Should I buy now...?

NEW -> Contingent Buyer Assistance Program
Wow I never realized this thread will get that active overnight.





To answer a few questions.





Sorry for the long reply...





My main concerns:





1. Rent is $1,600 1 bedroom - Mortgage is $4,600 3 bedrooms full amortized including HOA Taxes and Melo Roos. This pushes us in the high ceiling of what we can afford. I will be living in the house no less that 5 years though. Its in Columbus Grove and the location is just perfect for me. My Land lord does not really bug me. By the price of my rent alone you can see that I live in one of the better apartments in Irvine. It looks really nice, have perfect neighbors (I actually hang out with them), very good parking and its close to everything.





2. My wife works for a bank so we have basically the loan at their cost. No application /processing fee and the rate is a tad lower that market. Thats how we ended up with the 30 year fix





3. Yes it's true that the mortgage is fixed and and our salary (me and the wife) has nowhere to go but up. Not to mention that our cars will be paid off in 2 years which means $1000 extra in cash flow each month. But all of this is not enough to offset double digit depreciation of the real estate market. I want to know that I can trade up if I need to in 5-8 years and right now thats not even a guarantee. For instance I already got around $25,000 of incentives from the builder so I can sign the purchase agreement 1 month ago. That alone makes me wonder how hard it is to sell these town homes. Seeing those William Lyon home owners picketing every weekend does not make this situation easy as well.





4. This is my 1st home and I don't want it to be my last. The way the market is going if I get in now I might be stuck with this for the next 10 years... No Bueno! We are buying to have something that we can call my own but there is no way I will live in a town home for the next 10 years and start a family in there.





5. Honestly I could care less about tax breaks. I'm young 27 and early on I've accepted that there are 2 things that you cant avoid in life death and taxes. Since I was younger I structured my claim on dependents such that I never get anything back on tax returns and most of the time I end up paying $300-700.





6. I am not tied up by any means I have 2 months before I close escrow. If I move now I can probably get my deposit back. Now I need a good tactic or excuse to back away from the purchase contract so I can get my deposit IF I do consider holding off. Any tips?








Thanks in advance for taking the time to read.
 
Great article about rent vs. buy - also check out the interactive chart.





http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html?ex=1176955200&en=27ea77576a1810ca&ei=5070&emc=eta1
 
How close can a buyer get out of the deal,( Escorw ) i am closing escrow in a week, its a new home. will the builder give back the deposit, ( floor has been laid ) please
 
<p>arctichaze-</p>

<p>You mention a few clues that suggest Kensington Court. You've probably reflected upon the price history in that thread. On one hand, >$100k in reductions might make one think it is much safer to buy now, since a substantial correction has occured. With my perspective, I think "What if I purchased now and it dropped this much again?"</p>

<p>Check out the Kensington Court community thread for some interesting MLS additions to the mix.</p>

<p>SCHB</p>
 
Artichaze





You just made the case yourself for getting out of this deal. If you look at the OC Fliptrack Blog, sorry if I misspelled, they highlighted 4 Townhomes...much more like condos...in Talega that in about 1.5yrs have lost more than 20% of their value. On another note you can also look at it this way: If you bought your "upgraded" house in 5 to 7yrs from today you would have this much more in cash for a down payment:





Cars: 2yrs left till paid off, $1000.00 / mth. 3yrs of savings equates to $36,000.00


Rent: you can find a nice two bedroom in Irvine for $2200.00 / mth. Assuming you could put away another $1800.00 / mth, this is much less than the difference b/w rent and mortgage, that is another additional $108,000.00.





In total you could have an additional $150,000.00 in cash, not including interest or ROI, that you could use for a down payment. Let alone the comfort of knowing that your purchase might be more secure vs what today's market is offering.





SoCalHousingBubble....sorry I should have clarified myself. I thought he was saying he was going to live in that place for quite sometime. Therefore, the overall impact could, emphasis on could, be less drastic vs the scenario that Artichaze presented later in the blog about upgrading in 5 to 7 yrs.
 
<p>mino2126 said</p>

<p><em>"....sorry I should have clarified myself. I thought he was saying he was going to live in that place for quite sometime. Therefore, the overall impact could, emphasis on could, be less drastic vs the scenario that Artichaze presented later in the blog about upgrading in 5 to 7 yrs."</em></p>

<p>OK. I thought you were implying "Don't expect double digit appreciation [to begin after you complete your purchase]" You meant in the longer-term.</p>

<p>Clarified.</p>

<p>SCHB</p>
 
Okay the consensus seems to be to get out of it... how can I present my case to the sales office and get my deposit back?





