Way, way, off topic, but I'm about to make a pretty big decision (for me), and I'll always listen to free advice (may not follow it though... ). Anyways, I'm about to buy condo #901 (<-- only 914 tie in in this entire thread!) in a building in downtown San Diego.

It's expensive. I can afford the payments on a 30y fixed and have 20% down, but I'd hate to see my 20% down payment go poof if the real estate market crashes. And we're due for a crash - it's been gaining 20%+ PER YEAR for the past several years.

What's your crystal ball say? Buy now, or continue to rent and then buy when it all comes crashing down?

-Steve

I was reading an interesting article the other day. I can't remember where I read it. But, let me paraphrase anyway.

I believe it was Goldman that reported that the current real estate market in the U.S. is overvalued by at least 10%. There are certain areas of the country where that number is even higher. Where I live, and probably where you are, the number is even higher.

They are predicting that when bottom falls out of the real estate market this time, it will be a hard hit. They are predicting that the overvaluation will disappear overnight. Then, the erosion of actual values will be significant. One of the reasons that they mention for this is that the Fed has no way that they would be able to prop up the market since the the interest rates are already too low.

There will be a hit. The question becomes, "When?"

If I could answer that, I wouldn't have to work. The Goldman report says sometime in 2005 or 2006.

It doesnt make any differance what the market does in the short term as long as you can maintain the mortgage payments. The market always rebounds and you have the privilage of living in your own home. the people who were renting over the last 5 years lost the value of growth of equity. which in San Diego was a lot of money.

Bernie

You do need a roof over your head.

I've been seeing predictions of a real estate crash for about 5-10 years. They seem to forget the above.....tho "they" will be right eventually. If you're looking at housing as an investment with 10% per annum growth, I think you should look elsewhere.....but it will keep up with inflation for the forseeable future (long term). Since you've only locked up 20% of the value of your house using your money, 3% growth of the total looks pretty good....and you have a place for your "stuff".

The comming crunch (IMO) is energy. Buy a place close to where you work and hope for the best.

back in the real estate and dot com boom of the bay area I bought a house. I bid $84,000 OVER asking because it received 20+ offers after one showing. this is when money was flowing like a river out there and I felt at the asking price of $335k I was even being ripped off. well, I sold the house 4 years later in a recession and near depression for $186,000 more than I paid for it. I don't think you will ever lose money on real estate if you buy in an area which will always be in demand. I think this great mysterious real estate bubble is a joke.

also, look at it this way. even if there are no gains on your property you're putting some money "in the bank" every month and also getting huge deductions from the IRS. I love getting my $12,000 tax return every year.

> They are predicting that when bottom falls out of the real estate market this time, it will be a hard hit. They are predicting that the overvaluation will disappear overnight.

But how does that really happen? Stocks can change in value overnight, but homes can't until people sell, and people don't generally sell their home for less than they paid, they just live in it longer which cause the housing marketing to flatten out, not crash...

> the people who were renting over the last 5 years lost the value of growth of equity. which in San Diego was a lot of money.

That's me. If I complete this condo purchase the guy I'm buying it from will end up with a 38% IRR.

> vortrex

Good job on your home purchase - sounds like you made a good decision. BTW, if you are consistently getting a tax return at tax time you should ask your employer to withhold less. That's money you're lending the gov't throughout the year interest free, that you could be earning interest on.

-Steve

I like it this way, keeps me from spending it on useless stuff!

I'm in mortgage lending, I think Bernie's right, the market will fluctuate over time, you still need a place to live. I would be more inclinded to keep as much cash as possible as long you are confortable with the payments ( Called Leverage). If you ever need to access your equity, and the value has decresed or the money has gotten tighter, you may not be able to access as much as you want. Rates are good on the 3 year and 5 year programs, not so good on the 7 and 10 year programs. That tells me that things look good for the next 3 to 5 years, after that it's anybodys guess. There is a lot of money out there to loan, you can tell by the easy qualifying requirements, when it's start getting harder to qualify, that will tell you the market is turning. In addition, I don't believe you can go wrong in the San Diego area. Just keep in mind, the Aero-Space and Defense industry lay-offs really had big impact on our last recession we had here in California. The vast majority of those affected have gone on to something else. Good Luck and Happy House Hunting