SF Bay Area Housing Bubble Battle

As the yen carry trade unwinds, the DOW vacillates wildly, market volatility continues to rise, and the idea of risk returns to the minds of investors world over, we are left with one, stubborn enigma:  The price of houses in the San Francisco Bay Area.

At this point, there is no denying that real estate prices are in a full on correction, nation wide.  Anyone with an ounce of honesty now fully recognizes the existence of a bubble.  The few who doubted the bubble have now seen their stake in the bet that the subprime loan game would last forever vaporize.  All you need to do is Google subprime meltdown for a current counting of the carnage.

The Dominoes are Falling

My longer term readers know that I am no doomster.  I've written numerous articles at Patrick.net where I've taken issue with the tendency for many "bubble believers/bubbleheads" to insist that the housing bubble will end in the smoking ruins of Western Capitalism.  Even Peter Schiff (Euro Pacific Capital) is far too pessimistic for my taste.  I think gold is generally a terrible investment for average retail investors.  It's a big suckers game where you and I are the suckers.  Schiff reminds me of Edward Yourdin: an otherwise intelligent, perhaps occasionally brilliant, thinker and technician who gets his biggest predictions wrong, or at least grossly mistimed.

No.  What we're seeing is just a big, unpleasant correction, not the end of the world as we know it.

As subprime lenders continue to implode and the holders of those mortgages start walking away from their obligations in ever bigger numbers, downward pressure on housing prices will continue to mount.

It's not that the subprime lending segment of US mortgages is overwhelmingly large.  In fact, it is but a smallish portion of the overall pool of all US mortgage debt.  The problem is twofold:

1. Subprime loans have funded an increasingly large portion -- in some areas over half -- of recent bubble-priced home purchases.
2. As subprime loans disappear as a borrowing option, so do a large number of recent marginal buyers.  Simply, these folks are subprime because they cannot afford to buy houses at bubble-prices with conventional loans.

In an article titled Housing Bubble Economics from August 2006 I detailed how the decline in housing prices would/should progress.

For the most part, this is what we're seeing now occurring in real estate markets across the country, including most of California.

Fortress Silicon Valley

Most, but not all of California.  The San Francisco Bay Area, especially Marin, San Francisco, San Mateo and Santa Clara counties (The City and Silicon Valley) continue to defy gravity.  While inventories continue build at arguably the fastest rate since the Great Depression, prices remain flat, or even edge higher!

Is the Bay Area an island?  Have we found the legendary "permanent new plateau" in home-prices?

Psychology (Mini)Bubble

What we are seeing occur, I believe, in the Bay Area is a psychology bubble.  Probably, a short lived one.  But, Web 2.0 is in the air. Google is still hiring.  Entrepreneurs are being funded, companies are getting bought, investment bankers are getting bonuses.  Everyone feels great!  And when people feel good about their jobs they:

1. Are willing to pay a very large portion of their incomes to buy a house, because they think their incomes will keep rising at an increasing rate.
2. Are not willing to sell homes for a discount, because they think they can ride it out indefinitely.

Price stickiness.

Where I was mistaken in my original analysis was in considering the power of psychology in the market of both marginal buyers and marginal sellers. What we have really is a complex transition from this graph to the earlier one, in which the shape of the buyer and seller curves both contain multiple discontinuities.

Discontinuities

Discontinuities are important to solving the mystery of recent confusion in the Bay Area real estate market.  On one hand we can see homes both super expensive and working class reasonable sit for over a year on the market without a bid anywhere near asking price.  On the other we see occasional outbreaks of bubble-like bidding wars, with buyers elbowing one another at the open house just to queue up to write up no-contingency offers.

Mathematically, a discontinuity (the vertical part of a supply or demand graph curve) is where the price function is undefined. In other words, anything can happen.  I alluded to this in my earlier article.  It is playing out much more than I would have expected, though.

Never bet against psychology as the short-term winner in any market function.

Fundamentals Always Win in the End

But in the end, fundamentals always reign supreme.  Things simply cannot be what they could never be.  In this case, people simply cannot afford houses which they cannot afford.

What is interesting right now in the Bay Area is that both fundamentals and technicals are working to depress housing prices.  But yet prices remain stuck.  The culprit:  behavioral psychology.

I don't need to draw a graph to prove that this cannot last very long, nor will it be pleasant when this mass thinking breaks down and prices come unstuck.

