Forbes Most Overpriced: San Francisoc

Forbes compiles their list of ten most (and least) overpriced real estate markets. And while overpriced isn’t necessarily correlated with “expected to fall,” San Francisco is singled out as a market that fits their “bubble territory” profile:

“San Francisco, ranked fourth, fits that bill. Despite home prices growing at a 2% clip over last year, according to the NAR, the city by the bay ranks third to last in expected income growth, reports Moody’s. Not good news in a market where only 7.5% of housing is affordable for the median-income earner. Combine that with a housing P/E ratio over 50, and it isn’t difficult to imagine some softening on the horizon.”

Other local markets that made the top (overpriced) ten: Sacramento (3rd) and San Jose (10th). And while it wasn’t Forbes, it was just six months ago that Business 2.0 identified San Francisco as one of five “bubble-proof” markets.

69 thoughts on “From ‘Bubble-Proof’ To ‘Bubble Territory’ In Six Short Months”
  1. What’s not clear to me is what encompasses “San Francisco” in their analysis. Does it include the East Bay? The Peninsula? Marin? Or is it just San Francisco?

  2. Sorry to respond to my own question — the $736K number is from NAR’s report that is the “San Francisco-Oakland-Fremont” metro area, which, interestingly enough, is separated from the “San Jose-Sunnyvale-Santa Clara” metro area, which actually has a higher number of $775K.
    Weird way of dividing up the area. But it still isn’t clear if Marin is included in “San Francisco-Oakland-Fremont.”
    http://www.realtor.org/Research.nsf/files/MSAPRICESF.pdf/$FILE/MSAPRICESF.pdf

  3. Henry,
    The San Francisco-Oakland-Fremont, CA Metropolitan Statistical Area includes: a) the Oakland-Fremont-Hayward, CA Metropolitan Division, which includes Alameda County, CA and Contra Costa County, CA, and b) the San Francisco-San Mateo-Redwood City, CA Metropolitan Division, which includes Marin County, CA, San Francisco County, CA, and San Mateo County, CA. Only the government could define it that way!
    See http://www.census.gov/population/estimates/metro-city/0312msa.txt

  4. Thanks fred. Of course what’s interesting is that this arbitrary division doesn’t include a lot of higher paying high-tech jobs in and south of Palo Alto (Santa Clara County) , but includes the higher priced housing in Atherton and Menlo Park (San Mateo County) as well as San Francisco.
    The other question, of course, is the salary data from company location or employee residence….

  5. Thanks for defining what ‘San Francisco’ entails guys. Very helpful, and interesting they’d include all those other counties. It would be interesting to see what Forbes’s housing price trend forecast is for just the city of San Francisco. 5-6% perhaps?
    Got to love magazines and their inconsistencies. San Francisco is in ‘bubble territory’, yet their housing price trend for ‘San Francisco’, which is not just San Francisco, is a postive 2% lol. Some crash. Put 10% down, and that’s a 20% return on your downpayment.

  6. Bubble or no bubble, San Francisco prices will only go up. Maybe they will slow down to an increase of only 5-6% per year, but soon they will be back to increasing at 15-20% per year. Every realtor that I have spoken to in the City says that prices will never actually decline – they will only go up. The only question is how fast. Maybe trees can’t grow to the sky (but in CA they get pretty tall), but SF real estate prices can (and will). The sky is not the limit for home and condo prices in our city. We are still a great bargain compared to Manhattan and parts of London (and Tokyo in 1989 and Hong Kong in 1997).

  7. You are not making 20% return.
    Your down payment makes 2% return.
    Then, for the rest 80%, you are borrowing at 6%+ to make 2%, for a 4% loss at the end of the day.
    People need to stop looking at mortgage as free money.

  8. John, that would be true if you neither lived in nor rented out the property. You need to add in the rent (whether real or imputed). That said, it’s probably still a loss.

  9. There you go again! At least once a week someone claims that San Francisco is a “bargain” compared to London and N.Y.C. (because they are similar cities?!) This is an apples and oranges comparison. I used to think realtors did this because of San Francisco’s chronic delusions of grandeur and self importance (Remember one local news station’s “Best Place On Earth” campaign?), but I am now convinced realtors make the comparison with NYC because it is the ONLY way they can justify these obscene prices. Sure real estate will go up in this city, but it can and has stayed flat in the city for years also, and with inflation and ownership costs, that means you can loose too. Any town in the U.S. can claim to be a bargain compared to New York, but only in San Francisco do we claim that we SHOULD be as expensive as New York.

