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Halfway thinking of buying a house in the bay area...


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2011 Nov 15, 12:58am   24,549 views  70 comments

by edvard2   ➕follow (1)   💰tip   ignore  

I never thought I'd say this, but for the past- oh I'd say 3-4 months- I've been toying with just the notion of buying a house here. This is all extremely preliminary. Doesn't mean I'm jumping on the house buying bandwagon, but I am starting to think about it.

Some of you might recall one of my earlier posts where I was debating moving out of state to somewhere significantly cheaper, which isn't hard since about 95% of the country is way cheaper than the Bay Area. This idea is still on the table. If we really wanted to we could- at this very minute- pack bags and go to TX, NC, NC, GA, CO, or whatnot and buy a house free and clear and have money left over as well as a decent amount in retirement. We have been saving for years.

But... on the other hand its more or less the case that as far as what we do for a living, most of the work is on the coasts in costly cities. If we moved that would probably mean changing careers, perhaps even going as far as to start working at retail/low income jobs with some occasional freelance. I wouldn't be totally against that because we would have everything paid for and thus the jobs would just take care of health insurance and basic monthly expenses. Some part of me isn't totally comfortable with that possibility. I have some insite into this because I was laid off a few years ago and tried to get a job out of state and despite being highly qualified had an incredibly difficult time getting any responses from anyone in even some of the high tech alternatives like Austin and Raleigh. As of now we both have very stable, comfortable jobs that we enjoy so I am not really in any mood to move at this time.

So lately I've been taking a peek here and there at various houses around us. What I'm finding is that houses that had been say- 600k-650k in 2006 are now at around $400k-$475k today. Certainly not cheap by any means, but we 'could' afford it. That would mean putting down a sizable down payment of say- $100k-$150k. The houses themselves tend to be somewhat smallish, adequate homes. My rough math estimate is that the monthly nut would probably be somewhere around $1,700 not including taxes. So realistically- closer to $2,000 a month. What it boils down to is that I've been sitting and watching the bubble for years. My automatic reaction to any house for sale around here was the same: Overpriced crap not even worth looking at. I was so used to that notion that even looking at homes was not on the radar. But now... I am seeing some homes that are more like- well... they're still pricey but not absolutely ridiculous.

That amount is doable. But... on the other hand we're currently renting a rather large house with a nice big yard for a little more than half that amount. So while we 'could' afford to buy a smallish starter home, we would likely be paying more money for less space and probably have to also pour some money into the house because often times these are older houses that some old person lived in forever and ever without doing much in upgrades. So while I can't deny that buying a house is a cozy idea the situation we're in now has me a tad spoiled size-wise. The math to me doesn't make a whole hell of a lot of sense, even with a big down payment. Besides- that down payment would be like 8 years worth of renting.

That brings me down to the last thing. The other idea is to just keep on working, saving, renting, and in say- 5-10 years if all works out, see what our financial situation is then. By that time I'd say we would be in a position to make an easy either-or decision where we could probably buy something outright in either location and call it a day.

Sorry for the rambling. Anyone care to share their thoughts?

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1   Â¥   2011 Nov 15, 1:40am  

If you are happier renting, then rent.

A $500,000 purchase with 20% down @ 3.75% has an average monthly cost of $1200 over the 30 years, not counting the opportunity cost of the DP or principal repayment.

So if you can find a place you'd like to be in for a decade+, buying now isn't that much of a worse deal than renting I don't think.

I don't know where the market is going from here.

2   PockyClipsNow   2011 Nov 15, 1:51am  

I recommend considering an FHA 3.5% down loan and see if you can get the seller to pay the 3.5% (either in escrow credit or for 'repairs').

Then you are in a great position to walk away when prices are down 50k and you want to move. A 50k drop in price will actually mean you lose 86k since it costs about 7.25% of sales price to SELL a home (both commissions + escrow costs/fees).

Lets all remember in CA we have non recourse purchase mortgages by law. DO NOT UNDERESTIMATE how valuable this is if you have any kind of net worth. It doesnt matter for people who go BK every 7 years like clockwork. BUT if you are responsible with cash then DO NOT PUT DOWN A LARGE DOWN PAYMENT since this will 'blow up' your non recourseability (is that a word?) the way it blows it up is that you lose the whole 20% down if u walk so you are 'blown up' financially.

