Homeowners Are the Housing Problem

I own a home in Palo Alto, California but please don't hate me.

For various reasons few new homes are built in Palo Alto, which limits the supply. Concurrently, many people would like to live here for access to great schools, a Mediterranean climate, Stanford University, career opportunities offered by Silicon Valley, proximity to San Francisco and so on.

The median home price in my city of about 60,000 people is $2.5 million and the median rent is $6,100.

These prices are often decried as "insane," "ridiculous," and "unconscionable." But they simply reflect the market's judgment, right? Not really.

The market does not exist in and of itself. It is an abstraction aggregating many human decisions. In Palo Alto real estate the most important decisions are made by sellers. And sellers are thinking big.

According to real estate site Zillow, my rickety 90-year-old, 1,050-square-foot bungalow might fetch almost eight times what we paid for it. A nearby home that has remained in the same family for 60 years could easily fetch 80 times what was initially paid. Similar situations exist all over town.

When people look to purchase a home in Palo Alto they are confronted by sellers who demand double digit multiples of what they paid. Doubling or even tripling their investment isn't good enough. They want the 10X or even 80X gain. Greed or simply good business?

The only ameliorating factor is an attitude of entitlement among some people who want to live in Palo Alto. Too many are literally outraged they are unable to afford to purchase a home or rent an apartment here. I have little sympathy for their complaints. There are many wonderful and more affordable places to live with equally good weather, excellent schools and amenities. They just aren't here.

At the bottom line (a necessary cliche) lies a fundamental conflict. The debate is over housing, a basic human need. But it also involves a financial asset, often the largest in a family's portfolio and sometimes the cornerstone of a retirement plan. As a potential beneficiary of this system, I hesitate to land solidly on either side.

I Live In A Slum

I just learned that, according to various sources, the median home price in Palo Alto, California is somewhere around $2 million.

Those same sources note the median home price in my Zip Code within Palo Alto is a shameful $954,000. My online research also showed the estimated market value of our home is well below the 94306 median.

I am stunned but educated.

I  now understand why some people look at me differently when they learn I live south of Oregon Expressway. I can figure out why the flicker of a smile when I note our home is west of El Camino Real is just a twitch.

I am so ashamed.

Malibu Beach Madness

See that cool house third from the left? It’s on the beach in the Malibu Colony west of LA.

Seems the owners couldn't’t make the payments because they lost all their money in the Bernie Madoff Scam and Wells Fargo Bank foreclosed.

Also seems that Wells Fargo SVP Cheronda Guyton – head of foreclosures – grabbed it as a no-cost, personal $12 million party spot. To keep her perk, she blocked efforts to show the house to potential buyers.

Wells Fargo’s a bit upset about the L.A. Times on this and it’s likely Guyton is on the fast track to unemployment.

But she could still be sleeping off hangovers to the sounds of Pacific waves if only she had connected with the right people.

You see, the people Guyton's bank kicked out had friends in the neighborhood and when they figured out what was going on, they ratted her out to the Times.

Ow. Yet, all she had to do in defense was to install some hip, young, unemployed people as house sitters. They (using her credit cards, of course) could have fronted the parties.

Nor would she have had to fend off potential buyers to maintain a westside presence. It’s the beach, she’s the head of foreclosures and the party is always on the move.