According to DataQuick, home sales volume in San Francisco fell 8.3% on a year-over-year basis last month (529 recorded sales in August ’08 versus 577 sales in August ‘07) and fell 13.1% compared to the month prior.
Keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded).
San Francisco’s median sales price in August was $725,000, down 11.8% compared to August ’07 ($822,000) and down 3.2% compared to the month prior.
For the greater Bay Area, recorded sales volume in August was down 0.9% on a year-over-year basis and fell 4.7% from the month prior (7,232 recorded sales in August ’08 versus 7,299 in August ’07 and 7,586 in July ’08), while the recorded median sales price fell 31.8% on a year-over-year basis, down 4.9% compared to the month prior. Once again, think foreclosures.
Last month’s sales total was the second-lowest for an August, behind 6,688 sales in August 1992, in MDA DataQuick’s statistics, which go back to 1988. An “average” August had 10,031 sales, while the peak August in 2004 had 13,940.
At the county level, foreclosure resales ranged from 8.6 percent of resales in San Francisco to 61.3 percent in Solano County. In the Bay Area’s other seven counties, August foreclosure resales were as follows: Contra Costa, 54.4 percent; Marin, 13.5 percent; Napa, 39 percent; Santa Clara, 24.7 percent; San Mateo, 16.6 percent; Sonoma, 41.6 percent.
At the extremes, San Mateo recorded a 23.4% year-over-year reduction in sales volume (a loss of 171 transactions) and a 19.8% decrease in median sales price, while Contra Costa recorded a 35.5% increase in sales volume (a gain of 454 transactions) but a 42.1% drop in median sales price.
∙ Bay Area home sales near bottom again, median price plunges [DQNews]
∙ San Francisco Recorded Sales Activity In July: Up 8.0% YOY [SocketSite]
Can sales activity reach negative numbers?
This is a game to see who will blink first, buyers or sellers. I think buyers have the upper hand here, and the picture shows no sign of improving for sellers anytime soon.
Well the number of buyers just went down, if we continue this way for another month I am sure you’ll see a noticeable decline even in the best of neighborhoods.
“Once again, think foreclosures.” This certainly does affect the median. But it no longer distorts it. Foreclosures are now such a significant percentage of sales that the “foreclosure price” IS the market price in many areas. If so many foreclosures are being sold for X and you are trying to sell a similar house, you can no longer expect to get anything more than X for it on the theory that foreclosure sales are rare enough that they do not impact the “regular” market.
This is not as significant an issue in SF — yet. Note that the percentage of SF foreclosure sales is now about double what it was in Contra Costa County just a year ago, and growing fast. The dramatically worsening credit freeze-up is only going to further accelerate declines in SF. (I won’t even get into the Alt-A recasts running about two years behind the subprime problems).
Missionite, I’ve read on your blog that you’re looking to buy. There is not a single indicator that SF prices are doing anything but plummeting. Not that you need (or want) any input from me, but you will save yourself hundreds of thousands of dollars by waiting a year (and more if you wait two).
socketsite, can we get a longer time horizon graph? It seems clear with continued economic issues prices will be significantly lower than they were in 2004.
Meredith Whitney (the smart money) is talking about 40-50% NATIONWIDE declines now so in CA and SF and anywhere with a larger run-up then the national average we will probably do significantly worse.
What continues to confuse me:
The listed median sales price is only down 4% (785k vs 818k).
There were I think an extra 85 unlisted sals a year ago, and 146 now.
A year ago these extra sales barely nudged the median price (818 up to 822).
But now these extra sales send the median price plumetting a further 60k down to 725k.
Thats a huge impact, does anyone know why this might be? Are they below market rate units?
FSBO any ideas?
Bascially these extra sales are acounting for 2/3rds of the price drop, which is a HUGE effect.
Nice looking charts and numbers! This continued erosion of house prices is very good news for the Bay Area. A region cannot maintain itself as a desirable and liveable place if prices for a basic necessity like shelter are as far above “equilibrium” or “fair value” as they have been here. I’d guess we’ll unwind all the way back to 2000 prices on average (in nominal terms, in real terms it will be much worse of course).
OT, but here’s a good laugh about “immune” places:
“Manhattan’s finest co-op apartments may have already lost a fourth of their value as a result of the financial crisis, and the worst is yet to come, says leading New York estate broker Kathy Sloane, of Brown Harris Stevens.”
http://calculatedrisk.blogspot.com/2008/09/report-nyc-real-estate-in-decline.html
Having lived in NYC for more than 20 years, and now in the SF Bay Area for about 8, I can say that NYers are generally more straightforward (to the point of rudeness) and less likely to try to sugar coat what is going on.
529 sales x 8.6% foreclosure resales = 45 foreclosure sales in San Francisco *last month*. No chance those were all D10. What happened to “it can’t happen here”?
Also find it interesting that both median and sales dropped from July to August – looks like it was the opposite in 2005/6/7.
But what if the government forms an RFC type entity? Won’t we all just foot the bill then? Or do you think that real estate prices will still fall dramatically? Also, what do you think of people stating that SF and NYC are a bit different because they aren’t building any more land here? Does that at least serve as a buffer when compared to the East Bay for example? I still think the idea that you will save several hundred thousand dollars in SF in a few years seems extreme. Back to 2000 figures is a large drop though. Why do 2000 number seem to be realistic?
Just a couple of observations.
1. I’ve been in 4 open houses recently in the Marina and in all of them of the realtors were talking about taking the condo off the market if “we don’t get a price we like” and renting it. I know that 2 definitely did just this. “We’ll just have someone else pay us rent and build us equity,” one said. Also, it will be so interesting to see how these new “landlords” react when property values fall another 10-20%, erasing all the equity that the renters were supposedly “building.”
2. For fun, I got pre-approved for a $1.1mm mortgage 2 weeks ago. I was in the highest credit band (based on FICO and available cash for interest coverage, etc) and most banks were telling me I needed 25% down and rates were in the 6.75% range for a 7/1. A 30 yr fixed was close to 8%. What this tells me is that the pool of potential buyers in SF has to be shrinking–since many do not have the credit score for these rates or cash for 25% down. I don’t think this is going to get any better any time soon.
Interesting times. Great time to be renting and waiting with a pile of cash.
G-man,
but rates are changing all the time. when I got my loan, it was 6% for 30 year fixed. And I already had 4 properties under my name before the purchase, and I was told that banks do not like to deal investors, and that is why the rate was as high as 6%. Not sure why you got 8% with the good scores that you have.
