Friday, August 18, 2006

Why?

Why are rising house prices considered a good thing when rising prices in almost everything else (oil, food, gasoline, books, movie tickets, cars, health care, insurance, etc., etc., etc.) are considered a bad thing?

Why is everyone hoping for eternal double-digit growth in house prices when it results in more and more people having no choice but to make use of "toxic" loans, go deeper in debt, stop saving, and never being able to really own a house?

Why does our culture judge a debt-financed lifestyle a good thing when it results in massive borrowing from the bank as well as from future generations (i.e., our children and grandchildren)?

And why does no one seem to worry about how and who will pay back all the debt?

Why do people in the Bay Area consider the pricing-out of the housing market of young families a good thing?

Why do people think that the obscene rise in housing prices is a good thing when it is forcing people to migrate out of state?

Why do people in the Bay Area consider outrageous house prices a good thing when it forces people to live so far away from the major employment center that they have to commute for hours just to get to work?

Why do people here seem to think that a bifurcated society of "haves" and "have nots" is a good thing?

Why does our culture place more of a premium on investing as opposed to working and producing something?

Why do our communities tolerate a situation where children who grew up in the community cannot afford to buy a house and raise a family in that community and so live near their parents; their children near their grandparents?

Why don't more people ask "why"?

24 Comments:

Anonymous Anonymous said...

Why? Why do people view double-digit appreciation as a good thing? The answer could simply be summed up in terms of which side you're on.
Remember that California has been in this kind of cycle of extremes for the better part of 40 years.As pointed out on this blog repeatedly, these rise and falls are made all the more dramatic by the myriad of self-defeating rules, taxes( prop 13) and regulations that prevent more normalized growth.Instead there exsists a cycle of upward and downward pressure more pronounced here thanks to fully intentional manipulations in supply and demand.
Thus what now exists in California is a culture of those that "got in" and those trying to get in. Those that got in the last 40 years or so also had to put up with some sort of unneccesary crap, from high prices, low supplies, and lots of red tape hampering healthy growth in new communities. So just imagine that you someday buy a house. You've done like those before you, which is put every damned penny on a little house somewhere.

You find yourself pretty disappointed that with all those hopes that buying a house in California would mean that "you've arrived" really turned out to be a license to merely join the lower middle class. As someone from another part of the country, I've been curious as to why Californians play the whole" everything is better in california" card. The reason is that what comes with the territory is in actuality a fairly low standard of living which can be conveniently covered up by spouting off about how gosh-darn wonderful it is here.

So that brings me back to the previous point: Why are californians that "own" so gleeful that they might get some assanine appreciation? because these people are DESPERATE to live the lifestyle they never got when they bought, nor could think of affording especially after they sank all of their wealth into a leave it to beaver house stuck on a hill in landslide/earthquake land.

The fact of the matter is that many Californians are not doing well financially. This is almost absurd since they get paid as much as 50% more than anyone else in the rest of the country, yet can't build actual school buildings for their kids. Cmon... Most schools I've seen around here are in freakin' trailers. What A joke. So the desire to compensate for this lack of material substance rears it's ugly head in the form of out-of-control- Real estate cycles. It also creates a really ugly element that destroys communities and pits everyone into a "me against them" atmosphere.

lastly, I have no doubt that within a few years, prices will come down, but they will still be insanely expensive. Put this into perspective. Some of you here will be the future buyers who have been placed out of the market for so long, that just being able to afford something will seem like a luxury. But you too will make the same conclusions that the generation of homeowners made, which is that all that money for the little house will leave you with a knawing desire to accomplish the wanton desire to accumulate wealth to offset your sacrifice.
Leaving the current legislation in place will only assure that this cycle will once again hit and go out of control. Realistically, how will some of you who buy react?I would ber VERY surprised if you acted any diffrently.
RE is stupid here.I agree somthing has to change.

Aug 18, 2006, 10:41:00 AM  
Blogger hemorrhoidforhousing said...

Why?

Because a large number of people in the Bay Area are self-centered, self-righteous, self-absorbed, narcassitic, pretentious, greedy, selfish jerks!

Now do you want me to tell you what I really think?

Aug 18, 2006, 11:02:00 AM  
Anonymous Anonymous said...

