So you're a first time home buyer and you want to own a piece of the 49 square mile San Francisco market? Since I've worked with a few of you already, let me explain what is most likely going to happen to you.
You: Am I paying too much?
Me: Yes, if you're to be the winning bidder. Otherwise you'd be offering too little and someone else would own the home. On the other hand, No, if the market continues it's 10 year upward spiral, or you don't sell until the market is above where it is now. So you should change your question to: "What is my time horizon, and can I carry the mortgage through a down turn in the market?"
You: Can I really afford the payments?
Me: The very first step of any home buyer is speaking to a lender. I can introduce you to several great ones. You tell them every last financial detail, and you get a written "good faith estimate" of your payments. Then you double and triple check your budget. And lenders today are more competitive then ever, you can reduce your payments through various types of creative financing that are common place today.
You: Will the real estate market crash and bust me just like my dot-bomb stock options and my 401k?
Me: The difference between San Francisco Real Estate and your devastated stock portfolio is there is a severe shortage in San Francisco Real Estate. There is no shortage of stocks, bonds, mutual funds and other investments touted by the financial community. As long as demand far outstrips supply in the SF real estate market there won't be a crash. Just think home many renters you know who have saved up cash and want to buy. What are they going to do if the market does crash? They will buy, and up the market goes again.
You: Oh my God, they accepted my offer, am I making a mistake?
Me: I will have already told you that you will feel this. Every buyer who gets an offer accepted freaks out. It's just human nature. So go back to your lender's statement and your budget, and remind yourself of all the reasons why you started the home buying process, and then think positive thoughts about how great it will be to be able to paint your own walls without worrying about a landlord.
You: My out of town family and friends say I'm nuts, I could buy a mansion on a golf course in Iowa instead of this 1 bedroom Condo!
Me: Will your local friends visit? How about year-round weather, hiking and biking trails, sailing on the bay, skiing in Tahoe, jogging over the Golden Gate Bridge. And all the other things you love about SF.
This emotion is happening to the home owners who have seen their homes double in appreciation, or in just the last year go up 10% to 25%. Where will you be 5 or 10 years from now?