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Author: foobarista Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127234  
Subject: Re: more Bay Area frenzy Date: 4/26/2002 9:35 PM
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(SORRY - I posted once already due to hitting escape at the wrong moment)

Anyway, I just can't help thinking that the odd bubble in the Bay Area market is a sucker's rally - the tech wreckage is still not quite done - especially with the Bill and Carly show at HP still far from over. Having lived here all my life (family moved to Bay Area during WWII), I've seen wild bid-up real estate markets at least three times, and things always cooled down later. My own feeling is the following:

1. The best time to buy in the Bay Area is the winter, preferably in a
year when there has been Bad News in October. I bought my present place in 1998 in just such a market (the Bad News at the time was the Russian default, and there was a mini-recession which depressed real-estate prices for a few months). I expect that this will also be a Bad News year, so I'm looking to buy some income property in November.

2. In the Bay Area, avoid places which "show well". Do you want to spend $150K for a nice paint job and a bit of landscaping? I got lucky with my current place since the owners for some odd reason were selling it after a fire, while there was still construction repairs in progress. Naturally, this drove off the vast majority of buyers, as did the reek of old kitty peepee in the master bedroom. After ripping out the carpet and subflooring and replacing with hardwood, and getting the brand new roof which the insurance company paid for, I had a very cool house for about $75K under market.

3. (A bit of perversity) I actually think low interest rates are overrated as a guide to making buying decisions. I'd rather buy with a low(er) price and high(er) interest rates than vice versa, since you can always refinance the loan but you can't change the price (assuming a relatively stable and possibly upward trend in prices).

4. In the Bay Area, expensive houses are riskier than cheap houses. After all the great real-estate runups of the past, the biggest tankage was in houses in the $1M+ category, while entry-level and moderate houses held their value. The problem was that the big expensive houses lost their entire market when the economy tanked, but the entry-level places hold value since there is still something resembling a market even in the worst of times.

5. In the long run, Bay Area prices always trend upward. It is a simple matter of population and land - too much of one, none of the other. And while the occasional person runs off to Idaho or Chicago, there is still a vast stream of people moving in to replace them who don't want to leave. But, as John Maynard K once said, in the long run, we're all dead...

Just some random dumpage,



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