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No Bubble Here: $1.5 Million 750 SqFt. Flat; Rent-A-Bed $1,000/Month Or 20 Beds In 7-Bedroom House $21,000/Month
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The incredible luxury of having a bedroom to yourself is out of reach for all but the very well-paid. Having an apartment to yourself requires serious money.
Those who say there are only two sure things in life, death and taxes, should add a third sure thing: realtors and stock market mavens will deny there's a bubble even when it's obvious to everyone the bubble has already reached insane levels of overvaluation.
And so here we are yet again, with housing and stocks both hitting price levels that make no sense in terms of traditional measures of value. And since these pesky metrics make it impossible to claim there's no bubble, those benefiting from the bubble have to claim that this time it's different: not only is the current bubble rational, there's no reason it can't keep expanding indefinitely.
In a zero-yield world, it's perfectly reasonable for corporations to borrow trillions of dollars to pump up their own stocks with buy-backs. Profits may be sagging but thanks to the miracles of Cargo-Cult mumbo-jumbo such as margin expansion, profits don't really matter that much. What counts is the central banks have our back: to guarantee a profit, just buy stocks now before the central banks push valuations even higher.
Housing may not be in bubble territory everywhere, but it's reaching bubblicious heights wherever global hot money is pouring into the domestic economy: for example, the San Francisco Bay Area. Global hot money has two increasingly desperate goals:
1. find a positive, low-risk yield
2. shift the staggering gains reaped from corruption and central-bank financialization bubbles into hard assets such as Impressionist paintings, real estate, etc.
On a global scale, trillions of dollars are sloshing around, frantically seeking a low-risk yield or hard asset. By some estimates, $2 trillion has already fled China as corrupt officials and cronies are rushing their ill-gotten gains out of China before the hammer of social unrest comes down on their fortunes.
Much of this hot money is landing in the U.S. and Canada, as the U.S. dollar's strength generates global demand for just about any asset priced in dollars.
The San Francisco Bay Area is being inundated with a second tsunami of hot money--cash seeking to invest in the next Facebook, Uber, AirBNB, etc. The current tech boom is another this time it's different story: this time (we're assured) is different from the 1999-2000 dot-com tech bubble because now companies are profitable and the global market is expanding for all the mobile apps and systems being designed/coded in Silicon Valley and San Francisco.
(Never mind the same line drove the blow-off top in 2000. This time it's different.)
And since the billions of dollars keep flooding in, it makes perfect sense to put in a bid of $1.5 million for a 750-square foot fixer-upper flat in Haight-Ashbury when the asking price is $775,000. By all means, don't fool around nickel-and-diming the deal by bidding $785,000 or $800,000--just cut to the chase by nearly doubling the asking price.
If you've managed to escape China with $5 million in bribes, what's $1.5 million? If you work for a tech start-up that just got bought out by a cash-rich tech giant, and your options are now worth $10 million, why wait around while that flat goes from $1.5 million to $2 million? Better to buy it now before it becomes even more expensive in a few months.
This is of course the bubble mentality.
Meanwhile, renters are being offered one of three beds in a small bedroom for $1,000 a month across the Bay in Berkeley. You have to share the bathrooms and kitchen with 19 other people, but hey, you're only a 25-minute BART ride away from all the action in downtown San Francisco.
Here is a rental listing for a 7-bedroom nothing-special house with 20 beds for $20,995 per month--such a deal! Instead of paying $3,000 and up for a studio or $4,000 and up for a 1-bedroom flat in S.F., you can share a small bedroom with two friends (and crowd into the kitchen with 19 other friends) for only $1,000 a month. (Please note the CraigsList listing may be removed at any time, so this link may no longer work.)
