to to buy or not to buy a house now
August 26, 2011 12:39 PM Subscribe
Do you think that buying a house right now is a good move or is it extremely risky?
My wife and I have been toying with the idea of buying a home for the last several months. At first we weren't really sure what we could afford. We have found a price range that is more doable for us but is high enough to get a decent home in a decent area. There is so much speculation right now that the economy is terrible and could get a lot worse. My wife's job is about as secure as you can get. My job is not, but I'm self employed so I'm not in a terrible situation. Our fear is that we could buy a house now and then the price could significantly drop or work could be slow for me or she could lose her job. On the flip side, buying a house right now could be a huge opportunity to get a great deal on a house. If it all works out with our jobs and the price of the house doesn't drop too much, we'll be sitting pretty. What are the recommendations? Do we roll the dice a bit and buy? Or do we wait and possibly pass up the greatest opportunity ever to own a home at a great price. Any thoughts or ideas here would be great. Thanks!
My wife and I have been toying with the idea of buying a home for the last several months. At first we weren't really sure what we could afford. We have found a price range that is more doable for us but is high enough to get a decent home in a decent area. There is so much speculation right now that the economy is terrible and could get a lot worse. My wife's job is about as secure as you can get. My job is not, but I'm self employed so I'm not in a terrible situation. Our fear is that we could buy a house now and then the price could significantly drop or work could be slow for me or she could lose her job. On the flip side, buying a house right now could be a huge opportunity to get a great deal on a house. If it all works out with our jobs and the price of the house doesn't drop too much, we'll be sitting pretty. What are the recommendations? Do we roll the dice a bit and buy? Or do we wait and possibly pass up the greatest opportunity ever to own a home at a great price. Any thoughts or ideas here would be great. Thanks!
Yes, buying a house right now is either a good move or extremely risky or somewhere in between.
Please do some more serious research past AskMefi before going further with this question. You have not provided any details about what where you are, what you want to buy, why you want to buy, a rent vs. buy analysis (NYT FTW), what your tax situation is, what your timeframe is, and what your future life plans are. Without details like those, your question is about as useful as "should I buy a car?"
posted by saeculorum at 12:45 PM on August 26, 2011 [5 favorites]
Please do some more serious research past AskMefi before going further with this question. You have not provided any details about what where you are, what you want to buy, why you want to buy, a rent vs. buy analysis (NYT FTW), what your tax situation is, what your timeframe is, and what your future life plans are. Without details like those, your question is about as useful as "should I buy a car?"
posted by saeculorum at 12:45 PM on August 26, 2011 [5 favorites]
Don't let your decision be made by the market: decide based upon whether you want a) to live in that area (and that house) for an extended period of time; b) to take on the maintenance responsibilities that come with ownership.
posted by holgate at 12:47 PM on August 26, 2011 [2 favorites]
posted by holgate at 12:47 PM on August 26, 2011 [2 favorites]
Response by poster: Here's some more details: We are in southern california, want to buy a 3 bedroom house, make in the high 5 low six figure income, have no time frame or any rush to buy, and plan to have 2 kids. My income has the potential to be a lot higher, but could also be very low. Hope this helps.
posted by ljs30 at 12:51 PM on August 26, 2011
posted by ljs30 at 12:51 PM on August 26, 2011
Yes.
It's a good move and could be extremely risky.
One thing that can definitely be said is that 30 year fixed rate loans are mindbogglingly low. They were incredibly low 18 months ago when the Lady Lurgi and I bought our house and we just refinanced down to stupid low. Now they are actually slightly lower than that.
Your house price could drop, but in some sense that doesn't matter unless you are planning on selling the home (or refinancing or taking a home equity loan). If you have a mortgage that you can afford and you plan on living there for a long time then the actual price of the house is of academic and psychological interest, but not financial interest. If you can afford the house then you will continue to be able to afford the house even if the nominal value of the home drops.
Buy a home because you have the money to do so and it's a good time in your life for you, personally, to buy. Don't do it just because you think the market is in good shape or because you think you can get a deal. A home that you can't afford when you aren't ready to buy is not a great deal, whatever price you pay for it.
posted by It's Never Lurgi at 12:51 PM on August 26, 2011
It's a good move and could be extremely risky.
One thing that can definitely be said is that 30 year fixed rate loans are mindbogglingly low. They were incredibly low 18 months ago when the Lady Lurgi and I bought our house and we just refinanced down to stupid low. Now they are actually slightly lower than that.
