HELP – NEW USER – BUYING in 4s

[asterix007]

Dear folks,
I’ve an opportunity to buy a house in 4s ranch. Here are the details:

Single family at 225$/sq ft. Beautiful neighborhood, we love the house. It however has a high Mello Roos, around 6000$/year.

Questions to the community:
1) Is 225$/sq ft a good price to buy in today’s market?

2) In good financial situation, can afford the house. Will be financially tight for a few years, mainly concerned about the downside and high Mello Roos. 6000/yr == 60K in 10 yrs, that is a chunk of money..

Very conflicted.. Can someone provide some guidance.

[UCGal]

I don’t know the 4S submarket enough to comment. I expect some others to chime in on that.

As far as MelloRoos – folks have varying opinions. If you plan to stay in the home long term (forever)… it might be worth considering paying them off. But that requires a chunk of cash.

Here’s a long thread on the subject.
http://piggington.com/paying_off_mello_roos

[SD Realtor]

Your realtor should be able to review the comps and tell you if the ppsf you quoted is above/below average.

You are purchasing at a time when the market has completed a significant leg up. Additionally your ppsf is to generic as ppsf varies based on home size. Average ppsf for a 2000 sf home in 4S will be much different then average ppsf for a 3500 sf home.

Yes there is a downside to Mello Roos but if you want to live in a relatively newer home then you will need to get used to it. Don’t count on MR fees going away or being paid off soon. I would not recommend paying them off early as you never know what curve balls life will throw at you. If for some reason you had to move in 4 years you would feel awfully foolish if you paid them out early.

Your guidance is work with your agent and demand a thorough analysis from them. That is what they do to earn your money. If you don’t trust them, go find someone you do trust.

[ocrenter]

[quote=UCGal]I don’t know the 4S submarket enough to comment. I expect some others to chime in on that.

As far as MelloRoos – folks have varying opinions. If you plan to stay in the home long term (forever)… it might be worth considering paying them off. But that requires a chunk of cash.

Here’s a long thread on the subject.
http://piggington.com/paying_off_mello_roos%5B/quote%5D

ok, forever is a slight exaggeration. 🙂

long term as in 10+ years would be a no brainer to pay off the MR. mid term as in 5+ years the numbers could still work.

[ocrenter]

[quote=asterix007]Dear folks,
I’ve an opportunity to buy a house in 4s ranch. Here are the details:

Single family over 3800 sq ft at 225$/sq ft. Beautiful neighborhood, we love the house. It however has a high Mello Roos, around 6000$/year.

Questions to the community:
1) Is 225$/sq ft a good price to buy in today’s market?

2) In good financial situation, can afford the house. Will be financially tight for a few years, mainly concerned about the downside and high Mello Roos. 6000/yr == 60K in 10 yrs, that is a chunk of money..

Very conflicted.. Can someone provide some guidance.[/quote]

bottom line is the MR payoff is essentially $60k. that’s why I said if staying 10+ years, paying off the MR is a no brainer

the house is $855k based on your numbers above. So the question to you is, if the house cost $915k, is that a good deal to you.

[SK in CV]

[quote=ocrenter]
ok, forever is a slight exaggeration. 🙂

long term as in 10+ years would be a no brainer to pay off the MR. mid term as in 5+ years the numbers could still work.[/quote]

My apologies for thread jacking, this is a bit off-topic from the OP, but I have to question the whole pay off MR thing…

My understanding, and maybe some RE professionals can chime in here, is that paid off MR doesn’t generally bring a higher sales price.

I suspect that the interest rate on MR bonds are probably a few points higher than prevailing mortgage rates, so on a $60K MR liability, the interest differential might be $1800 a year.

From what I’ve read here, paying off MR early does eliminate future increases in MR assessments, though I’m a bit confused exactly why this is so.

But for a homeowner who has a mortgage, why wouldn’t it be better to pay off a big chunk of mortgage debt rather than paying off MR? Paying off mortgage debt is a guaranteed increase in equity, and paying off MR may generate zero increase in equity, and the interest savings compared to equity build is pretty minimal. Are any of my assumptions way off? What am I missing?

[The-Shoveler]

Don’t know much about that area really, but in general I would recommend finding a small builder (or Spec, home in older neighborhood), That way you may be able to avoid the MR and if luckily the HOA as well and still get a newer designed home.
I have seen small builder next to the larger development (KB/LEN/Toll etc…) that go to the same schools, still walk to same parks etc.. but have no MR or HOA and sell a lot of time for a better price even (better quality of home as well).
One side of street 3K a year MR/ other side of street no MR, not fair ? maybe.

[all]

[quote=SK in CV][quote=ocrenter]
ok, forever is a slight exaggeration. 🙂

long term as in 10+ years would be a no brainer to pay off the MR. mid term as in 5+ years the numbers could still work.[/quote]

My apologies for thread jacking, this is a bit off-topic from the OP, but I have to question the whole pay off MR thing…

My understanding, and maybe some RE professionals can chime in here, is that paid off MR doesn’t generally bring a higher sales price.

