First Time Buyer - Appreciate Feedback

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Submitted by SurfAndTurf on January 4, 2022 - 3:58pm

Hey folks,

Long time lurker. I come with trepidation seeing how some of the discussion goes in here [and the internet/life in general these days :) ]and realizing I'm stepping into a community as a newcomer. That being said, I've found the resources invaluable and would appreciate a crowd-sourced opinion on my home buying journey.

tl;dr/BLUF: would you advise a loved one to buy, as a new young family, in the current market?

Understanding the case-shiller graphs putting us at all time highs and the other macroeconomic conditions.

Early 30s, dual high income, 1 month old. Plan to be in SD for the intermediate future (at least 5 years), if not permanently. Looking to buy a 3/2 SFH to grow with.

Wrestling with the risk/reward of a major correction, missing out on equity appreciation, being priced out if things keep being wacky, etc. Will be able to put down 10-14% on a ~850Kish home and remain roughly at 26% of gross income for mortgage/interest/taxes/PMI.

Understand much of it is speculation. But hoping for some nuggets of wisdom regardless.

Thank you!

Submitted by an on January 4, 2022 - 11:09pm.

Yes, if you can find one you like and want to live in.

Submitted by svelte on January 5, 2022 - 7:30am.

One of my children bought their first house a few months ago. They had a lot of the same concerns and worries you have...including that they didn't want to get priced out.

I have no crystal ball so I couldn't give them definitive buy or don't buy advice, but I did point out what history tells us.

The worst-case scenario is that you buy, the housing market tanks, and you lose your job. In this case, you could be under water and trapped in a house that is worth less than you owe and you aren't able to make the mortgage payment. To protect against this, my position is that:
a) you buy a home you could be happy to live in for 10 years as that is how long the worst of the worst economy tanks lasted
b) you have emergency cash you could access somewhere should you lose your job during a period when you can't sell your house. That could be a 401K, a relative, something that could tide you over 6 months to a year.

If you have a and b covered and considering that the worst case probably won't happen, you're good to go.

Submitted by sdrealtor on January 5, 2022 - 12:40pm.

Agree with both and I'd add that I would try to do it asap. With the pent up demand we are likely to see prices increasing this Spring. I know a few spots that fit your general criteria that are ripe to appreciate 10%. The benefit of buying early this year is assuming prices continue as they seem certain to do your 10 to 15% down payment will be 20% or more equity later this year. That will allow you to refi into a fully conventional prime loan without PMI or an adjustable 2nd subject to rising rates.

Submitted by gzz on January 5, 2022 - 3:42pm.

Hi Surf, I am having a pandemic baby next month too.

I agree 100% with SDR. Buy RIGHT NOW. Even a 5% increase in the next 4 months is a loss to you of 0.05*800k or $40,000!

You should also seriously see how much higher you can go with your budget. Moving gets harder and harder as you age and should be avoided if you can get a place that’s better. I never thought I’d stay in place for 10 years, but I did. I am happy I got something nice and big back then.

We have submarkets here where inventory is 80% below the lowish levels of 2015-2019, or even at zero listings. When I purchased in Ocean Beach in 2011 there were about 40 detached homes and 30 condos to choose from. Now there’s zero condos on the market and the three “
detached listings are actually one duplex and two teardowns of tiny old beater cottages on big lots.

Something I didn’t realize btw is that as soon as you close, you can reduce your tax withholding to reflect your new mortgage interest deduction. Your take home pay will go up by about $600 per month for this reason.

Submitted by Escoguy on January 6, 2022 - 8:18pm.

sdrealtor wrote:
Agree with both and I'd add that I would try to do it asap. With the pent up demand we are likely to see prices increasing this Spring. I know a few spots that fit your general criteria that are ripe to appreciate 10%. The benefit of buying early this year is assuming prices continue as they seem certain to do your 10 to 15% down payment will be 20% or more equity later this year. That will allow you to refi into a fully conventional prime loan without PMI or an adjustable 2nd subject to rising rates.

When I survey greater North County (inland to the coast) it looks like the 1M to 1.2M will be the entry point for 4BR 2000 sf home soon.

The dearth of inventory is humbling and somewhat shocking.

That being said, there are many high paying jobs here, if both can work, even a mild downturn should be manageable.

I don't see 2008 happening again.

Submitted by flyer on January 6, 2022 - 10:43pm.

If you have some particular zip codes in mind, go to sdlookup.com to get some idea of what's currently available on the resale market, and the pricing.

Also, depending on your location of interest, there are some new communities around town you might want to check out.

The competition for housing is unlike anything we've seen in our lifetime in San Diego and in many other cities, so you might need some help from a realtor, and, even then, it may be a challege.

Wish you the best!

Submitted by sdrealtor on January 6, 2022 - 11:35pm.

Escoguy wrote:
sdrealtor wrote:
Agree with both and I'd add that I would try to do it asap. With the pent up demand we are likely to see prices increasing this Spring. I know a few spots that fit your general criteria that are ripe to appreciate 10%. The benefit of buying early this year is assuming prices continue as they seem certain to do your 10 to 15% down payment will be 20% or more equity later this year. That will allow you to refi into a fully conventional prime loan without PMI or an adjustable 2nd subject to rising rates.

When I survey greater North County (inland to the coast) it looks like the 1M to 1.2M will be the entry point for 4BR 2000 sf home soon.

The dearth of inventory is humbling and somewhat shocking.

That being said, there are many high paying jobs here, if both can work, even a mild downturn should be manageable.

I don't see 2008 happening again.

$1m is the entry point in Coastal as well as RB already. Money seems to be pouring in with no end in sight

Submitted by Coronita on January 7, 2022 - 9:31am.