G-Man – I have also been to many open houses, and been to see many rentals, and it is all the same stock. People are not moving their homes to sell (I am looking at SFH in Berkeley, Orinda, Rockridge) and spinning them into the rental market. Then I track the rental prices, hitting Craigslist at 5-6k per month, and then quickly retreating down to 4k or below. There is some serious delusion and many owners really think this will all turn around in a year or two and things will be back to “normal”. There are going to be some great deals out there in a couple years, I don’t question that.
I am also amazed at how many people bought a second home within the past couple years with the intention of having a rental property, those are all bad investments.
Trip,
Looking to buy, but as I have conveyed in my blog, I am primarily lowballing. I just missed getting a 3/2 foreclosure in Mill valley for $610k so they are out there.
But I’m not trying to time the market either. I have a growing family. I need a yard, a garage, bedrooms, a good school to send the kids to, etc. I’m looking for a place to live in for 10 years, so I can absorb overpaying a little in the short run, but after watching the market fall apart yesterday I’m definitely casting a wary eye at making any sudden moves.
Questions to the people who are looking (like missionite):
Where did you keep your down payment money? If in stocks, did the stock market affect your plan to buy?
John: dp is in HSBC online savings. was 3.5%, now 3.25%.
I would not go long in the stock market today,
but was seriously considering shorting all the “too big to fails.”
socketsite, irvine and burbed have been dead on.
John,
I’ve been trying to get a good deal (on a fixer), and have yet to get one. They all keep getting more than my offer. But, my money is in a basic savings account so it is still all there.
John, on ex SFer’s heads-up on this very board, we set up three CDs at B of A to stay under the FDIC limits. Yielding 4.11%. One each in my name and my wife’s and one joint account. Money is tied up for 7 months but we’re not buying anything until long after that.
well you can’t short the market anymore anyway
rules be damned, markets be damned everything must now go straight up
john: cash. retirement accounts are getting crushed with the markets but dp money is in cash making 3-4%. Unfortunately, I need more of it so I hope some posters are right that there will be good deals a year or two from now. It looks like there are some good deals in Marin right now.
REpornaddict – I’ve been unable to explain the discrepancies between the DataQuick and MLS monthly numbers. As we’ve discussed before, there are differences in the timing of reportings and recordings and there is the issue of unlisted sales – but the delta between the two systems seems too large.
For single-family homes + condos, MLS indicates the following:
Aug 2008: 404 sales, $780K median
Aug 2007: 492 sales, $818K median
While DQ says:
Aug 2008: 529 sales, $725K median
Aug 2007: 577 sales, $822K median
What were the extra 125 sales in the DQ numbers? We have been assuming that they are unlisted sales that are not reported in the MLS system – possibly from new condo developments. If so, they would need to have lower prices since they dragged the median down from $780K to $725K. Assuming the 404 MLS sales are also in the DQ numbers, 89 of the 125 additional DQ sales would need to have sold for less than $725K to bring the median down to $725K. Maybe there were some lower priced new condos in the DQ numbers (but Cubix and many new developments are also listed in MLS). In general, I think the MLS numbers are more timely because DQ waits for the county recordings. From some limited spot checking, the date reported in the MLS system as the selling date almost always matches the actual recording date – so I think there is accuracy and consistency in the MLS data. If there is any lag in the recording process, then the DQ numbers should be LESS than MLS – at least for their initial monthly report. (Of course, by MLS we usually mean SFAR MLS. There are other MLS’s that may have listings and sales in San Francisco that don’t get reported through SFARMLS – but I have checked this before and the numbers are very small.)
I had hoped to get access to the actual DQ data to do a unit-by-unit comparison – but I haven’t been able to yet. (DQ’s subscription rates are pretty high.) I would like to look at a time frame of a few months and see exactly what sales are in each system.
looks like bailout is the flavor of the day
return on investment–where is it going?
Real estate, should be small potatoes. 30 year mtg is reasonable, lending long money
how’s it going for the splicers and dicers?
Couple thoughts after reading this chain.
1) Just spent a couple afternoons in Antioch, and saw for myself what a home that has lost 50% of its value in the last 18 months REALLY looks like… how can people assume that anything similar to that will happen to Pac Heights, Atherton, Woodside, or Sausolito? That’s just outrageous.
The difference is that nice parts of SF or the Peninsula have a little thing called “land value”, which never existed in a lot of markets, especially the inland parts of the Bay Area. Some plot of desert near a new highway has intrinsic land value of about two dollars a square foot. How can you compare that to Green and Hyde with a view of the bridge? It’s absurd.
2) NY is going to take a larger hit than SF this time around (as opposed to 2001), since their economy is in the hot seat. As one who has worked on Wall Street, I can say with confidence that a lot of those nicer homes will plummet in value as people begin to lose their seven-figure bonuses en masse. A lot of the deflated homes in Antioch are being bailed out by the government. A lot are also coming out of Lehman employees’ equity holdings.
3) You SS readers simply don’t understand the concept of distinct markets. The people who are in the market for a new development in Antioch are not the same people who covet a Pac Heights condo. What does the market for powdered milk and the market for Marc Jacobs have in common? Nothing. The best thing you guys have conjured up is the “domino effect”. Here’s the thing with that:
NOBODY WITH AN $8 MILLION NET WORTH WANTS TO LIVE IN NOVATO, VALLEJO, GILROY OR PITTSBURGH.
They probably don’t want to live in Sunnyvale or Burlingame either. They want to live in the nice part of the poshy town that appeals to them, and they don’t give a crap if land in San Bruno has come down in price. They probably don’t even know where San Bruno is, because they don’t take CalTrain.
And if you guys think it’s going to be so gradual that everyone downgrades their location by one notch, well that’s going to take a decade, and by then, who knows what our nation will be like.
Just my 2 Cents.
Kudos, New Buyer. IMHO, your statement makes the most sense and has the history and fundamentals to back it up. Most of the folks on this board are still praying for that $200K luxury condo in South Beach that will never happen.
I take CalTrain once in a while. I just wish it didn’t smell so bad.
Sure, the markets are distinct. The difference is temporal Two or three years ago I was routinely outbid on SFRs by people with rather silly financing. Today folks need to put a lot down.
I’m pretty confident that (a) one of the houses on my wish list will come up over the next 24 months and (b) there won’t be as bids competing against an all-cash offer.
