Bay Area housing frenzy cooling

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runner540
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Re: Bay Area housing frenzy cooling

Post by runner540 » Fri Sep 14, 2018 1:37 pm

Hyperborea wrote:
Fri Sep 14, 2018 1:16 pm
mervinj7 wrote:
Fri Sep 14, 2018 12:05 pm
Noobvestor wrote:
Fri Sep 14, 2018 11:45 am
I generally agree, though there is some variability - consider SF's direct neighbor to the east (literally one BART stop away):

https://www.trulia.com/real_estate/Oakl ... et-trends/

From 2000 to the peak in 2007, median sale prices went from $170,000 to $530,000.

They then proceeded to crash all the way back down to $170,000. That's massive.

It didn't stick, but for a few years media prices did stay in the $170-230K range.
Thanks for the link. I did the same for Campbell, which is a small town near San Jose. It's not on the peninsula like Palo Alto or Mountain View nor does it have large tech offices like Cupertino and Sunnyvale.
From 2000 to the peak in 2007, median sale prices went from $360k to $725k (100% increase). After the crash, it dipped as low as $555k in 2012 (23% drop). Since then, it has appreciated to $1.35M (243% increase).

Just based on this, I would tell someone buying in Campbell to be prepared for a 23% drop if another 2008-like recession occurs.

https://www.trulia.com/real_estate/Camp ... et-trends/
The problem with using bulk median sales price is that the type and quantity of units sold varies and especially during a housing downturn. During the recession the number of homes for sale dropped considerably and were likely made up more of houses at the lower end of the price spectrum. That probably caused most of the 23% drop - not all of it but most of it.
Case Shiller avoids this issue by using repeat sales of the same properties. Peak index in Mar 2006 of 219, with a low 3 years later in May 2009 of 119. (46% drop) Ouch!

https://fred.stlouisfed.org/series/SFXRSA

randomguy
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Re: Bay Area housing frenzy cooling

Post by randomguy » Fri Sep 14, 2018 1:50 pm

Noobvestor wrote:
Fri Sep 14, 2018 11:45 am
randomguy wrote:
Thu Sep 13, 2018 6:22 pm
Realistically 40% nominal drops are really rare in established areas (i.e. we are not talking towns 90 miles away that were build on speculation) without fundamental changes in the area (i.e. major unemployment).
I generally agree, though there is some variability - consider SF's direct neighbor to the east (literally one BART stop away):

https://www.trulia.com/real_estate/Oakl ... et-trends/

From 2000 to the peak in 2007, median sale prices went from $170,000 to $530,000.

They then proceeded to crash all the way back down to $170,000. That's massive.

It didn't stick (now back up to around $750,000!!!), but for a few years media prices did stay in the $170-230K range.

First off Oakland isn't real bay area. Next thing you will be telling us is that east palo alto is affordable;) Median sales prices are horribly deceptive. Pretty much nobody had a home that went from 170 to 530 to 170 to 750. What happened was the mix of houses being sold changed. Most of the same to same drops were in the 25% range with exceptions for foreclosures. There were a lot of 400k houses that went to 1 million, back to 750k and are now worth 1.5 million. Those are still some big drops. But if you are off the peaks much (i.e. the 1 million dollar house was only 850k 18 months prior) both the drops and gains aren't as extreme.

It is also important to realize how odd 2005-2014 was real estate was in the area. It wasn't so much a real estate crash as a financial panic. Once that panic passed the house prices bounced right back. If you look at the more regional busts (say NYC in the 70s, houston in the 80s, CT in the 90s), you were often looking at 7-10 years of steadily dropping prices. There wasn't one big drop of 20% years. It was paper cuts of a few percent/year. The situation was different in that housing was adapting to changes in local economies/desirability. Those type of trends take a lot longer to work out.

