Here is another interesting update. Two short-sale homes in our nbrhood have been listed off the market in last few months as the owners decided to come back after seeing stability in the market and prices starting to tick-up....hmmm, if this isn't showing a reversal of the mindset then what else cld it be?

The other update is that Windemere is finally out of "distressed" category as lenders have started offering 80% LTV loan programs.

Lastly, Stafford at Windemere has bumped up the price of the homes recently by another 25K and is not negotiating at all (as my friend is trying to purchase one in Windemere and they won't reduce by even 10K). Let us see how long this is going to last but it is good to see the recent trend!

Hawkeye:

> Folks can check this info for themselves using Redfin.com. Here's the sales for the last 6 months:
> http://tinyurl.com/ybqu72f

Do u know why it doesn't show any of the properties that I mentioned? I found this sale data (that I had mentioned in my previous email) as we just had an appraisal and these comps showed up in the appraisal but I don't see these on any other site (including the one u sent). This thread was originally meant for Santorini and hence I wanted to list only the most recent sales in Santorini community.

> GSS, your posts seem to advocate a specific Realtor (i.e. Rama). Are you affiliated with her?

Based on my research w.r.t. Windemere, I found Rama's website very informative and detailed and that is why I sent the link (for anyone who is looking to buy in Windemere and wants to know what has been the trend). If u have any better links then pls do send out. I am a buyer in this market and am not trying to promote any particular realtor but want to share what I found useful information. Does that answer ur question?

~gss

Folks can check this info for themselves using Redfin.com. Here's the sales for the last 6 months:

http://tinyurl.com/ybqu72f

GSS, your posts seem to advocate a specific Realtor (i.e. Rama). Are you affiliated with her?

Some recent sales in Santorini (that closed during last 1 month)

7836 Kennard Lane : 1.065Mil (Plan 2)
7851 Kennard Lane : 1.061Mil (Plan 3)
7875 Kennard Lane : 1.045Mil (Plan 2)

These are the homes that went in contract around May-Aug period of this year and are on 9K to 12K lot sizes.

http://www.msnbc.msn.com/id/34126239/ns/business-real_estate

I guess no one is willing to take me up on the challenge and be willing to track their home price because they know it will not rise. Artificial support for the market will only continue for so long. If your kid is flunking in school and you start doing his homework to get him up to a C, once you stop doing his homework, he'll go back to getting F's. That's what we're going to see with housing based on the FACT that a quarter of homeowners are underwater.

Very informative link (provides real data and trend instead of just speculation and gets updated every week):

http://www.windemerenewhomes.info/

Even the wall street journal is now corroborating my analysis:

http://online.wsj.com/article/SB125854971533953543.html

If you take the time to read the article, you'll see they are confirming nearly everything I said below.

-H

That's quite a claim by hawkee - that s/he does not have an agenda, that his/her "market analysis" is purely his/her way of volunterring here on the forum, trying to help other potential home buyers ... blah, blah, ...

If I am not mistaken, Hawkee is some kind of analyst by profession. I don't know how many ppl would dis-agree that anal-yst(for inancial investment) is the less respectful profession. To me, they're much worse than even thieves. Look at all the financial mess the US/world is in today ...

Maybe hawkee is an exception ... and hope s/he is, as one day s/he might be our neighbor in windemere/san ramon(seem like s/he really want to get a house here in windemere/san ramon).

Thanks all who responded with support, I do appreciate it. I don't have an agenda, just hoping to share what I've learned and I'm happy to hear that some have found it helpful.

Vish,

I thought that the San Ramon low mid market ($350K - $550K) would have settled down by now, but I'm not sure that is the case. Nearly all 18 of the 3 bed 2 bath homes, townhomes, and condos currently on sale in that range are short sales:

http://tinyurl.com/yldf3my

And, there are nearly 100 additional properties that are in some phase of foreclosure (77 SFRs and 22 TH/C's) that have not yet come onto the market.

http://tinyurl.com/yjpj264

buying or renting is personnal decision. Locating real bottom for any market is a skill. So far economy situation is concerned, we are in ercovery mode. So, worst time is behind us. Corporate spending is started after a year. Job recovery will take a year or so. But, house price reflects the future 6 month ahead like stick market. Lot of bay area companies are hiring, malls are again getting crowded..things are in positive side. If you think that we are getting into a situation like last year, you are dreaming...

