So I pulled the trigger: My buying experience in Temecula (long story)

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Submitted by newguy on May 31, 2007 - 7:23pm

Hey guys,

So I pulled the trigger on buying a house. I know the market is going down and everything, but I wanted a secure place to live (sure, I could have rented). I just wanted to share my experience with you guys.

First of all, I was primarily looking in the Harveston area of Temecula. It's community, new-ness (is that a word?), and location were perfect for me. French Valley was too far, and Murrieta (the northern parts) were even further. Also, old homes were still way too inflated, especially after hearing the new home prices.

The first community I looked at was Charleston in Harveston back in middle of April. They asked us 420K for their 1900 sf home plus 25K in incentives (either for upgrades or buying down interest...395K/1900sf = $208/sf). At the time, I thought it was a good deal as I just went with a real estate agent around Temecula, and the only homes you can get for under 400K were about 1500-1800 sf with no granite table tops, no appliances, no new flooring etc etc. I thought about it, and was about to go with them until I visited the community right across the street the next week: Aberdeen. They offered us 428K plus 10K closing costs for their 2334 sf home. That's $179/sf.

Interesting. To me at this point, it seems like prices were pretty flexible. I went across the street the next week (end of April) to look at the Lennar homes (the Barrington community). Low and behold, they offered us 399K + 10K incentives for their 2434 sf home which closes in August. Since I didn't have a broker, I was able to have them pass on the broker fee saving to me. So the total became 392K+ 10K incentives. That's $157/sf. Going back to Aberdeen, they were very reluctant to budge on the price of 428K + 10K closing. However, after running my credit score (815) and seeing how I was putting 20% down, they offered us 390K (no incentives) for the house ($167/sf). This in my mind basically came down to which floorplan would be better.

I decided to go with Lennar's as the floorplan was fine for me and the price was cheaper (and you get a lot more included with the home than with Meritage's Aberdeen). So I signed the PA, put down my deposit and called it a day. The 72 hours to cancel the deposit came and went and I still felt somewhat good about it. Homes were still selling for $200-220/sf in Harveston, so I felt like I had a decent safetey cushion. The next weekend, I went to visit Barrington again to find out that one of their homes fell out of escrow (the house was already done being built). It was their 3063 sf house with "$27,000" in flooring upgrades. They told us it would be a firm 465K + 10K incentives. They also had two homes that haven't been sold in that phase with a closing date of June/July(same 3063 sf house minus the upgrades). Those homes were at a firm 455K + 10K incentives. To me, the extra 600 sf wasn't worth the 55-65K extra. The higher monthly costs of a 30-year loan wasn't worth it.

Being nosy, I asked Lennar about the empty lots behind my future home (as it would suck to have construction noises behind me in a year or two). Finding out they were Prescott homes (Lennar's biggest community in Harveston), I went to the Prescott office to see when those lots were going to be built.

Here's the kicker: they told us that there's a home for a July close date that they couldn't sell. For their 3668 sf home (their largest), their offer was 450K + 20K incentives. I asked them to pass on the broker fee savings to me and use 10K of the 20K incentives to lower the purchase price. The final cost: 432K + 10K incentives. That's $115/sf. At this point, I cancelled my PA with the Barrington home and have the deposit transfer to the Prescott home.

Before I did so, Barrington gave us a final offer of 409K + 10K incentives on their 3063 sf home. This was a LOT lower than what they told us last week of "455K + 10K firm". However, for the price, I stayed with Prescott.

So here I am, just purchased a new home in Harveston. 3668 sf, 6300 sf lot, new stainless steel appliances, new flooring, jacuzzi tub, etc etc for 432K + 10K incentives. I plan to stay in this house for at least 5-7 years. I know this goes against what you guys were all saying, but for me, I can afford it, the price was good, and I'll be here for awhile.

Hope I didn't bore you =)

Submitted by newguy on May 31, 2007 - 7:29pm.

