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For a few weeks here in Survival-land, we’ve been discussing the own-vs.-rent riddle of the San Diego housing market. You can read those threads here and here and here. And it’s all in an effort to get to the bottom of the question: How much are you willing to pay for a house?

Here was a look back at the long history of real estate optimistic spin in San Diego, from reader VG:

My wife and I were barely old enough to vote and dirt poor when we married during the Reagan Recession in the early ’80s. The country was still paying the price in savings-sapping inflation from the huge national debt run up to pay for President Johnson’s War on Poverty and the protracted quagmire of Vietnam. Good jobs were scarce in San Diego and interest rates on home loans were above 15 percent. A real estate and investment “expert” counseled us to “buy now” because Americans would never see single-digit interest rates again. Instead, we saved and waited. In 1994, at the bottom of the last crash, we put down 10 percent to buy a four-bedroom, two-bath home for $135,000 at a fixed rate under 6 percent. The unlucky previous owner had paid $180,000 for the same house. Just 12 years later our home’s value has “declined” below $500,000. Yet many of our neighbors are upside down again. History does repeat itself, and there is much to be said for the old-fashioned virtues of saving and patience.

And here’s another perspective: investing in real estate doesn’t necessarily mean you have to live in it.

Earlier this week, I heard from Robert Vallera, principal of Commercial Realty Advisers. He’s a commercial real estate veteran here, and I often call him when I’m working on stories about the market for buying apartment buildings or other commercial real estate.

Here’s some of what Vallera had to add to the debate:

After reading some of the recent comments regarding renting vs. owning your own residence, it once again struck me that people easily confuse the advantages of owning their own home with the advantages of owning real estate. Most people don’t consider de-coupling the issue, but many should. They mistakenly assume that any real estate they own should also serve as their residence.

Yes, there can be tremendous financial benefits to owning real estate if you make wise acquisitions. Likewise, owning your own home can provide tremendous intangible benefits, such as far greater control of your living environment. Go ahead, paint the walls purple if you like. Your spouse may be the only one who complains or attempts to evict you for your eccentric behavior.

The market price of a house or condo is usually more than a purely financial analysis will justify (unless one assumes that the alternative cost, rent, will sharply escalate). Yes, a wisely purchased home might prove to be a profitable acquisition. However, your own home will not necessarily out-perform alternative investments that could have been made with all of the dollars required to purchase, maintain, and finance a house over an extended period of time.

Vallera concludes with this: if you want to own a home so you can paint your walls purple or because you have particular family needs, buy one. But he says the potential for cash-flow from another kind of investment, like an apartment complex, is hard to beat.

What do you think of VG’s take? Vallera’s endorsement of the commercial market? Send me your thoughts.

KELLY BENNETT

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