patrick.net

Thanks! Please keep us updated on how things go.

I feel your pain, I sold my house because the property taxes were nearing 4k, and I only make about 60k pre tax. I'm single, but for one, nothing is really all that affordable anymore, and I even live in the midwest. Instead I rent for a couple thousand more than that with all utilities included. Yes, I decided food was more important. Still, my wages stagnated, and I'm in my 40's, my best earning years are behind me, and I did not even have a decent job until I was 30 anyways. Go live with her folks, save lots of money. Hard to believe how much more everything cost than it did back in the 70's before we had our initial bout with inflation soon after going off the gold standard, I would say, get ready for the ride of your life but I can't tell the future.

varmint says

The last one I bid 22k (5%) over asking and weren't even selected as a backup.

this has been the normal for the past few months.

some of new constructions have a 1 year occupancy requirement meaning investors can't touch them. so that eliminates half of your competitions. it's best to ask them about this before make the offer.

Why would you buy a house with your girl friend? Isn't this something to do after you are married?

everything says

Go live with her folks, save lots of money.

No way, that's awful. I like her folks and all but I've been on my own since I left for college 15 years ago. Doubt they would want us there either.

If that is what people feel like they have to do, it's really sad. I'd like to own a house to have more space, be able to modify my living quarters as I want, have a yard I can do what I want in/to, etc. I'm willing to pay more (within reason) than rental prices to do it and take on the financial risk of the mortgage loan etc. Sacrifices past that are crap and make you wonder what kind system we're running here.

I'm sorry you are going through all this. But the fact is, you are trying to purchase a home in the midst of a very dysfunctional market. Between underwater values, artificially low interest rates, manipulated supply-side economics, Wall Street deciding to become landlords, foreign investors with more money than sense, and desperate realtors... things are pretty messed up to say the least. The question is... Is this temporary? It's hard to imagine that it could last forever.

Land in sfba is in short supply and lots of people want to live there, I mean, its so effing cool and all. It is what it is, there's zero chance of that, or any other highly demanded city for that matter, of having a return to reasonable prices. You pay a premium to own things that everyone else wants that can't be produced en masse.

My advice is either rent, or leave the area. This is a big country and a bigger planet, there's plenty of other opportunity to be had, without sacrificing a quality of life just to hold a mortgage while the bank holds the deed and the local government raises their protection fees into perpetuity.

Get over it and move on with your life

Get a house in Florida for 60k or 70k. Mint. Nice weather. You'll save so much money you can take flights to see the folks as often as you want.

In the east bay, I don't see prices dropping much for houses under 500K as rates are staying so low. By spring time, if rates are this low, year over year change will give buyers perceived buying power. Houses over 750K have peaked at this point. Houses over 1M might actually correct as people realize that higher taxes are here to stay.

This market sucks. I don't think what's going is right, but little good can happen to change what's going on. If something bad happens to drop the prices lower, then we are probably even in bigger trouble in economy.

In 2005 -2006 when I posting on here, I was pretty sure that the market would right itself. At this point my understanding of the "market" has changed. I am no longer sure that the market will do what's :right".

Great!

I'm glad you stepped up.

If it were me, and I wanted only two bedrooms, I would drive neighborhoods I want, and look for houses that looked like they have been lived in a good long while, like ten years.

Second I would look for six bicycles, or tricycles in the yard of that house. I would be looking for a couple who has out grown the current house, and may want to move up. Then I would knock on the door, or send them a letter.

You can also blanket a form letter to any house that looks like it might be worth taking a run at.

It's hard in a multiple offer situation to find anything, and I would recommend you wait out the hysteria, but it doesn't mean you can't look on your own.

Move up sellers may want flexibility, and you can offer that, as well as the incentive of the 6% commission that they will save.

I hear you, varmint. I grew up here and have 31 family members within a 30 minute radius here in the South Bay. I would really like to stick around to be close to all of them, and being avidly into the outdoors, the complete lack of weather here is a giant plus. Yet, the housing market is beyond dysfunctional at this point. Honestly, my outlook for RE in the SFBA is worse than it was in 2005. At least at that point there was hope of a crash. Now, our own government has mandated that housing shall remain expensive, that debt shall reign supreme and that fiscal prudence is for fools.

My wife and I are in the 96th income percentile (nationally) and there is literally nothing for sale that doesn't involve us putting all of our disposable income into it. Thanks, FHA, for doling out $730k loans to anyone with $25k in cash and a credit score of 580. Thanks, Fed, for fucking with treasuries so that Wall Street steams full-speed into equities and real estate.

