Year-over-year median prices grew 3.9 percent to $632,500 in Contra Costa County, increased 4.2 percent in San Francisco to $1.48 million, and inched up less than one percent to $869,500 in Alameda County. Prices dropped 3.7 percent to $1.16 million in Santa Clara County and fell 2.7 percent to $1.45 million in San Mateo County, according to DQNews.
Does anyone understand why the home prices in Bay Area have been falling while the home prices in areas outside Bay Area, like Tracy, Stockton, Modesto, or Sacramento and areas out of state like Phoenix, AZ and Austin,TX are holding up or even rising?
Tech companies are expanding in Austin My Austin rentals have appreciated 8% ytd.
Boomers are moving out and retiring in adjacent areas. BA prices are peaking due to affordability. New buyers will have to settle for condos. SFH buyers will have to move to the exburbs.
How much of it (price drop) could be due to cap on SALT (state and local taxes) deduction on federal tax return since 2018? What I am trying to understand is whether the time is right to buy rental in places like Tracy, Austin, or Phoenix.
Do you own any rentals now? What is your goal? Just get one or 2 for extra cash flow or trying to build a small empire full time?
I own a rental in bay area that is cash flow positive. But, that was acquired about 10 years ago. Want to buy a few more. But, the prices are too high. The properties in far off areas like Phoenix and Austin are priced low and produce income. But I have zero experience of being an absentee landlord. I do not understand stock market enough. So, planning all investment in real estate. I want to own some properties so that I can build some source of income in retirement ( about 10 + years away),.
Read up on dollar cost averaging (DCA), index funds, exchange traded funds (ETFs), and pros of DCA purchasing of an index fund/ETF offer by Vanguard/Fidelity. Some examples of index funds/ETFs, VFIAX, FUSAX, and VOO.
I have another thread on the SF case shiller index turning negative this month. You can look at the chart. There were a few times this has happened in the past. Every time it happened it came back stronger than ever. Is this time different?
To add more to hanera’s point.
Fidelity or Schwab best as they also provide zero commission now.
Start with VOO, buy only when you see VOO is down 5%-6%, normally this happens 2 to 3 times in a year. If it goes down, sometimes, to 10% or 15%, buy more. You will always exceed S&P returns.
Once you start this habit, you will be find with other stocks over an year.
Never trust any news media (or analysts) on speculation.
After market dips, they will tell us we are going to recession.
After market is up, they will tell us we are fine to buy.
This is the common mistake many investors do. This can be avoided by reading a book. Just read one book, intelligent investor available in amazon. This is more than enough to start.
This might not be helpful to the conversation but…
Where were you the last 10 years? There were so many opportunities to buy in the Bay.
In her market of Willow Glen, Holly’s gotten less “all cash” buyers and seen clients’ homes sit on the market for an average of 25 days before a sale. A couple years ago your home would likely sell in less than 10 days and you would get several hundred-thousand dollars over asking price.
“If it’s in a beautiful neighborhood, all fixed up, highly desirable property, you will get multiple offers,” Barr said. “It may not be the numbers we saw two years ago, probably won’t go crazy over asking, but you’ll maybe get two or three right around the asking price.”
I am worried that we might be living in Peak California. I am neither a university professor nor a journalist, but I am taking liberty to call it " Peak California" because California might peaked as a political, economical, and cultural force that would shape america in times to come. The most important factor is population. The population of California may be peaking out . If the population of California remains stable or begins a decline, I do not see much hope for real estate market appreciating much faster in coming decades. As a state, California is mismanaged. A case in point is recent fire that could have been mitigated or avoided by doing simple things such as clearing forest floors, or allowing controlled fires, as done in other states where the climate activists in government do not run forest department. Not only have these forest fires turned well to do people homeless, and made planned power cuts a norm, but have also burned morale and trust of a lot of people in competence of state of California to manage its act.
I have been in bay area for last 10 years but I was not in a position to do much. I was lucky to get qualified for a rental in 2008 that I bought at 20% below its peak price. I thought I was winning by buying at the bottom. Unfortunately, a few months after (fall 2008) the acquisition, the market crashed and the value of the property dropped further 20%. Then it took almost 4 years to recover the price in terms of inflated dollar ( the purchasing power of a dollar in 2012 was 70% less than the purchasing power of 2008 dollar due to massive money printing by FED). My property became cash flow even a few yeas later.
But, I also lost my job after 2008 crash. I remained jobless for a long time, and burned all my savings. I had became afraid of returning to stock market again because my 401 had become 201k in 2008 market crash. I lost trust in markets, and I am still afraid. I always fear the market will fall next week. (once bitten twice shy?). Had I returned to market or stayed invested, I would have recovered and benefited from market appreciation since 2009. But, I have lost all that gain. You can say, decade of 2010 was a lost decade for me.
