Friday, January 11, 2008

Sellers' Expectations

How true it is. And in Marin? Lots of sellers still asking, no expecting, no feeling entitled to prices from a year or two ago (emphasis mine):
During the recent boom, new housing got an even bigger price bump than existing ones because people often wanted the best, and, with a Icarian faith in the market’s eternal flight, buyers were willing to pay more and more to get the best. Now, with the downturn in the market, developers have scrambled to respond. The result? Some experts say that the price of a new house is now cheaper than an equivalent existing house.

“I think that’s true," says Joseph Perkins, president and chief executive officer of the Home Builders Association of Northern California. "New housing is a better deal for prospective home buyers because builders are responsive to the marketplace, whereas some sellers still haven’t responded to the marketplace and they’re trying to sell their homes for prices from two years ago...”
It was fairly clear as much as a year ago that the unwinding of the housing bubble would lead to recession. Never mind what the perma-bulls thought/said. Fast-forward to the present day: the housing bubble is unwinding around us and guess what? Merrill Lynch and Goldman Sachs are now on record as stating the obvious -- that we are heading to or maybe even currently in a recession. I guess not being an economist or paid to have a particular point of view is a good thing.

So I ask you: Say you are a renter who is looking to buy a house in the Bay Area or maybe you are relocating to the Bay Area (my advice: turn around and go back), would it be wise to "buy" a Marin cottage which is asking a price from year or two ago (say, around $900k) realizing that you might lose your job in the foreseeable future? Or what about buying the median $650K house in the Bay Area? Or is it wiser to rent for 1/3-1/2 the cost of "owning" (not to mention the freedom to move easily from a rental in the event of job loss) and waiting? Or does the ingrained sense of RE entitlement that so plagues the Bay Area short-circuit any such financial reasoning?

And assuming a recession leads to a serious decline in the stock markets (seems like a sure bet to me, but what do I know?), will that lead to a disproportionate number of job losses in cities like SFO and NY where investment-related business is so prevalent?

So what's a seller to do? Pull the listing and hope it all goes away by next Spring?


Blogger Matthew said...

Q1: “Would it be wise to "buy" a Marin cottage which is asking a price from year or two ago (say, around $900k) realizing that you might lose your job in the foreseeable future?”

Q2: “

A: Very simple answer... "No".. or "Hell No" is more like it..

Q2” “Or what about buying the median $650K house in the Bay Area?”

A: Again, “Hell No”.. What was the median price before all the false inflators hit the market?; That’s the question a prospective buyer should ask themselves. What’s out there now still reflects the results of all the illegal lending, hyped incomes and pent up greed and market manipulation. The punch bowl is busted and I’m not drinking. Unless $300K or so meant nothing to me, who the heck in their right mind would ?

Q3: “Or is it wiser to rent for 1/3-1/2 the cost of "owning" (not to mention the freedom to move easily from a rental in the event of job loss) and waiting?”

A: Yes, of course..

Q4: “Or does the ingrained sense of RE entitlement that so plagues the Bay Area short-circuit any such financial reasoning?”

A: Who cares any more? The king had his clothes removed and he’s not as well endowed or trim or healthy as everyone thought he was. This bubble mentality is a good thing to let go of for would be buyers because RE is no longer king; more like ball and chain.

Q5; “So what's a seller to do? Pull the listing and hope it all goes away by next Spring?”

A: Sellers can do whatever their wallet and gut will let them do. I frankly don’t care. Prices are coming down and there is little any one seller can do about it and very little the RE machine can do about it. The fundamentals and math involved here are firmly in control now.

I frankly am not concerned about the direction of prices in Marin any longer. I don't know the total Marin population size, but I'll make a wild presumption that not everyone here is "rich" and has $200+K per year jobs or income. Because of that and because of the pressure on wages and the uncovering of all the BS in the market, I’ll sit back and watch it all work out ahead of me.

Going for another hike.


Jan 11, 2008, 6:04:00 PM  
Blogger blacku8w1eb said...

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Jan 12, 2008, 8:30:00 AM  
Blogger Lisa said...

Re: Seller's in San Anselmo, the asking prices are still insane. Not as bad as a couple years ago, but still high. Some houses are selling, some aren't.

I think it's going to be hard for sellers to "let go" of 2005 wishing prices. When they do that, they also have to admit that what propped prices up to those levels was anything but real market fundamentals. Otherwise, why would a house be worth 10%, 15%, 20% less than just a few years ago?

And fraud and subprime and stretched borrowers are seen as everywhere EXCEPT Marin, because we are so special here.

We'll get there. I just think it's going to be a while longer.

Jan 12, 2008, 9:07:00 AM  
Blogger susan said...

Prices are coming down in ALL parts of Marin. In the next few months there will be unequovacal data of significant prices declines (mean, median, whatever). Prices are going to drop by 20% or more. Anyone buying now is absolutely out of their mind (or they just don't care about money). At long last, EVERYONE in Marin will realize that prices are plummeting. If you want to sell your house, you must drop the price back to the 2001 levels.

Jan 12, 2008, 2:36:00 PM  
Blogger Lisa said...


