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San Francisco Home Prices Fell for the First Time in Four Years in March

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Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#211

Post by refurb »

Domenic_S wrote: post #76
refurb wrote: post #47

Earlier quoted context omitted.

True, but what is more risky? Having most of your money in a single, non-liquid asset with a very local market or having most of your money in a diversified, liquid asset? I'm not saying owning a home is a bad idea, just having 80%+ of your money in it.

Diversification can include real estate. Besides, it's the leverage. You can buy $625,500 of house with 2.5% down + a monthly payment with a ~4% vig. Nowhere else can you get that kind of money at that kind of rate with ~$16k down. Then if you're smart you invest other money other places to diversify. You can live in house, unlike Vanguard funds. But you should have both.

You are correct, but with leverage comes risk.

Here is my nightmare scenario: I live in the Bay area and if I wanted to buy a single-family house, I'd be looking at $900K at a minimum (if you avoid the really run-down/dangerous areas of the city).

Let's say I have the down payment of 20%. That's $180K. I buy the house and I can swing the $6000 per month in PMI, utilities, maintenance, etc.

Then the market takes a dip of 20%. If you own a $200K home, the hit would be $40K. That would suck, but with a good paying job, you could handle it.

In SF, a 20% drop (still within the realm of possibility) means you just lost $200K (if you include the other costs of closing on the home). $200K would be 5+ years of savings down the tubes.

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#212

Post by dmode »

jordanb wrote: post #4

I think that SV has probably been in recession for the last few quarters judging from some friends I have who have been interviewing. Everyone is interviewing like crazy but few are hiring.

Ha ha. You think SV is in recession because few friends of you are interviewing. SV has ~3% unemployment rate, continuing increase in house prices, billions of dollars in VC funding, ever expanding job market etc. I just sold my home last month in a span of one weekend. I had 400 people show up for the open house and received 15 bids. The highest one was 50K over asking, with 50% down.

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#213

Post by refurb »

scrumper wrote: post #114
refurb wrote: post #47

Earlier quoted context omitted.

True, but what is more risky? Having most of your money in a single, non-liquid asset with a very local market or having most of your money in a diversified, liquid asset? I'm not saying owning a home is a bad idea, just having 80%+ of your money in it.

Owning $300k of stocks is better than owning a single $300k property for the reason you give. The question becomes a lot fuzzier when you overlay your own need for housing on top of it. What I mean is, if I had $300k cash in the bank and I was renting an apartment I enjoyed, I'd be smarter to invest the $300k in a diversified portfolio than spend all of it on a single rental house and playing landlord. Equally if I h…

I don't disagree. I'm certainly not anti-owning a home, but it's much more risky than people think it is. This is despite all the people who witnessed the 2008 crash.

I see people stretch themselves with a mortgage, dumping every dollar they have in order to make up the down payment. A single-asset investment philosophy. Why do they do it? The only answer I can imagine is that risk of their home going down in value is low. I disagree the risk is that low.

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#214

Post by wwweston »

gorkemyurt wrote: post #102

Developers are finally building in SF.. http://www.bizjournals.com/sanfrancisco/blog/real-estate/201... http://www.socketsite.com/archives/2016/04/san-franciscos-hu... This is very good news, my prediction is that this wave of supply is going to reduce the prices for a while. There is actually still a lot of space in SOMA/Mission Bay/Central Waterfront to build. New construction is all going to be condos rather than…

> This is very good news, my prediction is that this wave of supply is going to reduce the prices for a while.

My prediction is that it may flatten prices (or slow the increase), but the buildout in supply will not reduce prices... because as far as I can tell, housing costs don't fall with supply increases, only from demand drops.

(Anyone know if there's a prediction market for this?)

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#215

Post by mtanski »

kspaans wrote: post #34
reverend_gonzo wrote: post #24

Earlier quoted context omitted.

A number of reasons: 1) You don't pay rent. Once you own the place free and clear, it's yours and you always have a home. 2) While the house depreciates, property may may still appreciate, especially if you live in a nice area, and even more so if you own the land beneath you. 3) There are tax benefits to owning your own house. 4) When you start out, it's usually not that much wealth, since you're taking a loan on it…

> 1) You don't pay rent. Once you own the place free and clear, it's yours and you always have a home. Assuming you can keep up with property taxes! :P Though I understand they can vary a lot from place to place.

Pick a place that has low property taxes and has legal limits on yearly increases. Like CA or NYC on 1 to 3 family homes.

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#216

Post by mtanski »

chrisabrams wrote: post #96
KKKKkkkk1 wrote: post #18

Earlier quoted context omitted.

