If someone offered me the bet, "Will East Bay real estate prices be 31% lower in 5 years?" I would take it in a flash. Yet this is the prediction CNN Money just rolled out (click here for article). They base their projection largely on a return to normal of the relationship between home prices and rents. They argue that "People typically won't spend more in monthly costs to own a home than they would to rent. " Nonsense.
By the way, their definition of the East Bay extends to Walnut Creek, Concord and beyond. Be wary of broad analysis that subsumes many markets. I would be most careful in markets that have been growing very rapidly in recent years and those where large amounts of raw land--build able lots, that is--is still available. Those living in mature markets like much of Berkeley and Oakland are much better off than those in Las Vegas.
Unless you like to gamble.
San Francisco Chronicle Real Estate
Thursday, November 8, 2007
Dire Forecast fron CNN?
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1 comments:
Hugh, you write with great style and I couldn't agree more with your POV on this "prediction" by CNN. Of course there's are many premiums that home owners realize versus renters. Pride of ownership, tax benefits, and an investment you can live in are three reasons people will always "reach" to own their own home. And of course we are insulated from market forces that will probably push prices down in general -- because there will always be more people who want to live in the "inner" Bay Area than housing stock to accomodate them. Simple supply and demand keeps the wind at our backs. --Skip Fogarty, Rockridge resident
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