I'm renting in San Anselmo, so I watch that pretty closely. Little cottages were going for $900K in 2005. They're going for $800K now, or about 12% less. Less, but still totally insane.

I think it's going to take another 1 to 2 years, at least, before we start seeing big drops.

I just hope more people wake up to the fact that it is insane to pay these prices just to own here. It's so much more expensive than renting, and unless your property is appreciating, there's no financial benefit at all.

Since I sold my house, I max out on retirement accounts and have a HSA, so it almost replaces my mortgage deduction. My cost of living is less and I don't have to work as much.

Jan 12, 2008, 2:59:00 PM  
Blogger John said...

Across the street from me in Sausalito there is a $4,995,000 spec house. The lot went for 1.4mm with a tear down on it over two years ago. The developer took his time getting started (mostly due to his inability to work with the neighbors on planning the house). The consensus figure he's in for is about 3.2-3.5 million plus soft costs.

Our guess was he'd push it and try for $3.995 million but he's totally ignoring reality and gone for five million (despite being too cheap to pay PG&E the $35K they wanted to underground the cable the totally spoils the San Francisco view). Assuming a construction loan at 7.5% he's looking at $22k a month in debt service.

It's going to be really interesting to see where it ends up.

Jan 12, 2008, 3:53:00 PM  
Blogger Matthew said...

Most of the data I've seen lately indicates foreclosures are STILL rising despite their historic highs already... that, plus the coming bubble in the mortgage resets, is a clear indicator that all thing Real Estate will continue to deteriorate...

The full economic impact of this bubble has just started playing out with increases in unemployment, increases in CC delinquencies, massive write-offs and losses on Wall Street and other sorted (but predictable) happenings.. Commercial Real Estate is under heavy pressure right now as well.. look at the stock price of any REIT over the past 6-8 months and the trend is very clear..

There will continue to be pauses and head fakes and such as this market returns to it's fundamentals.. Those fundamentals do not support a $800K shack in San Anselmo or a $650K 3/2 1200sf house in Novato.. Sorry, they simply don't. All the stomping, pleading and groveling by RE machine will not affect that simple fact over the long term..

“The bottom is here”… Nope, not even close..
“The market is poised for a rebound”… Nope, especially when you consider the extent of this bubble..
“Housing is a great investment”… Yes, when purchased at the right time and price it sure can be..


Jan 13, 2008, 7:54:00 AM  
Blogger Lisa said...

"Those fundamentals do not support a $800K shack in San Anselmo or a $650K 3/2 1200sf house in Novato.. Sorry, they simply don't. All the stomping, pleading and groveling by RE machine will not affect that simple fact over the long term."

Amen. But sales are still happening here, so clearly not everyone gets it or cares to get it.

The problem is that sane lending standards disappeared in the late 90's, so we're pushing 10 years since people had to make downpayments, no piggyback loans were available, you had to document your income, no credit card debt, cash reserves, etc. were all required to get a mortgage. And no one wanted to lend you more than 3x your gross income.

Maybe the entire secondary market for Jumbo loans has to disappear before we see that again, which may happen as defaults spread up the food chain to Alt A and Prime borrowers with adjustable mortgages.

Even a $600K house would require a $200K annual income under traditional standards, and how many of those folks would WANT to live in some 1200 sf place in Novato??

I am hoping this Spring will be the turning point, that folks will start to grasp that these prices were nothing more than massive fraud, and we may never see them again in our lifetimes.

Jan 13, 2008, 9:19:00 AM  
Blogger Mothermaven said...

Another thing to consider is all the foreclosures the banks are holding onto. At some point, auditors are going to go through the books and tell banks to get rid of these properties and not wait for the prices to go up. If banks have to let go of these properties priced to sell then this will bring prices way down.

I have told friends that if they can stand to watch property values go down further after they have bought -- go ahead.

Jan 13, 2008, 10:09:00 AM  
Blogger Matthew said...


I completely agree... I'm mentioned to several of my friends and neighbors that a few homes sold in one neighborhood, that I'm very familiar with in Novato, will never see those prices again... well, at least not for a long, long, long time.. well past my lifetime probably..

Why ? Well, simply, because of the historic relationship between incomes and rents/home prices for a particular area. Yes, contrary to the RE machine's propaganda, that relationship does exist. Why? Because it has to or you run into situations like we have today in the financial and credit markets.

We were in unchartered waters during this bubble because of many factors, with loose and fradulent lending leading the way. I don't think we'll ever get back to that point again... not for a long time..

What gets my goat is why the RE machine thinks the asset that they are selling should require more of my fiancial pie than all the other things I need to buy combined (and then some) in any given month or year.

The answer is it shouldn't or can't... not over the long term or it will correct itself to the mean..

I imagine the UAW has a love-hate relationship with the NAR.. They might of loved them during the bubble, but I suspect they can't stand the sound of them now because their industry is being turned upside down because of the decline in housing..

Jan 13, 2008, 2:13:00 PM  
Blogger Matthew said...

Recession or no recession ?

Hmmm.. I don't have good enough visibility on this one..