My friends still want to put down 20% to get slightly better rates. But paying a slightly higher rate is like insurane allowing you to walk scott free if you need/want/find a better house for way less/etc.

Its called having a plan B. 20% down on a house is for chumps who get married with no pre-nup, do not use birth control, take crazy gambles, etc. IMO.

3   David9   2011 Nov 15, 1:58am  

Just my own story, I have been looking online at properties in the West San Fernando Valley for exactly two years now. The property values have only dropped, the banks or 'whoever' will delist a property and then it magically appears months later, and virtually no sales are happenning. I have not seen one 'green flag' yet here. Sure, if I wanted to buy in Las Vegas, I would be a happy camper.

4   Â¥   2011 Nov 15, 2:28am  

PockyClipsNow says

My friends still want to put down 20% to get slightly better rates.

PMI is 1.15% (but is deductible).

5   edvard2   2011 Nov 15, 2:29am  

Bellingham Bill says

A $500,000 purchase with 20% down @ 3.75% has an average monthly cost of $1200 over the 30 years, not counting the opportunity cost of the DP or principal repayment.

But from what I've heard, you have to have absolutely STELLAR everything to get that rate. As dumb as this sounds we have never had credit cards and always buy things with cash: cars, TV sets, and whatnot. So I'm going to guess we have good credit, but probably not the absolute pristine credit banks would require to get that rate... right? So if that's the case the payments would be a lot more than $1,200. Correct me if I'm wrong.

6   Katy Perry   2011 Nov 15, 2:44am  

I recommend Paying 100 percent cash or quit saying your buying anything. your borrowing the money. you will buy the house almost twice BTW in 30 years on your "I'm buying" plan.

debt is slavery

7   thomas.wong1986   2011 Nov 15, 2:49am  

Recent Sales and Price results for SoCal.. NorCal will be out soon.

“For a few months now, lower prices and amazingly low mortgage rates have kept resale activity slightly ahead of last year. Of course, that’s not saying a lot when you consider sales were 25 to 30 percent below average. The market continues to struggle with a difficult lending environment, uncertainty among potential buyers, underwater homeowners who can’t move up, and a weak job market. The lower conforming loan limits implemented last month help explain the relatively sharp drop in mid- to high-end sales during October. Now we’ll have to see if the private loan market can fill the void,” said John Walsh, DataQuick president.

http://www.dqnews.com/Articles/2011/News/California/Southern-CA/RRSCA111115.aspx

Los Angeles .....$300,000 -7.70%
Orange ......$405,000 -7.50%
Riverside ........$187,000 -5.60%
San Bernardino......$150,000 0.00%
San Diego......$315,000 -5.80%
Ventura.......... $335,000 -5.60%
SoCal.........$270,000 -4.60%

8   David9   2011 Nov 15, 3:07am  

I had to search on 'gigablast' to find this article, but I agree "The notion that the housing market was free is a total fantasy" Buy? Nah.

http://www.aynrand.org/site/News2?page=NewsArticle&id=24015

9   edvard2   2011 Nov 15, 3:08am  

Katy Perry says

I recommend Paying 100 percent cash or quit saying your buying anything. your borrowing the money. you will buy the house almost twice BTW in 30 years on your "I'm buying" plan.

debt is slavery

Hey, you know, I've been lurking on housing bubble forums probably since around 2004 so I am all wayyyy too well aware of the ridiculous situation on the California coasts. While I could buy for all cash elsewhere, doing so in the Bay Area would be totally stupid. Why? Because if you did then all that money you blow on the house would basically be wasted for the sake of unrealized investment potential. If for some crazy reason you decided to stick 400-500k into various stocks, investments, bonds, and so on, you'd probably be a very, very wealthy person in 20-30 years even if gains were modest.

As far as "timing the market", well I for one don't really care how much whatever house we buy would be worth. I don't view houses as investments- especially not the one I'd live in. Its a place to live and if it somehow gained value over the next 30-40 years then great. If not- so what. My retirement is coming from stock investments.

Like I said- it isn't like I'm got money burning a hole in my pocket and I'm about to buy a house tomorrow. Its just a thought I am entertaining a bit.