Here's a summary of the homes:

Charleston: 1929 sf (not sure about lot size) - 420K + 25K incentives ($205/sf)
Aberdeen: 2334 sf, 4300 sf lot - 428K + 10K incentives (170/sf, $97/lot sf) --> 390K + no incentives (167/sf, 91/lot sf)
Barrington: 2434 sf, 5130 sf lot - 392K + 10K incentives (157/sf, 74/lot sf)
Barrington: 3063 sf, 5130 sf lot - 455K + 10K incentives (145/sf, 74/lot sf) --> 409K + 10K incentives (130/sf, 78/lot sf)
Prescott: 3668 sf, 6300 sf lot - 432K + 10K incentives (115/sf, 67/lot sf)

Submitted by newguy on May 31, 2007 - 7:37pm.

And as a follow up story, I was able to find out how much the homes sold in our neighborhood. The highest for the 3668 sf home sold for 637K (Mar 2006) while the lowest it has sold for was 525K (Feb 2007).

Also, I found out that a 3668 sf home sold in the next phase (closes in Sept) for 470K + 20K incentives. And if my deal fell through, there were 3 backup offers (I had them reserve the house for me 2 hours before 3 familys came to look at it).

Also, the home that was 3063 sf that had "27,000" in upgrades was also sold as well as the other two homes closing in June/July were also sold (my guess is 440K + incentives).

So surprisingly, people are buying homes at a steady rate. How much they've bought them for or if the escrow will actually close...I don't know. But at least in the Harveston community, it looks like homes are being sold.

Ehh...we'll see how this plays out. I just hope that I won't lose too much while the RE market is falling. Hopefully by the time I get out, the market will be rising again.

Submitted by FormerOwner on May 31, 2007 - 7:40pm.

newguy,

That's some pretty good shopping you did there and it really shows how desperate the builders have gotten. I'd say your purchase price is about 200K lower than what people were paying for houses that size in Harveston just last year. I'm very bearish on the market but if you're going to stay there long-term and you like the area, it's probably not a bad deal. Congratulations and thanks for sharing the info with the rest of us. VERY interesting.

Submitted by NeetaT on May 31, 2007 - 7:48pm.

How much is your property tax and HOA fees per month? I think property tax bothers me more than it bothers most people.

Submitted by Bugs on May 31, 2007 - 7:48pm.

You're buying the house for other than financial gain, right? If so, the congratulations on your purchase and I hope everything works out for you.

Submitted by FormerOwner on May 31, 2007 - 8:12pm.

I posted my response before I saw all of newguy's posts, but it looks like my guess of his buying approximately 200K below the peak was pretty close.

Anyway, here are some things I've noticed about the Temecula Valley housing market and I think these have held true since before the boom, during the boom, and even now, after the boom:
1) Most home buyers up here are people moving from San Diego and want a faux riche house without paying SD prices. The vast majority only look at brand new houses and are awed by the faux riche models.
2) The builders set the prices. Resale homes don't really sell for any more than comparable new ones, regardless of how much the people spent on backyard landscaping, pools, upgrades, decorating, or anything else. I think this is due to #1.
3) I think #1 and #2 are due to the continuous stream of new construction up here. How can houses appreciate when the builders keep popping out new houses at incredible rates? The only reason house prices increased at all up here is purely the speculative bubble fueled by loose lending - that's it!

That said, the builders now appear to be ratcheting the prices back down the same way they ratcheted them up. Now we also have the additional pressure of massive waves of foreclosures and short sales coming on the market. My guess would be that before too long the builders will pull out once they've lowered prices as low as they can and still make a profit. At that point, the only sales happening will be foreclosures, distress sales, and short sales. We're now about half way to a 50-60% price drop IMHO and I'm starting to see how we'll get there. This will be of biblical proportions.