So, in a nutshell, I was in the bay area in the decade of 2010. But, I was a psychologically paralyzed person (in terms of investing) without much investable capital in hand. The thing to go in my favour in last decade was the rental that I was able to acquire before the crash. I could not have obtained the same rental after crash because no one would lend me money due to tightened lending standards, and due to lack of a job for long time.
Basically, I am trying to get even with what I lost in the decade of 2010. But, as I come back, we are at another top or possibly in another bubble. I do not know what to do or where to start.
Don’t worry. California has always been mismanaged. Didn’t kill us the last few decades and likely won’t kill us in the few decades ahead.
Have been telling @manch about this but not as eloquently put as you. Perhaps an analogy is in order. @manch is thinking, in the past he is able to pour water into a cup, and then he drinks some, pour again, drink some, each time he pours more than he drinks, so the cup is filling up gradually. The time has come when the cup is full but he still thinks he can pour more water Mismanaged = Paper cup. Initially the paper is sturdy, now it is quite damp and about to break.
@manch My advice is to take some mitigating action now before the number of people thinking like @pandeyathotmail and me (and I think @Jil is considering too) turns into a flood. At the very least, don’t put any more eggs into the basket.
Btw, impact on RE. Other than SALT, you have state-wide rent control, and political pressure to build more affordable high density housing. According to zillow, my SFH in Cupertino has declined 20+% from ATH in 2018, more than the drop from 2007’s peak to 2009’s low due to financial crisis.
Plenty of opportunities in CA besides the BA. The Sacramento MSA has been good for me for 20 years. As far as investing out of state, I only use REITS and partnerships. Too far for hands on investing. Besides too much hassle finding good, honest and reliable small time local property management.
This is not an advice. Just an observation of what the legendary investor, Warren Buffett, is doing.
Read up on WB’s saying,
“Be fearful when others are greedy and greedy when others are fearful.”
Baron Rothschild’s saying,
Buy when there’s blood in the streets , even if the blood is your own."
Also, concept of margin of safety.
Well you learn the same lesson that I learned from the Dotcom bust. Many stocks become insolvent and currently high flying stocks like AAPL and AMZN dropped over 90% Staying fully invested in the right stocks is the correct strategy, and if you don’t know which one, just stay fully invested in an index fund/ETF.
Thanks for sharing. I’m sure it wasn’t easy to relive those dark days.
I don’t know where you are financially but I think you should just keep it simple.
Focus on your day job and maximize your income and/or security.
Have a big emergency fund in savings account. For someone as conservative as you, I think you need at least 6-12 months of expenses saved.
Then max your 401k until you hit your company match, then max your Roth IRA, then finish out the 401k.
If you still have cash, then you invest in a taxable brokerage account.
As to what to invest, I’ll keep it simple as well. Use a target date fund that’s 10 years ahead of your planned retirement year to keep it conservative. If you want to do your own, use 50/50 stocks and bonds (might be too much bonds but you can 60/40). Keep things on autopilot. Markets move up and down, sometimes violently, but just let it ride. Stick with your allocations and keep investing.
Time is your friend, assuming you’re at least 20 years or so from retirement.
You might be better off at Bogleheads.org - Index page
to get you over the hump of investing in the stock market and deciding allocations.
I had all these in my life too. I have gone through 3 lay offs during 2001-2003. After I bought rental in 2008, house value dropped heavily like 20%, but I also bought home in 2011, 2013,2015 and 2018,
I had following worst experiences.
Tenants lost job, unable to pay stayed, vacated and took some loss (even with -ve cash flow)
Tenants fought, damaged the home heavily, filed divorce, ran away without paying, took me 5-7k to make it move-in. Left them free as I could not trace them.
Tenants dogs damaged the whole backyard, paid $1200 to clean up and house was opened without tenants (dogs urine smell) for one month
Tenants damaged the wood floor with pool water, forced to change entire wood floor (5k cost) and removed pool (10k cost).
Tenant sued me to extend their stay, paid huge compensation as if they stayed at my for $500/month.
California has changed/changing the law with rent control (I really hate the way they implement)
The last two made me to rethink entire strategy as I have become easy victim of predatory lawyer and law is always favorably turned towards weaker tenant than richer landlord.
Other than this, I do not any reluctance towards real estate as RE business is too good for wealth improvement.
I am selling (planned selling) all real estate assets one by one and turning into stock market soon. I am not buying any more real estate as remote real estate is a big hassle in life.
For pandey purpose:
My real estate experience was 10-15 years here, but stock experience is appx 5-8 years. In fact, I learnt the entire stock experience from this forum when bugmenot (an user) hinted how to do.
The best is to read/analyze lot of materials and read good books before you start. First two years struggled to grow, but had luck to grow my wealth.
Now, I am changing entire net worth into stocks, by end of next year, I may have 30-40% real estate 60-70% stock from current 80:20.
Read intelligent investor (start with), you will be fine in the long run.