Having graduated college in 1999, it's been interesting. I'd consider myself an adult long before that, but only since 1999 have I been investing in real estate and the stock market. Thus, my only experience in those things is during the "lost decade." & what a decade it was!

I guess it's extra interesting since the dot com bust was in my backyard, as was one of the biggest housing bubbles in the country. I have always had a lot of extra insight to all this as I watched it unfold before my very eyes. (I know a lot of people in the world weren't quite aware of all the insane borrowing going on around here, etc. & in the end both collapses had worldwide effects).

Anyway, as our 10-year anniversary of home ownership passes, I was reflecting a bit on it.

The wisest advice I can give people is to not give into the hype. It's kind of funny, but everything I hear about housing TODAY is everything I have been hearing the last decade. Nothing really changes. We have had the luck to be homeowners in a most volatile real estate market decade. In 1999 people were saying the exact same things as they are today. Mainly, "If I don't buy now, I will never be able to!!!!" Irony is that I have heard the same frantic statement every year for the last decade. On the way up and on the way down - it's all the same.

I suppose it's a lot like the stock market. You can't time the market. You just have to buy when it makes sense for you. & make it a fiscal decision, not an emotional one. What's the point of "buying now because it's my last chance," if you can't afford it and end in foreclosure.

Another juicy tidbit I heard up until 2008, I suppose, was that it was stupid to pay down our house. (Told to me by people with multiple homes and ARMs, who eventually lost all their houses to foreclosure. Not surprisingly!). As our house value falls to about the price we paid for it, I am relieved it has another $90k to go before we hit "upside down." & though we put a fair amount down, I understand the sentiment not to put too much into your house early on. I understand inflation and all that. BUT I am talking people who thought have a fixed rate mortgage was stupid. (Not even getting into large down payments, 15-year loans and extra principle payments). I remember people telling me I was stupid, and me wondering what planet THEY were from! (Stupid because I want to pay off my house some day? BEcause I am locking in the lowest mortgage rates of the century?)

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Anyway, when I think back it is kind of funny since dh and I were so young and naive when we bought our first home. Some smarts and good financial advice helped us through though.

As was the entire last decade, we decided to buy in an extremely volatile market. I would have never bought a home if not for dh. Living near San francisco the prices of homes were absurd in 1999. It was somewhere near the end of college that dh told me he didn't want to get married until we bought a home. I had actually been waiting 4 years, to finish college, to turn my engagement ring into a wedding ring. When he first told me this, I thought he was stalling. I REALLY thought he was insane. Who can own a flipping home here, right out of college? What is he thinking?

In the end, it wasn't a stall tactic. Since my family had come from more reasonably priced areas, we had never really heard of the "start with a condo and move up to house" strategy. So dh told me we should buy a condo. At first, still thought he was crazy. But I did my homework. At the time, the cheapest house we could probably find was about $500k, whereas nice condos were to be had for as little as $150k. & when we did the math, it made sense. I Was renting a room (had roommates) for $400/month. Dh was living at home. Thing was, we couldn't get our own place for less than $1k per month. PRobably would cost more if we wanted anything safe and decent. When you run the numbers, condos were far cheaper. & this is somewhere we grew up and intended to stay forever. No doubt about it.

There was just one problem. Though the asking prices looked okay, all condos were selling in minutes with up to 6-figure over-bids. Condos and town houses were appreciating FASTER than houses, which was a selling point to me (my parents were wary if we wanted to invest in a condo, but the region was unique enough to make sense). So yeah, honestly, I didn't think we would be buying a condo anytime soon. I had heard the horror stories from the trenches.

The next part of my story is why I would never do a real estate transaction without a GOOD realtor. A relative referred a realtor who was worth her weight in gold. She had a lot of insights into some of the better neighborhoods, and some of the inside info that no casual buyer would have. (i.e. she told us not to buy in the complex next to where we ended up, because there were construction defects, etc.). Anyway, and I suppose this is how we stumbled upon our home buying MO. Find a TERRIBLE selling realtor - the rest is in the bag. Not a conscious decision at all, but over the years we have stumbled onto homes worth farm more than ever advertised. Way underpriced, etc., etc. I suppose "no realtor" is better than a bad one. But I would personally never buy or sell, without a good realtor on my side.

So, that's how we did it. We wanted 2 or 3 bedrooms, though were sure we would probably end up with 2. We were only shopping end units. I didn't want to share all our walls with neighbors. So, we come across this 3-bedroom condo, remodeled to the hilt, that had been sitting on the market for 6 months. At which point, I swear to you, we just about turned and ran the other way. It was impossible that anything semi-decent was on the market for 6 months!!! (I still think to this day - what if we didn't give it a try). We walked in, and we fell in love. (In the end? Problem was terrible selling realtor. SO penny wise and pound foolish for the sellers - I can't even tell you how much so. We were relieved to narrow down the problem and know the place was just fine. It was a GEM!)

I suppose some of our friends or family thought it was a bit much to take on 3-bedrooms. Dh and I were always looking for the long term. Though we hoped to ride the equity wave up to a house, we wanted somewhere where we could have kids, etc., if it didn't work out. We weren't sure if we could ever afford a house. Let's face it - this might be our "forever home." & we were happy with that!

Anyway, the condo was at the top of our price range, and they immediately accepted our full price offer. (Bad realtor had said they had lower offers and would accept nothing less. Can you believe our relief that we didn't have to get into a bidding war with 100 people? Full price it is!)

The financial advice I got from my parents at the time was to:

1 - put 20% down
2 - get a fixed rate mortgage
3 - No pre-payment penalties
4 - Don't escrow taxes/insurance

They didn't really give advice on how much to borrow, but I presume if we bought a $500k house, they would have said something. At the time, lenders were still pretty conservative (1999). I mean, our lender was trying to talk us into ARMs, and 0% down, of course. But beyond that, the income guidelines were pretty strict even then.