Your house price could drop, but in some sense that doesn't matter unless you are planning on selling the home (or refinancing or taking a home equity loan). If you have a mortgage that you can afford and you plan on living there for a long time then the actual price of the house is of academic and psychological interest, but not financial interest. If you can afford the house then you will continue to be able to afford the house even if the nominal value of the home drops.
Buy a home because you have the money to do so and it's a good time in your life for you, personally, to buy. Don't do it just because you think the market is in good shape or because you think you can get a deal. A home that you can't afford when you aren't ready to buy is not a great deal, whatever price you pay for it.
posted by It's Never Lurgi at 12:51 PM on August 26, 2011
At the moment, buying a house is "rolling the dice" for you. It shouldn't be rolling the dice; it is most likely the largest and least diverse investment/purchase that you will ever make. Go do your homework, as saeculorum suggests, and come back and we'll talk.
posted by craven_morhead at 12:52 PM on August 26, 2011
posted by craven_morhead at 12:52 PM on August 26, 2011
It is both. If you are certain you can afford it long-term, your intention is to live in it long-term rather than flip it, and you can take on the non-mortgage financial and other responsibilities involved, then this is a great time if you're smart. Nevertheless, buying a home is always risky, mitigated somewhat by insurance and by holding your breath/hoping for the best.
At the end of the day, has this depressed market enabled you to afford something in an area you've wanted to live but couldn't afford previously? Then the risk should be worth it. Has this depressed market made you want to speculate on a home, on the chance it will swing up again in the next few years so you can flip it? Then the risk (to me) isn't worth it.
posted by davejay at 12:54 PM on August 26, 2011
At the end of the day, has this depressed market enabled you to afford something in an area you've wanted to live but couldn't afford previously? Then the risk should be worth it. Has this depressed market made you want to speculate on a home, on the chance it will swing up again in the next few years so you can flip it? Then the risk (to me) isn't worth it.
posted by davejay at 12:54 PM on August 26, 2011
If you desire a house, can afford one, have good credit and stable income, are realistic about what you can afford, and are buying this as a home and not an investment, then yes, buy a house. There are very good deals going on interest rates right now for people with decent credit, and this is very much a good market to be a buyer in.
As to job security, I don't know that being self-employed is all that much less stable than working for someone else these days. Neither of you is ever going to be in a place where you're certain your job will be there in six months.
But yeah, buy a house because you want a house, not because you feel you should get a deal now. And stay the fuck away from adjustable rate mortgages.
posted by middleclasstool at 12:55 PM on August 26, 2011
As to job security, I don't know that being self-employed is all that much less stable than working for someone else these days. Neither of you is ever going to be in a place where you're certain your job will be there in six months.
But yeah, buy a house because you want a house, not because you feel you should get a deal now. And stay the fuck away from adjustable rate mortgages.
posted by middleclasstool at 12:55 PM on August 26, 2011
Don't underestimate the impact of kids.
We bought a house (in Los Angeles) in 2003, then started having kids in 2006.
We were so distracted with the kids that we didn't notice housing prices plunging until we were underwater, otherwise we might have sold at a profit.
Also, the wife's plans to return to work never panned out, so we have been surviving on one income since 2006.
Other things we underestimated: 1. cost and hassle of house repairs, 2. cost of property tax (pretty much negates the interest deduction), 3. loathing for the neighborhood we hoped might gentrify but did not, 4. the feeling of being trapped, ...
posted by markhu at 12:59 PM on August 26, 2011 [1 favorite]
We bought a house (in Los Angeles) in 2003, then started having kids in 2006.
We were so distracted with the kids that we didn't notice housing prices plunging until we were underwater, otherwise we might have sold at a profit.
Also, the wife's plans to return to work never panned out, so we have been surviving on one income since 2006.
Other things we underestimated: 1. cost and hassle of house repairs, 2. cost of property tax (pretty much negates the interest deduction), 3. loathing for the neighborhood we hoped might gentrify but did not, 4. the feeling of being trapped, ...
posted by markhu at 12:59 PM on August 26, 2011 [1 favorite]
Sorry, but if you are not planning to flip the house and are instead planning to raise these putative kids in it, what is the risk? Get a fixed rate mortgage where you can comfortably afford the repayments. If you are not planning to sell, the market value of the house is irrelevant. Whatever.
