From: markh@sag4.ssl.berkeley.edu (Mark Hurwitz)
Newsgroups: misc.invest
Subject: Yes I DO trust a bunch of perfect strangers to advise me...(long)
Date: 10 Apr 1992 16:55:01 GMT
Organization: Space Science Labs
Distribution: usa
NNTP-Posting-Host: sag4.ssl.berkeley.edu

Hello again Net-folks:

	I am agonizing over a decision involving what is for me
a great deal of $.  Any and all comments will be appreciated.

	The issue is whether to buy a home in San Francisco.  For
various reasons, we are looking in a neighborhood which is desirable
due to its location and its ambience but is by no means grandiose
or high-prestige.

	Representative home prices: A 30-yr-old, 2-bedroom, 1-bath, 1000 sq. 
foot home which has been remodeled (decent carpet, new kitchen
appliances, but nothing fancy) on a 25 X 90 ft lot (back yard was
an unkempt flat plot of grass with lots of "potential" as they say)
was recently offered at $279K and sold for very close to asking price.

	We can marginally qualify to buy a house like this.  But it
will take all our savings and a great deal of our incomes to make the
payments.  So, essentially 100% of my economic future would hang
in the balance of whether buying proved to be a wise decision.

	When I calculate where we would end up, financially, say in a 3 year 
period, including all the income tax deductions, closing costs, etc., I find 
that we would be better off to continue renting than to buy.  And as much as I 
would enjoy owning my own home, if it's going to lose me a bunch of money, 
I'll continue to rent, thank you.  But there are two wildcards which are 
responsible for the agonizing, and which are connected to the themes of
misc.invest:

1. Inflation.  If we really are heading into a period of devaluation
of the dollar, then getting heavily into debt is a smart move, no?

2. Appreciation / Depreciation.  With home prices so high, an appreciation
of only 2 or 3% per year on that huge sales price would make it more 
cost-effective to Buy rather than to Rent.  (Conversely, if the house falls in 
value, it could fall a very long way.)  

	Every day the newspaper headlines carry some new hysteria which
seems to bear on this decision.  Omigosh, the stock market is crashing,
we're heading for a depression, better not buy today.  Omigosh, inflation
is heading up, better buy right away.  Omigosh, 1997 is approaching, and
the California real estate market will be driven skyward as Hong Kong
investors move in.  Etc.

	What scares me most of all is to look at the tax rolls, and
see just how few homes in California have turned over at the outrageous
prices which they currently command.  On the block where the $279K
house is located, for example, I would guess that 9 out of 10
houses have not been sold since the early 1980s, when prices were of
course a small fraction of their values today.  In other words, my informal
research leads me to believe that the following statement is (roughly) true:

	"San Francisco real estate prices could fall by a factor of two,
and 9 out of 10 home owners would still be able to sell their homes at
a significant profit over what they paid for them."

	I don't want to be the 1 out of 10 home owners who takes a bloodbath!

	So, net_folks, what do you think?   Where are the U.S. and/or world
economic conditions heading?  Is this a good or bad time to borrow 
1/4 Million $ and gamble it all on the San Francisco real estate market?  

Thanks in advance...

-Mark
Newsgroups: misc.invest