Reply
Contributor
naiivenewb
Posts: 19
Registered: ‎06-17-2011
0

Staying sane in an illogical market

I have been looking at homes in North Bay area for a while and have become concerned at what people are willing to pay for properties.  You can just throw the comps out the window.  People are displaying crazy bubble behavior again!  And agents are more than willing to egg it on.  Sorry.  Just wanted to rant.

Platinum Regular Contributor
tjh
Posts: 4,814
Registered: ‎01-09-2010

Re: Staying sane in an illogical market

I'm with you there.  And, it's not just the north bay.

 

The low inventory is getting people all revved up again:  "If we don't get it now, we'll never get that great place in XXXX".  The very low mortgage rates fuel this as well.

 

I always come back to income vs. mortgage.  And, I've had to learn to factor in age - something we frequently make little allowance for here on the debates on this forum. 

 

My wife and I could certainly afford even our dream house in a desirable location in many parts of the Bay Area.  But, we are very close to retirement and we either take on what was once an inconceivable amount of debt for thirty years, even though the longevity tables tell us we are less than 50% likely to live to pay that off or, we dip into our retirement savings to buy it outright, which could result in our being forced to sell at a later time, so as not to outlive our money.

 

We are uncomfortable with either option.  And, like you, we are frustrated by the behavior we see in others who are in positions similar to ours.  I chalk that willingness to roll the dice at least in part to our bailouts of those in dire straights.  There was little to no consequence for many so, as a society, we've learned nothing and people are diving back into relatively large debt again, without rational analysis of the long range implications to their own lives.  They need to "get it now' before someone else does and thus, prices rise but once again. 

 

Fine, if that is what they are willing to do.  It is their life and their choice.  I just don't want them seeking public bailouts later for their lack of planning now.  That is what I believe I saw on too many home tours I've gone on where the distraught owners were understandably depressed.  But, in various conversations we heard the same refrain:  "It's not fair.  It wasn't our fault".  If I'd at least heard once in a while, "we screwed up and should have saved more"

 

I might be more sympathetic.  Instead, this lack of understanding of cause and effect scares me.  We are ants who don't wish to fund the grasshoppers in their old age when they find out that they should have perhaps been more prudent. I know others who are feeling he same way, many who might be described as "avowed, left wing liberals".  Although they are very attuned to their own concept of fairness and social justice, they've managed to save a large nest egg for retirement and they too fear that those who've gambled and lost will soon be looking to loot the nest eggs of those who did not.  I know one or two who have threatened to start hiding their money under their mattress for fear that the drums of confiscatory policies are sounding louder.

 

Funny how that works!  :smileyfrustrated:

 

We can revisit this post in ten or twenty years and see what the results actually are.  Maybe I'm just all wet.  :smileyfrustrated:

Regular Contributor
AprilMay
Posts: 79
Registered: ‎11-01-2011
0

Re: Staying sane in an illogical market


naiivenewb wrote:

I have been looking at homes in North Bay area for a while and have become concerned at what people are willing to pay for properties.  You can just throw the comps out the window.  People are displaying crazy bubble behavior again!  And agents are more than willing to egg it on.  Sorry.  Just wanted to rant.


What part of the North Bay are you looking in? People have different ideas of where the North Bay is, so I'm curious.

Super Contributor
PatentAvenger
Posts: 250
Registered: ‎02-02-2010

Re: Staying sane in an illogical market

I can feel everyone's pain, but it seems like whenever the housing market is hot, there are tons of would be buyers who feel that all of their fellow buyers are acting illogically by bidding more than the comps suggest.  I would offer, however, the counterpoint that anytime housing prices go up, the buyers are inherently bidding more than comps suggest because there is a 3-6 month lag between comps being closed and visible and when the bidding must occur.  I think its important for your sanity to adjust your expectations to understand that you have to bid more than comps suggest in a rising housing market. 

 

Just because a housing market gets hot, doesn't mean that buyers are acting illogically.  They could be acting very logically in response to record low interest rates, low inventory, and rising bay area salaries, bonuses, and the stock market. 

 

Of course, the same can be said when prices go down. 

 

I mean, what are buyers supposed to do?  If there are 14 people wanting the same house and no real good alternative on the market at the moment, I don't think its unreasonable for the buyers to bid up the property - and doing so doesn't necessarily imply they are spending more than they can afford. 

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
0

Re: Staying sane in an illogical market

  Take this in consideration: Supposedly, the RE market was going to crash more than it did. Prices started to get so low that even investors got discouraged by the drums or war. When interest rates started to get so low, some people like me started to think why not buy a home instead of paying more in renting? But, again, we were told to hold on; the market is going to tumble again and give us the buyers the chance to buy super cheap. So, we started to look around with some kind or cockiness. We started looking at properties that had 3/2 or 4/2 rooms. Months went buy and between being beaten by cash buyers and our own mistakes regarding loans and the stupid realtor's lack of professionalism we started to realize we were in the middle of a bidding war. Cash buyers and investors noticed that the market wouldn't be going to sink like the Titanic, they got smart and greedy and the ones suffering were the first time home buyers without any cash or good credit history. No matter what my wife's good credit (777) and 5% down, we got nowhere.

