......unto temptation. For I am weak and my patience is not indefinite.
We just looked at a new house by a very reputable builder today.....on almost a quarter acre lot in EDH, that is priced at around $187 a square foot. If we use their lender we get another $10,000 towards closing.
We just looked at a new house by a very reputable builder today.....on almost a quarter acre lot in EDH, that is priced at around $187 a square foot. If we use their lender we get another $10,000 towards closing.
Looking at my screen scrape numbers, $187 puts them in the bottom 15% of over 100 listings. Folsom and EDH Prices would have to drop another 13% to make this the average price (and I do think they will drop at least that). So if average prices drop another 20% that would make our this house approximately 7% above the average price....for a new home. Okay, okay.....I am seriously justifying....
On the other hand, looking at the HOA, Mello-Roos and the fully loaded payments, its way over our rent. I could handle $500 a month over rent...but this is averaging $1000 over.
Sigh...temptation....we may go back later and look at some hard numbers....
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19 comments:
Buying Time:
Your guess is as good as mine (probably better) when it comes to estimating how much more prices will drop. Case Shiller historical charts and historical Sacramento affordability indexes suggest price drops as much as 50% from the highs. Remember we still haven't seen the impact of the "bulge" of ARM resets identified by Credit Suisse and B of A. But if you are right that house prices drop another 15%, then is the time to find the same builder selling the same model, for 15% below the new lower average! Patience Buying Time, patience ... Just remind yourself how much money you will save (house vs rent), if you wait another year to buy!
True you will save the difference between rent and payments, if rates don't go up and rent stays flat.
Find out if this builder is protected against the EDH permit and fee increases - was it $30K? If so will the builder have to raise prices or decrease incentives?
How are they selling?
They are new, that is worth some premium vs resale
The ARM bulge is a moving target, was supposed to be October 2007 but it keeps moving due to sales, refis, etc. There is no
big brother" collecting really good data.
I'm seeing the market that froze up in August due to the credit crisis starting to thaw. . . sales volume starting to recover in the protected neighborhoods I've been watching and a few in the hinterlands.
You will see median prices continue to drop - but that could be the resale dropping to meet the new you're looking at.
When the market starts moving again, the great stuff moves first, the leftovers will continue to drag the median prices - is it price or nice you want? There is some combination that will make the buyer and the seller meet.
BTW Case Shiller is a lagging indicator - I don't know how far, but it will continue to show dropping prices after the fact just as it is only now showing price drops - so maybe 6-18 months lag.
Thanks for the advise gentlemen. (Sippn that was particularly helpful given your usual MO.)
We visited two other buliders in the local area today. All have dropped considerably, between 60k-20k. We are starting to see homes in the size we want at a price we feel we can afford.
If we were to buy right now, it would definetly be a new house...they are hands down the better buy compared to just about everything resale I am tracking. Unfortunately, none of the three had the exact right combination of lot size, location and home layout (okay...probably fortunately). If they did, we would probably have plunked down our 5k, cause I am so tired of waiting...but for not exactly what we want...we can wait a little longer till the incentives get a little sweeter.
Yea there is no reason to buy now unless you find your perfect home at a price you like. Then if you plan to live in the home for a long time the price fluxes wont really matter to you.
I would like to buy now as well, but until foreclosures slow down and the large amount of ARM resets hit next year, it makes too much sense to wait.
Banks and Builders cant even move the homes at so called "auctions" anymore. They can't hold all that inventory on their books forever.
Just curious which homes you were looking at? We recently sold our home in Rocklin (yes, somebody who actually sold one) to EDH. We looked in the Pulte Laurel Oaks homes, but they weren't wanting to come down much so we bought resale. I heard from somebody today that they are now down in the range we were asking for in February. I couldn't help but laugh when I heard that.
Good luck in your search! We love EDH. So much better than where we were at.
Paul...forgot to mention...while Sac may fall %50 from peak (although I don't think it will be that much since the economy seems to be holding).....I think EDH and Folsom will fall 2/3 to 1/2 of that since there is more demand for these desireable areas.
Anon - Yup we looked at Laurel Oaks...nice sized lots, and the single story was a great layout. They seriously dropped their prices and are offering a no payments for 9-12 months if you have 20-25% down. But I do think they need to come down another 50k for us to bite. I really loved that they kept so many oak trees. We also looked at Centex and Lennar. Lennar has only been open a couple months and they have already dropped their list prices....Centex doubled their incentives....from around 20k to 40k off list (depending on financing). All three are priced much better than resale. I am soo tempted....
