San Diego Housing Market News and Analysis
Buy or Don't Buy?
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Submitted by sakina96 on March 18, 2006 - 12:05pm
So I'm looking for a little advice or input from one of the many intelligent people on this site...
I'm new to the San Diego area, I have a good job and salary, and I am considering buying a house. I have no interested in overstretching myself and expect to get a standard loan product (15 or 30yr). I am also a firm believer that San Diego, like so many other places, is in the midst of a bubble as evidenced by rising inventory, reduced sales and some price reductions. I also believe that prices will also come down over time. I'm not quite convinced that housing prices will drop 40-50% as some people assert. However, 20% seems quite likely.
Likewise, I also expect that long term interest are only going to rise. I must admit that I'm not smart enought to understand all of the influences on long-term interest rates to the point where I can predict how high they'll go. Anyway here is my dilemna...
Given that house prices are going to decline over the next several years and that interest rates are going to rise is it better to buy let's say:
1. An 800,000 house now at 6.5%. Assuming 5% down giving a monthly payment of 6000 inclusive of taxes, HOA fees, etc.
2. Wait two-three years buy the same house for 640,000 but pay 8.5% interest. In the end it probably leaves you with nearly the same monthly payment.
Could someone point out the flaws in my logic or point out things that I have not considered. To me it seems like lowered housing prices over time favor the decision to wait it out. However this is counteracted by rising interest rates. The only difference is how much of your monthly payment is going to interest versus principle. Thanks in advance.
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