Tognoli Insights

Jump or Pull the Ripcord?


Let’s face it…the NorCal economy is on fire. Companies are hiring like crazy and all of the big names like Google, Facebook, Adobe, Netflix, Sales Force and Apple are buying up Bay Area Real Estate and building massive campuses. They are all making long-term commitments to this place we are lucky enough to call home. And with that commitment comes a lot more jobs, more people, and a lot more money. Like it or not. And I believe the reverb of what happens here in the Bay area will be felt throughout all of NorCal…from Carmel to Tahoe…and beyond.

So is now the time to jump into the real estate market, or pull the ripcord and get out? Let me start with a story about the history of the Silicon Valley real estate market.

I purchased my first house in Sunnyvale at the age of 25 in October of 1989…less than 15 months after getting my real estate license and less than 3 years after graduating college.

Sounds great on the surface, but do you remember what happened in October of 1989? Yes, the A’s beat the Giants in the World Series, but October of 1989 also saw The Loma Prieta Earthquake, the stock market crash, interest rates where over 10% and it was the beginning of a 5+ year housing market slump.

I had a negatively amortized loan with Home Savings of America at around 11%. And of course, because I was new to real estate I didn’t put much down. So when property values dropped, I was upside down, owing more on my house that it was worth for the better part of 7 years. I remember because I had to sell two houses a month just to keep my head above water and make my payment. Talk about back against the wall.

Back in the early 90’s it was a real buyer’s market. It would take months or years for something to sell. Back then if you were lucky, 50% of your listings sold before they expired. Since that time, I have been through several ups and downs…stock market crashes, earthquakes, the .com bust, financial crises and more.

So, is now the time to jump in and be a buyer/investor or pull the ripcord and get out? That’s the question everyone wants to know. Like always, it depends upon your personal situation and your time horizon.

Remember that house I purchased in 1989. I paid $225,000 for it. I sold it for $450,000 10 years later in 1999. Today that same little 1,200 sq.ft house is worth $1.5 million++.

Here is my answer when it comes to buying real estate or almost any asset. If you are doing it for a quick buck, there is a lot of risk and you better know what you are getting yourself into. That’s why there’s the opportunity to make big profits…because there is great risk. On the other-hand, if you are a long-term investor or homeowner, it’s always a good time to own real estate. Yes, there are better times than others to jump in, but we only see better times when they are in the rearview mirror.

If you had purchased just one piece of real estate at the top of each of the cycles over the last 30 years, you would be very happy today. Don’t try to time it. Be in it like Google, Apple, Adobe, Facebook and Salesforce are in it. Long term.

Hot off the trail: I was hiking on Friday with a bunch of agents and they all said the market is heating up. Buyers are back from summer vacation and interest rates are at a 3 year low.

For what it’s worth, I am a buyer of Bay Area real estate. Especially with interest rates under 4%. If you need help feel free to ping me. I have roots here in NorCal and I know people who can help you.

Tom Tognoli Jump or Pull the Ripcord