Thanks FSBO, yeah its a conundrum – a) why there are so many more unlisted now than a year ago and b) why are they having such a negative impact on the median as opposed to a year ago (when the effect was effectively neutral).
But for me – the big story this month…Marin
Wow, reading NewBuyer’s comment and atNewBuyer’s concordance is an eyeopener – not that anyone needs any further proof of what’s coming. Standard sort of strawman set up by NewBuyer – namely, that the bears are saying EVERY HOUSE in EVERY desirable area in SF is going to go down 50%. I don’t think anyone sensible is saying that.
For my part, I’ve always said a RANDOMLY picked property in SF will go down about 30% (not 50%) from peak. That means some will go down 50%, some might go down 10%, a vanishingly small percentage might even hold their respective peak values or even go up. Let’s see where this winds up – it all looks pretty on schedule to me!
BTW, the sort of arrogance displayed by NewBuyer regarding the people who would live in Novato or Antioch is what makes this bust so delicious to bears like me! In my new digs in Tiburon, I am seeing all sorts of pain being endured by a number of (arrogant) people who have overextended themselves and are now caught wrong footed by this downturn. (Those 25% Marin declines in median are NOT all concentrated in Novato and northern Marin.) That’s just wonderful – I’m sure they thought they were “better” than people who sensibly chose to rent these houses for $3-5K per month (plenty of rentals around it seems) or those who could “only” live in Antioch.
Also, NewBuyer, if $8M net worth sounds like a tremendous amount of money to you (someone like “that” wouldn’t want to live even in Burlingame, pshaw!!) then you really were a piss ant on Wall Street. $8M was a decent annual payout for a moderately successful hedge fund trader 10 years ago. I can’t think of any of my friends from my Wall Street/hedge fund days who would think that $8M was a particularly large net worth. Not a single one.
Look, in the 60’s, – 80’s, SF was a run down dump.
Difference, people didn’t have the money.
Look at the financial collapse–what will be the consequence?
I’ve been in 4 open houses recently in the Marina and in all of them of the realtors were talking about taking the condo off the market if “we don’t get a price we like” and renting it.
Great marketing technique: first tell the potential buyer that no one wants to buy it at this price, then “threaten” them with the prospect of renting it for 2/3 what it would cost to own it so that the buyer can pay even less next year! Brilliant!
Next…
The difference is that nice parts of SF or the Peninsula have a little thing called “land value”, which never existed in a lot of markets, especially the inland parts of the Bay Area. Some plot of desert near a new highway has intrinsic land value of about two dollars a square foot. How can you compare that to Green and Hyde with a view of the bridge? It’s absurd.
You don’t have to compare Green and Hyde with Antioch, I can compare “Green And Hyde with a view of the bridge” with “Green and Hyde with a view of the bridge” in the year 2000, when incomes were the same as they are now AND loan qualifications were the same (if not easier) as they are now.
And *that* tells me that prices will fall. No, it *assures* me that prices will fall. It doesn’t matter a whit what prices in Antioch do. So you have that correct: Antioch and Green and Hyde are *not* related. But if something is *not* related, just because one thing falls by 50% *does not* mean the unrelated item cannot fall by 50% either.
If you want to really see land value, look at 1998 or so. That will tell you the land value, not today, 4 years into a 5 year option arm time bomb, when a lot of people who took on those mortgages are literally stuck in their homes.
Nobody *repeat* nobody knows the depth of this Wall St rabbit hole.
And, believe it or not, Satchel, someone who has $8m in worth today may not have $8m in worth after this debacle unravels…well, maybe he will if he buries his fortune in coffee cans in his backyard…but then, the paper may be worthless by the time he digs it up….
Hopefully, my overly pessimistic thoughts are worse case scenario. But, the market isn’t going to be the same. The fallout will be hitting soon.
I think these DQ numbers are irrelevant right now. I am more interested in seeing their numbers six months from now.
the difference in the 60-80s was demographics. Suburbs were new and popular–cities were dangerous and unpopular. The city is back in, and ever more popular with gas prices soaring. just my two cents.
Of course the price will fall. No matter how “distinct” each city is, there is a supply curve and there is a demand curve.
However, so far, we only see the demand curve shifting down – so we get lower price and lower volumn. Why does it shift? Because it is harder to get loans, higher down payment requirements, and higher mortgage rates. The point is, those external factors do not making buying easier, despite the apperant lower prices.
I have repeated many times…if you buy today at 10% lower price than the peak, you still pay more than the 2005 buyer who got a 4.5% mortgage. So, this market is bad for sellers, but is not good for buyers (yet).
Sure, maybe the mortgage rate will go back down again. However, that would shift the demand curve back, and guess what, the price will go back up.
What people on SS really wish for is a shift of the supply curve.
When supply curve shifts down, we will get lower price and MORE transactions. A simple review of Econ 101 will tell you that. That is already happening in D9, where a lot of new condos just entered the market. I mentioned this a few weeks ago on a thread about sales/district. D9 was that only district where the supply shifted.
How will a supply curve shift? Well, more new units will definitely do it (like in D9), and ARM adjustment will also have some impact. But so far, other than D9, I didn’t see the supply curve moving much.
It is not about “seller vs buyer” and “who blinks first”. Demand curve shifting down will make a lot of owners’ expectations unrealistic, but supply curve does not move with demand curve. It just means that dot on the supply curve is now above the equalibrium, and thus it won’t change hands.
So, a lot of sellers will indeed take the property out of the market (until the ARM adjustment hits).
Satchel, ex sfer, et al. what are your thoughts on proposed half trillion bailout by Feds/Congress on RTC Mk II and what it will do for economy, and real estate in SF? Im trying to get my head around the consequences of what it will mean to those of us who have been financially prudent the last few years. And even if it will pass? I cant believe the US taxpayer is going to rescue these loans on behalf of banks and irresponsible debtors.
do tell satch,
“I can’t think of any of my friends from my Wall Street/hedge fund days who would think that $8M was a particularly large net worth. Not a single one.”
do you know anyone w/this net worth who does not own a house??
I think Paulson is very much a realist who understands the maximum pain he can squeeze from the bankers and yet keep the lenders lending.
He did a pretty masterful job of ramming down the throats of AIG directors his 11.5% interest loan. WSJ article today said the message that came first: this is the ONLY offer you get – take it or leave it, it isn’t negotiable.
