patrick.net

Actually, when you view this chart, SF median house prices are back to mid 90s prices......the authors note however the following; Since 1980, California’s median home price has been approximately 80 percent higher than the national median price on average.

I would definitely pay more to live in SF than in chicago, but I don't think I'd pay 80% more.

Kevin says

I would definitely pay more to live in SF than in chicago, but I don't think I'd pay 80% more.

All things equal, I wouldn't either. But, my job is here, and I hate the cold, so I end up doing so :)

I suspect that is what most people say Kevin and perhaps why the population of SF has remained relatively constant for the past 60 years. 1950= 775K, 2010=805K. Source; http://en.wikipedia.org/wiki/San_Francisco

RentingForHalfTheCost says

Yes, run out now and give you money to any owner. They worked hard to keep the house from falling apart and deserve all your money. Give then 100k over asking and don't ask any questions. Then become a slave to the bank and watch as the owners drive off in their new Mercedes.

I think this is bad advice.

Better run out now and rent the house from them so that they can keep driving their leased cars and eat out daily. After all, its your rent paying for their lifestyle. And don't make that mistake and take your rent payment and multiply it by 12 and then 10 years and look at it like its money you throw out. Don't do that. Hey, at least you are not a slave, right? Plus, if something breaks in the house, your landlord has to pay for it...when he gets around to it and in the cheapest manner possible but hey...can't have everything. At least you are not a slave - you are free! - remember - you can always pack everything up, kids, dogs, spouse and just move...wherever you want to..anytime. You could always rent another house. For more. Or less. Ok, I am not sure how you would gain then...but hey, at least you are not a debt slave. Right??

Don't buy!!!

:)

Kevin says

The homes are larger and we spend more time in them. Our houses are twice as big as they were prior to 1980.

I'd buy that for absolute prices, but not an increase in price per sq. ft., which is still at 2003 levels, not 1999 levels.

Kevin says

2. The average finish quality of new / remodeled homes has moved to the right of the curve. In 1990, natural stone counters, hardwood floors, and professional grade appliances were considered high-end luxuries. Today they're considered basic finishes.

I'll buy that for new houses, but not old ones. I'd much rather spend $200k building a new house than spending $300k on a house of the same size built in 1978. And that's what typical in south Florida.

Kevin says

Interest rates really are absurdly low, and I don't see anything to suggest that they'll go significantly higher in the near term.

Low interest rates certainly do increase the prices of homes, but not their values. Given that interest rates are almost certainly going to increase even over a short 15-year mortgage, the market price of any house bought now will drop over the course of the loan.

Kevin says

4. People are just willing to spend more on housing than they would have in the past. With pensions gone and 401(k)s either too confusing or unavailable for many, housing is the last "dumb" retirement planning option available.

I think that was more true during the bubble than now. In any case, using a house as a retirement vehicle is a really bad idea for anyone younger than 65. As the Baby Boomers retire and downsize, there will be downward pressure on housing for decades. I do not think anyone buying today will see real appreciation of their house over a course of fifty years.

The Boomers were lucky. The population of America doubled during the past half century. Now the population has stabilized. The growth in demand that the Boomers experienced is not going to be repeated for the next few generations.

Kevin says

Inertia. People have an idea of what a thing should cost, and it takes an enormous amount of energy to change that.

Just remember that momentum is directly related to inertia. This would equally imply that prices will not only correct to the 1990s level but over-correct as people keep expecting more correction.

SubOink says

Don't buy!!!

:)

I say, do the math. Don't base you decision on emotions, what people are saying the market is doing, what you read in the newspaper. Just look at the Case-Shiller Index value for the closest region, and if it's at pre-bubble levels buy, if not, don't. The numbers don't lie, but you got to trust the math and you got to make the decision rationally and dispassionately.