In doing my usual weekly scan of NODs & foreclosures in EDH and Folsom, I was saddened to see that our old landlord is now on the list of NODs.
He was a really great landlord, and a funny guy, with a nice family. When we met him, his story seemed the epitome of the American dream. He and his wife came to this country, started a successful business (that was expanding when we met him), and had amassed a modest empire in local real estate.
Not sure if it was for our rental home, or the one two doors down from us that he owned as well. I know he had found tenants shortly after we left. In any case, I am really quite distressed at this news.....even though I figured the day may come.
Speaking of the foreclosure & NOD listings.... www.foreclosure.com, where I gather my data, has changed their free format. There seem to be many listings for land and commercial properties now. Not sure if I am only noticing because of the format change, or if their listings have expanded to include more listings.
Showing posts with label Renting. Show all posts
Showing posts with label Renting. Show all posts
Tuesday, June 9, 2009
Thursday, February 12, 2009
The Appeal of a Depreciating Asset
I am compelled to respond to a recent comment, about why one would purchase a home now, knowing the purchase will be worth less in the future, and still feel good about said purchase. The person called this behavior non-coherent and illogical. I thought I would explore this concept a bit. My reasoning may not be solid, but I think I can make a bit of a case.
If one thinks about a home purely as an investment, I somewhat agree with the commenter. I say “somewhat”, because this line of thinking can lead to irrational behavior (bubbles), based on current expectations of future value. It is hard to predict the future, there are many variables and actors involved. This summer everyone thought oil was headed for $150 a barrel….now it’s less than $40.
On the other hand, almost everything we purchase is a depreciating asset (cars, electronics, computers, clothing, furniture etc.) In theory, just as I currently rent my home, I could also lease a car, electronics and furniture. Taken to its extreme, one would never purchase anything given the above logic (except perhaps food and jewelry).
If I do not plan to use an asset for most of its useful life, then leasing makes more sense. But in reality, we typically purchase most items (weighing utility versus price). It’s often a matter of convenience, not having to worry about preserving the condition of the item, less billing etc. Sometimes our life circumstances change, and force us to sell things earlier than we would like. However, Craigslist is an excellent tool for recouping some of the residual value.
That said, I still try to be prudent in my purchasing of depreciating assets. Do I buy the latest and greatest electronics/computers when they first debut? No. I typically wait until I feel they are reasonably priced. Do I have time to shop around at every possible store to make sure I am getting the best deal possible? No. I usually check consumer reports to make sure I am getting a good value, and often purchase at Costco.
Of course some assets lose all value, but people still buy them. I bought a computer at Incredible Universe (now Fry’s) to use for grad school applications back in 1997. It cost me $2000 for the setup, and 6 years later was worth almost nothing. That computer was an enormous purchase for me, as I was only making $10.50 an hour (ah the joys of working for a not-for-profit in the public interest). Yes there were alternatives (library perhaps), but I chose to purchase the computer.
Given current macro/micro economic factors, are home prices where I live likely to depreciate. Yes. Do I feel making a purchase now is a good alternative to leasing given our current time horizon. Yes. Did I do much more homework and due diligence for my home purchase, since it is likely the largest purchase I will ever make? Once could argue either way. Is this illogical and non-coherent behavior? Perhaps, but humans are not always the rational actors economists assume (although some of that is changing).
P.S. I spend a disproportionate amount of time in my home (as a full time teleworker) so my utility of a home is perhaps greater than most.
If one thinks about a home purely as an investment, I somewhat agree with the commenter. I say “somewhat”, because this line of thinking can lead to irrational behavior (bubbles), based on current expectations of future value. It is hard to predict the future, there are many variables and actors involved. This summer everyone thought oil was headed for $150 a barrel….now it’s less than $40.
On the other hand, almost everything we purchase is a depreciating asset (cars, electronics, computers, clothing, furniture etc.) In theory, just as I currently rent my home, I could also lease a car, electronics and furniture. Taken to its extreme, one would never purchase anything given the above logic (except perhaps food and jewelry).
If I do not plan to use an asset for most of its useful life, then leasing makes more sense. But in reality, we typically purchase most items (weighing utility versus price). It’s often a matter of convenience, not having to worry about preserving the condition of the item, less billing etc. Sometimes our life circumstances change, and force us to sell things earlier than we would like. However, Craigslist is an excellent tool for recouping some of the residual value.