Complaining is fun! But at the end of the day, you have to see that you can't fight the system. The best chance you have is to get a RE agent license, join the CAr and see if you can scoop a deal before it hits the "fair market." I am in the process of doing that myself.

I’m not sure if it still works (the rules of the game keep changing) but you may want to try contacting some of the smaller local banks in your area, see if they have any inventory that hasn't hit the market yet.

Better yet, if you have access to the ownership records. (In my area all of that is online) you can search for a specific bank, target a few homes they have in their backlog that may meet your needs, and fax offers direct (make the offer subject to satisfactory inspection of course).

dump the buyers agent, call listing agent the day of list and have them write it up. no need to outbid!

I appreciate the comments. A few thoughts:

errc says

My advice is either rent, or leave the area. This is a big country and a bigger planet, there's plenty of other opportunity to be had, without sacrificing a quality of life just to hold a mortgage while the bank holds the deed and the local government raises their protection fees into perpetuity.

I don't see why I should leave. I grew up in this area, my parents grew up in this area, and their parents as well. They are getting older and I don't want to not be around. Also this is one of the best areas to work in my industry. Other centers are in San Diego and New England. Not exactly bastions of affordability.

Maybe renting is the best course, but rents are escalating as well, at least they are much higher than when I last looked in 2006 or so. At least in 2006 one could easily see that buying was the suckers bet. Now it looks like buying may be feasible or at least not laughably worse.

Call it Crazy says

Another thought... she is your girlfriend, is marriage in the future? Trying to split a mortgage, title and deed can be a bitch in the future if it doesn't work out. How about kids??? Whatever you decide to buy, make sure you can carry it on one paycheck in case she gets pregnant.

Marriage is in the future, but the mortgage will on my check. We would prefer to use her income to fund other expenses, among them a future child.

PockyClipsNow says

dump the buyers agent, call listing agent the day of list and have them write it up. no need to outbid!

Tried to make a first day offer on the last house. The listing agent would not look at it, preferring to set an offer date and incite a bidding war. They got the best price for the client which is their job.

EastCoastBubbleBoy says

I’m not sure if it still works (the rules of the game keep changing) but you may want to try contacting some of the smaller local banks in your area, see if they have any inventory that hasn't hit the market yet.

Better yet, if you have access to the ownership records. (In my area all of that is online) you can search for a specific bank, target a few homes they have in their backlog that may meet your needs, and fax offers direct (make the offer subject to satisfactory inspection of course).

I'm not quite understanding what you mean. I have a listing of foreclosed homes that have not come to market. Should I be contacting the bank and see if they will work with me directly?

Seems like it would be a good plan. From what I have seen the banks waste money on lipsticking foreclosures before listing them. It's more trouble to undo the mess they created (windows painted shut, etc.) than to do the fixes right.

varmint says

I don't see why I should leave. I grew up in this area, my parents grew up in this area, and their parents as well. They are getting older and I don't want to not be around. Also this is one of the best areas to work in my industry. Other centers are in San Diego and New England. Not exactly bastions of affordability.

Based on your description, it sounds like a fairly simple situation of you not being able to afford to buy in your area. It doesn't really matter if your grandparents and parent could afford to buy. You can't, even though you might be more highly educated than your grandparents/parents and have a better job. It sucks and it's unfair, but there's nothing you can do about it.

San Diego County is, for the most part, significantly cheaper than the Bay Area. Take a weekend trip down there and compare an average house in San Diego with an average house in your area. Chances are the San Diego house will be a lot nicer, especially if it's a little inland.

varmint says

Marriage is in the future, but the mortgage will on my check. We would prefer to use her income to fund other expenses, among them a future child.

California is a community property state. Once you're married, your money is her money and vice versa. So the mortgage and kid expenses are on both of you, regardless of who pays.

varmint says

We would prefer to use her income to fund other expenses, among them a future child.

Are you absolutely sure that she will return to work after having said child?

turtledove says

you are trying to purchase a home in the midst of a very dysfunctional market

The East Bay area is a dysfunctional market. For that amount of money, would buy a really nice place on a decent piece of land in 98% of the United States. I purchased my house near Atlantic City for 400k in 2008 and it's 3200 sq ft finished, over 2000 sq ft unfinished on 2 1/2 acres of land built in 1991. It's only worth about 320k with the market slide, only slightly more then the outstanding mortgage. California is a market exception, most housing markets aren't like CA.

varmint says

Should I be contacting the bank and see if they will work with me directly?

Seems like it would be a good plan.

Might be the way to go, if you could cut out the middle man (the realtor's) a 6% sales commission on a 400k house is $24,000.

