• Protip: Profile posts are public! Use Conversations to message other members privately. Everyone can see the content of a profile post.

Is it a good time to buy Real Estate in Cali?

Rating - 0%
0   0   0
Joined
Jul 15, 2006
Messages
4,341
Location
So Cal & On the Colorado river
My neighbors down the street are getting a divorce and thier house is vacant and its up for sale at a very good price. They are taking at least a $160K hit on it since they bought at the peak in 2006 for $589k and selling now for $429k. I was thinking of buying it since it has RV parking on the side of it and the area is quieter. I am on a busy corner and the back yard is adjacent to a busy street. I am tired of the noise where I am and was thinking that maybe I could rent out my house for a little more than the mortgage payment and move to my neighbors old house. It would be easy to keep an eye on the rental since I would essentially live across the street a few houses down. I was thinking that I would live in it for 6 years untill my youngest kid graduates high school and then re-evaluate.

I was thinking of offering $399K and putting 5% down. The mortgage and taxes on this house would be more than I am paying now, but I can swing it. I think it would appraise for more than the current asking price. It has tons of upgrades.

Is the Cali housing market near the bottom? Is the rental market decent or is it hard to find renters these days? I am going to talk with my friend who is a Realtor and then a Rental Property Management company to get their opinions.

What do you think? Should I go for it?
 
Rating - 0%
0   0   0
Joined
Feb 28, 2007
Messages
403
but by putting 5% down, you will end up paying a lot more $$$ for the interest?
how many year are you planning to mortgage?
 
Rating - 0%
0   0   0
Joined
Apr 1, 2008
Messages
350
Location
San Fransisco Bay Area, CA
To answer the market condition question, yes cali is very near the bottom and realtors are jumping on each other to get houses sold. My friend just bought a foreclosed house for cheap. In turns of your buy, I would definitely do some hard thinking ;-).
 
Rating - 0%
0   0   0
Joined
Jul 15, 2006
Messages
4,341
Location
So Cal & On the Colorado river
but by putting 5% down, you will end up paying a lot more $$$ for the interest?
how many year are you planning to mortgage?

I was thinking of a 30 year fixed or maybe a 5 year ARM. I could do 10% down but I'd probably have to give up my NSX to raise the cash. I have 23 years left on my current house and its at 5%.

I don't mind paying a little more interest since its a good tax shelter. I can get a 5.75% interest rate right now.
 
Rating - 0%
0   0   0
Joined
Jul 10, 2007
Messages
1,248
Location
Pebble Beach
I read that CA real estate is expected to drop another 16% this year.
 
Rating - 0%
0   0   0
Joined
Feb 28, 2007
Messages
403
I was thinking of a 30 year fixed or maybe a 5 year ARM. I could do 10% down but I'd probably have to give up my NSX to raise the cash. I have 23 years left on my current house and its at 5%.

I don't mind paying a little more interest since its a good tax shelter. I can get a 5.75% interest rate right now.

but isn't that if you pay less then 25%-20%, the bank make you buy some insurance which is about 4-5% of the total amount of your house!
so if you are buying it for $400k, you would have to pay $20k more just for the insurance, but of coz, it will be ad up to your mortgage!

i am in the market for a house too, but just waiting for a good one to show up so i don't have to give up my car for the down payment!
 
Rating - 0%
0   0   0
Joined
Mar 2, 2003
Messages
4,344
Location
San Francisco
First thing you should do is get qualified to purchase the property. As I understand, 5% down is difficult to obtain. Most mortgage companies are requiring at least 10% down. The problem with the mortgage market is that buyers are not able to obtain financing.
 
Rating - 0%
0   0   0
Joined
Nov 9, 2007
Messages
1,311
Location
Ora-gone
im not into real estate so i didnt read this article i saw on yahoo, something about how its a big market for people renting out houses/duplexs,

probably since people got turned upside down on thier house payments and cant afford them it would be easier to rent a house now since not as many people can get approved to buy houses and buying houses isnt the "cool" "in" thing right now.



i wouldnt see a problem buying that house, especialy if they paid 560 and your going to offer 400, hell in a few years(or the six year you mentioned) it will be worth 600k+


but i would make sure you can afford to pay the payments for both houses(not counting the rent you think your going to get) just to be safe so you have a shelter


good luck baller:cool:
 
Rating - 0%
0   0   0
Joined
Jan 24, 2006
Messages
1,349
Location
Los Angeles
yes cali is very near the bottom.

