[23109VC]

you can’t rent squat for $800/month..not even here in Temecula.

up here where things are “cheaper”… a 900 sq ft apartment will run you $1400-1500/month.

[23109VC]

this somewhat misses my original question..

House A is sold as brand new construction for $450k.

Prices fall – like we all knew they would. Now it is only “worth” $350k in the current market… and it sells for that new LOWER price… $350k.

when new owner buys the property, at 350k…. will his new property tax bill be based on HIS new cost of 350k… or will the county try to claim it’s still worth MORE and assess/bill off the older/higher value?

so basically – if you buy a house for LESS than the prior owner bougth it for – do you pay taxes on the new lower price??

[23109VC]

the builders are tossing incentives around like crazy right now… but their prices are still too high.

there is an area my wife and I really like. we looked at the house. it’s a richmond home in Greer Ranch Murrieta. hthe house lists for $495k. it’s 2800 sq ft. loaded…tons of tile, hard wood, stainless appliances, granite, etc. rear landscaping..etc etc… it’s done and ready to sell/move into.

they wanted 495. i told the on site realtor/seller i’d give them 450k. they said they’d only come down 25-30k…either via a price reduction or via buy downs..but bottom line they claimed only 25k in price drops. i don’t believe them. i tink they’d go lower. this wa all via the phone…so if they will knock off 30k over the phone toa total stranger who isn’t even in the office..imagine what they would do when i wa there iwth a preapproval letter, and ready to sign a 30 day escrow….

i bet they would come dwon 100k… i’ve seen other builders READILY offering 75k-100k in incentives….

we have been on the fence about buying and seriously almost pulled the trigger on the house we are renting, but i’m coming back to just saying F** it and keeping on renting.

[23109VC]

here in temecula, it would be amost 600 in many areas b/c taxes hit almost 2% in many neighborhoods!! but yet..you re right.

rent vs. buy.

consider rent cost vs. interest payment + taxes – writeoff

you wind up with rent vs net housing payment.

the only hangup is that if you buy and do a normal loan, you are paying down principal..so the actual payment for the hosue will be more as you are doing principal reduction….so cash flow month to month expect to pay a bit more for ahouse…. but if yo want to consider apples toa pples…look at rent vs net cost of mortage interest + taxes.

[23109VC]

i’ve been through the rent vs. buy scenario a LOT lately.

I have rented the last year and am glad I did. one year ago prices in my area were quite a bit higher than they are now. they seem to have come down a bit. will they come down more…maybe….good chance they will..but how much no one knows.

do your taxes…on sometehing like turbo tax and then look at your net taxes. figure your taxes on this software WiTH the mortgage deductions for the anticpated mortgage interest and the anticipated propety taxes. t hen figure it w/out those writeoffs.

see what your net difference is. i figured for me it was about 700-800 month tax savings to buy a 350-400k house.

so factor whatever you pay in rent…add that amount to it. for me…renting the house i want..or like what I am in now..would be about 1800/month. 2000 max. add that 800 and you can figure that a 1800 rental is like a purchase of 2600.

the principal isn’t something you should realy factor as it’s not a renting cost…you could figure it’s money back in your pocket in that you’re paying down the loan that much… but to compare apples to apples..

i like the idea of comparing interst on the laon vs the rent payment. that way you are comparing renting the money vs. renting the house.

then you have to factor int he non-financial things. do you like moving at the whim of a landlord, do you need to be able to tweak things or mod the house to your lking in a way a landlord would not allow… etc.

renting has some serious upsides.

in temecula you can rent a NICE house for 2000/month. 2500 sq ft, fully upgraded, in a nice area. to buy that house would cost $500-600k. no way you can buy that for a close to th rent evne when you factor in the tax writeoff.

[23109VC]

i agree that there comes a point in property values where it’s cheaper to walk away.

if prices in CA fell 50% state wide – this would be epidemic. People would be walking left and right.

imagine you have an IO loan for $500k, and then prices hit $250k….. do you keep paying for something worth half what you paid or just walk and become a renter. it would almost make sense to just rent at that point….

if people walked at this rate – yeah, prices would go down the tubes… i just dno’t see it happening.

we don’t have job losses in so cal like we did in the late 80s….

did the late 80s job loss/housing crash affect SO CAL, or did if affect ALL of CA?

