Need advice on timing a home purchase.

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[quote author="bkshopr" date=1219275608]Bear,



The price of home ownership = 2-1/2 x your current rent = a no maintenance newer home.



An older home will escalate to 3-1/2 x your current rent. Yard maintenance and water bill = $425 /mo.



Owning a home = many trips to Home depot = all your eating out lunch budget.</blockquote>


I have found a way to lease AND get my home improvement fix on... I've discovered that my landlord, who is very nice by the way, is agreeable to small upgrades/repairs/etc. provided I am doing the work myself and he doesn't have to pay outside labor costs. I've done a few tiny things so far (replaced toilet handle and toilet seat, fixed a mini-blind) that he's allowed me to deduct off the rent.



Last night, the wife was complaining that the garbage disposer didn't work very well and was a bit stinky. It appears to be the original unit from the builder. I emailed the landlord, offered to pick up a new and better unit on his behalf and install it myself, and he agreed to the expenditure without hesitation. It's kind of win-win, he gets free labor on small repairs, upgrades, etc. and we get a nicer place to live. I'd really love tile in the master bath, inexplicably they elected to carpet it likely because it was cheaper/easier, but I don't know if I could get him to go for it... We'll see.
 
HB Bear Too-



you don't need advice on your purchase. deep down you know you don't want to buy right now. What you need is advice on how to talk the wife out of wanting to buy.....
 
Seriously, give your wife the mission of finding the best rental house in your target area in your budget. That way, she will feel involved and happy with the outcome, and should be ok with staying in it for a few years.
 
[quote author="HB Bear, Too" date=1219276850][quote author="awgee" date=1219275857]HB Bear Too - Honestly, I do not know what you should do.




My wife wants to own again in the worst way. I want to own again, but I kinda like leasing. And we will wait a couple more years. I do not fell like jumping on the train in the middle of the train wreck.</blockquote>


Awgee, I empathize regarding the wife. My wife, and I don't think this is hyperbole, <strong>desperately</strong> wants to own a home. She feels like we're going to wait in perpetuity (or at least a time frame that feels like eternity) to buy and she's sort of looking for closure I think. Add to that the fact that she's turning 40 next year--I think maybe she feels a bit like it's understandable that folks in their 20s or 30s don't own, but those in their 40s!?!? That's a another kettle of fish all together from her perspective, I reckon.



I'm considering discussing the idea of renting a bigger/nicer home (we really are very cramped) if we decide to wait. Maybe, that will keep her legitmately happy in the intervening period.</blockquote>


My wife calls it home limbo, and I am thinking of leasing a larger house also, with a pool.
 
[quote author="freedomCM" date=1219289293]Seriously, give your wife the mission of finding the best rental house in your target area in your budget. That way, she will feel involved and happy with the outcome, and should be ok with staying in it for a few years.</blockquote>


So, my wife and I went to lunch today and talked about renting a new home. As it turns out, you and she have the exact same idea: we set the budget and she picks the house. I am allowed to have some yet-to-be-defined and very limited veto power, but the decision is essentially hers.
 
[quote author="awgee" date=1219299576][quote author="HB Bear, Too" date=1219276850][quote author="awgee" date=1219275857]HB Bear Too - Honestly, I do not know what you should do.




My wife wants to own again in the worst way. I want to own again, but I kinda like leasing. And we will wait a couple more years. I do not fell like jumping on the train in the middle of the train wreck.</blockquote>


Awgee, I empathize regarding the wife. My wife, and I don't think this is hyperbole, <strong>desperately</strong> wants to own a home. She feels like we're going to wait in perpetuity (or at least a time frame that feels like eternity) to buy and she's sort of looking for closure I think. Add to that the fact that she's turning 40 next year--I think maybe she feels a bit like it's understandable that folks in their 20s or 30s don't own, but those in their 40s!?!? That's a another kettle of fish all together from her perspective, I reckon.



I'm considering discussing the idea of renting a bigger/nicer home (we really are very cramped) if we decide to wait. Maybe, that will keep her legitmately happy in the intervening period.</blockquote>


My wife calls it home limbo, and I am <strong>thinking of leasing a larger house</strong> also, with a pool</blockquote>


There seems to be some wisdom in this idea. Why not, budget permitting, trade up to a nicer rental?
 