What are you basing this opinion on? REOs and foreclosures are piling up on the banks' books, preforeclosure activity is very high, and ARM resets have yet to begin the 2nd large wave. Meanwhile lending standards are tightening and about 1 in 3 deals fall out of escrow. The fundamentals are the only true floor for the market. $400k for a property is about fair if you could rent it for $2500/month or more. Check the neighborhood comps for rentals. Craigslist is quick and easy.
 
Rating - 0%
0   0   0
Joined
Oct 15, 2002
Messages
4,796
Location
West Vancouver
I say its too early when you dont have much margin for error. If you want to buy this house (in a buyers market) and sell yours (in a buyers market), than maybe thats better, but moving toward investment properties in CA right now is risky.

Why not wait for the market to turn and then step in? You will pay more than otherwise (probably), but you will at least have the mkt heading in the right direction.
 

Ski_Banker

Suspended
Rating - 0%
0   0   0
Joined
Sep 24, 2005
Messages
2,997
Location
Yesterday, today and tomorrow
Absolutely not. Best case, the market hits bottom (today, since it's dropping about 1%/month) and sits at that floor level for a long time. I'm not aware of a market ever behaving in such a way. Worst case, it continues to fall another 50+% as economic conditions deteriorate due to a host of non-real estate related economic problems.

Some facts:
- General Electric missed its Q1 earnings estimates by 10%, which just 3 weeks before the end of the quarter, it had confirmed. And GE is probably the most well run large organisation on the planet. Unprecedented.

- Same store retail sales (excl. WalMart) are down 5-25% Y/Y. That figure is staggering since inflation alone should result in 3+% increases Y/Y. Unprecedented.

- The auto asset backed loan market has completely dried up. Total new issuances have been steadily declining since August. As of a few weeks ago, the latest figure was "0" (February I think). Unprecedented.

- The student loan new origination market has almost completely dried up. Now, that's a funny one since the current economy should have little impact on student loan creditworthiness, since kids aren't expected to begin repaying for a ~2 years anyway. Apparently, typical buyers of student loan ABS are very worried about the prospects of new college kids getting a job in a few years. Unprecedented.

I could go on, but the point is, the economy is hemorrhaging and we are well past the point of "just a dip, then back to business as usual". And because it is an election year and our political leaders are laughable, no meaningful congressional acts will do anything to stop the tidal wave. We are a few months away from a Just In Time depression.

No, I wouldn't buy a home in California now.
 
Rating - 0%
0   0   0
Joined
Jul 15, 2006
Messages
4,341
Location
So Cal & On the Colorado river
Seems like its a bit too early to buy now. I suppose I should wait then and see how it all plays out. Usually RE sales peak in the summer, I wonder what it will do this year... I really like that house though.

Meanwhile I'll have to turn up the Stereo to drown out the street noise. Maybe I should install another fountain in the backyard.
 

Ski_Banker

Suspended
Rating - 0%
0   0   0
Joined
Sep 24, 2005
Messages
2,997
Location
Yesterday, today and tomorrow
One point I forgot to make -- the international economy is *not* decoupled from the U.S. as many jokers want to believe. GDP size in 2007, source: Wikipedia.

1 Flag of United States 13,794,221
2 Flag of Japan 4,345,948
3 Flag of Germany 3,259,212
4 Flag of the People's Republic of China 3,248,5222
5 Flag of United Kingdom 2,755,920
6 Flag of France France 2,515,241
7 Flag of Italy Italy 2,067,680
8 Flag of Spain 1,414,646
9 Flag of Canada 1,406,430
10 Flag of Brazil Brazil 1,295,355
11 Flag of Russia Russia 1,223,735
12 Flag of India India 1,089,944
13 Flag of South Korea South Korea 949,698
14 Flag of Australia 889,681
15 Flag of Mexico Mexico 886,441
16 Flag of the Netherlands Netherlands 754,883
17 Flag of Turkey Turkey 482,015
18 Flag of Belgium Belgium 442,774
19 Flag of Sweden Sweden 431,605
20 Flag of Switzerland Switzerland 413,921


Bolded are the countries that have property bubbles similar to the U.S. (except perhaps Canada, but that is bolded because of how it's economy is so completely tied to the U.S. outside of Oil & Gas)

Take a close look at the magnitude of the U.S. relative to everyone else. The number two economy, Japan? Has an even worse aging demographic trend than the U.S. and its interest rates are already at zero. It never really recovered from it's 1980s real estate driven boom. It is also an export economy, to?? The U.S.

