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Ken Shuman’s Blog

By Ken Shuman | Home Owner in San Francisco, CA

Thinking about my investment...

For anyone that has bought a home in the past 5 years, you have to wonder if you made a good investment.  Like most people, I drained my investment account to come up with my down payment.  Draining my acount means I was able to put 5% down on my loft. 

As I sit and listen to all the facts and stats being thrown around like the housing market has dropped 20% in the last year or the stock market has dropped close to 20% in the last year, I wonder if I did the right thing.  I am a firm believer that my real estate investment is still a good one.

In my area of Oakland, I would say my place has dropped in value 5% to 10%.  I have a wonderful place to call home and I truly believe in the long run, the loft will increase in value more than the stock market will.



How do you feel?  Are you happy with your real estate investment or do you wish you never jumped into the market?

Comments

By Dr. Danimal, Phd,  Thu Oct 2 2008, 10:50
I think your anxiety is shared by most of America. Mostly though I think like any investment it depends on your timeline. If you're planning on staying where you are for many years, things will turn back up eventually. People with a shorter turnaround time are going to be left with a losing investment unfortunately.
By Emily Erekuff,  Thu Oct 2 2008, 11:00
Wow Ken, your loft looks awesome. If you're really enjoying your home, I think that should tip the scales in favor of it being a good investment. When are you having another party so us Trulia folks can come check out your place in person? :)
By Heather,  Thu Oct 2 2008, 11:06
I have never purchased a home but maybe one day. I guess I just don't buy into it when everyone says the first thing you should always do is buy (not rent). There are other variables besides having equity...you have to work like a dog to pay those mortgage payments for 30 years and I would never do that to myself. When I look at the prices of homes in my neighbourhood, it still is going to cost more in the end to buy than to rent. And I can't take it with me :) Just my 2 cents
By Shawn,  Thu Oct 2 2008, 11:17
I'm right there with you. We are about to celebrate our 2nd anniversary of buying our house- and a few weeks ago, a similar house on my street sold for $60,000 less than what we bought ours for. I nearly plotzed. We aren't planning on going anywhere, anytime soon, so I am trying not to sweat it too much. However, I'd be lying to you if I said I wasn't concerned about owing so much more than my house is worth.
By Chris,  Thu Oct 2 2008, 11:27
There are some places that won't get hit as hard as others, and I think Oakland is a solid choice. Much like the areas around NYC and LA, there is always a premium on proximity to the best cities in America.
By Greg,  Thu Oct 2 2008, 11:54
The agency I work for is moving our administrative location. They own a considerable sized house which has been converted into offices. The board has discussed selling it, and re-investing. Completely absurd in this market. Why not hold, and re-rent, or wait till market changes. What does this have to do with Kens Loft, ummm yes, owning is good, always will be. I am also amazed a the lack of ownership in SF as opposed to say NYC. why is that?
By Tooley,  Thu Oct 2 2008, 13:14
As a prospective homeowner I wish I bought a long time ago, like 10 years ago when we moved here. But, I misplaced my time machine key and am stuck living in the here and now. That being said, I am still positively motivated to be a San Francisco home owner. The market will turn around in time. If I do better buying now than let’s say a year ago then good for me. But, no one knows what the future holds, lost the key to the time machine remember… So, if I buy now and prices continue to decline the only factor that matters is will I continue to be able to make a living that will allow me to make my payments and live some semblance of a life. Over time property is always a good investment and I only wish I had the money and balls to get in much sooner.
By Mamaphish,  Fri Oct 3 2008, 06:59
I agree with you. The old saying location, location, location(if you've bought in a desireable location)property values will rise. Typically, real estate has always been the best investment. So hold on and don't worry.
By Mamaphish,  Fri Oct 3 2008, 07:01
I agree with you. If you've bought in a desirable location, property values will recover. Typically, real estate is your best investment. So, hold on and ride it out.
By NonRealtor,  Fri Oct 3 2008, 08:01
Hopefully you have a stable job. Good Luck
By David Kendall,  Fri Oct 3 2008, 12:21
It's important to remember that the fundamentals of Bay Area real estate have not changed. This is still a great place to live with a strong and diverse economy, an outstanding cultural life, and endless recreational possibilities. The current dip in prices really stems from problems in the capital markets - not from any change in the underlying desirability of the region.

