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When to stop renting and buy?


               
2011 Jul 11, 5:26am   35,262 views  132 comments

by therapy   follow (0)  

Hey guys, you helped me out a lot last year and I was able to escape from a tricky situation unscathed. I sold my 1br/1ba condo without having a short-sale on the record based on your advice.

My wife and I needed more room since we were having a baby in January, and so we're currently renting a 3br/2ba house with a pool in a great neighborhood. The rent is reasonable for what and where it is, but I still feel like I'm throwing thousands down the drain instead of building equity.

I'd like to buy a reasonable starter home in the future, and I should be able to scrape together 10% down myself, and possibly get some family assistance, depending on the total cost.

But even decent starter homes in the South Bay in good neighborhoods are $500k+, which means a 20% downpayment is $100k.

Having been burned on my condo, I'm naturally cautious. Also, I'm very comfortable in my rental, my family enjoys it, and it's in a great neighborhood I could never afford to buy into. (Rent is $2,390 a month, house appraises at $795,000 on Zillow and was appraised last year for $850,000 for refi purposes by the owner).

So how do I know when the time is right to make my move? Should I just wait until those $500-$700K suburban nearly-identical homes all through the valley drop another 10%? Should I wait until inventory is lower? Or average time on the market is lower? What do I look for?

Compounding the difficulty, we're probably going to try and have another baby in two years, which would be fine in our current house as well - but since 2 kids in day care costs more than my wife makes, our income will probably change a bit in that time frame.

Any advice is appreciated guys.

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1   thomas.wong1986   @   2011 Jul 11, 5:42am  

therapy says

So how do I know when the time is right to make my move? Should I just wait until those $500-$700K suburban nearly-identical homes all through the valley drop another 10%?

10% would be the same trap you fell into before...

More like down to 300K would be a safer bet...

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

2   Hysteresis   @   2011 Jul 11, 5:45am  

therapy says

The rent is reasonable for what and where it is, but I still feel like I'm throwing thousands down the drain instead of building equity.

if prices continue to fall (as they have for the last 4 out of 5 years) you will be losing equity, not building it.

seems you may very well make the same mistake as last time.

3   therapy   @   2011 Jul 11, 5:47am  

You really think the $500-$600K houses in, say, Cambrian are going to drop by 40%?

4   Hysteresis   @   2011 Jul 11, 5:49am  

therapy says

You really think the $500-$600K houses in, say, Cambrian are going to drop by 40%?

you haven't learned anything.

i encourage you to buy a house because in your case it's better to learn things for yourself than to learn from others.

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