I cant' decide to buy or wait?

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Given so much valuable advice from all the experts in the forum, I much rather be patient and try to reevaluate in 6 months. But my wife is screaming that we are missing a great house at a "reasonable" price.
 
[quote author="roundcorners" date=1240092302] My wife, child, cat and I live very comfortably in a one bedroom rental.</blockquote>


Poor cat.
 
Perhaps my story can give you some perspective.



When I closed on my new construction condo (Dec, 1990) I knew full well I was doomed. Within 6 months my property value was about 1/2 of what it was. The builder stopped construction on the remaining 3rd of the development. It was pretty grim.



The thing was is that I really liked the property. The location worked well for my family. I wasn't moving out of the area. If I had to move I knew the home could rent. We stuck it out and by February 2000 our value came back above what we paid for. We eventually moved into a SFD using the Condo sale proceeds for our down payment. Thats roughly 10 years we had to wait things out.



Will values drop? Of course. It's baked into the cake already. Since you know this as fact, your criteria for buying should be pretty simple: If you can find a good house in a neighborhood you like and will not be moving anytime soon (or the home might make a reasonable rental), then buy. The time spent in your rental today is simply an irritant, never to get better.



If you just can't cross the Rubicon, then move into a rental thats a bit better that what you have. Although buying today is a risk, it all depends on your risk tolerance and long term goals.



My .02



SGIP
 
I think that you cant go wrong paying what you think its worth to live where you want. Once people start looking at homes as investments, the trouble begins. If the market falls further/goes up, who cares?



If you are in a job sector that is subject to unpredictable relocation, thus making short/semi-short term home value a factor, then you shouldnt even be thinking about buying anyway.
 
[quote author="MojoJD" date=1240356681]I think that you cant go wrong paying what you think its worth to live where you want. Once people start looking at homes as investments, the trouble begins. If the market falls further/goes up, who cares?

</blockquote>
Me.
 
I'm not pushing for anyone buy, but at some point in time risk has to be taken. Sure, a person could lose their job or have some other catastrophic event come along. That's going to happen no matter if you're an owner or a renter. Life is a risk, isn't it? You can't plan around every single contingency.



A $400k home with 10% down means that at minimum the $40k down is at risk, with a possible $40k also at risk if prices decline another 10%. That additional 10% loss should be considered, but it's as theoretical as were all of the 50%+ appreciation gains.



All of this assumes you're not able rent, not able to sell, and not able to make the payments no matter the circumstance. At that point, your problems are not simply housing but much, much more. With a real employment rate of 85% (15% real unemployment) there is a risk of a person losing their job - but it depends on the industry and the ability to be re-employed quickly.



At some point a floor in prices will come - not a bottom - a floor. The same for employment. Most "big bears" believe 2011-2012 will be the floor for housing. That said, a 5 year outlook is reasonable if your risk tolerance is high.



My .02 - SGIP
 
Soylent, well said. I just think we should ask ourselves how much risk we can take to buy a house in a down market. How much happier are you(and family) going to be in a house of your own vs renting. I don't think everyone needs to wait till the bottom to buy.
 
Say your $400k house only does lose 10% in the next year (though I would put money down on 20%+).



That's $3300/month.





You could take your family on a lot of nice vacations, one every month, for that, if you hold off buying.



or maybe fund a 529 for the kids?



or maybe just insurance against unemployment?
 
[quote author="freedomCM" date=1240376296]Say your $400k house only does lose 10% in the next year (though I would put money down on 20%+).



That's $3300/month.





You could take your family on a lot of nice vacations, one every month, for that, if you hold off buying.





Minus tax credits and lost rent, maybe 1 nice vacation?
 
[quote author="freedomCM" date=1240376296]Say your $400k house only does lose 10% in the next year (though I would put money down on 20%+).



That's $3300/month.





You could take your family on a lot of nice vacations, one every month, for that, if you hold off buying.



or maybe fund a 529 for the kids?



or maybe just insurance against unemployment?</blockquote>


You're not paying any rent for that year?
 