The German word describes this future unwinding quite efficiently:  Torschlusspanik. For those who study behavioral finance and economics know well that what market psychology giveth, so too can it taketh away.  I would add, "taketh away with beautifully terrible speed and efficiency".

[Parallel discussion I'm hosting on Patrick.net is here.]

Comments

[Davis Freeberg]

Very interesting reflections. It's amazing to watch the home prices continue to show no dent from the pessimism that's crept into the national market. One thing you didn't address though is the property tax laws in California. Between the tax savings that come from rolling property profits into another property and with many baby boomers paying a fraction of what it costs a new home buyer in property taxes, I can't help but wonder what impact this is playing on bay area real estate. At this point, to buy a home in SF, it would cost me three thirds of my rent just in taxes alone.

[Geoff Ball]

It not about psychology it's about supply and demand. The demand stems from stock options and gifts from mommy and daddy.

[randolfe_]

Davis,

Tax structure does play a significant role in real estate market behavior within CA. I would point out, however, that these rules are largely uniform across the state, yet we see drastically different price action in different large markets. Much of CA is transient and the Bay Area is no exception. What is exceptional here is the persistence of positive buyer psychology. It would be interesting to see a demographic breakdown of home purchasers over the past 6 months as correlated to age and tax status (which we could reasonably infer from percentage downpayment, age and first time homebuyer status).

[randolfe_]

Geoff,

Simplified supply and demand don't explain much in a vacuum. The supply has exploded over the past 12-18 months, and demand has subsided, yet prices have stayed flat and even creeped up slightly in some areas. If we assume supply and demand curves are discontinuous (or highly distorted) then things make more sense. But then the question is "why" are these curves distorted.

Enter market psychology. Unless you have an alternate explanation based on fundamentals or technicals, I'm not sure we're left with anything else to explain things.

[Geoff Ball]

One point I was trying to make here is that OPM does not operate under the what the working man would think are the normal laws of supply and demand. Add that to an area that has great wealth and the new affluent that want to live in the bay, add some more stock options and real estate prices stay pretty much the same. As for the rest of the country it's another story.

[GK]

Prices staying the same for 5 years, if income rises 5% a year, is still a 27% correction in real income-indexed terms.

That could be what form the correction takes. That was how 1989-96 was - flat prices amounting to a 35% real correction.

[TN]

If you model the demand and supply curves as a function of time (with the supply slowing shifting), you can probably get rid of the discontinuities in the 3-D model that would hold up with current observations.

One reason I think there is a non-insignificant chance of a rather rough economic patch is the yen-carry trade. With the large functional short on the yen that the hedge funds have, any loosening of monetary policy by the Fed will put downward pressure on the dollar, which will cause more pressure on yen carry trade unwinding. So depending how the numbers work out, the unwinding may soak up any or more liquidity that the Fed tries to inject. More liquidity = more unwinding. Imagine the past few soft patches without the Greenspan put.

[Birdman]

OK. I think I’m officially annoyed now. So according to The National Community Reinvestment Coalition ( http://www.msnbc.msn.com/id/17628941/ ) my tax money should go to bail out not only the FB’s out there but it should also go to bail out the damn Lending Companies/Banks???? Please tell me I’m reading this article wrong.

- Birdman

[GK]

Birdman,

Ultimately, you have to pay. Note that all members of a society are connected. If you don't pay, and more people go homeless, crime rises, and you could be killed in a carjacking.

Spreading the pain is the only answer.

The only way this could have been handled better is if we had strong churches, stronger families, and a more responsible media. Then, the moral fiber of people would be higher, and they would not get themselves into such messes in the first place. In the absence of these institutions, consider your taxes to be the same thing as why you buy auto insurance.

[randolfe_]

Interesting take GK. There is a moral hazard. I would argue that there is something to the protection of consumers, however. From my perspective the most egregious transgressions were with the upstream banks that were chasing risk, knowing well that the cost of that risk would not fall upon them once the music stopped. They knew what they were doing, yet did it anyway.

But there is some truth to the notion that many emptors lacked the education and skills to caveat. Seriously, some of these loans are so complex that it would take me literally hours to financially model their risk and value, and I have the education to do such things. Some products probably shouldn't be sold to "Average Joes". We don't let Average Joe invest in hedge funds either. And we require that mutual funds, credit cards (although that's a whole other beef), insurance policies and even used cars all carry impactful, simplified warnings and disclosures -- enough to scare all but the most ignorant into paying attention.

