In the mid-90’s, I moved to San Francisco after graduating from Columbia Business School in NYC for a fantastic job executing mergers and acquisitions for Bank of America. I was living in the Marina district of SF until 1999 when I bought my first house in the mid-Peninsula. The SF Bay Area in 1999 was a whirlwind of hot Internet companies getting major funding, going IPO and was one launch party after another – Prince’s lyric around “party like it’s 1999…” sure rang true. The real estate market along with the general frothiness of the economy saw rapid appreciation. After losing out on a couple of offers, I saw a nice 3 bedroom, 2 bathroom house in San Mateo – a small, starter home.  As I was debating how much over the list price to offer, I recall saying to many people that “this would be amongst the highest $ per square foot in the neighborhood”. After crunching a spreadsheet trying to best value the house and predict where housing prices were going to go, and comparing it with remaining a renter and putting my savings into the stock market…..I put the purchase into the following perspective that homeownership is as much a personal ‘lifestyle’ choice as it was an investment decision. Unlike investing in the stock market, one gets to enjoy the tangible product of a house and being able to call it home.

I got the house at 7% above the list price which was aggressive at the time. There is a concept called “winners curse”.  Sometimes when you win an auction in a competitive situation…rather than celebrating, one may be tempted to second guess the decision. In my situation, we quickly assimilated to the neighborhood and loved our house so we were happy with our new home even when the dot com bubble burst which temporarily affected real estate.

Since that time, I sold that house in 2006, and bought another home. During that approximately 7 years, the value increased so much even after a temporary post-dot com blip that my 1st house to this day remains one of my best financial investments ever – and we were able to enjoy the benefits of living in a house we owned. The moral of the story is that no one can predict the future with respect to the economy, the stock market, or housing prices. People ask me all the time what I believe the real estate market will do and I certainly have my thoughts. Even more specifically, the question of “should I buy/upgrade now or later?” is even a harder question to answer. That question can only be answered individually factoring in future opinions of housing values, interest rate dynamics, job situation, life stage, savings, and many other personal factors. In a rapidly changing real estate market (either appreciating or declining), having a long term perspective for owner-occupied buyers that the house is both for investment and for lifestyle purpose will make for a healthier mindset.  And in my situation in 1999 when I was unsure of either, it is a great feeling when both the investment and lifestyle choices work out well. To this day, I sometimes miss the days of 1999 when I would be invited to 2-3 Internet launch parties each week.