A related question however is the makeup of our GDP as a nation.. I'd be very curious to see how the basket of goods and services that we produce as a country has shifted during the bubble.. Anyone have access to this ? Just curious..

We the hard times in Detroit and the industrial mid-west and the booming times in Wall Street, I suspect we're no longer the producers of things we once were.. that too can only last for so long..

Jan 13, 2008, 2:25:00 PM  
Blogger marinite2 said...

Those fundamentals do not support a $800K shack in San Anselmo

But years from now the fact that such crap was selling for such astronomical prices will give us cause to laugh.

(Not to mention being definitive for our period of time in history).

Jan 14, 2008, 9:36:00 AM  
Blogger Lisa said...

Our beloved Marin Heat Index is at 0.39 today. Still in the deep freeze. Well, I'm sure it will pick up after The Super Bowl -);

What happens when the Spring just goes bust? Will folks finally realize Marin is NOT different?

Jan 14, 2008, 12:06:00 PM  
Blogger marinite2 said...

What happens when the Spring just goes bust? Will folks finally realize Marin is NOT different?

No, it will just be some other excuse and/or someone else to blame.

Jan 14, 2008, 12:25:00 PM  
Blogger bob said...

To answer your questions one a two, I'd say no, and no. Despite prices that are starting to decline, the depreciation is hardly what I would call producing any real deals. A 450,500-650k house is still just that- 500k in change.

Whenever I think of home prices, I think of basic mathematics. Admittedly, I do fairly well economically, as in earn a six-figure income. My wife almost the same. But getting out the little calculator and punching the numbers shows that even with our income, the most that we should be paying for a house these days is around 400k. Sure- there's a few very small, almost dilapidated homes in this price range in my neighborhood, but the thought of making 6 figures and yet buying the crappiest house in the area is stupid.

At the same time, I also wonder how intelligent locking myself into a permanent residence given my track record in the job market: I've had six different jobs in five years. The job market in the BA has been robust for years, but at the same time it has grown more volitile. Who knows what the job market will look like here in a few years? In my mind, I see the US economy as in it's twilight. By the time we recover from this recession, countries like India and China will have taken the reins and will be fully capable of producing the same highly dynamic economies based in intellectual design on their own. Given the expense of doing business in CA, I can see that if a highly overpriced area like this were to compete with say- China, there would be no contest. The BA's costly environment is it's own worst enemy. Of course that could be good for those seeking lower cost housing, but if I were to buy now, I definitely see a severe drop in prices from way too many internal and external factors.

Lastly, I look to other areas like the Southeast where even now, home prices are extremely affordable and the job market is growing. It beckons to reason why I'm actually staying here when my living situation could be so entirely opposite of what it is now.

By any count, all of this is highly entertaining.

Jan 14, 2008, 2:43:00 PM  
Blogger marinite2 said...

I saw this post by "Randy H" over at I was going to make a separate post around it, offering up something along the lines of a "golden turd" award for all those Marin sellers who paid too much for their POS and who now refuse to "give away" their houses, but thought better not seeing as it is a natural extension of this post.

Here is the snippet:

...For Mr & Mrs homeseller, many of them have waited too long now. I’m not talking about the easier computation of eminent foreclosure fodder. I’m talking about the folks who are now too far below their psychological cutoff point. There are a ton of those types around here in Marin. They can stay in their current house — even many who bought in 2005 — regardless of how much further their paper-losses rack up. They can just put their lives on hold indefinitely to service their mortgage and keep their albatross alive (ok, around their necks, you get the point). Nothing you will ever tell these folks will convince them they will be better off, richer, happier, or more rational by selling now below their mental-break-even point. Nothing.

These are the hundreds of days on market, relisted 12 times, folks. They’ll wait until 2020 if need be, but “you’re not going to rip them off, damnit!”*

*actual quote from my next door neighbor, who bought in May 05, and now rents out his MinMcCrapsion for less than half his monthly nut. But wifey poo has family money so they’ll “wait until a reasonable buyer comes along, or rent it out forever, but I’m not going to give this house away!”

Jan 14, 2008, 4:48:00 PM  
Blogger Matthew said...


Implied in your last post was a thought that has occurred to me for some time now, and that is, the dumming down of America and Americans over the course of this bubble.. (of course, we bubble heads are excluded)..

Look at the “wealth” affect and the lifestyle image the RE industry has created. Who's living it or who’s hands did it largely fall into? A good number of them are bimbos and dropouts who thought (and still think) they’ve "got it all figured out".

Think how much better we'd be served if incomes for doctors, engineers and scientists were increased by the same amount as Realtors or Mortgage Bankers over the last 6-8 years. How many kid's career decisions and lives would be positively affected by that fact ? Instead, we've dummed ourselves down by glamorizing an industry that is built largely on fraud and superficial BS. Yes, boob jobs, BMWs and café lates have trumped hard work and study. Who would have thought ?

Too bad..

I'm from back east and I’ve got two older kids. They hear "no" often from me and it will serve them well in the long run. My son who’s in college wanted to study business for a while because of his perception that it was a quick way into Real Estate riches. We had a little talk…. He’s studying a science at the moment, enjoying it and doing quite well.