Thanks HawKeye for posting indepth Analysis . Housing and Stock market recovery is artificial fueled by cheap money pumped by Fed which can't last long without leading to even bigger trouble. My Lease was expiring and I was thinking of buying Home but based on your analysis and my own research , I thought of leasing a Good house , you can rent it for 2/3 of amount of Mortgage without risking your downpayment.

I know few folks who bought million dollor homes based on double income now they are single income and barely able to pay the Mortgage so no one is immune to this down economy be it home owner in San Ramon or Tracy. I don't see any fundamentals to sustain these high prices when Jobs/People are moving out .

Hawkeye,

Keep up the good work. Your analysis and insight are great, and balance the unbridled optimism of NAR and RE agents.

For the one's who would like to believe that housing will go up forever, and that we have touched bottom -more power to you - and you may well be right.

As long as businesses can keep paying higher wages, and can remain globally competitive, prices will rise. At some point, higher prices lead to a competitive disadvantage - my feeling is that we are already at that point in the bay area. Look at the eagerness with which high tech companies are encouraging employees to move to North Carolina or India.

This is a forum, and sapient beings on this forum have a right to provide their perspective.

Keep up the great work Hawkeye.

>> http://tinyurl.com/yh9o548
>>
>> Yikes, SEVENTY ONE mid high properties in some phase of foreclosure, but that have not yet made it onto the market.

Does anyone know how accurate is this listing? It shows quite a few homes due for auction in Septemeber of this year but I don't see them listed for sale. thx.

~gss

Hawkeye,

forget about all the economics and all the analysis and lets talk about this example.

A home owner who has kids going to one of the best schools (windemere) in the bay area and his home value has gone down 100k-200k. The home owner has a good and stable job.

Do you think this particular home owner will quit? I think no and most of the windemere home owners are in the same situation.

Thanks again Hawkeye,
I am considering san ramon area as I feel that I am going to get a relatively big house for my range (which is upto 500k). Also, I am looking at new construction windmere and gale ranch. Looking at the march to Sep sales, the prices went little up so not sure is this right time or in other words, the price that I am paying is right or not. My plan is to stay for 5-7 years and then probably move to a bigger house. So, any guidance in this area will be a huge favor for me . Thanks again.

I also applaud Hawkeye for his analytical input to the forum. His analysis and arguments are based on facts. Most folks bashing him are either ignorants or are in denial. On a separate note, we recently finalized a deal and are in the escrow process, so we hope that the prices do not drop by more than 10% in future (we are in the $600k segment).

Hi guys, stop bullying Hawk. Maybe most people do not agree with him, but he is a honest person. Correct or not, we shall appreciate his input. Many of his point are valid although some are a bit biased.

Antu and Susan,

If you don't find my posts helpful, then ignore them. If others do find them helpful, why would you begrudge them that benefit? My analytics are fact based and easily corroborated by independent research. You both sound bitter and/or angry, wanting to shoot the messenger because you don't like the message.

And no, I don't work for Redfin or Trulia. As I've said before, I'm an analyst who is happy to provide my research free of charge. I know a lot of people who got burned by the bubble and if they'd had someone warning them, perhaps they would have made a different decision. Yes, there are much better things I could do with my time; but, for me this is the equivalent of "volunteer" work (using my profession to help people for free). Maybe you should do the same and volunteer at the local soup kitchen or charity? Sometimes helping other people is a great way to ease your anger and bitterness, as you focus on others instead of yourself. Just a thought.

