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|June 14, 2000|
Roti, kapda? Sure. Makaan? Hmm, let's see...
I'm still shaking my head over this incident I heard about the other night.
A few days ago I'd gone to this dinner party at friend's house. Somewhere between the post-dinner liqueurs and dessert, the talk turned, as is inevitable in most Bay Area parties, to the housing situation.
There are really only two topics about which people exhibit any real animation in the Bay Area- stock tips for their portfolio and the housing situation. I guess these are two things everyone identifies with, regardless of background, and about which everyone has a personal opinion, usually delivered with some emotion.
That the housing prices across Silicon Valley have been going through the roof for the last four years is well known. And for those who don't know, here's a bit of background.
People are readily paying prices of half a million dollars or more for houses that based on house age and plot size, in other parts of the country, would be difficult to sell at a quarter that price.
Sticker shock at the high markups in real estate is common, especially if you are from a different part of the country. Real estate agents openly quote the real estate prices in Hong Kong and Bombay to potential buyers. The demand for houses in good school districts and central locations like Cupertino and Sunnyvale is just phenomenal. Listings sell even before they hit the market or the same day. Basically old-timers taking advantage of the boom and unloading their 30-40 year old houses for nearly double the price.
This guy I know made an offer on a house in Cupertino. The price was a 100,000 more than they were initially ready to spend. But he wanted the right schools for his daughter and they liked the neighborhood so they decided to make an offer. Two hours later the realtor calls back. Another client had topped their offer by 50,000 more and was ready to pay cash down. Ready to pay cash! Who the hell carries 750K around in his pocket?
Every day we get to hear of more outrageous experiences. The price the house listed at is a mere formality. Listed prices are no longer the price at which a house sells. They are merely a foundation from which the bidding takes off.
Silent bidding, unlike an auction where you can see the counter bids and raise your price accordingly. You make an educated guess about what the house must be worth in today's inflated market and write it down on a sheet of paper. That's it. That's your bid. Mostly people put down the maximum they can afford to pay, usually the combined value of all their assets. Get this. You don't bid on what you think the house should be worth, you bid on what you can afford to pay for that house, on what that house means to you.
How do you put a dollar value on your dreams and hopes? A dollar-estimate on the life you hope to lead in that house with your family, on raising your kids? Beats me. So basically you put down a number, any number. Here, you say, this is what my wife and I can hope to make in our lifetimes. And here's how much we have in stocks and jewellery. Here, take it all, just give us a house to live in. And in exchange, for the next thirty years we'll undertake this humongous debt and try to discharge it in monthly installments.
Only in Silicon Valley. I mean, just think about it. Anywhere else in the country or the world for that matter, if you said you were ready to spend half a mil, the real estate agents would be all over you. Half a million dollars, that's like around Rs 2.5 crore. And here people are showing up with fully approved loans for that amount and still being given the run-around.
And for what? The houses are old, the plot sizes are tiny. Rarely do you even see something even as big as 10,000 sq feet; 4000 or 5000 sq feet is more common. On the East Coast or in the South, you could easily get one or two acres of land with a mansion on it, for the price people are paying here for a three-bedroom single family home on the peninsula.
And yes, before you point it out, I am aware that Maryland or Louisiana are not Silicon Valley.
OK, back to the incident I heard about the other day. That's what started off all this in the first place. These friends of mine, let's call them Savita and Kishan, were telling us about their attempt to purchase a home.
"This happened a couple of years ago." Savita began. "My friend had told me about this area, Evergreen. It's a bit of a drive, south of the peninsula. But it was one of the few places where new homes were still being built and the price seemed within affordable range. Besides, we really liked one of the floor plans at the model homes. And so we decided to sign up at the realtor's office."
"A few days later the office called us back. Construction of the new homes is conducted in phases. A new phase would be coming up shortly and were we still interested? Naturally we jumped at it."
"Little did we know what that 'yes' would involve. We were asked to come to their office on the day of the release would be announced and sign up again. The office opens at 10 am. We showed up at 10.07. There were already six people ahead of us." She paused dramatically. "So we signed up, hoping like crazy that there would be at least seven houses of different plans released in that phase."
"And?" The rest of us asked.
Well, yes, there were seven." Her husband, Kishan, continued. "But nine people signed up before the phase was declared sold-out. So the last two were waitlisted. And so it was up to us, each of the seven signatories to 'prove' the sincerity of our intentions. So there would be a line for the houses and the line had to be maintained till the sales office opened its doors on the day of the actual sale. So we had to make we didn't lose our place for, I forget, how many days..."
"Five days." Savita took up the story. "So we all got together, the seven of us and made up these rules. Everybody had to come back and sign in every day once at 9 am and once at 4 pm. Principals only, that means husband and wife; you couldn't ask your friend to come do it for you, for instance. And if you didn't, it meant you weren't serious and so you'd lose your spot and the first person on the wait-list would be called instead.
"But that wasn't all. In addition we decided there would be a camp out. Each signatory was to camp out in the parking lot of the realtor's office for 4 hours. We figured out the schedule; seven of us and 5 days to go so that made 30 shifts of 4 hours each. We chronologically assigned shifts. Each family made sure they could recognize the persons both ahead and behind in the 'line' and took down the necessary contact information -- phone, cell etc. I think we ended up doing it four times. Two were day shifts and two were at night. So round the clock and for five days, at least one member of those seven families was in that parking lot."
Wasn't it dangerous? And what about work?
"Oh, you sit in your parked car and make sure that the doors are locked. As for work, it was the least of our worries." Kishan said. "But yes, we didn't get much done that week. By the time we drove all the way out and signed up in the morning and then came in to work, a couple of hours later it was time to go sign up again. Savita did the day shifts and then we did the night shift together.
"Bear in mind, at this point we had no idea of the actual price these houses would sell for or even the actual plot sizes! So all this was just to have the privilege of having first crack at one of the seven new houses being built.
But why? And can anyone legally ask you to do this?
"Oh, no one told us to do this. The housing sales office was completely out of the picture. This was a mutual decision by the potential buyers. Basically it was important to maintain the line and show that it was in place to prevent some XYZ showing up on the actual sale day and wanting first pick. Also in part, it was to prevent another line from starting up. That could have led to a dispute about which line started first and the sales office could not be expected to arbitrate. It was up to us to prove beyond doubt that the first person in our line was the candidate for the first pick."
Big deal, you might think. But wait there's more.
"In the end we didn't get the house." Savita admitted wryly. "As it turned out, only two houses of the plan we liked were to be built and people ahead of us in the 'line' changed their minds and picked both. So we had the choice of one of the other plans or of opting out. We decided to opt out. Like I said, this was a couple of years ago. Now I hear it's much worse."
Great. They go through all this and they still didn't get a house at the end of it!
Savita and Kishan's story about standing in line reminded me of my childhood in India. I remember how as a youngster in the 70's we would have to stand in line for raashan and the yucky milk supplied by the Delhi Milk Scheme service. And how when the fresh supplies came in, the news would fly around the neighborhood. We kids would do our part by 'keeping the place' in the 'line' till an adult could come and take over. Sound familiar? Well, It's two decades later, we are all in a different country but we still can't seem to get away from these lines. We have all worked hard, come far in life, made enough, more than enough, in absolute terms, some of us maybe even millions, but what's the use? In those days we stood in line for milk and staples, now we stand in line for a home and our children's admissions.
At the end of the day everybody else in that 'line' still has approximately the same net worth as you do.
Just another of the many contradictions in Silicon Valley today.
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