Is it time to buy? (San Jose, Sacramento: for sale, real estate, sublets)

[daddiesgirl]

After looking for almost 5 months, my wife and I finally settled on a home in Lincoln, CA. With 4800 sq. ft., 4 car garage, fully upgraded with 1/2 acre in 12 Bridges for $600k.

We currently live in San Jose, CA and you can barely get a 4 BR that's 2006 and newer here. We've lived in a nice neighborhood (Evergreen) all our lives and feel it's still overpriced.

Several of my coworkers have been renting and are now looking to buy in Roseville, Rocklin, and Sacramento. I keep hearing about foreclosures and people running, but it feels like everyone I know is house hunting with some fabulous deals. Is it a good time to buy or will it continue to go down?

I guess my question is when really is the right time to buy?

[wburg]

When it's right for you, basically. If you can afford the payment comfortably, and you can get the credit without an ARM or other tricks, and you want to move, buy. Don't worry about gaming the market; you're buying a place to live, not trying to break the tables in Vegas.

[DMenscha]

Originally Posted by wburg

When it's right for you, basically. If you can afford the payment comfortably, and you can get the credit without an ARM or other tricks, and you want to move, buy. Don't worry about gaming the market; you're buying a place to live, not trying to break the tables in Vegas.

That's the best advice you'll ever get!

[zen_klown]

I wouldn't be in a hurry to buy in the Sacramento region right now. In the past year, prices fell 17.6 in Placer County and prices are continuing to fall.

Sacramento home sales rise for sixth month - Sacramento Business, Housing Market News | Sacramento Bee

HousingTracker.net: Median Home Asking Price & Inventory Data for Sacramento, California

Housing prices have momentum. Unlike the stockmarket, the best predictor of how prices are going to change next month is how prices changed this month. This is a graph of the historical change in prices levels of the OFHEO housing price index for this region. Below the graph is the data supporting the graph. You will notice the data is bunched in groups. There are the periods when the index is negative and those are grouped together and there are the periods when the data is positive and those periods are grouped together. When I say that housing prices have momentum, that is what I mean. This most recent reporting period just set a new record for how much housing price levels have dropped in a reporting period. It is unlikely that prices will stop bottoming out soon. If you don't know what the OFHEO housing price index is, you can read about it below.

Central California OFHEO Home Price Appreciation Tracker
Office of Federal Housing Enterprise Oversight

The other big problem is the local economy isn't doing well. In the past two years unemployment has shot up from just over 4% to 7.4%. That is a dramatic increase in unemployment in a very short period of time. Moreover there is a lot of reason to think that is going to get worse.

http://www.calmis.ca.gov/file/lfmonth/sacr$pds.pdf

The primary employer in the region is government. It seems pretty likely that given the budget problems the region is facing that government payrolls in the region will likely be contracting.

California budget battle looks like it'll be a rerun - Sacramento Politics - California Politics | Sacramento Bee

If you look at the edd release, employment in most of the other industries in the region is contracting as well. Manufacturing is down, real estate is down, financial services is down. During the boom, this area got expensive enough where it is no longer able to attract employers from other areas of the country. So I think the only thing that will bail this region out is for prices to fall enough where suddenly this place is cheap enough that employers once again consider the place desirable for its cheap housing. This is the macro reason I think prices will continue to fall.

Its hard for me to see prices going up any time soon in the region when the local economy is tanking, when housing prices are still high in inflation adjusted terms and when people are afraid of losing their jobs.

[ColfaxTeri]

Only you and your wife can really answer if it is a good time for you to buy. From the info you've given the house in Lincoln is about $125/sq ft. How do the comps look? If you can safely afford the payments and other expenses of home ownership and plan to stay at least five years, I think now is a great time, interest rates are still in a good range, there is a lot of inventory to choose from, prices are down, so when you find the right house (which it sounds like you have ) buy it and enjoy it. Each one of us has to weigh the risks we are willing to take and make our decisions from there, the #'s only reflect the general picture, not your individual situation.

[edwardius]

I would hold off another year at least.

