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First, let me say, what a wonderful thread I've just discovered. I wish I'd seen this two months ago, as it would have saved me a substantial amount of time doing research. My wife and I are buying a house in the SF Bay Area, which is daunting for several reasons; it's a weird and unusual market, we're shopping in the $250k and down range, which even now is still the low end of the market, and there is tremendous amounts of stupid investor activity making everything more difficult. Anyway, while I'm reasonably confident I've done my math right, I'm interested in opinions as to whether I'm shopping for the right price range, and whether I'm making a mistake looking at forclosed houses in this market right now. I'm 34 years old, I've had my current job for over 5 years, I have a degree and a career and here in the bay area, people with my experience level in my job are (still) at least somewhat in demand. Because of various details I don't need to go into, I feel my job situation is very secure. Moreover, my employer is very flexible about telecommuting and I already have approval from my boss to do so to whatever degree makes sense for where I move to. My wife and I gross just under $100k a year. We have $5000 in cash. I finished paying off my car last month, and I was paying almost $400 a month on that, so beginning this month I'm now saving about $400 a month - prior to that, I was basically breaking even every month after servicing my debt, all other expenses, and some comfortable quality-of-life expenses. My car is now 4 years old, in fantastic condition, and I will own it until it dies; so I do not expect a car payment for at least another 5 years, probably more like 10. Between the two of us we have about $40k in student loans, all of which are federal loans, so they're at very good interest rates. I also owe about $13k in credit card debt, all at rates of 5% or lower (in the past three years, despite my car payment, I've reduce that from over $18k at its peak). My wife makes about enough to pay her student loans ($35k of the total $40k), her own personal expenses, and that's it... so basically I'm buying the house on my own income. To help cover closing costs, my parents are offering a few thousand - basically whatever we need to cover those costs and any gap in the down payment. We have $45k in 401(k)s that we will not be touching for this, but, the bank sees it as an asset for qualifying for our loan, so they're not concerned with cash. Both of us have credit scores in the 740 range. We are pre-qualified for a $250k FHA loan at 3.5% down, and my finance guy says we're good to shop and could "easily" get a larger loan if we wanted to - say, up to $300k. Nonetheless I am adamant that my ceiling is 250k, given the costs of insurance, taxes, maintenance, and the FHA fees they add to the loan and tack on to the monthly payments. California real estate taxes are low - prop 13 sets the state taxes to 1% of the purchase price. There are local taxes that depend on the exact area, and we're casting a broad net, but I'm confident our property tax will be below 2% and probably more like 1.25%. We're seeing large numbers of listings in Oakland, Hayward, Richmond, and areas around those cities, in the East bay. Many are in terrible, hosed up neighborhoods, but we are getting advice from locals and finding tucked-away neighborhoods that are not so bad. On the peninsula, there are lots of listings in East Palo Alto, which is mostly a hosed up hellhole but nowhere near as bad as it was 10 years ago (the murder capital of the bay area at that time). We see a scant few listings in other cities on the peninsula - a handful in redwood city (in a little bitty ghetto we had no idea was there), sometimes one or two in south san francisco or millbrae or whatever. Those tend to be either tiny (550 sq. feet) or in seriously bad condition (or both). Realistically we're still going to keep looking in those cities but we don't expect to get something there unless we get very lucky. San Jose has tons of houses in our price range but is too far for my wife to commute into SF for her jobs. Really we think in the east bay, no farther south than hayward (maaaaybe union city for the 'right house'), no farther north than richmond (but only in the best parts of richmond). For the peninsula, we'd go as far south as maybe mountain view (but there are zero listings there at $250-). Right now I pay $1650/mo in rent, have been doing so for three years, and we're on month-to-month so we can leave at any time. We obviously want to get that $8k if we can, but it's not a deal-breaker, and it's really the only thing that adds urgency... although the weird market here could heat up even more (or collapse further). Everyone seems to have conflicting opinions about that. Some more interesting info: we've heard from multiple sources now, including people who 'would know' (an agent whose company works as a brokerage for banks selling forclosures, for example) that the banks are supposedly "holding on to inventory" - forclosing on houses but not putting them up for sale. The idea is that they're trickling them out to the market to avoid having too many properties up at once, which depresses prices. IF that is true, we should expect to see an ongoing but not high availability of forclosed properties for the next year or more... but it seems a bit stupid, because it means these banks are sitting on empty properties that depreciate by the day as they go unmaintained, and they have to pay property taxes on them, and there is no guarantee that default rates will not continue or even climb which would then gently caress them over worse. On the other hand, if the banks really believe that the end is in sight in, say, 18 months or so, then they might use this strategy to get better values for their forclosed properties. To me it smacks of anticompetetive fuckery because they'd all have to do it for it to work, and I don't get how that's remotely legal, but what do I know. Another One more annoying thing; we're looking for an agent and it seems everyone has their area of specialty, so we'll probably have to get two different agents, one for the peninsula and one for the east bay. And neither is going to be happy about that situation because they'll have a fairly high chance of doing lots of legwork for us and then not making a dime on it when we go with something offered by the other agent. But everything I read says that you want an agent that specializes in a smaller area, because they'll know that area and it's properties much better and therefore find you a better house. Anyway, what do you guys think. Am I an idiot for buying at all? Am I looking to spend too much? Or do you agree with every pro I've spoken to that I could "easily" afford $300k? And I'm particularly interested in opinions about the SF Bay Area market and it's unique peculiarities.
