patrick.net

everything says

my guess is that more underwater owners make that decision to walk away.

More taxpayer $$ will flow to the banks to cushion their losses.

We are planning on putting in an offer for a house, but since it is much lower than the listing price I don't feel confident saying we're going to buy.
We have a mortgage broker and a real estate lawyer and my obsessive researching skills... and if the sellers decline I will obsessively research other properties. Since this is the first house that we have seen that we were willing to spend *any* money on, finding another could take some time. We are really really lucky that we mostly fit comfortably in our apartment and our landlady lets me plant things next to the driveway... I am nesting here quite well.
What made me start looking harder was that 6 months ago houses that didn't suck were starting to be sold for amounts that didn't make me weep. More recently, a local friend had to get a new apartment and discovered rents had gone up a lot while we were busy having babies. We haven't had a rent hike in 2 or 3 years, so I expect it's only a matter of the next water bill before the landlady knocks on the door and shrugs apologetically and there goes half of the next pay raise.
At the price we would like to pay, the mortgage/taxes/etc would increase our monthly outlay by about 20%. However, we would get three times the space and (unless inspection says otherwise) it's a legal two family-- so if we had to rent out rooms or even a whole floor that would bring our expenses to well under neighborhood rents.
Caveat: we live in New York City, which has a thriving rent culture. Our third year here, our landlady thought it was terrific that we were subletting our second bedroom and only asked that we give her a little extra for the hot water our friend would consume. Meanwhile she and her adult son and daughter and her daughter's twin girls were living upstairs in her three bedroom apartment ...
...which is to say: Any house we buy has to have flexibility built into it. There needs to be room for my sister and a big dog and whatever life throws at us, or the debt is not worth it to me...
But maybe I'm being greedy, and I should stay renting month to month. Right now, my family is comfortable either way and it isn't clear if there is a wrong answer-- or a right one.
I thought being a grown up would make things more clear. grumble grumble.

Thanks for the stories so far...

these stories are helpful as we are considering a purchase in Austin, TX.

Anyone else? Summer is about over so the cyclical component is on your side if not the longer trend.

If it won't kill you, I'd rent and let Austin cool-off for at least a year or two -- literally and figuratively. Austin may be one of the better-looking glue horses in the US housing market, but don't believe the hype:

http://www.carvajalgroup.com/austin-real-estate-market/2011/03/06/california-new-york-make-a-bee-line-to-austin-tx/

Or do, and make some Austinite and his realtor wealthy. Every third person you meet here these days is, in some way, involved in real estate, and they refer to Californians as fish in the proverbial barrel.

The house below closed this month for nearly 100K more than it listed for initially in 2009 -- and that was in the midst of the tax credit free-for-all. Somebody got lucky...

http://www.zillow.com/homes/1001-Arcadia-Avenue-austin-tx_rb/

If you are referring "they" to government then they are going to come up with more money to give away struggling irresponsible people. :)

I'd say this was prescient of you all the way back in July - but then again, I guess this strategy is pretty old hat by now.

I recently got married I am looking to buy a house in the $1 million range in the Los Angeles area. In this price range in the areas I am looking at, houses seem to be going fairly quick, and homes seems to be getting multiple offers. I have also looked (with no intention or ability of buying) homes going up to $1.5 million, and these houses seem to be moving. Is it just that people with money and able to afford in this price range are still buying homes? Have homes in this price range not taken the same hit % wise as homes in lower price ranges?

beautybar1 says

Have homes in this price range not taken the same hit % wise as homes in lower price ranges?

Supply/demand. People making the big money in LA generally have to live convenient to their work. They could hire a car service and commute but that's still lost time, and when you're making $100,000 a week, time is certainly money.

Prices down in Laguna Beach are far from sticky though. Eg:

http://www.redfin.com/CA/Laguna-Beach/31551-Toto-Loma-Ln-92651/home/3264197

Aug 16, 2011 Price Changed $999,000 -- SoCalMLS #L35759
Jul 08, 2011 Price Changed $1,199,999 -- SoCalMLS #L35759
May 04, 2011 Price Changed $1,250,000 -- SoCalMLS #L35759
Apr 15, 2011 Listed (Active) $1,300,000

The area I am looking at has a good school district so it makes it very appealing to families. I guess what I am trying to figure out is how much the location is really in a bubble. I do think it is overpriced, though people are still buying. With all of the analysis about median income not supporting home prices, prices are still up there. Perhaps like you said the demand is high and supply is finite so prices will continue to stay high regardless of what is taking place in the economy?

