Should my friend start escrow on home purchase? SFH, VERY nice, $700k range. Pay stability 8/10, 6/10. 20% down, D/I 40%+

Submitted by equalizer on March 28, 2020 - 8:31am
Cancel. The local economy will slow. D/I too high, salary not guaranteed.
18% (2 votes)
Delay escrow for month if possible to get better handle on their jobs.
36% (4 votes)
Buy. SFH will be ok in long term. Rents won't drop more than 10-15%.
45% (5 votes)
Cancel. Dump family, weather, move to different state.
0% (0 votes)
Total votes: 11
Submitted by zk on March 28, 2020 - 10:48am.

I don't know.

But I would think a buyer would have some leverage right now. And for the next few months at the very least. And I'd make sure I took full advantage of it.

Submitted by Coronita on March 28, 2020 - 11:32am.

Welcome back equalizer, old timer! How have you been?

Submitted by FlyerInHi on March 28, 2020 - 12:18pm.

Of course cancel.

A friend had a buyer cancel on him.

I have a military couple moving in April 1. They sold their house anticipating a move to Texas but the military put a hold on the transfer orders. Lucky them, selling just before the recession.

Submitted by barnaby33 on March 28, 2020 - 5:30pm.

Though I think the long term implications of this are negligible I don't think buying a home in the heat of the crisis is a good idea. The risks have multiplied socially and economically and there is no realistic way a seller is going to compensate them to make the deal work.
Josh

Submitted by CafeMoto on March 28, 2020 - 9:02pm.

Voted yes: Hard to find a great free standing house close to work etc.
We would likely proceed in such case as long as planning to stay many (10 or more) years.
Recommend buyer has 9 months to a year of savings to cover all emergencies etc.
Not sure US is going to manage the pandemic efficiently but I do believe we will get back to work in not too many (3-4) months. Hopefully

Submitted by sdduuuude on March 28, 2020 - 11:26pm.

I'd say it depends on how sick and tired they are of house shopping. If they back out will they have to do it all again in a few months, which could be daunting depending on what else is going on in their lives. If they want to get settled, they may take a hit on price but they may be happier for it.

Submitted by equalizer on April 1, 2020 - 10:29pm.

Thanks for input everyone. The friend had overtime cutoff and spouse senses less new workload.

New houses I see listed at higher prices, as if nothing happened. I don't sees residential rents dropping yet. They could just stay at same level for 5 years and would still be too high.

Friend has to make choice tomorrow. They have only been looking for a year, raised their limit 100k over comfort level because everything else was only 2 bath or junk.

Submitted by sdduuuude on April 2, 2020 - 9:48am.

Someone once told me that when buying your primary residence, buy it when you need to buy it - relative to everything else going on in your life and independent of what the medium-term housing market is doing.

This is different from the investment property game of trying to pick the optimal time to buy.

I think it is decent advice, especially for first-time buyers who likely haven't been tuned into the market for many months or years prior.

Submitted by svelte on April 2, 2020 - 11:05am.

As has been touched on above, there is no clearcut answer.

Depends on a lot of things:
- How secure are their jobs?
- How long until they plan of selling?
- How tight will finances be if they buy?

I wouldn't cancel a purchase just because of CV. The effects on prices are unknown, and as we saw during the Great Depression it can a looong time for prices to decline because most people will try to wait it out.

I just helped a relative close on a purchase last week. I didn't even mention canceling to them, and they never mentioned it to me. Reason? They can comfortably afford it no matter what happens, they only have probably 20 years left in life, and they never plan on selling it anyway. Given those parameters, they could end up waiting 25% of their remaining life for prices to drop and it wouldn't matter to them anyway.

Just to check on what is happening in their area now, a month after they started escrow, I just checked zillow on their northern calif neighborhood. Only one other house is for sale now that is comparable to what they bought, and it is on the market for 10% more than they paid. No evidence of prices dropping there yet, and very few homes on the market right now.

So there is no clearcut answer unfortunately. It is on a case-by-case basis.

Submitted by FlyerInHi on April 2, 2020 - 11:38am.

svelte wrote:
The effects on prices are unknown, and as we saw during the Great Depression it can a looong time for prices to decline because most people will try to wait it out.

the % drop is unknown. But down real estate will go with rising unemployment.
Do you have info on what happened during that Great Depression? Please share if you have it readily available. Thanks.

For high cost areas such as San Diego, it depends how the economy will be rearranged post covid. Will well paid jobs remain here or will telework change the employment landscape?

Submitted by svelte on April 2, 2020 - 11:39am.

FlyerInHi wrote:

Do you have info on what happened during that Great Depression?

Sorry, that's a typo. I meant Great Recession.

Submitted by FlyerInHi on April 2, 2020 - 2:10pm.

There was a a whole debate about the bottom in San Diego after the Great Recession. There was a sharp decline 2008 to 2009 then a bounce followed by another decline to 2012.

Submitted by FlyerInHi on April 14, 2020 - 10:23am.

What did your friend decide to do?