patrick.net

If your referering to the many Web based Mortgage calculators... you should stay way from them.
They are mear hooks by advertizing lenders. Your better off getting a legit excel spreadsheet from the microsoft site or simply buy quicken program.

I would be careful of spreading your tax obligations, since they are payable when due, your tax relief will be some 12 months away. I suggest keeping 1-2 years of Prop Tax liability reserves stashed away in seperate savings for such purpose.

Hyperinflation! yipes, maybe! certainly there were more an handfull of people saying that there was a housing bubble, yet many didnt believe (Gov, media, general public) that there was even a remote possible that prices could even fall 5-10%. It certainly fell more than that.

I’m thinking the pricing may come down even more because of the foreclosures still yet to come on the market.

And when the tax credit expires (if it expires). Prices will also come down if/when mortgage rates go up.

I think buying at the $250K level isn't a risky thing, really. At that pricepoint and with these interest rates the mortgage tax deduction is worth about $5000 over the standard deduction, or ~$100/mo.

I don't think anybody knows if we'll see inflation or deflation, both or neither. Getting a purchase-money loan you can walk away from is certainly a reasonable way to hedge, but Maryland is not a non-recourse state (VA is).

As long as prices are stable you're better off keeping your powder dry. Moving in now is knife-catching.

You can make your own spreadsheet, it's not that hard. Here's mine:

Purchase Price $250000.00
Down Payment 7250.00 (3.50%)

Loan Principal 241250.00

Points 7237.50 (3.00%)
Points Net Tax 4689.90

IO 1005.21 5.00%
PMI 100.52 0.50%
Prop Tax 257.08 1.23%
Tax Credit -312.51 35.20%

Subtotal $1050.30

HO Ins 80.00
HOA/Utils 150.00
Maintenance 100.00
Opportunity 19.90 2.00%

Total Other 349.90

Nominal Cost $1400.20

Actual Expense $1770.08

My "nominal cost" is everything except principal paydown.
The "actual expense" is everything.

If you'd be happy renting your $250,000 purchase for $1400, then buying when you're 30 is a no-brainer. You'll have the house paid off in time for retirement.

I don't really see a deflationary collapse like Japan's coming. That's a singularity event that noone can see beyond.

Wow thank you for the fast responses! I put a bid on a house this week for $229k. It's 4bd room, 4 levels, with two car garage (built in 1986). It's a short sale and I'm the only one to offer in 50 days (I offered 10k below asking). I paid off all my debt last year (studen loans, credit cards, motorcycle car, everything) just so I could buy a house when I was 30. I also saved up enough for one years worth of expenses just in case the worst happend. You wouldn't believe how frugal I have been living (down to washing clothes in cold water to save on electricity LOL). I'm hoping the impending HAFA activation on April 5th and the expiring first time home buyer credit will motivate the bank to bite on my offer. The area in PG county is so upside down it's heart breaking. I saw one house that was sold for $410,000 in 2007, a house just like it sold for $256,000 last month. I'm just wondering if it could get so bad my $229,000 house will be selling for $90,000 5 years from now.

Concerning inflation vs deflation. There are experts out there a lot smarter than me who disagree. Both sides would kick my butt in a debate and I'm doing my best just to understand the details. From a high level I understand an increase in money supplies = inflation and a reduction in money = deflation. I know we have borrowed and printed a lot of money. I also realize a lot of debt evaporated during the mortgage crisis (hence the money supply flowing in the market contracted due to savings by the consumer and tigher lending). I just can't get my brain around the details enought to lean toward one way or the other. I am convinced that India and China will soon consume more vs today and will lead to another long term rally in commodites (especially oil, precious metals, alternative energy, and industrial materials).

I'm also on the fence as to whether we will see inflation, deflation, pricing increasing or decreasing over the next 5 years.

I do know one thing, whatever way things start tipping, it's going to hurt a whole bunch of people. Those people will fight to keep things from sliding out of control. It doesn't matter WHICH way, someone will slow the process down. Either the government, or someone who figures out how to make money from the situation.

I also think there is a lot of pent up demand. People hunkering down to weather the recession are eventually going to get tired of waiting for the dooms day they've been preparing for and will spend, ill regardless of what people are saying.

People will want satisfaction at some point in the next 3-5 years. They simply won't sit around waiting 10 years to buy another house, or to get back into the housing market.

Factor in 25% off todays prices (say 200K in your case) is probably about the lowest things will go. And probably not for long, if they do get that bad, the pent up demand will be unleashed pushing housing up again.

newhomebuyer7 says

I just can’t get my brain around the details enought to lean toward one way or the other. I am convinced that India and China will soon consume more vs today and will lead to another long term rally in commodites (especially oil, precious metals, alternative energy, and industrial materials).

