What price point would I buy!
Currently, we are leasing a space across from Balboa Park in Bankers Hill the space is 1671sqft, gorgeous top floor, views to the park, close to everything and a nice bay breeze to keep temperatures perfect. We are in an interesting position because as many on this site we have decided to wait to buy. We took it one step further and in support of our decision we have for the last 24 months paid not only our lease payment of 2700.00, additionally we have made a payment to our savings account; equaling what our mortgage w/ taxes and insurance would be if we purchased this space. This has been an interesting experiment.
1. It has shown how easy it is to save money
2. It has shown how many other things our hard earned money can get us
3. It has proven that in the long run we have saved countless amounts of money and most importantly we have saved ourselves heart ache as the example below will show.
Let me share the results of our little experiment then I will offer the percentage drop necessary for me to enter the market again:
Traditional mortgage on this unit had we bought 24 month ago
Price; 850K
Down payment: 20%= 170K.
Balance due 680K
Payment $3400.00 I/O loan or $4080.00 monthly 6% fixed
Taxes $885.00
Insurance $100.00
HOA $300.00
Total $4685.00 Based on I/O
Lease $2700.00 flat monthly.
24 payments: $1985.00 monthly =$47.640 to savings account
When balance on savings reaches $5000.00 we convert it to a 4.5-5.0% CD
Yields an average of $2143.00 annually
Add all of it up
170K
$47.640.00
$4286.00
Total 221.926.00
Unit next door same location, view, sq footage currently listed $699K (listed is key word) not sold, may or may not move for 640K
Total drop to date 17.5% if we had bought that would equal -$148,750.00
Unit was 509sqft currently: 418sqft (if it sells for 699K). My prediction is 640K: 383sqft. The next round of sales will probably hover at 300-325sqft
I will buy after these three things happen:
1. September lenders will FULLY initiate the new lending standards
2. What is now a short sale and or pre-forclosure will revert back to lenders as REOs in the fall
3. Resets on ARMS will facilitate people literally walking away from their properties. One issue is peoples values have declined, the bigger issue is the new rates for most will be in the 10% range; try that payment on a balance of 500K= 5000th monthly. Sadly many with significant equity fell for this option by taking cash out and reifying in an ARM
5. Lastly, an ARM is not sub-prime in the traditional sense but that is exactly what it is and even the well to do participated some where in the range of 30-50%
4. Many of the properties you currently see on the MLS are falsely being promoted as non distressed properties. The reality is many of these sellers are in some sort of short sale and or pre-foreclosure situation and all including agents and banks are conspiring to make it appear their pricing is correct for the market, even if the market rate has changed. This tactic will not work because, houses, condos commercial properties, are not selling Period.
5. Oct. Nov will be the banks selling season on their REO properties preparing for the 2007 write off of bad loans
Hence 2008 will reset comps for all areas
After all of this happens coupled with the leg work I am currently doing by looking at and visiting every property of interest I will secure a property at 30-35% below today’s market. Over all I predict a 25-35% drop and it will happen quickly and abruptly…….Every one will say they never saw it coming!!!
