SD Home Prices/Personal Finance Rant

[KristopherSD]

I’ve posted here several times before and have received a lot of good advice and different perspectives on the housing market in San Diego. I’m back once again with a mini rant and frustration vent on what I feel is an insane market in San Diego. To recap I’ve been saving for a home for years and have accumulated close to $250k now.

I feel like a chump at this point for saving so hard and being frugal to try and do things right by putting 20%+ down while leaving cash for an emergency fund and remodeling of a home, as well as keeping things under 30% DTI. Maybe I should have just taken the easy route and put 3.5% down like a lot of people I know and been in debt up to my eyeballs but have a home as a result. It’s crazy to me to see prices climb ever higher while knowing that I’m a top 10% income earner in San Diego. Who is buying these homes and how exactly are they doing it? Is it all funny money?

Meanwhile I see so much excess all around me friend wise when it comes to new cars, elaborate vacations, high end dining etc. They make a lesser income and I just don’t see how it’s possible. I wonder if they are all in credit card debt or paying monthly payments out the wazoo. They’ll often chide me in good spirit for saving so hard and delaying vacations while they rip roar it up. I know they mean well but it stings nonetheless.

At this point I feel like saying screw it and just buying a condo in Temecula cash and being completely debt free not giving a damn. Why stretch for a $550k+ house in La Mesa or Allied Gardens that needs work on a postage stamp lot? The only savior at this point would be a recession, and who knows if that will even put a dent in the San Diego market. I know I sound like a spoiled brat; I’m in my late 20’s and damn lucky to have a great job and be able to save all that I have. I guess it’s just hard to feel like I’m doing the right thing/old school way and at the same time feel like I’m spinning my wheels and getting nowhere.

/rant

[spdrun]

Hopefully Mel the Skell will either be replaced or fall victim to the Dennis Hastert disease next year. Ed De Marco was much better about not giving loans to unqualified bums.

[Anonymous]

you’ve got 250k savings and still in your 20s? That’s pretty impressive, not sure how you can say that is “spinning your wheels”. What is the big hurry to buy a house? Just keep doing what you are doing and wait for the next housing crash/depression. Your are in perfect position for when it happens.

[flyer]

It’s true that, per a recent Pew Charitable Trust report/poll, a huge percentage of Americans–especially in CA–live far beyond their means.

As a native, who is 50+, and started buying real estate in my 20’s, I can tell you that I’ve seen many of the live-beyond-your-means set come and go over the years, because they’ve found, to their complete amazement, that they can’t afford to maintain their lifestyle here later in life.
You don’t want to be one of those people.

You’re young, you’re smart, and you’re on the right track. Don’t let the appearance of wealth among your friends and peers bother you. Make the decision to buy or not to buy based upon criteria that makes sense to you, and, if you do buy, buy in a place you’ll enjoy living.

[Coronita]

Listen dude… You have a choice in life. You can choose to be financially responsible or choose not to….It’s a matter of personal preference…If you choose to live like a miser and try to be smart with your money, don’t complain if later on, people want to redistribute your earnings/savings or people who choose to buy things that are nicer. There are a lot of people that was hell bent on “moral hazard” in thinking those folks who are not as financially responsible will eventually “get what’s coming to them”…Sadly, these where the same folks that ended up sleeping though the biggest real estate firesale in history and they were really disappointed.

If you really think some of your peers have it so much better, than the choice is obvious…Be more like them. Frankly, if you can get away with a 3.5% down loan that is also a fixed rate, why wouldn’t you do it? Sure beats paying rent, and with only 3.5% down, you have very little skin in the game to lose. Heck, I would do it if I could. It’s not about total outstanding debt, it’s about your monthly debt load relative to your income and about your monthly expenditures as an owner versus a renter.