[23109VC]

i’m not saying there are NO homeowners with ARMS or other toxic loans in nicer areas… I’m just saying that I personally think it is less common.

i think that as you get to nicer areas, that attract higher income people, they are in general SMARTER…and more financially savvy…which is why they HAVE good jobs, and have some money – they aren’t stupid.

of course you have people who will stretch their income at every level…so you will have the person who stretches and makes poor choices to buy that 750k or 1 million dollar house… but do you really think EVERYONE has an ARM in the nice areas?

too bad people wouldn’t put their loan type, amount financed, and interst rate on their garage door.so you could just driv ethe neighborhood and see who is about to go down the tubes…

my main point was in general, as people get smarter, they tend to on average make less stupid decisions. just b/c people live in an ice area or have money does NOT make them smart..but if you generalize on al arge scale…i would dare to bet that the average IQ of a person in a nice part of Temecula is just a TAD bit higher than the average dumpy area of Perris…where you probably have ARMS on every house….

just a thought… c’mon.. is RAncho Santa Fe gonna go down the tubes too??

[23109VC]

explain to me why the subprime melt down will hurt nice areas?

in the neighborhood where you have upper income people, who have good jobs, high incomes, …money…. when prices go down, they just sit tight, make their payments, and ride it out. they don’t have an ARM…they have a 30 year fixed and put down 10-20%..and have payments they are fine with. these people don’t drive the market down. yo may have the divorces, deaths, relocations, etc that force them to sell…but the majority just sit tight.

the nasty dirty areas where the gardner did a stated income loan and bought the 500k house he/she had no business even looking at…. now goes into foreclosure b/c they no longer can afford their neg am loan that reset…and the house goes short sale or foreclosure. you have piles of these in lower income areas….wherease you have less of these in nice areas.

if you have piles of forced sales, in less desirable areas, i see how prices go down. lots of inventory, maybe no to little demand..and prices drop.

but in a nice area, with well off people – how does the subprime market drops hurt these areas? i don’t see the connection? if the whole street were realtors, loan agents and roofers…maybe the housing slowdown hurts the street…but if you hve a doctor, lawyer, stockbroker, etc… all with good jobs/loans who can ride the storm out… why does their neighborhood go down?

[23109VC]

i bought the paper today… and read the article.

they interview the family on the front page. they bought a house they couldn’t afford and lost it. then they rented a house. the people they rent from are even more screwed….that’s the good part… the family who rents the house tried to sell their house while buying their “dream home” and then couldn’t sell it. rather than back out they just bought the new house anyway…

the couple claims to have $5400 net monthly income. they have a monthly payment of $4000/month on their $615,000 home they bought from Lennar. the wife was quoted as saying..and I kid you NOT.. “it’s their fault”…. the builder/lendar. guess why it’s their fault?? because “they qualified us for it”….. the wife (idiot) who bought a 615,000 house with a 4000/month INTEREST ONLY payment said they thought it would be easy to pay for it as it was to qualify for the loan..

i mean…. I make MORE money than these people, have relatively NO debt aside from one car payment…and I’m sweating spending between 350-400k. but i’m not going interest only…and i’m not going with an ARM…

anyway…these people are idiots. they complain that the builder sold them a house they couldn’t afford…but what part about “affording” it didn’t htey get.

reminds me of that SNL skit on “don’t buy stuff you can’t afford”….. how do people who make $5000/month net afford a 600k+ house…while still floating their last house? before they got the renter, the “idiot” family in the story was paying $6000/month in INTEREST ONLY payments. the husband was quoted as saying they weren’t paying anything down, paying $6000/month interest payments and were over a million dollars in debt… yeah, who’s fault is that?

just ask his wife.. “it’s their fault”…. sorry. i don’t buy that BS.

i understand that some people aren’t that sophisticated, and can get sold stuff they don’t need, or charged too much…. but please.. you buy a $400k house, do interest only, then you can’t sell it to upgrade to the bigger house, but you buy a second house anyway..knowing you owe $2000 on one house, $4000 on the new house…you sign anyway…and then when you get stuck with $6000/month in payments you say it was too easy to qualify so it’s the bank/builder’s fault?

they have no furniture in th ehouse b/c they can’t afford it and the backyard is all dirt…once again, can’t afford landscaping.

maybe they drive BMWs too… 🙂 the article never mentioned their cars..but that would just be the icing on the cake.. a 330 and an X5.. 🙂 leased… 🙂

[23109VC]

i’m on my computer drafting my purchase agreement, and of course i like to check piggington… and then i see this..

