Author Topic: East Palo Alto, CA  (Read 956 times)

littleman

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East Palo Alto, CA
« on: April 06, 2018, 02:32:49 AM »
This little plot of land is going to make some people very wealthy in the near future.


nffc

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Re: East Palo Alto, CA
« Reply #1 on: April 10, 2018, 05:57:46 PM »
Somewhat related and worth a read

https://www.zillow.com/research/hourly-home-equity-earnings-19356/

...if earning a six-figure annual salary represents a certain amount of privilege, homeowners in San Francisco, San Jose and Seattle all made comfortably more than that simply by virtue of owning a local home.

littleman

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Re: East Palo Alto, CA
« Reply #2 on: April 10, 2018, 09:22:32 PM »
That's a good article.  I feel very fortunate that I was able to buy a house 16 years ago and have been able to ride this ridiculous wave.


Those folks who own property in EPA are sitting on values that are going to skyrocket.  For those who don't know, EPA has historically been very low income and high crime, but it is rapidly transforming from East to West.  FB just bought up a block and built a multi-story office complex there.  Unfortunately, many of the residence in the old neighborhoods in EPA are renters and they aren't going to benefit.

ergophobe

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Re: East Palo Alto, CA
« Reply #3 on: April 10, 2018, 10:37:11 PM »
...if earning a six-figure annual salary represents a certain amount of privilege, homeowners in San Francisco, San Jose and Seattle all made comfortably more than that simply by virtue of owning a local home.

This, to me, is part of why the real estate market is so whacked. That equity only becomes a meaningful number when you cash out.

I think of a friend of mine who, just a few years out from his PhD was a multi-millionaire based on his stock options. The bottom fell out of the biotech market just before the options vested and within two days he had become a multi-thousandaire.

Real estate is not so volatile, of course, but if you sell your home in San Jose and because of your job need to replace it with a house in Mountain View, you haven't actually "made" anything. You only "make" the money when you cash out and move to Detroit.

I've seen two booms and busts in our area. One year everyone is rich and there's a short selling frenzy. Then everyone feels poor and decides to hang onto their houses (most are investment properties, not homes, so there's a lot more market timing than most places).
« Last Edit: April 10, 2018, 10:42:27 PM by ergophobe »

Mackin USA

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Re: East Palo Alto, CA
« Reply #4 on: April 11, 2018, 09:40:53 AM »
A year before we LEFT California our home, on paper, was worth $200K more than we sold it for.

Still the appreciation was off the charts.
Mr. Mackin

ergophobe

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Re: East Palo Alto, CA
« Reply #5 on: April 11, 2018, 05:31:26 PM »
Still the appreciation was off the charts.

Yeah, it's great for those who can cash out. And I don't see the bottom ever fully falling out in the Bay Area over more than a relatively short run.

I was thinking of all the people who think they're rich because the bank wants to give them 100s of thousand of dollars of home equity loans... which becomes a problem when their equity falls. Or who get into the trap of "trading up" when they should be focused on "paying down"

I know that Rich Dad, Poor Dad is kind of controversial and there evidence that it was all made up, but when I read that, the concept that a house is a cost and, at least early on, a liability (and shelter, of course), rather than a source and store of wealth, has stuck with me.
« Last Edit: April 11, 2018, 05:33:18 PM by ergophobe »

littleman

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Re: East Palo Alto, CA
« Reply #6 on: April 11, 2018, 07:02:41 PM »
Quote
That equity only becomes a meaningful number when you cash out.

This is true about everything.  I know several people who lost big on stocks when they sold at the bottom during the 2008 recession*.  I also know plenty of people who lost their homes during that time.  In both examples these folks would have been OK if they just hanged on.  Of course, many people were in bad loan situations for homes because they thought the pre-2008 upward trend would never be disrupted.  Those folks had little choice other than defaulting.