If you dont have kids and are dual income, what the heck are you whining about?

ducsingle5313 says

Based on your description, it sounds like a fairly simple situation of you not being able to afford to buy in your area. It doesn't really matter if your grandparents and parent could afford to buy. You can't, even though you might be more highly educated than your grandparents/parents and have a better job. It sucks and it's unfair, but there's nothing you can do about it.

He has a good point here, just because your family has always lived in the area doesn't give you any more rights than new comers to the area. Perhaps a compromise is in order. If want to live near your parents and they want to live near you, perhaps the parents can sell there house and you all move to an area you both can afford.

You could also post your desire to buy a two or three bedroom home in your area. I was thinking day cares.

Get a form letter together explaining what you are looking for, and market that.

You can also send the letter to the banks, or to any vacant house you see, send a letter to the owner of record, but research it.

In other words, do what a good Real Estate agent should be doing to look for inventory.

You may also find a lot of new inventory coming on the market this year. So, be patient, it will happen for you.

TechGromit says

Perhaps a compromise is in order. If want to live near your parents and they want to live near you, perhaps the parents can sell there house and you all move to an area you both can afford.

Some of my older Bay Area friends are planning to do this. Their 20-30-something kids have moved away from the Bay Area because they couldn't afford to buy a house and raise a family here. When grandkids come into the picture, my friends are planning to sell, take their $500k tax free capital gains, and relocate closer to their kids.

Again, this is a crappy situation for Gen-X and Gen-Y folks who grew up in the Bay Area and who want to remain here. But there's not much you can do about market forces.

ducsingle5313 says

varmint says

Marriage is in the future, but the mortgage will on my check. We would prefer to use her income to fund other expenses, among them a future child.

California is a community property state. Once you're married, your money is her money and vice versa. So the mortgage and kid expenses are on both of you, regardless of who pays.

Then that's the way it goes.

donjumpsuit says

Don't be discouraged. I think we both missed Fall of 2011 as the best time to buy. I would encourage you to rent for now, as this market is horrible. If Real Estate moves in booms and busts, get a reasonable rental and wait for the next bust.

Already in the Bay Area, prices are as high as they were during the bubble. The rest of the country may have data suggesting otherwise, but here in the RBA it's awful.

In the past you were able to get a fixer on a limited budget, as there would be enough available to satisfy the flippers and first time buyers. Now that's all gone. The REO's and Fixers go cash direct to flippers who turn them in 3 months and place them back into a limited inventory of middle to high priced homes.

I think rents are fine. There was a lot of concern over rising rents in August, but I think it's simmered. There is a ton of multiple family living situations, so high rents are being pushed back by no demand

Thanks,

Yes I did another look at rents and they are down a bit from the summer.

Another option being considered for a fixer is to hire a middleman to buy a property cash only then transfer it for a fee. Would be more expensive than the flipper gets it for, but if the fee is less than their profit after improvements you would come out ahead. Plus the improvements would be how I want them, not what the flipper thinks will sell.

varmint says

hire a middleman to buy a property cash only then transfer it for a fee.

There are people who go the the Real Estate auctions every week to buy property.

You need to be careful of these people, they can be tricky, but you can go to the auction, and say you want to buy, what area, what criteria.

You hand out the flyers to the auction buyers like any ad.

A true flip is when the auction buyer does nothing, but a short hold of the property. You may find some of these guys Real Estate rich, and cash poor. Some may want to work with you, and some that is all they do is buy, and sell, as quickly as possible.

Also look on Craigslist, or put an ad on Criagslist for what you want. It says Wanting to Buy a two bedroom house in pick your area.

Mark D says

varmint says

The last one I bid 22k (5%) over asking and weren't even selected as a backup.

this has been the normal for the past few months.

some of new constructions have a 1 year occupancy requirement meaning investors can't touch them. so that eliminates half of your competitions. it's best to ask them about this before make the offer.

Interesting observation. I was wondering why there are currently bidding wars on resale housing while new construction properties don't have this issue. The change however is that builders are not as generous with incentives for closing costs/upgrades as they were a few years ago and prices went up due to lower interest rates. This explains it - the bidding wars are heavily influenced by investors vs people who want to live in the principal residence.

dublin hillz says

Interesting observation.

some still have these incentives if they had them when the construction started a few years ago and now they are finishing the last phases. some will not advertise these incentives on the MLS listing so you'll have to ask their agent. there's this condo development area near me that offers a combined rebate of up to $13.5K ($8.5K from the seller and $5K from the lender) if the buyer goes with their preferred lender. then RedFin offers a rebate of 15% of the buyer agent's commission as well. zero closing costs.

they will adjust their prices to reflect market prices though.

varmint says

Should I be contacting the bank and see if they will work with me directly?

