Learning from the past. It’s a popular idea after any big downturn, particularly among first-time home buyers apprehensive about making their first major financial decision. But the problem is that first-time buyers are like generals: they learn everything about the last war, but the next war is completely different.
My ears were burning, and now I know why: I just got a pingback telling me that a link to one of my real estate posts was introduced as evidence in a Ferrari chat room debate on whether Ferrari prices are in bubble territory. This would be incomprehensible unless you understand the powerful effect bubbles, Ferraris and Silicon Valley real estate have on the general imagination. I’m not sure I understand it myself.
Are single-family homes a better investment than condos and townhomes? Are neighborhoods with highly-regarded schools a better investment than neighborhoods without?
The intensity and longevity of this boom continues to amaze me, and this isn’t my first rodeo.
People who’ve “always wanted to get into real estate” usually wait until there’s absolutely positively no doubt that real estate is back! back! back! Then they get their license and join a brokerage. It makes sense intuitively, which means it’s neither a particularly good idea nor a particularly bad idea. It’s just an idea.
“Bay Area home prices are nearing their pre-recession all-time highs as sales all around the Bay soar, according to a recent report by CoreLogic, the La Jolla-based real estate information firm,” says Mike James of Coldwell Banker. I’m sure Mike knows that Silicon Valley prices equaled their previous peaks several years ago, then moved on from there. “The median price of all new and existing homes in the Bay Area in June (the most recent data reported) was $660,000, a 6.8 percent rise from a year ago and the highest level since prices hit their peak of $665,000 in June and July of 2007.” I’m also sure Mike knows that top-end Silicon Valley prices didn’t peak until early 2008.
One of the favorite real estate questions on the Internet these days is “will higher interest rates lower home prices”. It’s a question that assumes a nice, clean, direct correlation between mortgage rates and the Fed’s fund rate that doesn’t exist even in a simple world, let alone the real world, let alone the real world of the past few years. But to anyone asking this question, I can tell them with a high degree of certainty that the answer is “no”.
Baby Boomers aren’t budging from their homes, says the California Association of Realtors, and it’s not because they’ve forgotten where they put their car keys. At least that’s not the main reason.