That said, I still try to be prudent in my purchasing of depreciating assets. Do I buy the latest and greatest electronics/computers when they first debut? No. I typically wait until I feel they are reasonably priced. Do I have time to shop around at every possible store to make sure I am getting the best deal possible? No. I usually check consumer reports to make sure I am getting a good value, and often purchase at Costco.
Of course some assets lose all value, but people still buy them. I bought a computer at Incredible Universe (now Fry’s) to use for grad school applications back in 1997. It cost me $2000 for the setup, and 6 years later was worth almost nothing. That computer was an enormous purchase for me, as I was only making $10.50 an hour (ah the joys of working for a not-for-profit in the public interest). Yes there were alternatives (library perhaps), but I chose to purchase the computer.
Given current macro/micro economic factors, are home prices where I live likely to depreciate. Yes. Do I feel making a purchase now is a good alternative to leasing given our current time horizon. Yes. Did I do much more homework and due diligence for my home purchase, since it is likely the largest purchase I will ever make? Once could argue either way. Is this illogical and non-coherent behavior? Perhaps, but humans are not always the rational actors economists assume (although some of that is changing).
P.S. I spend a disproportionate amount of time in my home (as a full time teleworker) so my utility of a home is perhaps greater than most.
Thursday, November 13, 2008
Why Punish the Prudent?
Dear Lawmakers –
I have a couple questions I was hoping you could answer. Why is it that people, who put little to no money down on a home, are now eligible for 2.5% interest backed by the government, and principle reductions of 90% to market?
We would love to purchase a home using a 20% down payment, however all we can find are interest rates at 6% or higher, and market home prices? It seems to me that those of us who have excellent credit scores, and down-payments are actually being punished and asked to pay more when compared to others.
I honestly don’t mind the government helping out actual homeowners. However, I don’t consider someone a homeowner unless they put more than 10% down when purchasing their home.
So all this talk about keeping people in “their” homes, seems like rhetoric aimed at people’s heartstrings. How am I, a renter, any different than someone who moved into a home with little to no money down? For a renter, it’s called a deposit, but for these “homeowners” it’s called closing costs. Yet paying closing costs, now entitles them to lots of special government subsidies that I am not eligible for.
As I am sure you are aware, rewriting loans to keep people in “their” homes, will prolong the pain and keep home prices higher than they would otherwise be. If a loan is rewritten, the government /lender should be required to record the new principle balance with the county, so that us home buyers can at least benefit from the lower more affordable comp.
As evidenced in many parts of Sacramento, the housing market is not broke. People will buy homes once they become affordable (using responsible lending products). Right now homes under $250,000 in our area are receiving multiple bids.
Letting the market adjust back to affordable levels has many benefits. If people are spending less on housing, they will have more disposable income to fuel the economy. It also means people can buy homes closer to work, as opposed to distant suburbs. This had a dual benefit because it will cut emissions and energy demand, while allowing people to spend more time with their loved ones and less time commuting.
Best of luck saving the economy,
Your Average Buyer
I have a couple questions I was hoping you could answer. Why is it that people, who put little to no money down on a home, are now eligible for 2.5% interest backed by the government, and principle reductions of 90% to market?
We would love to purchase a home using a 20% down payment, however all we can find are interest rates at 6% or higher, and market home prices? It seems to me that those of us who have excellent credit scores, and down-payments are actually being punished and asked to pay more when compared to others.
I honestly don’t mind the government helping out actual homeowners. However, I don’t consider someone a homeowner unless they put more than 10% down when purchasing their home.
So all this talk about keeping people in “their” homes, seems like rhetoric aimed at people’s heartstrings. How am I, a renter, any different than someone who moved into a home with little to no money down? For a renter, it’s called a deposit, but for these “homeowners” it’s called closing costs. Yet paying closing costs, now entitles them to lots of special government subsidies that I am not eligible for.
As I am sure you are aware, rewriting loans to keep people in “their” homes, will prolong the pain and keep home prices higher than they would otherwise be. If a loan is rewritten, the government /lender should be required to record the new principle balance with the county, so that us home buyers can at least benefit from the lower more affordable comp.
As evidenced in many parts of Sacramento, the housing market is not broke. People will buy homes once they become affordable (using responsible lending products). Right now homes under $250,000 in our area are receiving multiple bids.
Letting the market adjust back to affordable levels has many benefits. If people are spending less on housing, they will have more disposable income to fuel the economy. It also means people can buy homes closer to work, as opposed to distant suburbs. This had a dual benefit because it will cut emissions and energy demand, while allowing people to spend more time with their loved ones and less time commuting.