And no I don't pretend to be able to predict the future of any real estate market. Maybe prices are taking a breather and will surge in the spring. Maybe we are starting on a 10 year downward trend. Maybe something in between. There is a big trend to think what happened recently will happen again. Often times we get totally different outcomes

randomguy
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Re: Bay Area housing frenzy cooling

Post by randomguy » Fri Sep 14, 2018 2:12 pm

runner540 wrote:
Fri Sep 14, 2018 1:37 pm
Case Shiller avoids this issue by using repeat sales of the same properties. Peak index in Mar 2006 of 219, with a low 3 years later in May 2009 of 119. (46% drop) Ouch!

https://fred.stlouisfed.org/series/SFXRSA
It is important to understand those numbers. They are for San Francisco, Marin, San Mateo, Alameda and Contra Costa counties. So places like Palo Alto and mountain view (santa clara) and San Jose aren't counted. Places like Antoich, discovery bay, bentwood, livermore and Pleasanton are despite being much farther away. SF it self is 7% of the sales and the index is driven by the east bay suburbs. You end up with a bifurcated sample. Here is another link https://www.bayareamarketreports.com/tr ... ome-prices

Notice how the high priced homes went from ~180 to 140 while the low priced (25% drop) ones went from 275 to 110k (like a 60% drop). The high priced homes were in SF, Marin, Berkely and the like. The low priced ones were in Brentwood. Those exburbs had huge foreclosure issues. The inner bay area had a fraction of that.

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Noobvestor
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Re: Bay Area housing frenzy cooling

Post by Noobvestor » Fri Sep 14, 2018 7:41 pm

randomguy wrote:
Fri Sep 14, 2018 1:50 pm
First off Oakland isn't real bay area
You lost me in your first line. It's not 'real' Bay Area? It's literally on the Bay, and just across it from SF. What could be more 'Bay Area'?

:shock: :)

https://upload.wikimedia.org/wikipedia/ ... ea_map.png
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Hyperborea
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Re: Bay Area housing frenzy cooling

Post by Hyperborea » Sat Sep 15, 2018 12:41 am

Noobvestor wrote:
Fri Sep 14, 2018 7:41 pm
randomguy wrote:
Fri Sep 14, 2018 1:50 pm
First off Oakland isn't real bay area
You lost me in your first line. It's not 'real' Bay Area? It's literally on the Bay, and just across it from SF. What could be more 'Bay Area'?

:shock: :)

https://upload.wikimedia.org/wikipedia/ ... ea_map.png
Yes, it's geographically part of the Bay Area just as East Palo Alto is. However, both have been considered as fringe parts of the bay for quite a while. They haven't followed the same price movements as the "core" parts of the Bay Area. That's changing as both are gentrified.
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randomguy
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Re: Bay Area housing frenzy cooling

Post by randomguy » Sat Sep 15, 2018 1:05 am

Hyperborea wrote:
Sat Sep 15, 2018 12:41 am
Noobvestor wrote:
Fri Sep 14, 2018 7:41 pm
randomguy wrote:
Fri Sep 14, 2018 1:50 pm
First off Oakland isn't real bay area
You lost me in your first line. It's not 'real' Bay Area? It's literally on the Bay, and just across it from SF. What could be more 'Bay Area'?

:shock: :)

https://upload.wikimedia.org/wikipedia/ ... ea_map.png
Yes, it's geographically part of the Bay Area just as East Palo Alto is. However, both have been considered as fringe parts of the bay for quite a while. They haven't followed the same price movements as the "core" parts of the Bay Area. That's changing as both are gentrified.
Here is a map of the real bay area http://www.burbed.com/2008/02/17/map-of ... chronicle/ to help everyone out.:) The term is a bit of a joke one but it encapsolates a truth about how Oakland and some of the eastbay suburbs had little in common with SF and the SV cities. The drive until you qualify buyers all went east and those areas suffered a lot more in the houses correction.

fanmail
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Re: Bay Area housing frenzy cooling

Post by fanmail » Sat Sep 15, 2018 10:47 am

randomguy wrote:
Fri Sep 14, 2018 2:12 pm
runner540 wrote:
Fri Sep 14, 2018 1:37 pm
Case Shiller avoids this issue by using repeat sales of the same properties. Peak index in Mar 2006 of 219, with a low 3 years later in May 2009 of 119. (46% drop) Ouch!