Savers always lose… That 1%CD sure sucks…The good news is since your in your late twenties, you are learning this lesson fairly young so you can still recover from it. And you’re not alone, maybe people learned that lesson much older than you. In fact, there’s probably a few really old people on this blog that still haven’t learned this lesson…

And being that you are young, why would you want to buy a condo with all cash? Lpok around. Microsoft is buying LinkedIn for $26 billion. Microsoft probably has over $100billion in cash… And yet they are financing the purchase… Have you considered why???? It’s because money so cheap to borrow right now….Why would you use your own money to buy at this point, especially if you are young and trying to build your nest egg. I congratulate you on your $250k savings at such a younger age, your’e doing much better than most americans…But giving you a little tough love, if you don’t learn how to invest that money, that isn’t going to be a heck of a lot, especially in CA. Personally, if I were your age, I would NOT pay all cash for a house. I’d put as little down as you can get away with, and use as much of the bank’s money as possible such that your payments are roughly in line with how much your rent would be..Then, as an added bonus, you get a nice mortgage interest rate deduction and property tax deduction (assuming you aren’t hitting AMT on the later), that will make your payments lower than your rent.

Then I would take whatever is left of your $250,000 and learn how to invest that money very well… Paying cash for a townhome and leaving you with very little cash, imho would be a bad idea, since IF home prices did correct, you just lost your own money. Versus, if you took out a loan, while you lose out on the value of your house, your payments are the same, and the banks end up eatting it when interest rates eventually rise.

This is the opposite of what I would do if you’re instead 40++ and just want to live worry free, with a paid off home. You’re young, you can afford to take some risk. And quite frankly, there is no reward without some risk taking….

There is no politician, government, political party that is ever going to “fix” this american problem. This is how a good portion of the people in our country behave. You are in the minority. So, rather than get all mad about it, figure out how you can profit off of this.

[svelte]

Let’s see, $250K would be 20% down on what, a $1.25M house?

Guess I’m saying that you could have probably put 20% down a long time ago on a lesser home.

But that’s neither here nor there – what would I do in your shoes right now?

I’d probably continue stashing cash. I can’t help but feel we are getting close to a peak. Maybe in the next 12 months. Probably right after the election, actually, no matter who wins.

I talked one of my kids into buying a home last year knowing prices were gonna rise…was the right decision and they are glad they did.

I talked the other kid out of buying recently in SF because my instinct tells me we are nearing a peak – told’em to wait and buy on the next dip.

At this point in time, that’s what I think you should do too. Ya just have to be brave enough to buy in a bear market. Its hard to do when you see prices crashing everywhere, but it’s much smarter than buying after a long run-up. Scaredy even found the courage to buy during the very dark days of real estate and he is glad he did.

Anyway, I understand your frustration. Hindsight is 20/20. All you can really do now is figure out the way forward. Good luck. Sounds like you’ve got a great head on your shoulders. I have faith you’ll figure it out.

[scaredyclassic]

[quote=svelte]Let’s see, $250K would be 20% down on what, a $1.25M house?

Guess I’m saying that you could have probably put 20% down a long time ago on a lesser home.

But that’s neither here nor there – what would I do in your shoes right now?

I’d probably continue stashing cash. I can’t help but feel we are getting close to a peak. Maybe in the next 12 months. Probably right after the election, actually, no matter who wins.

I talked one of my kids into buying a home last year knowing prices were gonna rise…was the right decision and they are glad they did.

I talked the other kid out of buying recently in SF because my instinct tells me we are nearing a peak – told’em to wait and buy on the next dip.

At this point in time, that’s what I think you should do too. Ya just have to be brave enough to buy in a bear market. Its hard to do when you see prices crashing everywhere, but it’s much smarter than buying after a long run-up. Scaredy even found the courage to buy during the very dark days of real estate and he is glad he did.

Anyway, I understand your frustration. Hindsight is 20/20. All you can really do now is figure out the way forward. Good luck. Sounds like you’ve got a great head on your shoulders. I have faith you’ll figure it out.[/quote]

I did not really have any courage. I just did what my wife told me. however, I did what my wife had previously told me, like ulysses binding himself and his men to the mast. even she wanted to back out during the crash.

thesec illusions are destroying us. be true to your self. also know thy self. and try to get outside yourself. but don’t deny the self.

as kids move out, the square footage per person in this house is getting a little ridiculous.

anyone see ANOMALISA? that is the darkest movie ever.

[Anonymous]

Not a good idea to buy a house now given the peak market prices. But if you insist, at least follow FLUs advice and finance as much as possible. Don’t put any of that 250K in downpayment if you can avoid it.

[poorgradstudent]

If living in Temecula is a reasonable option for you, by all means, live in Temecula.