Best of luck saving the economy,
Your Average Buyer
Wednesday, October 29, 2008
Making a Move
Now that we are no longer actively looking to purchase a home, Mr. BT and I have been struggling with whether to find a less expensive rental that would suit our family better for the long haul. Our current rental is much larger than we need, and we hear the local elementary school is impacted which may force us to drive our daughter across town every day (all this for only three hours of kindergarten).
But moving involves a lot of trade offs in terms of time and $$. The premise is based on two questions that we continually struggle with. How much rent savings justifies the move, and how long do we need to be in the new rental to make the rent savings worth it. There is a lot of time and hassle involved in a move, and some expense (moving costs, utilities etc.).
Moving a family of four is not something I take lightly, even if it is a local move. My kids are too young to be of any help. In fact, they have a special knack for unpacking and destroying any semblance of order. Which will likely make moving more even more difficult.
Its not like our current economic climate will last forever....I am hoping we will know by spring how bad and how long of a recession we are in for (V, U, or L shaped recession). Perhaps by spring prices on the higher end (most of the homes in East Sac, Davis, Arden, CP, EDH, and Folsom) will finally be in line with the rest of the market (Pending Sales are way down according to my weekly screen scrape). According to Housing Tracker, the 75th percentile has started moving downward again, after a bounce earlier in the year.
We aren't too far from what I consider equilibrium (based on income and rent multipliers etc.). However an "L" shaped recession could easily push us past that point.
But moving involves a lot of trade offs in terms of time and $$. The premise is based on two questions that we continually struggle with. How much rent savings justifies the move, and how long do we need to be in the new rental to make the rent savings worth it. There is a lot of time and hassle involved in a move, and some expense (moving costs, utilities etc.).
Moving a family of four is not something I take lightly, even if it is a local move. My kids are too young to be of any help. In fact, they have a special knack for unpacking and destroying any semblance of order. Which will likely make moving more even more difficult.
Its not like our current economic climate will last forever....I am hoping we will know by spring how bad and how long of a recession we are in for (V, U, or L shaped recession). Perhaps by spring prices on the higher end (most of the homes in East Sac, Davis, Arden, CP, EDH, and Folsom) will finally be in line with the rest of the market (Pending Sales are way down according to my weekly screen scrape). According to Housing Tracker, the 75th percentile has started moving downward again, after a bounce earlier in the year.
We aren't too far from what I consider equilibrium (based on income and rent multipliers etc.). However an "L" shaped recession could easily push us past that point.
Monday, September 29, 2008
The Beginning of the End
Watching today's market, and Congress, I am sufficiently freaked out right now. Enough to call off our home search until I feel we have a reasonable indication that our economy has found its footing.
Until today, we had renewed interest in the housing market, with lower interest rates, and some attractively priced homes. Now, I think it would be prudent to save our down payment for a rainy day (decade) fund. For me, renting in times of turmoil is also preferred. In case one of us looses our job, then we can look for a cheaper place to rent nearby or where ever we find work.
Of course I often change my mind, so if we do get serious about a home in the near future, it would have to be one we could afford on one salary.
Along the lines of economic survival, I also will be resuming a full-time work schedule with the start of the new fiscal year, so posting activity on Average Buyer is likely to suffer.
P.S. Does anyone know if the Sac Bee posted the DQ Sac metro sales by zip this month? I never saw them.
Until today, we had renewed interest in the housing market, with lower interest rates, and some attractively priced homes. Now, I think it would be prudent to save our down payment for a rainy day (decade) fund. For me, renting in times of turmoil is also preferred. In case one of us looses our job, then we can look for a cheaper place to rent nearby or where ever we find work.
Of course I often change my mind, so if we do get serious about a home in the near future, it would have to be one we could afford on one salary.
Along the lines of economic survival, I also will be resuming a full-time work schedule with the start of the new fiscal year, so posting activity on Average Buyer is likely to suffer.
P.S. Does anyone know if the Sac Bee posted the DQ Sac metro sales by zip this month? I never saw them.
Friday, August 22, 2008
Circling In
When we moved into our rental in the Fall of 2006, we signed a 6 month lease. We figured that would give us plenty of time to get reacquainted with the area and purchase a home. At the time, I was open to living in almost any family friendly part of Sacramento that had reasonable public schools.