My house is not an investment. It solves a problem, which is that we need to live somewhere. We can pay $X to a landlord each month, or pay $X to the bank each month. The advantage of paying it to the bank is that a) I get to paint the walls any color I like; b) in 27 years, right around retirement age when I move to a fixed income, I will stop having to make payments to anyone. Regardless of the value of the house today or whether we are upside down on our mortgage in not, there is no chance the market will not recover over the long term. We will realise a profit on this property if we choose to sell it in 10, 15 or 30 years.
If you are content to sit in a house you can afford to make payments on for the next ten years, I argue there is very minimal "risk."
posted by DarlingBri at 1:05 PM on August 26, 2011 [11 favorites]
My house is not an investment. It solves a problem, which is that we need to live somewhere. We can pay $X to a landlord each month, or pay $X to the bank each month. The advantage of paying it to the bank is that a) I get to paint the walls any color I like; b) in 27 years, right around retirement age when I move to a fixed income, I will stop having to make payments to anyone. Regardless of the value of the house today or whether we are upside down on our mortgage in not, there is no chance the market will not recover over the long term. We will realise a profit on this property if we choose to sell it in 10, 15 or 30 years.
If you are content to sit in a house you can afford to make payments on for the next ten years, I argue there is very minimal "risk."
posted by DarlingBri at 1:05 PM on August 26, 2011 [11 favorites]
Anytime is a good time to buy a house. If you are thinking that you may want to flip that house within the next five years, then you may have to consider the housing market in the area where you are buying the house. If you are looking to buy a home to live in, then you would have committed to that home for the next fifteen years at least. In fifteen years, your house will gain and lose value, but so will the interest rate. If you notice, the interest rate rising will cause the property values to drop and vice versa. Is the house you are looking for significantly higher estimated monthly mortgage than the rent you are paying? No matter what happens, you will have to pay for a place to live so if you are renting, you still have to pay rent in order to keep living there.
Get a pre-approval from the bank so you can see what price home you are qualified to purchase and from there, you can decide if that is something you can work with.
If you keep renting, you are just helping someone else pay a mortgage, so why not help yourself pay a mortgage and when you decide to move, you will get some money back if not all or make a profit? Renting recovers you no money when you leave.
posted by Yellow at 1:06 PM on August 26, 2011 [1 favorite]
Get a pre-approval from the bank so you can see what price home you are qualified to purchase and from there, you can decide if that is something you can work with.
If you keep renting, you are just helping someone else pay a mortgage, so why not help yourself pay a mortgage and when you decide to move, you will get some money back if not all or make a profit? Renting recovers you no money when you leave.
posted by Yellow at 1:06 PM on August 26, 2011 [1 favorite]
DarlingBri is right. Buying a house isn't "rolling the dice" right now, unless you're specifically doing it as some kind of investment, rather than to settle down in a home for the long term. In that case, one risk has to do with the soundness of the structure, long-term desirability of the property for you and yours. Another risk is one you will have regardless--you could encounter some economic or employment-related difficulty that makes it hard to pay your obligations.
There's some risk with the "risk" that you'll borrow at the wrong time when you could have lowered your borrowing cost by waiting. You'd have to do the math on that to weigh the interest rates (probably rock bottom already, but only if you qualify) as compared to how much more you could put down if you buy later.
posted by Hylas at 1:38 PM on August 26, 2011
There's some risk with the "risk" that you'll borrow at the wrong time when you could have lowered your borrowing cost by waiting. You'd have to do the math on that to weigh the interest rates (probably rock bottom already, but only if you qualify) as compared to how much more you could put down if you buy later.
posted by Hylas at 1:38 PM on August 26, 2011
Yes, it's a good time to buy if you're not looking for a short-term gain. Home prices have dropped more than 50% in some places. The bubble has busted and then some. Buy low, sell high generally applies. Prices were really, really, artificially high. Now they're low. That's not to say they couldn't drop further, and prices could stagnate for a decade. However, in my uneducated opinion, there's not a *lot* further for prices to drop. If you can afford it, I say go for it.
posted by cnc at 1:38 PM on August 26, 2011
posted by cnc at 1:38 PM on August 26, 2011
Mrs. Exit and I ask ourselves this question like three times a week. Others have given great answers.
