I talk to and correspond with a lot of people who are in the business of Real Estate and pretty much all of them agree that the low end properties (under $600k) that Investors have been buying do not make sense using the traditional metrics of price to rent or price to income ( I’m using multipliers that were common here prior to the last bubble)
The investors are either assuming significant wage inflation, significant appreciation, or they are all real dumb. Or…they look at the stock market, the bond market, the other alternatives and think that Real Estate is the best bad bet out there because it is tangible. I have heard several very intelligent and well informed people say just that.
I’d like to be clear about my opinion, there are good investments to be made in Real Estate. Very few of those good investments are available to someone who has a moderate amount of money unless they are contractors and/or they have first rate management skills. I do see some raw land, some estates and some commercial properties available that look like good investments using traditional metrics. But they are not cheap and not many people have the financial wherewithal to plunk down a Million plus dollars.
What do our readers think? Is the current rise in Bay Area home prices partly or wholly a flight to safety?