Jan 14, 2008, 6:03:00 PM  
Blogger Matthew said...

Randy H's observation is noted.. However, as this RE tide continues to ebb, I'm sure we'll see a few more neighbors and others who we thought had healthy personal balance sheets and cash flow statements clinging for dear life..

Why pick the dead carcass lying well inland and risk getting sick ourselves when the fresher carcasses will be exposed in a year or two further out to sea?

Jan 14, 2008, 6:16:00 PM  
Blogger John said...

While were bashing the RE industry - just why does selling a house cost 6% (actually 5% in most of Marin)?

In the UK where I grew up 1% was more the norm - then you paid a lawyer to do the paperwork (a couple of thousand typically). 5% is outrageous for the amount of work they do.

Jan 14, 2008, 6:44:00 PM  
Blogger see me said...

Casey on Dr. Phil Show this Wednesday! Inbox
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Casey Serin


I will be on the Dr. Phil show this Wednesday!

7PM Chanel 31 in Sacramento. Use this link to look up your state for local stations and times:

I will try to get a recording of it and post it here:

My Current Status:

The show was taped a few months ago. I'm still trying to save my marriage. Following Dr. Phil's advice by staying off-line and working a steady job. Unfortunately there hasn't been much progress. Still hoping though. Prayers appreciated!!

And I still have 250 to 500K of defaulted debt and foreclosure deficiencies to deal with (plus other more serious legal issues). And I don't think bankruptcy will be a good move for me.

I'd love to pay it all off instead. That would be a sweet comeback story. We'll see...

By the way, do you know anybody who is facing foreclosure?

I can help by sharing my experience of going through 6 foreclosures, dealing with short sales, 1099s, deficiency judgments, etc. I was blessed with some great lessons.

Casey Serin

P.S. You signed up for my mailing list or are in my address book. If you want to stop receiving occasional updates feel free to unsubscribe below. Thanks!


Jan 14, 2008, 8:32:00 PM  
Blogger Omar Cruz said...

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Jan 15, 2008, 11:33:00 AM  
Blogger maquan said...

There is a quote here about how not all Marinites are "rich" making over $200K. True. However, I think that many people here underestimate the number of people in SF and down in Silicon Valley who do make that amount easily. And that makes all the difference.

Let's just say that there are 200 new blue chip employees in the SF investment banking industry each year. For the most part, in 5 or 6 years they are going to be able to afford a nice starter home ($800-900K in their world). Meanwhile, assume another 50 young bucks per year make money in a tech/bio-tech start up per year.

There you have 250 brand new home buyers (maybe even un-married/single, mind you) that can basically afford $800K++. (By way of example, a close friend of mine bought Condo #1 at age 26 for $550K, and then added another investment to his portfolio by picking up House #1 at age 28 for $1.63M, and he's just a regular example... oh, he's single by the way so didn't even have a second income).

Next you have all the SF couples that make over $200K and are renting in SF. There's an army of them. Eventually quite a few of them will want to move into Marin school districts as well. There must be 500 of them ready to go whenever... there simply must be because I probably know 25 such couples and I don't know anyone.

Any of these people can come up with $100-200K in cash for a down payment on their first home purchase so no worries there.

So, let's just say that of these 750 potential home buyers, 1/3rd of them decide to move up to Marin. Those 250 people will not want long commutes to the city. They'll want the best schools, community, etc...

In short, they'll want Tiburon, Mill Valley, Greenbrae, Kentfield, and Ross.

Now, just to reset a little here... keep in mind that these are NEW HOME BUYERS. They're the bottom of the barrel so to speak. So don't forget about the couples/families that have already been in the game 5, 10, or 15 years. They also look to upgrade and move around and can afford WAY more. So back to the cities listed above, demand will always outstrip supply, because there is no new housing coming in those cities, yet there are always new home buyers.

Hence, people need to make decisions about how much they're willing to pay. Generally speaking... there seem to be enough that are willing to pay a huge premium to have a quick commute to the city, a great community, and excellent schools.

So, these folks will win the market in the premier cities, and that pushes everyone else either down Sir Francis Drake Blvd, or up the 101.

And the cycle basically starts to repeat itself at the lower end. Either you're willing to pay up for San Rafael, Novato, Fairfax or San Anselmo... or you're stuck in an apartment here forver, or moving to Petaluma.

So... do you really, really think that the tide of "new money" will ever stop in the Bay Area? Do you really think that these cities right next door to SF won't be in demand at these escalating prices? Where would you expect a couple with a family income of $300K to go if not Central Marin?

In short, you're really not arguing that home prices are crazy over the long-term and demand won't be there. It's really not about that. You're arguing that there won't be newly minted rich people anymore. Because that's the only way that the supply/demand curve in Central Marin would change in a meaningful way.

Jan 15, 2008, 1:30:00 PM  
Blogger Holland said...

The Heat Index is 0.36 today. We are facing a recession as a country. With tightened credit market and layoffs coming, how many people with $200k annual salary could get huge jumbo loans and afford houses in Marin? Especially housing prices are dropping now. Any sensible person would think twice before making a huge financial commitment.