10   socal2   2011 Nov 15, 3:20am  

I have been renting and sitting on the sidelines for nearly 10 years and we finally pulled the trigger and made an offer for a big 2,500 square foot house in the San Diego North Coastal Area (La Costa) last week. They listed the house for $650K and they accepted $583K and are currently doing some minor repairs before we remove contingencies. The house has a HUGE yard, 4 bedrooms/3 full baths and a 5th bonus room upstairs (25' X 28') with a decent ocean view! They are also leaving us a nice pool table in the bonus room and there is still enough room for an office, couches, TV and all my kid's toys. The houses across the street are on a ridge and have HUGE unobstructed views of the ocean and Bataquitos Lagoon, so I think that will help keep the neighborhood prices a little bit higher. No HOA or Mellow Roos fees. The neighborhood has mature vegetation and most of the houses were built in 1978.

I was paying $2,100/month to rent a small 900 square foot stucco box in La Jolla, CA and my oldest kid starts Kindergaren next Fall and we don't want to raise kids at the beach. The rental house is simply too small and I didn't want to move the whole family into a bigger rental to wait another year or two for the market to settle. We are ready to plant roots.

We put 20% down and got 4.13% 30 year fixed. Sellers are paying for most of my closing costs. So my monthly mortgage payment excluding taxes/maintenance is about $2,200/month. I figure I am paying an additional $400 month when it is all said and done with taxes/maintenance to have a house 3X the size of my current rental in a neighborhood that I want to live in the next 10-20 years to raise my kids. Schools are award winning and some of the best in SoCal. I will have a 25 minute commute to work and just a few minutes away from some good surfing beaches.

I know this house will drop more in price over the next two years, but I have to believe that interest rates will go to at least 6-7% in the coming years, which means my house could drop almost $150K in price and still have the same monthly mortgage payment.

I have a very stable job for California (water/sewer infrastructure engineering) and my modest life goals are to live comfortably in coastal San Diego. Wife doesn't work, but could start working again part-time as a certified financial planner if times get tough.

We have a few more weeks before we close. Am I making a mistake?

11   LAO   2011 Nov 15, 3:28am  

Bellingham Bill says

PMI is 1.15% (but is deductible).

PMI isn't deductible if you make enough money to afford a $400K+ home.. I'd have to doublecheck, but i think the cutoff for writing off PMI is like $100K or so household income...

12   edvard2   2011 Nov 15, 3:39am  

We too have been waiting for years. Probably around 7-8 at least. Most of that time the plan has been to just save save save and one day cut and run.

But... here's the thing. I've been here 12-13 years. In that time I've gotten to know the area frontwards and backwards. Seeing as how I moved here right after college I've had my whole financial career here so far. All my friends are here. I am part of a few little groups and clubs. I know all the stores and who works in them. Basically this has become my home. Moving out of here would mean starting over. I'd have to find a new job-probably have to change careers, new friends, get familiar with a totally different area, and so on and so on. I'm in my mid-30's now and that's sort of a tall order. Simply put- I've lived here for too long. Could I move out? Sure. I suppose I could. But I'm increasingly finding that I don't really want to. So if that's the case, and we can in fact afford a house here... then why not? Any good reasons why I shouldn't buy and just keep right on renting?

13   socal2   2011 Nov 15, 3:58am  

edvard2 - I am in a similiar situation as you. I moved from the midwest to San Jose (Los Gatos) in 1995 and then moved to San Diego in 1998. I lived through both bubbles, first the Dot.com bubble in the Bay Area and then the housin bubble when I moved to San Diego.

Unfortunately (or fortunately) I got the surfing bug and can't imagine living away from the coast now. All my friends, networks and opportunities are here. Plus the weather in San Diego is perhaps some of the best in North America or even the world.

That said, I really can't stand California's suffocating dysfunction and politics. If I didn't find San Diego (an oasis of reason and normalcy) or a great house with an ocean view, I probably would have moved out of the State by now.

14   edvard2   2011 Nov 15, 4:12am  

socal2 says

That said, I really can't stand California's suffocating dysfunction and politics. If I didn't find San Diego (an oasis of reason and normalcy) or a great house with an ocean view, I probably would have moved out of the State by now.

