Survey: At what price will YOU most likely buy?

[housingfreefall]

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!!!

[kewp]

Great analysis, freefall!

I’ll agree, I’m more interested in the all the fraud and funny money washing out of the game first. I’m less hung up on price.

[kewp]

Great analysis, freefall!

I’ll agree, I’m more interested in the all the fraud and funny money washing out of the game first. I’m less hung up on price.

[La Jolla Renter]

Looking to get a 1.2M fixer in La Jolla. I will start getting serious with offers in the Fall. I think La Jolla is down 10% from the peak and hope to see it down another 10% this fall/winter. With a little luck I can negotiate another 5% below market value.

Can it go down more? Maybe, I am not looking to time the bottom perfectly.

[La Jolla Renter]

Looking to get a 1.2M fixer in La Jolla. I will start getting serious with offers in the Fall. I think La Jolla is down 10% from the peak and hope to see it down another 10% this fall/winter. With a little luck I can negotiate another 5% below market value.

Can it go down more? Maybe, I am not looking to time the bottom perfectly.

[temeculaguy]

Housingfreefall, excellent post.

[temeculaguy]

Housingfreefall, excellent post.

[PerryChase]

housingfreefall, thanks for your great story. You’re a fine example of what smart Piggingtions have been advocating. 🙂 You’re living in a nice place and you’re saving money.

Also don’t forget interest on the $170k downpayment, money that would sit idle if you had put it towards a house.

From what I understand, all of 5th Avenue will be condo row, from Hillcrest to Downtown, so you’ll have plenty of choices in Bankers Hill as time progresses. At the rate you’re going, you’ll be able to pay cash for a top floor condo at the trough. Great job!!

Keep on tracking the buy vs. rent scenarios and update us on your progress as times goes by. It’ll be a good learning experience for us all.

For those of you considering buying single family house at inflated prices, also consider this article.
http://realestate.msn.com/buying/Article_kip.aspx?cp-documentid=4980274&gt1=10130

[PerryChase]

housingfreefall, thanks for your great story. You’re a fine example of what smart Piggingtions have been advocating. 🙂 You’re living in a nice place and you’re saving money.

Also don’t forget interest on the $170k downpayment, money that would sit idle if you had put it towards a house.

From what I understand, all of 5th Avenue will be condo row, from Hillcrest to Downtown, so you’ll have plenty of choices in Bankers Hill as time progresses. At the rate you’re going, you’ll be able to pay cash for a top floor condo at the trough. Great job!!

Keep on tracking the buy vs. rent scenarios and update us on your progress as times goes by. It’ll be a good learning experience for us all.

For those of you considering buying single family house at inflated prices, also consider this article.
http://realestate.msn.com/buying/Article_kip.aspx?cp-documentid=4980274&gt1=10130

[sdcellar]

I’ll say 70% of where prices are now, although even typing it, that “feels” conservative. (wow, do I really believe that?)

…returns a moment later.

Okay, put me down for 60%.

[sdcellar]

I’ll say 70% of where prices are now, although even typing it, that “feels” conservative. (wow, do I really believe that?)

…returns a moment later.

Okay, put me down for 60%.

[NotCranky]

I think if I were going to move now I would just trade my paid off house for another.I am sick of housing bubbles and want life to go on. Most likely my next purchase will be rental property or developement property. I will go for it when the risk reward analysis point towards a likelyhood of increasing my cash flow or equity positions going forward. I would like to know ,at the least, that there is a possibility that we are coming into a period of economic growth and stability. Since we seem to be on the opposite extreme and prices are absurd, I tend to want to take a wait and see attitude. I have been doing some feasability studies of small developements with a potential partner where I would build a house or a few houses, maybe a fourplex and keep them rented out if profit opportunities are minimal at finish of construction. They pencil out now if I we can keep carrying costs down and don’t pay myself for much of the developement and construction, which is a luxury I have with the mortgage paid off and my wife working part time. The other project we will be studying is fixing up long term rentals.When we can put 20% down and fix them up/add on for the cost of materials only and rent them positive or at a very slight negative cash flow we will start collecting them. I just love sweat equity real estate opportunities and won’t delay more than I have to. I am not really worried about the exact bottom in this scenario because if prices keep falling it will have a positive “dollar cost averaging” effect(as long as things don’t go completely kaput).Feel free to explain that dollar cost averaging is not the technically the right analogy. I know there is a real estate investment term but can’t think of it right now.
“Laddering” or something like that?

[NotCranky]

I think if I were going to move now I would just trade my paid off house for another.I am sick of housing bubbles and want life to go on. Most likely my next purchase will be rental property or developement property. I will go for it when the risk reward analysis point towards a likelyhood of increasing my cash flow or equity positions going forward. I would like to know ,at the least, that there is a possibility that we are coming into a period of economic growth and stability. Since we seem to be on the opposite extreme and prices are absurd, I tend to want to take a wait and see attitude. I have been doing some feasability studies of small developements with a potential partner where I would build a house or a few houses, maybe a fourplex and keep them rented out if profit opportunities are minimal at finish of construction. They pencil out now if I we can keep carrying costs down and don’t pay myself for much of the developement and construction, which is a luxury I have with the mortgage paid off and my wife working part time. The other project we will be studying is fixing up long term rentals.When we can put 20% down and fix them up/add on for the cost of materials only and rent them positive or at a very slight negative cash flow we will start collecting them. I just love sweat equity real estate opportunities and won’t delay more than I have to. I am not really worried about the exact bottom in this scenario because if prices keep falling it will have a positive “dollar cost averaging” effect(as long as things don’t go completely kaput).Feel free to explain that dollar cost averaging is not the technically the right analogy. I know there is a real estate investment term but can’t think of it right now.
“Laddering” or something like that?

[cr]

Burbank – prices would have to fall at least 40-50%.

[cr]

Burbank – prices would have to fall at least 40-50%.

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