Has anyone bought, or know anyone who has bought in 2011?
Are you/they happy with their purchase?
This general post will have some interesting follow-ups this year...
Bought or Buying a house in 2011.
By American in Japan Follow Wed, 2 Feb 2011, 9:47pm 17,552 views 189 comments
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Some say prices of homes are rising again in the Bay Area...Lol!
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I want to buy this year. There are a few signs that make it seem pretty worthwhile.
1. The prices in the neighborhood I am looking at are pretty much around the price to rent (including HOAs, PMI, Property Taxes)
2. One building I really like seems to have a few short sales and foreclosures in the pipeline. 4 new units on the market in the past 2 weeks. 4 more in pre-foreclosure state on the tracking sites right now.
3. Current renters in the area are looking to buy (evidenced at the open houses)
My big problem is I am still saving for a down payment. The list prices seem to have fallen by 10-15% over the past few months -- so it looks to be right in my target. I hope this trend continues until I have my down payment together. ;)
Plan to buy by the end of the year. I think ratio is fine and it will be a good investment/place to live.
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Bellingham, WA
jaded says
This is better than it was for me in 2000-2002, when I came back from Japan.
I was saving for a down payment too, but prices in 2000-20001 were rising faster than I could save! Seriously -- what was a $300,000 place in 2000 became $400,000 in 2001 -- requiring $20,000 more down payment! WTF!
Then IIRC around 2002 they started innovating in 90/10 mortgages which helped me since the bay area was too high for FHA. But by then the dotcom bubble was dead and I decided renting was the better deal.
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American in Japan says
actually they are. spring season is starting early this year.
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47 male
Lafayette, CA
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I intend to buy at least one more SFR in 2011 and perhaps two if I can find the cash.
Looking at Concord of course.
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La Mesa, CA
I want to but what's up with San Diego real estate? Anybody following have insight/ predictions? It seems to be one of the few cities showing slight increases when it clearly needs to be decresing to fall back to reality...starting to really piss me off actually.
Thoughts?
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Professor Piggington (sorry) shows that San Diego has historically maintained high average home prices relative to average incomes.
http://piggington.com/shambling_towards_affordability_yearend_2010_edition
Ratios of over 7 have been the norm...
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47 male
Lafayette, CA
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American in Japan says
Thank you for that link. Here's a chart that SHOULD shock the hell out of real estate bears and make them rethink their entire position. Pretty amazing considering the "people can't afford it" rhetoric going around.
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American in Japan says
Yes, up to 1990. Than the income dried up, decline in the Aerospace industry, sending prices downwards for the next 7 years. Prices declined even though Mrt. rates also declined. Pigginton does a very good job looking back at historical trends and providing some excellent analysis. His is correct providing you do find a "reasonable" priced home.
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47 male
Lafayette, CA
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thomas.wong1986 says
Not according to the above chart. There's plenty of income and housing has never been more affordable.
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iwog says
Pigginton:
"I've argued a million times (latest iteration here, I won't drag everyone through it again) that price-based ratios are much more important than payment-based ratios in determining whether housing is fairly valued on a sustainable basis."
"Well, we are out of the danger zone of high aggregate valuations as far as the price-based ratios are concerned. But unlike with payments, home prices are not actually cheap. They are right square in the middle of their historical range. While this removes the dangers posed by overvaluation, it certainly doesn't rule out a move into undervaluation."
"My own suspicion, and this is purely a guess, is that valuation ratios will drift downward in the years ahead. Not plunge, but drift downward. This is based on headwinds to housing price growth I anticipate: a big foreclosure backlog, structurally high unemployment, higher rates, and the potential for a serious economic downturn (plus much higher rates) as a result of a US sovereign debt crisis. (I know I have said that rates don't impact valuations as much as many people think, but nothing happens in a vacuum -- a sufficiently large and sustained rise in rates could certainly exert some downward pressure on valuation ratios, at least for a time). "
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iwog says
Boy, you really dont recall or know the economic history of SD. Dude! incomes got slaughtered in 1990s. SD today isnt what it was back in the 80s. Industries today pale in comparison to what it was before.