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Aug 19, 2009 22:02
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Cmdr. Shepard posted:I don't know if I'm reading this correctly, but you make $100,000 a year and you only have $5,000 in savings on hand? If this is the case, you don't even have enough money for the MINIMUM down payment, let alone the closing costs on top of this. I'm not a financial expert, but I make $35k a year and I have $15,000 in savings, and I'm prepared to just about blow all of it on a down payment, closing costs, and up front maintenance and repair costs. We're paying too much in rent, basically. If we buy a house for $200k, even after insurance, taxes, FHA fees, higher energy costs, and maintenance... we'll still be lowering our monthly housing cost. Also, with my car paid off, I have another $400 in my monthly budget. I'd have far more cash savings if I hadn't been paying for a car, hadn't been paying down debt as aggressively, and hadn't just got married last year (after a 10 year breaking-in period, haha). quote:All of this debt, combined with a very small amount of cash in savings, is adding up to paint a not very pretty picture. Just my opinion, I think you need to take some more time and focus on paying down debt and increasing your savings, I'm pretty sure this is the same type of basic advice anyone will give you in this thread. You are correct. When I graduated in 2000 I made some poor financial decisions. I lived beyond my means for three or four years and, although I've always been able to service my debt and still live quite comfortably, I should have been more frugal and kept my house in better order. And in 2005 I should not have bought a brand new car (although I got a good deal, a very low rate, paid a good down, and will never sell this car). The car is now paid off, my debt is lower, my income is higher, and I'm done paying $1650 a month in rent. quote:3.5% down on a $250k house is $8,750. Add in closing costs and FHA fees and I'd be willing to bet you're pushing $13,000 - $15,000 on closing costs. Are you willing to throw down your entire $5,000 in savings, and put your parents on the hook for potentially $10,000? Yes. I sat down with the paperwork and my folks are willing to put up $10k, give or take. They have the money and want to do this for us, and although I'd have been more comfortable waiting, we're basically going to get $8k back within a few months, which I'll give back to them. And if we can't close in time and don't get the $8k, that's OK with them as well. In fact my parents specifically said "we'd rather you reached for a higher price and got something in a safer neighborhood, and we'll help you with a higher down-payment/closing cost if it'll do that". We vacillated for three months on this issue, and it's still something we're not just shrugging off. I've proven the ability to save cash several times in the last decade... we're not spendthrifts, we no longer buy anything with credit cards, we have a comfortable $600/month margin in the budget as of right now, and if we buy for under $250 my math says that'll increase to more like $800. And I'm 34 years old. If I want to retire at 65, it'd be nice to know I'll have a paid-off house by then. I'm done living in apartments and duplexes, dealing with lovely landlords, lovely loud neighbors, not being able to have a gas stove because my landlord put in the cheapest electric Sears sells, having ugly-rear end wall-to-wall carpeting, hating the landscaping but having no power to change it because the landlord hires her gardners that she likes and won't change, having lovely pipes under the tub but not allowed to do anythign more than clean them out, etc. etc. etc. I've been renting now for 12+ years and I'm done with it. We never thought we'd be able to buy a house in the bay area. Two years ago the median price was over $500k, and the cheapest, shittiest houses in the worst neighborhoods were still $350 and up. Yes, I'm going to buy regardless of advice here, I understand that... but I am interested in whether folks think I'm going too high with $250k (or could go a wee bit higher), and what you guys think will happen in the next 5 years in the Bay Area. Edit: let me qualify that a bit. I'm going to buy, but if I am shown with real actual math that $250k is probably too much, we'll drop our cieling futher. We've seen houses below $200k, not our favorites but they're out there. My detailed calculations do make assumptions. I've tried to be conservative, but it's hard to know exactly what earthquake insurance will be on a given house, what we'll be able to get a seller to do, or what the exact rate is we'll get if we close in two months. Leperflesh fucked around with this message at 23:19 on Aug 19, 2009 |
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Aug 19, 2009 23:13
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sheri posted:How much is your rent? It was buried in a bad place in my first wall-o-text post, so I don't blame you for not seeing it. $1650. I updated my debts/assets spreadsheet an hour ago. My own 401k is now worth 40k (17% increase in value since Jan 1st, although that includes my contributions). I'm contributing 6% of my gross salary every month, which my employer matches at a 50% rate - the maximum they'll match. After 401k contributions, tax withholding, medical insurance withholding, etc. my take-home pay is just about exactly $3700 a month. Here's a summarized version of my current monthly budget: pre:Monthly Bills DirecTV $59.99 AT&T $24.18 Sprint $105.00 PG&E $115.66 Rent $1,650.00 Auto Insurance $108.33 Water $20.69 Garbage $13.44 Internet $63.52 Total monthly bills $2,037.31 Debt Service - planned payments Student loan $56.47 Credit cards $460.00 Total payments $515.47 Total monthly budget $2,552.78 Average Net Income $3,701.47 Margin $1,148.69 gas 100 lunches 128 groceries 400 extra $520.69 "Average Net Income" is an averaged value of the prior 24 semi-monthly paychecks, so in years where I get a raise, it's actually a trailing average. I occasionally get some overtime so that accounts for fluctuations in the total, but my overtime tends to be about the same year-to-year. My auto insurance actually has a larger up-front payment of about $200, and then 10 lower payments, and then one month with no payments. Amica is weird I guess? The "extra" line is what is left of my budget after all the expenses I listed, which is all of my expenses. It used to be almost $400 less until last month when I paid off my card. There's more room in the budget of course. I don't really need to buy lunch every day at work. I could live without sattelite TV. My wife and I could dump the data plan on our phones and save $40 or $50 a month. I am making substantially more than the minimum payments on my credit cards. And as a last resort, I could reduce my 401(k) contributions to get more cash, although I am loathe to do that because the employer matching would also be reduced, and that's throwing away an instant 50% gain on my pre-tax contributions. My car is also worth around $9k. If I had to I could sell it - in this economy, I'd assume I'd only get maybe $7500 - and buy a $2000 econobox to thrash if I desperately needed a few grand. I'd hate to do that though, as it's just hit that sweet spot where most of its serious depreciation has passed and it's going to much more gently slide downwards in value from here on out. Knowing all of the above; even given our low amount of free cash, does it still seem like we're idiots for wanting a $1600/month housing cost that is buying a house, rather than paying rent? Edit: We already own a very good, high efficiency front-load washing machine and a gas dryer. We rent a small house, about 700 square feet, so we have furniture, furnishings, etc. We also have a rollaway/portable dishwasher that plugs into a sink faucet. We do not have a stove or fridge, those belong to the landlord, but those are the only kitchen appliances I think we'd be forced to buy immediately if the house didn't come with them. And, my parents have not asked to be paid back, it's just something I want to do. If it takes a year or two to get the money together that'd be perfectly fine. Leperflesh fucked around with this message at 03:53 on Aug 20, 2009 |
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Aug 20, 2009 03:48