https://fred.stlouisfed.org/series/SFXRSA
It is important to understand those numbers. They are for San Francisco, Marin, San Mateo, Alameda and Contra Costa counties. So places like Palo Alto and mountain view (santa clara) and San Jose aren't counted. Places like Antoich, discovery bay, bentwood, livermore and Pleasanton are despite being much farther away. SF it self is 7% of the sales and the index is driven by the east bay suburbs. You end up with a bifurcated sample. Here is another link https://www.bayareamarketreports.com/tr ... ome-prices

Notice how the high priced homes went from ~180 to 140 while the low priced (25% drop) ones went from 275 to 110k (like a 60% drop). The high priced homes were in SF, Marin, Berkely and the like. The low priced ones were in Brentwood. Those exburbs had huge foreclosure issues. The inner bay area had a fraction of that.
Couple likely reasons for that. High end ones were more likely to be bought with cash by wealthy who could weather the downturn easier. Lower priced ones were more likely bought with mortgages and owners may have become unemployed and more distressed.

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Re: Bay Area housing frenzy cooling

Post by randomguy » Sat Sep 15, 2018 12:17 pm

fanmail wrote:
Sat Sep 15, 2018 10:47 am
Couple likely reasons for that. High end ones were more likely to be bought with cash by wealthy who could weather the downturn easier. Lower priced ones were more likely bought with mortgages and owners may have become unemployed and more distressed.
I have no clue if cash buyers were numerous to make a difference but the SF buyers in general were of a higher quality in terms of not getting subprime loans. In 2010, SF had .052% foreclosure rate. Contra Costa had a 2.3%. Of San Franciscos foreclosures, 2/3s were in bayview-hunters point (i.e. the ghetto). That pretty much explains why you didn't get the huge drop. Of course you didn't get the huge rise either as really unqualified buyers ran up the prices. The high level point is that when looking at stats, you need to understand where the data used to make up the stats comes from and how it matches your situation.

GuineaPig
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Re: Bay Area housing frenzy cooling

Post by GuineaPig » Sat Sep 15, 2018 12:39 pm

Hyperborea wrote:
Sat Sep 15, 2018 12:41 am
Noobvestor wrote:
Fri Sep 14, 2018 7:41 pm
randomguy wrote:
Fri Sep 14, 2018 1:50 pm
First off Oakland isn't real bay area
You lost me in your first line. It's not 'real' Bay Area? It's literally on the Bay, and just across it from SF. What could be more 'Bay Area'?

:shock: :)

https://upload.wikimedia.org/wikipedia/ ... ea_map.png
Yes, it's geographically part of the Bay Area just as East Palo Alto is. However, both have been considered as fringe parts of the bay for quite a while. They haven't followed the same price movements as the "core" parts of the Bay Area. That's changing as both are gentrified.
Statements that start defining which areas qualify as being part of the Bay Area that are based on how much wealth is in that area are distracting for this conversation. There is no question that Oakland is part of the core Bay Area. A quick Google search results in a fairly good article on the "core" of the Bay Area: http://www.newgeography.com/content/004 ... o-bay-area

If you want to speculate on real estate prices and trends and say that Oakland's have been different than the Peninsula's, please state it in such terms.

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Noobvestor
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Re: Bay Area housing frenzy cooling

Post by Noobvestor » Sun Sep 16, 2018 12:01 am

randomguy wrote:
Sat Sep 15, 2018 1:05 am
Hyperborea wrote:
Sat Sep 15, 2018 12:41 am
Noobvestor wrote:
Fri Sep 14, 2018 7:41 pm
randomguy wrote:
Fri Sep 14, 2018 1:50 pm
First off Oakland isn't real bay area
You lost me in your first line. It's not 'real' Bay Area? It's literally on the Bay, and just across it from SF. What could be more 'Bay Area'?