----------------

Vish,

Thanks for your post. The three areas that I track are very specific, namely the mid high range in San Ramon, the mid high range on the SF Mid Peninsula, and the mid high range in Pacifica. I have several colleagues that track the low mid range in the SF Bay area and would be happy to ask them about conditions in that segment and report back to you. Which areas are you looking?

-H

Vish,

I agree with Susan. I have same opinion about hawkee. Don't be mislead by his trash analysis. When you realize that, it will be too late ..

Vish,
Don't be so naive. Hawkeye has not even owned a home as he said. He is a renter living in Belmont, Peninsula!
He has been hoping the market will reach to bottom soon so he can buy a house. How can you ask someone who has never bought a house to give you advise on buying????


Hawkeye goes to every forum and every topic to tell people hold on buying on homes. I used to post 3 questions on Trulia and he went to all the 3 places to warn me not to buy any house. Why does he care so much about other people buy or not. He is like a full time Trulia employee to me. How can anybody have so much time to argue about home buying on Trulia and Redfin?

Even elementary school kids know the real estate market is in the stabilize mood for now till next year. The price can go higher or nlower in 10%-20% range. You have to buy house base on so many factors not just on the price!!!! The interest rate is a big factor in my opinion and vise versa.

Good luck everyone. This is my last post. Live a happy life as you wish to. Ignore the trash talk for your own good.:-)

Hawkeye,
Great analysis and thank you so much for sharing your knowledge. Hope you will clear the doubt I have. My understanding from your posts and some of other posts, that mid-high end market is the area where there will be some more correction, where as the low to mid market (350k - 550k condos and townhomes) already bottomed. Is this correct ? or do you think there going to be some more correction. Being a newbie in the housing market I kind of having hard time deciding right time/ right price combo and new construction vs old houses etc,.. Could you please share your some your knowledge on this too. Appreciate your help.
Thanks.

I bought and moved in Windemere about one-year ago, with expectation at the time that the price would move further downward for another 10% or so in 1-2 years. The decision to buy at the time was not pure financial, rather the need (we loved the community for my 2-year doughter and her grandma who has been taking care of her). Up to now, I still believe, and agree with some nice analyses posted here, that the price in WIndemere would drop another 10% or so before truely stablizing. But I also feel good about our purchase, as we provided a nice home for my daughter to grow in, which is priceless. I used to visit this forum often and learned a lot info here, thanks and best wishes for everyone!

Josh,

Just want to say thank you for sharing your story and sorry for your circumstances. Hang in there, if you are in for the long haul, prices will recover. The Bay Area is very much a cyclic economy and when unemployment eventually drops back below 5%, as it will, the demand for housing will go right back up. It's just going to take a while.

My message is targeted to buyers who are thinking of jumping into the market in the next 6 - 18 months. For current owners who are in for the long term, like yourself, I would just ignore the short term trends and focus on the things you love about your home and community.

-H

OK I just spent the last 30 mins reading all 91 posts and felt compelled to offer my $.02. I have to agree with Hawkeye. The facts are there to support his beleif. The $900k-$1.2m market is going to continue to stay soft for the forseeable future. I too am interested in buying at windemere but it doesnt seem like the new homes are worth the prices they are commanding these days. But I think that a big part of that is there are a certain % of people that are willing to pay a premium to buy a never lived in home where they can have a say in the upgrades, finishes, etc.

I check the chronicle RE section every Sunday and look at the homes sold listings. If this data is reliable, I am consistently seeing homes that sold in Windemere in 2003, 2004, 2005 sell for $300-$400k below their sales prices from those years. And i have to assume these homes have already paid for the landscaping and maybe some other improvements that you dont get from the builder. So that said, these sellers or more likely the banks are losing alot of $$ on a previously owned home.

And when i just look at the sq footage and # of bedrooms (but no other factors such as lot size, prox to open space etc) and compare the previously owned home recent sale price with what the builders are asking today for a new home, it doesnt make sense to me. But again there are those that will pay more for new vs "used".