Are your home prices still pretty inflated where you are or did 2008 et seq. sort of work its magic already? (I.e., I don't know that the "greatest opportunity ever" has actually hit yet. Some areas still have a long way to fall because they were ridiculous to start with. Further, as boomers with no retirement [or even the ones with retirement--someone will have to want to buy their crappy stocks] and a paid-off house seek some liquidity, all of a sudden lots of 3/2 long-empty nests flood the market and prices drop as supply increases.)
posted by resurrexit at 1:48 PM on August 26, 2011
Are your home prices still pretty inflated where you are or did 2008 et seq. sort of work its magic already? (I.e., I don't know that the "greatest opportunity ever" has actually hit yet. Some areas still have a long way to fall because they were ridiculous to start with. Further, as boomers with no retirement [or even the ones with retirement--someone will have to want to buy their crappy stocks] and a paid-off house seek some liquidity, all of a sudden lots of 3/2 long-empty nests flood the market and prices drop as supply increases.)
posted by resurrexit at 1:48 PM on August 26, 2011
Something we were hit with last year when buying a house: At first the Bank was ok with something like 13% down, but at the very last minute said the deal would not happen unless we had 20%. It was a scramble, and we were able to do it, but I would really think about how comfortable you are with departing with a large amount of cash.
That said, if you can do it, you'll feel more comfortable with so much equity at the outset. This is also assuming you are not planning to flip the house, like DarlingBri says.
Good luck!
posted by waitangi at 1:50 PM on August 26, 2011
That said, if you can do it, you'll feel more comfortable with so much equity at the outset. This is also assuming you are not planning to flip the house, like DarlingBri says.
Good luck!
posted by waitangi at 1:50 PM on August 26, 2011
Interest rates are extraordinarily low right now, so that's a good reason to buy. There's no way that we on the internet can tell you whether the house might drop in value or whether you will have enough income going forward to cover your mortgage and keep above water. And to some extent these things are really beyond your control. What you can do is make sure that you are being prudent, which means at a minimum (a) do some research about your local real estate market and how it's weathered the economy so far and what it is predicted to do; (b) put down at least 20% and (c) may sure you have an emergency fund with at least 6 months of expenses (d) get a traditional fixed-rate mortgage.
posted by bananafish at 1:58 PM on August 26, 2011
posted by bananafish at 1:58 PM on August 26, 2011
To hedge against job loss, you can also qualify for a mortgage on one salary and make your buying plans as if you just had that one salary ... depending on what home prices are like in your area.
We live in a house half the size of a lot of our friends, in a middle-class neighborhood rather than McMansionVille ... but we qualified on one salary (and pretty conservatively at that, we bought like half the house we qualified for), so we were able to have me stay home with the kids and we've weathered some bumps (expensive basement dewatering catastrophy!) better than if we were qualified on two incomes and stretching.
In some housing markets that is obviously impossible, but if it is possible in yours, look at buying less house than you qualify for, and look at buying on one salary if possible.
This also means we've accelerated payments on our mortgage so that we have more equity than we would otherwise, so as we're starting to think about moving to a larger home, we have a lot more to put down than we otherwise would. It gives us a lot more options in a SECOND home to have bought so conservatively for our FIRST home. We're in no hurry, though, and to my mind, the longer we look for the PERFECT next house, the more equity we have towards a downpayment. :)
posted by Eyebrows McGee at 4:08 PM on August 26, 2011 [1 favorite]
We live in a house half the size of a lot of our friends, in a middle-class neighborhood rather than McMansionVille ... but we qualified on one salary (and pretty conservatively at that, we bought like half the house we qualified for), so we were able to have me stay home with the kids and we've weathered some bumps (expensive basement dewatering catastrophy!) better than if we were qualified on two incomes and stretching.
In some housing markets that is obviously impossible, but if it is possible in yours, look at buying less house than you qualify for, and look at buying on one salary if possible.
This also means we've accelerated payments on our mortgage so that we have more equity than we would otherwise, so as we're starting to think about moving to a larger home, we have a lot more to put down than we otherwise would. It gives us a lot more options in a SECOND home to have bought so conservatively for our FIRST home. We're in no hurry, though, and to my mind, the longer we look for the PERFECT next house, the more equity we have towards a downpayment. :)
posted by Eyebrows McGee at 4:08 PM on August 26, 2011 [1 favorite]
I'm not convinced that low interest rates mean it's a good time to buy. I think a lot of people buy houses based on the monthly payment and not on price. The way I see it, when interest rates go up, so will monthly payments, and prices will have to fall to maintain equilibrium.
posted by monstrouspudding at 5:36 PM on August 26, 2011
posted by monstrouspudding at 5:36 PM on August 26, 2011
If you can afford it, it's a great time to buy. Never use your primary residence as an investment. Live in it, enjoy it.
posted by blue_beetle at 6:01 PM on August 26, 2011
posted by blue_beetle at 6:01 PM on August 26, 2011
I agree with both markhu's thoughts about hidden costs and DarlingBri's thoughts that it really need not be that risky....