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47 male
Lafayette, CA
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thomas.wong1986 says
Median household income for San Diego in 2008: $62,820
http://quickfacts.census.gov/qfd/states/06/06073.html
Median household income for San Diego in 1989: $35,022
Median household income for San Diego in 1989 inflation adjusted: $60067.68
http://factfinder.census.gov/servlet/QTTable?_bm=n&_lang=en&qr_name=DEC_1990_STF3_DP4&ds_name=DEC_1990_STF3_&geo_id=05000US06073
Looks like you're wrong again Thomas. Household incomes in San Diego are actually a little bit higher now than in 1989.
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La Mesa, CA
I appreciate the responses about San Diego. One metric I often use is sales price pre-2000 and then compounding 3% yearly- what I believe to be normal house appreciation. It still always comes up way off what the sellers are asking. I guess Piggington's point is that monthly price is low but not necessarily sales price. Ugh, stupid sunny San Diego.
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San Diego, CA
Yes, I will definitely buy a house in the San Diego area towards the end of this year. I've been waiting the past 6 years for prices to go down. MANY of the houses we are looking at in the area are down 25% to 30% from peak prices. I think prices can fall a bit more but I also think San Diego will always be a more desirable areas. I've noticed lately more price reductions and a few of the houses we are looking at that are in "pre short sale" the banks (1st and 2nd) have both approved short sales. One we looked at the buyer made a lower offer and either didn't get qualified or backed out.
We're hoping prices continue to fall this year before we buy. I know there are a lot of bears on this board but our situation is a bit different. We definitely know we will stay in the home for the long haul. We have 2 small kids and don't want to move around in rentals. We're in it for the long haul so we are looking at larger 5 bedroom homes in nice areas. Homes are still pricey there even with the price drops. Most of the houses we are looking at are over $1 million still.
With Patrick's buy/no buy formula it's about a 6.5 which is borderline but rentals are around $6,000 - $7,000+ per month for a rental in a high end home that size. Property taxes in that area for that size home is mostly around $13,000 - $18,000 per year and Mello Roos fees in some of those areas is as high as $500 per month. Still even accounting for those high fees, we're going to stay in the home until our kids are finished with high school. So for us it's not an investment but to live in and we won't move around.
I've looked at tons of cities around the USA but for us we really love everything that San Diego has to offer including fabulous weather, great beaches, great schools (we're looking at the La Jolla, Del Mar, Carmel Valley areas) and beautiful homes. About the only negative factor I can think of is the cost of housing. But not too many other negative things about the city besides the higher cost of living that I can see. The job market, like the rest of California pretty much sucks but I'm not sure if I'll go work for a company. So it might be a moot point.
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iwog says
Shocking indeed! incomes only rose with inflation in the long run. Maybe just maybe you should do the same with home prices.. starting with 1997 prices and factor in inflation to 2009.
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bubblesburst says
LOL! have fun. Just remember many didnt pay for the Sun and Beach Tax, so be sure to avoid that.
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Lafayette, CA
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thomas.wong1986 says
You claimed incomes were slaughtered.
You were wrong.
In 1997 a 30 year fixed rate mortgage was about 8%. Today it's a bit over 5%. Maybe just maybe you should stop ignoring everything that doesn't agree with your conclusion.
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iwog says
So what happened to the AeroSpace industry in SoCal which was booming since the 50s ?
End of Cold War ? Berlin Wall fell ? End of Communism ?
iwog says
Were interest rates higher in 1989 ? didnt SoCal/San Diego prices fall and so did interest rates?
surely you must have some knowledge of this.... Exodus from SoCal afterwards ?
http://news.google.com/newspapers?id=8_ggAAAAIBAJ&sjid=GHQFAAAAIBAJ&pg=1586,6214536&dq=socal+exodus+1990&hl=en
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thomas.wong1986 says
I proved that incomes are about the same now as in 1989. Why are you still arguing this?
