Sunday, January 4, 2009

What Changed our Minds?

As some of you may recall, at the end of September, my desire to purchase a home had completely faded. Only three months have passed since that time. So what has changed since that time?

  • NBER has finally acknowledged what we all knew to be true; we are in a full blown recession as of Dec 2007. This declaration alone means very little, but I believe it has many psychological and political implications. Now that we are "officially" in a recession, which is already approaching the average length, we can focus on pulling ourselves out, as opposed to debating/denying its existence.
  • Americans elected new leadership in November. Obama is a brilliant and articulate man, who seems less bent on blindly following ideology, and more focused on finding the right solution to what ails our nation (I don't want to start a political discussion here, so please limit your comments on this one).
  • Interest rates have come down considerably, approximately a full percent (from mid 6s, to mid to low 5s).
  • After looking for 2 years, we finally found a home in our price range, meeting most of our criteria, that doesn't need major repairs or renovations (this was a big issue for me, with two young kids, a full time job, and a husband that travels for work...I would much rather continue to rent than spend all my spare time fixing up a home to make it livable).
  • Sacramento home inventory continues to decline, and sales continue to rise. Of course this doesn't mean prices will stop falling, but it may help with the pace of the decline.
  • As I mentioned in the last post, our daughter will start kindergarten this fall.
  • Mr. BTs job contract should be good for at least another 9 months and is likely to be renewed. My job, which is closely tied to air transportation infrastructure, will hopefully continue to be funded by the federal government (since it is aligned with the agenda of the federal stimulus).
  • With relative job security for the next 9 or so months, a job loss will be offset by the reduced daycare payments when our kids start public school (currently an outrageous $1,700 a month for a local center).
I have to be honest, I really didn't think the builder would accept our offer. So this is a very unexpected turn of events. But I am fairly comfortable with it, given the items I outlined above.

Side note: unlike the MSM that often crucifies our political leaders for changing course, I actually admire people who keep an open mind and re-evaluate their position as new information and data comes in. (I'm not talking changing fundamental beliefs, but rather reevaluating the best course of action, i.e. I was pleased that Paulson changed his course on the TARP, from buying bad assets to infusing capital.)


alba said...

Congratulations! Settling in for the sake of kids is very important. Looks like your patience has rewarded you generously. You'll probably only develop the backyard once, so be patient and do the basics right the first time. Awesome!

Husmanen said...

You previously mentioned that the rent to own ratio was pretty close.

The homes that I look at in EDH and Folsom are still over 25% more per month with a 30 yr, fixed rate, 20% down loan. However, I have seen a dramatic change in the last weeks, prices are really dropping for some homes, mostly bank owned.

On Piggingtion's there was a good discussion regarding 'how much cheaper the rent to own ration must go'.

Buying Time said...

Husmanen -

Yes, that was my first criteria, rent vs. buy needed to be in the ballpark. Otherwise we would have bought in this development a long time ago.

The numbers were relatively close (we are buying a smaller home on a larger lot than what we rent). The lender is kicking in for closing costs, so that makes the numbers work out much better.

The other new development we were considering, was actually significantly below the rent equivalent.

By the way, for those needing rental comparisons, Homepoint has a rental survey:

Sold in '05 said...

Can we ask what percent you were able to get below the builders posted asking price?



Husmanen said...

Thanks for the Homepointe link for rental prices.

I checked the prices for Folsom for 4th Quarter 2008 and they are what I would expect for a 3 or a 4/5 bedroom home.

The trend for the 3bd homes is rather flat from 1st Qtr 2006 to 4th Qtr 2008. The 4/5 bd homes are trending a little upwards, and there is a spike in 2008 Qtr 1. But with averages these numbers can be very sensitive and misleading (positive/negative).

This data will go into my archives. So close to ‘analysis paralysis’ sometimes .... got to pull back from the edge :-)

Again, thanks!!

Buying Time said...

'05 - I shall divulge, but plan to wait till things become a bit more the mortgage approval etc.

sacramentia said...

I think that bubble blogger buying is a leading indicator.

Deflationary Jane said...

"I think that bubble blogger buying is a leading indicator."

Nahhhh the leading indicator is when _I_ buy something >; )

We have a rent bubble to unwind yet and couple that with the unemploynment picture for the next 2 years; look for the bottom in 3Q2010 to 1Q2011.