To me it makes no sense to buy a highly leveraged asset in a market where its price is rapidly dropping. Especially when this asset is usually your largest asset.

Unless you can find a place where it cheaper to buy than to rent, I just see a lot more downside risk than upside risk for the foreseeable future. The local economy in the area isn't doing great. The national economy isn't doing great. There isn't anything I can point to on the horizon that makes me think things are anywhere near turning around anytime soon in Sacramento. Buying in Sacramento right now is like buying in Detroit right now. There are a lot more reasons to think things are going to get worse than there are reasons to think things are going to get better.

In a market where prices are falling 20-30% a year, comps aren't so much the issue as the weakness of the overall market.

[daddiesgirl]

Thanks for all the feedback guys! It's a tremendous help.

Well we've already decided and have started the loan and paperwork. I have no problem making the payments since I work in the entertainment industry and our market is focused in Asia and there's no sign of slowdown yet. My concern is what Edwardius brought up and that is purchasing a house just to find out you could have gotten $30-40k off i you waited another month or two.

We've run the comps and the property we got is a bank-owned house that's significantly lower than others in the area. We were worried that if we don't pick it up, it'll just be bought up since most other homes in the area are easily $100k over what we paid and not as nice.

I've heard that Lincoln has its fair share of traffic and problems, but I haven't experienced it as much.

[divetatoo]

Originally Posted by edwardius

I would hold off another year at least.

To me it makes no sense to buy a highly leveraged asset in a market where its price is rapidly dropping. Especially when this asset is usually your largest asset.

Unless you can find a place where it cheaper to buy than to rent, I just see a lot more downside risk than upside risk for the foreseeable future. The local economy in the area isn't doing great. The national economy isn't doing great. There isn't anything I can point to on the horizon that makes me think things are anywhere near turning around anytime soon in Sacramento. Buying in Sacramento right now is like buying in Detroit right now. There are a lot more reasons to think things are going to get worse than there are reasons to think things are going to get better.

In a market where prices are falling 20-30% a year, comps aren't so much the issue as the weakness of the overall market.

Where are you getting your information from Edwardius?

[j760]

Originally Posted by wburg

When it's right for you, basically. If you can afford the payment comfortably, and you can get the credit without an ARM or other tricks, and you want to move, buy. Don't worry about gaming the market; you're buying a place to live, not trying to break the tables in Vegas.

I agree, live for today. You never know if there will be a tomorrow, if you can afford a home and find a place you like then just go for it.

[edwardius]

Originally Posted by divetatoo

Where are you getting your information from Edwardius?

For economic information see here.
Unemployment rate highest since 1994 - Sacramento Business Journal:

and here.
http://www.calmis.ca.gov/file/lfmonth/sacr$pds.pdf

What stands out in the edd report is that in the past two years unemployment in the area has shot up from less than 5% to almost 8%. Its the breath and depth of how bad things are, employment in construction, manufacturing, retail, government is all in a funk.

Moreover there are reasons to think things are going to be worse. The primary employer in the region is state government and the state has hole in its budget of about 27.8 billion dollars. I think its reasonable to assume that the state budget crisis will likely lead to cutbacks in state employment locally.

Moreover, its doesn't look like the national economy is going to be bailing out the local economy anytime soon. It too is having its problems.

Lawmakers deadlocked over car tax, budget cuts - Sacramento Politics - California Politics | Sacramento Bee

As for changes in sales prices in the Sacramento region, this is what I am talking about. Look at how much median prices are falling in all of these counties in the past year.

Sacramento County median home price falls to $195,000 - Sacramento Business, Housing Market News | Sacramento Bee

The economic fundamentals in the region are poor. Housing prices are falling.

This is why in general, I think its probably a bad time to be buying in the Sacramento region. But there are a few exceptions.

Attached is a price to rent ratio by zipcode. The bluer the neighborhood, the more likely it is cheaper to own than to rent in that neighborhood. In neighborhoods like Oak Park and Meadowview, its profitable to be a slumlord. If those folks want to buy right now, I can see why they are doing it. But a lot of the more desirable places in the region to live are also some of the reddest places on this graph.

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