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San Francisco Real Estate: Credit Squeeze Stalling Deals | Add Comment

    • When are people going to learn... 6/16/2009
    ...that the "typical" appreciation level in California (or anyplace else in the US right now) from the last few decades has absoutely nothing to do with the new world we live in. There will be nothing "typical" about the next 20 years... The bubble is going to "pop" at first then slowly fissle for at least a decade. Prices will drop 40% this year then consistently drop another 2-4% per year for a very long time as America SLOWLY digs out of this gigantic over-expansion. Prices went up because of expanding access to credit--and there will be no such expansion (quite the opposite) anywhere on the horizon. California in particular depended on net immigration--but now they are building a giant wall (literally, a wall made of bricks and mortar) to keep immigrants out. Goodbye, population growth. Baby boomers are going to retire and move into smaller houses and cheaper locations. As a hedge against inflation, housing is retarded because it is a credit-based commodity: when interest rates go up, prices go down. Inflation drives interest rates up by definition. Now that the bubble is popped and the free-money era of the US economy has passed, housing is no longer an investment: it's an indulgence. You buy a house with PROFITS from your investments like you buy a nice car or a expensive set of gold clubs. As an "investment", housing is d-e-a-d DEAD. If you want to go into the property management business (good with a wrench and a plunger are you?) then fine, buy some houses and try to make a living. If you want a hedge against inflation try stocks, inflation-indexed t-bills or plain old gold... OP

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      • RE: 6/16/2009
      I disagree. While housing still might have farther to fall, it won't fall for "a very long time," at least in most places around the U.S. The reason for this is that in many places it is now cheaper to buy a home then it is to rent. At that point people will buy, and they should buy. Home ownership is part of our culture, and until this changes people will always desire to own their home. Also, while real estate might not be the best investment I'd pick it over t-bills any day. I can go find thousands of income properties tomorrow that pay me more than double what I'd make from T-bills, even more if I were to use leverage (and that is with property management included). I think one misconception people have in real estate investment is that you have to make your money from appreciation, which is not the case at all. Smart real estate investors buy income properties, and they are in it for the long term.

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        • Good points... 6/16/2009
        Being "in it for the long term" implies that you are counting on long-term appreciation, which in some areas may never materialize. Remember that demographics don't favor housing overall, the current bubble implosion notwithstanding. Population growth won't fill the currently empty houses for decades. Smart stock investors can make money in a down market--any dummy can make money in an up market. The same is true for real estate. The problem is, like stocks back in the .bomb years, the bubble brought out all of the dummies who thought they were really smart but actually were just temporarily lucky. Now real estate just like any other investment that can easily lose if you don't know EXACTLY what you are doing. Hence my advice for more casual investors that don't want to spend a lot of time learning about local markets, regulations, property managers, etc. etc. Unless you are a "pro", you should go for something a lot safer.

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