***UPDATE*** Closing on Jan 15, 2008 - Savannah

jim jones-



you right bout everybody being different... as for right now i would prefer not to have a yard. i hate doing yard work on the weekend. heck i hate cleaning up. most likely we will hire a maid. hahahhaaa yea you can say i am lazy. i work hard monday though friday... last thing i want to do is work on my house. maybe i am just not there yet. as for fixing up my own house.... i would have no clue. but if you ask me about computers and software that is where my expertise is at.



i would agree with you. HB house for 460k yes in 1.5 years. interest rate would be 7-8% thus it would cost more to buy and it would be alot harder to borrow money. that is guaranteed. i been reading that 2008 the loan process will change alot. DTI ratio might get dropped or underwriting and appraisal rules will get change also, making the buying process all that much harder. i have friends in the loan business and they say that all their bread and butter program are getting major rework or taken away. even the 30 year conventional is getting some upgrade and fixes. they didn't tell me excatly but they did mention that it will be tougher even for those with good credit and full doc.



i didn't experience though the 80's crunch or the 90's down cycle but they keep talking about how much harder it will be this time compare to the past cycle. too many banks are getting burn with the subprime and investor are scare.
 
<p>Jbatzmaru-


You seem to have a good understanding of how much more difficult it will be to secure financing in the coming years. If this will be the case, there will be a commensurate drop in the price of real estate, which will also be further exacerbated by rising interest rates. I think you have a general understanding/acceptance of this notion, but I'm not sure you fully appreciate just how much prices will drop given these factors. If wages don't skyrocket (which they won't), who do you think will be buying these homes unless they drop significantly in price? </p>

<p>It seems to me that you are more focused on somehow trying to "protect" yourself from these factors (i.e. it will be more difficult for me to get a loan next year, so I better do it <strong>now</strong>!) rather than thinking about the nature of the overall market and what it really means to purchase a rapidly depreciating asset. This is realtor talk! Remember that it will not only be more difficult for <em>you</em> to get a loan, but it will be more difficult for <em>everyone</em>. At the same time, builders will still need to sell homes to a population of workers/buyers who are still making the same average salary and who are all facing the same credit crunch. Result = significantly reduced prices. There are no two ways about it. </p>
 
You would be foolish to look at monthly payments alone as an indicator of affordability. Though higher interest rates can offset (some of) the reduction in selling price of the house, you can refinance a house purchased at (or near) the bottom later on. Nothing short of a short sale will reduce the principle.
 
jbatz,





i'm curious as to how you estimated your monthly tax pymt. i didnt see a sales price but i'm assuming around $450k is what the residence2 is selling for according to lennar's website. including mello roos and using 1.8%, that gets you to $8100/yr or $675 a mo. less than $100/mo but over the course of a yr, when that tax bill comes you might be surprised.





please keep the taxes in mind carefully. the comment about the taxes being a wash causes me a bit of concern for your sake. while it may technically be a wash, prop taxes are due in dec and april. also keep in mind there will likely be a supplemental tax bill about 6-8 months after you close. so your tax refund may not conveniently coincide with when payments are due. and if your refund turns out to be different than you estimated (for example: you get hit by the AMT, which is certainly possible where your income range is at), suddenly you're caught in a bad situation.





i cringe whenever i hear people say things like, i'll just sell some investments, or something along the lines of that -- i.e. coming up with the money to pay taxes at a later time. it's the exact sort of thinking that is causing many to lose their homes now.





"i can always refi so its ok if i do an adjustable rate loan"


"the house will appreciate so its ok if i take out an interest only"


"my equity will just keep growing so its ok if i take out an HELOC and splurge a bit"


"my income will go up so its ok if the house is a burden for the time being"





how i like to think of taxes in my mind is that the money technically isn't mine -- its the governments. i'm just holding it for them temporarily, so i maintain an escrow acct with the loan servicer. even though i would get better return keeping the money in savings on my own. the convenience and also preventing myself from dipping into those funds is worth it to me. risk vs return, i suppose. many would prefer to manage the money on their own and keep the interest in the meantime or adjust their w2 so they're getting the tax benefit with each paycheck instead of once a yr. but the point being the money should be available on a monthly basis.





so its worth takign a look at your finances and also thinking about the timing issues regarding when taxes are due and what pace you need to save to be ready for the pymts.
 
acpme has great points !



