North Park: will prices get lower? rent vs wait vs move

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Submitted by bzribee on November 21, 2008 - 2:18am

I am reeling after reading sdrealtor's post re spring bump in prices (Active Forum: Spring Break Prediction). It's such a fascinating discussion but I'm wanting to bring it down to my level: I live in North Park and LOVE it here. I'm just a few blocks from University and 30th, in an OLD and somewhat ratty apt that my friend's call my "hobbit hole". I pay $700/month for probably 600 sq feet. This is good because a few years ago I decided to work less as I can live on not-too-much. I want to buy here, but not anything near the prices that the other forum is looking at. I keep waiting for condos under $160,000 (really) and with reasonable HOA's (not the ~ $400/mo of La Boheme).

Do you folks think this will ever happen? I saw a great condo in Spring Valley this week: 2B/B, detached garage, ~$200/mo HOA's, $115,000. I like the place. I have the savings for a good DP which may not be true as the market tanks. But, no offense to SV folks, I really don't want to live there. I'm VERY worried that I may be making a really stupid decision: Buying a condo for so little could protect me (and my diminishing assets) through this downturn.

But, as a single person, I like being near "the action". I like being central.

I would value anyone's thoughts on this...

Submitted by NotCranky on November 21, 2008 - 8:34am.

Can you define the condo you are thinking about because there are already many condos in the area under 160k with low HOA. 1 bedrooms in condo conversions mostly.

http://www.sdlookup.com/MLS-080059809-48...

It sounds like the margin for error you have is pretty tight on a few fronts. That complicates the thought process a bit(as you know.I think a little more patience won't hurt.Maybe a year.

Anyway I think it would help the discussion if you post the parameters you have for the unit you have in mind.

Submitted by sdduuuude on November 21, 2008 - 9:06am.

If I were you, I would skip the "work less" plan for a year or two and hunker down.

Believe me, nobody likes to "work less" more than me, but earning and saving cash over the next couple of years is just the right thing to do.

Your cash is safe as deflation seems to be taking charge for a while. Some day (1 year? 2 years? 5 years?) inflation will take over and putting the capital into a house will make more sense.

If you LOVE it there, why are you even looking in SV ? Makes no sense. Look where you want to live.

If I were you, I would focus almost 100% on the difference between the total cost of living in a rented place vs. purchased place. Compare the same place, too, not your $700 hobbit hole to a 2BR condo. If you want to buy a 1 BR condo - check out rents in that exact complex. Compare it to an actual mortgage that you would pay. Consider property tax, income tax deduction, monthly cash flow, depreciation/appreciation, the cost of adding furniture and upgrades. Everything. How does the loss of flexibility in owning compare to the intangible comfort of owning ?

When researching condos, inquire aggressively into the status of the HOA group. Are people skipping their HOA payment? It's a sign of trouble and an insolvent HOA (one with not enough cash) is really something you want to avoid.

Also, I'll give you my best advice: Put the difference between your rent and your monthly house payment into the bank every month. I can't say enough good things about this strategy. It teaches you the discipline to make a big payment every month and it builds a down payment. When you have enough of a down payment and feel you can make those payments for 30 years, and prices come down a bit, it's time to buy.

Submitted by peterb on November 23, 2008 - 10:26am.

bzribee- Hang tight and save your cash. This is no run-of-the-mill recession we're in. Events of this economic magnitude happen once every 60 to 80 years. For historical reference you can investigate the credit bubbles bursting of 1825, 1873 and 1929. When these things pop, like now, there's huge financial carnage that follows. CA just recorded 8.2% unemployment and it's going to rise all of 2009. And foreclosure's of higher dollar loans have been defaulting at great numbers for the last 5 months, which translates into foreclosures in mid 2009. These two trends add up to massive downward pressure on real estate prices for 2009.

Submitted by ltokuda on November 23, 2008 - 10:28am.

bzribee, I wouldn't get too startled by sdrealtor's prediction. During previous housing downturns, almost every year saw a spring bounce in prices. After each bounce, prices dipped even lower than they were a year prior. That's why its important to look at year-over-year prices. If you ask sdrealtor for his fall of '09 prediction, I'm sure he'll tell you that prices will probably be lower than they are now.

Submitted by sdrealtor on November 23, 2008 - 11:46am.

they will be although occassionally a deal pops up that will stand the test of time. Here's an example, Last Fall there was a 3BR condo in Village Park (Encinitas) that was a probate sale by the estate of the orginal owner. Was about 1500 sq ft, best location in the community with a nice westerly view. Well maintained but needed updating. Sat on the market for a couple weeks when no one was paying attention. Ultimately sold for $300k and I had a buyer who could have gotten it for about 285K but balked. In Spring it would have sold for close to 400K and it would sell for $350K today without much trouble.

Submitted by ltokuda on November 23, 2008 - 12:14pm.

Some friends of mine started flipping houses in Riverside recently. The houses that they are buying are damaged and usually need about $20k of rehab work. If they buy a house for, say, $100k, they rehab them and sell them for about $160k. This type of house would rent for about $1350/mo right now. In order to find these deals, my friends might bid on 30 properties and only get 1 hit. The point is that on the low end side, there are deals to be had if you look really hard for them and are able to do the rehab.

The prices in Riverside are still coming down, though. That's why my friends are flipping the properties. They don't want to get stuck with an asset that is depreciating in value. We believe that by late next year, the low end will be very close to its bottom. At that point, I'll start looking a properties to buy and hold as long term investments. There are some good deals to be had right now. But there will be even better deals in Riverside in the future.

Submitted by bzribee on November 25, 2008 - 1:24am.

A few responses:

Itokuda: Thanks for your perspective. It wasn't just "the bounce" that made me reel--it was the depth and breath of the discussion. As a non-realtor/ expert, it was a lot to think about.

Rustico:You're right! I'd love to live within 3-5 blocks of University and 30th, not near El Cajon Blvd, and staying between Texas and 805. 1 bedroom is fine if there's a garage. I've used realtor.com which gave me some different locations than sdlookup. I need to follow both of these more closely. There are options I wasn't aware of.

sdduuuude: Sigh! I don't wanna listen but yes, I should keep working. I've begun a small part time business and save plenty (for my needs). I needed your prompt to look at costs vs rents.

Everyone's comments are good reminders that it's okay to wait, to look where I want to live, and to run the numbers. Thank you, all. I appreciate the conversation and opinions.

Submitted by sdrealtor on November 25, 2008 - 10:19am.

another piggie saved.

We should get one of those signs from MickeyD's

Over XXX served!

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