Posted this before, but I believe it's worth repeating: A lot of realtors have posted that "it is a great time to buy" in places like San Ramon. Yes, prices have dropped from the late 2005 peak, but they aren't inline with affordability fundamentals - i.e. housing shouldn't be more than 4 times your income, aka, if you make 100K, you can afford a 400K home, assuming minimal other debts. Even this 4X income level is a bit aggressive, but I'm willing to concede that level because San Ramon is a nice town with good schools and weather.

The average household income in San Ramon from 2007 is $116,108, according to http://www.bestplaces.net/city/San_Ramon-California.aspx. According to Trulia, the average sales price from Jan-Mar 08 is 721,189. So, we are now at a 6.2 times income to housing cost ratio. In order to return to affordabilty fundamentals, average home prices would need to drop to $464,432, which is another 35% drop from now.

In my opinion, there is no good time to buy this year. If you are keen to own a house (for whatever reason), wait till October when the prices drop (this happened in SR even in 2006 & 2007).
I do not want to say Barb is wrong, but she conveniently forgot to include several things.

1. You put down 10-20% of the home price, instead it can be invested to get a return of 6-8% annually (if u rent).
2. You pay property taxes, which are high in SR (compared to south bay). BTW, if you are subject to AMT (most 2-earner families in Nay area are), you cannot deduct this.
3. You have to spend some money for the maintenance, even for a new home, 0 if u rent.
4. You also have to pay insurance.
If you really add all of these, there is no comparison in money. Renting is definitely cheaper.

On the other side, we do like to own nice things and if you like a house, you will buy it. I bought my house in 2003 (before the bubble) and got a great low rate mortgage, still if I rent my house I will get less than what I pay out in mortgage+taxes+insurance+maintenance. I still like my house and do not feel bad about buying it.

the real estate market needs to correct. it has gone up 20% plus from 2001 to 2006. The average home needs to be prices relative to average incomes. the historic ratio is income x 3 = home price. SR is highly over priced, although a nice community. Real estate agents will tell you that it is ALWAYS a good time to buy. So don't believe them. They are not objective. You can rent in SR and enjoy all the amenities for a fraction of the cost.

also, the argument that homes prices will go up because they have in the past, is illogical and weak. past performance is not indicative of future results. Harry Dent has a great book on demographics which has been on the amazon best seller for years; he notes that the great baby boomer generation will begin to divest their real estate holdings, due to age, health, death; etc or downsize thereby creating a huge glut of homes in the next 5-20 yrs. Just a different perspective, fyi.

you will not make money by buying homes for 1 million and renting them for 3,000/month. real estate in the long run is not a good investment, even Donald Trump will tell you that. from 1890 to 1990 prices went up in the US only at the inflationary rate, while stocks were up an average of 7-10% from 1919 to 1990. You are better off in the stock market. yes, if you bought in Moraga in 1990 and sold now you will did well. (I bought in 1989...3K sq ft house in Moraga for 220K, now worth 1.6 million. no bragging, just saying that those times are over. if I bought at 1.6 million now, I would not expect the price to be 9 million for this home in 15 yrs. the crazy appreciation of the past is over. homes are places to live not ATM machines. Real estate agents have encouraged this ponzie scheme for too long.

the Moraga guy is right. You can enjoy the amenities of the community and be a renter. Frankly, I'd love to have an investment home that I could rent out, and have someone else (like John, below) pay my mortgage, while I sit and wait for the market to turn around, while I utilize the deduction, and gain the eventual equity.

However, do your due diligence - What will your income taxes be with the mortgage deduction, and without it? Run Turbo-tax or something similar, and put in the two scenarios. No deduction versus practically the entire mortgage payment for the whole first year as a deduction (you pay very little principal in the first years, and it is only the interest that is deductible.) Decide for yourself what is better for you.

Secondly, how much more do you think the market will fall? 10%? Then offer $900,000 on that $1,000,000 house, and get it and enjoy the tax deduction now. If they won't take it, find another house, and hope that your guess of the market falling by that much is right.

How long are you planning on staying? If fewer than 3, think hard. No one knows how long the market will stay undecided, and how long it will take to recover, though in one year (1999 into 2000) the market rose 20% in some areas. If more than 3 -5 years, buy while the market is low and the interest rates are low, and while you can negotiate the best deal, and have a house you can live in, enjoy, and make your own. Do you care about what house you live in? What if the house you love is for sale now? Are you willing to risk that it will still be for sale in the fall? Or, if you feel that there is always another house, then wait. A house is more than an investment, it is a home.

And to address John's point, some of us Realtors really do care about our clients, really do want a client for life, and not just one deal. It doesn't benefit me to talk people into buying (as if any of you would do that anyway) if the time isn't right for you. I want my clients to be happy now, and happy in 3 years or 5 years when they move up or out, so they call me again. I don't know what John's problem is - maybe he was talked into doing something he regrets.

Excellent time to buy in SR - value for money is great. Most people from south bay are moving to SR due to same reason.