The California Real Estate Market

I originally wrote this post in 2006. We've hit the major correction I mentioned in the article, but I think many of these issues are still relevant, given a market that is defined by high costs and low liquidity.

When we first moved to the Bay Area, we searched for a new home for several years. The real estate market had a single, unwritten rule:

Rule #1: Screw the Buyer

I've seen what must be hundreds of houses and I've talked with dozens of real estate agents. I finally found one broker who was willing to work with us as an agent's buyer for a flat fee, on the premise that my wife and I would do all the legwork. He'd only be involved in writing offer letters and any final contract negotiation. This was perhaps one of the smartest moves we could have made.

Here's how buyers get screwed in this market.

1) Your agent doesn't really represent your best interests. Buyers' agents are paid a percentage of the gross. They have a strong incentive to get the deal done as quickly as possible, not to get you the lowest possible price on a house. We've had agents pressure us to make offers way above asking "to be sure we got in while we could". In one case we backed off from a deal where the agent tried to strong-arm us into increasing a good offer by another $50,000. Angry, we walked away. The house eventually sold for $50,000 less than what we'd originally offered.

2) Agents on both sides can withhold and distort price information. A free market is based on the free exchange of information, or at least I thought so. If real estate is a free market, then as a potential buyer shouldn't I be allowed to know what other bids have been placed on a house, and the amount of those bids? Apparently not. In fact, I was told by one seller's agent that it's unethical to provide this information. Less profitable perhaps, but unethical?

3) The press pumps up buyer's frenzy. Reading the papers here (before 2008), you'd think every house you walk into is going to be a multiple bid death-match, with the biggest wallet winning. Horror stories of twenty offers and final prices 30% above asking abound. Yet on the ground, this doesn't happen all that often, and there are certain segments of the market that are soft.

4) The construction cost here runs $100 to $200 per square foot. This is greater than the retail cost per-square-foot of many other regions. Labor costs may be a bit higher, as well as insurance and permits, but that much more expensive?

4) The state and communities of California use zoning laws and restrictive ordinances to help keep prices high. Land is relatively scarce, but zoning forces houses to be single occupancy. So if a decent-sized lot costs $600K, the builder has an incentive to put up the largest single family home that zoning will allow, and sell it for $1.3 million to maximize his profit. Changing the zoning laws would reduce sprawl and increase available housing, but that would negatively impact real estate values. Can't have that.

Here, the tax rate on a home is based on the last purchase price. The higher the price, the higher the tax revenues. In fact, unless I get very lucky when I finally do buy a home, I'll be paying more in property taxes than I will be paying in state income taxes.

The Sig From Hell

Yesterday I received what I thought was a social email untile I came to the following signature:

This document, and any attachments, may contain confidential and proprietary information of Really Anal Inc (RA). Any unauthorized dissemination or copying is strictly prohibited. If you are not the intended recipient, please destroy or return this document without reading or copying it, and notify us immediately. RA will protect its intellectual property rights to the maximum extent possible under law.

I'm glad I was the intended recipient, 'cause the last time I got a sig like that when I wasn't supposed to, it sure screwed up my paper shredder when I ran my CRT through it.

I'm better prepared now. Flat panel display and big honking industrial shredder. Far better to do that than to risk prison for reading an email.

I'm still wondering how I'm supposed to avoid reading the email when the sig's all the way at the bottom. Perhaps I should just delete all the emails that come from these companies, just to be on the safe side.

The Cubicle of Death

If your manager doesn't understand why cubicles are a bad place to spend your working day, then they should have to spend a couple of weeks in a Cubicle of Death. I found one when I was contracting for a mid-sized company. I thank the fates that I was only there for a few weeks.

The biggest problem is noise. The cube neighbors nattered endlessly about incredibly inane topics. When they're not talking, they liked to eat crunchy, high decibel foods like corn chips and carrots.

Very little of that nattering relates directly to work. It's about the dead bird in the driveway, or the pictures on the latest tasteless Internet site, the email joke of the day, and so on. It's best if they use a lot of obscenities. It shows they really mean what they say, even if what they say has little meaning.

If they need to talk on the telephone, they'll do so loudly. They don't really need to talk on the telephone, but their day is somehow unfulfilled if they don't. There is a direct correlation between the volume of their voice, and the degree to which the phone conversation does not relate to work. If they are talking about their hemorrhoids, they'll be practically shouting.

After noise comes the cramped, artificial conditions. No natural lighting. Windows were reserved for second-tier managers. Windows that open were reserved for the topmost executives. The furniture would be utilitarian if it was in good repair, but drawers are missing, and the ergonomic chair must have been designed for some other species.

The Libertarian Party and Big Business

A friend sent me the following link:
http://www.reason.com/0411/fe.dc.whos.shtml

So I read through it and saw all the Libertarian support, and then went back to the Libertarian site (not for the first time), and I'm left with the following quandary.