And if they are building their own alternative energy like solar or nuclear plants, buying precious metals and oil from non-US sources, like Australia, Africa, South-East Asia then what happens to the US producers of such products who see a drop in demand. You can certainly see drop in US producer prices.

Here's what I am thinking.

Where in PG county? Adelphi, Largo, Laurel, College park or other place close to DC?
PG country sucks in general to compare with other counties in south. It's pretty much upside down area. Maybe that's what made people able to afford big homes arround there though, I want you to think about couple of things about the location. First, security. Second, school district. And the last, how long will you stay there?

If those turn out to be positive, then think about the reason why the home hadn't gotten any offer in 50 days. Many homes sitting there for a while tend to have serious problems like foundation issue or bad crime history in or arround there. Check yourself and see if you can take it.

Then, think about money issue.
I don't want you to be over excited or over desperated on this matter. :)

Keep in mind that it's very tough to get loans in these days. So you'd better get ready for 20~25% downpayment or find a good financial guy for FHA loan. I am usually for traditional loan with chunky downpayment, so let's get on with that.

If your downpayment is like $50K, and your mortgage is $200K, then you are looking for monthly payment of $1400 including mortage, home owner's insurance and property tax. Then, you need to pay other expenses like HOA (if there's any) and utilities, and that's the funny part. Most old homes in DC area is not properly insulated, thus heating and cooling cost can get ridiculously high. There always is something to fix in old homes. Trash, sewer, water, gas etc is not exactly cheap either. So, I am highly recommend you check out utility bills in comparable homes in the area. I assume that you're going to need about $2000/mo minimum for the home alone even after the tax return.

Little too conservative? Maybe.
But as frugal guy you are, you knew assuming cost high and planning accordingly is way better choice than the other way when it is you to pay.

seaside says

Keep in mind that it’s very tough to get loans in these days. So you’d better get ready for 20~25% downpayment or find a good financial guy for FHA loan. I am usually for traditional loan with chunky downpayment, so let’s get on with that.

I would call that being normal, not tough. Certainly prices need to go down further so the typical buyer will be able to make that 20% down count.

I am convinced that India and China will soon consume more vs today and will lead to another long term rally in commodites (especially oil, precious metals, alternative energy, and industrial materials).

AFAICT, here's the deal. . .

You don't need to worry about India, OPEC, the price of gold nor the tea in china. You need to worry what's happening to total disposable income wagebase in your market -- how much money people have to spend on housing, how much loans cost, etc.

Gasoline going to $20/ gallon would NOT be good for home prices, capiche?

Also, whether people are moving into your area to get jobs or leaving your area to get jobs is important.

Without WAGE inflation, home prices will go down not up, though government jobs generally are first in line for inflation protection so that's an argument for buying in the DC area.

Where in PG county?
My response: Largo

First, security.
My response: I looked up the crime stats via 3 crime mapping tools. Much of Largo is really bad but I mapped the crime for this particular neighborhood and the crime was extremely low (mostly due to the neighborhood being situated in a unique way).

Second, school district.
My response: PG county is not known for it's spectacular school system. In fact it sucks.

And the last, how long will you stay there?
My response: 3-5 years max. More than likely 3 years.

I'm also single, with no kids, expect to lose money on the house (not an investment but a lifestyle upgrade). I currently live in Laurel, MD right now and the crime is currently worse here vs the neighborhood in Largo.

I would say the alarming thing here is, the plan to move in 3-5 years.

Beyond all other considerations, this is the one that says don't do it. If you're not planning on staying there, don't get yourself mixed up in there. There are too many iffy reasons right now not to buy. The only good reason to buy is holding long term, you get a potential couple years of paying down your mortgage, while building equity.

Buying will make it harder to switch jobs.
Buying will make it more difficult to handle job loss / hardship.
Buying will tie you down to that area
Buying will possibly lead to some serious repairs (if they're long term no big deal) but if you're paying 20K to replace a roof, only to sell it 3 years later and it hasn't really added any value to the house, you're losing a lot right there.

OK, then.

As a virginian, the last time I went to six flag in largo, the area is little too boring for me. I think the college park and wheaton area looks better though, I am not the one who choose a home for you. :)

If you're looking for something like this

http://www.redfin.com/MD/Largo/9600-Teakwood-Dr-20774/home/10816931

or this

http://www.redfin.com/MD/Upper-Marlboro/10902-Mount-Lubentia-Way-20774/home/10835456

Don't know much about the neighborhood up there. But sure, it's nice and big. Good enough for a couple and two three kids. Home price up there already went down 40% from the peak, so it's pretty much about as low as it gets. I don't think it's gonna be 90K in next 3 years. However, price could go down to upper 100Ks or so if things are not improving at all for few more years.