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GamingHyena posted:The fact is you want to buy a $250k house with only $5k in savings. Even if your parents are going to cover your closing costs and you throw every cent you have into the house you'll still have virtually no equity - and that's assuming the housing market has truly bottomed in your area and your house won't depreciate further. In other words, with little to no equity you'll basically be "renting" the house from the bank for the foreseeable future. This, of course, excludes the fact that with no savings you'll be completely unprepared in case of job loss/auto repairs/medical expenses/housing repairs/any other emergency. I do not want to come off as argumentative here, but I am not in quite as bad a situation as this assumes. First, I have excellent health coverage with no maximums through my employment. I have four weeks of vacation saved up as well, so if I were laid off tomorrow, I'd have almost a month's "severance" off the bat. I do most of my own auto repairs. (Although something really catastrophic could indeed cost a substantial amount... but while I'd want to avoid it, I do have roughly $80,000 in credit available on my credit cards. If it came down to "pay $2k now in car repairs or lose your job (it would not, I could function on public transportation in the Bay Area without a car indefinitely) I could do that. I have broken the habit of putting every purchase/expense onto credit cards, and I will not take it back up, but they are there to help with emergencies.) I have accidental death and dismemberment insurance, and carry a life insurance policy worth six times my annual salary. My job does not require physical fitness, so just about the only things that would render me unable to work would be severe enough for me to claim permanent disability. And much of my family lives here. We've often fallen back on each other - in fact, of my family, I've fallen back on that safety net by far the least. If I found myself in dire straits, I would not be facing a situation where I could wind up bankrupt or destitute. But you are correct that if we bought a house this month, we'd wind up with maybe one or two thousand dollars left in our combined checking accounts and a couple of other minor liquid assets I have not mentioned. I've certainly got a couple grand worth of random poo poo lying around I could sell, I suppose... that's probably not a bad idea at this point anyway, since we're facing a move. quote:The mentality of "rent = thrown away money" is what got us into this housing bubble in the first place. In owning a home you will be "throwing away" money on interest, taxes, maintenance and insurance every year. Look at a 30 year amortization table - it takes several years until a significant portion of your monthly payment is going towards principal. In fact, considering how little equity you'll have in your home you might as well be renting it from the bank. Except that I could not possibly rent a house - any house - for $1650 in the bay area. If I for some reason had to sell in 5 years and had zero equity in the house at that time, I would look at my total outlays - all the closing costs, payments, etc. - and I'd be in no worse situation than I am right this moment. I'd have lived in a larger, better situation enjoying a better quality of life, and paid a few thousand dollars more for that. I am not looking at this house as an investment. If I can gain equity that'd be fantastic, and I do think I've got a reasonable chance of doing that after 5 or 7 years (and an economic recovery that I believe should be well underway by then - many reasonable people disagree with that though). But for my wife and I, this is more about "renting sucks rear end, I want to be my 'own boss' of my own property" than "rent is a waste of money". Two years ago my landlord raised the rent 10%, and I really had no choice but to pay it - rental occupancies were sky high, finding a new place would take months and be very disruptive, with no guarantee we'd even save any money on it. With a fixed-rate loan, I'll have predictability about my housing costs, with the only variable factor really being maintenance/improvement costs - and some of those can add equity when you do them, bonus!
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Aug 20, 2009 08:50
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necrobobsledder posted:And given what I know about the SF Bay market, I'd prefer to move nearly every year instead of pay ridiculous rent increases, especially at your sort of price range (what you going to get for $250k, a 1 bedroom condo? A house far away from the city where you'd have to commute for an hour?). Single family houses in Oakland, Hayward, San Leandro, San Jose, East Palo Alto, and a scattering more. At this moment, for under $250k I get 81 listings for Hayward, 289 listings for Oakland, 10 in San Leandro, 161 in San Jose, 34 in East Palo Alto, and so on. This is realtor.com, single family houses only (no condos, no townhouses). Granted that probably 80%+ of those listings are unsuitable due to either condition, location, or both; that still leaves literally a hundred or more houses that are reasonable picks. We're not considering San Jose. Commuting to my job from Hayward would be about 20 minutes; about 35 or so from Oakland, depending on where exactly; maybe 15 from East Palo Alto, and so forth. And I can telecommute three days a week. I am hearing you. I appreciate your perspective. Just wanted to get the facts straight. necrobobsledder posted:I've gotta say as someone trying desperately to get rid of a home (that's apparently still wanted!) it's ridiculously crazy how little you'd walk away with if you had to sell even within 7 years (regardless of mortgage). Perhaps ownership is worth all that to some people, but I don't really think so anymore unless I had a lot of money to blow and a lot of time to sink into my home. Could you elaborate? This thread seems to be full of some pretty good advice. I realize it's not the "house selling megathread" but everyone who buys a house should know what will go into selling it, since the possibility of needing to at some point is probably there for most people. Leperflesh fucked around with this message at 19:17 on Aug 20, 2009 |
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Aug 20, 2009 19:14
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How is that a short sale, if the house is worth more than the outstanding mortgage? Isn't that just a straight-up normal sale? And if the fair market value of the house is over $300k, why are they selling it to you for less? I feel stupid for asking but I've got to be missing something here.
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Aug 21, 2009 03:07
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My understanding is that a "short sale" is when a seller is selling a house for less than what they owe on it. The bank approves a negotiated price and forgives the unpaid remainder of the mortgage, because it is preferable to going into forclosure. I don't understand how a short sale is possible if the couple is selling the house for more than they owe on it. Hopefully someone will explain.
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Aug 21, 2009 06:25
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qirex posted:Those CA ZIP codes aren't anywhere decent in the Bay Area and most of the price drops around here have been $5 million houses dropping to an easily affordable 3. $250k for any house worth living in most places in the area is not a bad deal. So many people want to live here that there's basically a price floor anywhere within half a mile of a BART station [that isn't West Oakland]. Berkeley isn't Stockton. Yes, things could go down but not another 30% or something. This is pretty much my own reasoning. A friend of mine's parents had a house for sale in Morgan Hill; they listed it originally over two years ago at $800k, couldn't sell it, dropped the price, took it off the market, and then finally sold it last year at less than $650. Today it's probably sellable at $500k or so. On the other hand, we are in fact looking at houses within a mile of BART. There are some acceptable neighborhoods in Oakland, San Leandro, and Hayward - people tend to lump all of the East Bay into a single "ghetto" attitude, but the truth is, there are all manner of small, nice little enclaves scattered throughout. We saw a couple houses near Mills college that were in an OK neighborhod, and we've seen some hoods in Hayward that are frankly better than plenty of the peninsula areas we've lived in in the past. That said, I'm not 100% convinced that even the $250k houses are bottomed out... but they cannot slide much further downward, either. Plenty of these houses are attracting 10, 20, even 30 bids. We interviewed a realtor today. A house she showed last week was listed at $170 (by the bank, it's an REO) and the highest bid was... $300k. In fact she had to recommend to the bank not to accept that offer because there is no way the house will appraise for $300k, so the bidder's financing is going to fall through on it. Nonetheless, this was a Millsmont (Oakland) house attracting interest simply because it was listed so low to begin with. We'll start seeing homes in earnest next weekend. But if we do not see something that meets our criteria (safe hood, decent condition, $250k or down, no major issues, various other things) then we are quite happy to wait. The floor of the market may yet tip down another 5 or 10 % before it hits true bottom. If anyone is shopping for $500k houses in the bay area right now, though, they're clearly ahead of the bottom. Do a search on Realtor.com for $500k houses in bay area communities... there's a huge glut, and those places are not getting bid up by investors. San francisco has 132 single-family homes at $500k and down... and 294 condos/townhomes at that price. Look at 500k to 800k in the City... 281 more single family homes, and 505 condos/townhomes. That's ridiculous. Those prices are going to fall, they have to. You'd have to be a blind fool to buy a $800,000 condominium in this market. And there's 134 more condos between 800k and $1,000,000. And another 168 at $1,000,001 and up. I sort of feel bad for people who bought those things (and couldn't afford them). Sort of, maybe. A little.