On the other hand, he understood that with all the money FM/FM threw around in congress, he couldn’t be quite so heavy handed with them, and yet he had to do something or the foreigners would take their marbles and go home, and we need those marbles.
So lets just say I for one would rather have Paulson running this deal, than comrade Obama or Ms. Smiley Face and her sidekick the war hero. I think Paulson intends to solve this before one or the other of them throws him out. My take: get it solved and move on, don’t do the Japan thing.
Paulson is also pretty good at making sure that the right group gets punished: I don’t think speculators (homeowners) are going to get bailed out in the end. And note: people though AIG was getting a free pass at first, but later it sunk in that Paulson had reamed them, but good.
So you might end up paying a few more pesos than you otherwise would, but if it keeps the country from being mired in recession for 10 years, it’s worth it: we’ll all be better off.
Whodathunk, I can’t imagine that an RTC would be created without some significant legislation designed to prevent this from ever happening again. That’s just how government works. Do nothing, then overreact.
Any legislation would put the kibosh on zero money down loans without some major amounts of disclosure to the buyer and risk management by the lender, would probably put some restrictions on mortgage securitization or require a rethink of rating MBSs, etc. Many of these might be good, but the immediate result is a tightening of possible mortgage solutions. Besides that, bank executives will be more conservative than is required for a long time. Again, the typical overshoot.
No matter what the RTC involves, it won’t be enough to stem a repricing of assets. Houses are too expensive. People no longer have a confidence that housing values will always go up, so many people will actually do the comparisons they’ve been neglecting the past ten years, “Is renting a better deal than buying?”
Just having potential buyers ask that question is enough to put a dent in prices. We need to get back to historic price vs. rent ratios -and probably will go through an overshoot- before it’s all said and done. Of course the caveat that the ratio can change by either rent increases or price declines or a combination of both.
it’s interesting and worth noting that SF is now the most expensive region in the DQ analysis. marin (former lead in price) dropped in median price quite significanly.
the DQ #’s bear the fact that SF is dropping both slower and in smaller degrees than any other part of the bay area. and i don’t think that trend will change.
my prediction for future DQ #’s: SF will be off no more than 20% in median price overall, and the bulk of that will come from dist.10. so unless you’re jonesing for a piece of bayview or HP, those who think we’re returning to 1990’s prices are, quite frankly, dreaming.
tipster —
I hope you’re right about the motivations and likely outcomes of Paulson’s actions.
But I have severe misgivings about the calls for a new RTC-like entity. There are trillions of dollars of MBS and CDOs being carried on the books of various banks and non-banks at near nominal value, though various ABX indeces suggest correct valuation would be 20-40 cents on the dollar. That loss hasn’t been realized yet. I fear that we the people will be saddled with this loss, to net effect of deflating the currency (lifestyle, economic prospects, lifespan, etc) by about 30 percent.
The past RTC dealt in discrete loans on real property. What we have now is a different beast, where toxic first-loss tranches across pools of mortages (“nuclear waste”, in insider-speak) was disguised on the books while years of book-value compensation was paid to the originators and passers-on of the somewhat viable tranches.
Monkey – I’m a strong supporter of public transport and I rarely drive my car, but there’s just no way that rising gas prices will have any appreciable effect on RE prices in a city like SF. Suppose that a family of 4 living in Walnut Creek drives 30,000 miles/year while the same family of 4 living in SF drives 6,000 miles/year. At 24 mpg, the difference of 24,000 miles works out to 1,000 gallons of gas. Say gas prices have risen $2.50 since around 2000 (from $1.50/gal to $4/gal). That means that the increase in gas prices have reduced the cost of living in SF by $2500/year relative to Walnut Creek.
On a $1.5 million house (which honestly is not an top-end home in SF), that $2500/year is equivalent to reducing mortgage rates by 17 basis points (e.g., from 6.25% to 6.08%). Will that help stabilize SF prices? Sure, on the margin, it’ll help a tiny bit. But it will totally swamped by whatever greater forces are at work in the macroeconomy.
If you could buy a decent 2BR condo in SF for $250K, then the $2500/year saving is equal to a 100 basis point reduction (even more once you take into account the tax benefit that isn’t available on the marginal dollar of a $1.2 million loan). At that point, maybe the gas price increase could have a noticeable effect. But SF condos will never be that cheap again, so there’s just no way that gas prices will have any major effect on SF RE prices.
“Satchel, ex sfer, et al. what are your thoughts on proposed half trillion bailout by Feds/Congress on RTC Mk II and what it will do for economy, and real estate in SF?”
One of the great things about having written SO much on this SS site the last 10 months is that I can usually just point to something I wrote months ago! (Sorry if that sounds arrogant or pedantic.)
First, this RTC 2 is NO surprise to me at all. Both ex SF-r and I (and others) were expecting this. I wrote this back last February:
“Ex SF-er is right here: the legislation for RTC II is FOR SURE being drafted right now, and you can also be sure that there will be intense pressure to relax lending requirements.
All that being said, none of this will stop housing values from falling towards a much lower equilibrium, as the non-stop credit inflation from 1982 onwards is now going into reverse.
Once the deflationary mindset takes hold, nothing can stop it. [snip]
Posted by: Satchel at February 7, 2008 4:25 PM”
https://socketsite.com/archives/2008/02/senate_passes_bill_to_temporarily_increase_in_conformin.html
But what does it mean for housing prices IMO now that it is acually being implemented? I don’t think it will stop the slide. This is all going down EXACTLY as I expected, and people who thought the Fed was going to “buy” mortgages were wrong (at least for now – let’s see what happens in 3 or 4 years when the Fed has to start large scale monetization of USG debt). I actually wrote something on almost exactly this point (sorry for the length – what else is new!):
“Well, I have been predicting this as well for a while. Although the “rumors” of course are that the Fed will “buy” mortgages, I wouldn’t count on that. It’s not what the Fed does.
What I think will happen (a slight embellishment of what I have been saying for a while) is that the Fed will point to the Federal Reserve Act, and say it is not able to “purchase” securities from private parties, and that it wouldn’t be prudent to put the Fed in a position to do that because it would require the Fed to monetize debt (by “printing” the purchase prices) an “we wouldn’t want that, etc…..” Then, Congress creates the agency that will purchase the bad debt that is now sitting on the Fed’s books as collateral for the loans it has been advancing to banks and non-bank institutions. These securities are largely worthless, but the taxpayer will buy them at an “appropriate” discount from par, say, 70-80% (who knows – just a guess), and the surviving investment and commercial banks will just laugh about the whole thing. The securities will be purchased from the banks and nonbank institutions, not the Fed.