[quote author="graphrix" date=1219240974][quote author="ipoplaya" date=1219239872][quote author="HB Bear, Too" date=1219235094][quote author="tmare" date=1219234402]Just wait a bit longer. If you have never owned a home and you seriously think renting is more expensive than buying, you are deluding yourself. The true costs of ownership are never really understood until after you own. When you do buy, you should try to buy the place you see yourself in for even longer than the 10-15 you have said. Please try to imagine all of the things you would like to do to the potential house and realize that most of them will never get done. Make sure that you are happy with the place as is (especially when you have children) because the chances of finding the money and the time to do the things you envision are unlikely. You will get a few things done, the rest you will give up for college educations and retirement (if you are smart), so make sure you REALLY like the place and DON'T underestimate the costs because of emotion.</blockquote>


Thanks. I've gotten similar advice from others, namely that is buy a house that you <strong>love</strong> and that is move-in ready. Definitely not interested in a fixer-upper or anything that requires too much work or investment.</blockquote>


Last year around this time I struggled with the same problem. I was looking at loan amounts around $550K or so and rates then were probably around 6.5%. I thought interest rates were headed up and that maybe I should buy to lock in before 8% rates showed up. Today, I can get that same loan for 6.35% and prices have come down at least 10% if not further...



Even if a home you would want is near rental equivalency, it's likely that market conditions will push those prices below rental equivalency in your target ara as other areas in OC get down to that level. Hold out for at least another year to see what the increasing foreclosure volume does to prices. The REOs should continue to pressure comps and you will be able to buyer more or buy the same for cheaper.</blockquote>


I... I... I'm touched. Our little Ipo has really come along way. He was a stubborn one too. It seems like it was only a year ago when you would look up stubborn in the dictionary and there would be a picture of Ipo and I strangling each other. Now... it is us, but smiling and holding a bunch of cash in our hands. Man... I am so proud of our little Ipo. All that time he struggled with his IHB education shows the pain of it all was really worth it.



HB bear, too - Wait, as that is what I keep telling people. Just wait until the NODs and foreclosures slow down, and when they ask again I tell them they keep getting worse, so wait. Look at it this way, when according to DataQuick foreclosures/REOs account for 20% of the resales, roughly 500 or so per month, and 1300 foreclosures happened last month, 1100 the month before, 1000 the month before, and probably around 1800 this month, does that tell you they are not being absorbed fast enough or am I a nutter (Ipo, shhhhh we know, I am)?</blockquote>


Honest to god, there's going to be ~1,800 foreclosures in OC this month? I have to admit, I've haven't been paying as much attention as I used to to the foreclosure market as I once did....
 
Wow, 1/3 of IHB voted to buy this year!! Double U tee eff!!!



I, like yourself, plan on putting atleast 20% down on my future home purchase. I have been hoping that rates will increase a bunch. I'm pretty sure the resulting price drops from rate hikes will leave those of us with 20%+ downpayments with smaller monthly payments, not to mention a much smaller principal owed.



Low rates make it a great time to refi, not to buy.



Monthly equity burn in most cases is paying 1-2 times equivalent rent. You could probably rent an equivalent place and tack on a new vert bimmer lease (the wife might go for this) and be financially ahead in 2 years of your would be buyer.
 
[quote author="HB Bear, Too" date=1219311872]Honest to god, there's going to be ~1,800 foreclosures in OC this month? I have to admit, I've haven't been paying as much attention as I used to to the foreclosure market as I once did....</blockquote>


It is a rough guess, but I would say a minimum of 1600 and a max of 1900 this month. Considering there were 50 alone today at the Santa Ana courthouse, then I am still leaning towards my 1800 rough estimate. We will see a month this year with 2000 foreclosures. That is more than triple the record in 1996.



I checked for you on HB, currently there are 84 scheduled for the SA courthouse foreclosure auction as of today. Figure 60%-70% will end up going through foreclosure. If you want, I will update this thread time from time, and you can show the wife just how bad it is. Hey, if it gets better for a few months, then it might be better to buy after all. There are quite a few that start with a 1 and have six more numbers after it too.
 
