Buying a House to Just Buy a House...

[84porsche]

I would be a first time home buyer but it seems that things are starting to look just barely affordable in Orange County, CA in my eyes.

Would you do everything, pull all the strings to get into a home in the hopes that things are going to get better as time moves along? or Would you be just a little more patient and see how the economy turns? I would like to be within 8-9 miles of work which leaves me in some of the more expensive cities of Newport, Corona Del Mar etc. for those that know this area.

My options are:

1) Buy a condo - possibly affordable
2) Buy an attached home - also possibly affordable
3) Buy a "real" detached home - a little out of my range but with help could be easily possible.
4) Stay in my apartment and keep waiting on the right time to jump rope.

[JayG]

Do you have a down payment?

[Porsche-O-Phile]

Wait 12-24 months. The bleeding is just getting started.

[RPKESQ]

Buying a house is a big decision. In order to provide sound advice, more information is needed.

Age?
Married/single?
Self employed/ employee?
Do you have 6 month cash reserve in case of job loss on top of a downpayment?
Current rent and living costs?
Future plans, relocation, wife, kids, retirement?

Generally, unless you have the need for a house due to family, securing a low rent apt. is far more finacially astute. Homes go up about 4-4.5% per year, add in taxes, insurance, upkeep and remodeling and most homes are very poor for investment. They are more of a "forced" savings plan. They can rapidly become no more than a money pit.

Your housing costs should not exceed 25% of your income. This is conservative, but will give you great peace of mind and allow you to live life, instead of being just a wage slave.

The Market will allow you to maximize your financial gains (8 to 10%) and with proper investment choices, lower your taxes and risk. Just depends on your future plans.

Most economists see another 12 to 18 months of lower home prices and tight credit (higher mortage interest).

[RANDY P]

Originally Posted by 84porsche

I would be a first time home buyer but it seems that things are starting to look just barely affordable in Orange County, CA in my eyes.

Would you do everything, pull all the strings to get into a home in the hopes that things are going to get better as time moves along? or Would you be just a little more patient and see how the economy turns? I would like to be within 8-9 miles of work which leaves me in some of the more expensive cities of Newport, Corona Del Mar etc. for those that know this area.

My options are:

1) Buy a condo - possibly affordable
2) Buy an attached home - also possibly affordable
3) Buy a "real" detached home - a little out of my range but with help could be easily possible.
4) Stay in my apartment and keep waiting on the right time to jump rope.

Hey P-O-P- Look, a FTHB actually wanting to buy a house to LIVE IN! Haven't seen any of those THIS YEAR.

(No, good move if you can afford the property and like the locale.)

[Porsche-O-Phile]

Hey now! I'm a FTHB looking for a place to live in too, but I just don't think the conditions warrant it yet. The situation is looking up (actually I spent part of yesterday doing some exploratory looking at a few neighborhoods in Orange County myself just to get a feel), but we're still a long way from what I'd call "the right time to pull the trigger". I still don't even want to contact realtors or brokers - we'd just be wasting each others time for now. I'm doing just fine renting financially (laughing all the way to the bank) but to be honest, I want to get the hell out of this area in the next year or two, possibly out of CA entirely, but that remains to be seen and is partially beyond my control (wife has a say in this).

The day is coming, but for now there are still way better places to put one's money. And even if one doesn't care about the investment implications (you should), I think it'd be prudent to hang tight for a few months to see what the overall economy is going to do. At least until the beginning of next year (after the holiday season). I think if we get through this holiday season with the economy still more-or-less in one piece, the worst will be over and things will begin a gradual, long period of flatness in most markets. Housing will still drop a bit but things (overall) will start to brighten up a little.

Just one guy's opinion.

[RANDY P]

Well, according to Snowman it never drops in Cali :O)

[daepp]

Do it. The region you describe will always be a good place to live, so if you can find something you can afford (with conventional d/p and loan) then do it.

With regard to the 6 month reserve for contingencies - what % of buyers over the last 40 years have done so? How many Pelicans herein purchased their 1st home only after meeting this requirement?

[RPKESQ]

Originally Posted by daepp

Do it. The region you describe will always be a good place to live, so if you can find something you can afford (with conventional d/p and loan) then do it.

With regard to the 6 month reserve for contingencies - what % of buyers over the last 40 years have done so? How many Pelicans herein purchased their 1st home only after meeting this requirement?

The question should be: How many run their finances according to proven financial principles and how many go through life by the method of "hope for the best"?

In any case a house is a poor financial investment the vast majority of the time. Make your money work as hard as you do, or be a wage slave for the rest of your life.

[Porsche-O-Phile]

And what % of people are less than two months away from being out on the street/bankrupt in the event of a job loss as a result?

Point is, do it right or don't do it at all. For one I want to have all my ducks in a row first. If that means I wait a little longer, fine. I'd rather wait a bit and be able to actually sleep at night than be stressed out worrying about it all the time.

Bottom line is if you have to force something to make it work, you probably shouldn't be doing it. If it can be made to happen with a little nudging and steering input, it's probably appropriate.