Bought and happy. I personally believe massive inflation is coming and so it now makes sense to fix as many expenses as I can.

Debt slave I am not, I can buy this house now in cash if I wanted to. But since loan rates are now lower than the rate of inflation, why not?

Also... moved away from California to the quiet and inexpensive midwest. If I still lived in CA, I would not buy. I would leave.

Forgot to say, that in this area in the midwest the rents are actually higher than the mortgages. Like a normal economy.

Mutex says

I personally believe massive inflation

wage inflation or price inflation?

Why should wage inflation appear when underemployment is 16%?

Now, farm-centric areas might in fact see further wage inflation as commodity profits bleed out into the wider economy.

Buy foreclosures. Some are for sale at 10% of the debt they foreclosed on. 50% is more common. YMMV

"wage inflation or price inflation?"

Price inflation ofcourse. In other words an inflationary depression.

http://www.ehow.com/about_6722921_inflationary-depression_.html

Is anyone planning on buying now that the "summer peak" has passed?

i was planning to but my down payment has been erased by the stock market.

Well seller accepted my offer after 3 weeks of going back and forth yesterday. Seller could have sold it at higher price but was in denial with 1 price reduction in 5 months and lost out on the summer season. Seller ended up selling to me for $97k less than their initial asking price.

Why did I buy a house? Sold the house 3 months ago and sick of living in corporate relo apt, Residence Inn and now short term furnished house. Family wanted to settle down as all of our stuff is in storage. Besides relo paid to sell my house and is paying all closing cost on new house including up to 2 pts. Also got decent six figure package consisting of cost of living monthly payouts and zero % interest loan. Otherwise we wouldn't have bought.

I don't know if I'd call it "Planning to" but I'm sitting on 80K in my bank waiting until the right time. I'm very torn. I want to buy, want to settle down, want to be able to technology up my house and get a home theater system going and put up actual decorations. But I like my 2/1 apartment that is cheap and near the beach and I'd hate to buy and have prices drop another 20% given that I'm looking at 250K houses.

My hope is that post-summer in Dec/Jan the people who really have to sell drop a good bit more. In the little neighborhood I'd really like to buy in there's currently 3 houses for sale and 1 short sale, but no war has started to see who gets to the bottom first.

My company also just did a round of layoffs, I'm not worried and think I have a super secure job, but it feels way better having 3 years worth of living expenses in the bank versus having no money in the bank and 2K due every month.

robertoaribas, just wondering, how do you handle the maintenance, upkeep, paperwork of what I assume are at least 4 rental properties?

Decades ago my folks had 3 small rental homes in SE Michigan that we let to automobile company relos. It was a huge amount of time to keep it all going. After my brother and I left the state for college, and my mother died, my father just couldn't manage it. He had to sell. There was no way to keep his job and handle all this stuff, much of which didn't seem economically or reasonably delegable to others.

badmigraine says

robertoaribas, just wondering, how do you handle the maintenance, upkeep, paperwork of what I assume are at least 4 rental properties?

Decades ago my folks had 3 small rental homes in SE Michigan that we let to automobile company relos. It was a huge amount of time to keep it all going. After my brother and I left the state for college, and my mother died, my father just couldn't manage it. He had to sell. There was no way to keep his job and handle all this stuff, much of which didn't seem economically or reasonably delegable to others.

Perhaps he hasn't owned them long enough to know what the maintenance issues are going to be. I too grew up with parents who owned rentals. Two to be exact. Both were smaller houses that had been more recently renovated. The experience made me decide that I will never buy rental property. Its a royal pain in the ass. Every single time renters moved out, even if they were squeaky-clean the whole interior needed to be painted. Think about it- people scuff up the walls, touch paneling, and so on. What looks like a perfect house with people living in it soon turns into a grubby looking house as soon as they move out. Carpets and flooring wear out. Plumbing and electrical needs repairs as does everything else.

I'm going to probably buy in 1st Quarter 2012. I don't know if that's going to be closer to the bottom but I'm going to anyway.

I am set to close in early November. We do not plan on selling it in our lifetime. We can afford it on one income. We've saved 20%. We like the schools. We like the neighborhood. We like the house.