And, of course, once the “crisis” has passed (it’s just a crisis for the banks – the real crisis for homeowners happened a few years ago when they agreed to trade their labor income for artificially price-inflated houses), the Fed and the USG will not care where the price of housing goes. Normal lending standards can return, and interest rates will be allowed to normalize, and house prices can continue their fall towards fair value unimpeded by concerns about bank solvency.
[snip]
Posted by: Satchel at March 24, 2008 7:01 AM”
https://socketsite.com/archives/2008/03/justquotes_resolution_trust_corporation_redux.html
I hope that helps!
(As an aside, with all the manipulation of markets that is going on by the Fed, USG/SEC, my advice would be for people who have ben worried about their retirement equity portfolios and equity positions generally, I would use this opportunity to lighten up on exposure. I will!)
Whodathunk,
Last pointer to an old comment from my end on your question (this google feature on SS really works!):
“I’ll bet almost anything it goes down like this in the end. Right now, the Fed has committed up to 60-70% of its balance sheet through things like the TAF, TSLF, liquidity “backstops”, term repos, etc. (we’ll never know exactly because the Fed doesn’t provide audited financials – never has, and never will). Much of the junk sitting with the fed now is toxic and crap. By later this year, a government agency will be set up to buy the toxic crap at 50 cents on the dollar when it’s worth maybe 10 cents (I’m just picking those numbers out of the air). The Fed will repo those securities back to the banks it chose to survive, who will recognize some losses, the Fed will get 100% of its precious treasuries back, and the taxpayer will eat another few hundred billion in losses, as the agency sells off the debt for pennies on the dollar to the Wall Street crime syndicate, keeping the worst of the worst on its books to die an ignominious credit death within the government hospice care facility.
With the problem “solved” banks will be then be free to raise mortgage rates, and no one at the Fed or the USG will care at that point if housing falls another 20-30% with the higher rates. Anyone who thinks the Fed and USG care about homeowners is crazy!
Posted by: Satchel at March 17, 2008 5:35 AM”
https://socketsite.com/archives/2008/03/sunday_night_special_the_bear_stearns_blowup_and_balanc.html
The very last bubble IMO to burst will be the population’s foolish belief that the USG and Fed cares about it. Believe me, they could care less. The guys who control Wall Street (and by extension the Fed and USG) look at average Americans with the same contempt that it seems “real” SF residents look at people in Antioch or Tracy. Perhaps with even more contempt.
Satchel — citing was invented to decrease the citing article’s length.
Consider thinking enough of your readers (and your opinions) to assume those interested will click over and read it for themselves.
Two consecutive cut-and-paste vanity posts is a bit much! Some folks conflate volubility and wisdom, so perhaps what you are doing is a rhetorical technique. If so, please consider the effects this has on those adding value with shorter posts (it crowds them out).
Are you sure you aren’t really in academia? I’ve seen this behavior in state-school assistant profs before.
“vanity posts”? Huh?
Somebody woke up on the wrong side of the bed 🙂
I just watched Secertary Paulson’s statement, and I appreciated reading this exchange between Satchel and whodathunk at the same time. Even though I remember reading it when originally posted, it helped to have it ready and available. So, thank you Satchel.
On the other hand, dub dub, I’ll encourage you to use the ‘back’ button more on your browser 🙂
“On the other hand, dub dub, I’ll encourage you to use the ‘back’ button more on your browser :)”
I think a better joke has something to do with my scroll wheel 🙂
“So, thank you Satchel.”
I’m glad you found it useful, “chunkie” 🙂 But dub dub’s advice is good, and I’ll try to take it in the future.
Suppose that a family of 4 living in Walnut Creek drives 30,000 miles/year while the same family of 4 living in SF drives 6,000 miles/year. At 24 mpg, the difference of 24,000 miles works out to 1,000 gallons of gas. Say gas prices have risen $2.50 since around 2000 (from $1.50/gal to $4/gal). That means that the increase in gas prices have reduced the cost of living in SF by $2500/year relative to Walnut Creek.
That is not the right way to do that calculation. You should consider that the family in Walnut Creek owns two cars, while the one in San Francisco owns one, or perhaps none. Even a relatively inexpensive car costs $5-6k/yr in total cost of ownership. Increasing gasoline prices probably put that at $6-8k/yr.
Of course, this has always been true to a certain extent and is perhaps already included into people’s calculation. But in practice, I find that most people do not include transportation costs when they do their city vs. suburbs cost comparison and I think that the rising cost of gasoline is making people take a second look at it.
he he he you like that “chunkie”. I love how on this board nothing escapes notice.
NVJ, I’m sure there are a fair number of families who own fewer cars because they live in SF, but it is far from universal. I’d say among my circle of friends and acquaintances, two cars for the SF residents is the rule. They do drive fewer miles than those in the burbs. Americans, even those in SF, love their cars.
It is a complex calculation with lots of variables and assumptions that need to be factored in, but with the higher housing costs in SF and the need to pay private school tuition for one’s kids, it is really a financial no-brainer that living in SF is far more expensive for just about everyone. For the cost of my two kids’ tuition (plus the “requested” annual donation) I could afford a whopping house in Marin or nicer East Bay towns. Lots of compelling reasons to live here nevertheless (and I do), but financial benefits are not among them.
Of course, this has always been true to a certain extent and is perhaps already included into people’s calculation.
More importantly, if anything the effect in this case would go the other way (i.e. against SF). The family living in SF with just one car is unlikely to get rid of that car since they are driving so few miles that gas prices have little impact anyway (I’m one of those families). The family in WC, meanwhile, might consider dropping one of its two cars as gas prices rise higher and higher. So whereas before it was 2 cars vs 1 (in SF’s favor), now it is 1 vs 1 (tied).
There was a WSJ article studying the lifestyle of city vs suburb. Its calculation shows it is pretty much a wash – any suburb savings on the housing is eaten away by the gas…and that study was before the gas reaches $3+.
Some factors Trip ignored.