Little did we know, we would still be renting the same home almost 2 years later. During this time, we have made friends, become active in local groups, and basically settled into the community.
As a result, I find myself wanting to purchase a home closer and closer to where we live now. In other words, my home searching radius is getting smaller the longer we stay here.
At this rate, if we are still here in another 2 years, I may have to talk Mr. BT into purchasing our rental home =)
Little did we know, we would still be renting the same home almost 2 years later. During this time, we have made friends, become active in local groups, and basically settled into the community.
As a result, I find myself wanting to purchase a home closer and closer to where we live now. In other words, my home searching radius is getting smaller the longer we stay here.
At this rate, if we are still here in another 2 years, I may have to talk Mr. BT into purchasing our rental home =)
Monday, June 23, 2008
Other Sacramento Renters
I updated the link section of other Sacramento area renters. If you would like to be included in the list, please send a link to your blogger profile or website. Content doesn't necessarily have to be housing related. My e-mail address is average_buyer at yahoo.com.
In particular, PeoninChief has a nice write up on some of the legal rights and remedies you have as a tenant if your landlord is being foreclosed upon.
In particular, PeoninChief has a nice write up on some of the legal rights and remedies you have as a tenant if your landlord is being foreclosed upon.
Thursday, June 12, 2008
Housing Options
When we first moved back to the Sacramento area in the Fall of 2006, we figured we wouldn't be in our rental for long. We signed a 6 month lease, and didn't put anything on the walls (since the holes would need to be covered when we moved). We also kept our down payment money in a high yield savings so that it was immediately accessible.
In some ways, I saw this as an option on the housing market. We could have saved money if we signed a longer lease (or moved to a cheaper rental), or locked our money up in a CD or some other financial product. The money we are not making by doing these things, is essentially the cost of our option.
Fast forward a year an a half, and I am starting to become frustrated. I am still hopeful that we will find a great place soon. But am wondering if it would be prudent to give up some of our options. Heck, I haven't even ordered checks that have the rental address on them (we are still using checks with our old D.C. address, and are down to the last book!). This hopeful mindset, has me living in denial, which makes the waiting both better and worse.
In some ways, I saw this as an option on the housing market. We could have saved money if we signed a longer lease (or moved to a cheaper rental), or locked our money up in a CD or some other financial product. The money we are not making by doing these things, is essentially the cost of our option.
Fast forward a year an a half, and I am starting to become frustrated. I am still hopeful that we will find a great place soon. But am wondering if it would be prudent to give up some of our options. Heck, I haven't even ordered checks that have the rental address on them (we are still using checks with our old D.C. address, and are down to the last book!). This hopeful mindset, has me living in denial, which makes the waiting both better and worse.
Thursday, May 29, 2008
What's Your Ratio?
Mine is around 21-25. What am I talking about? Price rent ratios of course. The NYT has a great article discussing rent/buy decision factors.
The author suggests that historical ratios are between 10-14, so at 21-25 (and that doesn't include the Mello Roos or HOA), it looks like this area has a lot of room for improvement.
The author suggests that historical ratios are between 10-14, so at 21-25 (and that doesn't include the Mello Roos or HOA), it looks like this area has a lot of room for improvement.
Friday, April 25, 2008
Closing the Loop and Breaking the Chain
The anecdotes keep piling up. Its seems many first time buyers are attempting to get back in the market now that homes are becoming reasonably affordable (under 300k). Unfortunately they are continually being beat out by investors.
It appears we have a game of musical chairs, investors buy foreclosed homes and rent them to folks who were foreclosed on. This is a closed loop, and does not set off the needed move up buyer chain reaction . I believe this is why homes over 500k are not selling very well.....there just aren't enough move up buyers out there!
As long as foreclosures dominate sales statistics, the chain will be broken. Homes have to be bought from real people, looking to move into another (larger) home for the chain to be repaired. One good to come of this: rent's don't go up, due to oversupply.
From what I understand, the government gives generous tax benefits to real estate investors, which makes rentals property an attractive investment even if rent doesn't cover all expenses.
It appears we have a game of musical chairs, investors buy foreclosed homes and rent them to folks who were foreclosed on. This is a closed loop, and does not set off the needed move up buyer chain reaction . I believe this is why homes over 500k are not selling very well.....there just aren't enough move up buyers out there!
As long as foreclosures dominate sales statistics, the chain will be broken. Homes have to be bought from real people, looking to move into another (larger) home for the chain to be repaired. One good to come of this: rent's don't go up, due to oversupply.