:shock: :)

https://upload.wikimedia.org/wikipedia/ ... ea_map.png
Yes, it's geographically part of the Bay Area just as East Palo Alto is. However, both have been considered as fringe parts of the bay for quite a while. They haven't followed the same price movements as the "core" parts of the Bay Area. That's changing as both are gentrified.
Here is a map of the real bay area http://www.burbed.com/2008/02/17/map-of ... chronicle/ to help everyone out.:) The term is a bit of a joke one but it encapsolates a truth about how Oakland and some of the eastbay suburbs had little in common with SF and the SV cities. The drive until you qualify buyers all went east and those areas suffered a lot more in the houses correction.
Two cents: if you make this "joke" when you meet folks who live in other parts of the Bay, it might rub some the wrong way. Anyway, going by prices, here's Trulia's heat map - the red (1.5MM+ median) spots wrap the Bay, east and west on all sides, with a few patchy exceptions:

Image

I think you folks may have outdated perspectives, no offense. It's expensive all around the bay. Oakland's the 4th most expensive city in the US:

Image

"Fringe parts of the Bay" ... please. Next you'll tell me SF (literally one BART stop away) isn't the "Real Bay" either. Or the peninsula?

Image

But OK: if you still think East Bay isn't part of the Bay, well, I have a Bay Bridge to sell you! Two guesses as to what it connects ...

8-)
Last edited by Noobvestor on Sun Sep 16, 2018 12:05 am, edited 1 time in total.
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HEDGEFUNDIE
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Re: Bay Area housing frenzy cooling

Post by HEDGEFUNDIE » Sun Sep 16, 2018 12:05 am

Official government definition of “Bay Area” for planning purposes:

https://mtc.ca.gov/about-mtc/what-mtc/n ... a-counties

https://www.sfgate.com/news/amp/In-or-o ... 720892.php

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Noobvestor
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Re: Bay Area housing frenzy cooling

Post by Noobvestor » Sun Sep 16, 2018 12:21 am

HEDGEFUNDIE wrote:
Sun Sep 16, 2018 12:05 am
Official government definition of “Bay Area” for planning purposes:

https://mtc.ca.gov/about-mtc/what-mtc/n ... a-counties
Yup! That sums it up well:

Image

Meanwhile, the Bay Area Regional Transit (BART) map tells a story of regional connections too ...

Image

Seeing people citing as parts of the Bay areas that aren't serviced by BART as being "Real Bay" as compared to parts that are serviced by it is (to me) very strange. And not for nothing, but all of the lines intersect in Oakland of all places. The mind boggles! Anyway, as someone commented above: if you want to talk about specific subsections of the Bay, please clear about where you're talking about to avoid confusion.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Bay Area housing frenzy cooling

Post by randomguy » Sun Sep 16, 2018 1:21 am

Noobvestor wrote:
Sun Sep 16, 2018 12:01 am


Two cents: if you make this "joke" when you meet folks who live in other parts of the Bay, it might rub some the wrong way. Anyway, going by prices, here's Trulia's heat map - the red (1.5MM+ median) spots wrap the Bay, east and west on all sides, with a few patchy exceptions:

Are you kidding? It is the people in Oakland that are making most of the jokes. You have people living in https://www.trulia.com/p/ca/oakland/593 ... 2083929406 up in the hills pretending that they are living in https://www.trulia.com/p/ca/oakland/133 ... 2083939478 and trying to talk up their street cred. It is the people out in Brentwood that are touchy about if they are part of the bay area or not.

Again the point is to know how stats apply. I am willing to guess that the high end neighborhoods in oakland performed about the same as the high end SF ones. The fact that the were a ton more low end houses going into foreclosure only matters if that was the type of house you were buying. If I had to hazard a guess there weren't very many people on bogleheads looking to buy houses in the parts of oakland that suffered a lot of foreclosures. Or maybe they never post asking if they can afford the house they are looking at in those areas:)

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Re: Bay Area housing frenzy cooling

Post by Noobvestor » Sun Sep 16, 2018 11:39 am

randomguy wrote:
Sun Sep 16, 2018 1:21 am
Noobvestor wrote:
Sun Sep 16, 2018 12:01 am


Two cents: if you make this "joke" when you meet folks who live in other parts of the Bay, it might rub some the wrong way. Anyway, going by prices, here's Trulia's heat map - the red (1.5MM+ median) spots wrap the Bay, east and west on all sides, with a few patchy exceptions:

Are you kidding? It is the people in Oakland that are making most of the jokes. You have people living in https://www.trulia.com/p/ca/oakland/593 ... 2083929406 up in the hills pretending that they are living in https://www.trulia.com/p/ca/oakland/133 ... 2083939478 and trying to talk up their street cred. It is the people out in Brentwood that are touchy about if they are part of the bay area or not.