So, we put 20% down ($52k), and financed the rest ($208k) at about 8%. At the time, we borrowed a fair amount - PITI was probably 36%-ish of income. We didn't really care about that so much. The place was dirt cheap when it came to renting anything similar, and with the homeowner tax breaks, would not cost us much more than renting a studio apartment, anyway. So, we did think hard through the finances and were happy.

Dh and I both got a $10k raise within the year, and with dropping interest rates, refied to a 15-year with a much lower interest rate, soon after.

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The thing about San Jose, is that the place was *nothing* in the 70s. It was just a little farming comunity, and by the 90s, its housing prices rivaled Manhattan.

Most of the people I know want to buy there because that is where they grew up. BUT, a lot of them seem to think they will make their riches in housing, like all our parents did. Dh and I have always felt it was a little insane. Um, that ship has SAILED? How do prices appreciate from "most expensive in the country" to twice as much, overnight? It's not going to happen. It's like chasing stock market returns. You have to find the good values. The "Manhattans of the future."

Considering dh and I didn't want to work into eternity, to buy a HOUSE (or to afford rent), we pretty quickly decided just to leave the area. Our condo appreciated $100k overnight, but houses went up $200k. IT started to feel pretty futile. Couldn't save fast enough, if you tried. Even with equity to help us along.

At the time, most of our friends with kids were moving to Sacramento. But we had a few single friends who made the move, to. Why pay $500k for a house, when you can get the same thing for $100k, in Sacramento?

We weren't exposed to much real estate crazy in San Jose. I mean - the people who were buying, were buying before they were "priced out forever." I would put dh and I in that category. (Which in the end, was over dramatic).

BUT, the real real estate crazy was in Sacramento. We bought a beautiful home for the same price our condo had been, and with no condo HOA fees, and lower interest rates, it was actually cheaper in the end - for us. Hell, our utilities are lower here - all the energy efficiency.

The people I met locally, never understood. We were labeled as "rich" or "crazy" to have such a nice home. Or we came with buttloads of equity. (Truth is - $0 equity - by the time we sold the condo). To us, it was just a matter of perspective. These prices were a dream!

But as people moved here from more expensive areas (LA, San Francisco), in droves, prices got pretty sky high. Then the locals started getting sucked in and paying $400k-$600k for homes, before they were "priced out forever."

I had been trying to talk my dad to invest in real estate, forever. Sacramento was going to be HOT! In 2004, he actually became open to the idea. I remember one of us came across a graph of the local real estate market, for like decades. The usual market was a series of hills and valleys, but the current cycle was a hill with no end in sight. It took just one look and we both said, "Now is not the time to buy." You know, we could wait for a valley...

So, you fast forward to today. What are my friends saying? The ones "who would never buy a house!" in particular. They are running out and snatching up houses before this "low" disappears forever. You know what the irony is? I have local relatives here, and when we bought this house, in 2001, they thought we were INSANE. Because they just didn't grasp how expensive our home town was. I remember precisely, one relative was in the process of selling his investment real estate. He had a good run, and as far as he was concerned, it was over. I always thought *he* was the foolish one, honestly. Seeing the potential for the market, from my eyes. & so - you fast forward to 2009/2010. What the locals thought was an "insane high" in 2001, is not an "insane low" in 2010? I suppose you realize through all this, how short-term people's minds think, sometime. I think that is what struck dh and I the most through all this. We are VERY long-term thinkers. Which is why I commented quite a few times, we do have friends/relatives who thought we were insane all along, who are now running out to snatch up houses for the same prices today, with little thought. In fact, they brag to us how they waited (& mostly paid more for the same thing). Because their memory ain't too good. It's like they try to rub it in our face that THEY Waited for the low of the low. & we go, "huh?" I thought this was the high of the high? Make up your mind? (I suppose that was before housing doubled overnight and all that).

Anyway, which is the final chapter in all this. Interest rates! Interest rates are the low of the low. No doubt. BUT, if you can not afford said house if the rate went up 1%, um, can you really afford it???? This is what drives me crazy about people these days. I know we are young, but we bought before most of our peers did. As such, we started out with a 8% interest rate. I don't know if people really grasp how that even with a fixed rate loan, they could be forced to refi, in death or divorce, etc., etc. IF you can afford 4.5%, but not 5.5%, I think I would step back and think it through a little more. For us, being able to refi down to 4.875% has been super awesome for our finances. But fact is, we could easily afford our house payment if we had to reset it at 8% for any reason. Even 10%. In the era of low interest rates - the advice I would add to my father's, is, "Don't let affordability be dictated by interest rates." Just consider it a nice bonus. I know we do!!!

I think the low interest rates are a big driver in the "crazy" in the real estate market here. The thing is, that good properties are getting snatched up in bidding wars here, today. In the end, it falls very deja vu. In the bubble, in the bust, always the bidding wars and the "if I don't buy it today, I never will!"

I've actually got home-owning friends with NO CASH who are buying investment real estate with $0 down in this "time of opportunity." (Um, did they know the vacancy rate on houses was sky high? Not sure who they will rent to). I just cringe as I watch it all unfold. On some level I wonder what is to stop another bubble from forming fast and furiously.

Anyway, typing all this out makes me curious about the insights of people who have been home owners for many more decades than I. You know, my parents have told us about the days of 13% interest rates (when they bought their house!), etc. & I appreciate having an intelligent, long-term perspective, when it came to the whole subject. It helped us from doing anything too stupid!

I know this is LONG, but these are all some thoughts I had been wanting to put out there, for a while!