Unfortunately, I think $1million is probably the entry point for most places that are in demand, whether it's coastal or RB or Poway or RP...

The difference is what you get with $1million.

Closer to coastal and/or sorrento valley, smaller house, smaller lot... RB bigger house bigger lot higher HOA/mello ruse(sic)... Further north like Carlsbad, bigger house bigger yard, closer to ocean, further away from sorrento valley (may not matter anymore)...

If you're in a profession that allows for remote work, I'd say commute time doesn't matter. If I were to do over, I'd probably be in Carlsbad.

If you're in a profession that still requires in person office, I'd prefer to pick the closer location that doesn't require a ridiculous commute... Time is money.

Submitted by SurfAndTurf on January 7, 2022 - 9:43am.

Thanks all! Some great stuff here. Be assured I read everything and appreciate it. I just cant figure out an easy way to quote-reply to all of them lol. Been a long time since I've used one of these html forums...

In general looking west of the 15, south of the 52, north of the 94. It does seem like 900K is roughly the floor. We have some wiggle room in our budget. I spoke with a broker and a RE agent this week. should be getting pre-approval next week so i'll have a better idea then.

We both commute south. I'm a day-a-week in office (for now?) in Chula and the wife works down that way as well.

Current lease is up on 06/01. I tried to start the process early. So i'm sure we could close ahead of that as long as we're willing to eat $2,700/month. Seems like predicted appreciation more than makes up for that.

Submitted by sdrealtor on January 7, 2022 - 10:54am.

FWIW I sold a house down near San Diego Country Club in CV a couple years back. Nice older area with big lots and no HOA. As a buyer Id poke around there

And yes appreciation could easily eat up that rent. Plus if you buy an older home some overlap is nice to get some work done for a month or so and makes for an easy move/transition

Get out there asap and good luck!

Submitted by gzz on January 7, 2022 - 11:54am.

You do not owe months of rent if you leave a lease before 12 months. You likely will owe nothing more and your landlord will be happy to find another higher paying tenant.

How about:

4542 Mount Frissell Dr, San Diego, CA 92117

Submitted by Coronita on January 7, 2022 - 12:25pm.

.

Submitted by sdrealtor on January 7, 2022 - 3:38pm.

gzz wrote:
You do not owe months of rent if you leave a lease before 12 months. You likely will owe nothing more and your landlord will be happy to find another higher paying tenant.

How about:

4542 Mount Frissell Dr, San Diego, CA 92117

Not a bad choice. Where’s sdudde when we need him

Submitted by SurfAndTurf on January 7, 2022 - 8:47pm.

interesting - didn't think about ending lease early. Just reviewed the terms and it does mention that i'd be liable only up to the point where it's re-rented.

We've only been here for a year, but have had to put up with a lot so would expect theres some goodwill with the landlord.

Submitted by Coronita on January 7, 2022 - 9:48pm.

SurfAndTurf wrote:
interesting - didn't think about ending lease early. Just reviewed the terms and it does mention that i'd be liable only up to the point where it's re-rented.

We've only been here for a year, but have had to put up with a lot so would expect theres some goodwill with the landlord.

I seriously doubt a landlord would object to you moving out earlier. He probably will get higher rent than he is getting from you right now.

and frankly, it might take some time for you to find a house. I'd say if you can find out and close escrow by March that is already pretty good imho.

Submitted by SurfAndTurf on January 26, 2022 - 8:45am.

Hey guys, wanted to check in.

First offer, first failure :)

Went in 2% over asking on a house in La Mesa. Was turnkey and well done. The comps came back and we settled at an offer that felt competitive, but on the higher end. Competing offers came in another 3% above ours. And that was before any counters.

With the price trajectory there seems to be quite a bit of risk with appraisal contingencies. The competing offers waived them and I couldn't stomach it. I couldn't bridge the gap on $40k of additional downpayment if the appraisal came in quite a bit lower than the settled price.

We're disappointed. Especially with the state of inventory. But we have another 4ish months to find something.

Also, that $850k clairemont house that was used as an example on one of the first replies sold above $1M, btw.

Submitted by sdrealtor on January 26, 2022 - 9:28am.

I feel for you, it’s brutal out there. Right now it seems as if a house is priced fairly one should expect it will go roughly 10% above asking price depending upon lot , location and condition it could be plus minus but that’s my rule of thumb at the moment

Submitted by SurfAndTurf on February 23, 2022 - 2:06pm.

Hey All -

Just informed by our realtor that our offer was accepted. A townhouse a couple blocks off Adams Ave in Normal Heights. We're over the moon.

Submitted by gzz on February 23, 2022 - 2:27pm.

Congratulations, that's a great area.

By the way, when you're settled down look into father's "bonding" time leave from the state. I should be getting $1100/week for 8 weeks, and mom will get a smaller amount.

https://edd.ca.gov/Disability/PFL_Forms_...

Unlike other state gov programs, the more you make, the more you get back.

Submitted by sdrealtor on February 23, 2022 - 3:01pm.

X

Submitted by sdrealtor on February 23, 2022 - 3:01pm.

SurfAndTurf wrote:
Hey All -

Just informed by our realtor that our offer was accepted. A townhouse a couple blocks off Adams Ave in Normal Heights. We're over the moon.

Congrats! Something must be in the air as I just got my first time buyer clients in escrow today also. There were 20 offers and listing agent said he heard countless sob stories of buyers trying up to a year. I know they are paying a premium but they are buying at least 200k below what they qualified for and are near family who watch kids for them. It’s brutal out there and there are 19+ who will now face this new comp.

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