Submitted by hipmatt on May 31, 2007 - 8:47pm.

ohh dear.. I hope 23109VC doesn't see this.. this all he needs to see to send him off into yet another state of massive confusion for another few weeks and many posts here to follow... geezzzeeee .... j/k 23109VC

Newguy.. congrats on your purchase, as long as you plan on staying here for a while, this will probably be OK. I really like the fact that you are putting 20% down. I realize that the builders are slashing prices, and the deal you have seems pretty good, relatively speaking. I also live in Harveston, since 6-2005, and it is a mostly nice place to live. I live in the plan 1 (single story) of Prescott, but not in Prescott, and that is a great floorplan too. I currently rent, and am not ready to jump into buying yet. I personally feel that this area has a long ways to go down, and the area itself poses higher risks (real estate market) than some other cities in socal. I definitely don't need over 3000 sqft of home, nor would I like to heat and cool a home of that size (esp. 2 story), but I might jump back in if I can get a decent 2500sqft single story for about $325k or so. The supply of homes keeps climbing here, and this IS just the first of the price cuts.

I would consider buying in Harveston if..
A. the taxes weren't so damned high, or B.. housing was much cheaper, and C.. the lots weren't so small.

That being said, good luck! and enjoy your new home and community! Thanks for sharing your story with us, especially considering the nature of this site!

Submitted by waiting hawk on May 31, 2007 - 9:34pm.

I spoke to the guy who made that Mapleton video today on the phone and told him of a quote I heard a while back, “the market can stay irrational longer than you can stay rational”. I believe most on here will buy before the bottom and there is nothing wrong with that at all. The only problem I have is what will the area look like after this shake out? I cannot buy in any of those tracks because I have to many guns and will not allow scum to live near me (maybe I am the scum lol), but this is why I am looking in wine country or De Luz for some land. I don’t want to grow fancy things or whatnot I just want to be the heck away from most others. Is that weird or what? Being serious congratz on that purchase. Great schools for your kids.

PS take photos for us would ya?

Submitted by deadzone on May 31, 2007 - 9:34pm.

Psychologically how are you going to handle it in 2-3 years when your neighbor's houses are selling for half of what you paid?

Submitted by newguy on May 31, 2007 - 9:57pm.

Yes, I would be buying for more than financial gain. Like most people on this board, I think we know that there's a group who buys with living in mind and there's a group who buys with money in mind. I'm more of the former (but the money is still on my mind).

And besides, Harveston is literally down the street from where I will be working which is the biggest reason why I was primarily looking at the Harveston area. I also have other factors that lead to me buying so soon, but that's another story.

And hipmatt, you're right about the property tax. Definitely on the high side. But hey, I have to look on the bright side (*tax break*). Thanks for the congradulations and good luck. From looking at this site, it looks like I'm going to need a lot of luck to ride this out.

Deadzone: I would laugh at the neighbors who would sell their home 2-3 years from now at half of what I paid for. Cause they paid higher than me. And I would probably buy their properties as investment if I can buy a 3668sf house for 216K. Probably get one of those 100% financing, neg amortization loans with some jumbo 50 year loan. (kidding aside, I would definitely buy homes for 216K at 3668sf)

Submitted by temeculaguy on June 1, 2007 - 12:14am.

Matt, I was thinking the exact same thing as i scrolled down until read your post, I hope 23109 doesn't see this. I know he will and he's been a good sport but at some point he's going to realize that the house he rents will sell in the high 200's before too long, it just will, granite or not, nobody will pay 350-400 for a 1900 sq ft when the big ones are heading towards $100 a ft.

New guy, you'll be fine and you are brave man for throwing up your numbers, come back and visit us sometime. I suppose over time we will be saying goodbye to a lot of good people. I paid $100 a ft in 1992 and $80 a ft in 1998, but gas was a dollar in 92, electric was $70 and I my income was less than half of what it is today, at $115 a ft for a long term investment in one of the premier neighborhoods, you did good. Maybe you could have done better but have no regrets because you went in knowing the facts and are prepared for any downturn unlike most buyers in the last few years. You have cusion for the bumpy parts because you can afford it now and the payment won't be going up. Seems like fiction these days that someone bought a house with 20% down, conventional 30 year loan, can afford it and plans on staying there for years, that's the way it was meant to be and that formula has always worked. BTW, My last house was a lennar, they build a nice house.