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Aug 23, 2009 07:50
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Cmdr. Shepard posted:Can you make these types of negotiations when dealing with a bank-owned property? Everything in my price range is bank owned, foreclosure, or short sale, and it's my understanding that you make an offer and it's either accepted or rejected - no room for bargaining. My wife and I interviewed two realtors this weekend. I asked exactly this question of both, and their answers were basically the same (and surprising to me). -It used to be (2+ years ago and more) that with REOs, the bank would not negotiate further on price, regardless of condition. However, with the huge flood of forclosures, some banks are willing to do that and others aren't. Both realtors said they'd closed multiple properties where the buyer asked for price concessions based on condition problems that were revealed by inspections post-bid; but that other banks simply weren't interested in doing that, even if it meant losing the sale and having to put the house back up. Surprisingly (to me, anyway), they said this was not the case with short sales (or at least, much less so). One realtor said negotiating on short sales was far more difficult; usually the seller accepts your bid, sends it along to their bank along with all kinds of other paperwork, they sit on it and do nothing at all for a month or three, and then all in one day, stuff goes through or gets rejected. At no time in that process is it easy to change what your bid was... your bid may get sent back to the bottom of the stack (which the seller doesn't want) or it may simply be rejected outright. Worse, with short sales, sometimes the bank's left hand doesn't know what the right hand is doing; a house up for short sale, with an accepted bid, sits there waiting for bank approval for two months with no progress... and then suddenly the bank initiates forclosure on the seller, which yanks the rug out from under the short sale (and makes zero financial sense for the bank, besides). I'm kind of pleased, because I was worried about bidding on the bank-owned properties, thinking that if my inspections showed lots of bad problems, but the house still appraised high enough to meet the bid amount, I'd not be able to get any concessions on price and potentially be stuck eating the cost of the repairs. Knowing that that is unlikely (I can pull out if the bank won't budge) makes me a feel a lot better about bidding on some of these houses, particularly since most of the ones I'm looking at were built either in the 1950s, or the 1920s. As for keeping the money you negotiated in the loan, Strict 9, I would check carefully about whether there are any tax or legal consequences of that. I know the FHA has a fix-it loan category, but my financier guy explained that when you do those, the work is monitored by the FHA, they write the checks directly to the contractors, and you probably never see the cash yourself. They don't want people taking the extra money supposedly part of a secured mortgage, and blowing it on a speedboat or a cruise to alaska or hookers or whatever. It does make sense for a lender to be willing to do it, though, when you think about it; it's a secured loan, with the property as the security. If a small extra investment makes that security more valuable/more likely to retain its value longer, that makes their own loan less risky. It also says good things about the buyer that he is interested in maintaining and improving the property. Edit: Oh, another thing. If a buyer bids on a forclosure, does inspections, and then backs out of the purchase (for any reason), the results of those inspections are still public records. I asked because it seems to me, a house that's had that process is more attractive to me; I'll know the condition before I make a bid, so I can more accurately assess what I'm willing to bid for it. I had thought maybe those records disappeared with the buyer dropping out, or that the bank would prefer to keep them secret if they're bad news, but evidently not. Which is cool. Leperflesh fucked around with this message at 18:35 on Aug 24, 2009 |
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Aug 24, 2009 18:32
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Mostly because, with the right price (below $250k), I will actually be reducing my monthly costs for housing. It is literally cheaper for me to buy than rent. And that monthly cost includes mortgage, the FHA insurance that is instead of PMI, state and local taxes, insurance (including earthquake insurance), AND a generous allotment for maintenance and upkeep. And higher utilities. Secondarily, because I'm sick of renting and I don't have to any more. Is it a risk? Yes, a substantial one. I feel I am at an age (34), employment status (senior level in an in-demand career, 5+ years at the current job, etc.), and financial profile where the benefits outweigh the risk to me. Yes, I could lose every dollar I spend on this house, and then some. We've got our eyes wide open on that. And yeah I post long posts. Relatively speaking. I could take the time to carefully edit them down I suppose, but this isn't exactly a formal/professional format. Edit: An interesting thing. The California 90-day "moratorium" on foreclosures (which was largely toothless, since banks could still foreclose if they had a program in place to assist underwater owners re-negotiate their mortgages) is set to expire Sept. 15th. Since it appears from various news stores that "most"(?) banks qualified for the exemption allowing them to process foreclosures anyway, there shouldn't be a sudden huge flood on Sept. 16th of fresh foreclosures. But... I wonder. We may hold off making any offers until after that date just to see what happens. Leperflesh fucked around with this message at 22:26 on Aug 24, 2009 |
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Aug 24, 2009 22:11
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Well, it seems to me that I can do both... but it is a good point. I suppose because we are not sure if this might be our only opportunity ever to afford a house in the bay area. Not that prices are going to get back to what they were for a very, very long time (if ever), but houses below $200k here really does seem like a short-term artifact of the crazy-bad mortgage crisis, and not at all a reflection of supply vs. demand once that backlog of bad debt is cleared out. I realize a lot of folks are sure that things are going to get much worse before they get better (and that's certainly a possibility). A more likely scenario is that prices continue to decline at the top of the market ($500k+) here for another year, two at the most, and then hit a stagnated spot for another 5+ years where prices become fairly stable, maybe rise enough to keep abreast with inflation, and that's it. Even if that happens I expect $200k houses to be gone in a year, unless you move out to Antioch, Pittsburgh, Tracy, and Sacramento suburbs. Frankly I'm looking at houses within 20 minutes of San Francisco or the Peninsula, and that's just always going to be a premium. Even so, even so. It's a risk. We go back over the numbers every couple of days and remind eachother that we can always back out, that waiting a year isn't a bad idea, that we're in a good spot right now and we'd be comfortable not buying yet. We're moving forward with getting a realtor and getting inside some of these $200k places, but if we're not excited about what we see, then it's not gonna happen. I sorta feel like I've been dominating this thread recently and not really contributing much. I'll continue to answer questions if people want to ask me stuff, but I'm not sure I'm a good example of a typical buyer; advice that is right for me probably isn't right for a lot of other people, especially people not in the SF Bay Area Halo of Weirdness.