So I think that if you are only looking at new you will see that Windemere is in short supply now and the homes have been selling at a pretty good clip since for the past several months, so why not raise the prices? And if you are using that data to gauge whether or not you are making a good decision to buy new now, it seems logical. But if you are like me and dont mind living in a home thats still only a few years old and maybe the previous owner has already installed a pool or other niceties, then you are looking at a different set of data which is the data that Hawkeye continues to point out.

Im underwater in my house now and it stinks! Its basically left me trapped for the time being. I cant re-fi for the reasons hawkeye has already explained, and if I want to sell then I either have to write a check to the bank, or walk away and have my credit trashed. Even if you plan to stay in your home for a long time and ride out whatever downturn there may be, what happens when the unexpected happens? If you are underwater your options become very limited and all of them are unappealing.

So to reiterate, dont label me as a windemere hater - far from it, I think its great. but put me down in the hawkeye camp that believes pricing in windemere is going to experience a setback in the coming 1-3 years.

Gss,

Sorry, the $800K applies to both first time and move up buyers.

http://www.washingtonpost.com/wp-dyn/content/article/2009/11…

The Fed knows they have to put the brakes on the government's artificial stimulation of the housing market or they'll be facing a double dip recession. Better to let prices in the mid high end drift down, rather than crash (soft landing approach).

The wildcard is that the banks have been holding onto mid high shadow inventory because they couldn't compete with the higher priced new homes. The suspension of "mark to market" meant that holding the homes was worth more than selling them (to their balance sheets). Look at the current shadow inventory in San Ramon:

http://tinyurl.com/yh9o548

Yikes, SEVENTY ONE mid high properties in some phase of foreclosure, but that have not yet made it onto the market.

With the new rules expanding eligibility to higher earners while capping the price at $800K, the banks now have an incentive to start releasing mid high shadow inventory because they can price into the credit seeking market. This is actually a very good strategy, as it will "pop" the shadow inventory bubble while providing a relatively controlled descent of prices. But this is a bad omen for new home prices.

Before the question was "why buy a $1.1M Santorini when you can buy a similar resale for $950K". A lot folks saw the trade off for the new home as worth the difference in price. In the near future, based on the tax credit renewal, the question will be "why buy a $1.1M Santorini when you can buy a similar resale for $850K". That's enough of a difference to cause folks to reconsider the value proposition of a home built in 2006 versus one built in 2009. Is it really worth paying $350K extra just to say you bough "new". Most common sense folks in a bad economy would say "no thanks".

Gss, I believe there are 2 things which are not as you believe.

1) 800,000 cap is for all

(snipped from HR3548, although you might want to look it up yourself to see the full context)
(d) Limitation on Purchase Price of Residence- Subsection (b) of section 36 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
`(3) LIMITATION BASED ON PURCHASE PRICE- No credit shall be allowed under subsection (a) for the purchase of any residence if the purchase price of such residence exceeds $800,000.'.

2) It modifies the original extension. Purchases after the enactment of the bill (Nov 6th) are affected, meaning people who close before Nov 30th who would have expected the credit got screwed.

(another snippet, note that the snippet above is subsection d)
(j) Effective Dates-
(1) IN GENERAL- The amendments made by subsections (b), (c), (d), and (g) shall apply to residences purchased after the date of the enactment of this Act.
(2) EXTENSIONS- The amendments made by subsections (a), (f), and (i) shall apply to residences purchased after November 30, 2009.
(3) WAIVER OF RECAPTURE- The amendment made by subsection (e) shall apply to dispositions and cessations after December 31, 2008.
(4) MATHEMATICAL ERROR AUTHORITY- The amendments made by subsection (h) shall apply to returns for taxable years ending on or after April 9, 2008.
SEC. 12. PROVISIONS TO ENHANCE THE ADMINISTRATION OF THE FIRST-TIME HOMEBUYER TAX CREDIT.