1. Tax deduction. Mortgage is tax deductable, gas is not.
2. Insurance and depreciation on the car.
3. Daycare and school. If both parents work, and if they both have to commute 1 hour each way, it is simply impossible for them to drive the kids to and from school on time. It is possible to find a daycare close to work, but when the kid is school age, imagine your day – get up at 6 to get the kid ready, drive kid to school at 7 or 7:30. Drive one house to work, arrive at 8:30. Get off work at 5, pick up kid at 6 (most after school program end at 5:30, and you have to pay extra for time after that). Get home at 6:30. It is 8 after cooking some simple meal and have dinner. By the time the kids are in bed, it is 9pm and you haven’t had any relaxation for 13 hours.
4. Quality of life. Take a look at above schedule. Do you want a life like that?
The kid’s age is a big factor. The most difficult time is when the kid goes to primary school. So the democraphic is a major prediction. The school age population has been decreasing over last and early this decade, and that’s probably one of the reasons why SFO’s apprecation was mild comparing to the suburbs. However, the birth rate rebounded over the last couple of years. They won’t be a significant factor until about 2012.
This is just to point out why people prefer to live close to work.
John, I’m in total agreement with you. Living in the city where I have a 15-minute door-to-door commute, lots and lots of other attractions (shopping, restaurants, museums and parks, etc.) nearby, and our kids can walk to school (albeit an extremely expensive school) is exactly why we live in SF. It is far, far more expensive, even with the mortgage deduction which is not all that significant (about 3% of my AGI last year), and remember that private school tuition is not deductible either, and this dwarfs marginal gas and auto costs from suburban living. But you only live once, so I’m comfortable with this financially unsound decision.
Your illustration of the horrible daily existence of those who live in the nearby suburbs is really unlike the existence of anybody I know, and most of my co-workers live outside of SF. Lots more driving to be sure, but it is not as painful as your example for most (although I agree that sounds like hell on earth for those who do live like that).
paco,
“do you know anyone w/this net worth [over $8M] who does not own a house??”
The short answer is yes, but as you imply the very large majority of people I know with net worth over this do own their house.
But here are few anecdotes.
I have a friend in Marin (former small scale VC) who is worth about $10-15MM and rents a small house in Tiburon school district for about $2800 per month (this rent is up $150 from what he rented it for 3 years ago). We talk every day.
We both have a friend who rents a “mini” estate in Ross (with pool and poolhouse, but it’s a “small” spread, 4/3 i think) for about $3500-3600 per month. Not totally sure what he is worth but based on his trading positions, I suspect it’s 8 figures.
When I started at my hedge fund in 1992/93, our director of research had TWO adjoining rent controlled apartments on Central Park West. He spent around $200K (1988 dollars) on joining the two and renovating and they weren’t even his! I don’t know his net worth at the time, but I know for a fact that he was paid $35M (cash) in 1988 for correctly positioning the firm for the crash. It turned out to be a smart move for him as upper end Manhattan coops and condos really got smashed 1989 through 1994 or so.
My best friend from that period (we went to college together) – who was a LOT more successful than I when we both got into the fund world, rented an apartment right on Broadway in San Francisco when he worked here in 1993-94 for a short stint. We worked together in Greenwich Connecticut in 1997, and he was worth about $20M and rented a nice large house for $15K per month from 1995-1998 or so. In 1999, his net worth was in excess of $100M and he finally purchased his “starter” house for cash (around $7-8M). He’s retired now (he left a few years after I did when he was about 35), and he still lives in that house. I’ve spoken with him recently and he is expecting (and also hoping) for a wipeout collapse. He’s made his money, as most of those guys have, and I don’t think he’ll sweat it if his house “crashes” 50%! We’re staying with them for a day or two around Thanksgiving, so I’ll report back!
Different people have different priorities I guess. All those guys I mentioned were relentless “economic opportunists” and not particularly worried about the “stability” that owning a place gives a person. But I don’t think most people are like that.
Give me a break! Not all of the planet outside of San Francisco is HELL! I have a former coworker who now lives in Palo Alto with a 5 minute walk commute who enjoys living close to University Avenue shops, stores and restaurants and who does not have to send her child to a private school. I am hoping to someday move over to Rockridge which has a shorter BART commute to Montgomery Station than my current MUNI commute.
Why must San Francisco boosters paint such a terrible picture of anywhere outside our little bubble. Here is news to all of you, many Bay Areans love living here to, but have no desire to live in San Francisco, even if it was cheap, and who do not spend their entire days trapped inside their cars. I have a friend in Tiburon who lives in one of the townhomes across the street from the ferry who would not give up his lifestyle for any price and who sold his Southbeach unit so that he could enjoy not being in San Francisco. Should I forward this thread to him so that he can find out how terrible his life is and so that he can feel bad for all he is missing out on for no longer living in San Francisco?
Enoughwithboosterisms, not sure if this is targeted at my post, but I agree with you. As I wrote, nobody I know who lives outside of SF lives the terrible daily life that John posited. They all prefer their non-SF lives, and they are much better off financially than the SF alternative. What I said was that the hypothetical picture John painted would be hell, noting first that it did not mesh with the reality of anybody I knew.
Sorry, my rant was in response to John. I really think many people living in the city are fooled into thinking the rest of the Bay Area would move here “if they could afford to”. Most of my friends who do not live in the city have NO DESIRE to live here for a variety of reasons.
Satchel’s lifestyle is a perfect example of someone who does not commute by car and can choose to live in a neigborhood that has desirable schools, climate, shops and landscapes.
Sorry about the confusion.
Do you realize Satchel doesn’t work? He doesn’t commute, period.
FSBO – (and others maybe?)
What about bank sales/foreclosures – might this explain the extrsa non listed sales? Or are they normally listed on the MLS? I know some are.
This would explain the higher non listed count now compared to a year ago, and also why they are now reducing the median.
(Disclaimer: this is not a bank sales should not be included comment!)
Seems one of my response was eaten by spam filter.
I wasn’t refering to SF, or even city life. It is equally stupid to work in SJ or Palo Alto and live in the city. The point is, people will try to live closer to work.
And don’t believe some people live that way? You didn’t read much then. I can remember many newspaper articles during the bubble days about people commuting 2+ hours each way to work from Concord or even Sacremento. During that period, the article was about what people would do to afford their own home.
And yes, my wife knew someone who commute from Sac to SF. It lasted a few months, didn’t work out, so he quit his SF job.
the need to pay private school tuition for one’s kids
This is a fallacy.
The guy in the office next to me lives in Tracy and complains about his long commute. I guess I should tell him he doesn’t know what he talking about and his quality of live is actually just great.
