
11-08-2007, 09:18 PM
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| Senior Member | | Join Date: Oct 2005
Posts: 2,226 | |
Bay area won't get into trouble, but will get into the control of law of big number.
Law of big number means that when an asset rises so much to a big number, future growth will become moderate. Just like a giant mutual fund with billions of asset value may not perform better than smaller funds. It doesn't mean the giant is in trouble. The giant fund will still generate good returns although percentage wise, its return is smaller than smaller funds. If you already have couple of houses, all having close or above million dollar valuation, future growth will be great because even a smaller percentage can generate great absolute value. But if you are starting new as a new investor, then, law of big number is not great, especially for curse coming from the carrying cost. It's a great place to live and continue to invest for old timers. But it's not such as great place to invest for new timers, even living becomes a challenge. |
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