I would have no problem telling them the truth but I'm afraid that wont hold any substance and they will just screw me over regarding my deposit.
 
<p>There was some good discussion about getting deposits back last week, but I don't remember the specific thread.</p>

<p>How much have you put down?</p>

<p>SCHB</p>
 
Let’s do some ROUGH math: Supposing the price of the house stays the same for the next 5 years, when you are wanting to get out,



Buy: $4600/mo x 60mo = $276000 – $90000 (deduction) = $186000 outlay

Rent: $2200/mo x 60mo = $132000 * 3.5% inflation = $141500 outlay

+ $2400/mo (savings) * 60 = $160000 (at 5% interest)



Net savings for renting a 2bd apt instead of the house = $160000 (in savings) + $45000 (less outlay) - $30000 (principal pmts) = $175000



Basically, your net outlay will be the same, since you’ll payoff about $30000 in principal. If you’re disciplined enough to save the difference every month, you will see that you have additional $175K in the bank to buy that house with. So you just have to ask yourself if $175K is a premium you are willing to pay for living in a bigger place that is your own. For some, answer is yes. For others, it’s no.
 
<p>With $6k in, they're going to try very hard to tempt you with a better deal to keep you from cancelling.</p>

<p>You'll need to go through your contract language and determine what your angle is. A couple-hundred-dollar RE attorney consultation would probably be worth it if there isn't a clear way to get the refund.</p>

<p>You did sign the pre-purchase agreement, so you need to be prepared to lose the money.</p>

<p>SCHB</p>
 
<p>All the calculations above indicate renting something smaller than the townhome you would have bought. I bet you can rent a very similar property and still save a substantial amount. I have seen SFH homes in Irvine for under $3000 a month. </p>
 
Oddly enough I cant justify paying over $2k for rent. But I am really picky so we got stuck with a 1 bedroom in the North Park Area.





I'm never gonna rent a house. Its either buying a house or renting a real nice 1 bedroom for us
 
" I'm never gonna rent a house."





Why not? I rent a really nice house, and it costs me half of the cost of ownership. Renting doesn't have to mean being uncomfortable.
 
Perhaps you should read this article in the NY Times:

<a href="http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html"> A Word of Advice During a Housing Slump: Rent</a>

<p> A promotional spot for the <a title="More articles about National Association of Realtors" href="http://topics.nytimes.com/top/reference/timestopics/organizations/n/national_association_of_realtors/index.html?inline=nyt-org" set="yes">National Association of Realtors</a> came on the radio the other day. The spot, introduced as something called “Newsmakers,” was supposed to sound like a news report, with the association’s president offering real estate advice.</p>

“This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”

<p> By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time. </p>

<p>That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, <a title="Find Real Estate listings and community news for Florida" href="http://topics.nytimes.com/top/classifieds/realestate/locations/florida/index.html?inline=nyt-geo">Florida</a> and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.</p>

<p> Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today, except for people who plan to stay in a home for many years. </p>

<p>With the spring moving season under way, The New York Times has done an analysis of buying vs. renting in every major metropolitan area. The analysis includes data on housing costs and looks at different possibilities for the path of home prices in coming years.</p>

<p>It found that even though rents have recently jumped, the costs that come with buying a home — mortgage payments, property taxes, fees to real estate agents — remain a lot higher than the costs of renting. So buyers in many places are basically betting that home prices will rise smartly in the near future.</p>

<p> Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter. The same is true in Phoenix, Las Vegas, the New York region, Northern California and South Florida. In the Boston and Washington areas, the break-even point is about 4 percent.</p>
 
<p> “House prices have to fall more before housing becomes a clear buy again,” says Mark Zandi, chief economist of Moody’s <a href="http://economy.com/" target="_">Economy.com</a>, a research company that helped conduct the analysis. “These markets aren’t as overvalued as they were a year ago or two years ago, but they’re still unfriendly. And that’s one of the reasons the market is still soft — people realize it’s not a bargain.”</p>

<p> There is obviously no way to know what home prices will do in the next few years. But there are two big reasons to doubt the real estate boosters who insist that it’s once again a great time to buy. </p>

<p> The first is history. After the last big run-up in house prices, in the 1980s, a long slump followed. In the New York area, prices peaked in early 1989 and then fell 9 percent over the next three years, according to government data. (Adjusted for inflation, the drop was much bigger.) Not until 1998 did prices pass their earlier peak. </p>