There's a lot of things that bug the crap out of me with California too. The traffic, congestion from freeways to grocery store checkout lines- is annoying. I grew up in a rural area and here its just people people people all the time, 24/7. The cost of living is annoying. The socio-economic disparity and the flaunted wealth is really apparent. The "we're special here and everywhere else sucks" attitude ( even though 75% of the people making the claim aren't from California actually) is obnoxious. Lastly, people are obsessed with houses. Back home nobody cared. You just bought one. Done. Finito. Not here. I'm so tired of hearing about real estate its ridiculous.

But... I guess I can deal with it, obviously. Of course the weather is stellar. Around here you can go to the mountains, beach, desert, city, country, and so on in about 1.5-2 hours for any of those locations. The wine is good. The food is good. People get out and do stuff- even people with kids. But ultimately its because I've been here a long time.

This isn't a simple or obvious decision ( again- I haven't decided yet). We make good money and our rent is a small part of our monthly expenses. Its nice to save large chunks of cash. We get along great with the landlord. Our house is nicer than most people's houses who bought. I get along great with the neighbors. Its safe. Its walkable. Its pleasant on weekends. So for all practical purposes we could just rent for years and years because even now, with some of the houses I've seen being priced a lot less than they were a few years ago, our rent is still cheaper than buying.

But... gotta admit there's a tiny voice in the back of my head saying I aught to maybe thing about buying anyway.

15   Â¥   2011 Nov 15, 4:30am  

Los Angeles Owner says

PMI isn't deductible if you make enough money to afford a $400K+ home.. I'd have to doublecheck, but i think the cutoff for writing off PMI is like $100K or so household income...

this is correct; phased out at $110K/yr.

d'oh!

PMI is AFAICT $4400/yr on a $400,000 purchase. Takes about 8 years of amortization to get below 80% LTV . . .

16   Â¥   2011 Nov 15, 4:37am  

socal2 says

We have a few more weeks before we close. Am I making a mistake?

hell no. My spreadsheet says your average monthly cost of ownership will be $1400/mo over the 30 years, and after that your housing cost will be $800/mo.

This doesn't count the opportunity cost of the $116,600 DP or the total $600,000 principal repayment, but I'd rather have a nice house in the north county paid off than $600k+interest in the bank, any day.

17   socal2   2011 Nov 15, 4:48am  

@edvard2 - I hear you about the "flaunted wealth" bit. I remember moving here in 1995 and seeing punks coming out of college in San Jose making 6 figure jobs with stock options, driving BMW's. Now many of them are working at Starbucks. San Diego County has a better vibe and community spirit IMHO that is not typical Coastal California like the Bay Area and LA - dominated by uber rich areas surrounded by ghetto.

Bottomline, the driving force in my decision to buy now is getting my kids settled and the price/interest rates are low enough to about equal my current rent.

That........and I really like the new house and neighborhood. Homes in this neighborhood were going for $800-900K during the bubble's peak.

18   Tude   2011 Nov 15, 5:04am  

The decision to buy vs rent is so personal. In a case of the poster who has kids, wants to stay in the area, needs a bigger house than the rental, and has more than enough money to buy, then of course it makes sense to buy.

If I was in a really nice rental in a neighborhood I loved with excellent landlords and it would cost more to buy, then I would probably keep renting and saving my money until the market turns and I am well positioned to pay practically cash.

19   frank649   2011 Nov 15, 8:54pm  

@socal2, it seems you have good reasons to buy.

I suspect rates will remain low for many more years and that home prices steadily continue to drop during that period.

However if rates should go up to 6-7%, your home will drop much more than $150K. But what's a few $100K compared to having your kids in a good school?

20   frank649   2011 Nov 15, 8:59pm  

@bgamall4, $400k for a rental property in Palm Springs and you think only SF has a bubble problem still? Lol.

21   frank649   2011 Nov 15, 9:11pm  

That would be a nice return even if its only for the winter.

22   IUnknown   2011 Nov 15, 11:38pm  

One thing to consider as well...

CA (the state) has a massive debt problem and a budget that makes no sense. Yet they still want to build that stupid $90 billion dollar train line that will continue to double in costs every couple of years.

All of that money is going to have to come from somewhere. One of the easiest places to grab it from are people with property. Especially those who are debt slaves to their property. The state will continue to take from the counties and the counties will continue to fleece the people. Renters can just flee the state when it collapses.

If you can afford 100k down, look at what you can buy for 100k to 200k in another state. Imagine paying little to nothing a month for your housing.

23   ArtimusMaxtor   2011 Nov 16, 12:00am  

I am seriously thinking of building a house entirely of stone. Solar powered. There are houses in France that have survived quite well for over 500 years built of stone. Slate roof possibly. Terraced gardens. With a swimming pool and Jacuzzi built entirely of stone not to mention the bath tubs.

Marble is to fragile in my opinion. 2 to 5 stone masons working full time. 2000k square feet all ground level. Near no one. Wood I feel just is not the best thing to build out of. I has a short life and is way to complicated in its designs.

Nice and open in a warm climate. Few are built like it. Everything seems to have a sort of planned obsolence to it. Cars etc. Why not build something permanent to pass along.

24   edvard2   2011 Nov 16, 12:16am  

IUnknown says

The state will continue to take from the counties and the counties will continue to fleece the people. Renters can just flee the state when it collapses.

If you can afford 100k down, look at what you can buy for 100k to 200k in another state. Imagine paying little to nothing a month for your housing.

Well... yeah, I am all too well aware of what 100-200k will buy in other states, seeing as how I am actually from NC where even now nice houses are in that price range or even less. The house isn't the issue. The problem are the jobs and some of the other things I mentioned initially.

As far as the state of California's predicament, while its nothing to scoff at the state has honestly been in financial chaos since the 70's. Most from well-meaning but disastrous tax and state finance laws. I imagine it'll be that way forever.

25   troutman   2011 Nov 16, 12:58am  

the money lenders don't want your interest payments. they want your soul. pay cash and keep the devil at bay. rent, drive a used car, hit the consignment shops. live humbly. no debt or obligation should cut into one's leisure time. the happiest people i know are fishermen.

26   joee   2011 Nov 16, 12:58am  

It is a no brainer, I was third generation Cali and left for CO 10 years ago. MY 5000 sq ft house on a golf course is paid for and now own 5 rental houses. I could never do that in the hell hole of California. Look around you, you think Cali quality of life is getting better or in decline. Get out as soon as you can and stop kidding yourself about California.
PS I am in high tech and now making more money in CO than I was in CA. There is more hi tech growth here than CA

27   clambo   2011 Nov 16, 1:49am  

Go to zillow and see what is going on where you think you want to buy. How many foreclosures are there?
See the median price of the houses, then find out the median incomes. Check the area and see who is pushing those baby strollers around, what kind of stores are there. Is your area full of fast food, check cashing joints, Mexican groceries, etc?
If you wait a few years you won't be losing money.
Others have mentioned the problem with expensive houses that you can still "afford": you become tethered to a tax liability, a job, a huge leveraged asset that is difficult to sell in a hurry, and you are enriching a bank with your interest payment.
The good old days are unfortunately gone in California.
We all have imprinted in our memories the success of our parents or grandparents. My father for example bragged to me when he finally paid off his $800K house in NYC that his mortgage was just $125. Oh, and today his place is not worth that much either.
Now, if I or someone else were to go buy his place for $700K I sincerely doubt he will make a profit on the deal.
Your only hope with buying an expensive place is the reverse mortgage when you are retired, that way you can get SOME of your money back.

28   edvard2   2011 Nov 16, 2:03am  

We would buy in the area that we live, which we have been doing so for 10 years. Its a nice, safe, walkable area. So its not like I would be looking to buy somewhere- anywhere- just because prices were in my range. So I don't need to research the areas we would buy because I am highly aware and familiar with the area.

Also, as mentioned we have been saving for years and years. We also have significant retirement savings. I am in no way looking at the house as a means for financial gain or as a dependency in regards to retirement, income, or whatnot. As mentioned it would simply be a place to live. So if the value fell, so what. I wouldn't view it as losing money because I wouldn't be counting my financial future on its value. Like I said, to me real estate is not an investment. I fully realize that if anything, its a liability and at the very best might counter inflation. Investing is for stocks, bonds, 401k's and mutual funds. Not houses.