$20995 / 7br - 2699ft2 - 20 Beds - House Near UC Berkeley
The advert claims that the 2,700 square foot house is "Huge and Beautiful," and maybe a suburbia-sized house over-run with 20 people strikes you as huge. Personally, I think a more apt description might be Jean-Paul Sartre's famous line from the play No Exit that "Hell is other people", especially when your bladder is about to burst and a few of your 19 housemates are hogging the bathrooms.
For only $3,675 per month, you can rent a 2-bedroom apartment in Berkeley and share it with 3 friends. With only two people per bedroom, this lowers the monthly bed-rental nut to only $925/person. (Please note the CraigsList listing may be removed at any time, so this link may no longer work.)
So a worker with a $15/hour job (the new minimum wage in San Francisco and some nearby cities) who works 35 hours a week will take home around $1,700 per month after payroll taxes and deductions, leaving around $700 for everything other than rent of their bed--their share of utilities, transportation (just getting to their job via BART will cost over $160/month), food, clothing, and whatever fun can be afforded after all expenses.
In other words, the incredible luxury of having a bedroom to yourself is out of reach for all but the very well-paid. Having an apartment to yourself requires serious money. For those who don't have trust funds or a big-bucks job, the options for affordable housing are slim: one enterprising young man paid $500/month a few years ago for a 7-by-5-foot laundry room, but it wouldn't surprise me if the rent for the 35-square feet space has doubled since then.
But no, housing and tech companies are not in bubbles. That $1.5 million 750-square foot flat will cost $3 million shortly, and the buyer who nearly doubled the $775,000 asking price to $1.5 million will be revealed (along with everyone else who buys into the bubble now) as a stone-cold genius.
Look at the rental income potential. An enterprising owner should be able to cram at least 6 people into the 750-sq.ft. flat at $1,000/bed, and generate $6,000 a month ($72,000 a year) in rental income. With mortgage rates so low thanks to the Federal Reserve's zero-interest rate policy, the new owner might even be able to skim a profit if a 7th desperate soul rents the closet for $500/month or the sofa for $900/month.
Looking ahead, it's clear the next buyer who pays only $3 million for the 750-sq. ft. fixer-upper will also be a genius, because the sky's the limit: in a few years, those who didn't snap this flat up for $6 million will regret it, because $10 million is right around the corner.
Pity the poor corrupt Chinese official who escapes the Second Cultural Revolution with only $3 million, or the techie whose options are only worth $3.5 million. They'll soon be priced out of the Bay Area, and probably New York and West L.A. too.
But there is still a slim chance these poor millionaires can own a piece of the Bay Area: the corrupt official can go in with two other corrupt officials and together they will still be able to buy a one-bedroom flat in San Francisco. The techie can pool his meager $3.5 million with two other bottom-of-the-barrel tech millionaires and still be in the game.
Heck, if the three go with triple-tier bunk beds, the living room will still be open for entertainment and dining. If they stick it out a few years, they'll be able to sell to even greater fools and skim millions in profit. The sky's the limit here, pal, you snooze you lose, get in now or get lost.
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green shoots ?
Reality once again rears its ugly head...
An oldie full of truth...
https://www.youtube.com/watch?feature=player_detailpage&v=1BNgRpRuWGs
If you were really greedy you could find shift workers willing to hot bunk the beds and triple your rental income just like they do in the Navy.
Of course if all your tenants are males you might throw in some Drano to keep the shower drain from clogging up on a weekly basis.
That sort of thing was once common for the lower classes. In Victorian Britain there were flop houses where they crammed in maybe 100 people and rented the beds out in shifts. Desperate working girls who were past their prime transacting their business in the street often had to troll most of the night to find a john so they didn't have to sleep out of doors.
That $1,500/month for a bed is going to look very cheap when a simple lunch costs $2,000 after the FED is done with us.
Bay area housing....from the sublime to the ridiculous.
I lived for a year in a cottage on the hills along Skyloine Drive (Parallel to the 280).
A slice of heaven on earth....I was literally and figuratively permanently drunk. THE . con had just crashed.
