SAN FRANCISCO — Chris Boome, an insurance agent in the suburb of Burlingame, doesn't want to work the rest of his life. Who does? But at 58, Boome knows he hasn't saved enough to retire.
So a few weeks ago, he revamped his retirement accounts. He sold most of the mutual fund shares and used the cash to buy an $83,500 chunk of land in the Nevada hills, a stretch of ground he had seen only in a photograph.
"This is more exciting than a mutual fund," Boome said. "It feels safer too. You buy a piece of dirt, you feel you'll always have a piece of dirt."
The astounding rise in home values is enticing many middle-class Californians to bet on dirt, gambling their retirements that they can do better with property than with any other investment.
In the same way that the stock market's apparently limitless ascent in the late 1990s seduced investors into buying shares in untested dot-coms, relentlessly rising house and land prices are spurring people to do things that used to be considered unusual -- if not irresponsible.
They're cashing in retirement funds, selling stock and taking out second mortgages. They're pouring the money into real estate, often in distant states, often without seeing the property.
"Markets are ruled by either fear or greed," said Robert Campbell, a San Diego investor who has written a book on timing the real estate market. "At the moment, it's all about greed. Huge numbers of people are buying in at very high prices."
Economists have been wondering for at least a year if real estate is in a manic phase that will end unhappily.
Federal Reserve Chairman Alan Greenspan, whose policy of low interest rates gets credit for launching the real estate boom, also has begun to fret. "I think we're running into certain problems in certain localized areas," he told a congressional hearing last month.
Some speculators have already been burned in Las Vegas, until recently the hottest market in the country. But for most investors everywhere else, any risks are outweighed by the potential rewards.
"People who did this five years ago aren't working today," Boome said.
Like just about every longtime homeowner in California, he's already made a bundle on real estate, at least on paper. Boome estimated his three-bedroom San Carlos home increased in value last year by $140,000 -- about what he and his wife, Sharon, a nurse, made at their jobs. In the super-charged Bay Area housing market, their home is worth at least $1.2 million.
If one property seriously boosts your net worth, investors have concluded, a handful could make you downright rich.
The number of homes bought not as primary or secondary residences but solely for investment jumped 50% in the last four years, according to the San Francisco research firm LoanPerformance. They made up 8.65% of all prime mortgages in 2004, the company said.
The National Assn. of Realtors contends the total is higher. About a quarter of home purchases in 2004 -- 1.8 million -- were made by people intent on becoming landlords, the association's surveys show.
Lenders are so eager to provide funding that it's easy to do a deal with a down payment of only 5%. If the house increases in value by 5%, you've doubled your investment. Many homes in California, the Northeast and Florida have increased by more than 20% annually for the last three years, a run-up with few historical precedents.
New investors like Boome realize they're coming to the party late but feel they have little choice. The stock market has been lackluster. Salaries are stagnant. The debate over Social Security has heightened Americans' worries about how to support themselves during retirement. And even those million-dollar houses are often less valuable to their owners than they may appear. Second mortgages and home equity loans have taken away large slices.
"Every time I took money out of the house, I should have invested it," Boome said ruefully. "But I used it to go on vacation or buy a car."
The Price of Proximity
Traditionally, people invested in real estate near where they lived. That way they could inspect the purchase and keep an eye on the tenants. For most Californians, proximity is no longer affordable. Houses in the coastal cities are so expensive that it's very difficult to charge enough rent to cover the monthly mortgage payment.
That's led to an explosion of buying in the Central Valley. When investments are calculated as a percentage of all purchases, the biggest market in the country is Redding, according to LoanPerformance.
Investors bought nearly one in five Redding homes sold in 2004. Not far behind were Merced, Visalia, San Luis Obispo, Chico, Fresno and Bakersfield.
"I looked in Merced and realized I was three years too late," Boome said.
That pushed him over the border to Nevada.
"Friends, Internet sites, articles I read -- they all kept saying, Reno, Reno, Reno. You think of Reno, you think of desert. But it's growing a lot, no question."