- you are underestimating your taxes

- you are not taking your HOA in consideration

- your payment will double ! in ten years

- you asume you will be able to refi and or make more money, or sell the house at a profit



all this is a gamble, look at the people who took that gamble a few years back...



so if you can



1.)put your principle of you interest only loan away on a monthly basis and invest it $500.- to $600.- a month

2.)pay your HOA right now (invest for the next two years) $350.-

3.)put your monthly tax aside and invest it $650.-

4.)have the dicipline to not touch this money except for paying taxes once a year and principle in 10 years into the loan

5.)have at least 3 better yet 6 months of salary in the bank (that would be $60k)



buy it.



so if you can afford your loan payment of $1600.- and on top of that a monthly payment of $1600.- and still live in comfort, go for it, otherwise you are taking a big gamble !



my opinion of course... yes the market will drop further, the homes will get cheaper, but i think the new housing market will be less affected than the used homes. i just bought brandnew, but the numbers work for me and i like living in my own home, not a rental. yes i would be making more money investing the money, but looking at a number in my bankaccount does not make me happy. living in my own home in a great neighbourhood will.



good luck to you and make sure to look at the long term picture not the payment now...
 
acpme- when i say tax is a wash... i mean i have money saved up to pay the bill once a year and when i get my refund it goes back into my savings account. so assume i pay property tax, and income tax and blah tax.... i am thinking that my refund will equal to my property tax. that to me is a simple wash. actual price is 435k.



as for bluefire...comment... i understand what you are saying... i know price will drop that is a given. but how far and how bad will the credit crunch affect everyone that is unknown. what i am seeing is that people who are seeing house reset in 1-2 years from now, they are maxing out their line of credit and taking that money to put down on their next house under their family member's name and sending in the key to the bank.... chain mail is starting up again. and you know what happens next.... interest rate will go from 6% up to the roof.... like back in the early 90's



One quick comment. just had lunch with a friend who works for an design/egineer group that is working on the great park. her project got cancel no more plans to build for her down there and all her other project are on hold indefinitely. Can anyone comment on how this will affect the economic of housing and jobs in OC?
 
jbatz - the refund won't be equal to the property tax. remember, its a deduction not a credit.


heres a very simplistic example: lets assume your income is 100k and income tax is 30%. in addition you pay $5k in prop taxes.


you're assuming you pay 30k + 5k in total taxes, then get a refund of 5k so its a wash, right?





not so unfortunately...


the 5k reduces your taxable income from 100k to 95k. so instead of paying 30k in income tax, you pay 28.5k (30% of 95k.) assuming you made left your w2 unchanged, you would get a refund of 30-28.5 or $1500 (can also think of this as 30% of 5k.) in other words, the IRS is not considering the 5k you paid in property taxes as income. same applies to mortgage interest.





i apologize if u already knew this. just wanted to make sure you understood the tax considerations correctly. common mistake when people think of tax deductions vs credits. big difference because at the end of the yr you might realize you underestimated your savings by 70%!
 
i hear you acpme- but last year with my house in az i already get back about 5200 bucks. so this year with my place in irvine.... more deduction... i am hoping to get back 7200. i don't think it is a reach. federal and state.



as for the house in az, family vacation home under my name....
 
acpme, you misunderstand jbatz's comments about it being a wash. He means deducting prop tax AND interest payments, it comes out to a wash.
 
jbatzmaru, u are playing with fire, look at my math and if you can't afford double the payment right now, don't do it. and the best way to pay taxes is by breaking close to even at the end of the year not get $7k back... that's $7k with no interest... if you don't have the dicipline to save the money elsewhere...

and $435k makes total tax just about $8700.-...
 
flmgrip- i hear ya bout breaking even at the end of the year but i haven't had the time to plug my number into turbo tax. probably do that when i get around to it. as for double up on the payment... i could afford it but man i would be tight squeeze if that is the case. but lets hope i won't have to pay double.... why would i pay double again? i think anyone who reads this board is smart enough to not stretch their budget. i could actually afford to buy in latana but i would be stretch to the max. so i choose not to do it. planning to pay off the savannah in 10-15 years. turn the townhouse into a positive flow income or just pay it down enough for the rental to cover everything hoa and tax and mortgage and then buy my first SFR. hopefully the market crash and i can pay cash for it. i hear 150k-200k for a SFR in westminster would be awesome. big lot and alot of my people. hahahhahaaaa
 
jbatzmaru,

Am I right in assuming you are Vietnamese, since you said there are "a lot of my people" in Westminster? My wife is Vietnamese also. Thought you would be interested in this article:



http://www.latimes.com/news/local/la-me-houston21dec21,0,3054899.story



Imagine buying a 4 BR home in Houston for $200k. It was already a pretty diverse city when I visited in 2002; now it sounds like it is really taking off. But I couldn't deal with the humidity and floods.
 