Why not with mortgages? They are, after all, the largest single investment commitment Average Joe will make in his life. Yet, we regulate his IRA savings account hundreds of times more carefully.

Joe hasn't committed any moral wrong if Joe doesn't even know what Joe is doing, and no one is educating Joe. Maybe the churches should teach a few free finance classes instead of constantly predicting the apocalypse? (and yes, I know that is only a certain flavor of church...but it's also the flavor usually shouting the loudest about morality)

[GK]

randolfe,

I agree with your Hedge Fund and Credit Card examples.

Very few fixed rate or even 5/1 customers will suffer as much as the Int-only/Reverse am/NINJA people will.

It also appears that financial institutions continue to stay 3-5 years ahead of the feds in creating new scams. The dot-com/IPO scam was followed up by this mortgage mess. The institutions are different but I bet many of the key participants at the very top are the same.

One more point. Since the stock market bubble is still fresh in many people's memories and thus will not happen again until a full new generation of fools comes in (20-30 years), and the housing bubble is also a once-in-a-lifetime event, is it possible that this is the last major bubble we see in a while (i.e. bubbles where millions of average people lose over 50% of their net worths)? I don't think commodities, oil, or hedge fund bubbles qualify, as these are not bubbles where millions of average people are caught up in.

[randolfe_]

GK

I do think bubbles are once per generation things, or at least have tended to be so in the past. Things are becoming ever more complex, and faster, so it's possible we could start to see more rolling-bubbles. For example, I believe I'll live to see another stock-market bubble.

Hedge funds are not, and won't become a bubble. Regulated access prevents this. They may be overpriced, and lots of qualified purchasers may lose their shirts, but it's far from a "bubble" as per the widely used connotation.

Commodities *could* bubble up, but that may not be so much a commodity bubble as an ETF bubble. I'm watching ETFs as a sort of next stock bubble risk, except that many ETFs don't even track equities at all, but commodities, currencies, and soon probably, who'll win the Superbowl.

You can see the demand pressure for the next general public bubble-gambling table. This ties to the battle I was fighting against the Virtual World game Second Life in the other threads here recently. I see that game platform as yet another example of how much pressure there is to contort something into the next place for people to become millionaires (usually without doing any real work).

The hype bestowed upon that, in the end fairly simple concept game platform, is a warning sign that the media is already searching wide and far for "the next thing". C'mon. Virtual Real Estate Boom, Virtual Millionaires, Work from Home and Make More? Those are real headlines about a game.

But more likely are the ETFs or something like that, in my opinion.

What is sure in my mind, though, is that we're in for rolling bubbles until someone or everyone (globally) takes the medicine and deflates. At this point global growth cannot hope to catch up with excess liquidity.

[GK]

randolfe,

I agree that 'Virtual World, Virtual Property' is the next layperson bubble. But it will affect younger people, while the RE bubble affected people aged 30-50 for the most part (I don't think the 22-29 age group has much RE bubble participation).

Also, what do you think about 21st century GDP growth rates? Read this too :

[ed: linked url]

I agree with the linear regression line (among those described in the link). This means 4.5-5% World GDP annual growth between now and 2025. 2026 to 2050 would be a tiny bit higher, and so on.

It is true that bubbles correct when things revert to fundamentals. But the fundamentals (at least in terms of GDP growth trendlines) are very slowly adjusting as well.

[randolfe_]

I am a strong adherent to "dynamic fundamental principals". Too often arguments relying upon fundamentals use static assumptions.

Most of those extrapolations, even though they differ quite a bit, are more or less reasonable. I actually think any of those outcomes is within the range of possibility. I'm not a doom-and-gloomster, nominally or inflation adjusted.

But when talking about long-run macro growth as an extrapolation it is very tempting and all too easy to forget about the volatility that will be encountered upon the way. When projected to 2050, there could readily be rather nasty cycles embedded in the linear regression forecast that still produce the same result.

I can conceptualize creating a model based on increasing velocity and volatility that shows both a growing mean and standard deviation, meaning ever worsening cycles of boom and bust (either longer cycles or shorter but more intense cycles).

That's why so many fundamental analyses are static, it's very hard to decide which variables to model dynamically and which to leave as constants. Clearly, in my mind, leaving uncertainty constant (as measured by stdev) while extrapolating growth is flawed.

