Only you can decide what is right for you to do but here is something else to factor into your decision.

A single story home generally lives about 10% to 15% bigger than it is because there is less space lost to hallways/stairs vis a vis a 2 story house. So at the very least you should be comparing a 1900 sq ft home with a 2100 to 2200sq ft home. Also single story homes are in far more limited supply while being in relatively limited demand. Builders hate them because they take up a much bigger footprint and build them because cities force them to. Throw in rising demand from soon to be retired boomers and you have a safer bet with one over the long run.

Not that you should run out and buy because of this but it is very important information to understand and apply to your decision making process.

It sounds like you have a tough decision on your hands. If I were you I would start by establishing the true current price for the house. This will NOT be done by looking at listings. You will need to find the actual sales price. There are many ways of doing this, and I am sure that someone else has a better way, but the tool I use is quick and dirty. I look at Zillow and use their comps to the house. This will give a very long list of many properties that are not really comps. They are simply in the same city. It is pretty easy to then save the file as a text file, import it into Excel and crunch it down to a list of true comps based on square footage. It will still be incomplete because you won’t know if there is a swimming pool etc., but for a place like Temecula, square footage is probably going to get you where you need to be. Once you do this, drop the number another $5-10K to account for the fact that the selling price tends to have some sort of incentive buried in it these days. This will probably land you at about $380-$390K for that house right now. Then it is a simple task of looking at buying a house now for what will probably be 10% under market or waiting for a better deal.

The other side is the hard part and what you will decide with yor family and that is the value you place on the schools, crime rate, hassle of moving etc.

I have done this exercise with my situation and I have set the bar at 10-20% below current market value for my target neighborhoods as the point where I think the risk reward ratio is balanced and I am willing to buy.

One last comment, the 100% financing you mentioned should be a red flag that the timing may not be right. If you can afford 100% financing on this house, then you can also afford to save for a down payment and wait for what are probably better options in the future. I would say that if I were in your shoes I would be sitting tight and saving.

Good luck.

dilemma…

Based on what you’ve said, I’d buy it. The rent cost/buy costs are almost equal, and you could probably even lower the cost of ownership some by accessing some of the useful tax deductions, such as the home-office tax deduction (if you have your own business).

As long as you can afford the expenses, you should be fine. If you can’t hack a 30 year amortized, go for a 10 year interest only.

As far as getting a larger home in the future, if you can’t sell it, you can rent this house out and get the tax deductions for depreciation (which would produce a small amount of cash flow), and then get the larger home (and you would even be able to justify the larger home’s home-office tax deduction).

I think you’ll be fine, but think long term in terms of your loan. As long as you can keep it up, you will be able to get ahead. Having a house isn’t guaranteed wealth, but it does allow you to access the best tax deductions.

Survey said America’s “faith in home values persists.”
http://www.latimes.com/business/la-fi-housing11apr11,0,5209585.story?coll=la-home-headlines

I’d wait to see cracks in that confidence. That will determine how low housing will go.

Think about it, if it’s too good to be true, it probably is. Why is the landlord wanting to sell to you if he can get $100k more by selling to someone else (ok, $50k after selling costs)? The truth is that he can’t because the Temecula market is flooded with inventory.

Landlord are not in the business of “giving away” $50k just because you’ve been a good tenant.

An identical house sold for $430k 6 months ago. Since then, prices have gone down. Currently, the most it can sell for would be ~$400k.

If you buy for $325k, you’re getting a $75k discount (at most). The effects of tightening lending stardards are just starting to kick in. I think this “$75k cushion” would last for 18 months in this downturn. By late 2008, you’ll start losing money. Will you be OK with that ?

It’s very likely that this correction will continue until 2010 (and possibly beyond).

Also, the fact that you have more than one kid tells me that you’ll like need a bigger house within 5 years.

Like Bugs said, prices in the low to mid $200k aren’t beyond the real of possiblity. I would even go as far to say as that’s likely to happen.

Watch the market and wait until you clearly a bottom — RE prices are sticky so you’ll have plenty of time to buy. Then buy even if interest rates are relative high, compared to today. The when rates go back down again (as they invariably fluctuate), refinance at a low rate with a low loan balance.

If prices continue to drop then you could even buy that 5-bedroom house that your family needs. Sounds like you’re a family man. It’s better to buy a house and stick with it rather than buy and sell and incur all the transaction costs.

As long as you can afford the expenses, you should be fine. If you can't hack a 30 year amortized, go for a 10 year interest only.

Horrible advice!

Remember that Harveston has high HOA and really high taxes along with the really small lots.  You will have to live with this for a long time if you go ahead and buy it.  At 350k you will be paying $7000k per year in taxes and another $1500 in hoa.  Thats over $700 per month even if the house was paid off.  I just think thats high because the last home I owned the taxes were $2200 per year and $35 hoa instead of $130.  I also rent in Harveston in Chatham, I do like the houses, but I wouldn't buy here  for the reasons listed plus the yuppie factor is really high here which I honestly don't care for.

Good luck, for $325k or less, it is a RELATIVELY really good price!