One more sign of real estate sanity in Michigan

[A2Mike]

A nice big house, but $23.889M? Detroit's promoters really need to play up the housing bargains abounding here. I know a view of the Ambassador Bridge isn't quite up to that of the Golden Gate, but here that SF price could probably get you Meadow Brook Hall, if it were for sale. http://blog.sfgate.com/ontheblock/20.../#photo-422115 Check the link and think what this Pacific Heights Victorian might command in SE Michigan.

[Bham1982]

Most people would bet you the return on that SF home is going to be higher over the long term than an equivalent luxury home in these parts. Like an expensive stock, the buy-in price is a function of the amazing long-term appreciation.

So who's crazier? The Bay Area resident paying a million bucks for a dumpy house appreciating at a 20% annual clip, or the Metro Detroiter paying 200k for a nice house showing almost no long-term appreciation? I guess the answer is whether you view your home primarily as an investment, or as the place you plan on living forever.

[401don]

You gotta think bigger. I'm sure this little Vancouver beauty has appreciated since Sept. 2013.

http://www.google.ca/url?sa=t&rct=j&...MOO6xSaH1BOm7Q

[313WX]

Until the State of Michigan has an abudance of good-paying jobs available and is able to properly maintain its infrastructure [[instead of having it crumble like all of the bridges that have been shut down lately) like San Francisco, housing will continue to remain cheap here, as not many people want to live here. Sure, we have plenty of beautiful outdoor scenery and fresh water, but so do several other states that are much healthier.

[ghettopalmetto]

Most people would bet you the return on that SF home is going to be higher over the long term than an equivalent luxury home in these parts. Like an expensive stock, the buy-in price is a function of the amazing long-term appreciation.

So who's crazier? The Bay Area resident paying a million bucks for a dumpy house appreciating at a 20% annual clip, or the Metro Detroiter paying 200k for a nice house showing almost no long-term appreciation? I guess the answer is whether you view your home primarily as an investment, or as the place you plan on living forever.

In order for real estate to appreciate, someone needs to be willing [[and able) to buy it. Now, this particular house may be exceptional, but cities like San Francisco and DC are definitely overheated. Incomes are not keeping up with real estate prices, indicating that those prices and gains are unsustainable over the long term.

Wasn't the idea of Home-As-An-ATM-Machine one of the primary causes of the 2008 economic collapse? I'd rather buy an affordable home and have money left over to enjoy my life, rather than mortgage myself up to my ears, throwing every nickel of earnings into a house, *hoping* that it appreciates in value when I sell it one day. But that's just me.

[iheartthed]

In order for real estate to appreciate, someone needs to be willing [[and able) to buy it. Now, this particular house may be exceptional, but cities like San Francisco and DC are definitely overheated. Incomes are not keeping up with real estate prices, indicating that those prices and gains are unsustainable over the long term.

Wasn't the idea of Home-As-An-ATM-Machine one of the primary causes of the 2008 economic collapse? I'd rather buy an affordable home and have money left over to enjoy my life, rather than mortgage myself up to my ears, throwing every nickel of earnings into a house, *hoping* that it appreciates in value when I sell it one day. But that's just me.

Places like SF and DC were not representative examples of "home-as-an-atm-machine" practices. These cities, SF moreso than almost anywhere else, do not have high home ownership rates. The places where people do use their houses as banks tend to be in the lower cost cities [[like the Detroit area), where the entry bar to home ownership is lower and more people participate. But the cities with high home ownership rates don't hold their value well because excess supply is the mechanism to keeping real estate cheap enough for low bar entry.

Even if there is a bubble in SF real estate it probably won't be a dramatic collapse because the limited supply will hedge against that.

[swingline]

Real estate markets in places like the Bay Area and Manhattan do not resemble the rest of the country because the economies of those places are unique to those places.

The increased wealth of the Bay Area has arguably been earned through legitimate economic trade generated by the vast, unprecedented technology advances created there during the digital age. Billions of tech profits have flowed in the Bay Area like nowhere else on the planet.

The explosion of wealth in Manhattan has a different source and comes mostly from zero sum wealth transfers from the rest of the country and the world. The finance industry has fueled Manhattan real estate for many years now. But finance has mostly devolved into rent seeking on a massively profitable level creating "too big to fail" institutions and seven figure compensation for professionals who simply gamble with other people's money. Add in billions from foreign oligarchs and you get $2000/sq. ft. prices for starter apartments.

These markets seem crazy to us, but they're not given the wealth that resides there.

[Bham1982]

Real estate markets in places like the Bay Area and Manhattan do not resemble the rest of the country because the economies of those places are unique to those places.

The increased wealth of the Bay Area has arguably been earned through legitimate economic trade generated by the vast, unprecedented technology advances created there during the digital age. Billions of tech profits have flowed in the Bay Area like nowhere else on the planet.

The explosion of wealth in Manhattan has a different source and comes mostly from zero sum wealth transfers from the rest of the country and the world. The finance industry has fueled Manhattan real estate for many years now. But finance has mostly devolved into rent seeking on a massively profitable level creating "too big to fail" institutions and seven figure compensation for professionals who simply gamble with other people's money. Add in billions from foreign oligarchs and you get $2000/sq. ft. prices for starter apartments.

These markets seem crazy to us, but they're not given the wealth that resides there.

Wall Street has almost nothing to do with the current real estate boom in NYC. Wall Street has been in fairly deep down-cycle since 2009. It's now recovering, but it has little to do with the city's economic or real estate growth.

There are, in fact, fewer jobs on Wall Street now than six years ago, yet the city has had faster jobs growth during that period than at any time in modern history. Granted, Wall Street is very important to NYC's economy, and as it recovers it will probably eventually fuel job growth, but not in the past few years.

I do agree that tech plays a major role in SF prices, but SF was expensive long before the current tech boom, and 90% of tech is 40 miles south of SF, in Silicon Valley. Somewhere like Pacific Heights likely has very little tech money [[it's an impossible commute from Pac Heights to Silicon Valley).

Probably the biggest reasons these cities are so expensive is because 1. They are huge bastions of foreign investment [[especially NYC), 2. They are extremely NIMBY [[especially SF) and 3. They have red-hot economies [[even looking outside the core financial and tech industries).

[Bham1982]

Even if there is a bubble in SF real estate it probably won't be a dramatic collapse because the limited supply will hedge against that.

And in NYC most for-sale real estate consists of coops, which almost never suffer deep declines during down-cycles, because of the nature of coops [[which generally require 50% cash buys and extremely strict rules on minimum assets). Of course coops don't appreciate as quickly as condos during boom times.

[EL Jimbo]

One thing that could put a cap on SF's real estate market is water. If drought persists, regardless of economic strength there simply won't be enough water to support the existing population let alone continued growth that would support increased real estate values.

[mwilbert]

While the price of unusual properties like the one posted at the top of the thread is not necessarily tied to the general price of real estate, real estate prices in the Bay area are very high relative to the incomes of Bay area residents. They are the highest relative to income in the country. It is possible that there could be high levels of appreciation going forward, but that isn't the way to bet.

[iheartthed]

While the price of unusual properties like the one posted at the top of the thread is not necessarily tied to the general price of real estate, real estate prices in the Bay area are very high relative to the incomes of Bay area residents. They are the highest relative to income in the country. It is possible that there could be high levels of appreciation going forward, but that isn't the way to bet.

I don't think that's true. The Bay Area has a much higher median income than New York, but it is not that much more expensive [[if at all on a regional level).

Further, the Bay Area real estate is not expensive from a historical perspective.

The San Francisco housing market, according to Trulia chief economist Jed Kolko, isn't really that overvalued when you consider current median incomes. When Kolko looked at the historical relationship between median income and medium home prices in the San Francisco area—including Marin and San Mateo—he found that houses here are only 6 percent overvalued right now. Compare that with the height of the housing bubble, just before the 2007-08 crash, when housing was a whopping 53 percent overvalued.

http://sf.curbed.com/archives/2014/08/07/gasp_sfs_housing_market_is_not_that_overvalued_aft er_all.php

As I said above, the Bay Area is expensive because of limited supply which is pretty much normal for San Francisco.

[mwilbert]

I don't think that's true. The Bay Area has a much higher median income than New York, but it is not that much more expensive [[if at all on a regional level).

Further, the Bay Area real estate is not expensive from a historical perspective.



As I said above, the Bay Area is expensive because of limited supply which is pretty much normal for San Francisco. [/FONT][/COLOR]

I believe you are mistaken about the similarity between NYC and SF prices. http://www.vox.com/2015/3/10/8181993...prices-incomes

[Bham1982]

While the price of unusual properties like the one posted at the top of the thread is not necessarily tied to the general price of real estate, real estate prices in the Bay area are very high relative to the incomes of Bay area residents. They are the highest relative to income in the country. It is possible that there could be high levels of appreciation going forward, but that isn't the way to bet.

There may also be cultural factors at play, or simply the money buying this real estate isn't reflected in local income figures.

For example, Toronto and Vancouver has real estate prices which are as high or higher than anywhere in the U.S. outside of NYC and SF, yet median incomes are more like that of Michigan [[or perhaps lower in the case of Vancouver).

So is Toronto a bubble market? Maybe. But maybe also there are cultural factors [[Asians are stereotypical huge savers and often have higher debt-to-income ratios yet lower default rates) or maybe foreign money is using Canada as a secure place to park money [[Canada has much more liberal foreign investment rules than the U.S.).

[Bham1982]

I believe you are mistaken about the similarity between NYC and SF prices. http://www.vox.com/2015/3/10/8181993...prices-incomes

Bay Area has higher median home prices than the NYC area. The core markets in NYC are generally much more expensive in than in Bay Area [[so Manhattan, Brooklyn, and upscale close-in suburbs) but overall, yeah, Bay Area has the highest medians in the U.S. In contrast with the NYC area [[where you can find reasonably priced, decent suburbs in NJ and the like), there are basically no non-ghetto cheap areas in the Bay Area.

