I think you should keep your gunpowder (some cash for downpayment) dry. If the bay area market crashes in next few years ( I have a feeling it might - I have no crystal ball), Then you can purchase one investment if you can get decent cap rate. Please look for some of my old posts on how to select a property to buy as rental.
In Singapore, the government owns all the land, and 80% of people live in government housing. The market is not free. House prices appreciate at whatever rate the government allows it to appreciate.
Right now, I am keeping some cash and investment conservative funds (30/70 stock/bond and such) to serve as rainy day fund. That is, I have set aside enough liquidity to continue to live here and pay all bills even if I lose job and cannot get another one for 2-3 years. Don’t feel like buying RE with those funds…
If Bay Area RE crashes, chances are that stock market also would have crashed. I am more likely to buy QQQ if Bay Area crashes
1 Like
RE pricing is a measure of local desirability. Maybe nationally you are right but BA RE has always beat inflation. Indiana and most of the Midwest has not kept up with inflation.
You’re right, demand vs supply equation + local salaries+jobs determine the pricing.
According to FED, the inflation is near 0 percent. BARE has definitely appreciated at 0+ rate. The problem is how you measure inflation. Real Estate all across america has appreciated at 0+ rate.
1 Like
Real estate is local. So, inflation refers to local inflation ie in SFBA, SFBA inflation not national CPI.
SG is a small nation, local inflation = national inflation
No government is that powerful.
Agree. 
Is a must to buy a Primary because of 30-yr fixed rate but no need to buy a rental.
To date, Austin is the first and only place where I deliberately buy rentals, purely for diversification and store of value, bonus is passive income.
1 Like
Stock market will increasingly diverged from SF bay area real estate as firms spread out employment and offices.
If you are so risk averse than you may consider selling now and renting.
2000sq feet home in 94087 $5K rent.
https://www.zillow.com/homedetails/1199-Crandano-Ct-Sunnyvale-CA-94087/19541235_zpid/
If market dips in the next few years, the central valley can be a good place to buy for diversification purpose. My sixth and seventh sense say that even thought population of California has peaked and no net population increase, we will see the population from south bay and peninsula to move out to trans-altamont towns (like Tracy/Manteca/Modesto and other cities along the 99 corridor). These can be good place to park money provided one can do some research and look for good cap rate.
I am not that risk averse. My strategy is to keep pre-tax IRA/401k in 100% stock funds (QQQ, SPY), and be more conservative in after-tax accounts - I.e., preserve liquidity and act as rainy day fund.
RBA real estate has been lagging behind QQQ and SPY in past 4 years. SFH prices are up ~ 30%, whereas QQQ has gone up ~ 150% and SPY has gone up ~ 75% in the same time.
But thanks to the multiplier effect of leverage, my equity stake in the home has doubled (~ 100%) in these past 4 years. So, performance wise, my equity in the house is appreciating at similar rate as my stock funds.
Why sell and miss out on those continued gains in RE equity?
that a big assumption that RE will continue to gain at same rate as stocks. RE can stagnate or decline or create lack of liquidity. than you miss out in opportunity of oversize stock gains by not investing RE equity into stocks. stocks are global with global currency flows.
having $2 to $3m equity in one asset is now too big a risk. have you seen the rescue of Florida?. what if mass event happened in SF bay area in next 10 years. rebuilding is out of question.
I am assuming that Bay Area RE will lag stocks just like what has happened in past 4 years. RBA SFH prices are up by a mere 30%, whereas QQQ is up 150%. But thanks to leverage effect, one’s equity in the home goes up by much more than 30% in past 4 years. And thanks to low interest rates, the non equity building portion of mortgage payment (PITI - P) is lower than rent of comparable house. So, it’s still a low risk bet to own a primary home in RBA, provided:
- One has sufficient leverage boost
- One can lock in a low (<3%) interest rate, fixed for 30 years.
