Comments on: Why Higher Prices are a Bad Sign

By: Lee

Lee — Wed, 14 Oct 2009 03:19:52 +0000

” To the 5 year old real estate optimists in the back seat “no honey, we’re not there yet, why don’t you nap some more.”

Well said.

Again.

By: Tom

Tom — Tue, 13 Oct 2009 19:25:21 +0000

I had some relatives buy near the peak, with a 10-year Interest Only mortgage, in San Carlos, and are either 1) naive or 2) in denial about their situation.

Here’s a home that is 2.4 miles from their place, built 50 years+ ago like theirs, and is about equidistant to the 280 and 101:

http://www.redfin.com/CA/San-Carlos/2335-Saint-Francis-Way-94070/home/799850

It is a 3 / 3.5 with 2,070 sq feet. There are two ways to use this home as a comparable to come up with an approx. value for my relatives’ house:

1) Using dollars per square feet: (generously) assuming they get their asking price of $948,500, that is $458 per sq ft. Using that value my relatives’ would now be worth $760,632 (they paid $960,000!! in Oct 06).

2) Using Zillow’s crazy numbers, but factor in a relative adjustment: Zillow has the above house’s value at $1,108,000. Gee, that’s funny, it is “worth” $1,108,000, but the sellers are selling it for $948,500! Something’s wrong with this picture. Hint: Zillow is on Kool-Aid. Anyway, take Zillow’s number and subtract how much they are really asking (the true value, assuming they get it!), and you can come up with a “percentage that Zillow is too high.” That percentage happens to be 14.39%, so then look up Zillow’s estimate value on my relatives’ house and subtract 14.39% from that value….that number is: $817,500.

So by these two rather quantitative, no-b.s. comparison methods, my relatives are down somewhere between $142,500 – $199,000 on their original purchase price.

By: marcitz

marcitz — Tue, 13 Oct 2009 17:54:09 +0000

Its a mixture of subdivided houses, houses, and apts for rent. Its more than I’ve ever seen but Palo Alto never has a lot of rentals so a small amount is noteworthy. Sometime the best strategy (especially in the downtown areas) is just to walk up-and-down the downtown streets and look for signs. Good luck. Rents are falling as well.

By: Casey!S

Casey!S — Tue, 13 Oct 2009 17:37:50 +0000

If it is Option ARM recast-ers rushing to the exit, a lot of them are still in denial about how much value their house has lost. I think that’s a big reason real-estate/the-economy are going to be bad for a while to come. Despite the gloom and doom in the news, I think a lot of people are in denial, and/or expecting prices to roar back any time now.

Marcitz, Is it more apartments you are seeing for rent? We are looking for a small house/duplex on the peninsula and not finding much. As far as for sale, I agree, houses going on market and either sitting or being pulled off.

By: marcitz

marcitz — Tue, 13 Oct 2009 16:33:44 +0000

Definition check – its a 100% MARKUP but a 50 % margin. See http://en.wikipedia.org/wiki/Profit_margin.

Also basic common sense. If you had a 100% profit margin that would mean you have NO costs.

By: Ryan

Ryan — Tue, 13 Oct 2009 15:55:39 +0000

Mathcheck… $100 for something that cost $50 is a 100% profit margin, not 50%

By: marcitz

marcitz — Tue, 13 Oct 2009 15:20:01 +0000

Down here on the Peninsula I’ve actually noticed a LOT more for sale AND for rent signs which is extremely strange. I guess people must be, on net, leaving the area because, technically, you are either a renter, owner, or homeless. The homeless level appears to be the same.

By: Mercurius

Mercurius — Tue, 13 Oct 2009 14:34:38 +0000

Its more than that, listing prices are up because people with Option ARM loans are
Finally being hit with recasts. Even those whose loans haven’t recast are now in a
Rush to the exit. Result is more high priced homes on the market and an increased
Listing price.

Its obvious on the ground here in SF, many more for sale than for rent signs, very few
Of them vanishing. Its also obvious that the city is full of empty homes, these are not on
The rental market and are almost certainly in the hands of flippers who wished to make
A quick buck on TIC conversions.