As a foreigner, I don't understand this attitude. Why would you want all your wealth to be invested in a single leveraged asset that's also depreciating, requires your constant attention and ties you to a single locale?

Real Estate is an awesome investment, but when done correctly. The irrationalness of buying a house gets in the way at times. To address some of your concerns: - Time: It only depreciates if you buy at the top of the cycle and sell before it recovers it's value - assuming you're able to stay in a house long enough for the cycle to recover. Many people can't wait for cycles - when it's time to move, it's time to move.…

> Value is correlated to many things, but timing is one that cannot be ignored.

The real estate market as a general rule moves slower then the stock market (when it does crash in a day or a week). Timing the stock market is hard, much more doable with the real estate market.

Example Houston, clearly the area is losing oil and gas jobs which make a decent chunk of their economy and also drive commerce downstream locally (car sales, entertainment, etc...) but the house prices currently do not reflect that reality in Houston.

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#217

Post by kspaans »

refurb wrote: post #211
Domenic_S wrote: post #76

Earlier quoted context omitted.

Diversification can include real estate. Besides, it's the leverage. You can buy $625,500 of house with 2.5% down + a monthly payment with a ~4% vig. Nowhere else can you get that kind of money at that kind of rate with ~$16k down. Then if you're smart you invest other money other places to diversify. You can live in house, unlike Vanguard funds. But you should have both.

You are correct, but with leverage comes risk. Here is my nightmare scenario: I live in the Bay area and if I wanted to buy a single-family house, I'd be looking at $900K at a minimum (if you avoid the really run-down/dangerous areas of the city). Let's say I have the down payment of 20%. That's $180K. I buy the house and I can swing the $6000 per month in PMI, utilities, maintenance, etc. Then the market takes a dip…

You did _not_ lose anything! That's a paper loss! Are you a speculator expecting to sell the house in 2-4 years? If you went to all of that effort to buy a _family_ home, presumably you are planning on staying there for a while (possibly long enough for the price to recover).

On the other hand, I agree that now you're underwater and if you're forced to sell you'd be in trouble. But if there was a risk you'd have to sell the house so soon, why would you buy it in the first place?

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#218

Post by muzz »

naakkupoochi wrote: post #71

East Bay - My neighbors on either side sold their homes recently (last week). The house on the right sold for 75K above asking price. The one one the left sold for 90K above asking price (around 20 offers for each house). Listing price for both houses were already high.

That really just means that both houses had too low of a listing price.

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#219

Post by muzz »

beamatronic wrote: post #150
gigawhat wrote: post #146

Weirdly, I own a house and think I'd be better off if prices fell-- fell a lot. I bought a few years ago and would be happy if prices uniformly dropped to those levels. Why? I want a 50% bigger/nicer house in the same area. But bigger/nicer houses have increased in price proportionally to mine. So the gap in absolute dollars between what I have and what I want has expanded quite a bit. My income has increased, but no…

Not to mention: Property taxes are "forever", even with Prop 13. In Santa Clara County, in the Bay Area, taxes are about 1%. So if your purchase price is $1,000,000, your taxes are about $10,000 per year, half payable in December and half in April.

They can go up a miniscule amount, 2%. So not exactly forever, but relatively close

Re: San Francisco Home Prices Fell for the First Time in Four Years in March

#220

Post by Domenic_S »

refurb wrote: post #211
Domenic_S wrote: post #76

Earlier quoted context omitted.

Diversification can include real estate. Besides, it's the leverage. You can buy $625,500 of house with 2.5% down + a monthly payment with a ~4% vig. Nowhere else can you get that kind of money at that kind of rate with ~$16k down. Then if you're smart you invest other money other places to diversify. You can live in house, unlike Vanguard funds. But you should have both.

You are correct, but with leverage comes risk. Here is my nightmare scenario: I live in the Bay area and if I wanted to buy a single-family house, I'd be looking at $900K at a minimum (if you avoid the really run-down/dangerous areas of the city). Let's say I have the down payment of 20%. That's $180K. I buy the house and I can swing the $6000 per month in PMI, utilities, maintenance, etc. Then the market takes a dip…

PMI is mortgage insurance, which you do not have to pay with 20% down. You may have meant PITI (principle, interest, taxes & insurance) which for that example situation would be about $4500/mo.

Even so, assuming your mortgage is fixed rate, your payments don't change regardless of the value of your home. Whether it's worth $1 today or $10MM today, it only matters what you paid. Like the other commenter said, it's a paper loss.

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