this is why i’m so stressed….

i can tell you this – my wife and i drive around on weekends and look at houses for sale – we look all over. some nice areas we want to buy in, other areas that are so-so…but we just want to see what is happening.

we see tons of homes for sale. some streets have that “look” like it’s a good street. good location, nice houses, well kept yards…. and then some streets and areas have that “trashy” look…yards neglected, and carspiled up out front like it’s a roommate situation. you can see through the side yard and notice the backyard is still dirt and it’s a 3 year old home… they either don’t care or can’t afford to landscape the back…

the nice areas don’t seem to have the same rate of houses for sale or the “repo” or “bank owned” signs on them. the crummier areas, and areas that have lousy locations seem like they are going up for sale at a much higher rate.

it is scary to see all the houss going into foreclosure. peole just bit off more than they could chew.

[23109VC]

i appreciate the comments and advice. some of you seem mad at me that I might buy. why do you even care – it’s not your money. I solicited advice – and I got it. I took it all into account. I got advice from other places besides Piggington. Many of you here have great ideas, but NO ONE knows where the market will go. No one. We are all gussing/predicting, etc. If anyone here on Piggington KNEW where the market was going, that person would be a multimillionaire…b/c if you know where the market was going, you’d be rich.

bottom line – i will probably buy. not to spite anyone here, but because it makes sense. i don’t think temecula will take as big of a drop in price as some of you believe.

my decision was based on some facts that had nothing to do with money.

if we rent another two years, and wait for the market to drop – we will potentially have to move 3 more times. a one year lease at another house – what if the owner goes into default and I have to move? then move again… then i finally buy and move to that house. moving sucks. it would REALLY suck right now with my wife being pregant.

the house we are in we LIKE. it’s a tad small, but it’s NICe. and the “small” part is all relative. it’s 1900 sq ft..which to some people is too small, and to some people that would be considered big. it’s small by temecula standards where half the people here have 4000 sq ft homes. it’s big when you consider historically, people grew up in 1400 sq ft homes and that was “Normal”.

i grew up in a 2000 sq ft home and i though ti twas big.

we like the neighborhood. the school. my son is about to enroll in school – we don’t want him bouncing from school to school as we move around.

we like hte house. it has a lot of upgrades, and great landscaping. we have looked at a LOT of houses, and very few have the combination of features, upgrades, landscaping that this one has, combined iwth a private lot. out of this entire subdivision – this is one of the nicest floorplans with the nicest locations. we like the neighborhood we are in. so maybe we lose money over the next 2-3 years. we are getting fixed rate P&I loans, so as i get my raises and COLAs, the payment will just get easier, and i’ll be paying down the loan..i’m not doing some lame Interest only loan…

we plan to stay 10 years at least. that way, if it does go down, we will just sit tight.

we figure the worst case scenario is that if we had moved a couple times, rented tow more years, maybe we would be able to get more for our money. but the costs of buying and renting right now are almost a wash on this house…so we see it as a way we can’t lose.

the only way we lose is buying now, then having an unforsee event force us to sell in the next 5 years – which is highly unlikely.

you can’t predict everything. you have to assess all the choices out there and then make the best most informed decision you can. we have done that…we have gone back and forth and obsessed over this decision for the past month. literally i have had nightmares over the decision….and woke up in the middle of th enight having dreams about houses, prices, etc… seriously. i put that much thought and stress.

part of the stress is that there is NO RIGHT answer. no atter what we chose, based on future circumstancs we have no control over – the decision could turn out to be good or bad. and most of those circs are things that no one can foresee and no one has control over.

in the end, we like the house. welike the neighborhood. the price is good. and even though the market may go down over the next few years, it will come back and by staying ten or more years, in the end – with rent/buy being almost equal…the loss..if any we suffer on paper won’t matter.

i thank all of you for the advice and suggestions. i sincerely appreciate it from all of you.

i will post a follow up over time. and if i get hosed you can all tell me you told me so. 🙂

[23109VC]

it’s not a condo. they are SFR’s, detached. I checked the property records, tax assessor records etc. NOT a condo.

I know what you mean about some places that “look” like houses but aren’t. lennar built a development a few miles from harveston up Winchester called Griffith park, or Griffith Place..somethingl ike that. i thikn they call them “courtyard homes”. each structure is freestanding…no shared walls..but they are ON the property lines, and they share driveways….”guest parking” spaces, like a condo. they look/feel like condos in size and the “crammed” in feel..but yet they are “free standing”. they are condos.

