Peninsula Living Blog: October 2010

Why is John Paulson Telling me to Buy a House and Why Should I Care?

Maybe this is a San Franciso Bay Area thing, but this post by Cece Blase captures what we're seeing here in our area of California - San Franciso and San Mateo Counties, especially. This fall buyers seem to have gotten the message and are finding bargains and buying some wonderful homes for themselves and starting to create their future.

"If you don't own a home, buy one. If you own one home, buy another one. And if you own two homes, buy a third and lend your relatives the money to buy one." - John Paulson 9/27/2010

WOW! That's a powerful statement. So who is this John Paulson guy anyway? And why should we care what he thinks?

Well, Paulson is a multibillion hedge fund operator who made a killing going short on subprime mortgages a few years ago. He saw the train wreck coming, which is more than most of us can say. He understood the dangers of the subprime market before we even really understood what this subprime mess was about. I think this is a fairly decent indicator that he knows more about real estate investing than most of us. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

The Wall Street Journal agrees with Paulson:

Ignore the critics. The odds have to be on his side...It isn't just that home prices have fallen a long way. It's also that, if you can get a mortgage, you are basically taking a reverse bet on the bond market. You could be a long-term borrower at fixed rates, instead of a long-term lender. Right now you can borrow for 30 years at around 4.3%. After the mortgage tax deduction, for some people the net effective interest rate is nearer to 3%. That's going to prove an awesome deal if we see inflation again.

And so does Forbes:

As this is the best time in 50 years to buy homes, Paulson advised his listeners to take 30 year mortgages to buy a home as "your debt and interest payments get locked in at record lows, while the price of your home will rise."

Bottom line? Friends and family members doing that 'chicken-little' dance about how it's not the right time to buy may not be the best qualified people to offer advice right now. Instead, it may be time to listen to people who better understand the opportunities that are out there right now.
Dreaming of San Francisco? Cece Blase offers local Advice to San Francisco Buyers, Sellers and Owners-- and feeds the dreams of those who wish they could live in Tony Bennet's 'City by the Bay.' Call or email at 415-577-0809 or email at cblase@paragon-re.com. www.ceceblase.com