patrick.net

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

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.

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

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.

Don't think of rent as just throwing money away. I really wish that simple idea would go away, it's much to simple a way of looking at home ownership vs. renting.

A lot of homeowners wish they weren't throwing money away on an asset that is depreciating in value. There can be financial advantages to paying rent, especially if rents in your area are cheaper than an equivalent home after including property taxes/insurance.

Hysteresis says

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.

Hey man, I was trying to ask a legitimate question. Do you really see houses in $500-$600K range in Cambrian dropping to $300-$400K?

I don't know as much about this as you do - which is why I'm here asking questions. I'm sorry if that somehow offends you, but I don't really appreciate "you haven't learned anything" comments. It's not helpful and it makes you come across like an asshole.

So, again, from a relatively young guy who's trying to make the right financial decisions for his family, I'd like to know a couple things.

1) Why you think the housing market will fall that much.
2) How to know when it makes sense to buy? I read so many differing opinions on this...
3) With real estate prices in the Bay Area being so high historically, and demand being relatively strong compared to other communities, to what degree is the area "protected" by relatively low unemployment and relatively high salaries?

I'm honestly asking for help here - not trying to judge your worthiness or something.

Hi, I expect to NEVER buy, but rent only and love this site for all the many reasons why buying is dangerous.

Today's news about Home Owner's Association often having the right to foreclose if an owner doesn't pay his fees? Marvelous and just a sign of things to come in this depression coming economy and society where you need to be very very nimble to stay above water with just living, much less owning a house.

Karl Loren
Devoted Fan, sent a $50 donation by paper check from WF account today -- on its way.

Houses are going to be cheap. Have you seen the price of food lately?

Debt-free Renter says

Houses are going to be cheap. Have you seen the price of food lately?

I don't know what this means or how they are supposedly related.

Maybe it means as the price of food goes up, people will have less money to spend on housing.

therapy says

I'm sorry if that somehow offends you,

i'm not sure why you think i'm offended. i'm just telling you what i see. someone who will possibly (i would go as far as "probably") make the same mistake as last time. if you repeat the same mistake, i claim you haven't learned anything. it's not nice to say, but the truth isn't always nice.

therapy says

It's not helpful and it makes you come across like an asshole.

i get this a lot; not that i mind.

Let's assume you buy, and the value of the house goes down. You are young, and if you can afford a traditional 30 year fixed (rates are good now), and you stay in the house to raise your family, it will be paid off by the time you are 60 or so, and want to retire. No one knows what the housing market will be like in 10, 20 or 30 years, but it is ALWAYS good to have a home that is paid for. There are other benefits such as being able to decorate and customize it to your tastes, and the most important - not having a landlord say, "I am not renewing the lease because. . . ."

We have to start looking at houses as we do cars - people buy nice cars all the time even though they know the car will be nearly worthless if they keep it 10 years - but we all need a car to get around, and many of us want a nice car.

Thanks to the last two guys - some good points. I guess I've been thinking that buying property is a good way to start building wealth - after all, unlike cars which are guaranteed to depreciate, land itself isn't. We could argue I guess that it always comes back to the inflation rate, but that's still only good in the long term.

I guess my concern is that I want a lot with some room to grow - as a first house, I'd like to buy a "starter" home and live there for about 10 years while we watch our kids grow.

10 years after that, I think I'd like to buy a nicer home, something a bit more unique and not so tract-like.

I don't think it's the right time to buy right now - just from everything I'm reading, I don't feel strong enough in the economy to make the bet. But I'm trying to gauge when it makes sense - not so much in a timeline, but more in a "what details to watch out for" type of thing.

Thanks again to those who helped.

therapy says

Thanks to the last two guys

aww you left me out. now i feel hurt. lol

E-man says

Huh? There is practically no inventory out there in Santa Clara County. I don't know when this artificially low inventory will be over, but at the moment, there are multiple offers/bids on any half decent property out there.

Look at the data and decide for yourself if inventory for Santa Clara County is artificially low.

http://www.deptofnumbers.com/asking-prices/california/san-jose/

What seems clear is that inventory was artificially high in 2008 and early 2009, but it's not clear that inventory is artificially low now.

thomas.wong1986 says

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

I disagree with this. With the cost of money at 3% (4.25% less tax deduction), you should put as little down as you can.

I don't think "good" inflation (the kind that raises interest rates on savings) is coming any time soon, but if it does, you'll be golden.

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

FHA is 3.5%. Just sayin'.

I have no idea what the housing market is going to do. I've never been right in 20 years and I don't expect to be right now.

My gut says buying now/soon is not a mistake, but I'd certainly wait past October for the conforming limit change to work its way into prices.

SCC will go down from $729k to $625.5K. This will lower the max 3.5% loan from ~$750K to $650K. While I don't expect prices to fall $100,000 in response, this is more than a love-tap to the market.

corntrollio says

http://www.deptofnumbers.com/asking-prices/california/san-jose/

Where do they get their numbers? Or did I misread something? Based on what I think I read, they are saying 7000+ properties in San Jose alone (ignoring the rest of SCC).

E-man's info says 2381.

If you do a search on Redfin for SCC, it shows ~2200.

Why such a large discrepancy? Which is correct?

Edit: deptofnumbers includes condos, but even redoing a redfin search, I only got ~4000 total and that included all of SCC, not just SJ. SJ was ~2000.

E-man says

That's basically just over 2 months worth of inventory for SFHs in Santa Clara County.

http://scc.rereport.com/market_reports

Yeah, when you use those BS reports from Keller Williams that ignore data so that DOM is always low.

Look at KW's Cupertino data and compare to raw sales data:

http://www.julianalee.com/reinfo/sold-CU.htm

KW says 42 sold, Juliana says 45 SFRs sold + 14 condos sold. KW says only 54 active listings, Juliana says 115 SFRs and 48 condos. I know whom I believe -- the person that gives me better data.

Even your own calculation is wrong. You ignored the houses that are pending, which doubles the months of inventory, even if you assume Keller Williams wrong numbers are right.

E-man says

The data is obtained from Santa Clara County

No, it's really not. :) The county does not provide the numbers at all.

Intero is using the same incorrect data feed as Keller Williams. That data is from one particular provider who has a proprietary method of calculation.

Even if you look at their own data for Days of Inventory (3 month moving average, that they give), you will see that it's not extraordinarily low. In fact, it is roughly the same as last summer.

Anyway, you need more evidence to say that inventory is "artificially low" than you've provided. For example, how does this compare to 2008 or during the housing boom and before?

I've been following this slow motion train wreck that is the housing bubble and bust for some time now....and waiting.
While I understand the rationale behind not buying, at a certain point paying rent in an expensive city like San Francisco does start to feel like throwing money away.

I've been renting the same SFH in the city for 12 years. Rent was $2100, is now $2300. We pay all utilities. Love our house, but honestly - we've paid well over 300K in rent. WTF.

At what point does this get ridiculous? How much rent is too much? The landlord paid off this house many years ago and pays pre Prop 13 taxes. Another 10 years here and we would have paid for what the house could sell for now (maybe 650K?).

How can renting for another 5 years be a good idea?