Submitted by mydogsarelazy on June 1, 2007 - 10:18am.

Hi Newguy,

I think you made a fine buy. Harveston is a very nice place.

I have one worry though, long term. If water supplies to this region are cut back, I wonder what that could do. I know that the water at Harveston is all recycled, but just today the Press Enterprise had a cover story about water cutbacks.

At any rate: good job negotiating!

JS

Submitted by ibjames on June 1, 2007 - 10:50am.

congrats!

Submitted by 23109VC on June 1, 2007 - 10:52am.

i saw this thread. no i'm not stressed. I looked at prescott but didn't care for the location. but that's just ME.

newguy - great deal. congrats! we will be neighbors. :) you got a great price for a HUGE house.

as to those of you who have any interst in my situation - my wife and I bought our rental. $350k for 1866 sq ft. one story. 3BD/2BA.

no need to post the "you'll be sorry" posts - I already know what many of you will say. :) My wife and talked about the decision to buy or continue renting EXTENSIVELY. In the end - there were numerous factors at play - some personal, some financial. In the end - after weighing *everything* - we feel we made a well informed decision. There was more motivating us than purely price/sq ft and real estate market considerations.

We bought the house to live in - to raise our kids in - to be in a good area. We had specific wants - such as being in Harveston, in a *one story*, in a certain location, with a private yard - and this house met all those needs (which is hard to find in Harveston).

i ran all the numbers of renting vs buying. and candidly - i'm going to be paying about the same to buy this house compared to renting something similar. So we could have rented another year and maybe bought more house for the same amount of money (or less money) - but we like this house.

i sincerely appreciate all the advice i received here. Just because I went against what many of you recommended - please don't think I didn't appreciate your time and input. I did listen to you all. I wouldn't have spent the amount of time here I did had I not cared about what you all thought. So while many of you will post here and bash me - thank you in advance to those of you who gave me your opinions and thoughts.

we are prepared for the very real and very likely scenario of the house being worth less than we paid for it. we are prepared for that - believe me - we talked about it.

we are in this house for the long haul. 10 years at least. We like the house, we are comfortable with our payments, we are paying about what we would pay to rent, and we don't plan to move for a long time. IN the end, I think we will be ok, and more importantly, we are happy with our decision.

newguy - when do you move in?

Submitted by NotCranky on June 1, 2007 - 11:22am.

Congratulations and good luck on your new home!
Seems to me like retirees will be buying up homes in Temecula at the kinds of prices you guys are talking about and even more so if prices continue to drop. Those prices are going to be pretty competitive and Temecula seems very suitable for the relatively able bodied elderly with decent fixed incomes. Just one example..yesterday I was talking to an agent who has an elderly female client who can sell her home in Encanto which is a rough area in San Diego and will make a cash purchase of a brand new home in Temecula. My wife and I spent the long weekend in Prescott AZ.. It is mostly a retiree haven at 5,200 elevation a few hours north or Phoenix. Prices for similiar homes are also in the 400-600k range now. If this is an example of what other desirable retirement areas cost then I think Temecula can really compete.

Submitted by no_such_reality on June 1, 2007 - 11:29am.

as to those of you who have any interst in my situation - my wife and I bought our rental. $350k for 1866 sq ft. one story. 3BD/2BA.

Congrats, you nailed it with the following: i ran all the numbers of renting vs buying. and candidly - i'm going to be paying about the same to buy this house compared to renting something similar.

That's what everybody needs to keep in mind. If they can gamble on prices coming down 10-20% next year, they also gamble on three critical components: financing, inventory and upkeep.

