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Housing Bubble - Location Matters

Location, location and location still matter in a housing bubble

Aug 9, 2006

Despite a major housing bubble, location still mattered and will always matter going forward.

08/08/2006

In response to a post in our real estate forum Housing Bubbles - Stock Bubbles posted by pete2214 who wrote:

Actually Texas because of their property tax and also lots of land available but in terms of location. Who would have thought people would commute 3 to 4 hours to work.

Some commute longer than that in the Bay Area so they can have real land in the Sierra Foothills rather than a condo in the Silicon Valley for $700,000. There are a few amazing stories. One of my friends who owns a windsurfing shop with his brother in San Mateo, near SFO, has a 20 acre ranch maybe 2 hours South of the shop East of Monterey. His commute would be 4 or 5 hours if he had to do it during working hours. But they open around lunch time so he can drive up after traffic clears on his hog (Harley Motorcycle) He builds surf and kite boards (windsurfing boards are now imported from Eastern Europe) and only has to commute to Santa Cruz in the winter season to their surf shop so his commute is seasonal which helps.

Location always matters... and keys to location are

Good schools (UC Berkeley and Stanford for Silicon Valley plus great schools for kids of employees)
Good Jobs (usually found around good schools to recruit from)
Good weather
Limited room to build more housing such as the SF Peninsula where most is designated open space or already built out. Most new housing near me is "in building" where they put high density housing in the buffer zones between transportation corridors, freeway and expressway on and off ramps, etc.

Texas had the problem of declining oil prices and Enron failing... Higher oil prices could be the ticket for that market, especially given their relatively affordable housing and low income tax rate.

Location really matters in expensive areas like the San Francisco Bay Area. Back in the early 1990's when we had our last decline, homes near Stanford (where I live and purchased my home on the decline in 1994) fell about 25% while homes far away from jobs and schools selling at a similar price fell by as much as 50%.

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Kirk Lindstrom:

DISCLAIMER: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk. Individuals should consult with their own advisors for specific investment advice.

The copyright of the article Housing Bubble - Location Matters in Investment is owned by Kirk Lindstrom. Permission to republish Housing Bubble - Location Matters in print or online must be granted by the author in writing.