To be real honest, I usually don't recommend anyone to buy a home for only 3~5 years. And you being a single working guy and the only person in the home, upkeeping that sized home in good shape all by yourself is not gonna be easy. And if, only if, things get worse... then you may lose the equity almost equal to your years worth of saving, thus ended up with debt at the time you want to move out in 3~5 years. So, that's something to worry about. If you feel like you're trying to swallow bigger fish than you can handle, then you're gonna have better off by staying in rent for couple more years, and saving little more for the future. So, you do the math. You will get my congratulation if you win on your bid. If not, don't worry too much about it and wait a little more.

Man. I am taking my day off right now to buy a home like that if it is in fairfax. :)

Seaside are you psychic? I just bid on the Teakwood property for 229k and the seller accepted. I just have to get the bank to bite . If the bank fights me I'm walking away. You guys have given me a lot to think about if the bank counters.

The property on Teakwood is large (4 bd room, 2 car garage, family room, living room, and basement). I also love the scenery of the forest right behind the house (deer, wild life, hiking trails, etc). I can keep up the property with no problem. The only thing that would definitely force me to move is having kids and moving before they hit pre-school. Largo is not known for their schools (rather it is known for the lack of good schools). But I'm mainly moving to have a garage, more room, a place to have gatherings. I do admit this is a lot of house and thank you for giving me more to think about. Any other thoughts I'd love to hear.

I like using http://www.idealhomebrokers.com/calculator/ (you can download it to Excel)

Where i'm at we are near rental parity. After tax savings and what goes to principal and adding in for repairs/maintinance i'm paying about $1800/mo, to rent the same place it would be about the same.

Prices could come down more though....

I would also factor in the cost of selling sometime in the future. Assume 10% to allow for Realtards and other closing costs.

I would say the alarming thing here is, the plan to move in 3-5 years.
I agree. Transaction and maintenance costs can wipe out any savings in that short of period. I'd also add, given the reasons why you'd want to move (schools, etc.), that the market has priced in a mobility premium for renters. Clearly, it's riskier to own -- hence the owner's discount. That said, you could hang onto the property and rent it out once you leave (but again, a risk that the market seems to be pricing in...)

Me? Psychic? I am the kind of guy who can't even read the wife's mind. LOL.

I assume you already knew though, just to make sure... did you have inspection and loan contingencies on the offer, right? Also there're some costs related to home purchase such as closing cost, home fixing up, cleaning and painting, lawn care, furnitures, appliances etc. This can add up pretty quick depending on the condition of the home.

Keep up posted. Ok? :)

Hello Everyone. I know it's been a while. I was in a bad motorocycle accident on March 21st and just now getting back on my feet. Well for those who may still be interested the bank accepted my offer but the house failed inspection. There was HVAC problems, fungal growth, evidence of termites, electrical problems, leaks, and the house needs a new roof. I'm pretty sure I'm going to walk away especially after finding out the bank wants me to pay for a new roof (probably be around 10,000). Anyways I'm hunting for a new house. If anyone is in the area and has any recommendations on best places to buy let me know.

Thanks for the feedback. The bank has stated they will not negotiate any lower and wants me to pay for the roof out of pocket.

Roof could be a pain. You might be able to find a better price on it.

The other issues could be big. Termites, and fungal growth. Leaks could also be a problem, as damage could already be done. They might not credit you for the roof, but the other items should be credited.

One of the best, most honest assessments I have read. Thanks.
We are coming out of the puppy mill real estate generation. We now have to see what we can recover, but most certainly the answer is not more production.

http://qedrealestate.wordpress.com/2010/06/16/puppy-mill-real-estate-generation/

What does 'need a new roof' mean? Is the current roof old and need replacement, or is it leaking and can't be patched/repaired?

I can understand the bank refusing on the grounds that it is simply old/at the end of it's life span, but if it is leaking, that's another matter...

The other issues can't be addressed unless more info is offered. ie:

Termites: depends on the level of infestation, the extent of the problem can vary greatly

Fungal: Yuk; depending again on initial cause and the extent of the current problem.

etc.

I can't believe how helpful you all are. Thank you again for all of the responses. The inspector said the roof needs to be replaced (brand new). IT cannot be fixed with patch work. The termite damage is minimal. There is fungal growth on the drywood in the kitchen and in the utility room but that's all the inspector saw . WE sent into the crawl space and didn't see anyt damage.

newhomebuyer7 says

The inspector said the roof needs to be replaced (brand new). IT cannot be fixed with patch work. The termite damage is minimal. There is fungal growth on the drywood in the kitchen and in the utility room but that’s all the inspector saw . WE sent into the crawl space and didn’t see anyt damage.