Number 5 on the list - UK is in the same real estate bust that the U.S. is in, just a year or so behind. Also, the UK economy is driven by two industries. Financial services (London) and Oil & Gas (Scotland). Nothing else to speak of, except London tourism. Financial services in London (as with everywhere else) is on the decline. Imagine what that will do to property values in the UK...

Number 3 on the list - Germany is an export driven economy (cars, engineered goods around the world). It will not suffer due to a credit bust, it will suffer due to the credit busts of its major customer(s). And since it has such an inflexible labour market, businesses will have to absorb all the losses.

So that leaves us with number 4 on the list - China.
Ahh, the communist saviour of the global economy. Too bad that it is entirely an agrarian and export/manufacturing driven economy, primarily to the U.S. The next time you hear some say "The U.S. has decoupled [from the global economy and China/India]" be sure to ask "How? All my suppliers are in China and my backoffice has been outsourced to India."
 
Rating - 0%
0   0   0
Joined
Jan 30, 2001
Messages
22,207
Location
Pa
A divorce sale is usualy looked at by buyers as a fire sale so if you love that house negotiate lower,say another 10%.
 
Rating - 0%
0   0   0
Joined
Feb 20, 2000
Messages
2,878
Location
N/A
If this chart is right, houses never gain value, they simply keep up with inflation. If that's true, it looks like you should be paying 1998/1999 prices(about 50% off) to get an AVERAGE deal.

thumb_480_llaf_chart1.gif
 
Rating - 0%
0   0   0
Joined
Nov 9, 2007
Messages
1,311
Location
Ora-gone
If this chart is right, houses never gain value, they simply keep up with inflation. If that's true, it looks like you should be paying 1998/1999 prices(about 50% off) to get an AVERAGE deal.

thumb_480_llaf_chart1.gif

you guys know there IS a point to how low stuff drops,

now this 590k dollar house for 430k is dam decent price right now, 400 would be an great deal. think about it THATS 2 HUNDRED THOUSAND DOLLARS.


the prices are not going to go 50 percent off 2 years ago prices unless it got to a point where all of you were selling your nsx's for 10,000 dollars and having trouble finding buyers.



but if im wrong and any of you have a 500,000 dollar property youll sell me for 250,000 than send me an email in a couple months, i might be buying
 
Rating - 0%
0   0   0
Joined
Dec 8, 2002
Messages
1,469
Location
Atlanta Ga
Absolutely not. Best case, the market hits bottom (today, since it's dropping about 1%/month) and sits at that floor level for a long time. I'm not aware of a market ever behaving in such a way. Worst case, it continues to fall another 50+% as economic conditions deteriorate due to a host of non-real estate related economic problems.

Some facts:
- General Electric missed its Q1 earnings estimates by 10%, which just 3 weeks before the end of the quarter, it had confirmed. And GE is probably the most well run large organisation on the planet. Unprecedented.

- Same store retail sales (excl. WalMart) are down 5-25% Y/Y. That figure is staggering since inflation alone should result in 3+% increases Y/Y. Unprecedented.

- The auto asset backed loan market has completely dried up. Total new issuances have been steadily declining since August. As of a few weeks ago, the latest figure was "0" (February I think). Unprecedented.

- The student loan new origination market has almost completely dried up. Now, that's a funny one since the current economy should have little impact on student loan creditworthiness, since kids aren't expected to begin repaying for a ~2 years anyway. Apparently, typical buyers of student loan ABS are very worried about the prospects of new college kids getting a job in a few years. Unprecedented.