- One has sufficient rainy day fund in a liquid post tax account (not IRA/401), to ensure that one is not forced to sell house in a downturn, if job is lost.
You are not considering man made or natural disasters that can happen to an area.
stocks are digital and global with instant exit on touch of button. you can enjoy wealth from some one else work.
It is one thing to have $300K equity in home but it is another thing to have $3m equity. if $3m convert into $6m. than global stocks and foreign currencies will be way up.
selling expensive home has transaction costs and that costs will keep increasing.
++ one can borrow against equity in home (heloc).
heloc is 4 to 5% and i doubt pulling millions are easy. you are allowed $3K per year of capital losses and rest suspended. on primary home there is no such thing. insurance will definitely increase on homes.
Any opinion for this video? AUSTIN Housing Crash Imminent + Big Bubbles in 5 Cities - YouTube
1 Like
When he posted above, I thought he is Patrick… move from MP to ATX? Now I think he is @manch 
Lagging rent doesn’t imply it won’t go up.
1 months to 2 months = 100% surge but is still less than 6 months.
Can’t help to wonder, did he know that prices of BARE hit a multi-year peak in Jun-Oct 2018 and is at a new ATH now? The “crash” of BARE had happened and lasted only 1.5 years.
If there is a mega earthquake in core of Bay Area, then the stock market will also take a tumble.
Agree that keeping $3M in equity in house is not wise, except for a retired person well into retirement. Eg., an 80 year old in Cupertino who owns their home outright. But that person probably bought the home 40 years ago for $150k and paid it off.
I think having about 40-50% equity in primary house is healthy and beneficial. For example, one gets the best interest rate on a refi if loan-to-value is 60% or less. And one still gets the turbo charging benefit of leverage.
As far as balance between stocks and home equity goes, having a stock portfolio that is 2x home equity is good. This allows one to benefit from both rise in stocks and property values. And since property value rise seems to typically lag the rise in stocks (time wise), this seems to have the effect of smoothing out the portfolio progression.
Housing inventory in the Austin real estate market has dropped to an all-time low, with only 0.9 months of supply on the market (as of November 2020).
Balanced market has 6 months of inventory. So acute low inventory.
Some info from my realtor (trust him or some stranger on the web?),
leading indicators show the Austin market is beginning to stabilize.
What are leading indicators?
While we rightfully focus a lot of time monitoring Avg Sales Price and Units Sold, these are lagging indicators. In order to get an earlier read on the direction the market is heading, we focus on leading indicators like marketing inquiries and mortgage applications. When buyers enter the market, they generally contact agents (us) first and then apply for mortgage pre-approval shortly after. Since we have access to these leading indicators, we’re able to get an earlier indication of market demand.
But First: Anecdotal Evidence
It’s natural to first notice a change in demand, and we certainly have. Roughly a month ago, we began to notice:
- A drop in the number of offers on listings.
- Monday social media posts from agents that said “My listing didn’t get offers this weekend. Bring your buyers!” Posts like these have increased.
- Buyers hitting pause on their searches due to fatigue.
- Price reductions!
It’s important to understand that this data does not indicate any drop in prices. In fact, we won’t be surprised if prices increase more, since sales price is a lagging indicator. Likewise, we don’t see a market shift to a buyer’s market. What we do predict is that the market will become more normal . Bear in mind that “normal” for Austin is an incredibly healthy seller’s market.
.
Despite the parabolic price appreciation, Austin is still more affordable than other cities (according to Freddie Mac),
1 Like
why will stock market take tumble if megaquake happens?. Are there datacenters in California that will crumble?. California is practically becoming irrelevant.
it may have 5 to 10% temporary downtime but MMT will fix it.(That MMT will create dollar depreciation against commodities and globale currency movments)
but what cannot be fixed is actual rebuilding work. we neither has the technical resources to recreate SF bay area again nor its desirable.
When drought happens. water table goes down and this create unstable geography.