My strategy is to buy a house that I could live in for 10 years at a fixed interest rate (which are still historically low). That way, I can get a great interest rate and be positioned to wait out any temporary market "price correction"
This is a good strategy actually. But don't feel like a foll when you are living in a $400,000 house that you paid $650,000 for. When this happens your interest rate will not feel so low because your monthly note will be high compared to the other homes that have become available on the market.
I agree with you that prices will probably cool but. . .your example assumes an approximately 40% reduction in prices. I'm no economist, but I think the prediction is that the market will cool somewhere between 15-25%. Moreover, the biggest drop in prices will not be the starter home market--these houses will always have the highest demand--but rather in more expensive homes. Finally, if interest rates go the way they did in the 80s (12% plus), my payment on a $650 K house with a 6.5% rate would still be CHEAPER than on a $500 K house with a 12% rate, assuming a 23% drop in price. Just my two cents.
My company does big tree work for people in Berkeley and we do business with a lot of millionaires. One client was getting ready to sell his house. He owned it for like a year and was flipping it for a million dollar profit! The guy that owned this house was in charge of getting big baller whales into casinos and he'd get a cut of whatever the casino made on these guys.
I am also looking to buy a commercial building with my boy EH so I am not just talking shit and telling others what to do. I am in need of serious space.
We were really serious about it and last summer had our Lawyer / Real Estate dude looking with us. We even were lining up financing and decided to bail. It was just too high at the time.
Our instinct has paid off so far as the commercial buildings have now started to drop too.
We wound up leasing a 5500 square foot building just West of Downtown L.A. for really, really cheap. 5 year lease.
By the time the lease is up on that place we will be buying entire city blocks for $100K. That of course will be after Osama blows up the Port of LA and the bird flu kills everyone but at least we won't have have a note we can't afford!
I don't deny that SF could be in for a downturn. I'm only suggesting that the market has different forces at play than the rest of CA.
However, scary fact: 82 precent of recent home loans in SF are adjustable mortgages. Obviously, one of the main reason to take out these loans is on the theory that you will sell the house in the short and make a hefty profit, thus making any future gains in interest rates negligble.
Even in the bay housing prices will go down in the near future. Most housing has tripled in the last ten years, that is such a violent surge for real estate. Long term, a house in the bay will always be a good investment (until the big one anyway) But I bet for the next five or so years there will be a pretty significant correction.
San Francisco or anyplace else is not immune from a dip in real estate values. Making a statement like this the equivilent of a dot commer five years ago saying that the stock market will never go down. It is the exact moment that people begin to believe these kind of wild sentiments that the market usually tanks.
ap
The dotcom boom started and ended HERE in the Bay Area and it only caused a momentary blip big picture wise in home prices. 450,000 highly paid computer/internet workers losing their jobs did not stop the increase.
Again, I'm not saying they'll always go up, but the Bay Area has defied all predictions based upon housing markets/trends in the rest of the country.
Far be it for me to disagree with Anthony but yeah man, as someone living in the middle of this shit, I have to concur with my peers in suggesting that while I don't doubt housing sales will COOL, I can't see a big dip coming.
Frankly, I'm just excited to see the cooldown. It's not like housing is affordable by any figment of the imagination, but houses are starting to actually sell BELOW asking price. When was the last time that happened?
Of course, this is all moot since I'm moving to LA. I hope AP's predictions turn out to be prescient down South so me and the fam can buy a spot down there at some point that doesn't involve moving to Moreno Valley.
Comments
I agree with you that prices will probably cool but. . .your example assumes an approximately 40% reduction in prices. I'm no economist, but I think the prediction is that the market will cool somewhere between 15-25%. Moreover, the biggest drop in prices will not be the starter home market--these houses will always have the highest demand--but rather in more expensive homes. Finally, if interest rates go the way they did in the 80s (12% plus), my payment on a $650 K house with a 6.5% rate would still be CHEAPER than on a $500 K house with a 12% rate, assuming a 23% drop in price. Just my two cents.
plaese to stop hatting.
I can't wait!
no hatting. i would be real lucky if i could end up in EC.
I don't deny that SF could be in for a downturn. I'm only suggesting that the market has different forces at play than the rest of CA.
However, scary fact: 82 precent of recent home loans in SF are adjustable mortgages. Obviously, one of the main reason to take out these loans is on the theory that you will sell the house in the short and make a hefty profit, thus making any future gains in interest rates negligble.
If you buy property in Emmeryville it says in the contract: "in the event of an Earthquake, soil source may liquify."
I want to buy a house within the next few years. I love my bay....
..but I think I might go for SanDiego instead
I'll probably wind up flipping a coin.
The dotcom boom started and ended HERE in the Bay Area and it only caused a momentary blip big picture wise in home prices. 450,000 highly paid computer/internet workers losing their jobs did not stop the increase.
Again, I'm not saying they'll always go up, but the Bay Area has defied all predictions based upon housing markets/trends in the rest of the country.
Frankly, I'm just excited to see the cooldown. It's not like housing is affordable by any figment of the imagination, but houses are starting to actually sell BELOW asking price. When was the last time that happened?
Of course, this is all moot since I'm moving to LA. I hope AP's predictions turn out to be prescient down South so me and the fam can buy a spot down there at some point that doesn't involve moving to Moreno Valley.
BY THE TIME YOU GET DOWN HERE PRICES WILL HAVE DIPPED EVEN FURTHER.
TRY EGALE ROCK BIATCH.
LATER.
AP
eDDIE gALE rOCK?
Maybe if I get a job at Occidental. But I'm trying for Pepperdine - they pay top dollah. Not like I could afford to live in Malibu though.