Unless you live in our Fantasyland, it is impossible to understand the how’s and why’s of it happening. It just does. We are very lucky to have a strong economy right now. But, even when it has been sluggish, the housing market between Burlingame and Palo Alto has not deminished. Just the opposite.

You are right on, Kevin, we have no where else to build and if you want to live here, you pay the piper.

Thanks for dropping by.

This ongoing story is a composite sketch of clients I’ve worked with. I know we live in fantasy land here in the Bay Area, but yes, there are many, many first-time home buyers who buy homes around ~$1M.

They’re typically dual-income families, with combined gross salaries around $300K or more (e.g. husband at a big high-tech firm, wife an attorney), who’ve been out of grad school (MBA, LLB, PhD) for at least 3 years.

The highest price home I’ve helped first-time home buyers get was around $1.25M; couple was similar to in the above paragraph but were 6 years out of grad school.

Single buyers, or couples with lower gross incomes, typically do start with lower-priced homes or condos.

I haven’t decided yet where my hypothetical first time home buyers will end up, but of course it will not be Atherton or Hillsborough. If this series continues over a few year time period, they might end up in Atherton or Hillsborough the 3rd or 4th time around, but only if one of their employers does a successful IPO. I probably won’t go down that route because it’s too much part of Silicon Valley lore.

Unlike yourself, I’m not a licenced real estate agent, but rather a property broker. The difference being that ‘as a property broker, I am able to source brand new houses from a variety of builders and developers at a certain margin below their registered valuation, and then on-sell them at their true valuation price.

I actually spent the best part of the last decade working, not as a property broker but as a mortgage manager for one of New Zealand’s mainstream banks. With hindsight, it was a great grounding for situations like meeting up with the “Bobs and Bettys” of this world… because unlike most realtors, I can literally tell within a few minutes of conversation “if” they can afford to buy anything at all, let alone buy the home/s I might be wanting to show them.

San Francisco sounds like it is precariously balanced at or near the top of the recent property boom. Auckland is exactly the same. In fact, despite the doomsayers predictions of the past three years, our property market continues to rumble ever onwards!

We’ve enjoyed 100% gains across the entire country over the past decade – and in certain areas, ‘hundreds of percent’ gains!

However, there are some fundamentals driving our market at present – particularly the investment property market – that don’t look like going away any time soon.

For example, we’ve enjoyed a massive upturn in immigration to this country. That in itself creates a ‘demand exceeding supply” situation.

Plus, with mortgage interest rates having risen 3% in 4 years, this has meant that ‘would be first home buyers’ are choosing to stay renting indefinitely rather than take on the crushing burden of a large mortgage. This in turn has meant that demand for rental property has exceeded supply, making property investment even more attractive than it already is!

Actually, a couple of colleagues and myself were recently studying some housing stats and came a cross an example of a villa in the Auckland suburb of Mount Eden (10 kilometers from the CBD) that was “living testament” to the power of property as an asset worth investing in.

For example, in 1983 it changed hands for a mere $79,000. 10 years later it sold for $312,000. In 2004 it was sold for $920,000. Last month it sold for $1,200,000!

Over a 23 year period it had enjoyed annualised returns of approximately 65% per year!

But here’s the real kicker…

During that same 23 year period this property was exposed to the impact and subsequent fallout from the 1987 stock market crash, the 1989 property crash, the recession of the early 1990’s, the sheer chaos leading up to the first Gulf War, the Asian crisis of 1997 (which ripped 15% – 20% out of the Asian – Pacific property market)… then there was “9/11″…and you know what THAT did to the markets for a few months!

So yeah… I keep telling the “Bobs and Bettys” that no matter what price they pay for their home, no matter how expensive they might feel it is… it’s gonna seem awful cheap in 10 years from now!