One thing that puzzles me about SF real estate-the phenomenon of slums in close proximity to million dollar plus housing! Consider the area south of MISSION Ave.-it is run down and has abandoned buildings! Yet, two blocks away, and you have 2 million $ condos-why is this?
Right, but we have had a very severe recession here. During the bubble the housing prices were propped up by options, high salaries, and a rosy view of the future. That all collapsed. I’m sure the interest rates helped. Now the job market and the stock market is coming back, and unless interest rates really soar I can’t see prices dropping a lot.
A lot of people refinanced at low rates - why sell unless one has to? It’s an election year -I doubt interest rates are going to skyrocket until November 2004.
I was surprised the prices didn’t drop, but without a steep increase in interest rates and/or a crash in high tech, I don’t think they are going to in the next few years, at least.
I am in SoCal, and the prices haven’t gone down in years. Our first house (bought in Anaheim in 1999) went up in value over 50% in two years. We sold it in 2002 and bought another home, which has gone up in value $100K plus in just over a year.
It is crazy, sure, especially to folks that don’t live here. But our home prices have been going steadily upwards for the last 30 years, at least where I am. My parents bought a house 31 years ago for $60,000 that is now worth about $750,000. Yes, they still own it.
There is no bubble, it’s just the way things are here. When times were good, home prices went up. When things were bad, home prices went up. In Orange county, a home increased in value 8% a year for the last 20 years, averaged out over good and bad years.
It’s the best investment you can make in SoCal. It’s just tough to get into the market now. My SIL and her husband desapir of ever finding a house in LA that they can afford, that isn’t in a slum.
Thanks for all the excellent opinions. I just want to comment on this particular statement, because I know it’s not true. Home prices always go up over the long term, but definitely not steadily over the last 30 years. There was a huge crash in the early 90s; I know people who ended up with negative equity for up to 10 years. From what I understand, lots and lots of people were stuck in an inextricable financial situation and ended up simply walking away from the deal and forfeiting their houses. In Orange County, for example, the median price went from $242,358 steadily down to $209,400 between 1990 and 1995. http://www.losangelesalmanac.com/topics/Economy/ec37.htm And I believe the crash was preceded by the same kind of extreme price increases that we’re seeing right now. What I’m trying to get at in this thread is why people believe that the situation is not analagous now. Most people didn’t know they were in a bubble in the late 80s; how are we sure we’re not in a bubble now? In other words, what factors apply now that didn’t apply in 1989?
You may be right, as I have no cite as yet.
However, as I am not in the market for the short term, I have no doubts that my properties will go up in value as they have done for the last 20 years.
IIRC, the crash in the early '90s was a result of the drop in the aerospace industry which was a job driver in Southern California. I remember seeing one news report about a town, close to a closed plant and nothing else, where a large proportion of the houses were shuttered because of negative equity. It also happened in Texas and Lousiana about 1980 because of the oil crash and high interest rates - we had to finance the buyer of our house for years until the rates went down.
Like I said, I was surprised that this did not happen in the Bay Area over the past three years. Perhaps it was because of the large number of two paycheck families. Perhaps it was the low interest rates.
Does anyone have data on the average percentage of equity? I’d worry that wih the increase in home equity loans, even a small decrease in home value, not enough to matter usually, could trigger a crash where many people wind up with negative equity and cash flow problems. Using home equity loans to pay off credit card bills while not changing ones buying habits seems like a recipe for disaster. If there is a crash, that is where I think it will come from.
Here are two of the many, many smart money articles, not written by Real Estate or Lending folks, saying that Housing prices are indeed at or nearing a few year high, fueled by historically low interest rates.
http://money.cnn.com/2003/11/07/pf/yourhome/rates_and_affordability/
http://www.findarticles.com/cf_dls/m1093/6_45/95629328/p1/article.jhtml?term=
I would be surprised if a majority of non-interested financial advisors thought that the 3-7 year picture was favorable to a Real Estate investment. That is the key.
If you are buying a home, and expect to be there 10 years, of course you will recoup and make money. If you groove on imaginary equity you are building up, cool.
But if you are planning your near term future based on 18% p/yr realestate run up on your house you are … well you should speak to the people who were going to be NASDAQ millioniares because we had gotten ‘rid of the business cycle’ and retirees had ‘no where else to put thier money’.
The good thing about residential Real estate is that it has always recouped its value in the US – usually inside a decade
My mom bought a house 30 years ago for $43k that is now worth about 1.5 million.
No, she doesn’t own it. 
Rats. Doesn’t that suck?
My parents are currently living in the 100+ year old beach house my grandfather bought for $4500 in the mid-1940’s, and it’s probably worth about $1 million. But it’s not like they’d ever take out a morgage on it or sell it, so it’s not “real” money.