And there was the Castro. And then over the bridge and far away into Marin.
1 Bedroom apt, $1,500.
Ended up sharing with three cool lucas arts kids, all 15 years younger than me and had the time of my life.
Went to Burning Man.
With a Belly Dancer.
See? The US is a boiling cauldron of possibility, has been too, for a long time., but the fires going out now and in a couple of months, cooling will begin.
It was like that in every major city in the US until the interwar period. Read about New York City housing in the 1800s. Don't even start with Asia, they're on a different level entirely. And before urbanization? You had the whole family in a one/two/three "room" shack, often with the smaller livestock too. One bed.
J.S. Bach, the J.S. Bach, lived in a 4-floor 800ft2 row apartment in Leipzig with about 19 other people including children, servants/maids, and students/guests.
People have gotten just a wee bit too attached to the notion that every man, woman, and child can have 700 or so square feet of living space just like that. There's nothing inherently wrong with having a lot of square feet to yourself, but it's entirely different to expect and feel as if you are owed same and have some kind of natural right to complain about it when it fails to materialize, and act like it's some kind of unprecedented catastrophe and imminent crisis.
But remember this isn't in any way the result of deliberately undertaken economic policy OR market decisions made by regular people every single day. It's those damned evil speculators.
This is what $1150 gets in you in NYC now:
http://streeteasy.com/building/14-st-marks-place-manhattan/sro
Bubble! I don't see no stink'n bubble. (subtle sarc)
This is what you get in downtown Norfolk VA for less than $1200/m (One bedroom apartment w/bath 950 sq feet)
http://www.apartmenthomeliving.com/apartment-finder/The-Lafayette-Norfolk-VA-23508-1589878?pk=platinum'=8&apage=1#photos
Are prices reduced in a bubble??
I don't think so!!!
No shared bathroom? That's what gym memberships are for! And it's only 2.5 blocks away from AOhelL and Fartbook!
Ummmm, I'll pass thanks,
green shoots ?
Tulips!!
sounds like London
Not sure student housing in expensive district is a reasonable barometer
"Housing may not be in bubble territory everywhere, but it's reaching bubblicious heights wherever global hot money is pouring into the domestic economy"
That and wherever there is a decent paying job. If you want to live where there isn't a single job, you're in luck.
Jeez, if you walked with $3 million in stock options you could move to Colorado,
buy a house for $300K and live on the remainder.
problem that they have 1000 houses and it's costly to pay for them, and they can't sell them because no one (ordinary people) have money to buy it
You would think that those fleeing bonds or negative yield accounts would consider gold. Real estate can become illiquid as it falls in value. Gold may have volatility but liquidity is never an issue.
Housing is illiquid and it's a depreciating asset. RMB bonds in your 401 k account is a much safer bet. German bonds? I'd wait for the bargains.
Basically anything that Goldman shills for is a bear sign on that vehicle.
Anyone who is holding their money in real estate or speculating in it is an idiot.
No, you couldn't. Colorado is ugly and filled with hateful people. The cost of living is astronomical and there are no chicks anywhere in the whole state. All of the best people live in Montana. The cafes there are the best and the free range mushrooms superb.
Free range mushrooms??
You mean like Amanita muscaria?
Don't Bogart that joint, my friend, pass it over to me.
. . . the sun is harsh, the air is dry and there's no oxygen, it snows on mother's day, a kid can hardly play soccer without getting struck by lightning and half the drivers are stoned.
you forgot to mention walking around Boulder and having to listen to aging hippies talk about Gaia and shit...
tarabel, Please refrain from comments like this. It only invites the undesirables to relocate. Thank you.
gotta love those pot smokin hippies with unlimited M&D cashflows
http://m.curbed.com/archives/2013/09/26/a-glimpse-inside-japans-ultra-mi...
Where do I sign up? Imagine they charge by the MM2/CM2.
Think of the crossover industry of coffins/apartments! Live in it, die in it, and be buried in it as well!
