Help! Want to relocate to Northern California 2010

[Ready2migrate]

Snort: What do you mean Cretin City ?

[coyoteskye]

Originally Posted by Ready2migrate

Snort: What do you mean Cretin City ?

he's a wise a** talkin trash.

[MrSaturn]

OK, so there were subprime loans, where people with bad credit and 0 downpayment got loans for houses. It was mostly in the lower end of the market. They mostly went belly-up last year and this year. But now there are Alt-A and Option-ARM loans. These were lent to people with good credit and 0 downpayment. Because of the real estate bubble, 3-5 years ago people were buying houses and expecting the price to go up. They were taking out loans and making minimal payments- minimal, as in they weren't even paying the full interest payments. The principal amount of the loan kept going up, but banks and owners said things were fine because they expected the property value to increase as well.

Well, now property values are in the tank. So if you took out an option-ARM loan for 500k, and made minimal payments, you probably owe 600k by now. You assumed your house would shoot up in value (to say, 750k) like it did during the bubble, and expected to unload the house for a tidy 150k profit. Well... now the house is worth 250k, and you're 350k in the red. Your low payments expire next year, and you're expected to pay the full interest and principal just like a regular prime loan. These are loans in good houses. And the payments are all resetting in the next few years. So this isn't the bottom of the market.

[Ludachris]

Originally Posted by MrSaturn

I strongly advise against buying a house in California for the next few years. There are still a ton of foreclosures yet to go out, and more to come when the option-ARMs default starting next year. Housing prices are nowhere near the "3x annual income" rule yet.

If you're here long term, I strongly advise renting before buying. Or just renting and forgetting about buying until prices become reasonable.

I agree somewhat that waiting to buy couldn't hurt, as there will almost definitely be more foreclosures hitting the market now that banks can no longer legally keep them off the market. But most of those are thought to be in the $300k and higher range, not so much the lower range. Many expect the lower priced homes to be relatively unaffected due to the pickup in demand for homes that are believed to be valued more reasonably. Do you not agree with that?

And just a curious - how long has it been since the SF Bay Area and other desirable regions in CA have seen the average home value ratio fall in line with the "3 times the annual income" rule? Some feel that the bottom won't be realized until this happens. I wonder what these areas have averaged over the past 3 decades in regards to that ratio. Anyone have a resource that could shed some light on it? I just did a quick search and couldn't find much data.

I can see the median home values dropping some still, but I tend to see that happening as a result of drops in the upper price ranges, not so much the lower price ranges.