First Time Home Buyer -- Sacramento (Rancho Cordova: best neighborhood, real estate market, rentals)

[Sandy36]

I am hoping to get some advice from people who are familiar with more Sacramento neighborhoods than myself I am working on buying my first house; I have a low price range as I am young, fresh out of college, and wasn't planning on buying (don't have a large downpayment saved) so I will be utilizing down payment assistance. This is my fourth year living in the Sacramento area. For the first three I rented in Rancho Cordova, right on the line of demarcation between the newer and older areas. For the past 8 months I have been renting in South Natomas.

I am looking at houses in the South Hagginwood area, I am drawn to this area because of the big lots, old houses, affordability, and close proximity to work. I know the school systems and crime rates are not great, but I don't mind that for my day to day purposes. Do those of you who know this area think it's a terrible idea to buy here? If so, what are your suggestions? I know this is difficult with such a low price point, but I think it's important to get into the market now, even if we won't be buying in the best areas.

- Buying or Renting -- Buying

- Budget or price -- less than $200,000

- Employment situation and location -- working in South Natomas, very close to I5 so it's easily accessible from many areas

- School consideration -- We won't be having children anytime soon and are comfortable with having to move to a better school system in 8-10 years

- Pets (especially those considering rentals) -- 4 dogs and 2 cats; this is one of my primary motivations for purchasing
No, I'm not crazy, (well not entirely), my mom is a veterinarian and I have always had a lot of pets

- Urban, suburban or rural preference -- Rural

- Need or desire for public transportation -- None

Any advice is greatly appreciated! Even if you just want to tell me that I'm crazy for considering south Hagginwood... I still want to hear it

[beb0p]

I used to pass by that area, it's not exactly the best neighborhood. But it seems like you don't mind its negative; so I guess if you know the minuses beforehand and you still want to live there, go for it.

The only drawback I can think of (other than the stuff you already know) is that area is very exposed to the market movement, it's not an area where real estate holds value amid a downturn. Sacramento is a boom and bust city, so the next bust is going to take a big chunk of equity down with it. If you plan to live there for a long time, that may not be a problem. But since you may sell in 8-10 years, who knows what the market will be like then.
.

[Sandy36]

Yes, resale values are my biggest concern. I feel as though, unless we have another major downturn, we don't necessarily stand to lose money over a ten year span though, right?

[Stay West]

I feel as though, unless we have another major downturn, we don't necessarily stand to lose money over a ten year span though, right?

Yes, you are crazy for considering this.

You have negligible money saved yet want to buy a house in a rundown neighborhood. Homes are expensive. Homes in rundown areas need work, expensive work. You're young and starting out on a career and there's no reason to hang an albatross around your neck such as this proposal. Ever heard of opportunity cost? The potential downsides to this financial decision are many, and the upsides are... you don't have to worry about your pets soiling the carpet?

Buying on credit alone means PMI, higher interest and very little equity built per monthly payment for many years.

Then there's also the neighborhood issues of crime, noise and general quality of life negatives.

The market is high right now, relatively speaking. Doesn't mean it won't go higher, but it doesn't seem like you're in a financial position to be taking this kind of risk.

Be patient, find rentals that are suitable and save money. You will be much better off buying with money down and established credit and hopefully when the market isn't so hot. Plus if your life plans change in the meantime... no problem!

[derekjones]

What are you paying right now in rent? Have you sat down with a lender and received an estimate of monthly cost and total funds needed to purchase a home? Owning a home comes at a cost. Not only do you have to pay mortgage/prop tax/insurance but you also need to factor in maintenance charges since any repairs will be on your shoulders.

Have you been renting a home or apt? If a home you can get an idea of the increased charges for utilities vs apt.

There are a few different downpayment assistance programs available and you could possibly combine it with a seller credit to minimize funds needed to close the sale. Look into CHDAP and calPLUS ZIP programs for what they have to offer.

No one can predict the future and if the market will rise or fall, just like no one can predict what the mortgage rates will be in a few weeks/months/years.

[Sandy36]

Thank you for all of the input!

To derekjones: Yes we are working with a lender, are already approved for our financing, and are using CHDAP. We have money saved, but it was recommended to us to use downpayment assistance so as to keep money in our pockets for the many big ticket costs which can come along with home ownership! We are aware of the various costs of maintaining a home, and at this price range we will be living below our means, so that it will be comfortable for us to afford any additional costs down the road. At the price we are currently spending on rent and utilities, we will be paying about the same on a monthly basis at the top of our loan pre-approval amount, and could even be saving money if we buy below our top price. I know it is really a leap of faith buying a home at any time and at any price since none of us can predict the future of the market, so I guess my concerns about resale value based on appreciation rates are a moot point

To Stay West: We aren't purchasing a tear down in a dilapidated area, I was just considering the possibility that the cute, old neighborhood buried in that South Hagginwood/Hagginwood area is not as bad as the surrounding areas might suggest. Driving through it at all hours of day and night, it seems nicely liveable! I realize though, that is a matter of opinion, and I will really have to come to my own conclusions about that. Also, our decision to purchase is not a matter of our pets "soiling the carpet," but rather we feel that, if we can have the same monthly expense (with the additional long term cost of maintenance of course) to own a small home with a decent backyard, then why should we continue to throw money away on a rental? I appreciate your input, and of course, continuing to rent is always a possibility!

[Bulldogdad]

If your not putting 20% down then you better have an emergency fund to make the house payment for at least 18 mos should someone lose their job. Even then you shoud have at least 6-12mos emergency fund for payments. Once you establish that then start stashing away as much cash as you can for repairs and maintenance.

[JohnS_15]

Interesting. I certainly understand the desire to have your own place. You seem like you have given this a lot of thought and researched it. Like others have said - there is no real way to know whats going to happen in the real estate market in the next 5-10 years so from an investment standpoint its a bit of a gamble at this time depending on when you will want or need to end up selling. Are you sure you want to take that gamble at this point in your lives? It could pay off down the road or it could end up being a big money suck that ends up being really hard to offload when you are ready to move on.

What about the area you are looking at? I don't know this section of Sac at all so I can't really offer any insight.

Some things to look out for:
What kinds of people are buying into this neighborhood right now? Is there an optimistic feeling around the place that things are improving? Are there a lot of long term owners that live there that have pride of ownership of the place and watch each others backs? What is the percentage of renters? What are the places going for compared to list price? Are there tons of cars parked outside every house that might indicate a lot of people crammed into the houses? When you go to the local park are there kids playing in the playground and people walking with their dogs or is it deserted and tagged up with shady looking people?

Just be aware that if there are no other people like you... young, educated and animal lovers... that you might feel isolated.

Make sure you are talking with a good realtor that knows the area really well and make sure you are looking at all the other neighborhoods at your price point.

Good luck I hope it all works out.

[derekjones]

Sandy36,

It sounds like you have done your homework on the neighborhood and visited it already during different times of the day/night and different days of the week. If you are okay with the neighborhood then that is all that really matters. When it comes to judging a neighborhood it is completely subjective and I wouldn't be too concerned with the opinion of others.

Be sure to also factor in other cost associated with moving into a home. Things like appraisal, home inspection, moving, furnishing, repairs, window coverings. Those things can add up quickly, when my wife and I got our place it had no blinds on the windows so there went an extra $1000, then we needed a washer/dryer, then a lawn mower.

Bulldogdad,
While it would be great if everyone had money to put down 20%, most first time buyers I've run into do not have that luxury. Even the 18 months of reserves is a bit much as with a $200k home thats roughly $23k.

[NickB1967]

Originally Posted by Stay West

Yes, you are crazy for considering this.

You have negligible money saved yet want to buy a house in a rundown neighborhood. Homes are expensive. Homes in rundown areas need work, expensive work. You're young and starting out on a career and there's no reason to hang an albatross around your neck such as this proposal. Ever heard of opportunity cost? The potential downsides to this financial decision are many, and the upsides are... you don't have to worry about your pets soiling the carpet?

Buying on credit alone means PMI, higher interest and very little equity built per monthly payment for many years.

Then there's also the neighborhood issues of crime, noise and general quality of life negatives.

The market is high right now, relatively speaking. Doesn't mean it won't go higher, but it doesn't seem like you're in a financial position to be taking this kind of risk.

Be patient, find rentals that are suitable and save money. You will be much better off buying with money down and established credit and hopefully when the market isn't so hot. Plus if your life plans change in the meantime... no problem!

I think real estate will remain a great inflation hedge, given what the powers that be are doing to the dollar, but Stay West is correct about having a higher down payment and avoiding PMI.