In reply to "curious" - your scenario of prices being flat from '91 to '98 so a "buyer lost 30% in real terms" vs. buying CD's at 5%.... I see that logic all the time on anti-buying sites. But take another look. Let's say you bought at the very beginng on the flat period... 1991... a 2Bed 2Bath condo in Pac Heights for $250,000... you hang on until 2007... and it's worth at least $880,000 or 350% higher. The 5% CD over the same time period is up 229%. But you didn't just lose $300,000 in "real terms" with your CD.... it's worse:
You would have had to put $250,000 in cash into a CD.... whereas you only needed $50,000 (20%) down on the $250k Condo. So the cash on cash return is 1762% or an $830,000 gain. If you only had $50,000 in 1991 you made a whopping $20,000 when you sold in 1998 and you would have made a total of $60,000 if you held on until 2007. So you can make $60,000 on a CD where you also pay Cap gains when you sell, and have ZERO write offs, or you can make $830,000 and only owe Cap gains on $330,000 if you're married and you get to write off your interest and property taxes all those years.
The above scenario is the bad timing one.... you bought in '91. What if you bought in '98 when the market started going up? Your $50,000 CD earned $22k through 2007 and your $250k condo, purchased with $50,000 is still worth $880k. An $830,000 gain vs. a $22,000 gain. That's why people say you can get rich in real estate, but no one ever got rich in CD's.
We agents get thrown under the bus for having a "vested interest" when we talk about the market. How about a new paradign in how you look at us.... we BELIEVE in real estate.
Should someone moving to SF buy now? If they think they'll be moving again in another couple of years, than they may not want to take the risk. But if they can hang on for the long term, it can be an incredible investment. In fact, 2008 may be looked back upon as one of the best years to buy real estate throughout the country. And if it goes down more in 2009.... well, by 2020 you're still going to look like a real estate genius just like the person who bought in 1991 even though they "suffered" in their home for 7 years of no growth.