Bay Area Home Sales and Median Price Are…Down

The first one is typo.

The practice in Austin is to price 10-15% above market and then gradually reduce price till some1 bid. Is normal for a house to sit for 1-2 months before it was sold. Occasionally, a desperate seller prices at or slightly below market.


what do you think the home would rent at? 3000 per month?

I don’t buy so expensive house for rental. I cap the purchase price at $350k for max size of tenant pool. Zillow indicates $3050, so should be able to rent out at $3000.

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Austin is not an energy city and not affected by oil and gas, only Houston/maybe Dallas. There have been several downturns in the oil & gas industry over the last 30+ years and Houston always suffers but Austin has not


If the lowered value is the real price then growth in Austin seems low for last 12 years. 60% increase is just 4% per year. Why do people say Austin growth is higher than SV?

Who are these people?
SV: Historical RE price appreciation 6-8% p.a. Yield 3-4%
Austin NW Austin/suburbs: Historical RE price appreciation 3-4% p.a. Yield 9-11%.
Beta for SV prices is higher than Austin.
Appreciation and yield since 2009 deviate substantially from historical.
Current trend is SV has started declining since mid 2018 while certain hot zip codes in NW Austin/Suburbs are still appreciating at 4%.

Appreciation of 6-8% is exponential growth. Yield of 9% is linear growth.

Rent increase growth is exponential. A flat 11% is still flat.

Gain = yield + n x appreciation where n = number of years

Gain = gain at year N

N = yield - yield / appreciation- appreciation
= 11 - 3/ 6 - 4
= 4

Gain = rent yield + (1+appreciation)**N - 1

Exponential growth can be enormous over the long term. A 2% extra appreciation every year could cause a huge difference in price.

Rent yield of say 3% is indexed to the most current price right? As price appreciates, rent should also increase.

When appreciation is very low, rent increase would be minimal.

If a high growth house has a rental yield of 3% all the time, rent income would be 15% of the original price when price 5x. But for the slow growth house with a rental yield of 6% all the time, rent income would be only 12% of the original price when price only 2x. The rent difference over the years would be less than the 3x price difference.

So it’s better to buy 3% yield house with high growth.

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You can reinvest the rent yield. Then it’s exponential too.

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Rent yield needs to be adjusted by tax rate. Appreciation has no tax until sale.

Reinventement of rent requires diligence and it requires a higher personality trait, which is questionable for most people.

For example, some people have already given up on their plan to buy one house per year.

Appreciation and rent increase are the most important factors. Cash flow should be neutral at least. Negative cash flow is not sustainable

Rent yield has little to no tax rate due to depreciation deduction. The deduction is much higher as a percent of purchase price in Texas where less the value is in land which can’t be depreciated.

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Given the way California is going, it might not be long for some1 to suggest adding the gross rent to the income for the purpose of determining the applicable tax rate, just like for dividends.

For comparison, have to assume cash flows are invested and in identical instruments. In practice, RE investors would plough cashflows back into RE. Is hard to do that in SV because of the high RE price.


MIllions of home sales per year are just families purchasing owner/occupier homes. Not everyone is in it for a quick buck to flip and take advantage of people (unless you’re Zillow or Redfin :slight_smile: )

Are you responding to my tongue-in-cheek comment or the article?

The article.

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2 homes went short sale in my hood. Nice referral fee in my pockets. :crazy_face::crazy_face: