patrick.net

I apologize if the post is on the wrong forum.

Depending on where you work, the commute could be far longer than 30 minutes. Have you done this commute before? eg renting now in morgan hill? And if you switched jobs, how far up might you have to go to find a replacement job? Would you end up with a 45+ minute commute possibly?

Commute is about 30 minutes right now and I just recently got this job so not thinking of changing jobs for few years.
But I understand your point that MH is at the bottom of the valley and everything else is up north. But it is just 7 or so miles south of the very expensive places like Cambrian or Los Gatos. I get that its not best of location in terms of proximity.

But in terms of fundamentals balancing, it seems to be closest to fundamental values. For examples, prices are just 9% above 2000 levels, rent to price multiples are around 18, etc. This is everyone's dilemma I guess. Prices have only come close to fundamentals in non-desirable locations and most of the semi-desirable places in 450-550K range are all over valued by 30-40% (prices areat 2004-2005 levels there). Most importantly, the perception has changed in the semi-desirable areas that bottom has already been hit and people are just running crazy thinking they will miss out on a life time opportunity if they didn't buy right now. It is a very frustrating and hopeless situation trying to buy in the valley right now. Morgan Hill was I guess just below the radar of most people so we thought about it.

Thanks for your help.

My friend lives in Morgan Hill and used to work at SFO. It was a long drive and luckily, he didn't start work until 11 am and got off at 7 pm and so he missed getting crunched in traffic. If you are working a 9-5 job and have to commute to work then chances are that you will get stuck in traffic, which will increase your commute time. You can't put a price on having a close commute. I used to drive from Pleasanton to SF for work and I hated it. I missed living on the Peninsula because it was a quick 15 minute drive with no bridge.

I know you will get more house for your money, but the question you have to ask yourself is it worth the commute? Commuting will wear on you and so will traffic. Also, consider the wear and tear on your car and the cost of gas. My suggestion is to stay at a hotel for a few days during the week in Morgan Hill and commute to work and see if you can see yourself doing that commute. Another thing to consider is if you are used the hot weather. It gets pretty hot in Morgan Hill and my friend runs his AC day and night during the summer.

Also, a bigger house means higher energy bills. Personally, I will take a 1,200 square foot home over a 3,000 square foot home any day. Less house to clean. Also, with a house being located in a town like Morgan Hill, your water bill will be higher because of running the sprinklers often during the summer.

Finally, my friend took in a family member that had to take a job in SF and his commute took 2 hours each way because he took light rail. While the family member appreciated the help my friend gave him until he got back on his feet, he couldn't handle the commute and ended up moving to Pacifica.

Everything is a trade off. You get a bigger house that is more affordable, but at what expense (increased commute time, less time at home, traffic, etc.,). There are many things to consider and I wish you and your wife the best of luck with your decision.

Thanks Kat, my commute is to Cupertino and that is about 35 minutes and my timing is flexible but even in rush hour the commute time is 45 minutes. Thanks for your feedback about MH in general, do you live there?.

Here is my rough napkin estimate on your time every day:
8 hours work
1 hour lunch
8 hours sleep
.5 hours get ready for work, have breakfast, get in the car
.5 hours get dinner, eat, cleanup
.5 hours get into bed and asleep
.5 hours on average for cleanup, pay bills, deal with daily issues
--
19 hours total here
24 hours in a day

5 hours are yours per day to watch tv, relax, hobbies, etc.

The difference between commuting for 90 minutes and 30 minutes isn't 60 minutes. Its the difference between having 4.5 hours a day for yourself, and 3.5 hours for yourself. About 25% less time for you to do anything in the day. If any of my estimates above are low, then that 25% radically increases! It could easily turn into 30-40% of your day just by adding 30 to 60 minutes to my above averages.

Be very careful here. What looks like a short increase in commute times can be a massive killer on your life in general.

Hi Alraaz, you're welcome. To answer your question, no, we don't live in Morgan Hill. We live in Dublin. One of my closest friends lives in MH and has lived there for many years. His wife grew up in that town and she doesn't want to move because her mom lives there. When it gets really hot in the summer, he won't go outside. He stays indoors. He blasts the AC and doesn't care if his bill is sky high because he wants to be comfortable.

Having done a long commute (50 minutes on a good day and 1 1/2 hours on a bad day) for about 4 years, I can tell you that it is tiring and it wore on me. My husband used to commute from Burlingame to San Jose and he didn't like it. He also used to commute from Burlingame to San Ramon and then from San Ramon to Concord. Fortunately, he found a job closer to home when we moved to Dublin and he is a lot happier because his commute is now 10 minutes without traffic and with traffic, it is 25 minutes. It took him 25 minutes to get home last night. Long commutes affected our quality of life and we were unhappy. If I knew then what I know now, I would have continued to rent close to work. For us, it just wasn't a good situation.

It's good that you have flexibility with your start time, but in case you decide you want to change jobs that flexibility might not be available. I understand the feeling of wanting to buy a home because I've been there, but if I could turn back time, I'd still be renting right now. Our water bill is through the roof in the summer because of the lawn and shrubs. And then there are other unexpected things that sprung up like plumbing issues and floor issues. And this house is only 10 years old. I wish someone could have given me the same advice I am giving you. There are so many things to consider and I am sure you have considered all of this. Buying a home is such a personal decision and it has its pros and cons.

Thanks everyone for your responses. I really appreciate it. Unfortunately I work in Cupertino and I cannot even afford to rent in Cupertino, forget about buying anything :). My commute right now is 18-20 minutes. I guess we liked the idea of a small town living but the practical consequences are more commute times and lesser resale options.

I guess the general consensus is to keep renting and hope for prices to come down in maybe Santa Clara or Sunnyvale to be able to buy something, right? Since we recently moved to Bay area and were not used to the small old houses for exorbitant prices, that may also be why we liked MH. Anyway, I would appreciate if you guys can recommend any good pockets close to Cupertino in the 425K-485K range. Thanks everyone for all the great help.

I imagine you can find what you are looking for in San Jose. San Jose is pretty large geograhically so Im sure there are pockets of good areas. E-Man should be more familiar with the specifics and should be able to direct you to under-estimated areas. You do not want to live in Cupertino without school age children, otherwise, you are paying for a premium that you cannot directly benefit. Most people pay for Cupertino in lieu of private schools.

Wait a little longer and explore the Southbay to get a better feel for neigborhood and people within the neigborhoods. Just get a feel for where your collegues are living and where they are living in the past, and where they really want to live and you'll get a sense of where people really want to live and avoid. There are reasons why things are the way they are.

On top of that, remember, if your commute isn't great now, it isn't going to get better. If you're able to skirt most of the commute time by coming in at off hours, that is great. But the people who might purchase from you in the future might not have that option. While it's cheaper and not a huge commute for you, for others it is. The people who might want to buy your property later.

There are homes all over, you'll get something smaller but that is the cost of living in a big city. Trying to get around that issue is only going to lead to pain. You'll need to make some changes, not try and fit your views into the city.

“I am new to these boards and I am looking for a home in Morgan Hill. My general assumption is that prices in Bay area back to 2000 levels are fair since they would be at inflation levels.”

Not even close. You saw prices double in Bay Area from 1998 to 2000. 1997 prices adjusted for inflation would be around high 200Ks to 300K.

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

pkennedy says

Here is my rough napkin estimate on your time every day:
8 hours work
1 hour lunch
8 hours sleep
.5 hours get ready for work, have breakfast, get in the car
.5 hours get dinner, eat, cleanup
.5 hours get into bed and asleep
.5 hours on average for cleanup, pay bills, deal with daily issues
–
19 hours total here
24 hours in a day
5 hours are yours per day to watch tv, relax, hobbies, etc

Welcome to Silicon Valley where your work is your life. Few things never change. Your generious to believe we all work 8 hours a day. Many put in 55-65 hours weekly excluding breaks and commute time. Plenty do the 9AM-9PM slot everyday for weeks.

alraaz says

My commute right now is 18-20 minutes.

Your below average, be thankful. My commute is about 20-30 minutes..
When I was an auditor at big 8, our clients were all over the BA.. so up to an hour
of commuting could happen.

From my personal experience, avoid any long commute. You just can't get back that time.

I did the commute from Gilroy to Santa Clara and it was no fun.

Hi Thomas,
Thanks for posting the link to the Bay area prices. I didn't know it went so high so I appreciate the info. My assumption has always been that 1997 prices were fair and then we had two back to back bubbles (Tech followed by Mortgage) and though the tech bubble brought a lot of money to bay area thus justifying some of the price gains till 2000, the credit bubble was totally out of whack. That's why I just thought that 2000 levels would be a fair value for houses.

E-man, Yes I do work at Apple but in a non technical position so don't make a lot of money. I imagine you are in real estate so appreciate your tip about these zip codes. Our initial impression of San Jose wasn't so good but I guess that is Bay area (small pockets of good areas mixed with not so good). I also found it impossible to do comps since each house can be unique. All makes the home buying experience for a new comer to Bay area bit confusing and frustrating.

From Morgan Hill, it can take as little as 25 minutes to go 20 miles north. That'll take you no further than highway 17 up 85, or to maybe a bit past Tully on 101. And this is assuming off-peak commuting (you leave after 9:00). If you are commuting to, say, Sunnyvale, from Morgan Hill, and you want to be at work before 9:00... it won't matter how nice, new, and big your house is... you're gonna end up hating it eventually.

Actually I got hit with a commute I had never done before, Los Gatos to Redwood City for about 4 months before I moved, it was long, but also incorporated something new to the twist. It had 3 stages of commuting vs the typical one stage. I had city traffic, stop lights and stop signs for 15-20 minutes to get to 280. Then fast DISTANCE commute for 15-20 min, and then stop and go for 15-20 minutes. I could never get into any kind of zone, because by the time I did, the traffic patterns would change.

Maybe others don't notice this, but it definitely wore me down quickly! I'm betting morgan hill would have high speed and then stop and go.

Back before they widened 101 north of Morgan Hill to south San Jose, traffic on 101 was gridlocked in the morning northbound through Morgan Hill as three lanes dwindled to two. So you would think that widening 101 to four lanes past Cochrane would have solved that problem, right? Three lanes going to four... it could only get better, right?

WRONG.

For some reason, traffic still gridlocks on 101 northbound through Morgan Hill in the morning. It's the most unbelievable thing.

If your morning commute takes you from or through Morgan Hill, and you go through there between 7:00 and maybe 8:30AM, you are eventually going to go crazy no matter what your final destination is, or no matter how nice your house is. You'll keep wishing you never had to leave it.

Thanks everyone. I would be interested to know what people's opinion is about which areas will do better in the Bay in 5 years. Looks like, the areas with desirable location are all still over priced (Moutain View, Sunnyvale,etc). Areas for middle class living have already bounced big from the bottom and have bidding wars going on there (Fremont, Evergreen, Blossom Valley, etc). Only areas that are not as desirable or not as close to job centres have come down in value enough to be considered good value for money but looks like consensus is that those areas will not do well in terms of appreciation. So really, what should a buyer do in this market?
You have economy getting better in one but shadow inventory on the other hand. No idea where we will be in a year.

E-man says

For an example: The house at 503 Bliss Ct, San Jose, CA 95136 was listed and sold for $335k several months ago. I think it was listed for $350k. I called and emailed the listing agent many times, but he never bother to respond to me. What can you do? The buyer is Chinese and a flipper. Now he put it back on the market for $488,888 and it’s pending. Go figure

Home Sales History
Price History
Date Description Price % Chg Source
12/11/2009 Sold $335,500 57.9%
06/17/1993 Sold $212,500 -- Public Record

At about 335K sounds OK...
Inflation Calculator shows:
What cost $213000 in 1993 would cost $312288.56 in 2009
But certainly additional $150K+ is way out there in Bubble Land.

I would walk in during open house and pull up the sales price history
asking why there is $150K bubble "premium" built into the price.. perhaps even scare the buyer
by stating this is fraud! Would be nice if a couple of people did the same...Give the seller a migraine, he will never forget..

thomas.wong1986 says

I would walk in during open house and pull up the sales price history
asking why there is $150K bubble “premium” built into the price.. perhaps even scare the buyer
by stating this is fraud! Would be nice if a couple of people did the same…Give the seller a migraine, he will never forget..

How would that be fraud? And why would the seller get a migraine? If someone did that to me, I'd laugh, then show him where the door was....

alraaz says

Thanks everyone. I would be interested to know what people’s opinion is about which areas will do better in the Bay in 5 years. Looks like, the areas with desirable location are all still over priced (Moutain View, Sunnyvale,etc). Areas for middle class living have already bounced big from the bottom and have bidding wars going on there (Fremont, Evergreen, Blossom Valley, etc)

Just like you many new buyers were from somewhere else and overpaid, using ARM loans in the process. Some 60% of sales were with ARM loans from 2000 to 2007, while the majority of pre-bubble buyers confortably used 30 year fixed. Many didnt even know they overpaid double-triple prebubble prices. Was it the sunshine tax or being next to silicon valley, i cant tell, but both factors have been for here for decades. If anything we have waaaay too many people from the east coast in the Bay Area.

As for Bidding War, dont even believe it. Thats the next shoe to drop. Take away commissions structure, you pretty much will see MO disappear. Fruad is pretty thick in the RE industry, makes Enron look like a joke...

tatupu70 says

How would that be fraud? And why would the seller get a migraine? If someone did that to me, I’d laugh, then show him where the door was….

It happens...

Is KB Home (NYSE: KBH) Illegally Inflating Florida Home Prices?
Posted: Jul 21 2009, 07:48 PM by Steve Berman | with no comments
Filed under: KB Home, Florida
Did Florida residents who purchased homes from housing giant KB Home (NYSE: KBH) fall victim to the same scheme home purchasers claim the housing giant used in California, Arizona and Nevada?

Earlier this year, we filed cases in Arizona and California against KB Home claiming the homebuilder conspired with mortgage giant Countrywide and its appraisal subsidiary, LandSafe, to artificially inflate home appraisal values in an effort to push up home values. According to the complaints, homeowners unknowingly overpaid for their homes and purchased overly expensive mortgages.

Now we are actively investigating similar claims of wrongdoing in Florida, another state crippled by a crumbling housing-market collapse.

Since we began our actions in California, we’ve heard from purchasers that KB may be using similar practices in Florida, where the homebuilder has 76 communities.

KB Home operates in California, Nevada, Arizona, Colorado, Texas, Louisiana, Florida, North Carolina and North Carolina.

We’re interested in hearing from Florida KB homeowners. If you would like to share your experience with us, please e-mail kbhomes@hbsslaw.com or visit our Web site at www.hbsslaw.com/kbhomeflorida.

As CBS 11 News first reported on Wednesday, the FBI and federal prosecutors charged 11 people in Dallas with taking part in a mortgage fraud scheme.

"I really hope they throw the book at him," said Breitwieser. "He deserves it. He really does."

tatupu70 says

How would that be fraud? And why would the seller get a migraine? If someone did that to me, I’d laugh, then show him where the door was….

So, you would buy a home at market and cook up what ever story to justify additional $150K in price increase over a few months. The end justify the means! Are you that blind with greed that you have no ethics at all ?

thomas.wong1986 says

So, you would buy a home at market and cook up what ever story to justify additional $150K in price increase over a few months. The end justify the means! Are you that blind with greed that you have no ethics at all

No, I would price the home at market value regardless of what it sold for 10 years ago....

If you're a buyer who had to sell, you would sell at a discount, therefore if you were a seller that didn't have to sell, you would likely put a premium on it. Sales commissions would be 6% or so. Borrowing costs and lost opportunity on the property.

150K sounds insane, until you factor in everything.

Of course, buying a new car, or a used car sounds insane to me, and I buy private party every time for a discounted rate. But to each his own. If the house is over priced, move on.

thomas.wong1986 says

So, you would buy a home at market and cook up what ever story to justify additional $150K in price increase over a few months. The end justify the means! Are you that blind with greed that you have no ethics at all ?

And I still don't understand the moral quandry you have. Nobody is forced to buy an overpriced house. If someone has overpriced their house for sale, then all a buyer has to do is move on and find a different house that is correctly priced. What is the problem??

And if you bid on a house and the realtor says there are multiple offers, bid up to whatever you think the house is worth and no more. If you lose it, fine, keep looking and bid on the next one...

Of course the seller is going to try to get as much as he can for his house. That's pretty much how a free market works.

Hi E-man,
How do I contact you? Does the forum has a private message option you can use to send me your contact information? My situation is that it is just myself and my wife right now, I work in Cupertino and my wife has started to look for work after graduating in January. We are getting used to the Bay area concept of house so we are ok with 1200 sqft house. I understand your terms and would like to talk more so please let me know how to get in touch.

@E-man
My email is alraaz78@hotmail.com.

There's no such thing as "20% below market".

OP, the direction you're looking for is down. Much further.

E-man says

If I can’t find you a property at least 10%, preferably 15% to 20%, below market value,

Do you tell the seller that he is selling at 20% below market value?
or Do you tell him that he is selling at 20% ABOVE market value and tell us that it is 20% below?

Does anyone know anything about a neighborhood in San Ramon called Windmere? My fiance would like us to look at homes in the area because she says its a pretty up and coming place for immigrants (she is Chinese - working on becoming a naturalized citizen). I want to make her happy, but I'm very reluctant to look at higher end homes that have had price runups before the crash.

Anyone have anything to say about Windmere?

Sorry to hijack this thread: I'm new to the boards and can't make a post until after I make 3 comments...

We've been renting a home in Orinda for the past 5 years, and now the landlord (his heirs, actually) want to sell. It's on a "less desirable" street as far as orinda goes - a 1372 sq ft 3/2 rancher built in 1961 in pretty much original condition (old aluminum single pane windows, kitchen and baths need updating, TINY bathrooms, good sized bedrooms and layout for this sized home).

The kicker is that it's on .83 acres - a natural slope ( less than 20 degrees) so Orinda's slides aren't an issue. The land is where the value is, not the house.

The owners' agent is a tool. I was here when he did a 10 minute walk through and promptly stated "$700k". No inspection, no researching/comps nothing. This was back in the Spring. We did a lot of homework, and offered 500 last week (it's not officially on the market yet), along with reams of supporting evidence on the local market. They countered with 675, and said that they wouldn't go below low-mid 6s - that they'd rather kick us out, slap a coat of paint on the place and test the market.

Their agent has no credible backup for $675 - we asked for his comps and analysis, and there was none. What a ridiculous way to do a transaction...but that's another rant. We think it would make sense in the 5s, but beyond that, it doesn't wash (and we're factoring in planning on spending anywhere from $20-50k on needed improvements).

FWIW - the rent we're paying is $2350 (never had an increase - sigh...wish we could just continue that...), and based on comparable rentals that we've checked out lately, estimate it could rent for $3k today. At $3k rent, that puts a $600k pricetag right at the 6% annual rent/price ratio.

Any thoughts or suggestions on how to approach this? Thanks!