Wednesday, February 13, 2008

What's our Price Range?

I really admire buyers who have a firm answer to this question. For us there is a lot of wiggle room and justifying that goes on depending on the house we are considering. So when new home sales folks ask what our price range is.....I really want to answer "it depends."

In theory we could stretch temporarily by paying less into our 401k. This would then be offset in a few years once we aren’t paying for daycare (approximately $1,800 a month). We are interested in finding a home where we can raise the kids and grow old (hence the interest in a single story), so stretching a bit now to make sure it meets our future needs is a big consideration.

We have swung wildly in both directions. In the past we have seriously considered houses with some land, and/or other special features and been willing to spend up to 30% above my desired budget. Other times I think it might be better to purchase a home we could afford on just one salary, to allow us a greater financial safety net (job loss, or stay at home mom/dad).

Over the last 6 months, my range has slowly evolved downward with the home and credit markets. Last year at this time we were looking at higher price ranges. However we didn’t quite have the 20% down for that range. So now with the credit tightening issues, and plentiful home choices, I have lowered my comfort range to the 20% mark.

All this to say, nothing is set in stone for us. Perhaps I am being a typical indecisive woman. But I also think it’s important to continually reevaluate one’s situation based on new information.

(And yes daycare really is that expensive.....if you think about it, its only around 5.50 an hour per kid....why college tuition gets all the press and special perks is beyond me.)


Paul said...

Not just "an indecisive woman" thing ... My general goals change with the market, too. Although my affordability range hasn't changed much, what I can get for that price keeps improving. And although our goal is for something "below our means," rather than "above our means," if the right property came along, we would stretch. That is the beauty of the market giving us so many choices now (and for the foreseeable future).

mcb44 said...

I think you're right on the money adjusting your range as market conditions change.

A significant decision point for me is what I expect the housing market to do. If I consider housing a good medium to long term investment, I'd be willing to pay more. If a house is not likely to appreciate as an investment, then I'm not willing to pay as much.

Based on my assessment of a house as a current investment, I've lowered my range by about 100k in the last 6 months.

One unrelated point, is I do not share my range with RE salespeople. When I talk with them, I limit the conversation to what I would be willing to pay for a specific house.

Gwynster said...

Our price is pretty firm. What has changed is what I expect for the price.

We're still in the 1600 sqft 3/2 that has a piti of 25% dti. I just expect a larger lot and better location.

Patient Renter said...

gwn, is the 25% dti thing net or gross income?

Gwynster said...

gross, the 25% goes into 401k and savings

kmm said...

Like Gwynster, our requirement is also DTI dependent, with a goal of 20% DTI of gross income. We're also depending only on my salary and making sure all housing expenses are covered by it including a 13th payment and $500 for expenses.
We're only looking at homes with 4+ bedrooms, and just like most people, the quality that is in our lower price range keeps increasing. We've realized that 8000+ sqft lots are now available, along with nice upgrades inside the homes.

smf said...

$100K to $150K over what we sell our current house for.

Cmyst said...

My range has dropped, largely because I faced the fact that I can't take out a 30 year loan and have to do a 15 year. Like so many others, what has changed is my expectations of what I can get in that range when the dust has settled. I'd pay more for a nicer, quieter neighborhood. Whereas a year ago, I was looking in decidedly blue-collar neighborhoods with a lot of foot and vehicle traffic, now I'm watching prices drop in more secluded and serene hoods.

G Spot1 said...

Don't sell your gender short - my wishes and goals have changed dramatically over the last several months.

We haven't changed the top of our price range, but we've lowered the bottom as good stuff keeps coming down. We are also dealing with the conforming vs. jumbo split being right in the middle of our price range, and we have to really really like a place to justify the 1% jump in interest rate. Curious how Congress' new bill will affect that.

mcb44, how do you get away with not telling RE agents your price range? I also figured we have to give them that so they know what range to look at. Curious how you handle it. thx

Anonymous said...

Over on Landers (Sac-Landing) I read this: "...Stockton saw a total of 22,184 foreclosure filings on 10,608 properties,..."
Do any of the bloggers on this site know what this means? I am guessing that 22K forclosures on 10K of properties means that multiple lenders have to file foreclosures on the same properties? Does that then mean that the number of forclosures does not equal the number of homes?
any help appreciated.
Thanks for the blog AB, love it.

watchingthebubble said...

My expectations have changed, too. What I want hasn't changed, but what I'm willing to pay for it has. But I also acknowledge that I'm probably going to have to come up with a bigger down payment to be competitive for good loans.

I'm patient. As much as I'm ready to be settled down in my own place so I can paint, decorate and garden at will, I want to squeeze as much value out of this falling market as I can. I don't expect to buy another home for a long, long time, so I want to make this purchase a smart one.

A lot of the houses that I wanted in 2005-2007 I couldn't have touched for less than $425K; now they're in the low to mid $300K's and I still have no intention of paying even that much. I follow the home auction listings closely and even receive a catalog of homes for auction from REDC ( I still want to have a decent amount of disposable income for other investments and savings after purchasing a home. I don't want to mess this up.

I'm so very thankful for all the housing bubble blogs that kept me from drinking Realtor Kool-Aid during the run-up to all this madness.

Jacob said...

I wanted a home in roseville/rocklin/lincoln. Back in 05 if I could have found a nice home around 2500 ft2 with a .25 acre lot that I could have afforded I would have been happy. Fortunately they were out of my price range so I couldn't make a big mistake.

now since I figure whatever home I buy I will never sell unless I was moving out of state to retire so I want more. Been checking out some with 1+ acre now.

Saw one for like $800k that was bought in 93 for $95k so only 18% appreciation per year lol. Still a ways to go.

So I am just saving like crazy. When the price is right in a few years I might be able to pay cash and if not will have enough for 50% plus deposit should I choose to lower the loan amount.

So like most people, as prices were going up, it was easier to ignore the flaws in a home. With prices coming down it is easier to focus on them.

mcb44 said...

"mcb44, how do you get away with not telling RE agents your price range? I also figured we have to give them that so they know what range to look at. Curious how you handle it. thx"

I won't rely on a "buyers" agent to find me houses, or to negotiate the purchase price. If I work with an agent to purchase a house, I select, it would only be to use their expertise to help protect my interests through the purchase. I do expect to negotiate with them for a compensation that would reflect the actual work they do, rather than the customary 3%.

I think the original business model of the buyers agent, bringing the buyer to a transaction, has not survived the interet access to the MLS. The prevelant compensation model hasn't kept up with the change in business model.

I did see a post by agent bubble a while back indicating his opinion on this and he is an example of someone I would look to work with.

Anonymous said...

SMF: "Anyways, I have glimpsed 2002 prices already."

I guess that means the home you purchased in 2003 for $348K is worth what now??

My previous post got conveniently once again, what would you get SMF for your previous purchase and then "up" $100K...maybe "buying up" to a $400K home??