There you are. You can afford to buy but you do not. Because it doesn’t make economic sense? Because you don’t want to live in a smaller place in a less good neighborhood? What kind of a reasons are those?

Don’t you know that you are raising rents for everybody else? Someone not as well off as you deserves that rental. And at a much lower rent. By sucking up supply and thereby increasing demand you are denying it to them.

It’s all your fault and you ought to be ashamed of yourself!

Your renting and investment income is a separate category from your 401(k) or IRA.

Come on this is basic economic common sense regarding opportunity costs for NOT putting down a down payment and saving the difference between a rental and a mortgage. The chances of significant real estate appreciation after an extended bubble is the risk factor that people here need to weigh. There is no “right” answer and folks will analyze things differently. My own take (with a decent 6 figure income) is that a $700k starter home for 1200 square feet is not worth the cost and I’ll invest elsewhere instead of trying to raise a family in a expensive shack. I currently rent a decent 3/2 townhome for $2300 and I’m investing the difference in rentals in Texas. To each his own.

I think you’re missing my points. To summarize again:

1) R.E. does not always go up. You can lose money “outright” (nominal dollars-happening now to a lot of people/banks), and you can lose money to inflation (happened from 1989-1997 in California).

2) R.E. is not a liquid investment. I can buy/sell my stocks in a fraction of a second. It can take 6 months to sell a house. While you can’t live in your stocks, neither does the roof on my stock start leaking and need a $8000 fix. Nor does my stock portfolio need $1500/year in insurance, nor does it cost me 2-5% to buy/sell my stock.

3) If you do the calculations, and it will take you more than 5-7 years to break-even buying a house, you are likely a) overpaying and b) exposing yourself to moving&losing money when compared to renting.

4) There are non-economic reasons to buy (or rather, you are attaching premia to intangibles associated with owning), but they are precisely that, intangible, and do not equate with investment returns.

Yes, I bought and sold myself. I did fine, by which I mean I was about break-even when compared to renting over the same period (maybe made a few percentage points). I didn’t really profit much except by living in a decent house (point #4). I did, however, suffer from the inflexibility (interfering with job searching, etc), and that is a real potential problem. I also bought the smallest, cheapest house on the block (literally) and the only one that made sense on a price/rent basis.

I also regularly short stocks, trade in options, including complex spreads and straddles. Does that mean you should too? Do you know what risk you’re taking; what you’re getting into? I also probably drink too much and don’t keep my blood pressure as well controlled as I should. Again, probably not the best choice. Buying a house now could also be hazardous to your financial health. Or maybe you can find a great bargain, or a dream home. But don’t go into it without quantifying your risk.

http://feeds.sfgate.com/~r/sfgate/rss/feeds/surrealestate/~3/247254116/article.cgi

I agree with Michelle that leverage is truly the key to making money in RE — IF you have a good sense of timing and are flexible in your transaction/holding periods. As David suggests, if you have any life events that force you to sell outside your ideal timeframe, you could lose big-time.

I can’t believe people don’t think an early 90s scenario can’t happen again in SF. And it can easily be worse this time!

If people cannot comprehend and see the rationale in David’s many detailed explanations, I don’t know what anyone else can say about this.

Buy when blood is running in the streets, not at the top of the market.

There’s absolutely nothing that prevents SF from collapsing like any other bubble. Even NYC has seen bad times in its R.E. market (’70’s, early ’90’s).

I would also welcome you to look at the graph I posted. Look at what happened from 1989-1997. SF home prices went absolutely nowhere, which of course means you lost significant money to inflation.

“being willing to wait” is problematic when real life intrudes. Even if you believe (which I do not) that SF is immune to enormous bubbles like those that afflicted Florida in the ’20’s, R.E. is not portable like your cash and stock portfolio.

If you need more than 7 years to break even, I can pretty much guarantee you that you will:
1) get married/divorced
2) have/want more kids
3) lose/change jobs

And any of the above will force you to move and lose money, if your assumption is that you will “wait it out.”