[mwilbert]

There may also be cultural factors at play, or simply the money buying this real estate isn't reflected in local income figures.

For example, Toronto and Vancouver has real estate prices which are as high or higher than anywhere in the U.S. outside of NYC and SF, yet median incomes are more like that of Michigan [[or perhaps lower in the case of Vancouver).

So is Toronto a bubble market? Maybe. But maybe also there are cultural factors [[Asians are stereotypical huge savers and often have higher debt-to-income ratios yet lower default rates) or maybe foreign money is using Canada as a secure place to park money [[Canada has much more liberal foreign investment rules than the U.S.).

Toronto seems bubbly, but I'm not really trying to claim that SF is a bubble. I do think that it will require a lot of things to keep going right in the Bay area for the median house in SF to have higher-than-average appreciation from this point on.

[Johnnny5]

The extreme top end of the real estate market isn't as much dependent on supply and demand as it is the finances of the prospective buyers. There may be only one interested party for a property, but if that buyer has the means and desire they'll pay the asking price regardless of the actual market value. That's why the asking prices and eventual selling prices for many of these homes can be so drastically different. The seller will throw out a crazy asking price with hopes that they'll stumble upon a buyer for which the price doesn't matter.

[Richard]

You gotta think bigger. I'm sure this little Vancouver beauty has appreciated since Sept. 2013.

http://www.google.ca/url?sa=t&rct=j&...MOO6xSaH1BOm7Q

Give me gilded age and only 15 mil with another 30 mil in rehab.

http://mobile.philly.com/classifieds...e&id=266532251

[Hermod]

http://www.realtor.com/realestateand...76-51140?row=2

[iheartthed]

I believe you are mistaken about the similarity between NYC and SF prices. http://www.vox.com/2015/3/10/8181993...prices-incomes

I'll concede that though I suspect some nuance there in how they define the SF market versus others. But I think the more important point is that from a historical perspective SF is not really that expensive right now, which means that it's not in a bubble.

[Király]

I watch you Michiganders from here in Vancouver, where you need $2.2 million to get you this:

http://www.cbc.ca/news/canada/britis...rice-1.3012604

Home ownership or even condo ownership is only a dream for ordinary income earners like me. Be grateful for what you have in Michigan.

[hybridy]

I watch you Michiganders from here in Vancouver, where you need $2.2 million to get you this:

http://www.cbc.ca/news/canada/britis...rice-1.3012604

Home ownership or even condo ownership is only a dream for ordinary income earners like me. Be grateful for what you have in Michigan.

the canadian housing bubble just hasn't popped yet...
http://www.financialsense.com/contri...-market-charts

http://blog-imfdirect.imf.org/2015/0...ts-resilience/

[DetBill]

I watch you Michiganders from here in Vancouver, where you need $2.2 million to get you this:

http://www.cbc.ca/news/canada/britis...rice-1.3012604

Home ownership or even condo ownership is only a dream for ordinary income earners like me. Be grateful for what you have in Michigan.

You are so correct, my Toronto relatives cant believe what we get for our money and they love the amenities we have for the price.. They have average paying jobs and are really struggling and cant afford many social evenings. Their wartime bungalow , 1,000 sq. feet, in a dowdy suburb cost 475,000. They always say how jealous of us in Michigan they are.

[sumas]

I watch you Michiganders from here in Vancouver, where you need $2.2 million to get you this:

http://www.cbc.ca/news/canada/britis...rice-1.3012604

Home ownership or even condo ownership is only a dream for ordinary income earners like me. Be grateful for what you have in Michigan.

I am so sorry, you make me sad. Have hope and faith. detroit is no picnic. I love my city, my neighbors, the best. My home outstanding. City policy sucks. See John's Carpet House Blues thread for a clue what our city wants to get rid of.

Still active in community work, pretty sure they want to move us out too. New development. Crappy homes, big prices. You wouldn't want to hear the screeching from my hood. All true, all sad.

Our furnace, not that old, 15 yrs, had a glitch. The service repair man wandered through our house saying wow. Our city is trying to get rid of these old neighborhoods, no respect for history.

[Gpwrangler]

I am so sorry, you make me sad. Have hope and faith. detroit is no picnic. I love my city, my neighbors, the best. My home outstanding. City policy sucks. See John's Carpet House Blues thread for a clue what our city wants to get rid of.

Still active in community work, pretty sure they want to move us out too. New development. Crappy homes, big prices. You wouldn't want to hear the screeching from my hood. All true, all sad.

Our furnace, not that old, 15 yrs, had a glitch. The service repair man wandered through our house saying wow. Our city is trying to get rid of these old neighborhoods, no respect for history.

Your neighborhood is definitely amazing. They don't build them like that anymore. Keep after the City to fix things.