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Aug 24, 2009 22:52
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Mister Fister posted:There's no guarantee that housing in CA won't stay down for an extended period of time, just look at Michigan. I hope I've been totally clear in what I've said before, that I am fully aware of this as a risk factor. That said: California and Michigan are very, very different. Demographically, economically, climate-wise... really, totally different in so many ways. And of course we can only make educated guesses at what Michigan's real estate market will be like in 2014.
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Aug 25, 2009 01:36
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Actually, checking my own spreadsheet, at $250k the costs worked out to closer to $1800. It's the run at $200k that is cheaper; we went up to $250k because I have that room in my budget. I could nitpick your laundry-list of costs (some won't apply, others will be a bit cheaper for various reasons) but I won't bother. The gist of it is "home maintenance is loving expensive" and that's pretty much true. This, however: Droo posted:... for a $225k mortgage at a good rate, which you probably won't even get because you have no downpayment and tons of debt and little income. I am already qualified for a good rate; I am putting down a downpayment (although I guess maybe by "no downpayment" you were denigrating the minimal downpayment; if so, fair enough), and "little income" is just plain wrong. I don't think life owes me a house. I have financial stability and have had it for upwards of ten years. I've never been in any serious financial risk since I graduated from college, and I've never had a bad credit score either (I check annually). Yes, I have more unsecured debt than I ought to. It's a salient point. I think your post is hyperbole though, I guess because this is SA and obviously goons always ignore advice and I'm in a well digging a tunnel or whatever. Tonight I talked to the wife and we agreed $250k was too high. We're gonna aim at $200k, maybe go to $210 or $220 if we can get something in very good condition for that.
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Aug 25, 2009 04:32
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The introductory text on this page pretty much outright says that that is not true.some website posted:The two major rules to follow are: You should probably check with a tax attorney before seriously considering such a thing though, to make sure you qualify and there are no niggling exceptions that would rule something out.
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Aug 26, 2009 00:16
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Hmm, yeah. Honestly Fremont seems to mostly be people who commute to san jose for tech jobs, but that's still a solid employment hit there. It makes perfect sense for Toyota of course. Labor costs in CA are far too high to be running a manufacturing factory in the east bay, it's just dumb. Might as well shut it down when orders are low and your other factories in the US can pick up the slack. Thanks for the heads-up.
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Aug 27, 2009 23:28
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We saw a house in Hayward this weekend that was pretty ordinary. 3 smallish bedrooms, 1.5 bath, a 2-car garage, corner lot with an unimpressive backyard and some fairly nice, albeit worn, parque flooring in most of the rooms. 1150 sq. feet, asking price was $230k. Our agent contacted the seller. They had opened for offers for exactly one week. They had 55 (fifty-five) offers, were making counteroffers to three of them, and the house was no longer open for offers. Fifty-five loving offers, for a modest house in a modest neighborhood of Hayward, CA. Given the asking at $230, they'll probably get like $300k for it or something. Maybe more, if it'll appraise for enough for the buyer's bank to approve a loan, assuming the winning bid wasn't a cash offer. There are a lot of cheap houses right now in the Bay Area, but there seem to be a huge number of buyers trying to get them. That's got to be setting a floor to the prices. We'll see what happens after the 15th (when the supposed foreclosure moratorium ends) and Nov. 30th (when the FREE MONEY goes away) but unless something big changes, I don't think we're going to see prices at the bottom of the market slide downward much more.
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Sep 1, 2009 19:42
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Sophia, have you looked into what's available for your price range? As a general bit of advice: it's usually a bad idea for people to "stretch" to afford the biggest payment they possibly can. A lot of things can happen in the next ten years that could affect your budget; anything from a spike in tax rates, insurance, rising HOA fees (and they never go down, they only go up), a change in career or employment, a new partner... a big health emergency... It sounds like you're in very good financial shape (no debts, good savings). Don't sabotage that by buying the absolute most you think you can afford. If you're dead set on getting a condo instead of a house, I suggest you account for a steady increase in HOA fees over time in your budget; assume you could at any point have to get a new job at a 10% pay cut; assume you might have to go 6+ months without a roommate/renter; and assume that property taxes, insurance, etc. could also rise by 5 or 10% at any point. Taking all that into account... are you sure there isn't a condo or (better) a house out there for, say, $250k, that'd suit your needs?
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Sep 2, 2009 18:50
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There are whole entire houses in SF that can be had for $500k. (Example: This house in Sunnyside.) So I'm kind of stunned at that price for a share in a TIC. 850 square feet is a pretty normal size for a condo, too. I suppose location is everything, though; I hope your location is really good. Personally I rejected the idea of a TIC early on for the same reasons as rejecting a condo or townhouse; I don't want to deal with an HOA; unpredictable fees, other people deciding what color I can paint, where I can park, etc; and (particularly with a TIC) other people having a say in when I can sell and to whom. Then again, I'm looking to buy at less than half the price you were shopping for, so maybe my own perceptions of what I'm willing to accept are skewed by being in a different tier of the market. Leperflesh fucked around with this message at 22:26 on Sep 2, 2009 |
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Sep 2, 2009 22:23
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It makes sense banks don't like TICs, of course; if you default, it'll be much harder for them to turn around and sell the foreclosed TIC unit, since the other unit-holders can essentially change the TIC contract at-will and make it really unattractive to anyone they don't like.