  10. I’ve been tracking pricing trends in my neighborhood – Noe – for quite a while. I have to say, there has been no slowdown as such. In fact, even the place on 25th St listed at 2.75 MM is already in contract ! Appreciation is definitely not in the double digits, but most properties rarely last for more than a couple of weeks.

  11. John – How many times must it be mentioned that ownership cost is negated by the cost you would have spent renting? Sure, it’s not a 100% offset, but with rents rising, and factoring in the interest/tax deductions, it’s not that far off. At any rate, SF prices are up much more than 2%, butcloser to +5-8% range over the past 12 months, and another 5-8% over the next 12 months.
    Anon 7:24pm – Is the 25th St. Noe listing for $2.75 million really already in contract??? That is UNBELIEVABLE! I coulda sworn similar properties went for $2-2.3 million just a year ago? 2200 Sacramento Unit #108 for $929,000 is also already in contract. Remind us in 30 days what the 25th St. place sells for, and I’ll see if I can find out about 2200 Sacramento as well.

  12. If you consider everything in the equation, that’s way beyond the scope of this thread. I was just pointing out the thought that “I am putting 10% down” is way too simplified to the point of stupidity. Everything factored in, it could go either way depending on the market.
    Even in SF, today, some properties, for certain people (depending on the tax bracket) are worth buying than renting.
    And of course, there are a lot of over-priced properties too.

  13. The 25th Street property at $2.75 million is unbelievable to 99.99% of the developed world. But in San Francisco it is a bargain and its owners will see double-digit appreciation every year. It will sell for $6 million by 2012. If it were in the west end of London, it would sell for 6 million now (pound sterling). My realtor has been telling me to “buy now or be forever priced out of the market” – and I now believe that she is right.

  14. Ruth – Are you being facetious? Don’t listen to your realtor talking about ‘buying now or be priced out forever.’ That’s just silly. There are always other neighborhoods you can buy into.
    It is amazing though that some thought it wouldn’t go over $2million, and another believed $2.25 million would be the top. This just goes to show how far off observers can be. The easiest way to gauge the market is to actually go try and buy something. When you find something you like, you will soon discover that everybody else also likes your place. Best time to buy is during the holidays, in the 4th quarter i.e. 4Q06.
    P

  15. The P/E ratio is a much less meaningful statistic for San Francisco than for other cities because of our draconian, crazy housing laws. In most cities, when rents are low relative to purchase prices (i.e., high P/E), developers smartly change rental units into condos, re-balancing the system. Not here, where that might do something terrible like make housing affordable to purchase!

  16. The P/E ratio is too high for those low-end units, renting for $1800 and selling for $900K. However, when you get to 1.5M+, it is not that bad. If a SFH can be rented for $6K, it is worth 1.5M.
    The Price/median income ratio is also misleading. Sure, only 7% of SF household can afford median price. However, SF is a renter’s city with only 32% of all properties are owned. Suddenly that 7% looks more like 20% to 25%(Price/median household income of owners).
    No, I don’t believe there will be double-digit appreciation for the next few years. I think the low end of the market will fall hard, to 500K to 600K. However, the 1.5M+ segment will be quite stable.

  17. Someone told me in 2000 to buy Webvan stock or I would be priced out forever. It was true! I didn’t buy any, and now they are bankrupt. I want to buy some now, but I can’t…
    For all those who argue that prices will always go up at some rate that always makes SF housing a “great investment,” you are idiots who know very little about investing. There is no investment that is always a great investment. That type of logic defies all logic.
    However, the mere existence of that attitude proves that there are currently greater fools who will pay any price to get into the game late. Thank goodness for you, or I wouldn’t have been able to make so much profit when I sold my house. As long as the banks and the realtors can keep you in the game, those of us who bought early will be able to escape unharmed. Thanks for playing!

  18. Ruth you are delusional if you think that prices are going to appreciate 15-20% per year? What do you base your logic on? A realtor whispering sweet nothings in your ear?

  19. Ruth is right. To borrow a quote from another site, soon all of us bitter renters will be priced out forever. Those of us who don’t buy now will be forced to live in tent cities or Honda Civics in the future, when studios in the Tenderloin are $2.75 million. Those who do buy now will be masters of the universe with guaranteed affluence for their entire families for generations. And yes, I am being facetious.