Lastly, since future cycles would occur at ever larger scale, and involve more volatility, it's not unlikely that these cycles will persist through major portions of one's life. So, to you or me as people, does it really matter what GDP is in $100,000bn in 2080, if that is reached by 2010-2040 being a series of sharp global recessions, followed by 40 years of 10-15% growth?

Economic models often ignore the role people play in actual outcomes. When people start winning & losing in large enough numbers, governments change, wars start, and ideologies shift. We can ignore this, but that is to ignore economic history itself. And some of those models reach back to the 1600s. There have been quite a few changings of the guard between then and now. No reason to believe today's systems are static.

[GK]

randolfe,

It is true that individual years could deviate very far from the trendline.

But in practice, World GDP has grown at an average of 3.8% between 1975 and 2007. The best year was 5% and the worst year was 1%. There has been no year of zero or negative GDP growth for the aggregate world since 1975.

That does not mean it could not happen - it certainly could, particularly if the std. deviation grows just as the mean trendline does. But having, say, two years of negative GDP growth is so many standard deviations from the mean that the probability of that happening in the next 20-30 years is small.

We can ignore this, but that is to ignore economic history itself. And some of those models reach back to the 1600s.

Yes, but the trendline of world GDP, going even that far, has been very smooth, despite massive peaks and troughs.

[randolfe_]

GK

If you're using this to support a 27% correction over 5 years assuming 5% year on year salary inflation, I would say those are equally unlikely inputs. Firstly, a 27% real correction over 5 years still only retraces supportable fundamentals by less than half. I'll agree that the world is dynamic, and "supportable fundamentals" is shifting at the same time.

But, this implies that people are forever willing to pay a larger portion of their incomes towards housing in order to [own a] home. That also requires that we accept an ever growing gap between "owners" and "renters". I'm not even going to say this will necessary be a "landed gentry" scenario, but it does mean less flexibility for renters to become owners, unless the inherit their land.

The problem is that 5% YoY salary inflation, within the current environment, would be economically devastating. The Fed will not allow this inflation -- 2 times their stated "comfort zone" -- to persist for 5 years. By the end of those 5 years interest rates will be well over 8.5%, and mortgage rates will be over 9.0%. So affordability does not grow 1:1 with salary inflation; the Fisher Equation (as a simplification) won't allow this.

And after all that, we're still assuming that people are comfortable paying over 35-38% of their AGIs to housing, instead of the previous 28% maximum average.

The problem I have conceptually with all the larger, macro arguments for supporting this level of nominal prices is that they are far more complex and fragile than the simplest solution: nominal price correction. Of course, nominal prices could stay flat, and all the other variables could cooperate in concert to close the gap over time. But I'd say the smart money is on the *one* variable which solves everything cleanly, simply, without anyone's permission or cooperation.

[GK]

Randolfe,

I used to be on board with the nominal price correction crowd. But after 18 months of stickiness despite the big hike in Fed Funds rate (critical to ARMs), I have my doubts that nominal prices may drop much (even though, as a non-owner, that is what I want to happen).

1989-96 was relatively flat nominally, but still a 35% correction of income vs. housing. We could have 5, 7, or even 10 years of flatness here as well.

Nominal salary growth of 5% a year is the natural trendline. 2-3% inflation, and 2% per capital real GDP growth. I have seen entry-level top-10 MBA salaries go up at a 5% annual trendline, as have engineer salaries nationwide.

[GK]

randolfe,

One other factor that could put downward long-term pressure on housing in expensive areas (especially Silicon Valley) is technology.

BB connection speed is rising, workgroups are already geographically disperse (I interact with colleagues in Taiwan, Europe, and other US states on a daily basis), and videoconferencing technology is getting much more user friendly.

Many larger corps may just decentralize their employees and allow more to be located away from the HQ. Employees and employers will have to adapt to this new paradigm of people seeing their bosses face-to-face much less often, but that should be no different than any previous disruptive technology reshaping the workplace - those who adapt best reap the fruits. Those who do not lose the advantages, and possibly even fall behind.

I think it is quite possible that by 2015, many larger corps have employees that do not live in Santa Clara or Sunnyvale, but possibly much further away, and only come into the main office once or twice a week. The rest is achieved through email, Webex, videoconferencing, etc. Intel already permits this arrangement for some departments, and I think Cisco does too.

This could work against the fact that Sunnyvale/Mountain View prices are over twice that of Sacramento or Stockton. It would also permit people who live in the cheaper midwest to compete for jobs in Silicon Valley (as well as Wall Street, etc).