From what I understand, the government gives generous tax benefits to real estate investors, which makes rentals property an attractive investment even if rent doesn't cover all expenses.
Tuesday, April 15, 2008
Renters Bliss
While there are quite a few downsides to renting, I thought it would be nice to highlight some of the less obvious up sides (of course the obvious upside is that, at least in our area it is so much less expensive than buying).
--The thing that has been the best about renting, at least for us, is the ability to “test-drive” a neighborhood. If we were really ambitious we would move into the neighborhood I currently covet, to make sure it’s as great as I think it is.
--In times of economic turmoil, its beneficial to be relatively mobile. Not needing to sell your home in order to take a new job is a great benefit of renting in times of uncertainty and high unemployment.
--If personal circumstances change, you can easily downsize to a less expensive place.....if gas gets too expensive, you can move closer to work, and if you family size grows or shrinks you can easily "right size your home".
--Similar to item one above, if a neighborhood that you initially liked, with all its new homes etc. starts to crumble before your eyes, you can move with little to no cost (as opposed to those who bought and would have to sell for a loss in order to get out).
--While we treat our rental better than we would our own house, when our potty training kid accidentally pees on the stairs on the way up to the bathroom, I can take consolation in that at least its a rental!
In many respects, as some have pointed out in the past, Renting is very similar to an option on the housing market and you life circumstances.
--The thing that has been the best about renting, at least for us, is the ability to “test-drive” a neighborhood. If we were really ambitious we would move into the neighborhood I currently covet, to make sure it’s as great as I think it is.
--In times of economic turmoil, its beneficial to be relatively mobile. Not needing to sell your home in order to take a new job is a great benefit of renting in times of uncertainty and high unemployment.
--If personal circumstances change, you can easily downsize to a less expensive place.....if gas gets too expensive, you can move closer to work, and if you family size grows or shrinks you can easily "right size your home".
--Similar to item one above, if a neighborhood that you initially liked, with all its new homes etc. starts to crumble before your eyes, you can move with little to no cost (as opposed to those who bought and would have to sell for a loss in order to get out).
--While we treat our rental better than we would our own house, when our potty training kid accidentally pees on the stairs on the way up to the bathroom, I can take consolation in that at least its a rental!
In many respects, as some have pointed out in the past, Renting is very similar to an option on the housing market and you life circumstances.
Thursday, March 20, 2008
Increasingly Impatient
As some of you have aptly observed, I think my views on the housing market are overly optimistic. The correction cannot happen fast enough in my book. I am sooooo ready to settle down in a place I can call my own.
Have I mentioned lately how I resent waiting out this bubble? I have tried to contain the bitterness and complaints .....but for some reason I feel the need to lash out today.
Yes wishing it so, won't make it so.....and this makes me an increasingly bitter renter (financially content, but emotionally bitter).
At first the local Sacramento housing market was a kind of geeky curiosity.....wondering if and when the economic fundamentals would kick in. During that time we were fairly productive and checked out various local neighborhoods.
But now that I have been in this rental for well over a year, and have pinpointed where I want to live, the curiosity has lost all its charm...even to this uber geeky blogger.
Have I mentioned lately how I resent waiting out this bubble? I have tried to contain the bitterness and complaints .....but for some reason I feel the need to lash out today.
Yes wishing it so, won't make it so.....and this makes me an increasingly bitter renter (financially content, but emotionally bitter).
At first the local Sacramento housing market was a kind of geeky curiosity.....wondering if and when the economic fundamentals would kick in. During that time we were fairly productive and checked out various local neighborhoods.
But now that I have been in this rental for well over a year, and have pinpointed where I want to live, the curiosity has lost all its charm...even to this uber geeky blogger.
Wednesday, March 19, 2008
Are we There Yet?
We have certainly come a long way. But how much farther do we have to go?
Last year, it was easy to be confident about the future direction of home prices. Rents were crazy cheep compared to purchasing the same home. As a result, home prices had to come down (rents weren't going up because frustrated sellers were flooding the market).
However we are now entering a rather grey area. Depending on your assumptions (and especially your location) things can go either way. For example, the home we are looking at comes out fairly even with our rent (with costs fully loaded into both sides) except for maintenance. This is a big exception, because the home is older, and in need of extensive maintenance.