I could go on, but the point is, the economy is hemorrhaging and we are well past the point of "just a dip, then back to business as usual". And because it is an election year and our political leaders are laughable, no meaningful congressional acts will do anything to stop the tidal wave. We are a few months away from a Just In Time depression.

No, I wouldn't buy a home in California now.

I don't like Ski, but he is correct here.
 
Rating - 0%
0   0   0
Joined
Apr 13, 2005
Messages
5,482
Location
Vegas/SoCal
FWIW, I recall Jim Cramer saying, about 3 months ago, he was planning on buying up real estate like mad in about a year and a half.
 
Rating - 0%
0   0   0
Joined
Jan 24, 2006
Messages
1,349
Location
Los Angeles
now this 590k dollar house for 430k is dam decent price right now, 400 would be an great deal. think about it THATS 2 HUNDRED THOUSAND DOLLARS.


the prices are not going to go 50 percent off 2 years ago prices unless it got to a point where all of you were selling your nsx's for 10,000 dollars and having trouble finding buyers.

$590k was a bogus bubble price enabled by lax lending standards and ridiculous expectations about the future. The same house may have been worth $250k in 1998. If prices can rise over 100% in a few years, they can surely fall 50% in a few years too. I routinely see homes currently listed for over 1/2 off a previous closed price.
 
Rating - 0%
0   0   0
Joined
Oct 21, 2005
Messages
3,023
Location
Austin, TX
My neighbors down the street are getting a divorce and thier house is vacant and its up for sale at a very good price. They are taking at least a $160K hit on it since they bought at the peak in 2006 for $589k and selling now for $429k. I was thinking of buying it since it has RV parking on the side of it and the area is quieter. I am on a busy corner and the back yard is adjacent to a busy street. I am tired of the noise where I am and was thinking that maybe I could rent out my house for a little more than the mortgage payment and move to my neighbors old house. It would be easy to keep an eye on the rental since I would essentially live across the street a few houses down. I was thinking that I would live in it for 6 years untill my youngest kid graduates high school and then re-evaluate.

I was thinking of offering $399K and putting 5% down. The mortgage and taxes on this house would be more than I am paying now, but I can swing it. I think it would appraise for more than the current asking price. It has tons of upgrades.

Is the Cali housing market near the bottom? Is the rental market decent or is it hard to find renters these days? I am going to talk with my friend who is a Realtor and then a Rental Property Management company to get their opinions.

What do you think? Should I go for it?

I wouldn't be surprised if the forclosed on couple were asking these same questions. Nobody and I mean NObody knows how far the housing market will drop. Anyone that tells you otherwise is probably trying to make money off you or had no idea what they are talking about (putting it kindly).

With 5% down, there is at least a 50% you will end up with negative equity in the house and then you'll be one of those "foolish suckers" everyone keeps talking about.

If all you can 'afford' is 5% down, you probably can't afford it in these market conditions. Let your friends buy all the property they want and get ready to loan them money this time next year. Go through Ski_banker's facts* and reconsider. I've been studying the current housing crisis for a couple years, you are in ground zero my friend.
 
Rating - 0%
0   0   0
Joined
Sep 26, 2005
Messages
1,461
Location
MD
If this chart is right, houses never gain value, they simply keep up with inflation. If that's true, it looks like you should be paying 1998/1999 prices(about 50% off) to get an AVERAGE deal.

thumb_480_llaf_chart1.gif

Good point appreciation is about 2-3% per year depending on region.

Housing market fluctuates based on 10 year cycles of war demographics etc.. I would say there is at least one more year of depreciation and expect another interest cut by the fed.

I would wait 1 year when it bottems out maybe even year and half, if your credit is good 10% down and 5 months mortgage savings in your account should lock the deal and I would do a 25 year fixed.

FYI if you purchase a forclosed home there is a tax break. :biggrin:

GDP is based on credit not equitiable cash value.

Our economy is largly based on the following.

1. Armorments
2. Pharmacuticals

.. and not the housing market.
 
Rating - 0%
0   0   0
Joined
Oct 15, 2002
Messages
4,796
Location
West Vancouver
One thing that people are not factoring in is that the neighbourhoods are going to become less expensive independant of individual housing values.