The technology needs to improve a lot, and adapting would take a few years, but the market forces for this are very large (demand for less commute time, parenting duties, real-estate costs, etc.) that it could happen.

[Space Ace]

GK you said "I think it is quite possible that by 2015, many larger corps have employees that do not live in Santa Clara or Sunnyvale, but possibly much further away, and only come into the main office once or twice a week. The rest is achieved through email, Webex, videoconferencing, etc. Intel already permits this arrangement for some departments, and I think Cisco does too."

Back in the mid-late 80s I worked at AMD we had FABS and engineers in Singapore Taiwan and Manila... we already were using Email Teleconferencing and Mainframe file sharing. Yes we had tools like that too..

Ultimalely like many from semiconductor to networking and some software companies sent their manufacturing overseas to Asia starting in mid 80s due to high costs in SV. By 1995 mfg was dead... new companies like Cisco and older companies like Apple and HP have outsourced their mfg to Selectron Flextronics and SCI Sanmina. In turn these companies have sent mfg overseas to cut costs.

Today companies large and small have moved R&D to Oregon New Mexico, and other cheaper metros to compete with rivals in Asia and Europe.

In my prior software company I worked at we grew our R&D in Hong Kong and India to equal size as local departments. The cost savings are very much there as is the technical knowledge.

Point is our salaries are too high in the valley for local employers to maintain and they have options to move our jobs elsewhere.

[RankBull]

Getting those Seller and Buyer Stickiness graphs into the mainstream press should sort this mess out straight away, mate. Otherwise you could easily rent and watch until the end of your natural life for your detailed fantasies to come to pass.

[randolfe_]

RankBull

Unless you have something valuable to add to the debate other than insulting those debating, your comment will be removed as incendiary.

You clearly have not bothered to read much of what I've written or you wouldn't have made this statement. You have 24 hours to respond.

[Rankbull]

[commenter banned]

Discussion rules.

Randy, you clearly have too much time on your hands as a rental-house-bound, stay-at-home modern-day metrosexual. Those "Stickiness" graphs of yours expose you as someone with some real "issues" you might want to explore with a pro and treat with med's, if you aren't already.

For the price range you can afford, you should be focusing your home search in the E. Palo Alto or Milpitas zip codes. It's no crime to be broke, Randy, but it is a crime to want what you can never achieve but think you deserve anyway and let that eat at you, day and night.

[randolfe_]

"Rankbull" you have been restricted from commenting on this forum. You were warned and invited to engage in mature debate.

By the way, I was born and grew up in the Midwest. I'm not quite sure what "metrosexual" even is. I have owned homes in the past, including throughout the entire bubble. Advanced math skills are not required to determine that I have benefited from growth in home equity throughout that period.

I did grow up broke though; which is why I've been motivated to work hard to ensure that experience would not be in my children's future.

You can feel free to return to patrick.net and continue your shouting matches with the regulars there. Or maybe you should go play "Second Life" if you don't already. That community would fit you like a glove.

[Alex Clark, sfnewsletter]

Randy,

Keep an eye on our new SF real estate blog. Yes, we are Realtors, but I am at the helm and am determined to do it right. Thanks for the great insight. The market in SF is taking off. Will it soar again, too soon to tell, but it is for sure getting HOT!

[randolfe_]

Alex

Realtors are welcome to post here and share their opinions the same as everyone else. Although I've been very critical of the real estate industry, I don't blame any particular group for what I see as very real abuses and excesses.

As with all booms/bubbles/"irrational exuberances", a lot of latecomers are attracted by the lure of easy money. These gold diggers quickly bring down the reputation of the industry for everyone, including the long-experienced professionals.

The same thing happened in my industry with the dot-com bubble. By the end of that there was a common belief that all internet startups were worthless, which of course was not true. But 'baby with the bathwater' is usually how excesses are corrected, unfortunately.

[GK]

Randolfe,

What are your thoughts on the telecommuting factor as a market force in RE prices between now and 2015 or 2020?

[randolfe_]

GK

I am a bit of a contrarian when it comes to the telecommuting-as-wage leveler arguments. I think there is something to this when it comes to global wages and offshoring. But I also think offshoring is overimplicated.

But the notion that telecommuting will enable vast portions of the workforce to flee the high prices of the urban/suburban metroplex is largely wrong, in my opinion. There is surely a certain type of job and a certain type/level of worker for which this is efficient, and it's already happening. But the extent of that efficiency is severely limited. Incidentally, there is a guy who promotes "Cote'an Philosophy" whom I've argued with at length on another forum. In essence, he takes this to the extreme of stating that all concentrated population centers are antiquated and doomed to irrelevance.