People laugh at agenda 21 and all the rest of the conspiratorial theories regarding herding us into pens. But look at these rising costs. Look at how people with jobs are willing to live. A clean used coffin might start looking pretty good to some, especially if they are stackable. apartments.com??
Obama: “I Don’t Know Any Poor People”http://downtrend.com/robertgehl/obama-i-dont-know-any-poor-people
It is relative. If you only know Americans you don't know any poor people. If you know an asian or an african you might know a real poor person.
America's poor are the most obese people in the history of the planet. Obese people cannot be all that poor.
I think HP was started in a garage..now that garage has 10 beds....I hope they start to flood to Denver....we have water and pot....cant beat that for an up and comer....must be pretty sexy bringing your girlfriend over for a nite..
if i went to stanford and majored in CS/math and got a job at google, id be pretty pissed at living in a bunk bed that resemebled my childhood bedroom
hope and change!
Socialists, the new Victorian overlords.
PS-- I see that you are using our company computer to view this. There will, of course, be a slight deduction from your pay packet for wasting our time and another one for using our resources for personal business. Don't let it happen again, you menial.
I wonder how long the S.F. and Berkley are going to allow 20 people per house in suburban neighborhoods. The traffic and noise & trash coming out of that place has to be astronomical.
I wonder which city councilman's relative owns these stack-a-proles?
L.A. is just as bad.
Homeless Population in Los Angeles County Jumps 16 Percent in 2 Years | Arcadia, CA Patch
No excuse for L.A.'s surging homeless population - LA Times
You have never been to a Mexican Neighborhood....same except they run an auto repair business in the front yard.....
And are pimpin' their sisters and daughters out back.
How 'bout a rim job ?
I personally like to see the corn growing in the front yard. A true sign of entrepreneurialism in action.
Youngman we got white boys right down the street doing that here in Concord CA. Engine blocks laying the yard.
Good one !! They also have a bunch of roosters running around shitting up the yard.
They'll charge you a body count regime fee. Only the new illegals are granted tax abatements.
If it is outlawed, it will simply be to force people into pretty much the same circumstance but in a government owned chicken coup. Its not the conditions but the thought that private citizens would profit from it. If we know anything about government, it is that if there is profit to be made, they are to be first in line....we all know they need the money, right?
The new American dream...to have a batroom..with toilet paper
And all the while people can buy silver under $20/oz.
HA!
Aren't young people getting sick of this yet? No jobs, unaffordable housing, student debt. They're fucked, but they're taking it lying down.
I'm not. But then again I already proved myself capable and what not (I have nothing to prove or be ashamed of)....
But I know PLENTY of bullies and thugs. Mostly bullies, backstabbing sycophant losers who- like their boomer idols decided to dick around out of "insecurity" (my boomer baby beating b* uses that excuse A LOT)---it's been reduced to a hyperactive glorified pissing contest of wannabe trust fund b*s. The 90's haven't ended yet.
They think the way out of this dilemma is for the catty to fuck over the next vulnerable candidate, which would be me since the caucasian group I know is from a racist area, then vote for Obama to pretend they're "tolerant" people.
I'm not white and I outperformed/earned them without the nepotism when there was an economy.
The racists from years past, beginning with the white on black racism to the Chinese Exclusion Act was basically the same thing-scapegoat vulnerable people as a red herring to protect nasty politicians. And people fell for it- unfortunately my own age group of self loathing retards are falling into that trap. I won't hold it against them though, their alcohol damaged livers will.
But that's what it is. It's denial and a cumbersome neverending pointless going nowhere competition and epic denial that one should be allowed into the kitchen of the rental to at least cook her own food in exchange for hard earned rent IF we should be so lucky to have a job.
The boomer real estate flippers don't think so.
Just think of all the wonderful diseases 20 people living in close proximity while living different lifestyles can pass around. The birth rate is going to drop, that's for sure.