Yes. If they are smaller banks (local credit unions or local banks, then you may be able to get in and negotiate a price (sans agent) before they hit the general market. Just be sure your offer is contigent on "satisfactory inspection" and "vacant home".

This is the approach I used, and altough it took a few years to come to fruition, it helped me get the inside track on a fair price.

Hi Varmint,

I think many people in large metropolitan areas in the US are experiencing the same challenges as you of buying a modest home with their middle income salaries. ...OK, rich by median household standards, but middle/poor by major metropolitan standards.

treatmentreport says

treatmentreport

I agree w/ TreatmentReport, that our understanding of the market has changed. If it was left to it's own device, we would probably not have had this housing crisis and or the absurdly low interest rates now which are causing house prices to be out of reach for middle-income people. Manipulation by the Fed, banking, and securities industries, coupled with people's greed have created a very uncertain market situation today.

I live in NYC, and I have also tried to "wait for the market correction", but have came to realized that there's no such thing as good timing, just lucky timing. Rather you need to consider where you are in life and what your needs are for you and your family. Our generation (I'm 35) cannot afford to "wait indefinitely" for what may or may not come. Therefore don't wrack your brains trying to time the market. Look at what your options are today and reconsider what's important to you now.

In other words, it sounds like location is really important to you. Would you reconsider getting a condo instead? (that's what my wife and I ended up doing despite really wanting a house initially also). Would your or her family be willing to sell their house to you as they may be deciding to move somewhere else like Florida to retire? Other poster had good recommendations about looking at other locations or finding ways to save up more cash. The other option, probably not the best is, you may just have to extend yourself and eat ramen every day. I think most who are on these boards would be very against that since most are fiscally prudent. But with the constant money printing from the Fed (QE4), there is greater risk of hyper inflation and buying property now may protect against that.

These are just some thoughts I think we should all consider.

"there is greater risk of hyper inflation and buying property now may protect against that"

I disagree. Gonzollo Lira (gonzalolira.blogspot.com) has done some good research-based writing on what happens to real estate in a hyperinflation. Current Bay Area housing prices are based on the existence of extreme mortgages. In a hyperinflation, one of the things that happens is that interest rates skyrocket, and the mortgage market falls apart. As a result, even though food and commodity prices are increasing, housing prices plunge.

400K wouldn't buy much in CA nowadays. You problem is,that price range has most competition,especially from specuvestors. :)

dofudong says

Would your or her family be willing to sell their house to you as they may be deciding to move somewhere else like Florida to retire?

The parents may be ready to retire, but you can't make a good living in the tech field in Florida. I was thinking more along the lines of having the parents sell there house and moving farther away from the bay area, but still be within commuting distance for the well paying jobs the bay area has to offer.

I consider the whole bay area to be "impacted" as far as housing is concerned, meaning too many people want to live there for the reasons you gave and others, and there is little if any new development. But anywhere there is air to breath a person can find happiness. I liked Dallas, Austin, San Antonio, Arizona, Florida, Nebraska, Montana, Oregon, and Idaho when I lived in each for a time. Each has its own unique beauty and pluses and all are way less expensive. I miss each of these places and visit as often as I can. I think prices in the bay would have come down alot more if not for the federal reserve interference. Also, this problem has to do with population. My opinion, at 200 million people, the USA was a much better place to live.

Zakrajshek says

My opinion, at 200 million people, the USA was a much better place to live.

I'll take it one further. At 3 billion, EARTH was a much better place to live.

"Rent or leave the area."

"I don't see why I should leave."

He didn't say that.

If you can't afford to buy, you should rent a place that fits your lifestyle.
If you can't afford to rent a place that fits your lifestyle then you can't afford to live there.
If you can't afford to live there, but you choose to live there anyway, then you can:

1) put yourself on a payment plan to near-guaranteed financial disaster
or
2) go live someplace else.

Those are the two choices you have. Sounds like you're really interested in the "near guaranteed financial disaster" option.

bmwman91 says

Zakrajshek says

My opinion, at 200 million people, the USA was a much better place to live.

I'll take it one further. At 3 billion, EARTH was a much better place to live.

It feels like bay area is getting overcrowded. Everywhere you turn, there's traffic. Shopping centers are extremely packed this holiday season. Even supermarkets have insane amounts of people there. Maybe economy needs to cool off a little bit. . .

You should move to where a place that is comfortable and has the majority of homes are within you budget!

2-3 homes is no good.