7 ms·

SF Bay Area Housing Crash Continues (2006)

40 points by epa 12y ago

Havoc 12y ago
Its all the hipsters fleeing because its not sufficiently underground anymore.
- bdcravens 12y ago
  You're speaking in present tense about an 8 year old article
  - chris_va 12y ago
    They were leaving before it was cool.
  - Havoc 12y ago
    >You're speaking in present tense about an 8 year old article Because they are still fleeing (there are many). More seriously...saw the 2006 tag but posted anyway because I knew it'll get downvoted either way.
bdcravens 12y ago
Title isn't title of page, and it's only one item in a list of dozens that is mostly a discussion of real estate at the time
- dang 12y ago
  Yes. We changed to the article title. (Submitted title was "San Francisco losing population at the fastest rate of cities in the US (2006)").
deleted 12y ago
[deleted]
- rhizome 12y ago
  The early-2000s carpetbagger exodus was very obvious.
  - deleted 12y ago
    [deleted]
    - rhizome 12y ago
      Not sure why you're focussing on "whites," but salaries for those who would normally be working jobs at more stable companies (companies that would survive a tech downturn, and/or companies more than 5 years old) are still high enough for them to afford living in SF.
      - deleted 12y ago
        [deleted]
        rhizome 12y ago
        On HN, users cannot downvote replies to their own comments. Or at least I can't. That said, I don't know from political incorrectness, Irene, but your reply did introduce a racial angle to the thread that confused me.
        deleted 12y ago
        [deleted]
debt 12y ago
I know this sounds crazy, but I don't want to buy in CA because we're running out of water. There seems to be no long-term solution besides the desalination of ocean water. There are towns[2] in California here people have paid off their mortgage, yet might not have running water in a year. [1]http://www.mercurynews.com/science/ci_25013388/california-drought-17-communities-could-run-out-water http://www.mercurynews.com/science/ci_25013388/california-dr... [2]http://www.newsweek.com/what-happens-when-town-runs-out-water-227929 http://www.newsweek.com/what-happens-when-town-runs-out-wate...
- paulbaumgart 12y ago
  What's wrong with desalination? Israel does it: http://www.haaretz.com/life/nature-environment/1.596270 http://www.haaretz.com/life/nature-environment/1.596270 And San Diego will too, soon: http://carlsbaddesal.com http://carlsbaddesal.com
  - Afforess 12y ago
    Super-expensive and massive energy requirements. Its the least efficient way to produce water. Also produces brine-salt waste which is nasty to process or dispose of. http://en.wikipedia.org/wiki/Desalination#Considerations_and_criticism http://en.wikipedia.org/wiki/Desalination#Considerations_and...
    - scythe 12y ago
      Even these costs pale in comparison to the annihilation of the Colorado River watershed. Desalination would make California produce much more expensive; it might severely hurt the lettuce industry. But it would save the environment of Arizona and northern Baja. Also the energy required to desalinate all the water in a LA house is less than that to heat one in Detroit. Especially since the rise of solar energy (and tokamak fusion and geothermal) means that electricity is going to mostly get cheaper and cleaner in the foreseeable future.
      - paulbaumgart 12y ago
lavamantis 12y ago
Articles like this should have "expiration dates." Everything in there was true at the time, but past performance is not always an indicator of future performance.
- Domenic_S 12y ago
  Right. It only becomes true when prices soar very very quickly. It's been my experience that rents stabilize with buying cost over the course of a couple years. For example, in the article: > It is possible to rent a good house for $1800/month. That same house would cost about $700,000. That situation is no longer true. That situation only became true in the mid-2000s because that $700k house cost $350k the year before. The landlord is in no hurry to bump his rent to $4,500/month because it's not costing him $4,500/mo like it would if he was buying today. The rent-vs-buy calculation is dead simple: you will never, ever pay less for your rental than it costs the landlord to own it. [Edit: but it will cost less than if you bought that same house today, generally. That's why you can typically rent in a better neighborhood than you can buy in]. That means as sales prices increase, rents increase. Then add demand on top of that, as demand increases so does price. (Obviously there are other things to consider to determine if owning is right for you, but I'm talking in an theoretical world).
araes 12y ago
Interesting that two years before the main crash was triggered, this article went down and identified almost all of points that led to it from a housing perspective by looking at one of the more extreme housing markets in the US. - Prices disconnected from fundamentals - Risky "home equity loans" - Extreme use of leverage - Surplus of speculators - Trouble at Fannie Mae and Freddie Mac I wonder whether similar "canary in the coal mine" approaches could be used for other large market or societal shifts in the US?
- muzz 12y ago
  Agree with most points, except Fannie Mae and Freddie Mac had their smallest market share at that time, as private lending was taking market share (and as we later found out, was driving the subprime lending).
ChuckMcM 12y ago
That was Awesome! First lets have a look at his points in the context of 8 years later, what happened? #1 This author misses that house fundamentals in the bay area are tied to wealth generation, not income levels. A place like Facebook goes public and several thousand people are in a position to buy a million dollar house for cash. Depending on who you ask Google pays their top performing engineers in option adjusted terms between $300 and $400K/year. #2 Interest rates are a function of economic activity, a crappy economy and you get low interest rates. At least now the Fed has stopped "promising" to keep them low. #3 Adjustable rate loans can force the unprepared to sell their houses, that has always been true. #4 The 'massive job loss' has been completely eradicated, the bay area is employing more people than it did in 2000. #5 The salary declines must not be in tech, it used to be you had to be management to make $100K now you just need to be a senior engineer. #6 The population loss from the dot com bust exodus was pretty impressive, but its also history.[1] #7 The stock market has recovered, the NASDAQ had been adjusted, its over 4400 today. #8 The leverage argument I didn't get. If you own a house you can't pay for you aren't "bankrupt" you are "out of a house" (that is the thing about secured no-recourse loans) and that sucks, but its not the end of the world. Lately prices have been crazy again. #9 Shortage of first time buyers. The weird thing is that somebody is buying those houses. A lot of them are buying for the first time, so where did they come from? #10 Speculation - I'd love to see real numbers on this today, in 2006 I could see the problem but I think the mortgage meltdown took a lot of those people out. #11 Moving and 'retiring' is fun, and the older I get the more folks I know have taken this route. Those folks are leaving behind houses which are being bought up. #12 Trouble at Fannie and Freddie. Boy was that spot on. I am still wondering what will be the final resolution of that mess. #13 Love the business week quote, it was made without an understanding of the underlying mortgage mechanism that was about to embroil the world in the greatest financial meltdown since the Depression. So it is helpful to compare this authors fears and their outlook with what actually happened in the 8 years since they wrote this. Yes there was something amiss in the housing market (the unholy love child between derivatives and sub-prime mortgages) and that did come to roost and did blow up. But once it blew up, the system has adapted. If you believe that the economy was "too good to be true" because it was being manipulated in this way, is it now more true? Less true? We will continue to see reverberations of that event in finance going forward, we appear to have avoided for now a similar melt down in commercial real estate, and many trillions of dollars have been "lost" back to the future where they belong. Good things have happened too, and eventually your grand children will read about this in their history books like we've read about the Great Depression. The tragedy would be if we failed to learn anything useful from the experience. [1] http://www.sfgate.com/news/article/Bay-Area-is-fastest-growing-region-in-state-5442241.php http://www.sfgate.com/news/article/Bay-Area-is-fastest-growi...
muzz 12y ago
Interesting to note that Zoning is never mentioned. In 2006, housing was constrained by "Nobody is making land." (#8 in the Who Disagrees section). Now it is somehow "zoning" that prevents housing from being built, and availability of land is not an issue but rather ability to use it. A pretty amazing perception/rationale change.