I'm happy dammit.

Don't worry ... be happy!

jessica says

I am set to close in early November. We do not plan on selling it in our lifetime. We can afford it on one income. We've saved 20%. We like the schools. We like the neighborhood. We like the house.

I'm happy dammit.

Pre purchase post purchase rationalization?

dodgerfanjohn says

jessica says

I am set to close in early November. We do not plan on selling it in our lifetime. We can afford it on one income. We've saved 20%. We like the schools. We like the neighborhood. We like the house.

I'm happy dammit.

Pre purchase post purchase rationalization?

Pretty much!! I know enough to be totally scared.

I want to buy but I'm fearful. However, rents in MA make buying very desirable.

I want to buy to have a "home" for my son to grow up in. We have been renting his entire life (he's 8) and I have owned homes in the past before he was born.

However, the home would be purchased on my income alone (hubs is sporadic) and the fear of losing my job b/c of the economy is justified.

I want to move in a town with a commuter train that could bring me into Boston for other job opportunities - but then I'm looking at higher home prices, etc.

Plus we have pets, so renting would be very difficult, if not impossible for us to do and I love them like family so I couldn't just "get rid" of them because I want to move. Right now we rent from MIL - so she allows the pets.

My head spins daily on this dilemma.

I've finally recovered financially from a divorce (done with alimony, and in 8 months I'll be done with child support). I've owned multiple homes in the past (and I mean owned, no mortgage), and owned rental properties (duplexes - also no mortgage). That said, you never really "own a home". At least not in the U.S. My last home that I "owned" still had an $8,500 a year property tax bill, water bill, maintenance cost etc. I'm amazed at the folks on here who underestimate what maintenance costs on a house really comes out to - they've never had to replace a septic system, or a roof, of have tree's removed, or replace a 700 foot driveway, or pay to have a house painted, upgrade/replace windows, deal with termites... you get the idea).
That said, I'll buy a single family again. I like the privacy of at least 5 acres around me and I like being on water. Donald Trump says it's a great time to buy a single family house. He's right, but he also adds the important caveat, buy, but only buy a bank foreclosure, after you've low balled them on the offer.
When you look at house prices, forget about monthly mortgage payments, think about how long you'd have to work to save up the money to pay cash for the whole thing. I only manage to save about $30,000 a year (back up to 50k after CS stops). That means a 300k home is six years of labor. That's a long time, but put's me back on the side of the fence for buying.

Anyone else planning to buy before year's end?

American in Japan says

Anyone else planning to buy before year's end?

I'm looking at 2016 or so.

http://www.reuters.com/article/2011/11/03/us-economy-california-budget-gap-idUSTRE7A28L520111103

California's got tons o' problems still. $600 per person state shortfall that's got to be closed.

$11B owed on unemployment:

http://articles.latimes.com/2011/oct/25/business/la-fi-california-unemployment-fund-20111025

I don't see how California is going to turn things around at all.

But Fukushima-I really did a number on my retirement plans. Tokyo might still work, I don't think the Cesium release is a present health threat, but who the hell knows.

Bellingham Bill says

But Fukushima-I really did a number on my retirement plans. Tokyo might still work, I don't think the Cesium release is a present health threat, but who the hell knows.

Sorry -- what did you mean by this? You wanted to retire in Japan?

corntrollio says

You wanted to retire in Japan?

It's one option. I found life in Tokyo to be pretty cool. Though it might be cheaper retiring to a Fortress, even Los Altos is cheaper than Tokyo as far as cost of living / quality of life goes.

Kinda depends on what happens in California. I don't think Silicon Valley's economy will materially worsen going forward, but I do think whatever trends have established themselves since 1995 will continue as they have.

In the wider scheme of things life in California may or may not become more difficult. I think we're on the path to more 1992-style street actions. 1992 wasn't just about police brutality, LA was deep into a major recession then:

http://research.stlouisfed.org/fred2/graph/?g=3am

things are a bit worse now, of course:

http://research.stlouisfed.org/fred2/series/LOSA106URN

Living in West LA during the 1992 riots really colored my thinking about wanting to hang around if this place starts looking like Soyent Green.

Though I'd also probably be happy up in Bellingham, hence my name.

American in Japan says

Has anyone bought, or know anyone who has bought in 2011?

