ERICOPOLY

And they did need a bigger house in that timeframe but they had an acre so my father built the extension that added 3 bedrooms. He drew his own plans and framed it all himself and also he did the electrical, floors, finish work and roofing. He used contractors for the windows, drywall, and foundation.

I've said before that I'm no options expert. But I went with shorter term $140 strike at-the-money for some because I don't want to be cut too badly if the stock dropped below that level and because it takes less capital to do so. Plus by going shorter term I'll lose less premium if there is a large move away from strike. The deeper ones are where I picked up some 2024 although some of those are also shorter term because let's face it if the stock takes off to $300 I won't want to be so heavily concentrated in it anymore so why put so much premium at risk.

I don't recall the LTV or income percentage. I believe it was maximum loan they qualified for and I believe they had down payment help from family. Newly married, he was a new engineer (HP) and she was an RN (Stanford).

Briefly I went to school with the kids of Marcus, Millichap, Peery, and Arrillaga. Some people made a crushing amount of money.

$55k was a fortune to them too. They were stretched with interest rates at 9% and it took them years to fully furnish it. But then my father just paid the mortgage off a few years early because he was annoyed by the monthly payment and inflation had made the mortgage payment trivial by the 1990s.

Zillow says it's now $5.1m Just like the rest of the US, up 95x since 1970.

Totally! My parents paid $55,000 for their Los Altos Hills home in 1970. I grew up in that home and they are still there. I just can't appreciate it. Hahaha.

First time buyer of FB today

If I were in the Army I would walk behind the minesweepers. Very sensible.

1st point. The option premiums are $154 for the calls vs $125 for the puts. That differential is $29. That $29 already takes into account the $17 that is in-the-money on the calls, and I'm saying there is an extra $12 to boot. 2nd point. Yes, no margin cost with naked puts so the margin costs needs to be known. However, if this is cash-covered puts the covered calls may be better unless you earn enough interest on your cash to meet or exceed $12.

Yes, cases where the option expires OTM but also when you get put the stock you restart the clock and need to hold yet another 12 months to get to long-term status. Also, notice that at closing the stock SAM was $517 and the Jan 2024 $500 strike call was approximately $154 whereas the $500 strike put was approximately $125. Taxes aside, you are risking less with the covered call strategy because $154 minus $17 (which is the amount in-the-money) is $137 and that differential is $12 greater than the $125 put premium.

Long term put options (that you write) are taxed as short term capital gains no matter how long you are tied up in the contract. So why not instead own the shares and write covered calls?

I agree that the less desirable places have no bidding wars, or at least unremarkable ones.

Here you go. Enjoy: https://www.trulia.com/p/ca/los-altos/1198-richardson-ave-los-altos-ca-94024--2082671675 I grew up close by.

Getting back to the supply not being enough to go around... the wages do more closely track inflation for the lower earners but they have tended to exceed inflation for the upper earners. That's what the whole income inequality argument is about.

Then there has been another effect... the stock market. Take the area around Palo Alto. People there tend to create a new business and raise equity on the stock market. They give equity out to the employees. Suddenly they are not only using their company's present earnings to buy housing, they're also using their share of all of its discounted future cash flows too.

So, people are in fact priced out, yet prices still keep going higher despite that. And there's a reason... My parents can afford pretty much anything in the Bay Area today, because they already live there and have done so since 1970. Many people who live there have done so for a long time. Once you are on the roller coaster, you can stay on it no matter how expensive it gets. Property taxes only climb a max 2% annually due to Proposition 13. So every now and then somebody leaves... and that opens up a spot for one of the hundreds that are waiting for a house. Maybe it's dozens waiting, maybe it's hundreds, I don't know. Point being it's not 2 people bidding on one home. And it goes to the one with the most money. It's the richest guy at the margin that decides Bay Area home prices.

And the 20 years of housing inflation from 1970 to 1990 was far more dramatic in California than the last 20 years.

Yes there are a bunch of people leaving but that occurs from time to time. Oregon, Washington, Idaho, Arizona for decades have seen an influx of Californians. It's what we do. We get the heck out of here when we can. But it never seems to be a lasting trend because it's still desirable despite the taxes. And we don't have a Texan running the state so there's that. Nobody's ratting out their neighbors for having an abortion just to get a bounty.

It's either drive home commuting for hours each way to and from Vacaville or bite the bullet and outbid somebody for a Bay Area home. Then covid hit and people could work remotely and it was like a mushroom cloud on the housing prices in Sacramento. Suddenly they were bidding the crap out of our housing stock and my house is suddenly up nearly a half million or so.

Incomes tracking inflation aside... Scenario 1: There are 1,000 people looking for housing and there are 1,000 homes for sale. Scenario 2: There are 1,000 people looking for housing and there are 500 homes for sale. Scenario 2 will drive up homes faster than wage growth. The reason is that the homes in scenario 2 go to the 500 top earning out of the 1,000 households that are looking. They bid them up. Now you understand Bay Area pricing.

Sad fact is that our investment horizons are temporary. And it's not just one income... it's two now.

I think back in the day the village bard in 1500 made the same inflation adjusted that he made in 1600. So real estate tended to stay the same. Population creep was controlled by medieval medicine. Now we have governments messing with minimum wage and the bard joined Led Zeppelin, etc...

And it explains why housing prices didn't keep pace with inflation in areas of Michigan when the automakers went elsewhere. Nobody brought out the CPI when pricing those homes. The incomes were gone.

That's why homes in Redmond WA increased in value after Microsoft and it's high income earners moved in.