The Libertarians seem to believe that the government never has the best interests of the people in mind, or if it does, it'll screw it up somehow and cause more harm than good, but that exactly the opposite is true for businesses.

Offhand, it's hard for me to believe that the likes of say, Wal-Mart, Enron, IBM, Worldcom, Monsanto, etc, has the best interests of their employees, customers and neighbors in mind at all times, and even when they don't, they'll cause more good than harm.

Or to put it another way, for me the Libertarian Party would have more buy-in if they took the same attitude they have towards Big Government and applied it to Big Business.

Silly Ideas

"Today the People's Republic of China announced that they are giving up Mandarin in favor of pig latin."

Is there a way for an encryption algorithm to simultaneously compress the data?

Turn signals on shopping carts. Oh you laugh, but try dealing with a crowded Whole Foods packed with the same SUV driving idiots that makes life on the freeways so interesting. Ah never mind, they're still on their cell phones and sipping their lattes and can barely move down the aisle much less operate controls on a shopping cart.

A game based on ant ecology, but with hardware: little robots that can be programmed with tactics and strategy.

How would Animal Farm sound if it were retold in terms of modern Free Market Globalization Capitalism? The CEO Pigs are more equal than others, obviously.

Overheard statement: "I used to know what that stood for." What does that mean? Memory going? That the thing has changed, but the person doesn't know how? Or did the person find out that their perception was wrong? Or has the definition been shifted by some Fox News duckspeak propaganda?

The Nation's Highest Court -- on acid. Well, it's interesting to ponder such a journey. If nothing else, I imagine some of the interrogation would take an interesting tone, and it might have an exciting impact on the rulings.

What if subatomic particles were actually sapient, and quantum physics were a result of their psychology? Then one day, they all change their minds on what they want to do...

A good wine; Pine Ridge Dijon Clove Chardonney '97

Books recommended to me:
"The Wine Country Cookbook" see www.alibris.com
"Connections" by James Burke
"Elements of Style"

Odd Web Sites
The Dead Sea Scroll pattern matcher: www.judaica.org

Seen in a parking lot: a cheapo Honda, with pieces of whiteboard tacked over the bumper; bumper sticker of the day! One says "I wasn't using those civil liberties anyway."

Q: Can you tell us your NPR station?
A: Sorry. The Andromedans beam your program directly into my skull and they don't use call letters.

Demons Among Us:
Typical American scenes of gluttony, replacing people with grotesque beasts driving SUVs, drinking their lattes, playing with cell phones, and crushing anything small in their path. They're the more equal pigs of course.

George W Bush Doesn't Waffle. Does He?

The other day I was looking for a recipe for waffles and lo and behold! Google took me to Johyn Kerry's campaign site. Another fine example of Google-bombing.

And certainly, the Right Wing has a lot to crow about in the waffling of Senator Kerry. President Bush has never displayed such despicable behavior. After all, once an opinion is formed, one should adhere to it through thick and thin, right and wrong, no matter how thin and wrong it may turn out to be.

George W Bush certainly stood firm on his conviction that there should be no 9/11 comission. After all, why should we hand the enemies of the US a blueprint of the weaknesses that allowed the 9/11 attack in the first place?

George W Bush has stood firm in his resolve that there are Weapons of Mass Destruction in Iraq. Unless they're in Iran. Or is it North Korea?

Then there's global warming where Bush has stood firm on his position (for most of his first term).

Of course, when George W Bush first learned that his nation was under attack, he stood firm in his resolve to finish Our Pet Goat.

Jan 2005 -- Realizing how inefficient it was to inspect passenger's shoes at the airport, the airlines instituted a new policy: passengers are given comfortable slip-on booties to wear during the flight. Passenger shoes are placed in a container that is then X-rayed with the rest of the luggage.

Aug 2005 -- Recent allegations that al Qaeda was perfecting a "coat bomb" that detonates when the jacket is briskly zipped up spurred the airlines into introducing a new security measure. Now along with their shoes, passengers are asked to change from their street clothes into a comfortable, one-piece jumpsuit to wear during the flight. Unfortunately, the only color that was available in large quantities was International Orange.

Sept 2005 -- Did we say coat bomb? We meant "wig bomb". It turns out that thousands of metal detectors around the country can't detect significant amounts of metal carried above neck level, and that al Qaeda is perfecting a bomb that mimics a bouffant hair style, or could fit within a turban, a shaggy beard, a bowler hat, or other headdress.

Now all airline passengers are requested to wear their hair short, or submit to random scalp and beard inspections. Barbers and styling salons are opening in airports all across the US for travellers in need of a quick shearing before boarding.

And so on, until passengers boarding a plane look like so many convicts.