Agreed on the very good analysis below.

I've 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.

Fri Apr 25 2008, 08:57

Excellent logical analysis. Prices in SR has dropped close to 2003 level. If econoly still goes turmoil, there is some room to go down. As prices in SR went down and prices in south bay (one with good schools) went up in lasst 2 years, price difference in those places has gone up significantly. This makes it very lucrative for people living in South bay to buy in SR - more value for money and take addtional commutte pain. Plus Quality of life in SR is much better with great parks, schools, trails, etc....

Thu Apr 24 2008, 20:28

How can there be a correct answer to this question ? No one knows what will happen in future.

But you can make an educated guess based on historical RE cycles and current economic / market conditions. I believe that over last few years, we witnessed one of the biggest bubbles in the history of mankind. The aftermath has just started. The leading indicators like NODs and forclosures - even in BA are going up drastically. Note that RE cycles are much longer and slower than say stock market cycles. So we have a long way to go as far as duration is concerned.

About prices. It's almost a certainty that the crazy lending standards are gone forever. Good riddance. So prices have no option but to get in line with incomes. Do your calculations. How much do you guess to be the income of people who are buying in your area. How much mortgage can the bank will let them afford ? That gives you a good approximate measure.

Even better, see what the prices were - BEFORE the bubble exploded. You can argue that at that time they were in line with incomes. So in San Ramon, the average price per sqft was below 250 - this is before 2003. There is a strong chance that it will revert back to those levels - and might even shoot lower. Has average income gone up or low during this period ? Hardly changed. So why should the house be more expensive than those levels ?

So do you wait for the bottom ? You won't know. But you can wait till it reaches 2003 levels or at least somewhere in that ball park. Currently it is around 300 per sqft. So by that logic, still lot of room to fall.

There are lot of Realtors on this board and most might disagree. I am not interested in starting a fight. So note that these were just my opinions. My only advice is, use cold logic. Hard numbers. Ignore the so called intangibles while you do your first analysis. Evaluate the risk in dollar terms. And then see if the fluffy stuff is worth the risk that YOU perceive.

Thu Apr 24 2008, 19:41