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Is it an In-ie or an Out-ie? Wanna know which San Francisco zip code is the 6th most overpriced in US?

August 4, 2008

Yours truly was interviewed recently for the San Francisco Examiner. Pardon me while I toot toot my own horn, would ya?

But seriously, other than the pride and joy of seeing my name in the print of a free daily newspaper, it is an interesting and quick read based on a Forbes Magazine article.

Basically, Forbes magazine did a top ten list of the most over-priced zip codes in the US. The Sunset came out # 6. What is interesting to me is that this is another example of how statistics are only as good as the system they use. If you use a measurement style that is not applicable or relevant to the data then your numbers are not that helpful.

For example, Forbes and many other media outlets use a price to rent v. price to own tool to evaluate home values. This is similar to P/E (Price to Earnings) ratio for stocks. The problem is that stocks and real estate operate very differently and it's just not fully appropriate to use the same evaluation tools.

Price to earnings or cost to rent v cost to own is a part of the picture and should be evaluated. However, it is not very helpful if you are looking to buy your own home to live in & enjoy.

If it is pure investment, then yes, you should consider what you will get in rent to what you have to pay to own the property. Will it cash-flow or break even?

But, if you are looking to get into a home and live in it for, say 5 years or more, chances are that buying in San Francisco will be a very favorable choice for you. Factor in the substantial tax incentives (income tax deductions and tax-free capital gains) and you are even more ahead. Owning your own home is also an inflation-hedge.

Bloggers' note: I was interviewed for an article on the Inner Sunset and this is what I spoke about. The Forbes article calls it the Outer Sunset but talks about 94122 which includes both the Inner & Outer Sunset.

As us local folk know, the Inner and Outer Sunsets have vastly different real estate economies. Remember my mantra, all real estate is local...VERY LOCAL. My 9th Avenue listing mentioned in the article and thoughts on the neighborhood are my opinions about the Inner Sunset though some of it applies to both. Maybe the Forbes' folks should have specified which Outer Sunset they refer to?

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