I suspect that the interest rate on MR bonds are probably a few points higher than prevailing mortgage rates, so on a $60K MR liability, the interest differential might be $1800 a year.

From what I’ve read here, paying off MR early does eliminate future increases in MR assessments, though I’m a bit confused exactly why this is so.

But for a homeowner who has a mortgage, why wouldn’t it be better to pay off a big chunk of mortgage debt rather than paying off MR? Paying off mortgage debt is a guaranteed increase in equity, and paying off MR may generate zero increase in equity, and the interest savings compared to equity build is pretty minimal. Are any of my assumptions way off? What am I missing?[/quote]

If you assume another 30 years of MR the effective interest rate for MR is 9%+, and that is if MR was flat (in theory it can be flat or get reduced, but in practice it increases the maximum allowed 2%/year every year).

Also, if you prepay the principal today you won’t see the effects until you pay off the mortgage or sell the house. If you pay off your MR your monthly expenses go down almost immediately.

[all]

[quote=The-Shoveler]Don’t know much about that area really, but in general I would recommend finding a small builder (or Spec, home in older neighborhood), That way you may be able to avoid the MR and if luckily the HOA as well and still get a newer designed home.
I have seen small builder next to the larger development (KB/LEN/Toll etc…) that go to the same schools, still walk to same parks etc.. but have no MR or HOA and sell a lot of time for a better price even (better quality of home as well).
One side of street 3K a year MR/ other side of street no MR, not fair ? maybe.[/quote]

That is how it worked in one area adjacent to 4S – the sellers advertised enjoying 4S amenities without paying 4S fees. The local schools no longer take kids from that area (part of the deal between the developer and PUSD was that only the 4S kids will be attending the local schools once the schools reach the capacity).

[The-Shoveler]

Hmmm , I guess you need to do some research into those type of deals, I have seen it the other way as well where they did not restrict the area not paying MR from the same schools,

I would be surprised especially once you hit the middle/high school level as they are much larger schools in general.

San Marco’s new high school is enormous.

[joec]

There are various articles stating pretty much all the new elementary schools in 4s is full so if you aren’t in the MR district, you won’t be able to go. Even people IN the district and paying aren’t sure to go to their school next door I read just in an article a few weeks back and the guy was being sent to Adobe Bluffs or something.

There is a new K-8 school coming in 4s near del sur where all the new building is which should help a bit I’d guess since most of the full classes seems to be in Kindergarten.

Everything in older 4s is pretty much sold/done.

[ltsddd]

It’s a tough decision. I have no opinion if you’re buying it as an “investment”. However, if you have school-age children then I’d say go for it – I believe it’s always a win situation if this is the motivation. Just make sure your kids could actually get in the schools.

I know folks who bought a house a few blocks from Stone Ranch elementary school last year and were told by that school that it may not have space for their kids.

The new k-8 school is adjacent to Del Norte High. I think they barely broke ground on that.

[Essbee]

I live in 4S the Stone Ranch Elementary area. (I LOVE it, BTW). I haven’t heard of kids not being able to get in to Stone Ranch. Then again, my kids are only 4 and 2, so maybe I haven’t talked to enough people yet. However, most of the kids here in south 4S seem to be older (older elementary/middle school/high school age) now as a function of the houses being built in the 2003-2006ish era. Thus, I imagine that more space in Stone Ranch will be opening up soon, as these kids age up.

In contrast I *have* heard that Monterey Ridge in north 4S is overcrowded and that some kids are being sent elsewhere (including to Stone Ranch, I believe).

[ocrenter]

[quote=Essbee]I live in 4S the Stone Ranch Elementary area. (I LOVE it, BTW). I haven’t heard of kids not being able to get in to Stone Ranch. Then again, my kids are only 4 and 2, so maybe I haven’t talked to enough people yet. However, most of the kids here in south 4S seem to be older (older elementary/middle school/high school age) now as a function of the houses being built in the 2003-2006ish era. Thus, I imagine that more space in Stone Ranch will be opening up soon, as these kids age up.

In contrast I *have* heard that Monterey Ridge in north 4S is overcrowded and that some kids are being sent elsewhere (including to Stone Ranch, I believe).[/quote]

I’m not surprised Monterey Ridge is so overcrowded given how many homes they managed to squeeze into the north side.

To the OP, if possible, I would try for a house on the 4S south side, the MR is less too.

[ltsddd]

[quote=Essbee]
In contrast I *have* heard that Monterey Ridge in north 4S is overcrowded and that some kids are being sent elsewhere (including to Stone Ranch, I believe).[/quote]

That’s interesting. I heard the opposite. The folks I was talking about were told that their kids may have to go to Monterey Ridge instead of SR. It ended well for them as both of their kids eventually attended SR.

Regardless, if the local schools are an important factor then it would be prudent to get these questions answered.

[Author]

Posts