SF Peninsula Real Estate Guru

I am continually amazed at how often and how consistently the print media paints a doom and gloom picture about the local real estate market but seems to give the stock market a free pass.

Today’s FRONT PAGE headline in the SF Chronicle read “Living the American Nightmare” tells the story of 4 homeowners who now face severe financial difficulties due to the financing they used to purchase their homes. 

3 of the homeowners purchased their homes with no money down.

2 of these homeowners had the same person act as their real estate agent and their loan agent. I consider the practice of acting as both a real estate agent and a mortgage broker in the same transaction to be highly questionable. More often than not, when I see an agent acting as both a real estate agent and as a loan agent, the interest rates on the loans used to purchase these properties is extremely high.  I believe the state legislature should look at this practice and determine whether the general public is best served by individuals who wear two hats in the same transaction.

In the past week, the stock market dropped about 4.3%. 

Did anyone see any front page articles about this? I didn’t!

The only article today about last week’s stock market woes was found at the bottom of the first page of the Business section titled “Market’s woes called ‘repricing risk’ as fears continue over mortgage defaults” and essentially laid the blame of this week’s stock market collapse on the sub-prime real estate financing problem.

I think we need to be careful and separate the problems caused by the sub-prime crisis and the generally very solid strength of the real estate market.

In the past 30 years,  the local real estate market has had no more than 2 or 3 years where property values dropped more than 4.3% in an entire year! During this same period, in most years we have seen property values go up at least 8 to 10% per year and in several years increase by nearly 20% or more.

Owning a home provides a place to live and is also a very good investment.

In my 29 years as a real estate broker, I have counseled my clients to purchase only what they can afford - that the only way people get hurt owning real estate is if they buy something they can’t afford. As long as people buy what they can afford, they can have faith that over the long term, owning their home will probably be the best investment they ever make.

The business practices of some loan agents and loan companies in the lending industry combined with the failure of individuals to take responsibility for their own financial decisions has led to the sub-prime mortgage crisis.

Let’s not throw the baby out with the bath water!

Real estate is a strong, safe and prudent investment.

 Arn