We are in a period that middle class is rapidly disappearing and wealth is being transferred to or controlled by the very few rich. Bay area happens to be a place with concentrations of the very wealthy class. Good luck to a family tries to live a middle class life style here.

Aug 18, 2006, 11:11:00 AM  
Blogger marin_explorer said...

I've been curious as to why Californians play the whole "everything is better in california" card.

Well, I think you pretty well summed up the mentality behind this assumption. Instead of comparing CA, SFBay objectively to other metro areas, people's pain, fear, and frustration sublimates into defensive and addictive behaviors: defending the ridiculous prices and stupid choices they made, dissing other "armpit" states, delusional consumerism (such as owning a sh!tbox condo and buying a new BMW), and following the herd of financial "geniuses" whose schemes will someday secure their financial success. Sigh.

And this whole "renter" vs. "owner" clique is the stupidest form of snobbery I've seen here. Seeing the "little people" get priced out might be satisfying in some twisted, Darwinistic sense, but just wait when you want to buy a larger home. If this insanity continues, you'll find yourself priced out too. That is, if your resetting IO on your $1M 2BR hovel doesn't crush you first.

More people follow an illusion of wealth in the SFBay than actually enjoy a "good life" of luxury. Ironically, their "armpit" neighbors may be enjoying a better standard of living--even compared to Marin!

Aug 18, 2006, 11:28:00 AM  
Anonymous Anonymous said...

The reason for this view is simply the majority opinion and self-interest. Most people own their homes, thus most people want house prices to appreciate. Tyranny by the majority of the minority. If you have all of your wealth riding on your home, you would not want it to be depreciating.
Rest assured as the boomers fade into the sunset, housing will become "unfairly" expensive as a larger portion of the population is trying to buy for the first time.

Aug 18, 2006, 11:54:00 AM  
Blogger marin_explorer said...

Rest assured as the boomers fade into the sunset, housing will become "unfairly" expensive as a larger portion of the population is trying to buy for the first time.

I have a contrary view. As retiring boomers move into smaller residences in their old age (debt anyone?), coupled with recently overbuilt housing, smaller families, and excessive resale inventory should help normalize prices long-term. The current credit party will not continue into the sunset and people will have less funny money to push up the housing sector (or all that "lifestyle" based retail).

And here's a case study of "California dreaming" vs. reality. While we all know how "great" SFBay life is, take a moment to consider what Marin's median home price buys you in other states. Here's just one example (from my hometown,) within commute to good jobs. (It will likely be reduced to sell).

Truth be known, we all make sacrifices to enjoy life, so it's really about how much "life" we earn with our sacrifices. When I consider what the life I have here to elsewhere, it gives me pause.

Aug 18, 2006, 12:15:00 PM  
Anonymous Anonymous said...

Hi folks- Did anyone catch Forum on KQED today? (It repeats again tonight) I'm too tired to comment now (in Paris), but I recommend listening if you want a few chortles.

Aug 18, 2006, 12:36:00 PM  
Anonymous Anonymous said...

California should serve as a warning to the rest of the nation.

Aug 18, 2006, 12:43:00 PM  
Anonymous SF Mechanist said...

Why?

Bubbles like this have happened time and time again in history since the invention of fiat currency. To know bubbles, one needs to understand credit in theory and practice well.

People with flock toward money like a moth is drawn to the candle flame. They will happily believe anything they are told so long as it makes them feel rich and superior. I remember my dad telling me how kept getting these flyers telling him how much his house is now worth, and feeling pleased as punch with his investment acumen or whatever, despite the obvious fact that the same thing is happening to every other house- so if he ever wants to move, unless it's to a smaller place, and that place is pretty small, financially he would be worse off. I recall a perfectly sensible friend of mine speaking of home equity on her house like it was free money in 2004, which even back then left me speechless and I said nothing further. She was encouraging me to buy, which might have been smart if I had the sense to flip it in summer 2005, but I just don't think that way.

Seeing the "little people" get priced out might be satisfying in some twisted, Darwinistic sense,

Yeah, you see a lot of these undertones with Carol Lloyd in "Surreal Estate" articles in the SF Chronicle. In the end, Darwinism consumes the stupid.

Some of us possess the instinctive knowledge that nothing is for free, everything must be earned, and thus credit cycles perplex us regardless of how they present; still we sense it cannot possibly have a good outcome. Most people however hope to have things given to them for free, just like ideal parents do, and then credit bubbles simply become the universe acting as it always should.