40 points by epa 12y ago

Havoc 12y ago

Its all the hipsters fleeing because its not sufficiently underground anymore.

bdcravens 12y ago
You're speaking in present tense about an 8 year old article
- chris_va 12y ago
  They were leaving before it was cool.
- Havoc 12y ago
  >You're speaking in present tense about an 8 year old article Because they are still fleeing (there are many). More seriously...saw the 2006 tag but posted anyway because I knew it'll get downvoted either way.

bdcravens 12y ago

Title isn't title of page, and it's only one item in a list of dozens that is mostly a discussion of real estate at the time

dang 12y ago
Yes. We changed to the article title. (Submitted title was "San Francisco losing population at the fastest rate of cities in the US (2006)").

deleted 12y ago

[deleted]

rhizome 12y ago
The early-2000s carpetbagger exodus was very obvious.
- deleted 12y ago
  [deleted]
  - rhizome 12y ago
    Not sure why you're focussing on "whites," but salaries for those who would normally be working jobs at more stable companies (companies that would survive a tech downturn, and/or companies more than 5 years old) are still high enough for them to afford living in SF.
    - deleted 12y ago
      [deleted]
      - rhizome 12y ago
        On HN, users cannot downvote replies to their own comments. Or at least I can't. That said, I don't know from political incorrectness, Irene, but your reply did introduce a racial angle to the thread that confused me.
        deleted 12y ago
        [deleted]

debt 12y ago

I know this sounds crazy, but I don't want to buy in CA because we're running out of water. There seems to be no long-term solution besides the desalination of ocean water. There are towns[2] in California here people have paid off their mortgage, yet might not have running water in a year. [1]http://www.mercurynews.com/science/ci_25013388/california-drought-17-communities-could-run-out-water http://www.mercurynews.com/science/ci_25013388/california-dr... [2]http://www.newsweek.com/what-happens-when-town-runs-out-water-227929 http://www.newsweek.com/what-happens-when-town-runs-out-wate...

paulbaumgart 12y ago
What's wrong with desalination? Israel does it: http://www.haaretz.com/life/nature-environment/1.596270 http://www.haaretz.com/life/nature-environment/1.596270 And San Diego will too, soon: http://carlsbaddesal.com http://carlsbaddesal.com
- Afforess 12y ago
  Super-expensive and massive energy requirements. Its the least efficient way to produce water. Also produces brine-salt waste which is nasty to process or dispose of. http://en.wikipedia.org/wiki/Desalination#Considerations_and_criticism http://en.wikipedia.org/wiki/Desalination#Considerations_and...
  - scythe 12y ago
    Even these costs pale in comparison to the annihilation of the Colorado River watershed. Desalination would make California produce much more expensive; it might severely hurt the lettuce industry. But it would save the environment of Arizona and northern Baja. Also the energy required to desalinate all the water in a LA house is less than that to heat one in Detroit. Especially since the rise of solar energy (and tokamak fusion and geothermal) means that electricity is going to mostly get cheaper and cleaner in the foreseeable future.
    - paulbaumgart 12y ago

lavamantis 12y ago

Articles like this should have "expiration dates." Everything in there was true at the time, but past performance is not always an indicator of future performance.

