could slow down the process but overbuilding will occur.
Fight for your place in Marin but please be more respectful of Marinites. They might be greedy - albeit no more than anyone else - but they did have vision and at least their stubborness does serve a good cause.
Remember that it's because they made it so attractive that people want in! There's a price for that.
The generation that started it, and have benefitted the most from it, are entering their retirement years; they won't be calling the shots here forever....You may be able to sit there today and smugly claim that you have won all your elections in the past, but that's no guarantee you're going to keep on winning them in the future.
In order to vote about Marin policy you must FIRST live there.....you can't vote in local elections about Marin from somewhere else. Since Marin is pretty much closed to entry due to the high price of homes, that makes it pretty tough...cause it seems to me most younger buyers in Marin get the same exclusionary attitude as the older residents. Once they're "in", that is.
Now there are a lot of pissed-off people out there
Let the revolution begin!
What is so wrong with protecting your area? Generally speaking most municipalities are greedy and lack foresight, get overdeveloped and deteriorate.
There are an awful lot of absolutes in those two sentences. "Protecting your area" for whom, exactly? Home ownership is not a requirement for citizenship (not yet, anyway). And one man's "overdeveloped" is another man's "stimulating urban environment." The question is, how is this all going to settle out? The answer is, it isn't ever really going to be "settled." It's an ongoing process. Society is an organic entity; growth and change are inevitable. In Marin, however, you have a significant number of people who believe that everything is a "done deal," and that they can freeze the county permanently in about 1979 (I really do think that's just about where a lot of the county's residents are still living, in their minds.) Good luck, ain't gonna happen.
Fight for your place in Marin but please be more respectful of Marinites. They might be greedy - albeit no more than anyone else - but they did have vision and at least their stubborness does serve a good cause.
$900,000 POS houses are not a good cause.
The good cause I was talking about is preserving undeveloped land.
I'd be pissed off if I wanted to get in and couldn't but I still believe they have as much right to fight to preserve than others have the right to fight to develop. Obviously they've been doing a good job!
Both sides have good reasons. This is not a question of who's right or wrong; it's all about who's going to fight the hardest and win!
Remember that it's because they made it so attractive that people want in! There's a price for that.
That is not why they want in- because it is so attractive....
People want in because it is close to high paying jobs and the weather is not super cold and foggy all year AND marin is dominantly white. Those are the main reasons. Look to the surrounding counties if you need to compare and contrast. It is pretty obvious to most intelligent and honest residents here.
weather is not super cold and foggy all year AND marin is dominantly white
Personally, I think the weather somewhat sucks in Marin, even outside the Sausalito-Mill Valley-Tiburon fogbelt. I happen to be from the Seattle area, where it rains 50% less than where I live now. The "great Marin weather" is either collective delusion, or a sales pitch generated by a chamber of commerce.
I think the weather somewhat sucks in Marin
I think the weather in Marin is incredibly good. I, too, have lived in Seattle and to me Marin has better weather hands down. But that's the thing about weather...it really is just personal preference.
I think the weather somewhat sucks in Marin
Depends on what part of Marin you're talking about. Corte Madera is chilly and windy; Mill Valley is in the shadow of Mt. Tamalpais and doesn't get much sunlight, so it tends to be cold. Fairfax and Terra Linda tend to be warm. I know two couples who fled San Francisco because of the fog. One ended up in Terra Linda, the other in Marinwood. Both those places are pretty hot in summer.
But that's the thing about weather...it really is just personal preference.
It's certainly that, and I knew others would chime in to defend Marin's weather. That said, one could argue that Marin's weather (or any other "intangible" may not be a selling feature for everyone--unless it's proveable. I mention this because sometimes when Marin prices are questioned, some unverifiable claim is often brought forward in support of Marin, as if there's a direct link between the two. Can Marin weather really be used to support some price premium? Recent news could be cited to suggest otherwise, for that matter.
It's convenient to pull out something that sounds good--that also takes the burden of proof off the claimant. Here's a few fallacious statements I've heard:
"You can golf in your shorts in January"
"Marin real estate never goes down"
"There's a higher quality of people in Marin, and homes are priced accordingly"
"Losers live in Novato"
"Marin real estate is a great investment--at any price"
"Everyone wants to live in Marin"
"You're safe in Marin [because it's so white"]
Et cetera, ad nauseum
I think a lot of us visit these blogs because we sense something's off in the mainstream groupspeak we hear on real estate. For some of us, it's an intuitive gut reaction. For others, we like to dissect arguments and see how they hold up. This is a place to question those entrenched assumptions...by whatever methods suite you best.
