Sunday, February 8, 2009

Is it really "a great time to buy"?

According to every realtor out there it is. But what's the deal, is it a good time to buy?

My short answer is....NO, here's 5 reasons why

1. Prices are still falling. Unless you can find a deal where you are picking up the property for significantly less than the comps you will probably find yourself underwater. That's not a good place to be. It limits your options if something comes up and you need to sell.

2. There's no rush. Even if prices were to stop falling there is nothing to indicate that they will start to rise again. The economy sucks, employment sucks and there is a glut of homes in distress. So there is no reason to rush into the market. You are not "going to be priced out" anymore.

3. In most better areas it's still cheaper to rent. Granted this may no longer be the case in Perris or San Jacinto but in Corona or nearby areas it's still cheaper to rent.

4. The foreclosure wave is still coming. Unless Obama and crew can pull some miracle from their hats, the ALT-A wave is due to hit over the next year and a half. Then there is the prime wave, also still to come.

5. Low interest rates seem like a great thing but they can also trap you. If the rates suddenly rise back to the normal 8% range, it will put tremendous pressure on prices. A person that could afford a $250k at 6% can only afford a $180k home at 8%.

So, if it's a crappy time to buy why are sales up? First sales are up because last year they were practically non-existent. It would be nearly impossible not to be up. If you look at the majority of what's selling though you will find it's low end stuff. Much of it is being sold to investors for use as rentals. There are even still flippers around, believe it or not.

There are still reasons to buy though. If you can get a deal that limits your downside risk then it might be worthwhile. Lets face it, renting sucks. It may be worth a 10% equity loss just not having to deal with a landlord. And if you stay in the house long enough you will eventually surface from being underwater. If you can easily afford the payments you tend not to dwell on what the house is worth. That only becomes a factor if you want to refi or get a home equity loan. Buying now will definitely limit your options in that respect. You're not going to be able to "pull out" $40k to put a pool in a few years from now.

Currently the median is falling at about 5% per month. Don't kid yourself though, that does not mean prices are falling at 5% per month. Prices are falling at probably 1/2 that. The rest of that decline is due to the shift in sales to the low end of the market. There is practically nothing over $500k selling these days in the IE and there's not much over $350 selling. Most of the sales these days are between $100k and $300k.

In the end, whether to buy or not is a personal decision we all must make on our own. We should gather as much info as we can and decide whats best for our families. As with most financial decisions there is a certain amout of risk in buying a home. But sometimes you have to roll the dice.

17 comments:

Seth Dallob said...

Sounds like our resident housing bear is starting to take from his hibernation - do we have breaking news of a home purchase?

Kyle said...

Golfer X (or anyone else), heard anything about this Feb. 20 cutoff date for banks to list their current inventory on MLS. I struck up a conversation at a Yardhouse with a fellow that mentioned a deadline for banks with too much inventory to stop sitting on them and price them to sell. Has anyone heard anything about this, or did this guy have too many yards of beer?

Oldtimer said...

Good stuff, X.

I'll add my 2 cents. This may not be a great time to buy (prices are still falling, distressed inventory is still huge and looming), but it is also no longer a terrible time to buy in the IE.

Buying a home in Corona for $100 a foot is a much better idea than buying that same home for $250 or $300 a foot.

Unknown said...

Hello Everyone,

Having been looking around for a property since last spring, this has been our experience.

There are many houses. But unless you can afford more than 2 or 3 mortgages, there is only ONE Dream Home for most family.

As the process goes... once you are attached to a listing emotionally, you will pay what you can afford.

The Realtard really smell blood when they turn you from buying a property into buying a emotionally charged sanctuary.

Some of us may regard future job security as a prerequisite to a bigger home purchase, but a lot of people don't or can't. They didn't and/or won't think that far ahead.

Case in point, we saw a REO listing last summer that seems to be my better-half's dream Home. It was a loss leader at that time and when the price was lowered to below 600k, a family won the Best and Final to close at the low 600k.

That family had sold their previous house for more money and took the money to buy this much Bigger REO Home. It worked out great at that time.

5 months later, the husband lost his job but luckily found another job out of state. They now list their Dream Home at almost 700k.

In one respect, I feel bad. Few days ago, I previewed this house that had been transformed into a home. If they don't sell their dream home, it might effect a Father, a Mom, and their kids. It become emotional when you meet the people in person.

But do I feel sorry for them?

NO!

Last summer, they help bid the house up from below 600k to above 600k. They help lifted the market price. Now because they poured their love into a house, I have to bid 700k for my dream home? That according to the Realtard is the current Market Price!!!

