Is Economy Doing Well?

[Randolph Kinney]

Nice Greater Fool graph, Terrel.

 

[normando]

That's all it takes to put people under and it happened in 1999 with the dotcom bubble. But leading up to that crash people were bidding 20% above asking.

The graph shows prices dropping 30% eight years ago in San Francisco/Bay Area in general. The low and working class area dropped as low as 50% but Silicon Valley dropped 10%-20% which is not bad.
On the other side, homes that dropped the most has increased percentagewise faster than stable home prices in Silicon Valley. There are only so many people who can afford $3,000,000 homes.

 

[Randolph Kinney]

The S&P Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of San Francisco’s, Marin's and Central Contra Costa's house sales are in the “high price tier", so that is where we focus most of our attention.”

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa.

San Francisco's single family dwelling (SFD) sales, which are what Case-Shiller measures, are only 7% to 8% of the total SFD sales in the 5-county metro area, while Alameda and Contra Costa make up over 70% of SFD sales.

 

[Randolph Kinney]

 

[Randolph Kinney]

 

[Big ole Boy]

Dog food prices are getting ridiculous. You tell them about and they do is say ........ yelp!

 

[normando]

The S&P Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of San Francisco’s, Marin's and Central Contra Costa's house sales are in the “high price tier", so that is where we focus most of our attention.”

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa.

San Francisco's single family dwelling (SFD) sales, which are what Case-Shiller measures, are only 7% to 8% of the total SFD sales in the 5-county metro area, while Alameda and Contra Costa make up over 70% of SFD sales.

Your graphs confirm what I'm saying. The higher end homes do NOT crash. Most hurt are the lower tier homes. When market crash, the top 10% are less adversely affected because they have jobs to continue making mortgage payments unlike the other 90% who live paycheck to paycheck. What we're seeing now are extraordinary price increases for low tier homes because of low interest loans and good economy(?).

 

[Randolph Kinney]

Your graphs confirm what I'm saying. The higher end homes do NOT crash. Most hurt are the lower tier homes. When market crash, the top 10% are less adversely affected because they have jobs to continue making mortgage payments unlike the other 90% who live paycheck to paycheck. What we're seeing now are extraordinary price increases for low tier homes because of low interest loans and good economy(?).

High tier homes do suffer a decline in value. You may argue percentages however, a 10% decline in a $1 million home is $100,000. A 20% decline in a $500,000 home is $100,000. Same loss in value, different percentages.

People Don’t Like Buying Depreciating Assets

 

[normando]

Yes, I'm talking about percentage. Once high tier home drops it stays at a more stable level. Low tier home drops and continue to drop during tough times. The area looks worse and I don't like it. Now these same ugly areas have no more foreclosures and look decent and good and prices have double. High tier home area still looks the same.

 

[Randolph Kinney]

Yes, I'm talking about percentage. Once high tier home drops it stays at a more stable level. Low tier home drops and continue to drop during tough times. The area looks worse and I don't like it. Now these same ugly areas have no more foreclosures and look decent and good and prices have double. High tier home area still looks the same.

When the bubble burst last time, millions lost their jobs, their homes and their savings. Home prices dropped for 6 years, finally hitting bottom in 2012; today, home prices are about 1% shy of that 2006 bubble peak. The difference today from a decade ago is that these prices are not being driven by faulty mortgage products that people can’t afford the payments. They are being driven by a severe lack of supply of homes for sale, as well as near record low mortgage rates. The concern, however, is if those rates start to move up. Then affordability would weaken and home prices could move lower.

There is no question in my mind that California home values are overly inflated. The government has no bullets left to boost prices. Money is not getting down the income ladder.

Your high price tier only makes up about 7% of total sales in the SF Metro. Keep your eye on the mid-tier.