With the prices mentioned here, the last three years of buyers will be priced-in to their homes, unable to sell unless they're willing to go to foreclosure.

They're also gambling that interest rates will stay near 50 year lows and not return to a more normal rates which will result in the same out of pocket.

The third gamble they're taking is the quality of the home. I remember resale houses in the early 90s, upkeep is the first thing sacraficed when the money get's tight. As you said, you've got the upgrades you want. Sellers are still updating homes to unload them, in another year, that'll stop.

Submitted by Reality on June 1, 2007 - 11:49am.


They're also gambling that interest rates will stay near 50 year lows and not return to a more normal rates which will result in the same out of pocket.

Not at all. Some people just don't get it. There's only so much purchasing power out there. Higher interest rates will make the prices go down more and faster. It won't "result in the same out of pocket".

Submitted by NotCranky on June 1, 2007 - 12:46pm.

Thank you John.
Here is another way of looking at it. Even if interest rates and the lowered pricing resulted in the same monthly costs, are there no advantages to having less debt or a better equity position?
Whoever buys using the logic demonstrated in you italicized quote,especially if they reasonably anticipate depreciatation ,as most here do....
...might have a debtor mentality. That said there is legitmate concern for interest rates. Hopefully the factor is considered appropriately and absolutely without fear. At this point it seems that concerns over a depreciating market and potential recession would have more weight in decision making than interest rates, especially if one is going to make a relatively highly leveraged purchase.

Submitted by Ash Housewares on June 1, 2007 - 12:52pm.

Way to go newguy. You should do a search on this site for "amarillo". A realtor from there was trying to sell a nasty pink 3600 sq ft house in Texas for 650,000. He's since dropped it to 598,000, but it's still $165 per sq ft IN TEXAS. He'd crap his pants if he heard about your deal.

Submitted by PerryChase on June 1, 2007 - 1:18pm.

There's the link to the Amarillo property.
Why go to God foresaken Amarillo, TX, when you can buy cheaper in Temecula (close to LA, San Diego, Orange County).

You should send the link to the house you bought at $115/sf to that TX Realtor. How much do you think that house in Amarillo is worth?

http://piggington.com/life_is_good_in_am...

Submitted by gn on June 1, 2007 - 1:52pm.

newguy, thanks very much for sharing your buying experience. No, you did not bore us. It was very interesting.

I'm curious about something:

23109VC paid $350k for: 1900 sq ft with landscaping.
newguy paid $422k for: 3668 sq ft without landscaping.

After factoring in the landscaping cost for newguy's lot (6300 sq ft), can the rest of it be attributed to:

1. The difference between the location of the 2 house ?
2. newguy got a bargain (relative the market's price) & 23109VC paid market price ?

I understand that, in the same neighborhood, the price per sq ft for a 3600 sq ft house will always be lower than that of a 1900 sq ft house. But in this case, the discrepancy is so large that there has to be something else.

Submitted by masayako on June 1, 2007 - 2:14pm.

"I understand that, in the same neighborhood, the price per sq ft for a 3600 sq ft house will always be lower than that of a 1900 sq ft house. But in this case, the discrepancy is so large that there has to be something else."

Yes, intelligence. :-)) (Just kidding, I just can't stop messin' with you, 23109VC. Sorry.... )

Submitted by FormerSanDiegan on June 1, 2007 - 3:14pm.

Amazing deal. If someone gave you that lot, it would be tough for an independent builder to build a house for $115/sf. (If you acted as your own builder and valued your time at $0, you might do better). Seems that the retail price of dirt in Temecula is about zero.

Submitted by 23109VC on June 1, 2007 - 3:45pm.