Again the point is to know how stats apply. I am willing to guess that the high end neighborhoods in oakland performed about the same as the high end SF ones. The fact that the were a ton more low end houses going into foreclosure only matters if that was the type of house you were buying. If I had to hazard a guess there weren't very many people on bogleheads looking to buy houses in the parts of oakland that suffered a lot of foreclosures. Or maybe they never post asking if they can afford the house they are looking at in those areas:)
I don't know anyone would would be 'touchy' about whether or not they are considered part of the Bay. It's not something that people I know worry or brag about - it's just simple geographical fact. Maybe I run with a different crowd. That said, they might see someone who goes out of their way to say 'well you don't live in the actual X' as a person with something to prove, or at best: someone unfamiliar with the area.

But that aside, I suspect you're right that Oakland suffered more foreclosures, bringing down the median sale price. Either way, I have looked at the price history of halfway-decent houses I would be interested in and it's fascinating how little they sold for in either the early 2000s or in the years of/after the crash. I definitely wish I had been in the East Bay and a prospective buyer a decade or even five years ago.

I can't speak to the rest of the Bay, but in Oakland, I don't see the housing frenzy cooling off.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Bay Area housing frenzy cooling

Post by TravelGeek » Sun Sep 16, 2018 1:22 pm

Having lived in the Bay Area for over 20 years, it seems very weird that someone would consider Oakland to not be part of the real Bay Area. Like other parts of the country the Bay Area is not homogeneous. Home prices vary. Do people living in Atherton consider their neighbors in Redwood City to not be part of the “real Bay Area”? :twisted:

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Re: Bay Area housing frenzy cooling

Post by nervouscorps » Sun Sep 16, 2018 2:08 pm

Pretty funny saying Oakland isn't real Bay Area. I live here and am actually OK with that statement! :wink:

Based on purely anecdotal information, it seems to me a lot of people are considering moving to somewhere between the East Bay and Sacramento-- Lodi, Manteca, Stockton, Vacaville etc. I think in 10-20 years the whole SF Bay/Sacramento corridor will be continuous. I rent, and am just going to save until buying makes sense to me. I still see too much irrational behavior in people buying homes in Oakland (people buying crap homes for insane prices, paying way over asking, etc), and irrational behavior in people moving to somewhat, but not substantially less expensive homes in the middle of nowhere. Many people are just leaving the area or planning to. I'm happy renting, and saving for when the bubble pops. People seem to be in too much of a rush to do something (move away, buy, etc) but I'm going to sit tight and see what happens.

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Re: Bay Area housing frenzy cooling

Post by shelanman » Sun Sep 16, 2018 2:49 pm

clutchied wrote:
Mon Aug 20, 2018 2:55 pm
Even the 2008 event took a year + to start materializing any downward pressure.

people just held tight until they were distressed and the distress built up and then more and more places ended up on the market pushing prices down as people either sat it out or weren't eligible.
In So Cal, it took until 2011 before prices really started moving down. I wasn't in the Bay Area market then, so I don't know if it was as slow to change. Of course, the '08 crash was special because the whole suspension of mark-to-market and the efforts to halt foreclosures prevented that supply from hitting market-clearing prices. In an orderly decline, the move might happen sooner.

On the other hand, I have about 10,000 coworkers all sitting on the sidelines waiting for a chance to buy a house the second the price drops enough that they can afford to.