Best of luck whatever you decide but I've said my peace on this one.

[pwd72s]

Perhaps something in Costa Mesa?

But really...have a good down payment, 20% minimum. Work 2 jobs if you must to reach that goal, but get a down payment saved. Goes without saying...fixed rate only.

Then I'd say buy lower than expectations. This will allow you to weather ups and downs of the general economy and your personal financial ups and downs.

Cindy & I did just that, several decades ago. The place has been paid off for 15 years, and is quite comfortable for the two of us. Just a cheap '70's ranch home of 2400 sq. feet, on 1.5 acres, which gives us privacy. I would like a game room, but don't want to put up with the hassles of adding one.

Anyway, don't stretch yourself to the max, payments wise. Stuff happens in life.

Timing wise? I'd give it another couple of years...saving up for that down payment in the meanwhile. The more you have down, the less interest you pay later.

Financial happiness is paying no interest, while others pay interest to you.

[daepp]

Do we know that he lacks a down payment?

[pwd72s]

Originally Posted by daepp

Do it. The region you describe will always be a good place to live, so if you can find something you can afford (with conventional d/p and loan) then do it.

With regard to the 6 month reserve for contingencies - what % of buyers over the last 40 years have done so? How many Pelicans herein purchased their 1st home only after meeting this requirement?

Cindy & I did...the 6 months reserve, plus over 30% down. In the long haul, a very wise move...

[the]

you'll lose money, likely a significant amount, by buying now in oc.

you will be throwing away your down payment. that amt (your eqity) will be gone in 2 years. if you like that buy now.

this was the biggest bubble in history. to think that it is anywhere near a bottom is pure folly. the last one in oc took 9 years to hit bottom. 89 to 97 peak to bottom.

just run the odds. odds of appreciation in oc in the next 2 years? zero.

odds of more decline? we can debate, but a lot higher than zero. id say close to 100%.

[daepp]

What if he just wants to live in a house? How does he "lose" his down payment if he doesn't move?

[84porsche]

To answer some of the questions.

Age? 28
Married/single? Single
Self employed/ employee? Employee
Do you have 6 month cash reserve in case of job loss on top of a downpayment?
This would likely go into the house.
Current rent and living costs? Current costs - $1400 a month
Future plans, relocation, wife, kids, retirement? Would like all of the above except relocation but not near those yet.

Down payment.
I have about a 10% down on $350K home that I could put together.

[JayG]

I bought a house at 21 here in Atlanta a few years ago. Saved some money and did 20% down. My mortgage is a grand a month. Rent around here was just slightly less so I did it.

You're either paying your own mortgage or somebody elses. I love the area and dont plan on moving for a long while. I mean no matter what you can pay a mortgage with just about any job if you HAD to. I have no other bills. (P-car for fun, 89 Montero daily driver) So you need a billion dollars saved up just a nice cushion, my god i would work at McD's if I needed to pay the mortgage.

[RPKESQ]

Originally Posted by 84porsche

To answer some of the questions.

Age? 28
Married/single? Single
Self employed/ employee? Employee
Do you have 6 month cash reserve in case of job loss on top of a downpayment?
This would likely go into the house.
Current rent and living costs? Current costs - $1400 a month
Future plans, relocation, wife, kids, retirement? Would like all of the above except relocation but not near those yet.

Down payment.
I have about a 10% down on $350K home that I could put together.

OK, good data answers. First, does your employer have a 401K with "matching" offering? If so, put the maximum you can in it to obtain the full matching offered by your employer. See below to pick the investment options to have in your 401K plan, just pick the best your employer offers.

If you haven't a wife or children then why hurry with the house? What is your monthly living expenses? Now subtract anything you don't really need (Starbucks, cable, etc. in case your job goes tits up) and keep 6 months of emergency living expenses in a good Money Market account.

Invest all the rest you can save in the Market. At your age, I would do 50% in stock index funds. I would do 30% in small cap and emerging market index funds. And I would place the final 20% in a high grade bond index fund. Go to Morningstar to research the performance of these mutual funds and pick the best in terms of long term success and low operational fees. Then sit back and enjoy the ride. Depending on your ability and discipline to save, in 10 years you'll have far more in money than any house will bring you. If you marry or have children you can always scale back the amount you are adding to your investments each month (You will not be able to do this with a house and mortage!). By the time you are 38 you will have far more options as to what you can do (buy a house, travel, change carrers, get a family going, etc) than doing it the other way.

[RoninLB]

banks are very tight assed on making mortgages now.


try asking for a jumbo and get ready for 1/3 down

[therotman]

I wouldn't do it yet- you have no family so don't really need a house. Even if prices stabilize where they are at now they are not going to go up anytime soon.

Just save up some cash and buy a house down the road. You will be much happier owning a house than a condo- wait until you have enough money for that. I have owned both in southern california and rent in oregon now instead. You don't want kids in a condo when that time comes either. get a house.

besides, if you get married your wife will just want to sell it and buy a place she wants.