This is not a fact!
And a particularly radical opinion at that!
I wouldn't let one person's prejudiced opinion deter me from doing what I know best.
They Bay area, (and areas like Danville) are experiencing a recovery due to the people who are living and investing there. If you want to follow someone, follow THEM!
Good luck and may God bless
Purchasing a 500K home in a 1.2M community will prove to be a low risk, cost effective option.
As others have pointed out in various ways, real estate is, has been, and for the foreseeable future is about location, location, location. Hire a local professional to analyze the data and know your options if the arrows go up or down.
As Vickie pointed out, value retaining factors are very important to consider.
What Patrick said in his blog has been said many times over in the past few years. His opinion is shared by many others. Are they right? A good business strategy is to buy low and sell high. To sell high will take several years. But, if you are buying an expensive home to enjoy a better quality of life, not just for an investment, the timing is real good right now. When in the past could a person buy a expensive home for the asking prices you see today and get a 30 year fixed rate loan for up to $4,000,000 at 4.875%?
Happy funding, Rudi
This sounds like a rhetorical question. What constitutes an expensive house? It's truly in the eye and pocket book of the beholder. If you are paying cash, it is vitally important to make sure you aren't over paying. If you get a loan, quanteed the appraisals in this market will determine it's current value, or at least the value that appraiser will approve for the loan. It's part of the checks and balances in place for buyers and sellers.
As with an entry level, mid range or high end purchase, it is important to align yourself with a knowledgeable and trustworthy realtor. We are your advocate and part of our role is to be your consultant with your best interest at hand.
Interview a couple and choose the one that you feel most comfortable working with. It will become a vital relationship throughout the transaction.
A home's value is based on the market place... what a willing buyer and a willing seller agree to exchange for the property. it works very similarly to the stock market in very slow motion... which means the price today may not be the price tomorrow or the price yesterday.
If you are going to buy a house, then do your homework, know how you will respond if the value goes down or up ... and do that before you own it. Find someone you trust to guide you (and I read Patrick's site and he would not be one i would go to)
An excellent real life example. My son just bought a home in Hawaii (expensive homes for what you get compared to other parts of the country). He owned a condo there 10 years ago, paid $100k for it and sold it 4 years later for $225k. Bought a huge brand new house in Florida for $210k (inexpensive compared to Hawaii) and still rents it out because it is now worth $100k. The condo he sold 6 years ago just came on the market for $425k. So he would have been much better off keeping that expensive condo for the last 6 years and renting in Florida than purchasing in an inexpensive area only to see that area collapse completely.
Broker / Owner
I am getting a lot of requests for Rentals in San Ramon, Danville and Pleasanton. There seem to be no affordable single family home rentals in the area. The East Bay did have significant appreciation from 2000-2005, but it was mostly driven by employment and school quality rather than over-building for investors. The quality of the schools and access to employment continues to support home prices locally.