Housing Rant

april 13, 2004

OK, sometimes I use UltraMookie.Com to rant. Then there are other times, like now, in which I will use UltraMookie.Com to get up on my soapbox, take a deep breath and rant with a megaphone. The house selling and buying situation in the San Francisco Bay Area is out of control and I need to rant about it. I need to get all these thoughts out of my head before I burst. So without further ado: I Step Onto My Soapbox... The current state of the housing market in the San Francisco Bay Area is just horrendous. It is also frustrating and borderline silly. There are certain areas, mostly areas with high concentrations of Asian people (be it from China, Vietnam, or India), in which this situation is more prominent than others. And before anyone starts yelling and protesting that I am racist, let me remind all of you that I am Asian too. This strange phenomenon is not unlike how gravity in the universe works: The more mass something has, the more gravity it has. Therefore, since there is more gravity, it will only attract more stuff. Attracting more stuff just makes the mass even larger, therefore making the gravity more attractive. This phenomenon seems to be the same with the mass of Asians in a particular area. The more Asians, the more attractive the area looks to other Asians. And you can follow the logic from there. In all fairness though, it is not just the Asians doing the following stuff, but they tend to be the majority. What I do not understand is how these people can be throwing money into townhouses without a thought. OK, maybe they have money to throw around, but still to throw so much money carelessly into a townhouse that will not appreciate as much as a house? Now, that is just plain silly. Who's in control of the brain here folks? Now, I am not just talking about people throwing the asking price into the house, that is OK. I am talking about people who are overbidding the asking price like there is no end to the loan sheet. These people are taking zero down loans for a townhouse or dumping cash into the townhouse to get it. These people are seriously outbidding each other and going over the appraisal value of the house. What does this mean? These people are buying the house for more than it is worth, or more than it is currently valued on the market. By doing this, they put themselves into a serious disadvantage. Mostly because in the future when they realize that the townhouse that they just paid fifty grand too much for is too small for them and the new twins, they will not be able to sell the townhouse and move out. Here is why, if one pays fifty grand too much now and the house does not appreciate over time to more than what you paid for originally, then you either sit on the house or you cut your losses. I'd hate to be the one cutting fifty grand in losses. Townhouses sit between a condo ("apartment for sale") and a single family home ("house with a plot of actual land"). Townhouses are good for newlywed couples or single people who can't afford a single family home and really don't want to live in an apartment type setting. What does that really mean? It means that although townhouses are nice, they are really a niche market. Those with kids do not like townhouses because townhouses have no backyards, no front-yards, and no place for the kids to play. Those that are just coming onto the market really can't afford the townhouse so they either rent an apartment or buy a condo. Because of this, townhouses do not appreciate as fast as single family houses. When a townhouse does appreciate to a value where it is in a sale-able price range, the owners have to take into account the amount of money that they sank into the homeowners association fees -- some of the HOA fees run upwards of $200 a month! Overbidding on a townhouse is a lose-lose situation. You are overpaying for a townhouse when that same amount of money can be used to buy a nicer single family house in a different area -- not to mention, this is a single family house with an actual plot of land with a front-yard and backyard. Also, in the future, the resale value of the townhouse will not grow as fast as that of a single family house. By overpaying, that just puts you into the negative with appreciation. Moving from the townhouse in the future will be a tough situation: Either lose money or sit on the townhouse until it appreciates. The other thing that these people do that I find annoying and unintelligent is taking the houses without contingencies. Yes, most of the agents nowadays provide all reports (JCP, termite, property inspection, etc) beforehand. But, that is just not enough. Understand that when buying a house, one has to put down a check in order to show that one is serious about trying for the house. The amount of the check can range between $10,000 (maybe a little lower) to 3% of the asking price. That is a large chunk of change to be putting up front. This check goes to the title company and is held by them. If one has contingencies like the owner will fix certain stuff, that is fine, those contingencies can be dropped. But, there are also contingencies on property appraisal value and on loan qualification. It is a risky move by dropping the contingencies on these two items. If the property does not appraise, and I am guessing these people are dense enough not to care about property appraisal value, then they are stuck with an overpriced house. If the contingency were in place, then they have an avenue of backing out of the purchase. If the loan does not come through and these people cannot get funding from the bank, they lose that check that they put with the title company. Plain and simple, they just lost $10,000 or 3% of the asking price. Now that is a large gamble. One other thing I hate are some of the slimy real estate agents out there. Yes, like in every profession there are reputable and professional people (like our agent) and then there are the slimy ones (like an unnamed agent with the initials F.L. who sells mostly in the North Valley). The slimy agents try to puff their chest and act as if they want to control the situation. Too bad to them because some buyers just don't play those games since this is such a large investment. If they do not take the offer, then there are more houses on the market. The unnamed agent above is that slimy and because of his attitude and unprofessionalism, we now refuse to look at any houses that is on the market under his name. He plays dirty, acts slimy, and that kind of bad karma will one day comeback and smack his inflated head. This is a business! People, lets act a bit business-like and professional. Please? So, what is a buyer supposed to do in these times? Be patient. So far we, Eileen (my fiancee) and I, have been patient with the market. It is a bit frustrating from time-to-time, but we are still in it to find a nice house to live in. After fighting for townhouses here in Milpitas, we have decided to widen our search into the rather quiet and quaint Blossom Valley area. Yes, it is a ways from our parents and work, but it might just be worth in if we find a good house there. And it sure beats trying to fight with the morons that are fighting for townhouses here in Milpitas! To those people I quote the imminent philosopher and political genius, Foamy The Squirrel: "Fuck them! Let them drop dead from some weird disease. And die." Thank you for listening. Getting Off Soapbox.