I think the thing that worries me the most is your assumption that you will be happy living in this unti for the next 10 years. Maybe you would, maybe you would not. As you really can't answer this question with any real confidence until after you have lived there for awhile. If the bears are correct and your unit drops another 20 percent in the next 2 years then at that point your 90k down payment is gone and if values continue to drop past that point you are now underwater and unless you are prepared to bring ever increasing funds of your own at closing you are effectly stuck in this unit. I hate to sound too bearish here but once you reach this point your options if you wish to sell become extremely limited.



The thing that has always worried me about condos is the fact that all it takes is for someone on the other side of my common wall to move and

be replaced by some noisy jerk, family with loud children, etc, etc, and over night my nice home becomes not so nice anymore. If you are underwater ifwhen this happens you are in a bad spot. Is there a limit on the number of units that can be rented out? I rent in a condo and it seems like half the people living here are renters.



I think in one of your previous posts you mentioned that you are planning to stay 10 years in this unit. I think the question I would ask myself is: "how can I be sure I will want to stay 10 years in a unit that I have yet to spend day one in?"



Sorry to be such a bear, but hey IHB is the land of the bears! And we roam free :)



Hopefully you are considering all possibilities here.
 
jbatzmaru, how are you going to pay off the unit in 10-15 years if you are paying interest only ?



double the payment is money for principle, taxes and hoa...



you do the math however and wichever way you want but make sure you do it right if you do want to yurn it over into a rental... right now you would need to rent it out for $3000.- to brake even...
 
saving about 2250 per month and another 8k per year in stocks from company. comes out to about 350k after ten years. hopfully in those 10 years i might get more money too but i did not calculate that in though.



jim jones.... that is something i am guessing on thus the question.... before the buy.... i don't know if i would be ok to live there 10 years... but so far everyone has point out several key points which i have thought of already. so no surprise yet.



SIDE NOTE: went to riverbend up in orange today and the builders are not wheeling and dealing anymore. anyone have any ideas? do you think they know something that we don't? they don't have standing inventory either. maybe one unit only out of the 3 community i visited. mello roos and tax up there is 2%. and they are only offering 25k in incentives. nothing else. 2 bedroom detached condo price at 441k-467k area is sucky at best. it could get better or it could get worse.... not sure yet. no upgrade on anything.
 
<p>jbatz,</p>

<p>I looked at Riverbend when it was just dirt. Finally, they started selling. The units I looked at started around $600k a yr ago. Then 6 mos. later, they lowered to 550k with 2 yrs. free of HOA and upgrades included. I almost considered but lending standard got tighter. That was a blessing in a way because a month later the same unit price dropped to 475k.</p>

<p>If they're not wheeling or dealing anymore as you have stated. I think they have reached bottom. </p>
 
<p>Lennar has an article in our shilling local newspaper, representatives quoted as saying that there are lots of people coming in and they are ready to buy. No tough questions, no questions at all, it's just assumed the representatives are telling the truth.</p>

<p>Lennar supposedly downsized the square footage in the subdivisions featured, to appeal to lower income people. (The lot size and square footage is huge by your standards.) Mid 200s to mid 300s. This to me, is not, as stated by Lennar, starter housingt. At least, not here, in the Land of Low Salaries. You guys could afford the prices comfortably. Lot size 50 by 130 or 75 by 130. And house size 2100 to 2700. Actually not bad prices, but not affordable for beginners.</p>
 
Columbus Grove is a much nicer area than Riverbend. Way nicer, no comparison.
 
<p>jpmorgan,</p>

<p>I agree. Although, Riverbend is nice within the community itself. But once you drive out of it. Oh, boy. Watch out. </p>
 
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