Hawkeye:

I thought the 800K price cap is "only" for folks who already own a primary home i.e. move-up folks and it is NOT for the first time home buyers...isn't that true? If that is the case then this will infact generate more sale activity as well, as it will push the prices up as more folks who have homes under 800K will sell (as the demand will increase) and move up. If someone is in the market for 800K+ home then, I highly doubt they care about 6K-8K savings...and this is in addition to the 8K credit that we already had i.e. that has just been extended beyond Nov end without any changes...am I missing something?

`gss

We just finished our analysis on the tax credit extension.

Ouch, sorry gang, while the fed did renew the tax credit, they designed the renewal to deflate prices in the mid high range. They expanded eligibility and lowered the maximum housing price to $800K. That means more people are going to be looking for houses that are priced at $800K or below, forcing re-sellers above that range to drop their prices. Now the builders are stuck, because the high number of foreclosure and short sales for comprable homes can easily be priced into that range, leaving the builders to either lower prices or take losses on sales.

Turns out that even the Fed figured out that their prior policy was inflating the mid high market, delaying the correction. So, instead of cancelling the credit altogether and re-igniting the crash, they opted for a soft landing approach. By expanding eligibility and creating a price cap, they are effectively forcing the market into a gradual downward correction.

Gss, we'll see when the next round of comps come out. BTW, the "media" is finally reporting what we've been discussing for 6 months:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/08/…

"The combination of rising unemployment at all income levels and the recasting of exotic loans used for expensive homes are likely culprits for mortgage problems infiltrating housing's top tiers, experts said. And values have slumped for homes at all price points, leaving many high-end homeowners, like their counterparts at lower prices, upside-down."

"Option ARMs, or adjustable-rate mortgages, which were used heavily in California and the Bay Area for expensive homes, will be recalculated in large numbers next year through 2012. Such loans allowed borrowers to make minimum payments that didn't even cover interest, with shortages added on to the outstanding principal. At recast, the loans can undergo dramatic payment jumps, as payments have to include both principal and interest spread over a shorter period of time."

"Foreclosures have a snowballing effect," Hanson said. "They establish terrible sales prices and then everyone's value comes down, and then you have thousands more people in a deeper negative equity position, which increases their likelihood of default and foreclosure."

Hawkeye:

U r still looking at the homes that went in contract 6 months back, so the homes that have closed in last 2-3 months are are going to close this month are not necessarily a representative of contracts that happened after Aug. These homes are expected to close early next year.

~gss

Santorini Comps. Interesting that they all sold roughly $50K less than list and overall prices are down from June to August.

http://www.redfin.com/CA/San-Ramon/7038-Emerson-Ln-94582/hom…

http://www.redfin.com/CA/San-Ramon/7055-Emerson-Ln-94582/hom…

http://www.redfin.com/CA/San-Ramon/7079-Emerson-Ln-94582/hom…

Thanks Hawk, that info is very useful.

Back to the original question of this thread. Last week Redfin upgraded their FREE service to include detailed listings for all home sales (including pictures), updated within 15 minutes of when they are removed from the MLS. I think they are still getting all the existing data into their systems, but here's a search on Windemere:

http://tinyurl.com/ygga96q

I also used this new feature to find the new home sales prices for Schaefer Ranch (Dublin).

Enjoy!

I think I found out the answer after I did some research on the Contra Costa County Website...it is indeed pretty high as the special assessments seem to run in $8000-$9000 range and for 1Mil range homes these add additional 0.8 to 0.9 %age....I cld not find out why it is so high though. It does seem like that these homes were targetted in the 1.4M+ range so that the %age cld be still in 1.7% (as the special assessment amount is kind of fixed). If anyone else has some insight into it then pls share with us. thx.

do you consider 2% increase on the top of buying price for tax basis?

Folks: I have a different question as based on what I see on zillow.com, it seems like the property taxes for Santorini community are close to 1.9%+ Is there any Santorini home-owner (or anyone else who knows about it) on this blog that cld confirm if that is the case? If so then why is it so as property tax for Stafford is in 1.7% range? thx.

Okay, let's all step back for a second, take a big deep breath and consider "bubble-ology".