HB Bear, you are not alone. I have a couple of friends who are married and have wives who keep haggling them to finally buy a place...(1 with a kid).



Anyways, best thing to do is tell the wifey...read the news and would she rather have an extra $100k in the bank (from the amount you're going to save because your future home will likely drop 15-20% more from here).



Personally, I'm looking to buy at the end of next year or early 2010.



Good luck.
 
As the wife approaching 40 who wanted a house married to a man who doesn't pay much attention to the real estate market and was on board with buying this year, I suggest waiting. We closed escrow in May and at the time it seemed like a really great deal, but there is a big part of me that wishes we had waited because prices are still dropping quite rapidly. We were able to get a 5.875 fixed back then, so when I weigh that vs the higher rate today, the payment is pretty much a wash with the lower purchase price.



On the one hand, we both really enjoy having our own house with a yard. On the other, we would have preferred a better location. If it was a matter of having to move into another rental at market vs buying this house, we would have definitely opted for the latter, even knowing what we know now. What gives me buyers remorse is that we gave up a steal of a deal on our rental. Even though buying this house is essentially at rental parity when you factor in the tax break, it's only so when you consider market value rents.



Initially I was really discouraged with the continued decline in prices, but as time goes on I think less and less about what the market value is today, meaning I've gone from obsessing over it to something I still think about daily . I think that's mostly because I've had to resign myself to accept that it may very well decline an additional 10%-20% from what we paid. I'm not sure if this stems from the natural tendency of owners to deny the worst, but I believe it's more likely to be an 11% drop than a 20% drop. I have a really hard time believing the uber bears predictions, but I also laugh at the bottom callers.





However, I haven't seen anything else come on the market here that I felt was a better value and wished we bought instead. Actually, there have been one or two, but they got snapped up so fast that we wouldn't have been able to buy them. There was one that appeared to be sooo much better for sooo much less that I was agonizing for two days over it, but when I went to look at it, thankfully it turned out to be a total POS. The day I do see something come on the market that is clearly a significantly greater value in our range, I know it will bother me quite a bit. I should just stop watching the market, but I can't help myself.



It sounds as though you've found your compromise, so my knife catching blather isn't much of a help. Your mutual resignation on the decision will take care of the inner debate of "do we or don't we."
 
I fifteenth the rental suggestion. Buy now, lose 20% of the house (about $120,000, right?) Well, spend *half* of that adding to your rent and you can rent a place for $3300 a month for 4 years and still be $60,000 ahead. Or rent a place that's your target size and spend a summer on a trip around the world.



A theme of this blog is that you don't need to own to have a good life. At 40ish with a decent income, it's time to enjoy life. Keep saving for retirement but get a decent place to live and do the things you want. Rent or buy? That's a decision that should be based on which one is cheaper long-term for the housing you want. Right now that says "rent" - but not "rent too small".
 
upper sez: <em>Wow, 1/3 of IHB voted to buy this year!! Double U tee eff!!!



</em>

Duh ! Those votes are all from the realtors that lurk on the IHB !
 
[quote author="HB Bear, Too" date=1219276936][quote author="bkshopr" date=1219275608]Bear,



The price of home ownership = 2-1/2 x your current rent = a no maintenance newer home.



An older home will escalate to 3-1/2 x your current rent. Yard maintenance and water bill = $425 /mo.



Owning a home = many trips to Home depot = all your eating out lunch budget.</blockquote>


Not sure I follow you here.</blockquote>


When you own a house there are a lot of unanticipated expenses. Don't own a pet when you can only afford the food. I am sharing with you my experience of owning a home. Being a homeowner you too can become a construction litigation expert.
 
[quote author="Trooper" date=1219362565]upper sez: <em>Wow, 1/3 of IHB voted to buy this year!! Double U tee eff!!!



</em>

Duh ! Those votes are all from the realtors that lurk on the IHB !</blockquote>


Thanks to Lansner's blog, they know how to clear the cookies so they can vote multiple times. Damn you Lansner!
 
If you are going to purchase with a mortgage, the smart way to buy a home is to wait until mortgage interest rates are sky high and prices are low. Buy with a variable rate mortgage. Make your payments for a few years, and then refinance to a lower fixed rate when interest rates come down and prices head up again. This is pretty much the opposite of how most folks buy homes, but if you pencil it out you will understand the advantage.
 