Yes. After being driven insane in the apartment we rented (the nice couple upstairs who we rarely even heard was replaced by a mother/daughter/dog from hell, with the daughter hyperactively running around with its shoes on and playing with a ball hours at a time every day with usual start times around 7am and ending at 10-11pm on a hardwood floor over our bedroom, the dog barking four hours straight at a time until the neighbor got tired of dealing with the police and had it de-barked, etc.) my wife looked at the rental situation, buying condos (would have the same common wall problem), buying houses, and after months of things like applying to rent places ("We were hoping for a family that would raise their children here"; we don't want pets; etc.) we became open to a new possibility I describe as affordable high-density (actually not worse than some new tract home developments) detached single family housing.

We bought a good double wide trailer (it's QUIET, has double pane glass windows, central air, over 600 square feet of deck and patio for outdoor living) on a perimeter lot in a great park (the location couldn't be better, people need to landscape the front of their lots so things look nice, rentals aren't allowed, a 700 credit score is required to get in, if we later sell to a family with grade school aged children they'll get Sunnyvale schools).

Our monthly cash flow is $500/month better than if we bought a similar house in the same neighborhood (which would have been built in 1950 and not had an open floor plan), would only get $150 worse instead of $500+ if they get rid of the mortgage deduction, if we don't decide to pay it off sooner the mortgage is done in 20 years not 30, and the down payment was a quarter of what it'd be on the house with a good mortgage rate. Prices should be more stable since there aren't many funny alternatives to chattel mortgages with 80% LTV requirements and amortizations over less than 30 years. It's about $1300 less a month than if we rented a small house in the area or even a similar sized condo that had common walls/ceilings/floors with other potentially horrible people.

Plus I don't need to deal with mowing a lawn or hiring a gardener to do it for me, although there's plenty of space for our gardens (harvested tomatoes, tomatillos, jalapenos, basil, chives, and parsley at the end of summer and have snap peas planted for the winter; ornamental plants include our palm tree, fuschias, a couple of succulent gardens, and more of my wife's flowers than I can name).

^ yeah, I lived among the mobile home parks in Sunnyvale for 5 years. Didn't seem that worse than anything else, really.

Apparently the space rents are capped or something? I'd hate to have the land inflate out from under me.

Bellingham Bill says

Apparently the space rents are capped or something? I'd hate to have the land inflate out from under me.

Sunnyvale and Santa Clara county lack rent controls although a 2-3% increase is typical (about $25/month) plus a $50 increase every time a property is sold.

We're gambling that the cash flow situation will remain better than the alternatives for long enough to cover maintenance, transaction costs, and drops in value less equity accumulation. That seems near certain given 1) the huge gulf between renting land and either renting land plus housing or renting money to buy land plus housing and 2) monthly housing rental prices increasing hundreds of dollars each year.

San Jose was capped at 3% annually but is now 75% of the area CPI increase with a floor of 3% and ceiling of 7%. Milipitas and Los Altos also have rent control.

Where I'd want to work and therefore live there's no way to win at housing without owning a time machine that lets you retroactively purchase before the bubble, although some options are arguably less bad than others.

@Bill (Troy)

>I don't see how California is going to turn things around at all.

>But Fukushima-I really did a number on my retirement plans. Tokyo might still work, I don't think the Cesium release is a present health threat, but who the hell knows.

I may be buying a house in Mejiro... more to come.

Mejiro is nice. A bit too far from the National Azabu, but I guess with the internet you can get home delivery now.

I used to ride my motorcycle from Takadanobaba to Azabu to get stuff like applesauce, peanut butter, taco shells, etc.

Got tired of that so I just moved such that National Azabu was on the walk from the station.

Wish I was still there, sigh.

@Bill (Troy)

Actually, National Azabu closed last month (at least the one in Hiroo). I am not sure if it is gone or will reopen. A bit shocking...

http://www.youtube.com/watch?v=WWaLxFIVX1s

ah, just going to refurbish it maybe:

http://www.japantimes.co.jp/text/nn20111008f2.html

One more month to go...

Bought a house in Monterey. Nice view of the bay. No idea how much more prices will go down, but we've been waiting 6 years now and this is the nicest house we've seen in that time (that we can afford). Time will tell, but I'm happy with what we got and that's all that counts as far as I'm concerned.