To buy or rent a home, which is better? Great article (San Francisco: apartment, condo)

[bodyforlife99]

Originally Posted by bmw335xi

Reported and I will follow up with one of the senior mods if no action is taken

Yawn. The irony is it would only be an accusation if you were indeed Ms. Money Penny (since I've never addressed you....you obviously have me confused with someone else). But since you are not, I would be accusing Ms. Money Penny. I actually accused you of nothing. Ms. Money Penny would need to make the complaint for it to be valid. Now that's funny!

[CaliRestoration]

The 2008 crash is almost unprecedented in U.S history with the exception of the Great Depression.

When it began, within a week or two, 12 banks were in danger of collapsing, and when Lehman Brothers actually did collapse, the market lost complete confidence that even companies like General Electric found it hard to get "cash in hand" to run daily operations.

If the FED didn't dump the entirety of its energies into ZIRP, and basically throw trillions of dollars of cash into the open market to create liquidity, I have no doubt that 2008 would have been worse than the Great Depression.

That was the atmosphere during which home prices decreased 8 years ago.

Can anyone imagine something like this happening again, especially in the short term, or even within the next 25 years? The FED would have to be sleeping big time for such a huge crash to occur again in such a short period of time. That's why a 50% drop seems more like wishful thinking (for those who didn't buy enough homes during the 2009-2013 buyer's market).

[bodyforlife99]

Originally Posted by CaliRestoration

That's why a 50% drop seems more like wishful thinking (for those who didn't buy enough homes during the 2009-2013 buyer's market).

I suspect many were far too busy telling home owners how stupid they were and gloating because they were renting.

[CaliRestoration]

Originally Posted by bodyforlife99

I suspect many were far too busy telling home owners how stupid they were and gloating because they were renting.

That did happen. I bought two homes in California, and a primary home out of state at the time. It took up a lot of my cash reserves, but I remember thinking "When will I be able to buy a 4/2 in Laguna Beach with white water views, a brand new wood deck, and 4 car garage again for $1.2 million?" I had friends and even family who were saying that the same house would eventually "settle" at $600,000.

I don't need to say what the house is worth now, but suffice to say it was one of my biggest winning investments thus far in my life besides my primary business.

[TheGreatCurve]

Originally Posted by Upstate67

In silicon valley.

One small section of one state does not = the whole country. Sorry, but the dot com bubble popping did not affect me, or my rentals one iota.

Yes, well this thread is in the SF forum so I assumed were were talking exclusively about Silicon Valley.

Believe me, the dot-com bubble bursting had huge effects on rents here, as I was renting here before, during, and afterwards.

And like I said, rents also dropped between 2008-2011 before they started going up again.

[TheGreatCurve]

Originally Posted by bodyforlife99

And what correlation are you making with the dot-com bubble and now? Let me help you. There is none. Those companies that went belly up weren't making money. It was nothing but they had the "potential" to make money and when investors realized that, they bailed on them. To compare a Facebook, Google, and the like to that is asinine at best. Rents in SF proper came down a few hundred dollars from 2008-11 (which probably accounted for in the ballpark of 15% to 20%...big whoop). And with a 1 bedroom going for $3600 now, maybe you get down to $3000 (wow, that's so much better). Somehow I don't think that's going to stop the whiners from complaining.

The big increase in rents in the past few years were NOT due to big companies like Facebook or Google, but due to the thousands of startups that have been funded with huge valuations. These valuations have been coming down over the past year. This means that these startups will be unable to raise as much money as before or no money at all, which will lead to layoffs or going belly up altogether. Oh, and almost all of these startups are UNPROFITABLE, which is no different than during the dot-com bubble. The only difference is that most of these companies are still private and not public so that the crash will not happen as quickly, as it does in the stock market, but will deflate more slowly as they fail to raise their next round of funding from private investors.

There were big companies that were profitable and growing during the dot-com bubble, too, like Oracle, Cisco, Sun Micro, EMC, HP, etc. But it was the unprofitable startups that caused the bubble to burst. It's pretty much the same situation now.

The most infamous words in history are: "It's different this time."

But it almost never is.

BTW, my rent went from $2,600 in 2008 to $1,700 in 2009. That's pretty significant.

[TheGreatCurve]

Originally Posted by TR95

Trouble with that logic, rents actually increased in the last recession, and in many cases increased significantly between 2008 and 2012. Many people lost their homes or did strategic short sales, had bad credit, and landlords could increase rent because there were many more tenants now that people lost their homes and couldn't buy.

Not true at all. I've been renting for decades, and my rent went down 35% between 2008 and 2009, and then stayed low until 2012, when it started inching up again.

[TheGreatCurve]

Originally Posted by TR95

Not true at all. Maybe slightly with large apartment complexes, but we're talking about homes here. Even large apartment complexes didn't really dip. I know I was working for a software company that had a property management, yield management, tenant management software and saw rents nationwide. It just didn't happen like you say.

This is the SF forum so we're talking exclusively about Silicon Valley and the Bay Area.

It did happen like I said because I lived through it and paid the rents.

[TheGreatCurve]

Originally Posted by CaliRestoration

This is the part some of these guys don't get. Anyone who has tried to get financing in the past 7 years knows that you have to have some real skin in the game before any lending institution will underwrite anything for you.

This isn't 2004-2007 where a gardener or mailman could walk up to a bank and write "One million dollars!" in the salary box for his loan application. You have to have documentation showing your 20% down, many years of tax returns if you're W2, and monthly salary stubs that are recent up to 12 months back. Also that DTI better not be approaching 36% or most of the big banks will shy away.

The people who are buying homes now actually have money (unlike the people who bought homes in the mid-2000s). They buy because they can afford it.

Anyone who thinks the Inner Richmond, Walnut Creek, Beverly Hills, or South OC are going to magically drop 50% in price in the near future (or ever) are people who aren't thinking about reality, they are solidly in the land of fantasy.

But if you lose your job, does it matter if you had documentation of your salary or not when you bought your home? You no longer have a salary, whether it was ever real or not. And you lose your home to foreclosure if you can't pay your mortgage, regardless of verification of your previous salary.

[CaliRestoration]

Originally Posted by TheGreatCurve

But if you lose your job, does it matter if you had documentation of your salary or not when you bought your home? You no longer have a salary, whether it was ever real or not. And you lose your home to foreclosure if you can't pay your mortgage, regardless of verification of your previous salary.

Yes and that was true as well in 2006. The difference being that the buyers now have proven long term employment, and at the asking prices these days in prime areas, they more than likely have good careers, good experience, good earning potential, and cash reserves. The same couldn't be said about the sub-prime buyers of 2006.

Which group do you think would be more resilient in the event of a recession?