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Sep 2, 2009 22:54
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Not that I'm one to talk - buying in the SF Bay Area - but the issue really shouldn't be "this is what people like me in my area are willing to pay." What is important is whether it's worth it to you, and those other people's situations don't matter a bit. A hell of a lot of people are being foreclosed on this year because they bought on the basis of what their peers were doing, rather than a sound analysis of their own finances, needs, and flexibility. If you think it's worth 60% of your income in order to own, then maybe it is. There are a substantial percentage of people out there right now who are sorely regretting making that decision... the hard-liners in this forum are only trying to convince folks not to become part of that demographic. There are areas where houses cost too much. It's too easy to lose sight of that.
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Sep 2, 2009 23:50
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Pinkied_Brain posted:Well I wanted a place in the city - my apt is 2 blocks north of the panhandle and a couple blocks east of GG park. So I think 500K for 850 sq ft is not too bad, though obviously sounds crazy for anyone outside of SF and NY. Sunnyside is in the city - although obviously not as nice/close to downtown as upper/lower haight/panhandle - but it's true prices go up a lot if you want that kind of neighborhood. (Honestly I kind of hate Haight now, it's full of panhandling kids with dogs and the Gap and poo poo, has lost all its old character, but whatever.) Sophia, it sounds like you're going in with your eyes open at least. Clearly you understand the financial situation you're taking on. What many first-time buyers don't realize is how much of their monthly costs are still not going towards equity... and how there are hidden costs that can go up (especially if there's an HOA fee) and have to be accounted-for. I'd say you're fine, given that you're aware of it.
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Sep 3, 2009 02:55
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To be fair, I moved out of the City about 8 years ago, down the peninsula. I haven't really hung out in the Haight for a long time. Prices for mere condos/apartments in SF still astound me. My parents bought a house a block off of Sunset, in (I think) 2000 or so, for $480k. The rise in prices since then was ridiculous, and it would seem even with the popped bubble, prices for really quite modest houses are still pretty sky-high. You really do pay a huge premium for an SF address. $500k will get you a whole lot more, in most of the rest of the bay area.
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Sep 3, 2009 22:59
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It's important to realize that what is commonly called "dry rot" is a kind of mold/mold damage, and will appear as such in inspection reports. That doesn't mean all mold is dry rot, but; wood damaged by dry rot needs to be replaced. In particular, dry rot that affects structural members must be replaced, and it's a good idea to deal with it wherever else it is as well. It can be prevented with properly sealed and painted wood, and avoiding contact between wood and dirt. There are millions of other kinds of mold too of course. Some you can basically just scrape off and paint over, other kinds you treat with something and then paint, other kinds you have to replace the wood, and other kinds are toxic and have to be treated professionally.
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Sep 18, 2009 21:36
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In all honesty I do not know. You need to consult with an expert.
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Sep 19, 2009 21:08
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It is tremendously frustrating wasting a weekend viewing houses that, it turns out, are already pending, but the seller's agent hasn't bothered to update MLS, and doesn't answer phone calls. Narrowed down three houses this weekend that we liked, and picked one that we were basically ready to bid on. Our agent called repeatedly, but nothing till 2 AM last night (?!) saying that they were only waiting on bank approval. Meaning they'd accepted a bid on the 1st and had left the loving listing up for three weeks, hadn't taken down the sign, hadn't taken away the realtor's keybox on the house... uuugh. We've seen a number of houses that it then turns out aren't actually for sale anymore. The banks' agents are the worst, I guess they've got like 40 properties each, so they're all too lazy to update listings or answer phone calls or e-mails or do anything at all that might be of mild inconvenience to themselves. They must be losing tens of thousands of dollars on every property they sell, by being so frustrating to deal with... missing out on a lot of bids they could be getting that way. But we will persevere. Waste one weekend after another until somehow, magically, we'll manage to like a house that is actually for sale, and then be allowed to bid on it (and get outbid).
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Sep 21, 2009 19:53
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moana posted:We just bought a house (in California! oh no!) and the driving factor was quality of life. Our budget was $500k, but we bought a house for $360k because it was nice and in a good neighborhood. If you find an affordable house in a place you can "put down roots" in, you buy it. If not, you wait until you do find one. To me, it was as simple as that - if you're buying for the long term, who cares what happens in the next few years? As long as you can be happy with the place you pick and not agonize over "oh, if we had waited, look what we could have bought!", you're okay to buy. If you don't really like the neighborhood you buy in, it doesn't matter if prices start to rise again - you'll still be unhappy in the neighborhood. This is really good advice. I'll add to it that all of the predictions about what the market will do for the next year, or two, or five, or whatever, are exactly that: predictions. They rely on technical data, trends, historical patterns, and all manner of rationalizing, hand-waving, and bias-confirming argumentation. Ultimately, as with stocks, or politics, or economics, or any other extremely complex, huge, and imperfectly-understood system, there can be no certainty, and for every expert opinion you can find at least one expert who argues the opposite. This means that if your chief reason for timing your buy is trying to time the market, you are taking a substantial risk of being burned. Buy too early and you watch your house's value decline, and miss out on getting a better house for the same money. Wait too long, and you miss the bottom and maybe get priced out of the house you want, or the neighborhood you want, or the financing you want. So don't try to time the market. Unless you're an investor, you've diversified substantially, and you're trying to put like 10 or 20% of your total portfolio into real estate, in which case, sure, go ahead and treat housebuying like a day-trader treats stocks. But that's not where most of us are. Buying a house is usually not all that great of an investment, even when the market is stable and rising, compared to other investment opportunities. What it ought to be about is your quality of life, long-term plans, that kind of thing. If you make those your priority, then it won't matter whether your house's value rises or falls next year; you'll be making payments you can afford on a house that you like, enjoying an improved quality of life, and ignoring the crazy world of real-estate investing entirely, because it's irrelevant to your lifestyle and happiness.
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Sep 22, 2009 19:33
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Unless you insist on your future wife being a professional, you shouldn't count on a future spouse's income to help with the house. It'll be great, but, just in my own example ferinstance, my wife is an artist, and she makes about enough money to pay her own student loans (private uni for a master's degree), personal expenses, and to help a bit with the groceries. Which doesn't matter to me at all, I love her and want her to pursue her career, but it does mean I'm paying for the house myself. Which is also fine. Actually I think it's a good idea when couples budget for a house, to take into account the possibility of one of them choosing to change careers, go back to school, or something, at some point. Lots of adults do that these days, and you don't want to be in a situation where, five or six years down the road, you feel trapped in your current jobs because of your house payment, even if you hate your career and want to change. Even if the new career would ultimately have a higher earning potential, but you can't afford to start over, go to school, and spend three to five years earning less money before you can earn more.