Some thoughts:

You will hardly EVER see a home inspection report state there is no termite damage, unless the home is built on ground with close to permafrost conditions. Minor treatment can be a few hundred bucks or so.

Fungal growth - so what is it, mildew under the sink? BFD, get some bleach. But if it's moldy roof rafters, drywall, etc... well... that's a problem.

Roof: if there is no current leak, typically the owner, whether a bank or private owner, will not replace it and there is no obligation to do so. If there is a leak and it's a foreclosure, ask your attorney what the requirements are, if any. Ten grand sound kind of high, unless the house is really huge, or it's a super-pricy shingle. I assume it's a tear off/replace. But even that, again, not a BFD... it's all done in a day... Shop it around if you really want the house...

Other electrical/HVAC: not enough info.

First, sorry to hear that you got accident, and wish you gets better soon.

If I were a contractor or contractors with me, I would look little further to determine if that's fixable within reasonable budget. Assuming that the OP is a regular 9-5 guy, I would say, walk away from the home. Simply little too much hassle for the home with known issues.

The home was priced at 235K IIRC. The home is at relatively better part of the county. But let me put it this way. The county in general is not the kind of place you want to retire in peace or raise your kids in.

Things ain't cheap here in VA-MD-DC area, and I wouldn't be suprised if the roofing cost is close to or over 10K. In addition to that, he may need to fix other stuffs like electricity, plumbing, mold issues and probabaly new paint, well... I don't see the value here unless he can find absolutely good deals.

I walked away from the teakwood property. I took a look at other short sales and foreclosures in the area and the properties are trashed. I'm looking to buy a non-short sale at this point. Here are my options now .

1) Buy a $250-300k house in Prince George's county (houses sold for $400-500k in 2007).
2) Buy a townhome for 280k-300k in Anne Arundel or Montgomery county

I know PG county schools suck but I don't have kids. There is no question PH has the nicest houses at the best prices. PG county also has really high taxes. In some cases the tax can be 30-40% of the actual mortgage.

Anne Arundel and Montgomery have the best schools in the nation.

I'm really conflicted and this is such a big decision. I'm almost 31 and don't want to live in an apartment much longer. I also think this area may not suffer as badly as other areas of the nation in terms of continued house devaluation because of the high incomes and low unemployment in Washington. I also have to wonder if inflation will ever kick in. The price of gold continues to climb despite CPI remaining steady. I suppose if inflation kicks in (like Peter Schiff is saying) buying a house with a locked in interest rate will be great.

If deflation kicks in everyone who owns a home is screwed but if you have cash on hand (saved) you should be able to manage as everything else should be cheaper.

Just in case anyone is wondering below are the MLS numbers of the properties I'm now considering

PG7299559
AA7305281
MC7305834
PG7313037
PG7366919
PG7263842

> Buy a $250-300k house in Prince George’s county (houses sold for $400-500k in 2007).

People should learn not to compare current prices with the peak prices. Cisco stock was close to $100 in 2000, and lots of people thought they were getting a discount when it went to $70. 2 years later, Cisco was at $10. Just because prices are now 30% lower than the peak, doesn't mean they are cheap.

"And the last, how long will you stay there?
My response: 3-5 years max. More than likely 3 years."

I love real estate and have never lost money on it here in CA, but that being said, I am not familiar with PG County real estate. I was all for a 30 year old, debt free guy like you getting a reasonable mortgage with a fixed rate that didn't exceed 30% or so of your income, but when you said you'd only be there 3 years, that changed my mind. I would not buy a home for a short term like that. Not enough time to ride the ups and downs of markets that will inevitably come and go. If you're only going to be there 3 years, I would say this is a house and not a home. A home is where you stay for a while, put down roots and become part of the community. I would not buy a house unless you were going to stay at least 7 years....the national average. I would suggest even longer. I have never kept a house or piece of property less than 10 years and they have rewarded me handsomely with tax breaks and appreciation over the years.

I realize comparing house prices three years ago doesn't necessarily mean we are near the bottom but the fact that Maryland has the highes per capita income in the U.S. and the low unemployment would lead me to believe real estate has a lower chance of plummeting much further in this area. A few more thing to consider.

1) I know that no one has a crystal ball but can anyone chime in on my point about low unemployment and the high incomes in Maryland leading it to be a bit more stable than the rest of the nation.

2) I'm considering staying here long term but even if I don't I want to minimize the hit I will have to take if I do need to move (short term)