Were it me, I'd probably try to accommodate both points of view, by buying a place with a rental attached.
From everything I gather, it's easier to earn rental income on a business space than a living space, but southern California may not be dense enough to have a lot of buildings zoned for both work and living.
If not, a duplexe with a rental attached, or a mother-in-law apartment, or something similar will still help you hedge the possibility of a lowered income because it will assure you that much of the time you will have some money coming in to pay the mortgage. It may also mean that you need to buy less house to accommodate future kids. Even so, this may be a good way to take advantage of your wife's situation, your future needs, the low interest rates, and your less stable situation....
posted by Violet Blue at 6:10 PM on August 26, 2011
Were it me, I'd probably try to accommodate both points of view, by buying a place with a rental attached.
From everything I gather, it's easier to earn rental income on a business space than a living space, but southern California may not be dense enough to have a lot of buildings zoned for both work and living.
If not, a duplexe with a rental attached, or a mother-in-law apartment, or something similar will still help you hedge the possibility of a lowered income because it will assure you that much of the time you will have some money coming in to pay the mortgage. It may also mean that you need to buy less house to accommodate future kids. Even so, this may be a good way to take advantage of your wife's situation, your future needs, the low interest rates, and your less stable situation....
posted by Violet Blue at 6:10 PM on August 26, 2011
Okay, you plan to have two kids, so you need to buy a house that you'd be content to live in forever in case you do end up unable to sell. So, buy one that is big enough for two growing children, and in a school district that works for you. Then make sure you can afford it on your wife's income. And make sure it's in good repair; repair costs can be surprisingly high, since the smallest piece of a house starts at $1500 and goes up from there, and it's not out of the question that you'd get hit with two or three $10,000 problems (like a roof, like a sewer line issue).
But -- much as we all need to include the caveat that "nobody knows if housing prices will go up again soon," particularly with respect to your local area -- suppose you are like me and happen to guess that it's not incredibly likely that they'd go up again sharply soon. In that case, there would be very little downside to renting something below your income and saving $3k-$4k / month, until such a point that you could put a lot more down and pay it off much more quickly. The thing you realize in the early years of paying a mortgage every month is how much of it gets thrown away on insurance and interest. At least once, you will think: "what if I were paying off this house at $3000 / month, instead of paying $2700 to interest and paying it off $300 / month? Just imagine how much faster I would own it." If prices will be the same next year as they are this year, why not "pay it off $3000 / month?" I've heard that Bay Area starter homes are back up off their crazy lows, so I'm not sure you'll get a great deal you couldn't get a year or two from now, but really, nobody knows.
At the same time, there's no harm in starting to look. The more you watch the market and talk to realtors, the more you'll have your own sense of where prices are going locally. So, I'd start to save up as though you were already making stretch payments, jump on your dream house if it appears, and also try to catch the down months of December - January - February (2012, if not 2013 or 2014).
posted by salvia at 6:25 PM on August 26, 2011
But -- much as we all need to include the caveat that "nobody knows if housing prices will go up again soon," particularly with respect to your local area -- suppose you are like me and happen to guess that it's not incredibly likely that they'd go up again sharply soon. In that case, there would be very little downside to renting something below your income and saving $3k-$4k / month, until such a point that you could put a lot more down and pay it off much more quickly. The thing you realize in the early years of paying a mortgage every month is how much of it gets thrown away on insurance and interest. At least once, you will think: "what if I were paying off this house at $3000 / month, instead of paying $2700 to interest and paying it off $300 / month? Just imagine how much faster I would own it." If prices will be the same next year as they are this year, why not "pay it off $3000 / month?" I've heard that Bay Area starter homes are back up off their crazy lows, so I'm not sure you'll get a great deal you couldn't get a year or two from now, but really, nobody knows.