God forbid, as nice as some of you folks seem on the blog, I'm sure as heck you won't come rescuing me if I'm forced to sell my 700k dream home.

Not when I'm asking 800k for it nowadays!

Knowing the background story, I can not try, in good conscience, to low ball the listing.

It is still my better-half's dream home, but in the end, we really can not afford that market price, not if we also want to live within a reasonable budget.

"Is it really "a great time to buy"?"

Yes, any time is a good time to buy when you can afford it.

Seeing what had happen, I'm asking myself if I can afford to take on new debt while riding out the economic turmoil in the next few years.

At the least, regardless if it is $100 or $300 per sq ft, can any one of us repay the note for at least the next 5 turbulent years?

Shouldn't we think about that first before we head out to bid higher than the next Koolaid drinker on the next listing?

golfer_X said...

Seth, there's no news from me about an upcoming purchase. I do however plan to start hunting seriously here pretty soon. I've seen at least a half dozen homes hit the market this week that I would consider at the asking price or maybe slightly below.

I agree with oldtimer's statement. Now is not a great time to buy but is not a terrible time either. And there are opportunities where you may not even go upside down. You just have to be patient and find the deals. They are out there.

Now is a decent time to buy if you want to live east of the 215. I can't see prices getting much lower out there unless rental prices start tanking.

Kyle, I have not heard any such rumor. The banks are releasing stuff and they are foreclosing again. I've seen a big uptick in new REO listings in the last week or so.

investor said...

GolferX,
I would not be so quick in pulling the trigger. Check this one out:

Listed for 1.2 mill, 999k, 849k,.......and then 449K. Sold at the auction for 330.2k. Home was purchased new on 01 for 575k
Single story 3450 sq ft, every room upgraded, 1/3 acre on 11th tee (not fairway) a total cream puff, move in condition. Over 150k in upgrades. Current listings go from bank owned 650k up to "bong smokers" sellers of 1.5 million.
Located in the gated community of bear creek.


http://www.redfin.com/CA/Murrieta/22997-Banbury-Ct-92562/home/6355337

investor said...

Correction, sold for $300,200 on Jan 29th, all cash.
The inside of this home is model condition was owned by a former realtor, he/she spent no expense!!!

Christina said...

I just don't think that $15,000 is enough protection on the downside for me.

If the govt wants to come in and give us money to pay off that the depreciation so that our mortgage reflects buying at the botton then I think the real estate market would turn around.

golfer_X said...

I featured that home right here back in Dec 2007 when they were trying to get over a million for it. $300k is a smoking deal for that place. The one next door was for sale back then for $700k.

Was that a sale to an individual or was the lender the winning bidder.

investor said...

X,
The title company shows this was a sale, but it is recorded as bank owned by "bear creek banbury trust", so maybe its owned by some MBS investors? The bidding started at $276,100 and they bidded it up to the final price of $300,200.

investor said...

Just got off the phone with my agent and he says that this was recorded as a "sale" as opposed to "back to the benny", ( the lender was WAMU) but we cannot figure out if the trust is an individual or an investor group.
Theloan was 671k at time of sale, so this was a 55%+ discount just off the loan.
You would love the house, you would be playing golf everyday, and sipping scotch in the backyard jaccuzzi at night, looking up at the stars.....life would be good.

golfer_X said...

Oh, hell yea. I would have paid $300k for that thing in a heartbeat. Probably woulda paid $400k. I could live with the commute for that house. What do you want to bet it's up for sale for $700k before too long.

Anonymous said...

what auction is this at? are there more deals like this to be had?

golfer_X said...

That is the trustee sale. They have em just about every day at the courthouse. All you need is a check for the full amount.....

Anonymous said...

can you provide more info on how i can find these. these deals seems to be very good

golfer_X said...

Trustee sales are not for beginners. There's a lot you need to know before going that route. It's very different from a regular sale. I'm not a expert on that since I don't have the cash to purchase a home that way. However, you really need to know what you are doing. You pay cash at those, no refunds, you get it with all it's faults. Those faults can be back taxes, HOA liens etc.

read this

http://www.realtytrac.com/ContentManagement/RealtyTracLibrary.aspx?a=b&ItemID=4608&accnt=64953

Unknown said...

Hello Golfer_X,

Waite til you read the story about this guy telling everyone that we all waited too long to buy:

http://blogs.pe.com/business/2009/02/you-waited-too-long-to-buy.html