Roomate9: did we have sex last night?
Roomate3: oh, was that you?
Roomate9: I didn't know you were gay.
Roomate3: I wasn't.
Don't get caught subleasing your squatter spot. $5,000 fine with a penalty up to ten years in jail. See, you can upscale your housing dwellings to a mansion.
Why bother?
Ironically, water - which is almost impossible to destroy - is being declared as a global shortage. As the rights are sold now, we can see this is a prelude to rationing later.
Of course there has been zero measurable water loss on the planet ... ever.
The ENTIRE issue is that this very-stuff-of-life is now subject to broad-swath 'ownership'.
Playing God, indeed.
Taking the highest priced markets and assuming or claiming housing is out of reach is chicken little bull shit.
There tens of thousands of cities in this country that are ridiculously cheap to live in with even a poor person's income.
It took me 8 yrs to sell my parents home, a solid, ranch in a good neighborhood. Having looked at past sales I originally priced it at $120,000, 1020 Sf, 3 br. full spacious basement built on sold bedrock.
Having tired of paying the taxes and other expenses of upkeep for a vacant house, I had to finally let it go for $45,000 net of all expenses.
I figured the mortgage payments for the new buyer at $200.00 a month for 30 yrs.
There are at least 2 dozen homes on surrounding streets for even less.
Stop trying to cry havoc by using only the most expensive homes to buy. They are only outliers.
8 years to sell a house? Idjit!
I live well below my means and have no debt - I wonder as I occassionally drive 14-lane wide 405 Freeway stacked bumper-to-bumper... At what point do those commuters throw in the towel - oh wait they can't, they owe too much.
If you read good books on retirement or living below your means, one theme is moving to areas with weak economy. You are not going to work, so who cares? Personally, I think more people will be forced to move off-shore... also believe assisted living will eventually be off-shored en masse.
Yes, detroit is pretty cheap. I still don't want to live there.
Snob. I'm not talking about where you want to live. I want to live on St. Barth's, on St. John's beach but I don't consider telling anyone the price of 100 yds of beachfront is $2mm dollars, b 4 the house is built.
I'm not in Detroit. This is a great city where I live with reasonably priced housing from low to upper upper classes, unemployment practically non existent.
It is far more representative of housing prices generally than a penny sized piece of scrub in San Francisco or Beverly Hills that costs a $1,000,000.
When the figurative poop hits the blades, these bottom shelf rich people are gonna be pissed. And come to the realization that they get screwed just like their baristas.
Quality of life is defined by what you value...and that is largely determined by what we are TOLD to value....
When claustrophobia becomes all the rage, we will know that we have arrived when our residence is the size of a coffin.
Oldwood +1. However, I sleep in my bedroom for maybe 8 horas a day - I do not need a 700 SF master suite with a w/in closet the size of most garages. I need a galley kitchen, not a massive commercial kitchen with grill island and counter seating in addition to a formal diving roo. What I value is freedom and that means living rathe rsimply, debt-free, well below my means. My mom lived through the Great Depression, so my view of the world is skewed.
If it does not have a transgender bathroom..I am not moving..
It's ok to piss on the floor standing up.
next we rent by the cubic foot.....and charge for the air that is consumed....remarkable boost to GDP...and WINNING!
Gold at $50,000 would cure much of this. It would give savers a place to park money that would not negatively impact the rest of us (ie gobbling up scarce housing.)
Crazy? nope...happened between 1971 and 1980 when gold went up 24X from $35/Oz to $850/Oz.
Yes it was suppressed at $35/Oz...but it is suppressed now too.
I can easily imagine the govt saying that 'you've got to much room' and therefore you're required to take 5 illegals into your home.
Costs 1 grand/month to inhabit our local tech hub here in the upper midwest. For a one bedroom, not walkable from city center. Not even a major city.
