Why do articles like this come out just before I buy a big house?

Strickly Bidness · #1 03-16-2007, 12:48 AM

http://finance.yahoo.com/real-estate/art...you-think-it-is

Cliff Notes of article: Buying houses is for donkeys. Buying stocks is for sharks.

Can we discuss? I'm about to buy a 1.35 million dollar home in San Fran Bay area and seeing these articles kinda make me concerned. Am I a donkey?

hlacheen · #2 03-16-2007, 01:16 AM

Are you buying it as an investment or as a home???

ahnuld · #3 03-16-2007, 01:25 AM

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Are you buying it as an investment or as a home???

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does it matter? A home is an investment. But im guessing OP plans on living in it.

edtost · #4 03-16-2007, 01:41 AM

[ QUOTE ]
[ QUOTE ]
Are you buying it as an investment or as a home???

[/ QUOTE ]

does it matter? A home is an investment. But im guessing OP plans on living in it.

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yes, it does.

if he's buying it to live in, the relevant comparison is buy vs rent

if he's buying it as an investment, he needs to compare investing in the house to all other securities out there.

(yes, i know this gets a bit muddled up when you consider the option of buying/renting a smaller/cheaper home, but my point is that the two cases are not the same)

mtgordon · #5 03-16-2007, 10:31 AM

Also you tend to make improvements to houses that you live in and just maintain those that you rent out.

Strickly Bidness · #6 03-16-2007, 11:56 AM

I am buying it to live in as my primary residence. My hope is that I can get some appreciation from it and make some bank in <5 years. The home is in the best area of the Bay (San Mateo) and I'm paying like 1.35 million. I would like to be able to turn around and sell it in <5 years for at least 1.5 million but these damn articles get me a little scared. It is possible that I will live there longer, but I'd like to keep the option open to make a decent short-term profit.

maxtower · #7 03-16-2007, 12:11 PM

Don't count on making bank in less than 5 years. The recent runup of home prices was huge, and a lot of economists are predicting we won't see real home price increases for a couple years. An 11% gain in 5 years is certainly possible, but if you are really thinking about moving, why don't you move into a cheaper house and invest the rest of your money?

Strickly Bidness · #8 03-16-2007, 12:27 PM

[ QUOTE ]
Don't count on making bank in less than 5 years. The recent runup of home prices was huge, and a lot of economists are predicting we won't see real home price increases for a couple years. An 11% gain in 5 years is certainly possible, but if you are really thinking about moving, why don't you move into a cheaper house and invest the rest of your money?

[/ QUOTE ]

To be honest, I dont really have any plans to move. I'd just sleep better at night if I knew I could someday sell the house for a profit. I'm kinda confident that I will be able to, but just not sure how long one should expect to wait to do so.

MatthewRyan · #9 03-16-2007, 01:23 PM

The last major eathquote in SF was in 1906, and it was hell there. But my point is that there is about 150 inches of tension (think biggest quake ever) that still need to be shaked out of the faults - and its only a matter of when. For that reason alone Id perosnaly worry

PokerPaul · #10 03-16-2007, 02:18 PM

I am facing a similar question at the moment. Should i buy a nice home or property, or just rent and invest the lump sum.

I have just signed a 1 year lease to rent a nice apartment to give me some time to decide what to do longterm.

All indications to me so far are to rent, but then also have the discipline to invest the monthly difference between the rent checks and what i would have paid going the mortgage/tax/interest route.

San francisco has been a major HOT market though, and maybe buying a huge property, in the hottest suburb of the hottest national market is being a bit risky.

But that article is strongly biased too. For one, i feel that he way over estimated the renovation/upkeep costs to exaggerate his point, and furthermore when he lists all the costs involved in owning a home for thirty years in his first chart, he failed to also list the fact that aftetr the thirty years you'd also be sitting on full equity of your home, which by then should at least have doubled or 2.5X value, which should be subtracted from the overall costs. And in that case you'd be way ahead compared to just renting.