I reject the idea that I need concern myself with missing the "perfect place" or that the "great stuff" will go first.
With the possible exception of some historically significant properties (done that, not this time), I don't think there are any "special" properties in my range (under 1 million), there are just properties which meet my requirements to a greater or lesser degree. They are NOT rare, NOT in short supply, and I if pass on one today there'll be others in May 08, and still others in Sept 08- cheaper.
This (false) argument of scarcity is a play on the emotions of buyers, a part of a "call of action" that is fundamental feature of advertising campaigns.
Giacomo...thats essentially the conclusion we came to....there is nothing to suggest these new homes won't be here (at the same price or lower) in another 6-12 months.
Scarcity is only an issue if we find the right older custom home...in which case we are willing to purchase ASAP.
Buying Time - If you see that combination of house and land that you really want, there is absolutely no harm in making an offer that is 10% or more below the builder's "reduced" incentive packed prices, give them seven days to accept or reject, and let the builder decide how motivated they are. If you have FICO in hand so the builder knows with some certainty that you aren't a subprime, and evidence of the downpayment in hand, you will present yourself as a non-contingent "sure thing" sale vs. the 30-60% cancellation rate buyers they are seeing, and maybe, just maybe, the builder will accept the offer, notwithstanding the sales' agents protestations to the contrary. Other than your time, it costs nothing to test the water.
"I think EDH and Folsom will fall 2/3 to 1/2 of that since there is more demand for these desireable areas."
Doubtful.
1. Way too much building was done everywhere, but EDH was a magnet for flippers with bigger budgets.
2. Name one place, just one place, full of track homes that becomes a desirable part of any town.
Saturday we also checked out Blackstone. Centex and Lennar. It bugged me how small the lots were.
The smaller homes were priced at $450k. When I compare that to whats on the MLS for this price - it seems the builders are the best buy right now.
I guess Lennars 3rd subdivision St Laurant has the biggest lots. Cambridge and one other builder that are supposed to come in this spring have bigger lots then the three that are currently advertised.
I'm most likely waiting until spring to see what happens.
Nicole - I think St. Laurent lots are bigger cause they are up on the hill (so the lots will be really sloped). If I had to guess, the useable acreage is deceptive. We plan to wait at least till the clubhouse is up and running before we seriously consider purchasing there.
SMF - I dunno...Orange County comes to mind (as much as I hate to admit it). EDH and Folsom are not in a flood plain, have good schools, and low crime. There are not a lot of communities in Sacramento that meet all these criteria. Thus there will be more than average demand, which in turn will keep prices higher when compared to other parts of Sac. Not saying prices won't fall...they just won't fall as much as the rest of Sac.
Personally I don't think Sac will fall 50% like the bubble bloggers ers do....I think it will be closer to 30% (or 40% from peak) assuming the economy holds.
"I think it will be closer to 30% (or 40% from peak) assuming the economy holds."
You assume much, grasshopper >; )
"there will be more than average demand, which in turn will keep prices higher when compared to other parts of Sac."
But what I am telling you is that they MET the demand, and then overshot it.
EDH is nice, but fairly far away. At the same time, it used to be a place to get away from it all (as heard from 20+ year EDH residents). They left because it is no longer what it used to be.
And as with Folsom, they MET the demand, and overshot it.
Everywhere builders overshot the speculative demand, and now that the specuvestors are mostly gone they have way overshot the actual demand.
Even if homes all drop 50% you still probably wont be able to sell them all, plus it will put more people under water and they will default thus adding to the inventory.
Prices will need to come down 50% and stay there for 10 years to fix this mess.
Meanwhile I wait for the house that has everything I want as prices keep falling. I'm not in a hurry, I don't need to buy the first thing I see.
Although I am tempted, then I see a home I was checking out drop 50k in a month. After already dropping 100k and still not selling.
I can wait, just think of it as being paid to not buy. Each month you pad your savings and the houses get cheaper, Its like getting an extra 10k each month. :)
Just to note, sometimes it isn't about price and can't just be about price. I may have overpaid a bit in EDH, but my dd is special needs (just started K) and it was important for us to be in the school and home she would be at long term. She has a mild autism spectrum disorder and consistency is everything. Renting sounds great, but isn't for everybody. Thankfully we bought our first home in 1999 so we had the equity.
Good luck with your search. I enjoy reading your blog. Although we are where we are going to be for a long time, I still find housing fascinating.
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