I just dont believe housing could be this expensive. Lowered RE prices are the part of the economic collapse that I'm most excited about! Bring on the 300 dollar rents, bitch! (at which time, 300/month will be impossible to earn, maybe, lol)
OMG storm rolling through LA CA!
I digress, nephew 28YO XGen valley drone trying to dive into a $800K shack in silicon valley, I believe he's still paying off his truck.
I wish I recorded the conversation we had when he told me he "made an offer", earthquake insurance? Ya and 1.X* property taxes? Prop 13?
XGen What are 1.X* property taxes?
I dunno I live in LA, depends on IQ of local voters
Fixed or variable?
XGen: I dunno yet
Silicon Valley has always been the definition of Boom/Bust. It's also where inflationary resets first become apparent.
Which is it this time?
Here the directors
Of Genetic Control
Have been buying all the property
that has recently been sold
(taking risks O so bold!)
They say, "Now that people will be shorter in height,
we can fit twice as many in the same building site!"
They say it's alright.
Get 'em Out By Friday!
Just shit on the rug if the bathroom is occupied.
Goodness, what do people with kids do? I'm rich indeed, 4 kids on 30 acres and a nice house. Under 200k. Paying $1400 a month to pay it off in 15. How can prices at 3k a month to rent a room be justified?
?
At that point, you've gone full retard. You'd be better off sleeping in your car or better yet, suv. Or I would have a tent (which I do because I like camping). F them. They are not guarenteed the money grubbing prices and I am not guaranteed a home.
Most youngsters these days are used to the trappings of "civilized" life, and don't have the adventure skills to go off into the unknown and make their way doing actual hard physical work. Sure, they might be able to pump their own gas to be on their way, but just wait until they get flat. Hope they break down near a stream. No, it's better to get a shit-eating Comp Sci degree amortized over 30 years so they can compete with the H1-Bs who will work for nothing more than access to a working microwave oven.
Fucking fucked we are
I'm so glad when I was young I didn't mortgage my future with student loan debt. Picked up a good paying job instead doing data entry and worked my way through a two year college for an associates, cash on the barrel. Later on had a job where the company paid for my BS degree. It just boggles my mind how higher education is allowed to prey on the naivete of young people, to saddle them with impossible debt so they can't even affort a $1000 per month bed to sleep in after waiting tables all night. Decisions, decisions. Most of these kids just can't make good ones anymore, not with all the noise constantly shoved in their face. Sell the dream, leave them with the reality.
It's just a matter of time before they turn into berzerking vikings. This country is so fucked.
The $5000 bottles of scotch down the street in Malibu grocer isn't strong enough to convince the local billionaires to bite though.
This could totally justify upcharging half a mil to sit near the congregation of Santarians. (for those of you who don't know? Santaria is basically West Coast hoodoo).
The price of real estate will go up 4-fold if nearby Pagans burn a local virgin (virgins are like unicorns in L.A., just like non-actors are imaginary like unicorns in LA).
Well basically this is the west coast white people's answer to gangs - just make them think you so crazy they get scared and run away.
And you know they're gentrifying South Central now known as "SOLA". Comptons' gonna have hedgerows.
Guns and hedgerows while you ghost ride that whip yo! Forget Oakland,
SPeaking of Compton, Dr. Dre's got something like $400 mil and Koreatown suffered $400 million during the K-town damage during the Rodney King Riots....and they're due reparations. But anyways--- you CAN move to the City of Compton and watch someone cap yo' ass in a $800k cookie cutter stucco hut upclose. Don't forget to bring the popcorn.
If you live next to a church, the price of real estate goes down...but anywho. I think the last churches standing in LA are latino Catholic and a few black presbyterian...and those hoods are still affordable.
The Mormon Church on a hill on SM Blvd between Westwood and Century City wasn't enough to scare them all away. But anywho...
I'm not even interested until the Shamans show up and suck the blood out of live animals and bring on the black magic. House prices don't fly until magical wizards do.