In 1998, when venture capitalists were artificially inflating the value of dot com companies, we were telling folks that the market fundamentals did not support the stock prices. We said "don't buy and if you own, sell".

At that time, folks said, "you are wrong! Look! The stock price keeps going up! You missed the boat and are just PO'd".

Then the first phase of the market crash hit in March of 2000. But it wasn't a total crash. It was actually a series of mini crashes, followed by mini recoveries.

For nearly six months, there were a series of false bottoms where smart folks shed their dot com stock, while other (not so smart) folks misinterpreted the relatively low prices as bargains in comparison to the previous highs and bought their shares.

All the while, we were telling folks not to buy, because market fundamentals did not support the current prices, even if they had already corrected by almost 40%.

During that period, everyone said "you are wrong! Look! The price is almost half what it used to be! It can only go up from here!...it's a great time to buy!!".

Sorry, not so. From September 2000 through December 2000, the "real" crash began. The venture capitalists realized that they could not continue to artificially prop up these companies and they stopped doing so. The end result was nearly a 2000 point drop in the NASDAQ.

Yikes. People's life savings were cut in half. Instead of playing golf, Grandpa was filling out an application to work at Walmart, so that Grandma could at least stay home and not have to go back to work.

Even more amazing is that in 2001, folks were still calling false bottoms in January, April, and September, buying these stocks as they continued to tank (thinking they were relatively good deals based on their former value).

In fact, the market bottomed a nearly a year later in Sept 2002, then as predicted, entered into relatively steady growth phase based on actual, market based valuation of the companies (i.e. market fundamentals).

Hmmm, sound familiar? That is exactly what I've been saying about the housing market in San Ramon. In fact, you can replace "dot com" with "house" and "venture capitalists" with "Government" in my above comments and everything is pretty much a reflection of what is happening in the current housing market.

All of you, stop meaningless discussion. This is simply a like or dislike situation. Anyone like Windy, it is like a heaven which can be purchased as a steal. Anyone don't like, it is a trash not worth a penny. None of you provide any meaningful analysis to backup your claims. The reality is, it is still overpriced. However, Windy is not alone. Everywhere in bay area is overpriced. With price to income ratio above 5X, it is far higher than national average of 3X. Still, regarding price to income ratio, Wind probably is one of the lowest in entire bay area. But, people are buying and price stopped dropping. Is this the bottom, maybe not. Will we see another 30% drop. Likely not. Some studies show price may restart downward trend again sometime in next year. Then we shall see the real bottom, somewhere about 10% off current price.

No one regard that $1.2mil Santornini house is a good deal. It probably worth somewhere between $1mil to $1.1mil. But no way you can get it for $800k. If it does get to there, how much it worth no longer matter. Because most people involved in this discuss will lose job before that happen.

Can you please educate us about rest of the peninsula where we will see more correction? I think that you are wasting your time abour dead horse. Widemere is already corrected and started upward move. I did the analysis of quality of the widemere houses with peninsula. It is just like comparing gold with bronze. So, people now understands the gold - so windemere realestate is going up from bottom. Don't compare current price with top. Top is still very far. I think that you should use your energy about peninsula home so that people will not do big mistake there and that market will see real price.

Rousen,

Yes, the Belmont market is very over priced (as is the entire mid Peninsula, mid high segment). Prices are actively correcting there, so I definitely would not buy into that market anytime in the near future. The prices drops are quite significant, considering the housing supply on the Peninsula is very low and the incomes are very high. But this thread is specific to the San Ramon (Windemere) market (there is another thread discussing the mid Peninsula).

By the way, I don't own a home in Belmont (or anywhere else).

So back to Windemere and price inflation. Here's an announcement of a class action lawsuit against Pulte Homes, who is accused of artificially inflating the prices in their new home builds in CA, only to have the homes lose significant value later:

"A California homeowner filed a class-action suit against Pulte Homes on Friday alleging that the nation's largest home builder fraudulently propped up home prices and sales in a "house of cards" scheme that eventually caused values in its developments to plunge."