That $3300 figure is theoretical money. If your property loses 10% and you don't sell, you've lost 10% of theoretical cash. Try to spend that theoretical cash at a the Royal Hawaiian Resort. They'll throw you out onto your real behind!
 
[quote author="asianinvasian" date=1240381071][quote author="freedomCM" date=1240376296]Say your $400k house only does lose 10% in the next year (though I would put money down on 20%+).



That's $3300/month.





You could take your family on a lot of nice vacations, one every month, for that, if you hold off buying.



or maybe fund a 529 for the kids?



or maybe just insurance against unemployment?</blockquote>


You're not paying any rent for that year?</blockquote>


You missed the point...



10% times $400,000 = $40,000



$40,000 / 12 = $3,333



The assumption didn't include the different between the rent or housing payment.



Is that clear?
 
Roo has it right.



That $3300/mo is already taking into account that your rent = PITI, HOA, maint, time, etc (less tax deduction).



And please find me a nice condo or SFR that has rent = all that. I can't.
 
[quote author="freedomCM" date=1240392708]Roo has it right.



That $3300/mo is already taking into account that your rent = PITI, HOA, maint, time, etc (less tax deduction).



And please find me a nice condo or SFR that has rent = all that. I can't.</blockquote>


Look to the IE, $700/month all included...



but don't worry, it's different here...



Or better yet, use that 20% theoretical down payment and buy CASH and pay taxes that are less than a typical Irvine HOA assessment.
 
[quote author="Soylent Green Is People" date=1240381816]That $3300 figure is theoretical money. If your property loses 10% and you don't sell, you've lost 10% of theoretical cash. Try to spend that theoretical cash at a the Royal Hawaiian Resort. They'll throw you out onto your real behind!</blockquote>


Isn't 'theoretical money' what created this mess?
 
[quote author="WaitingITOut" date=1240393159][quote author="Soylent Green Is People" date=1240381816]That $3300 figure is theoretical money. If your property loses 10% and you don't sell, you've lost 10% of theoretical cash. Try to spend that theoretical cash at a the Royal Hawaiian Resort. They'll throw you out onto your real behind!</blockquote>


Isn't 'theoretical money' what created this mess?</blockquote>


Read this post: <a href="http://www.irvinehousingblog.com/blog/comments/timing-does-matter/">Timing Does Matter</a>. It has the complete argument for waiting in one location.



Waiting may not be the best emotional decision for you, but it is clearly the best financial decision. Don't fool yourself into thinking otherwise.
 
I do agree with the Peaker and Trougher analysis. Time and the numbers in context favor the example.



Most bears believe a floor is coming between 2011 and 2012. Assuming it's 2012, thats roughly 3 years worse case away before some stability returns. It could be 2 years which relatively speaking isn't a great deal of time.



During the next two to three years the pricing floor is estimated to be another 10-15 percent lower. As much as a 20 percent price reduction may be ahead of us. 40% of a $600,000 home (2005-2008) is $240,000. If that 2005 $600k home is purchased for $360k and you lose 20% - that's $72,000. Still a great deal of money to lose if you are selling. That's a reasonable worse case scenario to weigh in the balance.



Depending on personal circumstance - stuffed in a rental compared to owning a home and faced with the possibility of losing 20% (if you have to sell) does not tip the scale in favor of buying. Buying is a reasonable choice to consider today based on what you consider risk. Stability in the market is on the horizon - a far horizon - but it can be seen. Prices can't rise to the sun. They don't fall to the center of the earth either. Since the buying at "the bottom" is a fable, people today who might want to buy now will have to consider the potential loss they will face, but it's not like buying in 2005.



My .02



SGIP
 
[quote author="Soylent Green Is People" date=1240447091]Since the buying at "the bottom" is a fable, people today who might want to buy now will have to consider the potential loss they will face, but it's not like buying in 2005.</blockquote>


Maybe you won't buy at <strong>the </strong>bottom, but why not at least purchase after, on the upswing?



-IR2





The wisdom of Pixar -

<strong>"Ain't no need to watch where I'm goin'; just need to know where I've been."</strong> - Mater



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