March 27, 2009

Where to buy? What to buy? When to buy?

Personally, I warms my heart when I see people helping each other out on Burbed. Those are the comments I love to see. It’s the powerful community in action.

In case you missed it… or you want to chime in… here is yesterday’s moment:

First, a question:

SoonToBeDad Says:
March 26th, 2009 at 2:25 pm

Long time listener, first time caller here.

I’m going to be a dad soon. The “host” is demanding we buy a place.

The 2br rentals in Mountain View and Sunnyvale are all about 1800 and they suxxors.

I think I can spend up $3500 in PITIZKLMUOK8J (everything all in) at most.

Downpayment is a mixed story.
I put it all in the stock market. Stooooooooooooopid me.
I think have $100k left.

What should I do? I’m thinking of a 2br /1ba . You guys have scared me away from condos and townhouses with HOAs.

Where should I buy? What should I buy?

Will it go up in value? (Just kidding. If it is RBA, I know it will. lolz!)

The first piece of advice?

nomadic Says:
March 26th, 2009 at 2:45 pm

The “host.” LOL. The kid isn’t even born and it’s already a parasite? ;-)

2BR/1BA? With all due respect, why bother buying? Save up some more, wait until next year.

Wait until next year. Ok. Next piece of advice?

smart dads rent Says:
March 26th, 2009 at 3:05 pm

Hi new Dad, I’m in the same boat. We sold our house in 2006 to move to CA and are we are renting a house. Equity was put in the stock market (it seemed less likely to loose money than the housing market!).

We are now renting, and will rent at least until the kids are school age. My current rent is less than the interest payment would be to buy a similar house.

Unlike the inefficient housing market, the stock market is much quicker to correct to economic reality. At this point, stocks are much more likely to appreciate while housing prices may continue to decline (except the RBA!).

My advice is to move to a rental house and let your landlord eat the depreciation. I know it is hard for aspiring homeowners to understand, but owning a house (and the headaches of ownership) is overrated.

Then, some clarification:

SoonToBeDad Says:
March 26th, 2009 at 3:34 pm

To Madhaus: Have I considered school districts? Yes. Anywhere in the RBA.

To nomaidc: 2br/1ba is the minimum. Ideally I’d like to see 3br/2ba. Or more!

Is $3500 and $100k for downpay not enough? Is that what people are saying?

To: Smart Dads Rent
Interest rates. So low. Cannot resist. They’re goin go back up.

I don’t have an MBA. How can I calculate/justify renting a $3500 a month house versus paying a $3500 all-inclusive payment mathematically? How do I justify it to “the host”?

Followed by this referral:

nomadic Says:
March 26th, 2009 at 3:47 pm

dad – I think steve originally posted this link. It’s a pretty good calculator to play with:

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=2

Figure about 1.1% for property taxes.

Some encouragement to buy ASAP:

Real Estater Says:
March 26th, 2009 at 3:54 pm

SoonToBeDad,

I think you’re making the right move. You’re planning for the future, instead of living day to day. You really can’t argue with the fact that now is a great time to buy a home. Interest rates are at historic lows, and home prices in the BA are about as low as you’re likely to see. You may not catch the absolute bottom, but the upside is way bigger than the downside at this point. Most importantly, you can’t put a price tag on raising your kids in a home of your own.

But then there was a difference of opinion:

smart dads rent Says:
March 26th, 2009 at 4:41 pm

To Realeater: Actually, my returns would have been much worse than the stock market if I had bought another house in 2006: I would have negative equity right now. Leverage works both ways you know.

To Dad: the point is that I can rent a much nicer house than it would cost me to own. Home ownership in the Bay Area only makes sense if you have substantial price appreciation (which we are not likely to see for years

Some disheartening advice:

DreamT Says:
March 26th, 2009 at 5:03 pm

“Is $3500 and $100k for downpay not enough? Is that what people are saying?”
Not enough for RBA cigars. In fact, not enough for grey area either. Unless you land a foreclosure or a fixer-upper, and you’re prepared to beat 50 other offers.

The city of Santa Clara’s housing plan – 1st draft – is out today at http://www.santaclaragp.com/pdfs/Santa_Clara_Draft_Housing_Element_032409.pdf
check p. 11 and p. 111 for population growth figures, p.119 for income figures, p.120 for rent figures, etc.

.. and SoonToBeDad – you can buy a condo with $20k down and be in a good school district. Considering your budget, if education is a priority, you should definitely consider this alternative.

But wait… then Karen steps in and says:

karen Says:
March 26th, 2009 at 7:54 pm

SoonToBeDad – please don’t buy yet!!! somehow convince the mom-to-be that renting is okay. I have incredibly fond memories of the rental places that we lived in when I was little (grad student housing and then a place very near to the beach that my parents could never have afforded to buy). my parents bought when I was about six, when they could genuinely *afford* to. this reduces stress!!!

why not rent in a nice apartment complex with lots of other families with little kids? It’s really fun for little kids to have loads of other little kids around. and while your kid is a baby, there will be plenty of other moms around for your wife to commiserate with.
Prices are going to keep going down, because the job market is going to get worse, and the resets are coming. better to invest now in loads of ice cream and milk shakes (mom bribes) and buy a house or apartment later.

p.s. have you looked at rentals in Redwood City? my impression is that the schools are not so good (I don’t have kids, so ask someone else), but that ought to mean that you can get a better rental deal while your kid is too young for school. you can then move to a rental (or buy) in three years or so, in a better school area.

Finally, some more advice:

smart dads rent Says:
March 27th, 2009 at 12:01 am

New dad, the best thing to do is to compare rentals to the interest expense of owning. If you buy, remember that moving will cost you 6% in realty fees and you will pay 1% a year in property tax.

There is no need to live in a good school district until your child is old enough for school. Until then you can rent more cheaply and invest the difference.

Wow. I love it when the community steps in to help.

Agree? Disagree? Chime in!

Actually, if you look carefully, one of the original questions is never answered: “where to buy?” – this is your chance to jump in with your favorite microneighborhood…. like WOEISME (West Of El Camino, Intersection of  Stanley & Miramonte Ave)

Let’s help a fello Burbian out!

Comments (154) -- Posted by: burbed @ 6:17 am