"The lawsuit, filed in U.S. District Court in Northern California, alleges that Pulte's "one-stop shopping" business model, in which it controlled sales, financing, settlement services and appraisals, allowed it to sell homes at inflated prices and give buyers mortgages they could not afford."

"Berman's (law) firm also has a class-action suit pending against KB Homes and Countrywide Financial, its preferred lender, alleging that they conspired to drive up prices."

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/27/…

If these allegations are true and there is a pattern among homebuilders to artificially inflate prices, that might explain why the Windemere new homes are still very overpriced compared to income growth and inflation. It would also be consistent with the fact that the resale homes in Windemere have lost 30 - 40% of their values.

Maybe $1.2M for a Santornini is not such a good deal after all?

So I've been the one providing most of the data. Now it's your turn. Each of you who bought in Windemere, tell us how much you paid for your home. What is the current market value?

Hi Hawkee,

Can you please share your great knowledge for belmont also? Where do we stand on Belmont? If I start relying your analysis and extrapolate it to Belmont, I am really scared about the price of your home, may be negative already :)

Okay, so I've finished the income growth analysis.

In 1995, you needed a family income of $78K per year to buy a $350K home in San Ramon. Note that I've used a relatively high price to income ratio (4.5x), in order to apply a location premium to San Ramon (good weather, low housing suppply, great schools, etc.). In a "bad" area, the ratio would be much lower. So that ratio is effectively a "location premium", meaning folks are willing to spend a much larger percentage of their income to buy in that area. So, the 4.5X multiple already has San Ramon’s “location premium” included within it.

So what about today? The current median family income in San Ramon is around $130K, indicating that over the past 14 years, family incomes in San Ramon have grown at roughly 4%; that is consistent with expectations, since wage growth generally matches (or slightly exceeds) the rate of inflation.

So clearly, in San Ramon, wage growth has not significantly outpaced inflation and the buying power is roughly the same as it was in 1995. Using the 4.5X multiple (which includes the location premium), a $130K family income in San Ramon will buy you a $585K home.

Wow, that’s really close to the $600K prediction I arrived at in the post below, by just using the inflation adjusted home values.

So now we have two independent points of analysis (wage growth and inflation adjusted home values) corroborating the conclusion that a San Ramon home that sold for $350K in 1995 should be selling for around $600K in 2009, if there were no abnormal market forces interfering with pricing. I also determined that to justify the current prices, based on wage increase alone, the wages of the majority of families would have had to increase 8% every year for 14 years (twice the rate of inflation).

Prices are clearly being supported not by market fundamentals, but by artificial and unsustainable policies, such as low interest rates, foreclosure moratoriums, loan modifications, and tax credits. These policies cannot continue indefinitely and when the cease, the market will continue its correction back down, toward values that are in line with historical inflation and wage growth (and then they will grow at those rates, as they did before the bubble).

I have a solution to all this back and forth which doesn't seem to be getting anywhere. For the folks who think the prices will continue to rise, especially Stephen, why don't you share with us YOUR buying experience and the price you paid for the home. Then we'll track the price of it for the next year or so to see if it goes up or down. If it consistently goes up, then you'll be right and we can all agree that you're right.

Yea, as we aged, we just become less worthy.

Hi Stephen,

You are also discounting the age of that crap house. House price appreciation is a combination of inflation and age. These belmont houses has another 10-15 yrs of age left while san ramon houses are new. If you take age as a consideration, this house will not fetch more than 500K. This is way overpriced. Market should correct itself and fetch correct price of this dying crap.

Hawk, use your own theory to check your favorite Belmont market. You shall be stunned how much it is `overpriced' in Belmont. Look at this one: http://www.zillow.com/homedetails/charts/15551630_zpid,10yea…

It was last sold in 1997 for $415k. It is listed for near $900k. That is 6.5% YtoY appreciation. If my memory is correct, there was not a single year since 1997 with inflation above 6.5%. Let's assume average inflation is 3% each year. The fair non-bubble price of this house shall come to $600k. Let's all wait until all bubble released and finally we can get that house for $600k.