This is evidenced by the strong rental market in Oakland and surrounding areas. Rents have increased significantly in recent months. I recently listed a rental vacancy and it was snapped up in less than a week. People still want to live here and are willing to compete with others to do so.

The bottom line is that I am still confident of real estate as an investment. The flippers may be hurting right now, but those who bought within their means and with a long term plan will very likely see the market recover.


By Jamie,  Fri Oct 3 2008, 18:23
I think that your investment in real estate vs. stocks will yield a better return in the long run. The reality is that most investments lost value in the last year, and had you not purchased the loft, your portfolio would see a similar loss. At least you have something tangible to show for it. Real estate historically yields better returns in the long run, too.

I personally aspire to own property someday, although this may physically ta while given the recent economic events.
By Matt L,  Mon Oct 6 2008, 08:47
Think more about how much you love you home. As long as you can pay the mortgage and you like where you live you can just wait it out. This is the SFBA and you are in a good part of it. It's value will come back faster than you realize, probably faster than the stock market turns around. Everyone who bought recently is in the same boat one way or another, but this market will turn around, recession or not. It is just a matter of when. As long as you aren't overextended, be happy with that! you have a beautiful loft and what is probably the safest investment in this brutal financial climate. Just hunker down and try to weather the storm. Good luck, Shu.
By Joc,  Mon Oct 6 2008, 08:51
nice loft!
By Mattyd4lyfe,  Wed Oct 8 2008, 13:32
Shoe - a lot of it comes down to what type of loan you took out. is it an ARM? if so, when does it reset? Rates are still super low. you might want to look into a 30-yr fixed...it could take that long to recoup Oakland's downturn. Don't look at comps, articles, etc now - it's going to psych you out. Assuming you don't plan/need to sell for 5+ years you'll walk away from the deal just fine. Worst case - cut out the booze, butts, etc. & you've just found a month's mortgage.
By InformedBuyer,  Wed Oct 8 2008, 20:04
Historically real estate is not a great investment. It sounds like Ken (author) got in at the right time. If he bought five years ago, and that was obviously a good time. Most properties purchased after 2006 have depreciated I would imagine. And they show no sign of appreciating anytime soon. All the latest economic news is negative, other than the bailout, which may also turn out to be a detriment. There are a few ways to simply gauge if it was a good investment. Umm, for one you can check its appraisal value versus what you paid for it.

We are very likely re-entering a period where real estate appreciates by 5% a year, as it had done for decades prior to the recent bubble. That bubble was fueled by a perfect storm of a good economy, credit so loose that you didn't need a credit score or proof of income, and very low interest rates. Loose money is off the table for at least the next 10 years, the economy is on the verge of contraction (ie, recession), and interest rates are edging higher. But the main culprit in the overvalued housing market was recklessly loose money, which will no longer be a factor moving forward.
By Jim,  Tue Oct 14 2008, 09:23
overall I like my investment. Let's say your investment lost 5%-10% overall. I'd be willing to be your yearly rent would be more than that. The difference being (if you have faith in the overall housing market over time and it falls into your investment window) your investment will increase in value again, regaining that 5-10% drop. Your rent just bought your landlord his/her groceries, etc. I'd prefer to own my place than to buy someone's carrots.
By Serena Russell,  Thu Nov 13 2008, 22:03
Hi Ken,
Your place looks awesome! I must say from my property management perspective, it would be easy to rent out should you decide to move or wait on selling. As a Realtor, I have been asked this question many time. If you plan for the short term, you might see prices fall for a while, however all economies work in cycles, and the one we are in should pass. We have come through the dot com crash, and a recession in the 90s, so I look at this as another 'phase' and we will come through it as well. Ask yourself, with even with a drop in value, are you still benefitting from the tax benefits or owning vs. renting? And do you love your place without having to follow the rules of rental living? Your home will be your greatest asset in the long run. People look at you differently when you are a homeowner vs a renter.................am I correct?

You made the right decision...............stick with it. And enjoy your awesome place!
By Rk123456,  Thu Nov 13 2008, 22:36
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