Are the good ole' days of Cali gone? Yeah, probably. Am I about to go out and buy a house? Nope. Its just a thought. I've been extremely aware of the housing bubble and its ludicrous financial state for the better part of a decade. If you had asked me if I was going to even stay in California a year ago I would've said hell now, I'm heading for another state. But I suppose things change. I guess its just that I am starting to realize that yes, we "could" theoretically afford to buy something here and pay for it just fine without making a significant impact to our finances. I'm about the cheapest SOB you'll ever meet. My cars all have well over 200,000 miles, my clothes are all from Goodwill, and I seldom if ever eat out. So its not like this is a frivolous decision I haven't thought out in detail.

29   peteym80   2011 Nov 16, 2:13am  

My wife and I have been following sales since 2009 in SoCal. We have the 20-305 ready and eagerly waiting for another 15-20% drop till 2013-2014. I think the safe bet is to wait out the election and see what happens to foreclosure, banking policies after that. Seems like banks don't want to get rid of their foreclosures before the election. Can't get re-elected on 13% unemployment.

30   clambo   2011 Nov 16, 2:52am  

There will always be places to rent, and always places to buy. Moving costs a few thousand bucks for movers (if you have nice junk, e.g. antiques). If not, you pay no moving fee either.
Selling houses costs considerably more and can take a long time. If this matters to you, ok, if not, fine too.
Usually the female partner wants the proverbial "cave" or "nest" to be permanent. Men often don't care at all.
I've seen it before, and it is fascinating. A younger woman can see you have financial assets that could choke a horse, and see her name as the beneficiary of the accounts, TOD etc. She's still going to feel very insecure until you buy a place and she is on the title directly or indirectly (Mrs.)
Governments, employers, women, banks all want you to be the guy pulling the cart. They all know that men are very productive sometimes and willing to be nice and generous and keep their noses down on the grindstone.
Guys who refuse to play that game will get envy, resentment, and anger from those who are going along.
In every place I have visited that I liked, there were places for sale and for rent. I mean in gorgeous places. It's just a matter of taste, especially if and when they throw out the mortgage interest deduction.
I feel nostalgic and envy my father when I visit his huge house surrounded by trees and green.
But at his age he now says he wants to get simpler and that he'd like to go rent an apartment down in Florida in a classy town to escape winter.

31   Tude   2011 Nov 16, 2:54am  

troutman says

the happiest people i know are fishermen.

That's funny. My husband is a mechanic by day, and a fisherman every moment he's not at work or sleeping. he is the happiest person I know. We live in a small house in a friendly, working class area. We live minutes from the Bay.

Life here is good, neither of us could live the same life we live anywhere else.

Mmmmmm.....I just remembered we are eating fresh Sturgeon tonight, ust caught it this past weekend. Over the weekend we had crab Saturday night, and fish tacos with fresh caught bass on Sunday. Not only did he catch a 60" sturgeon Sunday, but it had a $100 tag on it! Yum... Love the Bay Area.

32   edvard2   2011 Nov 16, 3:03am  

I know people who are computer programmers, waiters, engineers, shop keepers, mechanics, and a whole slew of other folks who are perfectly happy. Its a sort of generic statement to claim that fishermen alone are privy to exclusive happiness. There's most definitely a large quantity of working class people who are barely making the ends meet. I doubt they're happy as clams.Likewise there's tons of super-rich people who are equally unhappy because money doesn't necessarily buy happiness.

As far as us, well despite the recession we're doing the best we've ever done. We're pretty content at the moment. My contentedness comes from having experienced what its like to make working class wages for years on end and then transitioning into a career that makes good money. Would I trade that for going back to scraping by? Hell no. Been there. Done that.

33   ArtimusMaxtor   2011 Nov 16, 3:04am  

HELL YEA TROUTMAN! Did not know they had sturgeon in CA. News to me. Never had sturgeon I have seen them however. Give me a nice Mahi any day. Swell fish. One if by dawn Two if by dusk. I even had a crane that used to fish with me. Loved that little guy. I would get near a certain point on the shore and he would usually show up. Trout, Pike, Walleye, Snapper, Bass fished for them all. Not much on catch and release though. More for dinner. That and some rosemary potatos and I'm a good guy.

34   EBGuy   2011 Nov 16, 4:49am  

@Tude, Just curious. Do you have a boat or does your husband fish off a pier.
@edvard, Almost did a spit take when I saw the thread. I guess the only other factor that you might consider is if your landlords are getting up in years. Are their kids take-the-money-and-run types (ie prone to sell the house when the parents pass). Otherwise, you've got those Prop 13 golden handcuffs (that are just as hard to escape -- even as a renter!)