You’re right that tons of people live above their means. In my marriage I’m the one who constantly reminds my wife that we can’t afford things.

There *is* something to be said for having fun and enjoying life in your 20s with a few frivolous vacations. It sounds like you’re not married and don’t have kids yet. Enjooooy it wile you caaaaaaan (he says in a spooky ghost voice).

Prices are high right now. It’s probably a good idea to keep renting.

[joec]

[quote=poorgradstudent]If living in Temecula is a reasonable option for you, by all means, live in Temecula.

You’re right that tons of people live above their means. In my marriage I’m the one who constantly reminds my wife that we can’t afford things.

There *is* something to be said for having fun and enjoying life in your 20s with a few frivolous vacations. It sounds like you’re not married and don’t have kids yet. Enjooooy it wile you caaaaaaan (he says in a spooky ghost voice).

Prices are high right now. It’s probably a good idea to keep renting.[/quote]

I would assume most of us put 20% down when we bought? We actually put more than that since we were self employed and qualifying was hard back then. I think in this market, as a single person, you may think 250k is a lot, but there is a lot of money out there and some people also have family money so you are competing with those folks too. There is just too little supply and rentals are insanely pricey.

I agree with most of flu posts as well. I don’t even know why you’d want to buy a house, maybe your rent is high, but assuming you are single with no kids, who cares what area you really live in? When I was single, I always lived in the dumpiest places since safety is not as big of a concern for a guy and I suppose I didn’t “care” that much what other people thought about me.

I suppose to impress the ladies, you don’t want to live in a crappy place or live in a “bad area” perhaps or want own a place since that looks good when you are out competing with all the other rich guys out there with just as much money or houses or jobs.

pgs, like you, my wife and I think women in general just need to spend more money overall compared to men.

Like it was posted before, I think men just simply stop caring as much on appearances so in most studies, I think men tend to save a lot more money than women.

If I was in the OP positions, just keep socking away the bucks while you can since saving money is far far easier without kids/single/etc…

Just enjoy a little as well and try not to be too upset about what other people save/housing.

A good thing with a bigger down payment though is your payment is prob a lot lower and with how our loans are set, we’re over 50% equity now I think and our mortgage will drop to like 2k/month soon when rentals are 4k in the area.

Makes cash flow much better for us and stable housing costs too.

Course, we have kids so aren’t moving anytime soon.

[Myriad]

Agree with Flu here. Since you’re young, a good place to start is a condo. But buy in a place that you want to live, where you commute isn’t terrible, and low HOA/mello roos (well, as low as you can find).
And finance it (3.5%, 10%, 20%), doesn’t really matter, but makes no sense to pay all cash at these rates.
Another consideration is that you may eventually decide to move to a larger home, so a condo in an area that is easy to rent out. I have a friend that just bought in UTC and is renting a room out for $1k/month.
As for the rest of the money, invest it in an index fund. You don’t want to have all your investments in real estate or be one of those people that is house rich, but cash poor.

[Coronita]

You guys want to talk about inflation,

A new 2014 911s was selling for $95k
A 2017 911s STARTS at $104k and comparably equip, is closer to $115k

A new starter BMW 330 with a 4 cylinder engine can put you back around $50k.
Now that’s insane.

[spdrun]

Can you still get either with a real 3-pedal gearbox, or do they only cater to the morbidly obese /w bad knees?

[scaredyclassic]

[quote=flu]You guys want to talk about inflation,

A new 2014 911s was selling for $95k
A 2017 911s STARTS at $104k and comparably equip, is closer to $115k

A new starter BMW 330 with a 4 cylinder engine can put you back around $50k.
Now that’s insane.[/quote]

true. I was waiting for my wife’s mini to be serviced and walked arou n d,auto Pkwy in escondido. the prices on the audi lot frightened me.

[livinincali]

[quote=Myriad]
And finance it (3.5%, 10%, 20%), doesn’t really matter, but makes no sense to pay all cash at these rates.
[/quote]

Just don’t go with FHA financing. The MIP for FHA financing is just too high to make it worth it to not go 10% or whatever percent down you need for a more traditional product.

That said I’d probably wait if I were in your shoes. The whole buy now or be priced out forever crowd seems to be back and I don’t think that’s a good thing. We’re also due for a recession so let that work it’s way through the system and see what happens.

[Author]

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