Aug 18, 2006, 12:51:00 PM  
Anonymous Sreilly1874 said...

Isn't affordability inevitably going to drop when there is a limited supply of land and a growing population?

Housing prices have historically doubled every 15 years - regardless of a correction in the next year or so, can anyone provide a reason why this historic trend that's lasted over 30 years won't continue?

I did a quick experiment to work out if you invested in a house with leveraged capital (~20% deposit, 6.5% IO loan, 7% annual gain, 7% realtor fee to realize the asset), or invested your deposit in mutual funds (8% gain, capital gains on interest, saving some of the difference between rent and buying, but not leveraged) while you rent which investment comes out based on the historic trends - it shouldn't come as a surprise that investing in the house easily outperformed mutuals.

Aug 18, 2006, 12:55:00 PM  
Anonymous Anonymous said...

"Isn't affordability inevitably going to drop when there is a limited supply of land and a growing population?"

good question, and one not so easily answer. That said, it is interesting that less than 5% of the SF bay area is residentially inhabited. That's a far lower percentage than almost every other major metropolitan area. Thus the questions of running out of space isn't a physical one, but an issue of development policy. The questions SF bay residents need to make are to what extent are they willing to pay in oder to have open/green spaces? How high a price are these places worth? That alone would have the potential to free up an immense amount of space. Will this change? I doubt it.
Next, the country as a whole is mostly vacant. I drove all the way out here 7 years ago and let me tell you... there are literally thousands of miles of freeway that pass through nothing. Even in the case of almost every other non- confined city, like Dallas, Houston, nashville, Memphis, Atlanta, and hundreds of other cities, there is an endless sea of vast open space for future development. When more people move in, more houses simply get built and more is added the infrastructure.They do this in order to operate a sucessfull, progressive city where business can be healthy as the result of a healthy populace.

I live in Alameda. The total opposite is true. There is plenty of vacant space on the island. A huge former miltary base and vast open spaces in old factories. Yet in 1974, Alameda passes Measure A, which prohibits the building of any multi-family dwellings, and for that matter- homes in general. The result is that yes-Alameda is cute, charming, and frozen in time to the 1940's. But there haven't been any new homes built since 1974 except for an upscale community built on the outskirts of town.
This is totally impractical when it comes to managing a modern city. This is a micro example of the entire state except perhaps Sacremento.
In conclusion, there is not a space or supply problem that ahs anything to do with physical space. instead, it is everything to do with poor management. I can easily see california fall behind other states rapidly if it doesn't do something to reverse the trend.

Aug 18, 2006, 1:44:00 PM  
Blogger Ali, in Cali said...

"I've been curious as to why Californians play the whole 'everything is better in california' card."

it's the weather. and the whole 2 hours to the mountains, 2 hours to the beach thing. Hard to find that for cheap anywhere.

Aug 18, 2006, 4:55:00 PM  
Anonymous ross valley local said...

Hard to find that for cheap anywhere.

Maybe not cheap, but definitely cheaper: How about Eugene, Portland, or all those jobs around Puget Sound? Oh, and I suppose there's spots east too.

No, they aren't SoCal beaches, but I don't like those anyway...

Aug 18, 2006, 5:09:00 PM  
Blogger Athena said...

Anon #1... fabulous thoughts and insight.

Athena

Aug 18, 2006, 5:29:00 PM  
Anonymous Anonymous said...

Why? Simple greed and very screwed-up values

Aug 19, 2006, 1:30:00 AM  
Blogger fredtobik said...

"Why does our culture judge a debt-financed lifestyle a good thing "

Because people think more is better, I have learned to deal with this majority, trying to change them just leads to frustration. Just make sure you are out of the blast radius!


"And why does no one seem to worry about how and who will pay back all the debt?"


Some people feel that it is no big deal, with the attitude of "spend it while you can".


"Why do people here seem to think that a bifurcated society of "haves" and "have nots" is a good thing?"

As you mentioned or a poster did, nothing is free; a competitive society is a good thing. And natural selection is after all… natural.

"Why do people in the Bay Area consider the pricing-out of the housing market of young families a good thing?"