 

   What happened to us is that a bunch of circumstances played a role in our final decision. We either kept renting paying more than what we would pay for a mortgage or buy a house that would give us a roof on our heads. My wife's job site got moved and at the same time this house showed up in the market listed by the program we had applied. It was a mile and a half away from her new workplace.  We played our best cards in this instance and we won.

 

   Like our friend said above, unemployment and some other situations don't have to lead the way this market is going. This area is different to any other one in the US. They say San Jose is where most of jobs are being opened and I think that means they are including the SV.  Besides that, a lot of foreigners are here with suitcases full of money buying a property that will give them a monetary relief because they feel inflations is coming or we already have it. They may be interpreting wrong or right thinking a house will depreciate less than money in the bank. At the pace these prices are going, I think they have some valid reasons to "invest" on a property no matter what the market is looking for the rest of Americans.

 

  Next to our house, there was a house to be in the market "pretty soon". I talked to the agent and she told me it was coming next week. Guess what? I saw yesterday some people at 7:45 AM already in line to see the house. And I ask forgiveness but I have to say this: Most of the buyers if not all of them are Asians. At least that's what I witnessed while touring homes last year. Isn't the same happening in PA and other high end housing prices? 

Contributor
user485928450
Posts: 49
Registered: ‎01-25-2012
0

Re: Staying sane in an illogical market


buyinghouse wrote:

  Supposedly, the RE market was going to crash more than it did. Prices started to get so low that even investors got discouraged by the drums or war. When interest rates started to get so low, some people like me started to think why not buy a home instead of paying more in renting? But, again, we were told to hold on; the market is going to tumble again and give us the buyers the chance to buy super cheap. So, we started to look around with some kind or cockiness.

 



This is exactly what happened to me.  I was bidding based on comps and losing every time.  At some point, the irrational person is the one who can't accept that the (local) market is trending up.  That doesn't mean it will keep going up, or that buying at a higher price makes financial sense for you, it just means that your comps are stale.

Gold Contributor
mediaguru
Posts: 1,875
Registered: ‎03-03-2011
0

Re: Staying sane in an illogical market


AprilMay wrote:

naiivenewb wrote:

I have been looking at homes in North Bay area for a while and have become concerned at what people are willing to pay for properties.  You can just throw the comps out the window.  People are displaying crazy bubble behavior again!  And agents are more than willing to egg it on.  Sorry.  Just wanted to rant.


What part of the North Bay are you looking in? People have different ideas of where the North Bay is, so I'm curious.


I'm assuming they are referring to the Marin/Sausalito area.  Because Sonoma certainly has plenty of good deals right now (great deals in some areas of Sonoma county), and Napa county is also back down to sane prices. Nobody in their right mind wants to live in Solano county (and the only part I would consider "North Bay" would be Vallejo) -- anything south of Vallejo is East Bay, so they must be looking anywhere in the vicinity of Sausalito / Mill Valley / Tiburon / San Rafael perhaps?

Gold Super Contributor
norcalnative
Posts: 3,277
Registered: ‎05-04-2009
0

Re: Staying sane in an illogical market

[ Edited ]

I have family in Vacaville the North side ie original vacaville not the commuter ie bedroom society South side. Green Valley is very nice I'd live there before Vallejo ever even made it into my vocabulary. None of those are Bay Area locations by the way. Nor is Vallejo in the Bay Area but most would argue otherwise

 

If Vallejo is in the Bay Area then Petaluma and Novato are in the Bay Area also given they are nearly strait across the top end of the San Pablo Bay which Vallejo sits at the very very end of.

Super Contributor
BayAreaLifer
Posts: 269
Registered: ‎08-24-2011
0

Re: Staying sane in an illogical market


norcalnative wrote:

I have family in Vacaville the North side ie original vacaville not the commuter ie bedroom society South side. Green Valley is very nice I'd live there before Vallejo ever even made it into my vocabulary. None of those are Bay Area locations by the way. Nor is Vallejo in the Bay Area but most would argue otherwise

 

If Vallejo is in the Bay Area then Petaluma and Novato are in the Bay Area also given they are nearly strait across the top end of the San Pablo Bay which Vallejo sits at the very very end of.


I think "the bay area" is defined in different ways by differnet people - and I know I'm one of the worst ones, as I only consider a handful of cities to be part of "the bay area".

 

My best advice to people looking for a good price - don't go by "comps", go by $/square foot preferably on a neighborhood by neighborhood basis.  While there can obviously be some significant reasons that two houses with the same price vary dramatically in terms of $/square foot, I think it's a good way of determining value.  Plus I'd rather have more square footage that needed work than less square footage that was "perfect"... at least for now.

 

But the low inventory is the real issue.  Lots of people want to buy, and lots of people have been waiting for some time.  Low interest rates are helping that, along with rising rents.

Silver Super Contributor
El_Katz
Posts: 1,337
Registered: ‎04-26-2009
0

Re: Staying sane in an illogical market