My reason for buying a house was that I had the money… We originally lived in NYC where my rent was $10,000 / month. The landlord let us out of our lease because the new people were willing to pay 13,000 / month. Thats when I left NYC! (lol). Bought in Carmel Valley at 810K, sold at 1.4M after 5 years. (We did however put in a new kitchen).
Even at inflated prices here in SD with prices going up I had no problem with making the decision. But I tend to be pretty risk adverse. I didn’t really care about 50-100K up or down – but my reason for buying was I thought I wanted 2 acres, pool, etc. but found it was a little too isolated for me. Would still be there but my daughter started a private school and it was just too far to commute and I didn’t want her taking a bus which left at 6:30am. If I felt that there was stability in the market and the house would hold it’s value I might still be there – commute be damned… But the combination of my feeling that the market wasn’t just tipping, it started to come down big time made me put the house on the market. I think I just managed to get out under the wire….
The house we bought was 2M$ and 4800sqft. We bought in July 04 and set a new price per square foot record in the neighborhood. But of course each house sold for the next year (up to late 2005) kept going up in price. My neighbors had a house with a slightly better view and a sports court, they sold for 2.5M in late 2005.
My sale in Dec 06 brought 2,050,000 which was 50K more than I bought for – so I didnt lose money… If you count in the real estate commission, then yes I lost 30K – but I paid 3.5%, not 6 percent like some people. Two neighbors would not drop their prices and the houses just sat there. Finally one dropped their price to 2,100,000 – comp wise the house was at least 50K worth more than ours – the other is just sitting there and now has company. They are still listing at 2,195,000 – and they aren’t selling.
Everyone’s story is different. If I was spending a good chunk of my income to pay the mortgage – I would have been freaking out. But I could afford to win or lose with the house – it wouldn’t dramatically change my lifestyle. What really freaks me out is that people buy houses they can’t afford. They buy houses without researching the market and without the financial backup which I have. If their house drops in value, they lose their job, they get sick, they get divorced, they have just screwed up their financial present and future.
Anyway – I was able to easily afford the risk I took – which is not the norm in this market where the average house can only be afforded by 10% of the population.