  20. Jeez, it seems that a whole lot of you are just a bit too literal around here. Since when does one have to call out obvious sarcasm with “yes I am being facetious”?

  21. Yes San Francisco is a bargain compared with many places in the world. And yes there are foreign investors who buy here because prices per square foot are cheap and the exchange rates make it even more desirable.
    A fact of any market is that it doesn’t necessarily need to make sense. Just because some people think a market is overpriced doesn’t mean there aren’t a bunch of people who are willing and able to pay way more than they should and wreck prices for everyone else. All it takes is some people willing to pay high prices to alter the pricing momentum. And really, how many penthouse condominiums facing the bay will there ever be in the city, probably about the same number as on central park west.
    The fact is that SF real estate prices have increased by an average of 4.5% annually since 1945!! Unless renters have an insane amount of self-control and can invest thousands of dollars a month in addition to their rental payment, they will retire with minimal assets. It is sad but true. I can safely say that 95% of my friends who have rented for 10+ years have basically nothing to show for it. At least a 30 year loan forces you to save (invest) a ton of cash.

  22. And where does inflated prices leave homeowners like me who can’t afford to move without paying substantially more for the same place, not to mention the astronomical property taxes? I think we’d all be better off with a slow but steady appreciation rather than the crazy increases in the last few years.

  23. AC, as an owner, I can still see how someone right now would want to hold off until the correction that is already taking place in many parts of the country takes it’s course. I waited till prices went down before buying plasma tv’s and waited 9 months before buying my latest car because when it initially was introduced they were selling about 6,000 above invoice. Sometimes waiting can be to your advantage unless you are planning on living in the same place for more than 7 years.

  24. I love the “rich foreign investor” rebuttal. Yeah, I admit this happens. But does it make San Francisco immune to price drops? Flippers in Phoenix and Vegas were expecting us “rich Californians” to bail them out of their stucco. Guess that’s not happening anymore, huh?

  25. I guess that I was being a bit facetious (and I wish that the realtors were too – but they seem to really believe). Yes I think that we are in a bubble, but who knows when this one will truly pop. $2.75M for the house on 25th in Noe seems pretty frothy. What is the P/E ratio on that? You could rent a similar house (if available) for what, $6,000 per month (or less?). The new property taxes on this house will be almost $3K per month – plus a capital cost (pre-tax) of what, $13,000 per month? I know the pros/cons of renting v buying and that there is often a financial disconnect between the two – but, this price seems really high. But the demand seems to exist.

  26. If there were a magnitude 6 earthquake in the City tomorrow would prices climb, plunge or remain the same? I know prices dropped after the quake in 89 but that also coincided with the early 90s recession. Renting seems so much less troublesome/ burdening than having to deal with earhtquake repairs. And do most people buy earthquake insurance on their property- I believe thats can be pretty steep.

  27. As has been said before, one cannot compare London and San Francisco, for a host of reasons. Having said that, in sheer currency terms, a house in Kensington & Chelsea (in the posh borough of Westminster) does cost at least twice as much as a comparable one in Pacific Heights.
    I believe the listing on 25th St will close for over $2.75 MM. I will try and report back on the final sale price.

  28. “If there were a magnitude 6 earthquake in the City tomorrow would prices climb, plunge or remain the same?”
    I would think at least in the short-term prices would fall slightly as people would reassess their personal/family safety. Additionally, most people don’t have earthquake insurance, so any damage would have to be covered “out of pocket” – its unclear if many home buyers have an extra $50K-$200K to fix what would mostly likely be major repairs – so might just decide to sell. Rentals rates would probably spike as people look for temporary shelter as they wait for their place to be rebuild/repaired.

  29. I’ll bet that prices would rise after an earthquake that damaged a lot of housing (reducing supply). If the earthquake didn’t do much damage, like a 6.0, it would have no effect. // I think the bottom line on San Francisco is this: Americans have been moving West since they hit the shores of Massachusetts, and they will keep doing so for a long time to come. San Francisco is, in relative historical terms, a brand new city, with centuries of growth ahead. People will continue flocking to the City and California, simply because it is a more pleasant place than most to while away your time on Earth. // Good weather, good food, beautiful views, no bombs blowing up in the streets, no secret police taking you away at night to “disappear,” no snow unless you want to go to it, free of buzzards, vermin and cyclones. I mean, we are in paradise, aren’t we?

