Sales of homes in the $1-million-plus category shot through the roof in Marin in 2005, becoming almost commonplace.In 1987, $1 million could buy an eight-bedroom house. Today, $1 million is seen as an entry-level price in many parts of the county.
It really makes me sick what the cheapening of the dollar and ultra-relaxed lending standards have done. So when every house costs a million dollars, no one is wealthy (unless they move to some place cheap…hence “the exodus” of a few posts back).
It’s almost as if there are two currencies in this country — one for houses and one for everything else. House prices have skyrocketed to absurd levels, but the cost of everything else has hardly increased (with a few exceptions of course) and income is barely up; a million dollars is not a lot of money in the housing market but it’s still a lot of money in the market for everything else; a dollar is almost worthless in the housing market, but in the market for everything else a dollar is still a dollar.
Step back for a minute, forget that you are a beneficiary of this state of affairs, open your mind, and look at this situation will you? There is something wrong with this picture. No?
The IJ even hints that many of the sales in Marin were from people moving from less desirable areas of Marin (like Greenbrae) to more desirable areas (like Ross), not folks coming in from outside of the county. So you know these sorts of folks in general haven’t seen the required 250% increase in their income.
As has been pointed out many months ago by many others, the majority of people who can pay these exorbitant prices seem to be people who already have a house (I am excluding “trustafarians”, “trust babies”, etc.); the housing market seems to have become an “incestuous market”. So people who don’t already own a house cannot buy anymore?! So every person who comes of age as of today will be unable to buy a “starter house” because you have to have a house to buy a house? So, has house ownership now reached or is on the threshold of reaching its maximum number of market participants? What kind of market excludes new entrants? There is no way a market can sustain such a disjointed state of affairs. Robert Shiller (and probably many other economists) discusses this exact phenomena in his book Irrational Exuberance (he calls these people “asset fanatics” if I remember correctly) and he shows that in all of recorded financial history there has never once been an instance of this state of affairs that didn’t end very badly.
But then again, maybe it is different this time.
If the asset that these “asset fanatics” were bidding up was something innocuous like tulips, stocks, gold coins, beanie babies, whatever, then I wouldn’t give a rat’s ass about it. But houses are needed and a bit more personal than tulips, stocks, etc. and houses make up a big part of our community. So I really won’t feel terribly sorry for people who knowingly bought into this insanity and ultimately get burned for it. Personally, I think a steep, sharp decline would be easier on everyone but it looks like we are in for a long, slow, excruciating decline. I’m sorry to say that people get what they deserve. But maybe the bulls are right and this will continue on indefinitely and then in three years the entry level house will be at two million dollars, then three…
“These aren’t the droids you’re looking for… move along…”