Sure, downtown Palo Alto is a great place to live, especially if you can walk to work as is Tiburon, if you can walk to the Ferry. These are both very expensive places to live. There are also a few other decent places, with good access to BART, like Rockridge and they command San Francisco-like premiums as well. I would add walking distance to Orinda BART to my own personal list. But the overwhelming majority of suburbanites drive to work and their life is just going to keep getting worse.
The family living in SF with just one car is unlikely to get rid of that car since they are driving so few miles that gas prices have little impact anyway (I’m one of those families). The family in WC, meanwhile, might consider dropping one of its two cars as gas prices rise higher and higher. So whereas before it was 2 cars vs 1 (in SF’s favor), now it is 1 vs 1 (tied).
They have City Car Share in Walnut Creek now? If you drive very few miles, it is much less painless to drop the car entirely and use cabs or Car Share in The City. The suburban family, with two commuters going to jobs in two different directions, is not going to be able to drop any car. They might be able to start carpooling with neighbors.
1 car for a couple in WC?
of course it is possible if one of them work at the Burger King two blocks from home.
NVJ,
Lets get to the heart of the matter: card carrying, car free Sierra Clubers want to be allowed to have higher DTI ratios on their mortgage applications (courtesy of massively subsidized transit systems). And, as you point out, why not?
NVJ/John: I agree that 1 car for a family of 4 in WC is unlikely – my apologies if that wasn’t clear in my initial post. But it’s hardly impossible: I grew up in the Lamorinda area in a family of more than 4 and at some points of my life we did have only one car. The essential point, though, is that it is more likely for a family of 4 in WC to own 1 car than it is for that same family to own 0 cars in SF. I’ve belonged to City Car Share and even as a single guy who doesn’t do much driving it was still a poor substitute for a car. To imagine an upscale family of 4 owning no cars and relying entirely on CCS, even in SF, is absurd.
More importantly, what is the mechanism by which higher gas prices will force the SF household to abandon its car? There is no sensible mechanism at all. If the family is a candidate for CCS, then almost by definition they don’t use their existing car very much – perhaps 5,000 miles/year at most. That means maybe 180 gallons of gas per year, so a gas price increase of $2.50 raises their total spending by $450. So the HIGHEST economic value that the family could derive from switching to CCS as gas prices rise is $450/year, because if the value of switching to CCS were HIGHER than that, they would have already done so before gas prices rose. And actually this overstates the benefits of switching to CCS as gas prices rise because CCS prices are rising too (CCS cars use gas too!).
Spin it however you want, but at the end of the day the fact is going to remain that the numbers just aren’t there for gas price increases to make a huge contribution to SF RE values.
Debt to Income ratio never even crossed my mind when making transportation choices.
And if you think that public transit is massively subsidized, you should take a look at the funds that go into subsidizing the personal auto transport system for a shocker.
Debt to Income ratio never even crossed my mind when making transportation choices.
This is about making home buying decisions (or even renting) as they relate to transit. Public (and free) transit can (and does) create market distortions. Are these distortions for the betterment of humankind? That’s the million dollar question.
Oh, I have no doubts that investment in transportation infrastructure influences the RE market. For the first half of the 20th century the street car lines molded the expansion of the east bay cities. Any land within walking distance of a new trolley line became instantly more valuable.
In the second half of the 20th century the same thing happened, except around freeways and expressways. Homes with easy freeway access became more valuable. Many people have never heard of San Antonio Valley : a huge swath of flat buildable land just north of Mt. Hamilton and quite near thousands of bay area jobs. That land is only worth about 1/100th of land in nearby Fremont because it takes about 2 hours on a twisty windy road to reach an urban area from there.
Both public and private modes of transportation rely on construction of expensive capital projects. One is far more expensive than the other. Can you guess which one ?
gmh
People’s commuting choice is little affected by gas price, the commute time is a bigger factor.
For example, if driving from SF to Moutain View is always smooth and take 30 minutes, some people will live in MV and work in SF (or live in SF and work in MV).
However, if the traffic gets bad and it takes 1 hour, people will start moving.
30 to 40 minutes seem to be the limit.
John – Yes, I completely agree with that. That is exactly my original point: changes of $2-3/gallon in gas prices will not cause major influxes of people moving into/out of SF. Doubling the amount of time that it takes to drive on 101, as per your example, would have much more effect (people working in Silicon Valley would move out of SF and people working in SoMa would move into SF).
One is far more expensive than the other. Can you guess which one?
Uhhhhhh… the one where the rolling stock is owned by the public and driven by unionized workers with defined benefit retirement plans? Okay, I’m baiting you with that one; don’t reply.
People who live in urban areas and don’t have cars drive less, that is the whole point gmh. Your miles calculation is way off because of that.
So the HIGHEST economic value that the family could derive from switching to CCS as gas prices rise is $450/year, because if the value of switching to CCS were HIGHER than that, they would have already done so before gas prices rose
You forgot the whole “total cost of ownership” part here. How about depreciation, insurance, maintenance, etc?
. To imagine an upscale family of 4 owning no cars and relying entirely on CCS, even in SF, is absurd.
How upscale do you have to be to count? Does family income of $250k/yr, owning a two unit building in Noe Valley, net worth +$1M count? Cause if so, then I guess I am absurd.
Noe Valley Jim,
I think the key metric here is family of four.
Speaking as HOH of a family of four, I can tell you that the adults ability to function as breadwinners for the children would be seriously curtailed if we did not have vehicles. I can easily imagine that there are people that pull it off, but there’s no doubt in my mind that they are an exceedingly small minority.
I can only think of one family of four among all our friends who get by on a single vehicle, and they are currently shopping for a second.
Anecdotal, it’s true, but if the no-car nuclear family was as common as you imply, surely I would know of at least a single example among a reasonably large circle of friends and acquaintances?
We are currently a family of three, with the second child on the way and no plans to buy a car.
Let’s see how it goes, but has not been any particular problem so far. We don’t have parking, so that definitely influences the decision.
So the HIGHEST economic value that the family could derive from switching to CCS as gas prices rise is $450/year, because if the value of switching to CCS were HIGHER than that, they would have already done so before gas prices rose.
This argument doesn’t make sense. The total cost of ownership is much higher than $450/yr. You argue that since they absorbed the $6k/yr already, the extra $450/yr will not matter to them. But you can argue ad absurdum that rising costs of $450/yr for the next 20 years won’t matter, to the point they are paying $16k/yr or more. Obviously, at some point, they will find an alternative.