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Re: Bay Area housing frenzy cooling

Post by randomguy » Sun Sep 16, 2018 3:37 pm

nervouscorps wrote:
Sun Sep 16, 2018 2:08 pm
Pretty funny saying Oakland isn't real Bay Area. I live here and am actually OK with that statement! :wink:

Based on purely anecdotal information, it seems to me a lot of people are considering moving to somewhere between the East Bay and Sacramento-- Lodi, Manteca, Stockton, Vacaville etc. I think in 10-20 years the whole SF Bay/Sacramento corridor will be continuous. I rent, and am just going to save until buying makes sense to me. I still see too much irrational behavior in people buying homes in Oakland (people buying crap homes for insane prices, paying way over asking, etc), and irrational behavior in people moving to somewhat, but not substantially less expensive homes in the middle of nowhere. Many people are just leaving the area or planning to. I'm happy renting, and saving for when the bubble pops. People seem to be in too much of a rush to do something (move away, buy, etc) but I'm going to sit tight and see what happens.
Read http://www.burbed.com/ and you will learn the difference between real bay area and fake bay area:) You might have to back to 2008-9 to find all the real bay area articles that defined the term. I thought this was all common knowledge:)

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Re: Bay Area housing frenzy cooling

Post by seychellois_lib » Sun Sep 16, 2018 3:39 pm

We just sold a rental in Stockton, Ca. Market there is definitely softening but boy oh boy, softening is a relative term. We bought for $300K as a foreclosure in 2008 (home had previously sold for $460K!! in 2006). We were down to approx $180 K value at one point in 2010, used HARP to get a better mortgage rate at that time. We just sold at $370K and were thrilled. Talk about a wild ride!!

I was astonished during the sales process with the number of home buyers bringing a 3.5% down payment to the party...What?? I thought the 3.5% down payment was gone forever. I would imagine this is not the case in the "Real Bay Area", wherever that might be, but it certainly gives me pause. We seem to be right back to the same mentality as before the crash.

BTW when I am travelling I always say I live in the Bay Area although I actually live in a place called Discovery Bay which is in East Contra Costa. I have a dock in my back yard floating in water that connects to the Bay so there is some basis to my assertion. So when I tell people I have the dock and they hear the term Bay Area they all say (or think) OMG you must be rich. I try to keep my Mazda 5 minivan hidden as long as possible since it is a dead giveaway. Fortunately for me most people have no idea where Discovery Bay is and I do a pretty good job hiding my car.

runner540
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Re: Bay Area housing frenzy cooling

Post by runner540 » Sun Sep 16, 2018 6:14 pm

seychellois_lib wrote:
Sun Sep 16, 2018 3:39 pm

I was astonished during the sales process with the number of home buyers bringing a 3.5% down payment to the party...What?? I thought the 3.5% down payment was gone forever. I would imagine this is not the case in the "Real Bay Area", wherever that might be, but it certainly gives me pause. We seem to be right back to the same mentality as before the crash.
Fannie and Freddie both have 3% down programs. Some lenders even offer 1% down. Nationwide, the MEDIAN down payment among all buyers is only 5%. 3% among first time buyers. There are a bunch of new 1% down mortgages, and mortgages where the lender "gifts" the tiny down payment. Oh, and 50% DTI is totally cool now. "Between January and March of 2018, 1 of every 4 FHA loans had a DTI of more than 50 percent"

Lots of data here: http://www.aei.org/publication/mortgage ... 2018-data/
https://www.ajc.com/business/personal-f ... ZkvKUwu3K/
https://www.washingtonpost.com/realesta ... ddf9175be9

clutchied
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Re: Bay Area housing frenzy cooling

Post by clutchied » Sun Sep 16, 2018 7:35 pm

shelanman wrote:
Sun Sep 16, 2018 2:49 pm
clutchied wrote:
Mon Aug 20, 2018 2:55 pm
Even the 2008 event took a year + to start materializing any downward pressure.

people just held tight until they were distressed and the distress built up and then more and more places ended up on the market pushing prices down as people either sat it out or weren't eligible.
In So Cal, it took until 2011 before prices really started moving down. I wasn't in the Bay Area market then, so I don't know if it was as slow to change. Of course, the '08 crash was special because the whole suspension of mark-to-market and the efforts to halt foreclosures prevented that supply from hitting market-clearing prices. In an orderly decline, the move might happen sooner.

On the other hand, I have about 10,000 coworkers all sitting on the sidelines waiting for a chance to buy a house the second the price drops enough that they can afford to.
you're right! We purchased in 2010 and there was still downward movement until 2011 and even 2012.

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