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Los Angeles Times - Los Angeles, Calif.
Subjects: Shutdowns, Pacific, Layoffs, Corporate reorganization, Aerospace industry
Author: Vartabedian, Ralph
Date: Jul 01, 1992
Start Page: 1
Text Word Count: 993
Unemployment in county soars to 9-year high | 42,000 jobs lost in last 2 years
[1,2,3,4,5 Edition]
The San Diego Union - Tribune - San Diego, Calif.
Author: TERRY SACKS
Date: Aug 1, 1992
Start Page: A.1
Section: NEWS
Text Word Count: 563
Abstract (Document Summary)
The last time the county rate topped 8 percent was in 1983, in the aftermath of the deep recession of 1981-1982. Though the area's jobless rate hasn't reached the 10 percent level of that earlier slump, the current recession is far worse in terms of job losses.
Since the start of the U.S. recession in June 1990, San Diego County has shed 42,200 jobs, with declines in construction, manufacturing and retail trade accounting for 85 percent of the losses, according to EDD figures.
Max Schetter, general manager and director of the Economic Research Bureau at the Greater San Diego Chamber of Commerce, had expected the recession to bottom out by midyear. But the California and San Diego economies are lagging behind even the snail's pace of the U.S. recovery.
---------------------------
Hughes to Close 92 Facilities, Lay Off 9,000
Hughes Aircraft will lay off 9,000 workers over the next 18 months, close 92 company facilities and take a $1.2-billion charge against profits as key elements of a restructuring to improve its competitiveness and adapt to lower defense spending, company Chairman C. Michael Armstrong announced Tuesday. About two-thirds of the layoffs will be in Southern California, roughly proportional to the company's employment here. The Los Angeles-based aerospace firm will emerge from the cutbacks with 15% fewer workers than its current 60,300. (excerpt)
---------------------------
Jobless Rate Reaches 8.1% in S.D. County
Los Angeles Times (pre-1997 Fulltext) - Los Angeles, Calif.
Author: CHRIS KRAUL
Date: Aug 1, 1992
Among economists, there was little optimism that the employment decline will reverse itself soon. David G. Hensley, director of the UCLA Business Forecasting Project, said San Diego in particular and the statewide economy as a whole are still "declining" based on key economic indicators such as housing starts, auto sales, construction employment and retail sales.
Raford Boddy, professor of economics and coordinator of San Diego State University's Center for Public Economics Forecasting Project, said San Diego's current economic problems resemble those of the two-year recession beginning in 1973 when local unemployment topped 10%. Then, as now, a downturn in the business cycle coincided with deep military budget cuts, a double whammy for San Diego's defense-reliant economy.
San Diego County has lost 4.5% of its jobs over the past two years. California has lost 600,000 jobs since 1990. Hensley said 175,000 of those lost jobs were in construction, and 90,000 were in aerospace.
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iwog says
Hey IWOG,
Why don't we do a chart on percentage of Wives in the workplace... in the 1970s-1980s... compared to today. Also why don't we do a chart on CHILDCARE/HEALTHCARE cost increases in that time..
Income alone is hardly the only factor in affordability. HealthCare and Childcare have become a much larger portion of ones salary over time... Dual Income families have become a double-edged sword.. Where unless your partner is making $60K+ a year ... It makes more sense to be a stay at home mom or dad financially. Home prices haven't corrected for the fact that dual high income households are much more rare than they were in the 90s.
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47 male
Lafayette, CA
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I don't think the demographics have changed all that much since 1989. I admit health care costs have gone nuts, but I'd argue that child care has actually decreased.
Either way it doesn't appear that real estate affordability is nearly as dire as some would have us believe.