We don’t have parking, so that definitely influences the decision.
That’s the key of it. Housing without parking attracts folks like NVJ who self select and do not require/want cars. Build more housing like that, and you attract more people like NVJ. If enough come, better walkability and transit come, which makes more people consider the idea of self selecting the car-free lifestyle.
Everything comes down to the availability of parking.
Enoughwithboosterism,
When I talked about places where the land was worth nothing and were clearly positioned for a crash, I was NOT talking about Palo Alto (or Atherton, Los Altos, Woodside, Sausolito, etc.) These are luxury areas that people will want to live… they are the suburban equivalents of Pac Heights or Russian Hill, and will hold their value while undesirable areas like Antioch and R10 sink 50%.
On an unrelated note, I hear a lot of people discussing public schools in the same breathe as 8-figure net worths. Is this a joke? Are you seriously sending your kids to public schools?
Sounds to me like the classic “I graduated from a Public High School in 1972, and I’ll send my kids to one too.” Wake up, guys! There are about seven schools in the Bay Area where anyone with money should allow their kids to go (University, Lowell, Bellarmine, Menlo, Crystal Springs, Sacred Heart, Castilleja).
Geeze — you guys perform fantastic economic analysis, then you talk about which public high schools you want to send your kids to? As one who watched 1/2 of his graduating class go to Ivy-caliber colleges, let me make something clear: if you can afford it, send your kid to private school!
that’s some kind of inflation…
Enoughwithboosterism,
When I talked about places where the land was worth nothing and were clearly positioned for a crash, I was NOT talking about Palo Alto (or Atherton, Los Altos, Woodside, Sausolito, etc.) These are luxury areas that people will want to live… they are the suburban equivalents of Pac Heights or Russian Hill, and will hold their value while undesirable areas like Antioch and R10 sink 50%.
On an unrelated note, I hear a lot of people discussing public schools in the same breathe as 8-figure net worths. Is this a joke? Are you seriously sending your kids to public schools?
Sounds to me like the classic “I graduated from a Public High School in 1972, and I’ll send my kids to one too.” Wake up, guys! There are about seven schools in the Bay Area where anyone with money should allow their kids to go (University, Lowell, Bellarmine, Menlo, Crystal Springs, Sacred Heart, Castilleja).
Geeze — you guys perform fantastic economic analysis, then you talk about which public high schools you want to send your kids to? As one who watched 1/2 of his graduating class go to Ivy-caliber colleges, let me make something clear: if you can afford it, send your kid to private school!
“On an unrelated note, I hear a lot of people discussing public schools in the same breathe as 8-figure net worths? Is this a joke? Are you seriously sending your kids to public schools?”
On this, I wholeheartedly agree with NewBuyer. Public elementary school in SF is really not an option for sensible people who have the means to provide a better environment for their kds, although there are (maybe) 3 or 4 school options that are “less bad”.
The public elementary schools in Tiburon (and I suspect other “high end” suburbs) seem to be reasonably good (I have a child just starting out in this system – it was a last minute decision because he is too young for most of the private schools in SF), but even up here we expect to switch him to a private system within a few years, when this silly “age-cutoff” issue that seems to infect the Bay Area primary school landscape should be less of an issue – I mean, I was still seven years old when I started FOURTH GRADE at a parochial school in the Bronx in the 1970s (just about to turn eight though), and there are kids over SIX in my son’s kindergarten class out here!
All that being said, I have a good friend with a 9-figure net worth who sends his 3 kids to the public school system in Greenwich, CT, so I’m willing to entertain that a very few public school systems might be ok.
EBGuy – Wrong, but I’ll give you one more guess 🙂
the surviving investment and commercial banks will just laugh about the whole thing
Ladies and gentlemen, we have just gone Through the Looking Glass-Steagall Act (don’t worry, we’ve got the FDIC this time around).
Alice (MS & GS, too):
I wonder if I’ve been changed in the night? Let me think. Was I the same when I got up this morning? I almost think I can remember feeling a little different. But if I’m not the same, the next question is ‘Who in the world am I?’ Ah, that’s the great puzzle!
Milkshake, I am trying to pencil out the over $100 million per mile construction cost for the BART to SFO extension. Don’t worry, though, our BRT boondoggle over here will take away traffic lanes in order to convince the “unbelievers” to get out of their cars 🙂
EBGuy – I see your BART to SFO @ $100M/mile, and raise one Hwy-237/Guadalupe River project at least $600M/mile. (using a very conservative estimate of that project’s cost)
While I agree that BART to SFO was an inefficient, bloated project shoehorned around preexisting railways and freeways, it at least provides a new service where none existed before. The Hwy-237/Guadalupe River project on the other hand only brought the roadway “up to code”.
See, you can prove anything if you cherry pick projects. Most road projects don’t cost $600M/mile. Nor do rail projects cost $100M/mile.
Most people vastly underestimate the costs involved in a car based transportation scheme. Yeah, public transit is expensive and we do a pretty poor job of developing them here in the bay area. We also do a similarly poor job of developing automobile based projects which have costs intrinsically greater than public transit.
I doubt many people understand how costly an auto based transportation system is. It’s way more than the car+gas+service+insurance+DMV that demand immediate, noticeable cash. The rest goes mostly unnoticed hence the continued subsidies of auto transport.
^^^How about the $2 billion+ per mile for the new Bay Bridge eastern span?
The rest goes mostly unnoticed hence the continued subsidies of auto transport.
Milkshake, what is this unnoticed rest that I am missing? Is it like the carbon emissions of a near empty transit bus. Or something like this: Since July 2002, Muni, which like other city agencies does not have insurance, has paid out about $66 million to people.
Three notable costs that are not borne by car drivers in general are:
1) “Free” parking – everyone pays for something that only a subset of the population uses. Perhaps this makes sense in some place like a suburban mall, where pretty much everyone gets there by auto, but it makes no sense economically to devote 40% of our cities real estate to giving people a place to store their autos for free. This subsidy is worth $1000-2000 per car per year.
2) Accidents – some of this is borne in the cost of auto insurance, but there is a huge effect on the overall economy from the 4M people in injured and 40k killed every year in auto accidents.
3) Air quality – there is a considerable negative health effect caused by all the air pollution from autos that is mostly borne by the elderly and children. Car drivers do not pay this cost.
This does not even include all the cost to build and maintain and police roadways that is not covered by the gasoline tax, which is substantial.