*Due to all the doom and gloom conversation we had before the 2008 crash in the Core we were largely liquid before hand and we were able to go on a buying spree at the bottom.  BTW, we're about 40% liquid right now -- no doubt, the we're heading to an eventual correction (or maybe crash).

ergophobe

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Re: East Palo Alto, CA
« Reply #7 on: April 11, 2018, 07:17:57 PM »
This is true about everything.  I know several people who lost big on stocks

Absolutely. That's why I equated this to my friend in a startup who started counting his money before his options vested.

At the end of the day, it's also true of cash and gold and Picaso paintings. They could all have a crisis that destroys value (boy I'm in a pessimistic mood!).

The one difference is that most average people are not buying stocks, gold and art on margin. But the vast majority of those Bay Area householders are heavily margined. So if they need to move during a correction, that's effectively a margin call during a market crash.

If your house is paid off, then it becomes more like a non-margined stock that has lost value. It sucks, but you still exit with cash.

But I have known plenty of people in hot housing markets who have some good equity, but their loan is still so high (i.e. they are so heavily margined), that a good-sized correction puts them underwater. If that happens at the same time as a job loss, they are in trouble. I don't know *any* regular people who buy stocks and commodities (i.e. gold, silver) on 80% or 90% margin.

So yes, it's not inherent in the nature of the asset, but more a cultural problem.

martinibuster

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Re: East Palo Alto, CA
« Reply #8 on: April 17, 2018, 02:04:30 PM »
California real estate is also being targeted by Chinese nationals, adding more fuel to that fire.

I'm a native Californian.
Northern California has always had a red hot real estate market. Except for the recent blip in 2008, real estate is as close as one can get to a safe bet for getting wealthier.

littleman

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Re: East Palo Alto, CA
« Reply #9 on: April 17, 2018, 04:26:39 PM »
>I'm a native Californian.

We met years ago.  East bay?

ergophobe

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Re: East Palo Alto, CA
« Reply #10 on: April 17, 2018, 11:41:11 PM »
Yeah, I probably have a really "off" perspective because of the strange market here.

In brief - prices here have never regained their 2006/07 levels. At that time, lots were selling at $180K-$250K. That $250K lot sale remains by a long shot the record. Our friend bought a lot in 2016 for $100K even.

Similar with houses. A really nice 1600sf house sold for $825K. A rundown but larger house sold for $900k. Then we saw many  sales in the $350-$450K range for rundown houses to $550K. A couple of sales of brand new, showpiece homes sold for higher, but probably less than the owners had into them.

Finally, two years ago a large, brand-new home with high-end construction and Craftsman features fetched $920K and there have been some pretty high-priced sales lately. But there's no way the old home that sold for $900K in 2007 could sell at that price today. And if you bought at $900K in 2007 and then needed to sell in 2015, you were still deep underwater.

Those types of scenarios probably never happen in the Bay Area.
« Last Edit: April 17, 2018, 11:44:06 PM by ergophobe »

ergophobe

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Re: East Palo Alto, CA
« Reply #11 on: April 19, 2018, 07:09:17 PM »
Okay... everything I've said in this thread is obviously irrelevant, bullshit and wrong

http://www.foxnews.com/real-estate/2018/04/19/condemned-california-home-with-holes-in-roof-mildew-sells-for-1-23-million.html

ergophobe

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Re: East Palo Alto, CA
« Reply #12 on: April 19, 2018, 07:12:35 PM »
Oh, and for those who do not know the Bay Area, just to underscore HOW wrong I am here, here is Exhibit B

« Last Edit: April 19, 2018, 07:14:58 PM by ergophobe »

littleman

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Re: East Palo Alto, CA
« Reply #13 on: April 19, 2018, 07:54:32 PM »
Most likely those properties in EPA are going to 3-5x on their value in 10 years.

martinibuster

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Re: East Palo Alto, CA
« Reply #14 on: April 23, 2018, 11:38:20 PM »
The SF Bay Area real estate market has ALWAYS been hot. That binge buying crazy prices thing that preceded the recession is what the SF Bay Area has always been like, although not as hot as it has been since the 90's.