Domenic_S 12y ago
Right. It only becomes true when prices soar very very quickly. It's been my experience that rents stabilize with buying cost over the course of a couple years. For example, in the article: > It is possible to rent a good house for $1800/month. That same house would cost about $700,000. That situation is no longer true. That situation only became true in the mid-2000s because that $700k house cost $350k the year before. The landlord is in no hurry to bump his rent to $4,500/month because it's not costing him $4,500/mo like it would if he was buying today. The rent-vs-buy calculation is dead simple: you will never, ever pay less for your rental than it costs the landlord to own it. [Edit: but it will cost less than if you bought that same house today, generally. That's why you can typically rent in a better neighborhood than you can buy in]. That means as sales prices increase, rents increase. Then add demand on top of that, as demand increases so does price. (Obviously there are other things to consider to determine if owning is right for you, but I'm talking in an theoretical world).

araes 12y ago

Interesting that two years before the main crash was triggered, this article went down and identified almost all of points that led to it from a housing perspective by looking at one of the more extreme housing markets in the US. - Prices disconnected from fundamentals - Risky "home equity loans" - Extreme use of leverage - Surplus of speculators - Trouble at Fannie Mae and Freddie Mac I wonder whether similar "canary in the coal mine" approaches could be used for other large market or societal shifts in the US?

muzz 12y ago
Agree with most points, except Fannie Mae and Freddie Mac had their smallest market share at that time, as private lending was taking market share (and as we later found out, was driving the subprime lending).

ChuckMcM 12y ago

That was Awesome! First lets have a look at his points in the context of 8 years later, what happened? #1 This author misses that house fundamentals in the bay area are tied to wealth generation, not income levels. A place like Facebook goes public and several thousand people are in a position to buy a million dollar house for cash. Depending on who you ask Google pays their top performing engineers in option adjusted terms between $300 and $400K/year. #2 Interest rates are a function of economic activity, a crappy economy and you get low interest rates. At least now the Fed has stopped "promising" to keep them low. #3 Adjustable rate loans can force the unprepared to sell their houses, that has always been true. #4 The 'massive job loss' has been completely eradicated, the bay area is employing more people than it did in 2000. #5 The salary declines must not be in tech, it used to be you had to be management to make $100K now you just need to be a senior engineer. #6 The population loss from the dot com bust exodus was pretty impressive, but its also history.[1] #7 The stock market has recovered, the NASDAQ had been adjusted, its over 4400 today. #8 The leverage argument I didn't get. If you own a house you can't pay for you aren't "bankrupt" you are "out of a house" (that is the thing about secured no-recourse loans) and that sucks, but its not the end of the world. Lately prices have been crazy again. #9 Shortage of first time buyers. The weird thing is that somebody is buying those houses. A lot of them are buying for the first time, so where did they come from? #10 Speculation - I'd love to see real numbers on this today, in 2006 I could see the problem but I think the mortgage meltdown took a lot of those people out. #11 Moving and 'retiring' is fun, and the older I get the more folks I know have taken this route. Those folks are leaving behind houses which are being bought up. #12 Trouble at Fannie and Freddie. Boy was that spot on. I am still wondering what will be the final resolution of that mess. #13 Love the business week quote, it was made without an understanding of the underlying mortgage mechanism that was about to embroil the world in the greatest financial meltdown since the Depression. So it is helpful to compare this authors fears and their outlook with what actually happened in the 8 years since they wrote this. Yes there was something amiss in the housing market (the unholy love child between derivatives and sub-prime mortgages) and that did come to roost and did blow up. But once it blew up, the system has adapted. If you believe that the economy was "too good to be true" because it was being manipulated in this way, is it now more true? Less true? We will continue to see reverberations of that event in finance going forward, we appear to have avoided for now a similar melt down in commercial real estate, and many trillions of dollars have been "lost" back to the future where they belong. Good things have happened too, and eventually your grand children will read about this in their history books like we've read about the Great Depression. The tragedy would be if we failed to learn anything useful from the experience. [1] http://www.sfgate.com/news/article/Bay-Area-is-fastest-growing-region-in-state-5442241.php http://www.sfgate.com/news/article/Bay-Area-is-fastest-growi...

muzz 12y ago

Interesting to note that Zoning is never mentioned. In 2006, housing was constrained by "Nobody is making land." (#8 in the Who Disagrees section). Now it is somehow "zoning" that prevents housing from being built, and availability of land is not an issue but rather ability to use it. A pretty amazing perception/rationale change.