<p> Keep in mind that the 2000-5 boom was even bigger than the ’80s boom and that house prices on the coasts, according to the official numbers at least, have fallen only slightly so far. So it is hard to imagine that prices will rise 5 percent a year, or another 28 percent in all, over the next five years.</p>

<p> The second reason for skepticism is that buying has never been quite as beneficial as Realtors — and mortgage brokers, home builders and everybody else who makes money off home purchases — have made it out to be. Buyers have to pay property taxes on top of their mortgage, while renters have the taxes included in their monthly rent bill. Buyers also face thousands of dollars in closing costs (and, in <a set="yes" href="http://topics.nytimes.com/top/classifieds/realestate/locations/newyork/newyorkcity/manhattan/?inline=nyt-geo" title="Find Real Estate listings and community news for New York City">Manhattan</a>, co-op charges). Renters, meanwhile, can invest what they would have spent on closing costs and a down payment in the stock market, which hasn’t exactly delivered a bad return over the last 20 years. </p>

<p> And that famous mortgage-interest tax deduction? Yes, it reduces the borrowing costs that come with a mortgage, but it doesn’t eliminate them. Renters don’t face any such borrowing costs.</p>

<p> Almost two years ago, I interviewed a thoughtful 37-year-old man named Tchaka Owen, who happens to be a real estate agent. (Whatever the sins of the Realtors’ association, there are a lot of smart, helpful agents out there. Just remember that they have a financial interest in getting you to buy a house.) </p>

<p> Mr. Owen and his girlfriend, Polly Thompson, had recently moved from the Washington suburbs to the Miami area and decided to rent a two-bedroom apartment with spectacular bay views. “You can get so much more for your money, renting instead of buying,” he said at the time.</p>

<p> Sure enough, house prices soon began to fall in South Florida, and Mr. Owen and Ms. Thompson started to think about buying a place. A three-bedroom Mediterranean-style house that they liked was originally listed for $620,000 last year, but the price was later cut to $543,000. They bought it in June for $516,000. Since then, the market has fallen further, but Mr. Owen said he didn’t mind, because they plan to stay in the house at least a decade. “We love it,” he told me.</p>

<p> Clearly, there are benefits to owning a house beyond the financial, like the comfort of knowing you can stay as long as you want or can fix the roof without permission. But real estate has been sold as more than a good way to spend money. It has been sold as a can’t-miss investment. Back in 2005, near the peak of the market, the chief economist of the Realtors’ association, David Lereah, published a book called “Are You Missing the Real Estate Boom?” The can’t-miss argument was wrong then, and it may still be wrong today.</p>

<p> After hearing that radio spot, I called Ms. Combs and asked her whether she thought there was any chance that she and her fellow Realtors had gone a bit too far in promoting the boom. “I absolutely disagree,” she said, still cheerful. “We help people look at the marketplace.”</p>

<p> So I asked what advice she gave her own clients in Grand Rapids, Mich., where she is an agent. “We often tell people that they need to stay in a house five to six years for it to make sense,” she said.</p>

<p> That’s a nuance that didn’t make it into her “Newsmakers” interview. In Grand Rapids, where the median home costs $130,000, it is probably good advice. In a lot of other places, it may still be too optimistic.</p>
 
<p>For those that are only staying with the house purchase because of being afraid of the deposit, they should not put this into that big of a consideration. You are buying a $500,000 (or more) house. Your $15,000 is 3% of the whole price (the ratio is even less if it's $750,000). Any price depreciation will more than cover for this so don't let this factor alone change your decision.</p>

<p>I do understand that it is big money and you should try whatever you can to get it back though.</p>

<p><a href="http://blog.davidmillions.com">My Own Millions Blog</a></p>
 
arctichaze: Looking at your situation initially, I made the (faulty) assumption that there was a large barrier to leaving the current deal and that you were going to keep it for a relatively long time. Since that's not the case, I wholeheartedly agree with the others. Get out. I'm of the opinion that in the 5-7 year timeframe the prices will still be lower than the cost currently. Looking at the other people's calculations, it will probably be worth getting out even if you lose your deposit...
 
Add this to the equation... the builder's preferred lender attempted to broker our loan which in effect produced a lot of inquiries on our credit report. Plus our lease on the current apartment is about to expire so they ran a report too!





Our credit score when we began this whole fiasco was 705 and 703 now its down to 680 and 685. Sub-prime Lending here we go!





Hooray!











I really feel bad for the $6k thats almost 1 month of hard earned money for us but it was a gamble to begin with. Well, I have a lot less to lose now than in 1 year's time if we got the house and double digut depreciation hits.
 
You must log in or register to reply here.
Back
Top