I used to live in Fremont. Back then Fremont's house is more expensive than Pleasanton. Right now Pleasanton is the one with premium except Mission district.

Also, tri valley area was not much known during 90s. Now, it is craze. I understand Hawkee's frustration. But, train left the station - accept it without crying in empty station...:)

HawkEye,
I am also one of those who is waiting on sidelines based on similar reasoning . I think one factor which we are discounting is the lots of High Tech workers who migrated to Silicon Valley during early 2000s and have kids in the elementary/middle/High school going ages now . For them schools with high API is the prime factor and they can pay unreasonable premium for home and cut down heavily on other expenses like vacation etc to pay such high mortgage.

Other factor is once you look at San Ramon Homes than you don't feel like buying much older Peninsula homes with much older construction and higher prices..

I agree the current prices doesn't make sense based on fundamentals but there are other factos in play which are preventing them from Sliding. Let us see how the ARM resets affects the market , I think 8K credit is a big impact for 900K homes as most of the buyers must be earning greater than 150K .

So I just finished a "non bubble" market analysis of San Ramon and was suprised to see that the data implies that there is still a $300K - $400K price inflation in the mid high market. I did a double take and re-ran the numbers, as that seemed a bit high to me, even with all things considered.

Since 1960 there have been two other real estate booms. One occurred from 1976 to 1980 and the other occurred from 1984 to 1989. The market corrected back to baseline in 1993 and thereafter, home appreciation roughly matched inflation until the start of the most recent boom in 1997. So there was a relatively "flat" period from 1993 to 1997 (where homes appreciated at the rate of inflation).

Here's the graph again for reference:

http://i86.photobucket.com/albums/k104/mathoda/homevalues1.gif

So I wanted to compare the new builds in Windemere to their equals during that non-boom period. What I found was that from 1988 through 1998 (the period between bubbles), 3000 + square foot homes comparable to Windemere were selling in the mid to high $300K range:

5 bed 4.5 bath, 3200 sq. ft. sold for $350K in Nov 1988
http://www.redfin.com/CA/San-Ramon/16-Cobblestone-Ct-94583/h…

4 Bed, 3 Bath, 3300 sq. ft. sold for $370K in March 1996
http://www.redfin.com/CA/San-Ramon/56-Sioux-Ln-94583/home/978024

3 Bed, 3 Bath, 3200 sq. ft. sold for $375K in March 1989
http://www.redfin.com/CA/San-Ramon/28-Dogie-Ct-94583/home/1413516

4 Bed, 4 Bath, 3300 sq. ft. sold for $342K in May 1994
http://www.redfin.com/CA/San-Ramon/2460-Palmira-Pl-94583/hom…

4 Bed, 3.5 Bath, 3200 sq. ft. sold for $375K in Oct 1998
http://www.redfin.com/CA/San-Ramon/2431-Ascension-Dr-94583/h…

4 Bed, 3 Bath, 3400 sq. ft. sold for $334K in Dec 1993
http://www.redfin.com/CA/San-Ramon/2431-Ascension-Dr-94583/h…

With inflation, these homes should now be selling around $600K, but instead are listing from $900K to $1M (as are the new homes in Santorini). If wage growth outpaced inflation that might justify the price run up, but I don't believe that is a factor (still finalizing that data, as its a bit complicated because of the large number of commuter to SV).

Assuming wages did not quintiple (i.e. 5X) from 1998 to now, it really does seem that the government's injection of "stimulus" into the market is artificially propping up prices (low interest rates, foreclosure moratoriums, tax credits, loan modifications, etc.). I'd hate to think that housing has taken on the economic dynamics of "beenie babies" or "cabbage patch dolls", but there seems to be a fundamental disconnect between 300 years of economic and financial theories and principles in this current market. This kind of deficit spending to prop up an entire market is not sustainable and I have to believe that at some point, they must remove all this artificial market mojo and let the correction happen.

I wonder what that $1200 beenie baby is selling for today...