At the same time, there's no harm in starting to look. The more you watch the market and talk to realtors, the more you'll have your own sense of where prices are going locally. So, I'd start to save up as though you were already making stretch payments, jump on your dream house if it appears, and also try to catch the down months of December - January - February (2012, if not 2013 or 2014).
posted by salvia at 6:25 PM on August 26, 2011
My husband and I are in the same position in SoCal right now, and I completely agree with DarlingBri; if the house price drops further, does it really matter? My husband and I don't care at all because it's about as unlikely as it can be that we'd want to sell it; there's always a chance, no matter how secure your job or whatever, that something will happen that means you have to sell it -- you can't even know that any neighborhood will be good/safe/whatever twenty years from now -- but you have to draw the likelihood line somewhere unless you just never want to buy a house. Which is cool too, but if you do want one eventually then what exactly would you be waiting for? Even if the economy was great you could lose your job and have trouble finding another one, or the economy could suck again in ten years, or whatever. Thinking of a house as an "investment" can just skew the decision in your mind unnecessarily if you're not planning on selling it.
So assuming you're not planning on selling it soon, it's a great time to buy. We started looking at SoCal home prices maybe four years ago, and they've dropped a ton. Depending on the area they're sometimes actually going back up compared to where they were prior, but mostly they've dropped and stayed down. For example, houses and condos in upscale, busy areas of Burbank, Glendale, and Pasadena were almost $100k less than they are now a couple years ago, but houses everywhere else seem to be $100 and $200k less than they were when we first started checking.
We just decided to rent a house in San Gabriel since we don't have a great down payment saved up, so that's something to consider too; TONS of houses for rent right now, since they can't sell them. Check PadMapper; that's where we found ours. It's a 3/2 and $400 less per month than our 1/1 apartment in Burbank, so we can save up for a better down payment. Consider renting something cheaper than what you're in right now if possible, and saving up the difference; if prices drop lower you'll be in an even better position, but if they go up you might not get as good a deal as you will now.
By the way, you say you've just started toying with the idea, so as far as down payments go, do you even have money saved up for one? It's getting harder to buy a house without a decent down payment, and good credit; I keep hearing 20% down for SoCal right now, and for even a kind of crappy house in most areas that's going to mean $70k saved. You might be able to do it with less, but ask around. Make sure you've investigated that angle and it's even feasible for you to buy; if you don't have much saved for a down payment, or you don't have good credit, then you know what you need to work on for the next couple years. And do NOT underestimate what good credit can do; it can save you tens of thousands of dollars just to improve your credit score by small amounts. Make sure you have looked into this and have done everything you can to get your credit up REALLY high before you throw away money unnecessarily. My husband has great credit but we're definitely going to game the score up even higher before we think about applying; people don't realize they can be throwing away $50k just by not doing a few things here and there in the year or months ahead of buying.
Also make sure there are houses near enough to your wife's job, and take into account things like traffic. If you can live east-ish of LA, for example, you're going to get a better deal. We had hoped to stay near Burbank but the value just wasn't there, and San Gabriel was the same distance from my husband's job. To get the same prices as we're getting there on the west-ish side of SoCal you have to live in places like Sunland, which is pretty run-down and not safe. There's a lot of good deals in South Pasadena, Alhambra, San Gabriel, Arcadia, and Temple City right now; safe areas, good schools, and lots of remodeled properties that aren't depressing to look at.
You'll probably want to check out LALife.com for any addresses you come by -- renting OR buying -- and plug them in there for safety ratings and school ratings.
Good luck!
posted by Nattie at 10:13 PM on August 26, 2011
So assuming you're not planning on selling it soon, it's a great time to buy. We started looking at SoCal home prices maybe four years ago, and they've dropped a ton. Depending on the area they're sometimes actually going back up compared to where they were prior, but mostly they've dropped and stayed down. For example, houses and condos in upscale, busy areas of Burbank, Glendale, and Pasadena were almost $100k less than they are now a couple years ago, but houses everywhere else seem to be $100 and $200k less than they were when we first started checking.
We just decided to rent a house in San Gabriel since we don't have a great down payment saved up, so that's something to consider too; TONS of houses for rent right now, since they can't sell them. Check PadMapper; that's where we found ours. It's a 3/2 and $400 less per month than our 1/1 apartment in Burbank, so we can save up for a better down payment. Consider renting something cheaper than what you're in right now if possible, and saving up the difference; if prices drop lower you'll be in an even better position, but if they go up you might not get as good a deal as you will now.