[quote author="awgee" date=1219373536]If you are going to purchase with a mortgage, the smart way to buy a home is to wait until mortgage interest rates are sky high and prices are low. Buy with a variable rate mortgage. make your payments for a few years, and then refinance to a lower rate when interest rates come down and prices head up again. This is pretty much the opposite of how most folks buy homes, but if you pencil it out you will understand the advantage.</blockquote>


It's a pretty basic concept that MANY fail to see clearly. You can ALWAYS refi your interest rate but you can NEVER refi your purchase price when it drops.
 
[quote author="graphrix" date=1219328723][quote author="HB Bear, Too" date=1219311872]Honest to god, there's going to be ~1,800 foreclosures in OC this month? I have to admit, I've haven't been paying as much attention as I used to to the foreclosure market as I once did....</blockquote>


It is a rough guess, but I would say a minimum of 1600 and a max of 1900 this month. Considering there were 50 alone today at the Santa Ana courthouse, then I am still leaning towards my 1800 rough estimate. We will see a month this year with 2000 foreclosures. That is more than triple the record in 1996.



I checked for you on HB, currently there are 84 scheduled for the SA courthouse foreclosure auction as of today. Figure 60%-70% will end up going through foreclosure. If you want, I will update this thread time from time, and you can show the wife just how bad it is. Hey, if it gets better for a few months, then it might be better to buy after all. There are quite a few that start with a 1 and have six more numbers after it too.</blockquote>


Yeah, please do update the HB foreclosure. Thanks very much.
 
[quote author="stepping_up" date=1219360124]As the wife approaching 40 who wanted a house married to a man who doesn't pay much attention to the real estate market and was on board with buying this year, I suggest waiting. We closed escrow in May and at the time it seemed like a really great deal, but there is a big part of me that wishes we had waited because prices are still dropping quite rapidly. We were able to get a 5.875 fixed back then, so when I weigh that vs the higher rate today, the payment is pretty much a wash with the lower purchase price.



On the one hand, we both really enjoy having our own house with a yard. On the other, we would have preferred a better location. If it was a matter of having to move into another rental at market vs buying this house, we would have definitely opted for the latter, even knowing what we know now. What gives me buyers remorse is that we gave up a steal of a deal on our rental. Even though buying this house is essentially at rental parity when you factor in the tax break, it's only so when you consider market value rents.



Initially I was really discouraged with the continued decline in prices, but as time goes on I think less and less about what the market value is today, meaning I've gone from obsessing over it to something I still think about daily . I think that's mostly because I've had to resign myself to accept that it may very well decline an additional 10%-20% from what we paid. I'm not sure if this stems from the natural tendency of owners to deny the worst, but I believe it's more likely to be an 11% drop than a 20% drop. I have a really hard time believing the uber bears predictions, but I also laugh at the bottom callers.





However, I haven't seen anything else come on the market here that I felt was a better value and wished we bought instead. Actually, there have been one or two, but they got snapped up so fast that we wouldn't have been able to buy them. There was one that appeared to be sooo much better for sooo much less that I was agonizing for two days over it, but when I went to look at it, thankfully it turned out to be a total POS. The day I do see something come on the market that is clearly a significantly greater value in our range, I know it will bother me quite a bit. I should just stop watching the market, but I can't help myself.



It sounds as though you've found your compromise, so my knife catching blather isn't much of a help. Your mutual resignation on the decision will take care of the inner debate of "do we or don't we."</blockquote>


Thanks for sharing your perspective on this. I think if I jump early I may end up with a pretty bad case of buyer's remorse and I definitely want to avoid that.
 
[quote author="graphrix" date=1219368754][quote author="Trooper" date=1219362565]upper sez: <em>Wow, 1/3 of IHB voted to buy this year!! Double U tee eff!!!



</em>

Duh ! Those votes are all from the realtors that lurk on the IHB !</blockquote>


Thanks to Lansner's blog, they know how to clear the cookies so they can vote multiple times. Damn you Lansner!</blockquote>


Bastards.
 
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