Why are real estate prices still so high?

[Ultrarunner]

As mentioned... some Bay Area neighborhoods have experienced huge declines. I can take you to home that sold for 500k as late as early 2007 that were later resold by the banks that foreclosed for as low as 80 to 140k.

I had sold a small home for $255k that was later resold for $350k 11 months later. The Bank foreclosed and the new buyer paid 70k.

A lot of what drives prices in the areas I know is the quality of the public schools... areas with top schools seem to always do better.

[LBfive]

I am a little late to this thread but...I'm originally from NJ, went to college in the midwest, lived in a small, coastal town in SoCal for 15 years, then moved to southeast Virginia (on the coast bordering NC) a few years ago...I find that climate is more important than i ever thought it would be. In much of coastal CA, you take for granted things like being able to eat a meal outside without being invaded by mosquitos...or summers so hot and humid that instead of going to beach a block away, you stay inside in the air conditioning between 10 - 3 in the summer (I didn't ever use air conditioning in coastal SoCal - never needed it). Summers are brutal, and January - March here is spent waiting for the weather to get better. I feel like we give up half of our year so we can live for the other half. People here are terrific, but I have found terrific people wherever I've lived. We are contemplating a move to Bay Area due my husband's job offer there and I'm seriously thinking about moving our three kids there even though we don't know a soul...I think that if you've never lived in a climate that determines your day to day activities, you may not appreciate how good you have it! You don't need a 5,000 sf house because you don't need to spend 24 hours a day inside half of the year...

[bayarea-girl]

Home prices are not at all as high as they were a few years ago. They are still declining a great deal and think they will continue to decline for years to come. It is funny because people will still start out with a high price then it gets lowered month after month. Think some people don't want to believe in reality.

[UrbanQuest]

The prices where so high in the Bay Area, that subsequently the prices have a really long way to fall to seem even remotely affordable by most.

Regardless of Silicon Valley and San Francisco having a high income work force, it is mysterious as to how the home prices are still at the level they are. No new jobs are being created in these places so where are all these home buyers coming from?

[sliverbox]

Summers are brutal, and January - March here is spent waiting for the weather to get better. I feel like we give up half of our year so we can live for the other half. People here are terrific, but I have found terrific people wherever I've lived. We are contemplating a move to Bay Area due my husband's job offer there and I'm seriously thinking about moving our three kids there even though we don't know a soul...I think that if you've never lived in a climate that determines your day to day activities, you may not appreciate how good you have it! You don't need a 5,000 sf house because you don't need to spend 24 hours a day inside half of the year...

Weather is sort of overrated. Truth be known I grew up in the Southeast. Yes- its hot and humid in the summer. Its also not great in the winter. But when I was living there we never thought anything about the weather. We spent most of the time outside. Just drink lots of iced tea and plant your yard full of trees. I have lived in the Bay Area for 11 years. Sure- the weather is great. But the cost of living is ridiculous also. We're actually going to move away at some point. I can deal with 90 degree heat. I can't deal with $500,000 starter homes and a state that is financially broke.

Home prices are not at all as high as they were a few years ago. They are still declining a great deal and think they will continue to decline for years to come. It is funny because people will still start out with a high price then it gets lowered month after month. Think some people don't want to believe in reality.

They're not as high. But they're still high. Basically it seems that at least in my neighborhood- which is a halfway decent East Bay neighborhood, not rich by any means, but definitely somewhat desirable, homes will still sell in and around the $500,000 mark. Anything above that and the house just sits. There's one not far from us that has seriously been on the market for 5 months with a $550,000 price tag. Its a nice enough house but in the meantime there was one house that sold for $400,000. On the other hand the $400,000 house was in need of at least $100,000 worth or work.

Realistically, home prices need to drop another 20%-30% across the board in order to come close to meeting with realistic median incomes. Buying a $500,000 house means you'd probably need to be pulling in $150,000 a year. That still means a huge chunk of your income is going for a house. We could probably afford to buy one ourselves. But in the meantime rent is still so much cheaper to me it makes zero financial sense. I don't really see the market moving anytime soon. Perhaps prices will ultimately come down due to inflation- meaning they stay flat for years.

[Joe_Ryder]

One thing that's always puzzled me is why property on the East coast sells cheap compared to CA but has insanely high rents (as compared to the cost of property) while West coast properties sell for considerably higher yet rents are comparatively low.

[Ultrarunner]

Originally Posted by Joe_Ryder

One thing that's always puzzled me is why property on the East coast sells cheap compared to CA but has insanely high rents (as compared to the cost of property) while West coast properties sell for considerably higher yet rents are comparatively low.

I think part of it may be due to the tax structure... people I know in New York and New Jersey say property tax is a big factor.

I have tenants that have been with me more than 20 years and I adjust the rent infrequently...

Rents are actually down in some of my areas because the supply is way up from those trying to rent as first time landlords and investors snapping up foreclosed properties just looking for someone to occupy till the market appreciates.

Generally, you can always rent in a much better neighborhood than buy... not uncommon for people with the means to buy a modest home choosing to rent in a great school district because they would be hard pressed to be able to buy in the district.

[sliverbox]

One thing that's always puzzled me is why property on the East coast sells cheap compared to CA but has insanely high rents (as compared to the cost of property) while West coast properties sell for considerably higher yet rents are comparatively low.

I experienced this firsthand. I lived on the east coast about 10-11 years ago. The rent for me on a crumbly 1 bedroom apartment in a crappy roach-filled building was $800 a month- not including utilities. That and just finding a place to rent was impossible. I moved to the Bay Area and at first it was pricey because the dot-com was happening. As soon as that crashed rent came down a lot. We've been renting the same 4 bedroom house for $1,200 a month. We share with another person so our rent is basically zilch. Its in a nice neighborhood and the cost to buy would be more like $2,500-$3,000 a month on the same house. As a result we save a good bit of our income.