My reasons for not buying into the larger telecommuting penetration is based on very fundamental and basic organizational behavior theory.

It goes something like this: as the velocity and complexity of information and accelerate, the reliance upon organizational communication increases. Formalized communications give way in relevance to informal, dynamic relationships. Humans are best at communicating when physically proximate. The need for proximity ironically increases as communication and information technology advances. Eventually technology may well overcome even this barrier, but probably not until there is both a lot of social evolution and much more immersive, responsive virtual communication environments.

[randolfe_]

I'll give a real-world example from software development. I've spent many years working with regionally sometimes internationally dispersed software development teams within telecom. The load complex development projects put upon formalized and semi-formalized lines of communication is tremendous. I have found it is effectively impractical to rely upon any type of rapid development methodology except for self-contained, proximate units of work. But integrated work cannot be accomplished cost effectively, with quality unless there is adequate formal methodology. I my case hybrid Unified/RUP methods.

However this only works within telecom or other large industry because of the long project cycle tolerance and deep pocket budgets. And it only is justified for large projects.

For small projects or projects with smaller companies, Agile/Extreme methods are much more efficient. These methods categorically do not yield unless the team is physically proximate. There are claims of "effective remote Agile" methods. I have never encountered a single instance of such where RUP would not have been more efficient if the project is large enough / or / Agile would have been more cost effective to pay the premium to support local workers.

[GK]

and much more immersive, responsive virtual communication environments.

I do believe this is the relatively easy prediction. I think such technologies will be available by no later than 2020.

Plus, while I agree that most jobs cannot allow people to be geographically dispersed, I think that even if just 10% of Silicon Valley's current jobs can be done by someone who lives in a cheaper locale, that alose is enough to place significant downward pressure on SV Real Estate.

[randolfe_]

GK

I'm not so certain to what extend the onshoring/telecommuting effect might put downward pressure on Bay Area prices. The trouble is that taking the effect in isolation, sure prices must go down, because there will be weaker demand.

But shifts like we're discussing don't happen in isolation. In fact, such shifts have tended to create *more* economic affluence and real growth, which sometimes seems counter intuitive. It could be one of those cases where the microeconomics are overruled by the macroeconomics.

For example, I could easily foresee a situation where the loss of onshore-able jobs from expensive, high skill areas like the BA causes those areas to become even more prime. Such could materialize if the onshoring/telecommuting effect leads to greater balkanization. The BA could become even more heavily "overeducated", except now there's additional demand because those services can be consumed by operations elsewhere.

[Roger]

As much as I want the Bay Area real estate market to crash. It seems unlikely

Bay Area is a supply restricted market. Its a desirable place to live so there is always a demand and not enough houses. So sub-prime or not the house prices will go up untill either the supply increases or it is no longer desirable to live.

If you want to take a look at the diametrical opposite. Take a look at Stockton. Plenty of houses and certainly not the most desirable place to live.

[Laure]

I am seeing more houses and condominiums for sale in Pacific Heights in San Francisco, two houses nearby that have stopped work several months ago midway through major renovations, and I know of three condominiums being foreclosed or already held by trustees within just a few blocks of my house. These are just my observations from walking my dog and from having friends send me info about foreclosures in my area they are interested in bidding for.

[Nik]

People cant affor dthat much money simple. I make 100K per year but any decent house I want I cant afford. The reason we never built enough houses for all the new jobs from the tech influx. Simple supply and demand as a result prices skyrocketed. Now you have a bunch of absolute dumps selling for 650K. On a fixed rate mortgage thats what 3K a month not including maintenance and property tax.

Some American dream. In Houston where Oil is booming a 4500sqft house can be had for 300K. The real answer is California government not doing enough to promote new supply into the market.

[Nik]

People cant affor dthat much money simple. I make 100K per year but any decent house I want I cant afford. The reason we never built enough houses for all the new jobs from the tech influx. Simple supply and demand as a result prices skyrocketed. Now you have a bunch of absolute dumps selling for 650K. On a fixed rate mortgage thats what 3K a month not including maintenance and property tax.

Some American dream. In Houston where Oil is booming a 4500sqft house can be had for 300K. The real answer is California government not doing enough to promote new supply into the market.