Jan 15, 2008, 5:01:00 PM  
Blogger Matthew said...


Acknowledge your comment about high incomes for Marin (relatively speaking), but disagree with your conclusion...

Your assumption was that huge increases in wealth/wages in the SF Bay Area created the increase in home prices.. well, the data on wages does not support that - even in Marin..

Also, for every new home buyer from the SF Financial and Tech Districts that you talk about, we are probably losing 1 wage earner right now to attrition and other factors (retirement etc). Say nothing of the complete implosion of some local RE related business because this bubble got way out of hand..

Your argument also implies that home prices will never decline.. Now, that sounds like a totally logical conclusion to me.. Well then, you should go for it and be buying homes with both hands and feet..

Hate to say it, but I predict your buddy there will be under water on his house #1 if he bought from 2003 on.. maybe even 2001/2002 on if a recession takes hold..

But hey, don't ask me, ask about 90% of the investment people in the know on Wall Street and elsewhere who don't have skin in this game and who study these things for a living.. or, you can ask the NAR and the local RE machine if you don't like their answer..

Jan 15, 2008, 6:31:00 PM  
Blogger Matthew said...

By order in terms of their affect on home prices since 1999:

1. Loose / Illegal Lending
2. Fraud
3. Speculation
4. Greed
5. Hype
6. Inflation
7. Fundamentals

No doubt about it...

Jan 15, 2008, 6:35:00 PM  
Blogger Lisa said...

"Let's just say that there are 200 new blue chip employees in the SF investment banking industry each year."

A whole 200 every year? Yeah, that ought to keep the Marin market propped up, assuming they all decide to move here.

There's no doubt that some people do have money, and some have lots. But you're talking pockets of Ross and Belevedere and Sausalito and Tiburon and Larkspur.

It's just not enough to keep the county propped up. Take a look at The Marin Heat Index. We're in the deep freeze.

And just wait until Jumbo loans require 20% or 30% down. On an $800K starter home, that may take a while to save for.

I know plenty of folks living in Marin in $800K+ homes who bought recently, and none of them can actually afford it. Not over the long haul. Not once their ARM resets.

Jan 15, 2008, 8:42:00 PM  
Blogger bob said...

Well... I'll step in and throw in my two cents. Me and my wife are one of those young couples that make a combined 200k a year.Maquan is suggesting that people who make such salaries automatically consider sinking money into 800k homes.

First of all, the mortgage payment on an 800k house would equal half of our take-home pay after taxes. That doesn't include property tax, insurance, repairs, and so on. It also doesn't include anything non-related to housing like cars, vacations, health insurance, groceries, and utilities. So in the end, someone making 200k a year buying an 800k house would be blowing close to 65% of their income every single month on the bare-essentials.

In reality, in order to pay for a 800k house and live what most in the US would consider a middle class lifestyle, you'd need to be pulling in over 300k.

So if I were to buy, then what would 'should' I consider? The number I came to was 450-475k. As I mentioned before, 450k in my hood is absolute tear-down crap.

My point is that it isn't all about the absolute price, but more about the Value. I'm from TN where even in the nicest parts of a given metro there a nice home can be had well below 150k. So when I hear of people making 200k and 'hoping' to someday buy a starter home in SF, I can't help but wonder if they've though about the fact that if they worked for 5-10 years, they could just save the money and semi-retire elsewhere.

Lastly, most people making those kinds of salaries are in highly volitile industries. Counting on that kind of income indefinitely is something most of us my age do not consider. Buying a home would be an outright risk and place immediate pressure on us to continually live the rat-race or perish.

So no- I don't agree that even people making decent money are automatically going to pounce all over overpriced homes.

Jan 16, 2008, 9:10:00 AM  
Blogger Max said...


Ditto for sure for me on the finance side...On another note: What makes a place "nice'? I'm sure it differs from one individual to the next... but one criteria is whether or not it is affordable and a lack of artificial pretension. I grew up in NYC...Marin and SF are Not NY...DC...Boston...Chicago...Philadelphia even. I like it here, but the pretense is amazing for an area that is essentially the 21st century's version of a American Industrial City. Smoke stacks have been replaced by routers and fiber. Great. Don't you think that that can be outsourced to other countries with 3 times the US population and 10 times the eagerness? It's nice here, but it is not infalliable. A $4500 mortgage is insane for a new least for me. Did see a house go for sale in the $550's today in Lagunitas. Only $200 less and they got a deal.

Jan 16, 2008, 10:41:00 AM  
Blogger bob said...

I agree wholeheartedly. Since living here over the past 8 years, I've noticed that same sort of invisible wall that Bay Area citizens seem to put up around the area. The sort of attitude that only smart, politically forward, intelligent people live here and that the rest of the country just sucks.

It's funny because my home town of Nashville is heavily democratic, has a new metro rail system in the works, smart growth initiatives, and believe it or not- a mayor who is originally from SF. Homes there are still at this time affordable and what you get for your money is much better than say-Marin.