  30. We don’t have to imagine — we just need to look towards New Orleans post-Katrina as a case study. The only difference is that San Francisco government is only marginally less incompetent and corrupt as New Orleans.
    If I’m not mistaken, real estate prices actually went up as speculators flooded (sorry) into New Orleans. I’m not sure where prices are now, but that’s my understanding.

  31. “// I think the bottom line on San Francisco is this: Americans have been moving West since they hit the shores of Massachusetts, and they will keep doing so for a long time to come. San Francisco is, in relative historical terms, a brand new city, with centuries of growth ahead. People will continue flocking to the City and California, simply because it is a more pleasant place than most to while away your time on Earth. //”
    Hey, nice spiel. Gotta love the armchair historians on this board. So much insight. I always come here to learn……

  32. I was thinking the same thing. Wonder if realtors in Nevada and Arizona use the same boilerplate marketing material, substituting only the place names.

  33. Indeed. Nevada, Arizona, and Southern California could lay claim to the spiel far more than San Francisco. Still, I guess we are to believe this is “Paradise” and this would have worked on the old “Best Place on Earth” campaign that one local station used to constantly drum into our heads after the 89′ quake.

  34. Re the earthquake scenario –
    Please remember, that even though many people don’t have earthquake insurance, in the event of a large earthquake a LARGE Federal Gov’t bailout would happen – guaranteed. The risk of earthquake damage affecting anyone in a negative financial way is minimal, if it exists at all.

  35. ACI: I second your observation “I can safely say that 95% of my friends who have rented for 10+ years have basically nothing to show for it. At least a 30 year loan forces you to save (invest) a ton of cash.”
    It’s entertaining to revisit this site from time to time and see that the same individuals are still engaging in their sour-grapes-based pontificating against buying. Of course real-estate is not a guaranteed investment. But nothing is less secure than renting for decades and on top of that not having some spectacular alternative savings and investment strategy.

  36. Um, yes, I do remember Hurricane Katrina. Do you know anyone from there that owned property that lost money? I know several people from the area (Southern Mississippi and Louisiana) that received MUCH more money than they would have selling before the hurricane. Government money was free-flowing.

  37. “I know several people from the area (Southern Mississippi and Louisiana) that received MUCH more money than they would have selling before the hurricane. Government money was free-flowing.”
    Oh yeah. I am sure the government will say: this shack in Bayview last sold for 700K. But hey, since this was an earthquake, we’ll pay you 900K for it.
    I have a hunch that all – if anything – you’ll get is a FEMA trailer. And a collector agency trying to hunt you down for that outstanding 690K mortgage.

  38. Agree with 6:51pm. Have any of you been to New Orleans in the last six months. The ONLY area that is O.K. is the tourist zone, the outlying areas are mile after mile of garbage. It is a catastrophe, and I would imagine this is what the priority of the govt. would be towards San Francisco. Fix up Union Square for a great presidential photo-op while the rest of the city is left to fend for itself, especially low income areas.

  39. Ok, peeps, a 700k shack is worth 700k because of the land, not the building that would fall down in an earthquake. You can be guaranteed that the federal govt would step in and help anyone with their mortgage payments (or at the very least, prevent lenders from repossessing). Unless an earthquake convinced thousands of people to no longer live in the area (quite unlikely), the govt wouldn’t need to “buy the house” for people to make money or not lose money. 100k in “fix it” money would help someone fix up their lot enough to sell the land.

  40. “The P/E ratio is too high for those low-end units, renting for $1800 and selling for $900K.”
    Where in SF can you rent a 900k condo for $1800/month?
    One of the 600k 2-bedroom condos in the new building on 15th and Mission was renting for $2900/month.

  41. A lot of Sunset homes can be rented for $1800. Most of the listings are in the 800K to 900K range.
    Condos tend to be lower priced because of the HOA. However, if an unit can rent for $2900, I will call 600K only marginally overpriced.

  42. “You can be guaranteed that the federal govt would step in and help anyone with their mortgage payments (or at the very least, prevent lenders from repossessing). Unless an earthquake convinced thousands of people to no longer live in the area (quite unlikely)”
    Maybe you should check what happened in the Marina after the quake in 89′. People were giving away their homes in the low 100s. The same homes which are now selling for a few Mill. If you think the government will help you pay your mortgage, think again. This is not Sweden.