Here's a few fallacious statements I've heard:
"You can golf in your shorts in January"
"Marin real estate never goes down"
"There's a higher quality of people in Marin, and homes are priced accordingly"
"Losers live in Novato"
"Marin real estate is a great investment--at any price"
"Everyone wants to live in Marin"
"You're safe in Marin [because it's so white"]
Here are a few statements I've heard which ARE generally true about Marin:
"The weather is great"
" The schools are great"
"It's close to The City, yet close to open space"
" The air quality is great"
" Every town in Marin is unique. Each has its own personality. Unlike the generic franchise-laden towns found in most other areas.
" The crime rate is very low"
"Marin real estate is a great investment...not at ANY price, but when you find that great piece of property of which there are many in Marin."
"Everyone wants to live in Marin" Pretty much true!
Here are a few statements I've heard which ARE generally true about Marin:
C'mon...how can such statements be "true" if they're not proveable? Such points are made that put the burden of proof on the reader. Again, so many of those statements are either subjective, or quanitfiably similar to other SF Bay communities. School scores are such an example we can compare. While some Marin schools are as good as Cupertino or Palo Alto schools, several others score below their levels. The data's out there.
I think there's a difference between confidently stating "everyone wants to live in Marin", and actually proving it's true, and bears a direct relation on prices. We enjoy living in Marin, as it suits our lifestyle. But, we won't fool ourselves into believing Marin is the first choice for every homebuyer. It's one thing to feel good about Marin, it's another to use that feeling to predict the demand for housing here.
While some Marin schools are as good as Cupertino or Palo Alto schools, several others score below their levels.
I disagree, you CAN compare school scores when purchasing a home. The schools GENERALLY are great in Marin. Not to mention the highest ranking on test scores. Of course, there are areas in Marin with lower scores just as there are in East Palo Alto, etc.
The point about "everyone" wanting to live in Marin is, of course, tongue-in-cheek. However, every other point is proveable to be true.
However, every other point is proveable to be true.
Hmm, it looks like cognitive dissonance doesn't play a part in all of this.
It's one thing to feel good about Marin, it's another to use that feeling to predict the demand for housing here.
I also think a lot of people like to pull out these intangibles to justify and rationalize away the inequities and the dislocated system we find ourselves in today. When self-rationalizing it is better to use rationalizations that are subjective and cannot be proved.
anon 10:07-
I like how that definition of Cognitive Dissonance uses 'buyer's remorse' as an example. Could not ask for anything more appropriate given the circumstances.
When self-rationalizing it is better to use rationalizations that are subjective and cannot be proved.
Hmm, it looks like cognitive dissonance doesn't play a part in all of this.
Given your logic NOTHING about real estate could be proven true except maybe square footage! And right... a 3000 square foot house in Lodi should be worth the same as one in Belvedere! After all, it's just subjective rationalization.
Dream On!
How about "back up with data"? Is that better? Do you feel comfortable now? If so, this blog has tons of good data backing up its points.
How about "back up with data"?
Great Point! It's true...the ONLY real data is historical sales prices of homes. Everything else is just talk.
Lodi is clearly not part of the original discussion comparing Marin to other parts of the Bay Area--and why buying a home in Marin must be prioritized due to weather, school, or other selective factors. I agree with Marinite: self-rationalizations provide convenient and indefinite bases for comparison--one drifts on the details when cognitive dissonance kicks in.
Addionally, providing an ample supply of straw men also ensures arguments can be redefined and summarily dismissed. Who suggested the comparison between Lodi and Belvedere? Seems like you're telling yourself to "dream on". Thanks, and just in case a few were missed, we could generalize about:
The commute within/through Marin
The "sense of community" here
The arts/culture available in Marin
Convenience/shopping/logistics
Marin's infrastructure/civic planning
Local weather
Physical quality of homes and neighborhoods
Pick somewhere around SF Bay that fares worse, and "prove" Marin is the best place to live.
the ONLY real data is historical sales prices of homes
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51 comments! Man, I leave for a business trip and now I have 2 hours of reading ahead of me!
First of all, a correction: gains on investment property ARE taxable. Gains on your personal residence are not (up to $500k, etc, etc).
Second: By all means, remove the interest deduction on investment RE but you would probably have to do so to all investment property (tractors, equipment, barns, factories) since they are all on the same form (schedule E). So by discouraging the RE investor, you will be clobbering small businesses who need to borrow money to make capital investments. And how would you make a distinction between someone buying a warehouse and someone who plans to rent out property? And why discriminate? What happens down the road when prices and rents regress to the mean and everyone is howling about high rents but potential landlords are discouraged from buying property because of the short-sighted tax policies that were put in place to fight a temporary asset bubble?
Third: Abolish prop 13 on commercial and investment property -- this is a no-brainer and protects the asset rich. (and owner-occupied property if you don't mind turfing out the oldies)
Fourth: Abolish stated income loans. Pure poison.
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