A 400k home in Marin is a dump. A 400k home in Nashville is a freakin' mansion. A 150k home there is what would usually qualify as a million dollars in Marin. Outside of Nashville, you can get a house on ACRES of land versus the cramped yards that often come with homes here.

That said... yes- SF and the area has pleasant weather. I can see at the very worst that the area might turn into another Florida full of old farts except the farts here will be leftover hippies still clinging to their precious socialist agendas.

Personally, after living on both coasts, I'm tired of the attitude that comes with both and am more than ready to move back to a region that's full of friendly people who care more about their families and less about what's happening thousands of miles away with a situation beyond their control.

Jan 16, 2008, 11:08:00 AM  
Blogger Max said...


Have a buddy that lives in Nashville and a really nice town (and from what I understand becoming a destination for celebs...more celebs I should say so watch out on how that town may change). I agree that you can get more elsewhere...but, not to be hypocritical for me at least, I moved here recently and am amazed by the area at times in terms of beauty in West Marin. Plus I enjoy skiing, camping and mtn bike and have family here and going back East is looking less likely. Moving to Washington and Oregon??? Well not likely, but I might retire there.

What I am saying is, If I was the opposition on the bubble argument (whether it exists or is justified in Marin or not) I have made their case for them. I complain it's too expensive, but I am not willing to leave. Now assume there are 1,000 other people who feel the same way, 250 of which have the $$ to buy a home...then the supply and demand premise is somewhat valid and will keep Marin prices inflated (however the market dynamics are not 100% applicable to Marin since it shut off supply due to the moratorium of further development and therefore subject to pitfalls of a closed market). Why I hope/believe prices will continue to come down?
1) No more cheap money
2) Replacement costs are too expensive for a 7,000 sf lot which means $/sf comes down effecting home prices in general

Bottom line...good properties will hold price..bad ones won't and aren't.

Last observation...for homes that are asking $800,000 for a cottage...why don't I see any Porches' and Mercedes' in driveways? Very bougeouis (sp) to notice I know...but that is my ultimate wait and see. See more Porches, then prices are never coming back.

Jan 16, 2008, 12:14:00 PM  
Blogger marinite2 said...

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Jan 16, 2008, 2:22:00 PM  
Blogger marinite2 said...

Thanks bob and matthew et al for responding to maquan's comment. It is more credible if others respond first. Now I will give you my take.

maquan... first of all let me just say that when I read your statement you seemed to be making the all too common (and frankly, rather offensive to me) assumption/claim/statement-of-presumed-fact that Marin County is the only decent place in the whole Bay Area worth living in (and maybe the only decent place to live in the whole state). That is a rather arrogant and unfortunately all too common attitude in Marin. Of course, the people who choose to live here think it is nice otherwise they would not choose to live here. So it is understandable that many folks here think Marin is the nicest place around. But to presume that others outside of the county share that feeling is arrogant. And in case I am misrepresenting you with this, then I am sorry.

But anyway...

If you go to the web site of the U.S. Census Bureau ( you can find median household incomes listed by county. "Household income" is defined as:

"To measure the income of a household, the pre-tax money receipts of all residents over the age of 15 are combined. Most of these receipts are in the form of wages and salaries (before withholding and other taxes), but many other forms of income, such as unemployment insurance, disability, child support, etc., are included as well. The residents of the household do not have to be related to the householder for their earnings to be considered part of the household's income."

So to be clear, household income as calculated here includes a dual-income family.

According to the Census Bureau, Marin's year 2005 median household income (that's pre-tax income from various sources of the whole household, not per capita or individual income) was $78,009 per year +- $3,158 (90% confidence interval). A screenshot of the Census Bureau I am referring to can be found here:

So households in Marin bringing in $200K or more per year probably form a small minority. Even if the median income were $100K per year (as recently claimed by the Marin IJ but I should note that statistic was based on only a subset of people filing taxes), the $200K per year earners would still be a small minority.

If county income follows a normal distribution, $200K per year earners probably fall outside the second standard deviation (I am too lazy to calculate if that is true but I'd bet good money that it is). The area under the normal distribution corresponding to 2 s.d. is about 5%. Since the normal distribution is two-tailed, that means the $200K+ per year earners fall within the upper 2.5% of the distribution.

No doubt the households that bring in $200K or more per year are concentrated in smaller, select areas of Marin and if you are a realtor who focuses on those areas or who preferentially takes note of what sells in those areas you might be led to believe that "pretty much everyone in Marin is making $200K per year", but you would be suffering from a sampling bias.

Now you might argue that the $78,009 median represents not only the people making $200K per year but also the old grannies living off of meager income from CDs or whatever and that everyone who has been buying houses lately are all the 200K per year types. After all, "how else can anyone afford our prices?" If that were true, that only people making around $200K per year are buying Marin houses, then, given that well more than a 1000 houses are sold in Marin in a year, that the median income in Marin would be rising at a rapid rate due to this presumed influx of $200K-per-year income earners.