OH - that hurts.... :)

i haven't seen newguy's place - but it sure sounds like a great deal!!!!

location wise - I prefer the sausalito area better - which is where my home is. that's just personal preference. I am walking distance to the lake - Prescott where newguy bought is not. Date street is a major surface street that will eventually connect to I-15. Prescott is part of "harveston" but it is separated from the "core" of harveston by date street. many of the original harveston homes are all within a central part of harveston and they are 1-3 minute walks from the lake, parks, clubhouse, and pool/spa facility - making them more convenient and useable. we are a 3 minute walk from all that stuff which we like. if i were in prescott i woul dhave to load everyone up in the car to get to any of that stuff. very short trip - but loading three kids into the car is more of a drag than just putting one or two kids in a stroller and walking 2 minutes...

the prescott homes struck me as more or less larger houses with backyards that butt up against one another - none of them seemed to offer any sort of privacy. most of them would have large two stories immediately beside and to the rear of them - with all their windows peering down at them. my home sold with a 10-15k lot premium due to it being on a greenbelt with no rear neighbors. i back up to pine trees, and bushe, with a 50-75' deep sloped embankment behind me..with no street behind me - resulting in a fairly private/secluded backyard. that is fairly rare in harveston. I"m not saying that my house is worth a ton more b/c of it - but it was a factor my wife and I considered when buying. to US - that was important. our last house backed up on a street and we HATED the noise...this house has a nice quieet and private rear yard..the yards are small..but for sitting outside to enjoy a cigar, glass of wine, or let the kids play in the grass or their sandbox and enjoy the cool evenings - it's ideal.

our personal opinion is taht despite our house being "small" in terms of square footage - our location within harveston is ideal (proximity to the luxuries of harveston) and private/secluded yard.

a neighbor who lives across the street said they could have bought my house when they orignally bought as both lots were still available - they passed on my house b/c they said the lot premium made it too expensive. it's not any bigger - just a better location. were i to try and resell, i have no idea if my lot would honestly command more $$ b/c of location, but i know it would sell before a house on the other side of the street - location location location.

if you price my house out vs. new guys per sq ft - no question - he got a much better deal. although candidly, I couldn't have afforded his house. I have a comfort level in what I wanted to spend and 350k was getting about to where I refused to go any higher. I *could* have stretched my budget and made it happen - but my wife and i have been "house poor" before - we dont want to do it again. we are very comfortable on the payment with 350k. bumping up to anythign close to 450 just adds enough $$ that other areas of our life, saving, spending will get impacted.

we also really wanted a one story. neither my wife or I have ANY desire to go up/down stairs. we insisted on a one story house - adn those are not that prevalent in harevston. prescott did have one floor plan that was a one story - but we preferred the location we were in to prescott.

the "extras" and location our house came with, combined with the price being relatively low compared to what we could have got anywhere else made it a relatively attractive choice. for our needs, and situation - i think it worked out for us. i'd rather pay 350k for a smaler house that is loaded up with a good $50k in options, vs. pay only $300k up front and be faced with $50k in costs over the next few years.

we took that into consideration too...we can afford the house..but to buy a house, THEN get hit with landscaping, window coverings, etc... is $$. i'd rather get a house that had it all done - nicely - and not have to come out of pocket for it.

in NO way am i trying to say that i got a better deal than newguy. if anything - on purely square footage - his deal is by far a better one than mine. for my personal needs, however, i like what i got. a nicely upraded one story in a nice area that costs me about as much to own as it would to rent.

newguy - congrats on your new home!!!

Submitted by gn on June 1, 2007 - 4:11pm.

I remember reading the following in one of the other blogs:

"If you are going to buy right now, you need to get out a big hammer & hammer out a deal because if you don't, you'll be the one being hammered in a couple years when prices will be much lower".

This is exactly what newguy did. He kept "hammering" the builders until he got a great deal. When the dust settles, I think newguy will still lose some money, but the deal he got will soften the blow.

23109VC loved his house so much, that he lost "the power to walk away from the negotiation" which is crucial in negotiating a good deal. Basically, 23109VC ended up bailing out the previous owner (unintentionally, of course). The previous owner was obviously desperate to sell that house.