Sausalito in Harveston are houses. you own the house and the lot. albeit the lots are on the small side, you still own it.

Despite a lot of you who are telling me NOT to do it, we are leaning toward buying. $350k for a 1900 sq ft house that is loaded with upgrades, in a nice community, in a good part of temecula, with a good location w/in harveston… no hassle of moving, (while my wife is pregnant), we can still get 100% financing, and the sller wil pay ALL our closing costs…

i don’t see these homes hitting high 200s. i think the worst it will get is 300-325k. i could be totally wrong..but if i’m right, and that’s the worst it gets, i’m not really doin that badly.

we have actually thought of bying it for 350k and then immediately listing it for sale at 440k…. and maybe being able to flip it to some sucker. 🙂 if we can’t sell it, we’ll happily stay.

[23109VC]

wow. i just checked my post and there were some seriously well thought out replies. THANK YOU.

350k is pretty much as low as i can get the owner to sell at. i checked records and that is his note value. at that price he sells to me, gets his money, pays his first, and walks away. the purchase price was 450k…and whatever cash he already put down is already gone…this sale woud prevent more cash comignt o the table,and prevent a short sale for him.

as far as harveston being a “nicer” area with more fixed up homes.. from my observations, a LOT of the homes in harvestorn wwere built by Lennar as “ei” homes, so they were more fully upgrraded by the builder…. almost al had granite, upgraded cabinets, upgraded fixtures, sinks, paint, etc. there are some that are not, but more that are. this home is NOT a condo. small lot yes, but it is a free standing home.

one factor to consider additionally, and while im no expert..they do say location location location…

here are some of my thoughts that make me think that while the home may drop on price further, it may fare better downt her oad tha some homes hwer.e.. this home is not “on” the lake, but walking distance to it. walking distance to the lcubhouse/pool. it is also one of the very few homes in harveston that has a priate backyard that does not back up to a street or another house. it backs up onto a greeenbelt. so the lot may be small, but the backyard does not have some mega two story 5 feet over my fencelne peering down at my yard… nto that that adds value..but the home did sell with a 10k lot premium vs other similar homes that were not on this side of the street…

downt he road, if i went tos ell, i’d have aleg up on some of the other homes in this area.

but ifprices fall to 280k…and i pay 350k… yeah, that’s a lot of money to be underwater….

[23109VC]

how many of you here think that a 1900 sq ft home in Harveston will fall below $350k??

i’ve talked toa LOT of people..not just Piggington folks… most of the people i’ve talked to who are NOT on Piggington seem to think that I”m crazy if I dno’t buy this house at 350k.

most have said that even if the market does keep dropping, the liklihood it would go below 350k is slim…and so they see it as a way to buy now at a low price, and be protected even if the market does tank.

[23109VC]

maybe he’s pressed for time? i don’t know why he would sell at $350k.. if it’s really worth $430-440k?

i have a few ideas

1) Possibly he is trying to fund some other purchase/investment and needs to free up capital and by unloading this house he can move on something else?

2) maybe he didn’t really pay $440k and got the thing for only $350k….due to his connection wtih the builder (he/his family was an employee of the builder) and maybe he is not really losing a thing, and just passing up possible earnings he’ll pay capital gains on?

i figure if he listed it tomorrow..he’d list it at $420-430. he’d get offered $400k? then pocket $375k after agent commisions. if it sits a while before it sells, and I’m not living there paying rent, he is carrying maybe $2000/month in costs…. so 3-4 months of it sitting there will cost him another 6-8k….

so it’s possible that he may be concerned that $350k is basically what he’s going to realize from a sale no the open market anyway…and he’d just assume get it in the next 30 days, instead of waiting almost 6 months to get it..

who knows. the guy owes me nothing. if he thought he could make more money by selling to someone else he would.

i’ve come across a handful of agents who i’ve talked to while looking at rentals…and discussed my situation. they all said i was dumb to not buy it at that price. or course several of them also told me that the housing market was not going to go down much, “not like the late 80s” it will be “different this time”…so they don’t know everything….or they are wearing blinders….only seeing what they want to see…

bottom line – i do think the price he’s offering it to me for is decent. but i think if i sit back and wait 1-2 years…i can get a bigger/better house for the same price. when the houses that are curently $500k are selling at $350-400k… or less…

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