From my limited calculations, in El Dorado Hills, we have another 10-15% to go. At that point, we will hit the rent adjusted value as well as the inflation adjusted value. Homes that are priced around 10-15% below comps in my price range are also flying off the market around here. So I feel fairly confident about this estimate.
Last year, it was easy to be confident about the future direction of home prices. Rents were crazy cheep compared to purchasing the same home. As a result, home prices had to come down (rents weren't going up because frustrated sellers were flooding the market).
However we are now entering a rather grey area. Depending on your assumptions (and especially your location) things can go either way. For example, the home we are looking at comes out fairly even with our rent (with costs fully loaded into both sides) except for maintenance. This is a big exception, because the home is older, and in need of extensive maintenance.
From my limited calculations, in El Dorado Hills, we have another 10-15% to go. At that point, we will hit the rent adjusted value as well as the inflation adjusted value. Homes that are priced around 10-15% below comps in my price range are also flying off the market around here. So I feel fairly confident about this estimate.
Tuesday, March 11, 2008
A Taxing Debate
As an ENFP I tend to be very idealistic......so please forgive the rather naive discussion below. I must be missing some crucial piece of information because the "tax argument" for purchasing a home isn't very persuasive.
We just completed our taxes for this year. It was our first full year in California, and our first full year as married renters with two jobs (we had rented while married previously, but my husband was attending college full-time). We are now at a point where our income is such that we don't qualify for many deductions anymore (except for our two little munchkins of course). So needless to say our tax bill was larger than in past years (the state was what really got us).
Getting to the issue at hand......the "tax benefits" of owning a home are often cited as a reason to buy versus rent. But I have always felt this is a misconstrued argument. For one, you have to pay a lot more in taxes and mortgage interest than your actual deduction. So the "its tax deductible" argument only goes so far in my book.
In all honesty it seems like a big shell game to me. Instead of paying county property taxes, and lining shareholder pockets with the interest on your mortgage, you are paying higher federal and state taxes. I know some have a visceral reaction to paying anything that smacks of a tax, but is paying interest on your mortgage that much more appealing? At least with taxes, in theory the money is being put toward the common good.
Once home prices come down, we will find a middle ground between the two extremes. In theory we will pay less interest and property taxes (since our loan amount will be lower), but federal and state taxes will be higher since we will have less to deduct.
In any case, buying a home for the tax deductibility, seems to be a false argument because those tax benefits are offset with many other costs, such as homeowners insurance, property taxes and maintenance.
We just completed our taxes for this year. It was our first full year in California, and our first full year as married renters with two jobs (we had rented while married previously, but my husband was attending college full-time). We are now at a point where our income is such that we don't qualify for many deductions anymore (except for our two little munchkins of course). So needless to say our tax bill was larger than in past years (the state was what really got us).
Getting to the issue at hand......the "tax benefits" of owning a home are often cited as a reason to buy versus rent. But I have always felt this is a misconstrued argument. For one, you have to pay a lot more in taxes and mortgage interest than your actual deduction. So the "its tax deductible" argument only goes so far in my book.
In all honesty it seems like a big shell game to me. Instead of paying county property taxes, and lining shareholder pockets with the interest on your mortgage, you are paying higher federal and state taxes. I know some have a visceral reaction to paying anything that smacks of a tax, but is paying interest on your mortgage that much more appealing? At least with taxes, in theory the money is being put toward the common good.
Once home prices come down, we will find a middle ground between the two extremes. In theory we will pay less interest and property taxes (since our loan amount will be lower), but federal and state taxes will be higher since we will have less to deduct.
In any case, buying a home for the tax deductibility, seems to be a false argument because those tax benefits are offset with many other costs, such as homeowners insurance, property taxes and maintenance.
Wednesday, January 30, 2008
With Each New Day, A New Story
With a sick kid and a broken dishwasher, I figured RE was going to be on the back burner for the day. But low and behold a story walked right though my door this afternoon (the nice guy fixing the dishwasher).
He had like 6 calls in the first 5 minutes of showing up (and boy was he late...but I work at home so its not as aggravating). I overheard him say on the 4th or so call that he can't work late cause he is meeting his Realtor tonight. I couldn't help myself...and had to ask if he was buying or selling. His response, "I'm one of the subprime folks".
He and his wife bought a home for a price that automatically gave them $60k in equity according to the appraisal in 04 or 05 (can't remember exactly), but now it is worth less than he paid. Interest only loan, and about to adjust. Sounds like they will be moving to somewhere in TX where they can get more home for half what they paid here. He said his payment is $3000 a month. Yikes (waaay more than our rent).