Submitted by recordsclerk on June 1, 2007 - 8:41pm.

Good job newguy, that's the way to make the builders compete with each other. Going into the deal with 20% down will make builders compete for you buisiness. They don't like working with %100 loans and people who can barely qualify. They also don't like working with people that have to sell their homes. The way you went into the deal got you such a great deal. For those that are planing to buy you might learn something from his post. The more leverage you bring into a deal with less headaches makes you the ideal buyer. This allows you to make deals.
23109VC I think you did great also. You got a good deal and saved $$ on moving expenses. You got the home you want. Although prices are still going down, I don't see your home selling for less than 300K. There may be a few bank repos that sell for 250K, but that won't be the going rate for your home. Unless the cost of building goes down, I don't see builders selling 1,900sqft 1 story homes with upgrades for $250K. And if I'm wrong I'll be very happy, because on still sitting on the fence waiting for the right price.
Temecula is a nice place to raise a family. For the price you get great schools. The tax is high, but that's part of the reason why the schools are so good. Enjoy your new homes and good luck.

Submitted by NotCranky on June 1, 2007 - 11:07pm.

23109VC your rationale sounds quite good. I dislike 2 stories as well, there is a glut of them relative to the aging population . You got the things covered that matter to you. Good Job.

On the topic of what it costs to build these tract homes. I would be suprised to find that the builders can do it for less than $80-$100/ sq.ft depending on upgrades. I am just making an educated guess. I don't know what the lots/infrastructure cost them. As far as owner builder or spec houses $125-$150/sq.ft+site work for similiar housing would be very reasonable in this area. Custom is higher. $200 sq.ft is a number I have frequently heard for replacing the houses from the cedar fires. That includes demo and site preparation.This is all ballpark for good but not exceptional houses.

Submitted by hipmatt on June 2, 2007 - 12:05pm.

23109VC -
Wow, I was laughing when I first read your post, not because of your purchase, but because, we all had figured that you had finally became decisive, and decided to stay put renting your home, for a relatively low price, if I'm not mistaken. My wife was watching me, and noticed me laughing, I was so surprised that you pulled the trigger, but I guess I shouldn't be. I will congrat you on your purchase, but I do think your logic is seriously flawed...

you claim....
i ran all the numbers of renting vs buying. and candidly - i'm going to be paying about the same to buy this house compared to renting something similar.

I would love to hear/see the details of this rational... I personally don't see it anywhere near breaking even, even after the overhyped tax and interest tax breaks.

If I'm not mistaken, you rent for somewhere between 1400-1600 a month right? I remember congratulating you on your exceptional (rental)deal. And you were going to go %100 on the purchase right? Explain to me, how you think you can finance a $350k home, pay about $7k in taxes per year, pay a $120 HOA, home ins, and P&I, and come remotely close to $1400-$1800 in rent you pay? Especially with out the use of an extremely toxic I.O. loan or some other silly type of "rental" loan, in which you don't really pay your debt down in a any reasonable fashion.

I come up with $2700-2800 TOTAL payment of P&I, taxes, ins, hoa with 350k financed, and 6% fixed 30 year loan. So you are paying at least $1100 more per month, the way I see it, before your tax write offs.... Do you really think that you will be able to realize that $1100 per month in decreased income tax payments? I don't see you saving $1100 per months in taxes, to make your break even point, but even if it did, and the property continues to depreciate... you could be in some real trouble.. I thought you agreed to take advantage of your cheap rent, save, and then buy at a lower price in the future(with a down payment), IMHO, this is a great way to go for you, anyways, I would love to hear your side on this issue, and if my math is way off, let me know.

And then....

no_such_reality....

You are looking at the picture completely wrong... you think that if homes drop in price, but rates go up, the monthly payment will be the same, so everything is fine, and you should go buy a house anyways, cause it won't matter.

