Much of SF Bay Area's ballooning housing costs propped up by risky loans

[UdoKier]

http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/04/15/MNG29C9D8D1.DTL


Homeowners find much to appreciate
Despite rising interest rates, sales and prices in the Bay Area rocket to new highs. How high? The annual increase in the median home price now tops the region's typical household income.

Kelly Zito, Chronicle Staff Writer
Friday, April 15, 2005

Forget the stock market or working for a living. Homeowners in the Bay Area made more money last year simply occupying their lofts, townhomes and suburban tract houses.

At least on paper.

The numbers say it all: Between February and March, the median price for a single-family house jumped $36,000, or 6.3 percent. Over the last 12 months, it soared $106,000, or 21 percent, hitting $605,000 in March.

That appreciation far exceeded the $74,124 the typical Bay Area household earned last year, according to Economy.com. And it certainly outpaced the stock market, which is down 4 percent in the last 12 months. If you'd bought a 10-year government bond on March 31, 2004, you would have received about 3.9 percent in interest in the last year.

{EDIT}

Economists worry, however, that the second part of Gabriel's adage may apply to uber-expensive markets like the Bay Area. Specifically, they cite the large percentage of risky interest-only loans in the market -- 62 percent of total loans in San Francisco last year, according to market researcher LoanPerformance.

[EFerrari]

1. 62%?! That's just unbelievable!

We're about to buy in the city and if Doug didn't need to be here, I'd take our pennies and buy something real somewhere else. It's just insane.

[UdoKier]

3. We got good deal on rental in the city. Maybe when the bottom drops out..

there will be some great bargains for those who wait...

[EFerrari]

6. We're between a rock and a rock. Our apartment is being

converted to a condo and we've been offered a generous sum for moving out. I'd rather buy it than move at this point (it's so damn disruptive and stressful).

But, it sure would be nice to take the dough and go somewhere like Reno or even TURLOCK and buy a real house with a yard and garden. I can work anywhere but Ferrari needs to be in town because that's where he gets most of his gigs or references to gigs.

Argh.

[democracyindanger]

14. I'm just waiting for a good shaker

Nothing serious, just big enough to send a bunch of people scrambling to San Jose and Walnut Creek...

[EFerrari]

15. Hilarious. My family has a little place in the SJ foothills

with three faults running through it.

My geology prof used to say, "It's easy to find faults in CA. Just look for hospitals, schools and amphitheaters."

[AlCzervik]

2. when those 1, 2 or 3 year zero down arm loans come due

it's going to be ugly.

[EFerrari]

7. What will happen, do you think?

Prices will drop, interest rates will go up and a bunch of people will lose their equity? Not a math head although I could play one on tv. :)

[AlCzervik]

16. prices will drop and their payments will go up a lot

and they will be upside on their mortgage.

[Coastie for Truth]

4. We are waiting for the "crash"

We bought below our "needs" in San Jose -- and are waiting for the crash to get a better deal in Los Gatos or Cupertino or Palo Alto (way too over priced) or Menlo Park (over priced).

But I think when the crash comes prices on high end condos in Los Gatos, Cupertino, etc. will drop 40%.

[dcfirefighter]

5. Split Rate Property Tax

You guys should look into it. So should every city.

[EFerrari]

8. I'm not familiar with this term. Could you say a bit more? n/t

[UdoKier]

12. Article on the split rate tax

http://www.sustainableusa.org/bestpractices/best_detail.cfm?BestID=40

[EFerrari]

13. thank you! n/t

[Xithras]

9. Ca property taxes are managed at the state level.

They're still collected locally, but Prop 13 brought all of California's property taxes under one statewide set of laws. Changing that requires amending the California constituion.

Even if a city wanted to go that route, they wouldn't be permitted to.

[UdoKier]

10. Unfortunately, Prop 13 severely limits property taxes in California.

People who have owned property for decades still pay only 1% of the value of their homes at the time they bought them. In other words, new homebuyers pay many times higher property tax than people who have been here for many years.

http://en.wikipedia.org/wiki/California_Proposition_13_(1978)


It has the effect of making people not want to sell or move, because they would then have to pay the new, higher rate, and this of course also contributes to the skyrocketing housing prices. I personally favor repealing this ridiculous law, which amounts to a discriminatory tax on people who have to move or who are new arrivals to the state.

[UdoKier]

11. Delete

nt