I didn't get many details since he kept getting phone calls and I didn't want to pry.
Have I mentioned how much I like our landlord? Really nice guy, and got right on the dishwasher thing!
He had like 6 calls in the first 5 minutes of showing up (and boy was he late...but I work at home so its not as aggravating). I overheard him say on the 4th or so call that he can't work late cause he is meeting his Realtor tonight. I couldn't help myself...and had to ask if he was buying or selling. His response, "I'm one of the subprime folks".
He and his wife bought a home for a price that automatically gave them $60k in equity according to the appraisal in 04 or 05 (can't remember exactly), but now it is worth less than he paid. Interest only loan, and about to adjust. Sounds like they will be moving to somewhere in TX where they can get more home for half what they paid here. He said his payment is $3000 a month. Yikes (waaay more than our rent).
I didn't get many details since he kept getting phone calls and I didn't want to pry.
Have I mentioned how much I like our landlord? Really nice guy, and got right on the dishwasher thing!
Monday, October 29, 2007
Renting is Even Cheaper than You Think
Home prices are dropping, and if you are anxious like me, you might be starting to compare your monthly payment (adjusted for taxes) to your rent. But there is a little twist that many don't consider.
If you buy a house, you will no longer be making interest on your down payment. (I'm making a rather brazen assumption that have to have a sizable down payment to qualify for a loan.) So when I compare my potential adjusted monthly payment (including any HOA and Mello-Roos etc) to my rent, I use an interest adjusted rent (Rent minus the $250 or so in interest that I make off our down payment each month). To some degree, you could say I am factoring in the opportunity cost of buying a house.
When you make this downward adjustment in your rent (13% reduction in my case).....you will realize that we are nowhere near where we need to be for this market to recover. Compared to purchasing, renting is a bargain. When you adjust your rent for interest, its even more of a bargain than you realized!
Speaking of downpayments earning interest. We are looking into a higher yielding investment to stash our $$ while we wait this out. Being optimistic, we originally put it into a high yield savings hoping to purchase sometime this year. Seeing as how we are still a ways off, we figured we should do more with our down payment.
Anyone have suggestions? I don't know much about the dizzying array of financial products beyond the general stuff.
If you buy a house, you will no longer be making interest on your down payment. (I'm making a rather brazen assumption that have to have a sizable down payment to qualify for a loan.) So when I compare my potential adjusted monthly payment (including any HOA and Mello-Roos etc) to my rent, I use an interest adjusted rent (Rent minus the $250 or so in interest that I make off our down payment each month). To some degree, you could say I am factoring in the opportunity cost of buying a house.
When you make this downward adjustment in your rent (13% reduction in my case).....you will realize that we are nowhere near where we need to be for this market to recover. Compared to purchasing, renting is a bargain. When you adjust your rent for interest, its even more of a bargain than you realized!
Speaking of downpayments earning interest. We are looking into a higher yielding investment to stash our $$ while we wait this out. Being optimistic, we originally put it into a high yield savings hoping to purchase sometime this year. Seeing as how we are still a ways off, we figured we should do more with our down payment.
Anyone have suggestions? I don't know much about the dizzying array of financial products beyond the general stuff.
Friday, August 31, 2007
A Glimmer
Of course right after we sign our new 6 month lease....with a 3 month rent penalty for early termination...we start seeing some nice looking properties that fit our budget.
There is the price range I browse....up to around 25% over what I would like to pay......since, by my calculations, these houses should eventually be in our price range.
And there is the price range we would feel comfortable making an offer on (under $450). Thus far, they have been pretty few and far between...but lately hubby and I have been sending each other at least one or two new listings a week. Most are older houses without all the superfluous trimmings....but that is pretty much what we are looking for.
This reminds me of when I was dating back in college....it seemed the times I attracted the most interest was when I was already in a relationship.
There is the price range I browse....up to around 25% over what I would like to pay......since, by my calculations, these houses should eventually be in our price range.
And there is the price range we would feel comfortable making an offer on (under $450). Thus far, they have been pretty few and far between...but lately hubby and I have been sending each other at least one or two new listings a week. Most are older houses without all the superfluous trimmings....but that is pretty much what we are looking for.
This reminds me of when I was dating back in college....it seemed the times I attracted the most interest was when I was already in a relationship.
Thursday, August 2, 2007
$150 a Month isn't Bad?
