Comments on: When Should You Buy Real Estate — And When Is It Better to Rent?

By: Sarah

Sarah — Tue, 09 Nov 2010 05:16:34 +0000

I have been reading similar posts around the internet, I was wondering if you would update as well your thoughts for 2010. I am in Vancouver, BC, in the middle of a housing boom. While I completely agree with you, I don’t think I will ever own a house at this rate, unless it’s in Texas.

By: Ana

Ana — Fri, 26 Mar 2010 18:17:58 +0000

I found this post so helpful and have returned to read it many times– any chance you’d consider updating with a new post giving your thoughts on how to make wise real estate decisions in the next few years, and whether your prediction of late 2010-2013 for the bottom still holds?

By: Danny

Danny — Thu, 08 Oct 2009 16:31:10 +0000

Funny you should mention that… The American dream of owning a house is a sham. Well, it’s a sham if you want to do it on credit. Simply put, I agree with you – the numbers just don’t make sense. And if you make a good deal, you can save 18K – 25K per year – which, if handled properly(read – DON’T LOSE ANY OF IT), makes a much better nest egg than a house.

Good advice Erica.

By: Financial Samurai

Financial Samurai — Tue, 15 Sep 2009 23:35:47 +0000

Erica, it’s good you moved, b/c with your metrics, it would be impossible for you to buy a place in Palo Alto/San Jose or San Francisco. We’ve been through the greatest downturn ever, and prices are only down 15%. It’s frustrating, and it’s good you voted with your feet and senses and moved.

It’s different up here in the Bay Area.

By: Takeda

Takeda — Thu, 22 Jan 2009 20:15:07 +0000

The major problem I have run into in California. Deception. I have found near impossible to find and ‘honest’ person in real estate. After reading Erica’s process on price I find it better than any agent I have run into, I wish I was driving a car when I ran into them. But I still have more Q’s.

1) Finding an agent in LA
2) Where can you get the best loan without the scam
3) Real Sales prices. During boom the cash out refi or gifts to buyer just inflated the price. Fake data. The MLS?? Do I have to go to county records?
4) A good inspector
5) I look at REO’s but never get a call back from listing agents.

I’m so tired of the lying.

BTW… I just came back from Australia… You should absolutely go.

By: ericabiz

ericabiz — Tue, 21 Oct 2008 03:41:59 +0000

@Sharon: You wrote “…typically Property Values double every five years since the 50’s.”

Cite needed! (I’ll help you out. You won’t find one, because this simply isn’t true.)

For the real data, take a look at this “history of home values” graph:

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

Over the long term, housing has barely beat out inflation, growing in real terms at less than 1% a year…making it a bad investment.

Let me guess…you’re a real estate agent?

-Erica

By: Sharon

Sharon — Mon, 20 Oct 2008 05:32:09 +0000

Erica, Interesting point of view. I think your research is flawed. I am in the Alberta Market Place where average Property Values are 5-8x our average income levels of 50-70K per year and property values are 90-250x the rent paid(depending upon the type of unit.)

I do agree with a 15 year cycle for bubbles, booms and busts. But what you fail to point out is typically Property Values double every five years since the 50′s. This is information is easy to gather from local real estate boards that track these stats. With this in mind I would advise that people consider each of thier real estate investments and put them on 2,5 and 10 year plans.

You must also consider that while you own a property and are making the mortgage payments the debt is being paid down. (When you rent you constantly have the same or worse an ever increasing debt load (Landlords increase rent as the markets will tolerate) that you gain no equity from.))

I feel that most people are better to own vs. renting provided they do not take loans that exceed the properties values.

By: Lynn

Lynn — Thu, 25 Sep 2008 05:34:29 +0000

So, if we bought 2 yrs ago, and prices in our neighborhood are still ticking up (but slowly)…should be bail and rent or stick it out? AND…we have 2 young kids. Looking up rental rates for houses close to work and the schools we are open to, rents are about the same as our current mortgage payment (even for smaller houses).

By: madhaus

madhaus — Mon, 21 Jul 2008 17:15:36 +0000

Erica, I was interested in your comment about 16 year cycles, but you seem to have misunderstood the difference between number of sales vs median prices. Your quote above about sales being down 26% refers to number of homes sold, not the price they sold for. Go reread the article, the median price was only down 6 percent, both month over month (a stat that only dishonest agents use since real estate is so strongly seasonal) and year over year.

So when you mention 30-40% price drops, can you show the equivalent price drop (not sales drop) in the last cycle? I’m not seeing that much of a correction either in the 1990 peak to mid-90s, or the 2001 correction. Yes, there was a price correction but I believe it was 15-20% in Santa Clara County.

Outlying areas have had huge corrections already, $4.60 gas is contributing to this. But doesn’t that make close-in areas to jobs worth MORE?

By: ericabiz

ericabiz — Thu, 03 Jul 2008 00:40:00 +0000

Hi Gerard,

I don’t know about Sydney specifically, but I can say that 100x rent is a pretty good indicator of a good investment no matter where you go.

Thank you,
-Erica