By the way, you say you've just started toying with the idea, so as far as down payments go, do you even have money saved up for one? It's getting harder to buy a house without a decent down payment, and good credit; I keep hearing 20% down for SoCal right now, and for even a kind of crappy house in most areas that's going to mean $70k saved. You might be able to do it with less, but ask around. Make sure you've investigated that angle and it's even feasible for you to buy; if you don't have much saved for a down payment, or you don't have good credit, then you know what you need to work on for the next couple years. And do NOT underestimate what good credit can do; it can save you tens of thousands of dollars just to improve your credit score by small amounts. Make sure you have looked into this and have done everything you can to get your credit up REALLY high before you throw away money unnecessarily. My husband has great credit but we're definitely going to game the score up even higher before we think about applying; people don't realize they can be throwing away $50k just by not doing a few things here and there in the year or months ahead of buying.
Also make sure there are houses near enough to your wife's job, and take into account things like traffic. If you can live east-ish of LA, for example, you're going to get a better deal. We had hoped to stay near Burbank but the value just wasn't there, and San Gabriel was the same distance from my husband's job. To get the same prices as we're getting there on the west-ish side of SoCal you have to live in places like Sunland, which is pretty run-down and not safe. There's a lot of good deals in South Pasadena, Alhambra, San Gabriel, Arcadia, and Temple City right now; safe areas, good schools, and lots of remodeled properties that aren't depressing to look at.
You'll probably want to check out LALife.com for any addresses you come by -- renting OR buying -- and plug them in there for safety ratings and school ratings.
Good luck!
posted by Nattie at 10:13 PM on August 26, 2011
NY Times Rent vs. Buy Calculator
When you have a better idea what the financial realities are, you can more easily weigh the intangibles, such as the risk of loss of value, the ball and chain of owning something that takes months to sell, the ability to put in a new kitchen, the stability of living in a house where a landlord cannot easily kick you out, the hassle of dealing with the tax assessor and leaking water heaters, etc...
posted by massysett at 7:37 AM on August 27, 2011
When you have a better idea what the financial realities are, you can more easily weigh the intangibles, such as the risk of loss of value, the ball and chain of owning something that takes months to sell, the ability to put in a new kitchen, the stability of living in a house where a landlord cannot easily kick you out, the hassle of dealing with the tax assessor and leaking water heaters, etc...
posted by massysett at 7:37 AM on August 27, 2011
Depending on the value of your mortgage, money down, home price and everything else, you're going to have a regular monthly payment. This is no different than having a monthly rent payment except around tax time when you get a big hunk of it back. On some level you just need to be aware of what you can afford as a monthly payment - will your mortgage be about the same as or less than your current rent? If so, awesome.
If your current monthly payment number leaves a lot of extra cash every paycheck then you can think about a place that needs a new roof or a new kitchen. If you're playing close to the bone then look for something that's in great shape. Obviously you need a home inspection.
One really good option is to buy a nice place that needs some cosmetic improvements - these places are often somewhat cheaper. For example, I just bought a place with the intention - in the next five years - to redo the kitchen and bathroom. Take a survey of exactly what you need to make a house livable. Is it OK if the counters are stained or if the appliances are from 1950?
Right now is a great time to buy - my fixed rate mortgage is at 4.75% and my neighbor's is 4.25% - and they just stay low! I have no doubt that home values will soar again and in five years or so, any of us will be able to get a great return on our investment. As long as you don't get in over your head by signing up for an adjustable mortgage for way more than you can afford you'll be fine.
posted by bendy at 1:47 AM on August 28, 2011
If your current monthly payment number leaves a lot of extra cash every paycheck then you can think about a place that needs a new roof or a new kitchen. If you're playing close to the bone then look for something that's in great shape. Obviously you need a home inspection.
One really good option is to buy a nice place that needs some cosmetic improvements - these places are often somewhat cheaper. For example, I just bought a place with the intention - in the next five years - to redo the kitchen and bathroom. Take a survey of exactly what you need to make a house livable. Is it OK if the counters are stained or if the appliances are from 1950?
Right now is a great time to buy - my fixed rate mortgage is at 4.75% and my neighbor's is 4.25% - and they just stay low! I have no doubt that home values will soar again and in five years or so, any of us will be able to get a great return on our investment. As long as you don't get in over your head by signing up for an adjustable mortgage for way more than you can afford you'll be fine.
posted by bendy at 1:47 AM on August 28, 2011
This thread is closed to new comments.
posted by headnsouth at 12:45 PM on August 26, 2011 [1 favorite]