Many months ago we decide to look for another rental when our lease was up. We had lined up our neighbor's place across the street who was planning to move in early summer. Well its now late fall, and he is finally getting around to moving (but the timing is bad for hubby and I work wise). In the mean time. the house next door to us also came up for rent.
So we figured it would be worth a try to renegotiate with the owner of our current rental, using the options above as a little leverage. Surprisingly, he agreed to lower the rent $150 a month! Its not the $350 a month we would have saved moving across the street, but I am also being optimistic, and hope we won't be in the current rental more than a year. If we had planned to rent for 1.5 years or more, I'm pretty sure we would have moved.
We are only signing a 6 month lease, since it will give us more flexibility. He would have dropped the price another $50 a month if we had been willing to stay longer term. But I didn't think the penalties for breaking the lease were worth the $50 savings in case we found our dream house.
Sigh...glad this ordeal is over. This whole thing took a lot longer to play out than we had expected.
So we figured it would be worth a try to renegotiate with the owner of our current rental, using the options above as a little leverage. Surprisingly, he agreed to lower the rent $150 a month! Its not the $350 a month we would have saved moving across the street, but I am also being optimistic, and hope we won't be in the current rental more than a year. If we had planned to rent for 1.5 years or more, I'm pretty sure we would have moved.
We are only signing a 6 month lease, since it will give us more flexibility. He would have dropped the price another $50 a month if we had been willing to stay longer term. But I didn't think the penalties for breaking the lease were worth the $50 savings in case we found our dream house.
Sigh...glad this ordeal is over. This whole thing took a lot longer to play out than we had expected.
Friday, July 27, 2007
Intuition
I graduated Georgetown Business School at the height of the dot com boom (2000). Many of my fellow MBAs had job offers at start ups.
While the money was tempting, my intuition told me something was badly out of sync. If everything I was learning in school actually applied to the real world, then these 1 year old companies with negative cash flows should not have a larger market capitalization than established firms with a 20 year track record of solid earnings and growth.
This intuition played out right around graduation, and it left several of my colleagues stranded without a job after school.
Why the long story you ask....well it is that same intuition that led us to sell our house in 2006 and wait out the real estate cycle.
Again my intuition has been questioning the current run-up in the stock market. I didn't see how the housing slowdown could not affect the economy as a whole. They way I see it, all the equity and $$ people have been making in RE over the last 6 years was fueling consumer spending. Hence earnings at Home Depot and Lowes were the first to take a hit. Now auto makers are blaming the housing market. I think we will see more unravelling to come.
Yesterday's market correction, was small. But sorely needed IMHO.
While the money was tempting, my intuition told me something was badly out of sync. If everything I was learning in school actually applied to the real world, then these 1 year old companies with negative cash flows should not have a larger market capitalization than established firms with a 20 year track record of solid earnings and growth.
This intuition played out right around graduation, and it left several of my colleagues stranded without a job after school.
Why the long story you ask....well it is that same intuition that led us to sell our house in 2006 and wait out the real estate cycle.
Again my intuition has been questioning the current run-up in the stock market. I didn't see how the housing slowdown could not affect the economy as a whole. They way I see it, all the equity and $$ people have been making in RE over the last 6 years was fueling consumer spending. Hence earnings at Home Depot and Lowes were the first to take a hit. Now auto makers are blaming the housing market. I think we will see more unravelling to come.
Yesterday's market correction, was small. But sorely needed IMHO.
Thursday, July 26, 2007
Looks can be Deceiving
I was starting to get bummed out recently because several of the houses I had my eye on went "Inactive" in Ziprealty (they send you a message, its a pretty cool service). It made me wonder if Folsom was already starting to rebound, thus killing my dream of being able to afford a place in 95630. However, after seeing Agent Bubble's stats, I was feeling much better.
Today, I also realized that looks can be deceiving. Turns out, as I was browsing rentals (since we are planning on moving next month) one of the houses that went inactive was up for rent! It wasn't sold after all.....ha. In addition, the house next to me, that is $200 cheaper than my house, is still up for rent (which is why I thought I would do another pulse check on rental prices).
Today, I also realized that looks can be deceiving. Turns out, as I was browsing rentals (since we are planning on moving next month) one of the houses that went inactive was up for rent! It wasn't sold after all.....ha. In addition, the house next to me, that is $200 cheaper than my house, is still up for rent (which is why I thought I would do another pulse check on rental prices).
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