35   edvard2   2011 Nov 16, 5:02am  

EBGuy says

Otherwise, you've got those Prop 13 golden handcuffs (that are just as hard to escape -- even as a renter!)

Yeah... that's just the thing. Its a BIG house in a nice neighborhood and since we take care of the place the landlords are kind enough not to raise the rent. So the reality is that in buying we would be paying more for less anyway you cut it. Like I said- its a cozy situation. I can't see them selling it anytime soon.

36   Tude   2011 Nov 16, 5:12am  

EBGuy says

@Tude, Just curious. Do you have a boat or does your husband fish off a pier.

We don't have a boat (yet...not for lack of him shopping for one!) but in his group of guys they have 3 boats between them. Every weekend they are either up by the mothball fleet, up the Napa river, out in the Bay, or sometimes out the gate and up the coast.

There is an abundance of Sturgeon, Striper, Halibut, plus Salmon and crab when in season. Yum!

37   tts   2011 Nov 16, 5:46am  

edvard2 says

But from what I've heard, you have to have absolutely STELLAR everything to get that rate.

Not quuuite STELLAR but close. They'll want near 800 credit score, a job history of 2 yr or more at current employer, 20% down, 6 months worth of payments ready to go and sitting in the bank account, and nearly no other debt. At all. Also your income will have to work out be around ~1/3 the price of the home.

Surprise surprise right?

The thing is even if you're off 2 or 3 of those things you can still get a fantastic rate. My brother bought recently and his credit is TERRIBLE (500-ish) and his income at a job he'd been working for only a month was about 1/4 the price of the home but he had the 20% down payment with savings in the bank as well as no other debt and he was able to get a home with a 4.6% rate on a 30 yr fixed loan.

He bought quite a nice home in ID for $140K, 2,300sq ft + .25 acre 2011 construction 4 bed + 2.5 bath + 3 car garage, probably would've cost him over $400K in CA easy.

The payment difference between what his paying with a ~4.6% rate and a 3.5% rate is something like only $80 a month IIRC. The full PITI for him is something like $780, but he puts down extra a month to try and pay the loan off quicker.

Anyways don't get hung up on interest rates right now. Even a "bad" rate is still very good. If you're gonna buy do your damndest to get that principal (IOW buy price) down!

38   madhaus   2011 Nov 16, 6:00am  

can't... stop... laughing....

Sorry. carry on.

mmpf...ahahahahahaha! But houses are SO MUCH CHEAPER IN TENNESSEE!!!!!!

39   edvard2   2011 Nov 16, 6:51am  

Well... all very useful information. As you can tell I have like absolutely zero knowledge of mortgages and so on. The thought of buying hasn't crossed my mind until recently and besides, like your brother, the idea of buying out of state is still very much a possibility because in that case I wouldn't bother with worrying about interest rates and down payments because I's just buy something outright and call it a day.

Anyway, as mentioned this is all extremely preliminary. The fact that I'm even thinking buying about seems crazy to me because at the end of the day prices in the Bay area are still grossly out of whack and truthfully, buying a house at this time wouldn't create any sort of real advantage other than the cozy feelings it might bring ( until the plumbing breaks or the roof needs replacing) Our rent situation is fairly unique and we've been able to take advantage of it for 9 years so far so I suppose it wouldn't hurt to just keep right on renting it.

Stay tuned...

40   tts   2011 Nov 16, 7:10am  

edvard2 says

The thought of buying hasn't crossed my mind until recently and besides, like your brother, the idea of buying out of state is still very much a possibility because in that case I wouldn't bother with worrying about interest rates and down payments because I's just buy something outright and call it a day

Yea, it really isn't worth it to buy in CA in any decent area. Particularly if you live in or near the Bay area which still has bubblish prices IMO. If you move out of state you'll have to find new jobs or possibly even new careers, but if the house is paid off your cost of living will be near nothing, so that is a factor to consider too. I think taxes + insurance +HOA on my brothers' home would be around $190 a month, which would be about all he'd have to pay if the mortgage was paid off.

Personally I'd just move out of state if I was able to pull that off since I could get by just fine even if I had to work a crappy McJob for a while before I'd find a OK job. Good luck either way though.

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