  43. I must be getting old, but I was living in Cow Hollow (Pierce and Green) at the time of the earthquake. We watched from our roof as the fireboats put together enough hose lines to be able to put out the fires (there was no water pressure!). I ended up moving and buying in Marin in the mid 90’s and I think part of my decision making process was my memories from the earthquake and weighing future possibilities. We did not have water for about two weeks and did not have hot water for about one month. Everytime I drive through the Marina I cannot help but think that all of that area could be wiped out very easily. I own some rental units in the city but would never EVER own any property in the Marina.

  44. If anybody is stupid enough to sell lots in the Marina from the 100s after the next quake, I’ll buy ’em all!

  45. If the Marina were to burn down, I would bet that it would be turned into a park, as it is almost impossible to safely build structures and utilities to them on a major liquifaction zone. Don’t forget, the 89′ quake was based 80 miles south in Santa Cruz, imagine if it was longer in duration or closer to the city. The Marina is nothing more than a landfill of the debris from the 1906 quake.

  46. anon at 3:14 PM
    good to see there are still some reality based people frequenting this board. I am always surprised about the lack of correlation between the price of a home and the ground it is built on. I would expect to see lower prices in the liquefaction prone areas. But that doesn’t seem to be the case except for Russian Hill, Telegraph Hill and Nob Hill.

  47. I’m completely clueless and would ask for a bit of help here. I am very young and just sort of starting out over here in upstate NY and read about life in SF all the time. If the average cost of a home is $700k+ what is the average income in the city as well? I’m still not sure how people even afford to live there.
    Any help?
    Thank you.

  48. Carrie, The average income in S.F., though high, is not nearly high enough to cover the cost of living in the city. This presents problems you will find when you come to visit what is a city that is in transition. San Francisco at present is loaded with the very rich and the very poor, with street crime, and homelessness far beyond what is normally acceptable in most cities. The other thing you will wonder is where are all the people with money? Unlike Los Angeles or Chicago where rich areas look rich, you will be in for a shock when some run down flat on Valencia street is 985,000. San Francisco is in fact becoming a wealthy boutique city (an “urban Beverly Hills with trash on the streets and homeless men with shopping carts picking through your trash”) and , as was predicted ten years ago in the book “Edge City” which devoted a large portion to the changes taking place in the Bay Area. Still, it is a beautiful and challenging place, with a history, climate and landscape that are unique.

  49. Anon – great description on what’s going on here. I’m going to have to read Edge City. I haven’t lived here that long – but I understand the “uniqueness” of the city and the economic factors that drive our housing costs to ridiculous (in my opinion) levels. But, there is something that I just don’t get. This is not New York or London (or Beverly Hills) – so why is that dump on Valencia Street $985K?

  50. I thought I would warn you that I do not agree with everything in the 1993 book “Edge City”. The book looks at many urban regions besides San Francisco, and what it shows in the Bay Area is that the jobs are not in “the city”. He predicted that San Francisco would become an upper income community for couples and singles without children who wanted to have a “pretend” urban experience. He felt that now that S.F. did not have a working port, a working industrial district in Soma, and a shrinking financial district, it was more of a historical urban upscale disneyland. The author precidected that housing prices would go through the roof in San Francisco as Nimbys fought to “preserve” the city when in fact they were killing the city instead.
    The writer made a grim long range forecast of San Francisco eventually being mostly trustafarians, wealthy retired second homeowners, and childless professionals AND a large very poor population poorly housed filling mostly service jobs.

  51. It may be a “pretend” urban experience, but the reason I would pay a million bucks for a place here is that it is one of the only walker-friendly cities in the US. I sold my car, I walk to work, use transit occasionally, car-share every now and then, and walk to restaurants and bars all the time. I can’t do that anywhere else on the same scale in the West. (Portland and Seattle may have parts that are similar, but they are much, much, much smaller – and in my opinion don’t have as good of weather)
    Another reason – if I wanted to change jobs, it would most likely be to something in Silicon Valley. And guess what? Total costs of living there are just as high. A house my be slightly less and slightly larger, but you have to own a car, you have to drive everywhere, you have to waste time in traffic. No thanks. I’ll take my “pretend” city any day over that.
    Also, it should be noted that while almost all industry has left the city, and there are other major employment areas in the region, the city still swells to almost 1.6 million people during each business day. Pretend? I guess in the same way that Manhattan is pretend.