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La Mesa, CA
Just wanted to update you all- we were preapproved for an insane amount, something we would never saddle ourselves with. I think the industry is up to it's old shenanigans and again, I don't see how this could be indicative of a price correction. But nevertheless, we looked at our first house in 3.5 years and may put an offer on it- for no more than Patrick's calculator though (82% of the asking price) so wish us luck!
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Hmmmm...best to buy by this April if you plan to buy at all before next winter?
Will the seasonal effect override other effects? Summer sees price increases all other things considered...
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Oakland, CA
I just put in an offer this week. Apparently there are multiple offers so we'll see how it goes.
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La Mesa, CA
Yes, good luck. We put in an offer ABOVE asking price on a foreclosure and were beat out by one of 7 all cash investors so yea...
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Oakland, CA
jessica says
Nothing worse than being outbid. by that time you're already mentally moved in and picking out the drapes.
My usual strategy is to not use a buyer's agent. Go directly to the listing agent and present your offer.
We'll see if that works again.
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Beverly Hills, CA
My wife & I are buying - supposed to get the keys today.
Reno Area
4bed
2.5ba
2300 sq ft
.2 acre
2 garage & rv pad
built 2004
26 min commute
clean master planned suburban neighborhood- parks etc.
annual rent / price = 1150 * 12 / 130000 = 10.6%
price / income = 130000 / 70000 = 1.85
56 $/sq.ft
10 year expected residency
At this point, I am very satisfied with this purchase. By cancelling our cell phones, our bills are the same as before, but we get twice the house. We were currently paying 750/ mo for a total POS in a bad neighborhood.
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I just went under contract. I've been looking for over a year for a place that's close to my kids. There are not a lot of rentals and prices have remained stubbornly high (local economy is good). I finally found an REO in pretty good shape:
Newtown, CT
3Br/2Ba
2200SF
1 acre
$287500
Taxes = $7300
20% down, 5.125%APR, $3500 back from bank (reverse points) towards closing costs
annual rent/price = $24000/$287500 = 8.4%
Price/income = $287500/$160000 = 1.80
5+ years expected residency
I'm currently renting a 1Br cottage and my PITI will be only $850/month more. I'm satisfied.
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Price/income = $287500/$160000 = 1.80
Great ratio! If only banks hadn't lent to people with ratios of 7, 8 or more!
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Pasadena, CA
I-man says
Wow, a 2.53% Property Tax rate?!?!
Well, at least it looks like they're investing some of that money into the schools. Newtown, CT has high-rated (9&10 out of 10) schools. http://www.greatschools.org/search/search.page?search_type=0&q=Newtown&state=CT&c=school
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46 male
Menlo Park, CA
I think rates over 2% are common in the US. California has strangely low property tax rates.
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Bring on the Georgist land tax!
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Oakland, CA
jessica says
looks like I am going into contract! I guess the strategy worked.
I think It's very hard for regular buyers to compete for the best deals.
My offer was with no contingencies, no agent, all cash, as-is no inspections.
I can pretty much eyeball the inspection myself now on a small property. I looked at the place once and made offer on the spot.
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closing in 10 another days, It's in San Jose's Cambrian neighbourhood.
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33 male
Fort Mill, SC
Bought in Tega Cay, SC (lakefront resort community near Charlotte, NC)
Close April 29th. Paid $100/sqft. for Brick front/vinyl side house built in 2003. Has 1200 sqft. walkout basement unfinished. Figure I can finish that for 10K, adding another bath/bedroom if I want. Whill push the price down to the $80 sqft range.
Total PITI is $1500, 14% of net income. About $1320 net of taxes which you cannot touch in this area in rent on a house of similar quality.
May live to regret it but at least I can paint the walls...jk.
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Patrick says
Just under 1% in Eastern WA.
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My property tax rate is 2.6% of assessed value, with homeowner credit and lottery credit applied. My parents property tax rate is 2.5% of assessed value with homeowner credit and senior citizen credit applied. Latest assessed values 2010 have been adjusted down for market, but market has declined further.
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@cloud13
How did the purchase go last month? You said you would close around the 26th...