Well, here are the Census Bureau's median household income calculations for Marin County for the last few years:

2005 -- $78,009
2004 -- $67,731
2003 -- $66,764
2002 -- $70,854
2001 -- $73,276
2000 -- $72,301

If there is an influx of "newly minted rich people" in Marin, I sure don't see it being reflected in the US government's calculations. Yes, there is absolutely no doubt that there are some very wealthy people living in Marin and there are some people who earn a whole lot every year, but as far as I can tell, they are the minority.

So maquan, what I think you are really saying is that Marin's entire stock of available housing will be supported by that small minority of people of "newly minted rich people" who earn $200K or more per year. I think that is dubious.

What we are seeing happening in our market is that the lower half to lower two thirds of the market is not moving much in much of the county due to unaffordable prices, tighter lending, etc. The higher end of the market is doing fine partly because the people who can afford those prices are less affected by price and changes in lending standards. I have never disputed that segment of the market is and will continue to do well. It's the rest of the market that I discuss most on this blog.

Probably this should have been its own post. Sorry.

Jan 16, 2008, 2:25:00 PM  
Blogger bob said...

Give it a few years. I moved here almost nine years ago and I've seen it in good and bad times, from the tech boom to bust, and now from the housing boom that replaced it immediately to it's bust, and presently to the new tech boom creeping up behind it.

I've talked to enough people who live around here and have seen what happens to the economy locally to get the sense that in reality, the area is prone to severe booms and bust cycles. Most people who bought and now seem to live like 'normal' people and have regular jobs are those that bought right at the bottom of the last bust, which was sometimes in 1997-98. The problem I see is that the bottom is the only time in which people who don't want to shell out serious dough in order to have a home can buy. That window is extremely narrow. How it will play out this time is anybody's guess. The level of opportunity is extremely limited.

With the advent of the internet and rapid-fire data, this bubble's crash was probably the most anticipated in history. So there are A LOT of people just like us who are waiting... waiting... and waiting for that bust to bottom out. Then it'll be great for about a year or so until we suddenly become entrapped in a bubble once more, which as mentioned will only be helped by whatever bubble that precedes or nurses it along- whether that be another tech bubble, or what have you. Wash. Rinse. Repeat.

Bottom line- there are 37 million people in California, 5-6 million of them in the Bay Area. My home state is less than 5 million state-wide. California is crammed-packed full of aggressively competitive people that for none other than lack of room willingly to go to extraordinary means just to get what many in other parts of the consider normal.

Secondly,if you like outdoorsy stuff, you’re going to see just how impossible it is to secure a campsite from March until early November. EVERYONE is outdoorsy here, so everyone goes camping, biking, hiking, etc etc.

I’m so tired of everywhere I go- whether that be a campground, music festival, or whatever, the places are crammed with people. If you’re from the East Coast as you say, then you’re probably already used to this to a degree. The East Coast isn’t all that different from here. Hence there’s way more east coasters than any other transplant.

On the other hand, My brother is a mountain climber and has his pick of any number of mountain ranges there. What’s more, we never worried about campgrounds or hiking trails being full. Often times you could go and be the only people there. Again- population makes the biggest difference.

That’s why I will probably wind up in an area that is less populated. Admittedly I am waiting it out here to see what prices are going to do. But I’m also tired of the area and the hectic pace. I think a change might be nice…

Anyhow, good luck in what ever place you wind up calling home.

Jan 16, 2008, 3:36:00 PM  
Blogger Mothermaven said...

Another thing to consider is that a couple making 200k moving up to Marin face pricey childcare options. It is about 20k or more (for more kids) per year to get into one of the better daycare. In general, services do cost more up here in Marin and should be factored in before one moves here.

Jan 17, 2008, 9:43:00 AM  
Blogger bob said...

Simply put, I don't think it is at all safe to assume that couples making 200k are automatically going to be able to buy much of anything in the Bay Area or Marin especially, and definitely if they have children. Kids these days cost an avg of 250k or so to raise, to use cold calculated mathematics.

I moved out here when the economy ( tech bubble) burst the first time. So I've seen how bad it can get. I'd just graduated college and there were NO jobs at all. Everyone was moving out in fact. So for three years I worked at Joe jobs making $8-$12 an hour. Try living off of that here. Trust me- I learned to appreciate the value of every single dollar I made.

It wasn't until the last 2-3 years that I started making decent wages. But even now, if me and my wife were to buy, we would still be placing ourselves into a dire financial situation. Heaven forbid if even one of us loses their job. The mortgage payments would eat us alive.

I guess what I'm saying is that I've seen the opposite end of the economy here. I know how nasty it can get, and have zilch trust in counting on income to purchase something as overpriced as a Bay Area home, even if we could more easily afford one. The risk to me is simply too high for just having a roof over your head that you can call 'yours'.

So when I hear of freshly minted younger people making 200k and buying Bimmers and houses, I think that they must have never seen a bad economy and probably do not have failure and rick as part of their vocabulary.

Until that risk is alleviated, which means that if one of loses a job, the other can fully support the finances, I will wait.

Jan 17, 2008, 11:38:00 AM  
Blogger Matthew said...

As usual, I was disappointed by the questioning of BB today by the Congressional Budget Committee..

