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If you're in it for the long haul, then it was a very wise decision. The bay area, specifically San Francisco, is one of the best real estate purchases anyone

If you're in it for the long haul, then it was a very wise decision. The bay area, specifically San Francisco, is one of the best real estate purchases anyone can make. It's geographically constrained and has historically shown to gain value over the past 100 years CONSISTENTLY. There will be some small bumps in the road here or there, but when you look back in 20, or 30 years, I can almost guarantee you're going to see pretty solid returns. At least you can rest easy knowing it was perhaps the safest real estate investment anyone (who can afford it) could make.

rpearl 9y ago
The fact that real estate is so fundamentally an investment here (in the US/in the western world) is a deep underlying part of the problem. I agree - this person made the right decision, from their point of view, and it will be a good return on investment. But I'm definitely sort of existentially disappointed in the sort of social system that makes housing an investment like this.
- pcwalton 9y ago
  Me too. I would take 0% return on investment and reasonable housing costs over obscene housing prices and some return on investment in a heartbeat. For people who just want a comfortable safety net for themselves and their children and not speculation, investments should be liquid and diversified, not tied up in one illiquid asset.
- rubicon33 9y ago
  You and me both brother. Want to get REALLY depressed? Consider this FACT: Foreign investors (rich people) can purchase homes in the US (San Francisco), and have no requirement to live in them, or use them. They can be purchased as purely speculative investments and it happens ALL THE TIME. I spoke with a real estate agent at a major SF firm, and asked them point blank - WHO can afford these insane home prices? He generated a nice little chart for me of the buyers by career. Software Engineers was number 4. #1 - Foreign Investors (mainly Chinese) #2 - Trust funds #3 - I forget (this was 4 years ago) #4 - Software Engineer How / why it's legal for foreign investors to hold onto homes that people could be living in is beyond me. It destroys communities, and seriously hurts everyone.
seanp2k2 9y ago
The thing holding me back is that I don't think it's sustainable to have small single-family homes going for >$1m in tear-down condition. It might not get hit with a huge correction, but I can't see these properties being worth $5m in 2028. No one can predict the future, but I don't see how it can keep going at anywhere near the pace it's currently going.
- jjeaff 9y ago
  That $1m is for the land. The tear down condition home can be upgraded ad-infintum. Look at the tiny London flats right now where they are building multiple stories down into the ground.
seanmcdirmid 9y ago
The 1990s weren’t that long ago. Anyone who believes markets can rise forever is in for a shock when they slide.
- ows_vs_obama 9y ago
  They can rise forever, thanks to inflation.
oxymoran 9y ago
I do not agree. You assume that things don’t change. The past 100 years doesn’t matter at all because the past 80 years are starkly different than the last 20 years. It’s not only the local housing bubble that one needs to be concerned about, it’s the stock market, specifically tech, bubble in general that should give rise to concern. While your city is culturally diverse, it is economically homogeneous. Sure, a stock market correction or downturn hurts the whole country, it specifically impacts those who overpaid for assets. If you can’t pay the mortgage for the next couple years, does it really matter that it will undoubtedly bounce back in 5-10 years? Never buy an assessment that is overpriced. Housing in the Bay Area is obviously and unarguably overpriced because supply is artificially suppressed.

rpearl 9y ago

The fact that real estate is so fundamentally an investment here (in the US/in the western world) is a deep underlying part of the problem. I agree - this person made the right decision, from their point of view, and it will be a good return on investment. But I'm definitely sort of existentially disappointed in the sort of social system that makes housing an investment like this.

pcwalton 9y ago
Me too. I would take 0% return on investment and reasonable housing costs over obscene housing prices and some return on investment in a heartbeat. For people who just want a comfortable safety net for themselves and their children and not speculation, investments should be liquid and diversified, not tied up in one illiquid asset.
rubicon33 9y ago
You and me both brother. Want to get REALLY depressed? Consider this FACT: Foreign investors (rich people) can purchase homes in the US (San Francisco), and have no requirement to live in them, or use them. They can be purchased as purely speculative investments and it happens ALL THE TIME. I spoke with a real estate agent at a major SF firm, and asked them point blank - WHO can afford these insane home prices? He generated a nice little chart for me of the buyers by career. Software Engineers was number 4. #1 - Foreign Investors (mainly Chinese) #2 - Trust funds #3 - I forget (this was 4 years ago) #4 - Software Engineer How / why it's legal for foreign investors to hold onto homes that people could be living in is beyond me. It destroys communities, and seriously hurts everyone.

seanp2k2 9y ago

The thing holding me back is that I don't think it's sustainable to have small single-family homes going for >$1m in tear-down condition. It might not get hit with a huge correction, but I can't see these properties being worth $5m in 2028. No one can predict the future, but I don't see how it can keep going at anywhere near the pace it's currently going.

jjeaff 9y ago
That $1m is for the land. The tear down condition home can be upgraded ad-infintum. Look at the tiny London flats right now where they are building multiple stories down into the ground.

seanmcdirmid 9y ago

The 1990s weren’t that long ago. Anyone who believes markets can rise forever is in for a shock when they slide.

ows_vs_obama 9y ago
They can rise forever, thanks to inflation.

oxymoran 9y ago

I do not agree. You assume that things don’t change. The past 100 years doesn’t matter at all because the past 80 years are starkly different than the last 20 years. It’s not only the local housing bubble that one needs to be concerned about, it’s the stock market, specifically tech, bubble in general that should give rise to concern. While your city is culturally diverse, it is economically homogeneous. Sure, a stock market correction or downturn hurts the whole country, it specifically impacts those who overpaid for assets. If you can’t pay the mortgage for the next couple years, does it really matter that it will undoubtedly bounce back in 5-10 years? Never buy an assessment that is overpriced. Housing in the Bay Area is obviously and unarguably overpriced because supply is artificially suppressed.