You are wrong it does matter, to a cash buyer, or a buyer that has a sizable down payment, rates DO NOT MATTER nearly as much as to the "all I can afford is a 100% financing interest only loan" crowd, who shouldn't be buying in the first place. This is the reason prices went up so high to begin with, easy credit, and I don't know about you, but my goal, is to own a home free and clear, not just finance the hell out of things for life. There is much more to things than monthly payment... It will matter when you go to sell that house, and you owe more than it is worth, and the smart ones, will have equity. BTW, even if rates go up, and we buy a cheaper home at a higher rate, and the payment is still a bit high, we can still refi at the next lowpoint for rates.

The ability to build equity can justify a slightly higher payment, but since most here agree, that owning a home now isn't building you any equity, or is actually sapping your equity, and for many more, they have negative equity, is yelling at me to avoid buying a home for a while.

Anyways, congrats to those who are buying a home responsibly, and for the long haul, the houses are very nice.

Submitted by temeculaguy on June 2, 2007 - 2:38pm.

Matt, not to defend 23109 but to clarify, his cheap rental days were numbered and his landlord would not renew his lease. His rationale included that he didn't want to move and couldn't find a comparable rental for what he was paying so he was comparing his purchase to higher rents that he was finding out there.

I share some of his frustrations with the lack of price declines in Temecula proper and the better locations within the city because until new guy reported his deal you had to leave the city to see significant declines. While I don't think 23109 is drinking full strength Kool-aid, he take take a swig of the diet Kool-aid. He initially posted about his current house being too small and not having enough rooms but when new guy got a McMansion in Harveston for what he thought his place would sell for three months ago, then it was all about location. He did good, not great, better than his neighbors, not as good as his future neighbors, I give 23109 a C- and Newguy gets a B+ (23109 would have gotten a C+ if he was going 20% down, fixed).

They both paid 20-30% below peak and there is too much support for it to go below 50% peak across the board for very long (we will find examples and hawk will get free beer, but it won't be across the board for a protracted amount of time). So they will suffer declines in the near term but won't get killed like the 04-06 buyers will. Neither will go down more than 100k from their strike price but there will be a time at the bottom where 23109's is in the 200's and new guys is in the 300's, but that will be as bad as it gets and it wont stay there forever. The main difference between the two transactions is the down payment and financing, newguy's debt is the same as the doomsday price, making his bet safer. I agree that 23109 is not going to be paying the same as rent and unless he had been saving $500-$1000 a month while renting he may find himself in trouble after purchasing. Income tax deduction is overated, maintenance, repair, hoa, etc. almost cancels it out. You should buy for a price that you have proven you can rent for. If you rent for $1600 and can live but not can't save much at that level, then that should be your target mortgage.

Submitted by 23109VC on June 3, 2007 - 10:23am.

the rent on my place WAS 1400. the owner mispriced it in the first place. i had been looking at rentals for a good month before i found this place...it was under market price by a good 200-300/month. it should have been 1700-1800.

before my lease on this house was about to expire - and before i bought - i looked for another rental. the closest price i could find for anything REMOTELY as nice as my house was about $2100. very few one stories... most were in areas we did not like.

buying is going to run me roughly $3000/month. total nut.
renting would cost me about $1800-2000. yeah i can find 1600 rentals..but they are stipped down yucky houses..and after living in homes that have been nicely upgraded, in nice areas, I candidly don't want to live in a dumpy 1600 rental. neither did i want a two story..so my options were lmited.

i calculated that i would be saving about $700-800/month off my taxes by buying.

so my 2000 rental is really 2800/month when you take out the tax whack.

my loans include principle reduction which I don't calculate when doing rent vs buy. i compared the total costs to rent which is the rent. vs the interest payments, taxes, hoas, maintenance. this house will run me about $3000/month. about 400/month is principle reduction..give or take...so i'm paying 2600/month to carry the house.

to rent would actually cost more... at the worst i'm breaking even.

if i sit tight for 10 years - prices will be back

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