I know he knows this, but I'd like him or someone with the mike to admit, once and for all, that this whole mess is all due to the falsely inflated real estate market... the whooooole enchilda... no doubt about it..

Man, what I wouldn't give to be on the other side of that mike vs some of those knucklehead congressmen and women..

Four questions Mr Chairperson:

1. In addition to the regulators and the fed's complete failure in overseeing the banking and mortgage industries these past 5-6 years (please acknowlege that failure sir), why are housing prices ignored when you are reveiwing possible monetary policy actions? Isn't that largely why we got into this mess in the first place? Wasn't the real inflation felt by most Americans much, much higher than what was reported through the CPI? If not, then how do you explain the record personal bankruptcies, foreclosures and CC delinquincies? All of these are clear indicators that the consumers are tapped out.

2. And given everyone from Secretary Paulson, Alan Grenspan, Paul Volker, Robert Shiller and all the major investment banks on Wall Street agree that real estate prices got way out of hand, especially for the middle income Americans, why would you or Congress propose any policy that would keep them artificially inflated, such as interest rate cuts or increases in the FHA limits? Don't we have an obligation to our children and the next generation to level the playing field? Shouldn't we be striving for a fair and open marketplace that allows all assets and consumables to seek their fundamental price? Shouldn't we help get to the bottom as quickly as we can in order to get everyone working again?

3. Do agree with Mr Volker that asset bubbles can be extremely damaging to the economy, especially to middle income Americans? If so, what will the fed do to help deflate the current housing bubble and help avoid a similar one from occuring when you start tightening again?

4. What is your estimate on the real unemployment and underemployment in this country? Is that of a concern to you?

Jan 17, 2008, 1:26:00 PM  
Blogger Matthew said...

If anyone, in Marin or elsewhere, doesn't think the historic write downs of assets and losses being disclosed by the financials won't have a profound (negative) impact on housing, and specifically home prices, they are certifiably NUTZO..

Jan 17, 2008, 1:43:00 PM  
Blogger bob said...

I totally agree. Simply put, despite everyone on Wall Street congratulating themselves over containing inflation and the success of the economy, the reality is that we experienced what could be defined as none other than hyper-inflation of the worst kind: the consumer was essentially bankrupted.

I had a friend about a year ago who mentioned that he was a bit concerned about the slowing of housing prices. ( he owns) I told him that eventually, housing would crash the economy and that virtually the entire economy was in some way attached to the fate of it. He didn't believe me. As we now see, this is coming ever more true by the day.

Today the reports came out that shows over a 4% drop in the SF Bay Area. The bust has finally arrived Sacramento style on our doorsteps.

Jan 17, 2008, 3:57:00 PM  
Blogger Lisa said...

DataQuick out for December 2007:

"Bay Area home sales drag along bottom, median price back to 2005 level"

Marin sales were down 28% and median price was down 5.5%.

Panic by Spring?? How'd you like to be sitting on some monster ARM with a reset looming?

Jan 17, 2008, 4:59:00 PM  
Blogger marinite2 said...

Marin sales were down 28% and median price was down 5.5%.

I'll make a post on this tonight especially as it is obvious that we need a new discussion thread.

But didn't you love how the IJ down-played this?

Jan 17, 2008, 5:23:00 PM  
Blogger susan said...

Regarding the comment about the DQ numbers just released - this is clear unequivocal evidence of a price decline. And who among us is now not predicting further and steeper declines? It will be interesting to see if the IJ has anything at all to say about it.

Jan 17, 2008, 5:30:00 PM  
Blogger Holland said...

Is a deflation on its way to haunt the US economy? This is one way to get rid of hyper-inflation. The economic picture is unfolding like the deflation period during 1930s. During that period, the stock market crashed then rebounded for the following 5 years. During that 5 years, people thought everything was OK and rushed in to bid up houses. Then the real economic slowdown came in and people lost houses, jobs, etc. This is what we know the Great Depression. Are we seeing history repeats itself?

Jan 17, 2008, 5:45:00 PM  
Blogger Lisa said...

I got a good chuckle from today's IJ. Oh, it's just the typical holiday slump. Hey, the holidays happen the same time every year, which doesn't explain why sales dropped almost 30% from Dec '07 to Dec '06.

And, of course, it's not as bad here as in other parts of the country, because, well, we are so special.

And I love how people say we just need Jumbo loans to lighten up. They're not. The days of 100% financing, pick your payment, 1st mortgage, 2nd mortgage, HELOC are GONE, GONE, GONE. I still don't think people have digested what this means. It means these prices are never coming back.

Even a 10% downpayment requirement will knock out a lot of first time buyers. And without access to a HELOC, the opportunity to "liberate your equity" and spend the money isn't there. So how do you remodel the kitchen and upgrade your car and go to Europe this year without that ATM? You'd just have a big house payment with not much to show for it.

No wonder sales are in the toilet.

Jan 17, 2008, 6:20:00 PM  
Blogger marinite2 said...

this is clear unequivocal evidence of a price decline

No, it is not. We have had negative monthly numbers out of DQ for Marin before. If this turns into a pattern, then maybe yes.

Jan 17, 2008, 6:23:00 PM  

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