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Sep 23, 2009 00:25
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My stepdad's been forwarding me stuff. This is from an article by Sham Gad, a contributor on RealMoney (subscription required).Sham Gad posted:Sham Gad That "shadow inventory" he's referring to, consists of mortgages at least 90 days past due. In a normal year, those would be going into foreclosure. This year, many of them are not... in fact, there are a huge number of houses that are over 12 months past due on mortgages, but have not entered foreclosure. Basically, the banks are sitting on these things, because as long as they don't foreclose, they don't have to admit (via losses reported to the Street) the true loss of value in their portfolios. Or something. That's a guess. But the shadow inventory is real. I don't know what they're going to do with it - maybe go on a bonanza of dealmaking to help people stay in their houses, maybe beg the government to bail them out, or, maybe, spend the next year dumping 7 million excess units onto the market and watching housing prices tank all that much more, as millions of them attract no bids whatsoever. Of course, we should keep in mind those are nationwide statistics. In some areas, the picture may be much better (or much worse). Edit: To add to the above: From the Wall Street Journal, quoted by Barry Ritholtz: WSJ posted:“The size of this shadow inventory is a source of concern and debate among real-estate agents and analysts who worry that when the supply is unleashed, it could interrupt the budding housing recovery and ignite a new wave of stress in the housing market . . . Analysts who track the shadow market have focused primarily on the gap between the number of seriously delinquent loans and the number of foreclosed homes for sale by mortgage companies. A loan is considered seriously delinquent, which typically means it is headed to foreclosure, if it is 90 days or more past due. Leperflesh fucked around with this message at 18:40 on Sep 30, 2009 |
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Sep 30, 2009 18:29
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BorderPatrol posted:I guess it's a good to be a buyer then? Cheap homes for a while? v Exactly. We've been shopping for a while, and we'd love to get the $8k credit, but we're passing on dozens of houses because we know there's no real time pressure. If we see a single substantial thing we're unhappy with, we're not going to bid. That means some flaw that will be too expensive or time-consuming to fix ourselves, or any aspect of the house, property, location, or price, that gives us pause. We figure we've got the luxury to be as picky as we want. Loads of people seem to be getting desperate around here, having lost several bids, wanting to get the tax credit, etc. We saw a house last week where someone had made a bid for it sight unseen. They backed out after visiting the house. No doubt they're doing that again, just as a tactic to get a bid in before everyone else. It's slimy but to be expected (and a wise seller should not consider a bid from a buyer who is clearly using such tactics). I'm sure our realtor will be sad if it takes us another 6 months before we get a house, but, we've been very open with him about our plan, and he is OK with it. The only urgency I am feeling, and it's minor, is interest rates. They're very low right now but if they start to rise rapidly, I'll start to get concerned. I don't want to get stuck with something above 6%.
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Oct 1, 2009 19:49
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That's the miracle of compound interest. We saw a house today that we liked a lot - we're going to bid tomorrow. So much for "la la la we have plenty of time", but then again, there's a very good chance we won't have the highest bid, and we're OK with that.
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Oct 2, 2009 04:27
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You will have a very hard time qualifying for a 220k loan at your current income. The FHA does not care how much money you think you'll be able to make once your wife gets a job - your current income, last year's tax forms, etc. matter. What you COULD do is use your big cash reserves to pay a big down, so your mortgage is much smaller. If you can put 20% down, you'll avoid PMI/FHA insurance payments, as well as having a substantially lower payment (and instant equity in the house). Even so... just wait till your wife gets that job. You do not want to be in a situation where the employment situation worsens, you've got zero equity in your house, your savings are rapidly dwindling, and you have to try and sell into a saturated, crappy market, taking a bath on costs, and getting nothing from the zero equity you don't have in the house.
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Oct 2, 2009 07:21
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Just to add some more: your $1400 a month cost is not right. That might be what your actual mortgage payment will be, but it's clearly not including: property taxes, insurance, PMI/FHA insurance (a big hit if you don't go with a conventional, 20% down loan), and increased maintenance & energy costs. I know this because I am looking at an FHA loan on a house at very close to the same price. I figured my monthly costs, not including maintenance and energy, is closer to $1800... and California has quite low property taxes (around 1.1%/yr in my case). My wife and I make just under $100k/year. We have some additional debt, but even so... I think $1800 is plenty for our budget. You're making a little over a third (call it two-fifths) what we are... so that seems to me like a pretty huge payment for you.
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Oct 2, 2009 19:05
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GOOCHY posted:You can't afford to buy a house. It's a bad idea all around. That doesn't even take into account that if you have 80 large in savings why in the world are you looking for a 3.5% down FHA loan? I fully understand the value of liquidity but if you're buying a home with only 3.5% down you're looking at mortgage insurance costs that'll eat you alive (plus probably an interest rate that's higher than you could have otherwise gotten with a normal 20% down payment). You are right of course, but let's be clear; FHA mortgage insurance is pretty cheap, comparatively speaking.. For FHA, you pay 1.5% of the loan amount up front (and can roll that into the mortgage itself if you want). That's 3300 or so for our guy and he can pay that in cash. Then, you pay .5% of the mortgage amount per year, canceled when your principal reaches 22%, but with a minimum of 5 years. (You have to pay a few months up-front of this on purchase, but that's just another closing cost that you then 'get back' by not having to pay it for the next few months.) On our guy's loan amount, that's less than 1200 a year, or under $100 a month. It's a substantial cost to take into account, but it's not "eat you alive" bad. PMI on such a small down would be a lot higher (which is why FHA is a better deal when you have a tiny down payment!). Obviously going with 20% down is a better move, for lower mortgage payments, NO PMI/FHA insurance, and a good buffer in case you have to suddenly sell in a year and the house value has dropped. With his savings, it's a no-brainer to make the 20% down, get a conventional loan, and get a better interest rate in the bargain (which makes a HUGE difference in monthly cost). But even if he does that, he should wait till his wife is working in a stable job. Prices are not going to leap back into the stratosphere in 12 months, especially not in Arizona!