Too often on this blog (and others) people fail to factor in renting as housing. Also, somewhere someone decided to add owning a home as an “American Dream”, when I was taught that having a choice on what you want to do and where you want to do it or A.K.A "freedom" was THE American Dream.

“Why do our communities tolerate a situation where children who grew up in the community cannot afford to buy a house and raise a family in that community and so live near their parents; their children near their grandparents?”

This is similar to your haves/haves not question. I think the kids need to get out more, experience the world (save money), and shouldn’t feel some maternal need to live next door to Mommy and Daddy. Most of the problems with Americans are probably caused by their parents anyway.



“Why don't more people ask "why"?”

You probably don’t want to hear this, but I am willing wager that most people you are trying to help? Really don’t want your help. Why? Because to them ignorance IS bliss, and the day they become educated is the day they have to think and work more, and nobody wants that! All they want to know is “who is playing on Monday Night Football?” “Who did you get in your fantasy football league” “OMG I can’t believe Jess didn’t get voted off!” all the while they roll down 101 in the HELOC’d BMW sipping their shitty Starsux Latte.


This was one of your best posts IMO, as I have said or alluded to at least, my theory that this housing situation has deeper issues than crazy lending or pushy RE Agents or etc... I would have liked to spend more time posting on it, but I know it will get buried quickly.

Aug 19, 2006, 10:32:00 PM  
Blogger fredtobik said...

This comment has been removed by a blog administrator.

Aug 19, 2006, 10:32:00 PM  
Blogger Marinite said...

but I know it will get buried quickly.

Maybe so, but I always read the comments of older posts.

Aug 20, 2006, 10:51:00 AM  
Blogger Marinite said...

This was one of your best posts IMO

Thanks. And I had figured you were going to retort that I was a whiner or something like that but decided to post it anyway and be damned!

Aug 20, 2006, 10:52:00 AM  
Blogger marinmaven said...

I think the kids need to get out more, experience the world (save money), and shouldn’t feel some maternal need to live next door to Mommy and Daddy.

While I am all for people to get out in the world and travel, I wouldn't be advocating families branching out from each other. A lot of problems can be solved by having families and extended families living closer together. I think it is healthy for families to create roots and history in a community.
Our society is the way it is because we move too much, don't have familial and community support systems, and we deal with the isolation by purchasing material things.
Part of the fault is that corporate america is forcing people to become economic nomads going where the jobs are. Part of it is that our culture devalues family ties for the whole "lone wolf" archetype.
The American culture is all about the short term accumulation of wealth without regard to what it does to others. Republicans especially have sold the idea that Americans are not responsible for each other and that everyone has to "pull themselves up by their own bootstraps." Americans have been brainwashed into believing that we have no obligation to each other. So we have to pay for chilcare and for people to take care of us when we are old.
Our economy is a consumer economy it wants us to work so we can consume and buy things. The more we buy things the bigger house we need. The bigger house we get, the more we have to work to work off the debt.
There are very smart people who sell us stuff by appealing to our "lizard brain" by appealing to fear and the need for comfort and external respect/love. We have countless magazines and shows that show off model homes that reflect a Martha Stewart lifestyle that is really for the rich.
Things don't change because not enough people vote or hold their representatives feet to the fire in an organized way. Not enough people fight to have sustainable economies and lives. They do not calculate the real cost of shopping at Walmart or buying a status car or McMansion. We are trapped in an economy that is bad for us and we need to find a better way.

Aug 22, 2006, 6:00:00 AM  
Blogger fredtobik said...

Socialism/Communism does not and will never work.

Aug 23, 2006, 11:14:00 AM  
Blogger Marinite said...

While I am all for people to get out in the world and travel, I wouldn't be advocating families branching out from each other.

Yes, that was a rather thoughtless (as in poorly thought out) thing to say.

Aug 23, 2006, 12:06:00 PM  
Blogger Marinite said...

This comment has been removed by a blog administrator.

Aug 23, 2006, 12:17:00 PM  
Blogger fredtobik said...

"when human communities are allowed to form in a more natural way free of external and artificial influences, they tend to form in a more communal/socialist way"

Until their survival is dependent on a resource that is controlled by another community. Then they either kill each other, trade resources or the stronger community enslaves the weaker. We could dialogue about this for years, but unfortunately this is not the forum for such topics.

Aug 23, 2006, 2:22:00 PM  

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