Comments on: Why Palo Alto Housing Will Fall 30% or More

By: chip

chip — Tue, 17 Nov 2009 21:05:27 +0000

here again, in my lunch time, I am going to reply to you. I checked your reference to zillow chart on palo alto prices. 6.6% down. It fell, but it will not fall 30%, not even 20%. Even it falls 10%, it is still out of reach. In mlslistings, there are only 7 houses for less than 1 million. If it drops 30% as you said, that will be nice. Maybe 2012 like movie, the prices will drop like 30% at least. But at that time, who is buying?

By: Brian Gray

Brian Gray — Mon, 16 Nov 2009 05:28:30 +0000

Amazing. How foolish can one be? You know, those are the exact same BS arguments I get about why home prices won’t go down in Irvine and other areas of the OC. Everybody thinks that their area is different. It’s not. Wake up. OOH, venture capital firms and so forth. Irvine has over 200 major worldwide corporate headquarters located in Irvine alone. There’s no other are like Irvine in the whole US. Yeah, sure, you cannot find this kind of talented (correct spelling) and well paid pool of people…blah blah blah. Have you ever even lived in the OC? I’ve lived in both places. You are far too closed minded. Open your eyes.

By: marcitz

marcitz — Sun, 15 Nov 2009 04:32:45 +0000

Like you said “every city experienced the same rise in house prices”. So Palo Alto experienced the same rise as others. More specifically it went up for the same reasons (loose financing, housng mania) and will fall for the same reasons ABOVE its normal historical appreciation.

Think of it this way. Housing prices over the past 10 years went up for two reasons. One reason was the normal run-rate appreciation. The other was the “bubble mania”. The bubble mania has popped so that component of the housing price surge in Palo Alto will disappear.

Another way to think of it is that Palo Alto (prior to 2000) appreciated about 6-8% a year. After 2000 it was appreciating 10-20% per year. The difference between those two numbers is the bubble mania component. Before 2000 Palo Alto still had VCs and Stanford, smart people and something even better than net 2.0 companies – we had net 1.0 companies where millionaires were being minted MUCH faster than today (remember pets.com?). Why in that period (1996-2000), when everyone was wealthy and everyone was moving here did prices only appreciate 6-8% per year? When that bubble collapsed and people lost millions (and many VCs closed) and started to leave (after 2000) housing prices started appreciating FASTER than the last peoriod. That was the housing bubble again. Clearly the area wasn’t BETTER than it was in the previous period.

So, in short, housing prices have to hold or drop such that the long run appreciation in Palo Alto maintains the historical norm of 6-8%.

By: marcitz

marcitz — Sun, 15 Nov 2009 03:00:24 +0000

Thanks for your comments.

Regarding Irvine (BTW I grew up in “The Colony” so I know Irvine well) you can get all sorts of data from Zillow. Here is a link directly to “sales per square foot” for Irvine for the past 10 years (Zillow doesn’t go back any further than that). If you poke around you’ll see a ton of other metrics on the left.

Happy hunting!

http://www.zillow.com/local-info/CA-Irvine-home-value/r_52650/#metric=mt%3D36%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D52650%2C276119%2C276486%2C274371

By: chip

chip — Sun, 15 Nov 2009 02:07:08 +0000

when real estate prices seemed to go up like forever, back in 06/07, every city experienced the same rise in house prices. There is no other region in USA that can compare to the cities I mentioned about: palo alto for example. You cannot compare OC with palo alto. Around palo alto, there are many venture capital firms on sand hill road, there is stanford, and there all these net 2.0 companies, and there is google, facebook, twitter headquarters, a lot of innovation in silicon valley, you cannot find this kind of telented and well paid pool of individuals in OC.
that is the difference. OC rose in prices because the overall prices went up. OC could not sustain, so they fell.

By: Brian Gray

Brian Gray — Sat, 14 Nov 2009 22:04:40 +0000

The claims I see here about Palo Alto housing not going down, etc are the same ridiculous claims I used to hear in Orange County over and over again. Guess what? Those houses are down 30-50%. The same will happen in Palo Alto over time.
Secondly, I’d love to see the over time square foot comparison for a place like Irvine, CA. Any ideas where I could find it?

By: marcitz

marcitz — Wed, 11 Nov 2009 20:21:20 +0000

Well actually my assumptions are based on facts. Will it fall 30%, maybe not, but it will fall.

You said, and I quote, “Palo Alto house prices will never go down”. You might want to look at this chart from Zillow

In this chart you will see these facts:
– In the past 10 years Palo Alto home prices (in all of the zip codes) have fallen from a local peak 4 times.
– In the last year Palo Alto has fallen 6.6%

Also we all know that foreclosures lead to falling home values and those are increasing at an alarming rate in all the neighborhoods you mentioned according to this article from the San Francisco Chronicle:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/08/MNMC1ABRBC.DTL

So you may get your chance at Palo Alto. Please just be nicer if you become my neighbor.

By: chip

chip — Wed, 11 Nov 2009 19:34:58 +0000

I am not bias , I do not live in any of the areas you mentioned, but live in san jose. I too would want to live in palo alto, but i think your case point is ridiculous.. Palo alto house prices willl never go down!!! I already accept that. Most likely your assumptions is all wrong. They do not apply to these affluent cities, such saratoga, los gatos, los altos, menlo park, san mateo, burlingame, etc. You mys be so angry that you made a big mistake in your life, that you write these ridiculous blogs so you can feel better . Please do something more useful with your time.

By: A New Measurement for House Price Declines « ReallyFuckedHomeowner.com

A New Measurement for House Price Declines « ReallyFuckedHomeowner.com — Mon, 03 Aug 2009 21:20:26 +0000

[...] ReallyFuckedHomeowner.com Regretting the American Dream « Why Palo Alto Housing Will Fall 30% or More [...]

By: marcitz

marcitz — Mon, 06 Jul 2009 13:28:47 +0000

Yeah, its like Zillow forgot about “comps”. Typically I believe that it doesn’t matter how the house cratered it will still get factored into a buyers “comps”. Thanks for backing up my point because if Zillow doesn’t include foreclosures then it does in fact further show that this data is consistent. Obviously the market had factored in those foreclosures when pricing the non-foreclosed properties.