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Oct 2, 2009 21:31
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You can get a fix-it loan, but keep in mind that you will have to have the repairs done before you can move in, really. That can be an issue depending on how much work needs to be done. It'll also be harder to get the loan. With 10% down you will not "avoid PMI", you'll be substituting FHA's insurance for it (see my post just above for the breakdown). Your big issue is your credit though. If your credit sucks, you won't qualify for a loan. FHA is a loan program but the loan itself still comes from a real bank, and the real bank won't loan you money if you're a huge credit risk. It sounds to me like you have a decent plan with lots of room to maneuver, but, you should not take any action until your credit score is good, and then re-assess at that point. This is another concern: "the only reason we'd have to move is if an engineering and business major are going to have to look beyond the central Maryland-DC area for work." You're just going into college? What if you change your mind about your desired career? What if you get a great job offer in New York or something? I think buying a house while you're just brand-new married, and you're both still in college, is risky. You can't predict the job market in 5 years from now, and people in college (myself included) have this tendency to change their minds after a couple of years of discovering what they're doing isn't actually for them. I hope that's not too condescending, it's just a fact, maybe you're an exception, I dunno.
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Oct 2, 2009 21:45
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Yeah. That's like a foreign concept to me. There are houses in the Bay Area for 100k - they're in the bad parts of Richmond, a really, really nasty neighborhood filled with gangs and murders and sky-high burglary rates. The idea of a place with 100k houses that's actually a nice place to live... it's crazy.
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Oct 2, 2009 22:04
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Zfuut posted:I guess I should have made some things more clear, the interest rate quoted to us was 4.875% and the monthly payment of $1,520 does take into account taxes, HOA, MIP etc. Were you quoted 4.875 on an FHA 3.5% down loan? Because if so, that's pretty awesome. That's more like the sort of rate I'd expect to see on a conventional loan. Also whenever someone lists things they've taken into account and it includes "etc." I cringe. "etc." should never appear on a spreadsheet with a number next to it. It's impossible for anyone to know whether you've really taken everything into account (presumably, the reason you're here asking for advice) if you're not explicit and detailed.
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Oct 3, 2009 02:46
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Zfuut posted:Also, the neighborhood is Pulte which seems really credible; however they make us to sign the house contract and put 5 grand to hold the house before we apply for their loan (of course if we don’t get the loan we don’t lose any money), is this strange? Also they are telling us another buyer is closing in, do agents do this to try and get you to hurry? The $5k is "earnest money" and required for any offer you make. Before you make an offer you should be pre-qualified, which just means you've run the numbers and your broker agrees you can probably get a loan at x interest rate, etc. After you make an offer, you should be pre-approved for a specific loan by your broker. After your offer is accepted, you then apply for the actual loan. At that point you have to submit all the evidence of your income, finances, etc. again, even though you already did it to pre-qualify. This is how it has been explained to me, yesterday actually, because we just put in an offer and it sounds like we're at the same stage as you. Your agent should be explaining the above very clearly to you! If you're not getting hand-held through the process, your agent isn't doing their job. Also who is telling you another buyer is closing in? If it's the seller's agent, well, sure. Your offer probably included a statement that allows the seller to share the terms of your offer (because if you restrict them from doing so, that's a negative thing that can discourage them from accepting your offer). Likely other bidders are also doing that, so, the seller is free to tell you (or anyone) that there's other bids and how much they're for. They usually won't tell you the exact number though, because they don't want you to bid $100 over the high bidder... they want you to give them your best offer, in hopes it'll be thousands over the next guy. This sucks but it's how things are. If the seller's agent is actually willing to tell you the exact number of the next highest-bid, that's fantastic for you, because it tells you precisely how much you need to bid to win. It is up to you to decide if that number is worth it to you or not, of course. But keep in mind that it is in the seller's interest to imply you need to make a quick, high bid. They want to sell the house fast, and for lots of money. Listen to your own agent, and be willing to walk away from a deal if you aren't satisfied... don't pay more than you really want to pay, or buy a house you're not really happy with, just because you're being pressured. As for the rest of your numbers... it seems you've accounted for most of the monthly costs. Be sure to budget for a higher energy bill if you've been living somewhere smaller or renting a place where utilities were included. Also include a healthy ongoing budget for maintenance.
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Oct 3, 2009 21:38
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Prices are still falling. Home Sellers in U.S. Cut Prices by $28.4 Billion, according to Trulia. Do note this detail: quote:Closely held Trulia collects data from brokers and agents, third-party providers and multiple-listing services. For the survey, it looked at homes for sale as of Oct. 1 -- about 3 million properties, excluding foreclosed homes and undeveloped land -- and calculated how many had previously been listed for a higher price. Some were lowered more than once. However, they also take data from another survey: quote:According to a separate survey released today by real estate data service Zillow.com, U.S. buyers paid a median $6,525, or 3 percent, less than the final listing amounts on properties bought in August. Excluding the foreclosures skews the numbers, I suspect, because I think a lot of them are selling for more than asking price. At least around here they certainly are. So what we're seeing is non-foreclosures having to accept underbids because of the ongoing cheaper supply of foreclosed houses. Some of that is probably overly-optimistic head-in-the-sand sellers ("...this house is great, it hasn't lost its value like those other crappy houses!"), but it still does reflect a real overall drop in prices in August, and that's worth paying attention to.
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Oct 9, 2009 19:58
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You are absolutely correct to wait till next year. There will be plenty of houses then, too... probably for just as cheap in your area, as there are no signs of a sudden surging economic recovery in Buffalo, NY. If you want one very good reason, just consider; you'll get much better terms on your mortgage when your finances are in order. The loan qualification process takes into account your savings... if you have no savings, even if the loan is tiny and you can easily afford it, you might not qualify, or you might qualify but only get a high interest rate. There is no price that is "too good to pass up" if it is money you don't have or can't afford. Remember, houses are priced at what the market will bear. If you see houses going for $50k, that's because that's what they're worth - appraisals and handwaving be damned. It's not a "bargain". A bargain is something priced below the market, where you'd have to scramble to compete with others to be first in line, where you could immediately turn around and re-sell what you got for a significant profit. That's very unlikely to be the case for the houses you're seeing. Get your finances in order, get your marriage done with, get into a position where you can devote the massive time and effort and stress to housebuying, and you'll be much better off in the long run.
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Oct 16, 2009 06:00
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| # ¿ May 2, 2024 04:48 |
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Record quarterly foreclosures: up 23%Ritholtz posted:During Q3, one in every 136 U.S. housing units received a foreclosure filing — a record high. This quarter was the worst 3 month period since the great Depression. We're still on our way down, folks.
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Oct 16, 2009 20:52
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