  52. Thanks everyone for your feedback. This site is an amazing source of knowledge and opinion. I still dream of living in SF one day. It’s a shame this isn’t being turned around. I should like to raise my family there one day.

  53. The daytime population of San Francisco does not swell to 1.6 million. Nice try. According to S.F.F.D. the daytime population at it’s highest during tourist season in Summer nears 1.1 million. (Same site notes that tourism and restaurants are the two biggest private employers in S.F.) The city population is around 745,000. My reason for correcting the previous post at 2:53pm is that this city is not nearly as large as it wants to think it is and this is no justification for the cost of housing. The cost of housing is high here because of the decades of slow housing construction and because “everybody wants to live here”.

  54. So that SF residents are no longer accused of thinking their city is larger than it is, they should pull a New York! Convince Oakland to join the city. And maybe Berkeley too. And maybe all of San Mateo County as well.
    People forget that Brooklyn was the third biggest city in the US when New York (Manhattan) swallowed it up. Without that coup, Manhattan would look like nothing more than a double size SF. Same high costs of housing, same demographic changes, same “pretend” city with no blue collar jobs, same problems with all housing being for the very rich and very poor.
    The facts – Manhattan is the biggest high-density, high-priced urban playland in the US. SF is second, but very much the same. If you want to bash SF about it’s size, add the other suburb cities that SF didn’t swallow in the same way that NYC did.

  55. This is really becoming funny. Manhattan has over 7 million residents! FOREGET Brooklyn and the other burroughs. After N.Y. we are second because of density? Tell that to Chicago!
    The Bay Area is not the economic powerhouse of the West, that title went to Los Angeles over 50 years ago. The real economic center is about 15 miles north of downtown San Jose.
    The FACT is San Francisco has 40,000 less people living in it than it did in 2000. (Look it up)
    So WHY is housing more expensive? Pure speculation and easy credit. This is a classic bubble.

  56. whoops. Got NYC and Manhattan populations confused. In looking this back up again, I was shocked to see that Los Angeles was the largest over-all urban area in the U.S. Sorry about the bad info.
    BUT, I stand by S.F. loosing around 37,000 people in overall population since the year 2000.

  57. I said that SF was the second biggest “urban playland”. Chicago is not at all like SF or Manhattan in demographic terms. Also – SF is much more dense than Chicago – look it up.
    Population figures don’t mean a whole lot for a city of only 46 square miles. 37,000 people less simply means fewer people are living in cramped spaces. We’re still the second most dense city in the country by a huge margin.

  58. I said that SF was the second biggest “urban playland”. Chicago is not at all like SF or Manhattan in demographic terms. Also – SF is much more dense than Chicago – look it up.
    Population figures don’t mean a whole lot for a city of only 46 square miles. 37,000 people less simply means fewer people are living in cramped spaces. We’re still the second most dense city in the country by a huge margin.

  59. Point well taken on second largest “urban playland”. I also think that as an upscale “urban playland”, S.F. property will continue to gain value for the short term. Could the reason for falling population be that homes in San Franciso are no longer being purchased by families, but by singles and retired professionals as second homes?
    As for Chicago, if you do the same exclusion of outer districts like we have done with S.F. (no Berkeley, Oakland, etc.) and NYC (no out burroughs) you will find that Chicago is perhaps today’s best value as an urban playland. Amazing subway-transit system, a central city density simlar to us and NYC, and great shops, restaurants and architecture, and safe clean streets.

  60. Just for the record, Manhattan has 4.2x the density of San Francisco and is approximately half the size (23 sq miles vs 47 square miles).

  61. “BUT, I stand by S.F. loosing around 37,000 people in overall population since the year 2000.”
    Anon, were you here in 2000? If you were, you would have been glad to see some of the people go. You can thank some of the people who left for driving up the rents in S.F. If they were still here the competition for rentals would have remained intense.

  62. Henry said: “San Francisco, is a postive 2% lol. Some crash. Put 10% down, and that’s a 20% return on your downpayment.” But Henry’s forgetting that pesky little 5%+ you’re going to pay an agent to sell the place, so you’re at least 2 1/2 years to even–not counting what it costs to carry the place–if the 2% holds, and deep in the toilet if it drops.

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