Once you start getting foreclosures, those properties are more likely to become a mess. Grass, weeds, out of shape paint, etc...Put enough of those on a street and all of a sudden your once "sought after location" becomes an eyesore.
 
Rating - 0%
0   0   0
Joined
Oct 21, 2005
Messages
3,023
Location
Austin, TX
you guys know there IS a point to how low stuff drops,

now this 590k dollar house for 430k is dam decent price right now, 400 would be an great deal. think about it THATS 2 HUNDRED THOUSAND DOLLARS.


the prices are not going to go 50 percent off 2 years ago prices unless it got to a point where all of you were selling your nsx's for 10,000 dollars and having trouble finding buyers.



but if im wrong and any of you have a 500,000 dollar property youll sell me for 250,000 than send me an email in a couple months, i might be buying


That logic will leave you broke. If it's overpriced 300,000 dollars and you only get a 250,000 discount the number are irrelavent.

What you are missing here is people don't buy houses with cash. In fact, most people cannot buy their houses cash even if they wanted to. They rely on loans from banks and the terms of the loans determine what house they can buy. The required downpayment has risen from nothing to real money on a more expensive house like this. 20% down on a 400k house+closing costs isn't exactly pocket change. Even 10% down plus closing costs is a very clean NA2 in cash.

So the lending standards have tightened dramatically, down payment requirements have risen, and people's ability and willingness to provide such downpayments has been reduced DRASTICALLY over the last year.

Homes in these areas could fall a long ways. This is a gamble and a poor one at that. You don't buy when the chart looks like it's falling of a cliff, you wait until it consolidates and makes a move upwards.
 
Rating - 0%
0   0   0
Joined
Apr 10, 2000
Messages
6,127
Location
Silicon Valley
Absolutely not. Best case, the market hits bottom (today, since it's dropping about 1%/month) and sits at that floor level for a long time. I'm not aware of a market ever behaving in such a way. Worst case, it continues to fall another 50+% as economic conditions deteriorate due to a host of non-real estate related economic problems.

No, I wouldn't buy a home in California now.
+1 (to this and the others that say "no")

over the past 6 months i've been close to pulling the trigger on an investment property and have backed away in the belief that economic indicators would continue to deteriorate. they have and, i believe, they will get even thumpier over (at least) the next 3-6 months.
 

TC

Experienced Member
Rating - 0%
0   0   0
Joined
Feb 21, 2003
Messages
561
Location
Seattle
I think the issue of whether to buy or not isn't a binary yes or no, rather it depends heavily on personal situation, the particular region in California and even the precise neighborhood.

Queenlives - I see that you are in Silicon Valley. I just sold a house in the Woodside/Emerald Hills area (which is about in the middle of the Silicon Valley) for $2.0m in less than 30 days from listing to close of escrow. Yeah, had I sold it 18 months ago, I would have gotten about 7-10% more money. As it was, I was up a pretty good clip from when I bought it 6 years ago.

I also purchased a new house (this one is in greater Seattle) and believe that I paid 15-20% less than I would have paid 18 months ago. The cost of money is also very low - especially with a substantial down payment (as in 25% or more). Also, the 2 banks that I spoke with about a mortgage for the new house were mainly interested in downpayment and reserves (and credit score). I had to produce only about 10 pages of documentation, namely proof of assets. The two banks really competed for the business; I ended up with zero bank fees (not even the appraisal fee) and a 7-year ARM just under 5% (JP Morgan/Chase).

Now, I don't plan (or believe that I will need) to sell in the next few years, so if the value of my home goes down in the interim, I won't care too much. The people that seem to have gotten hurt the worst are those who purchased at/near the peak of the bubble and then had to sell on the down slope. I would guess that most people who purchased 3+ years ago are still in the money, even with the decline in values (select cities in Florida, CA, Nevada and elsewhere not withstanding).

Of course, we all would like to buy at the very bottom and sell at the very top. But if you believe that values today are being artifically compressed due to the subprime mortgage fallout (just as they were actifically elevated due to the subprime mortgage availability), then you are buying something with intrinsic value. Once the market returns to some equilibrium, then you will have a gain in value. Factor in that money is cheap today, and it is something to strongly consider. IMO.
 
Top