Is now a good time to buy? (San Diego, Orange: short sale, rental)

[JohnSoCal]

Interest rates have jumped 0.5% in the last couple weeks. If this continues then it will probably affect prices. However this same thing happened to interest rates a few months ago and then came down again. It really depends on what Bernanke says and does. Lately he has been saying that he will be easing off on QE3. This has caused a drop in the price of treasuries raising the interest rate. However this can change if Bernanke thinks that the economy ( ie jobs ) is still too weak. Watch the May employment figures due this week. If they are not good then rates may drop again.

[earlyretirement]

Originally Posted by JohnSoCal

Interest rates have jumped 0.5% in the last couple weeks. If this continues then it will probably affect prices. However this same thing happened to interest rates a few months ago and then came down again. It really depends on what Bernanke says and does. Lately he has been saying that he will be easing off on QE3. This has caused a drop in the price of treasuries raising the interest rate. However this can change if Bernanke thinks that the economy ( ie jobs ) is still too weak. Watch the May employment figures due this week. If they are not good then rates may drop again.

As well, a big part of the equation is what Fannie/Freddie do. They along with the banks/lenders drastically affected prices/demand by doing the smart thing and not unloading the "shadow inventory" on the market. They correctly figured that housing prices would go up by holding back all that shadow inventory.

Many permabears kept citing over the past 2 years all the shadow inventory that never materialized. But there are still a LOT of homes out there with no/negative equity. As well, a LOT of homes out there that are delinquent. So along the lines of what Shmoov mentioned, we aren't out of the woods yet and there can be more ups and downs.

The key is not to buy more house than you can comfortably afford in any market.

[LaVieQ]

One thing unique about SD RE that I've heard about from the RE professional is that it attracts a lot of non-resident owners, particularly in the above-the-median housing market.

For example, at one of the tony condo complexes I looked at in down town in 2010, the agent showing me around told me that more than 50% of the owners are from out of the state, and that they were there only a few months of the year, such as as a summer (particularly those from TX), or, winter (many from Canada, for instance) residence. He was talking about how the facilities such as gym, wine tasting room, movie screening room, etc are readily available should I choose to live there (no, I didn't due to the very high condo fees, and, the fact that any wine tastes the same even without a specially designated room to that end).

Point being, SD RE prices are not just dictated by the local economy. And certain segments of the market may rise and fall quite independent of the local economy.

[mover79]

Originally Posted by earlyretirement

I wouldn't get too caught up trying to time the market. Prices will always go up and down. I for one don't think home prices can go up at the same level it has been the past 2 years at the same pace.

I also believe you will start to see more inventory coming on the market. I've already seen more inventory in my neighborhood come on the market. But of course many of them have sold within hours/days of getting listed.

I wouldn't force yourself into buying something that you aren't crazy about if there is not much inventory and just buy something that you can comfortably afford while still maintaining a healthy emergency savings fund. Don't tap out all your cash savings with the down payment.

But as long as you plan to be around San Diego for the long haul and can easily and comfortably afford the payments, I wouldn't try timing the market.

I've always maintained that San Diego would eventually pass peak prices during the bubble years. And most houses are still far from the absolute peak prices from back in 2007. I thought it would take much much longer. But there will ALWAYS be plenty of demand for people to move to San Diego for all the reasons we always list.

My goal is to stay in between 28% to 36% debt to income ratio and be able to afford a house on one income. However, this will require me to drain around 80% of savings. But with two incomes the emergency fund can be built up fairly quickly.

I think the market will either get more inventory or the prices will stagnate/go lower in the next 6 months. Right now 30% of the purchases are investors and 25% or more are FHA. I got my fingers crossed.

[earlyretirement]

Originally Posted by LaVieQ

One thing unique about SD RE that I've heard about from the RE professional is that it attracts a lot of non-resident owners, particularly in the above-the-median housing market.

For example, at one of the tony condo complexes I looked at in down town in 2010, the agent showing me around told me that more than 50% of the owners are from out of the state, and that they were there only a few months of the year, such as as a summer (particularly those from TX), or, winter (many from Canada, for instance) residence. He was talking about how the facilities such as gym, wine tasting room, movie screening room, etc are readily available should I choose to live there (no, I didn't due to the very high condo fees, and, the fact that any wine tastes the same even without a specially designated room to that end).

Point being, SD RE prices are not just dictated by the local economy. And certain segments of the market may rise and fall quite independent of the local economy.

Firstly, I wouldn't trust anything automatically that a real estate agent tells you. Although there are some good ones, my experience in hundreds and hundreds of transactions is that most agents aren't good and they will say anything and do anything to get a deal done. So take a grain of salt with the Agent's "50% of the owners are from out of State in this building".

That being said, I do know a few friends that do have a place here in San Diego. (La Jolla) and they don't live here. They use it for long weekends. I can't imagine any building or development where it's 50% like that Agent is claiming. That sounds absurd! But I do know that there are owners from 'fly over' states like Texas and Arizona that don't live here. For example, in my development I know some people from Arizona and Texas that own here and use it for part of the year but they spend the bulk of their time in Arizona or Texas for tax reasons.

Take whatever a realtor says with a grain of salt!

Originally Posted by mover79

My goal is to stay in between 28% to 36% debt to income ratio and be able to afford a house on one income. However, this will require me to drain around 80% of savings. But with two incomes the emergency fund can be built up fairly quickly.

I think the market will either get more inventory or the prices will stagnate/go lower in the next 6 months. Right now 30% of the purchases are investors and 25% or more are FHA. I got my fingers crossed.

Those numbers are rational and sound. Do yourself a favor and don't blow all of your savings on the down payment. A big mistake I've seen is people blow ALL of their savings on the down payment. Bank up some emergency savings. I'm not saying it has to be a huge amount but at least a couple months of typical expenses.

Definitely I do think we will see more inventory coming. As mentioned, I've already seen it. However, lots of it is getting sucked up pretty quickly. Still, things don't move in straight lines. I see people getting complacent and thinking this stock market is normal and the real estate rise is normal. Both are certainly not! Good luck. Let us know how it goes.

[MikeC92101]

Just like one of the members said, timing the market is not always easy. In general, if you intend to live in the house for many years to come, then buying now may not be such a bad idea. On the other hand, if you are buying for the sake of investment and cashing out in the next couple of years, it may not be ideal. I don't believe prices will increase at the pace we have seen in the last 2 years. Not only that, as more inventory comes on the market, we will see better opportunity for buyers. Another important factor to consider is the Housing Affordability index. When very few people can afford homes in a given market, the market will see price reduction or adjustment. If you are up for an interesting read on trying to time the market, check out this blog post:

<a href="http://www.92101urbanliving.com/perfect-season-buy-sell-downtown-condo-san-diego/">Best time to buy or sell a Downtown Condo in San Diego</a>

Good luck!

[Cardiff Kook]

I think coastal SD and other highly desirable areas of the country will always be good investments for the most, especially if the property is being held for the long term. Low interest rates will keep inventory low, along with plenty of wealth and surges of foreign cash making it a recipe for high prices

[wymore]

Originally Posted by Julesjarrod

I'll say this - now is a FRUSTRATING time to buy. It's very hard to compete with cash investors if you are financing. We have had 4 offers rejected already. But, inventory does seem to be rising so fingers crossed there is a light at the end of the tunnel sooner rather than later.

I was unaware of this change in PMI rules. Greeeeat.

Agreed. I just moved here from Kansas and had a better offer rejected on a place because another buyer with cash said they would be able to close escrow in 14 days.

[SportyandMisty]

I bumped into someone in the grocery store checkout line. Turns out he's a realtor. He says now is a great time to buy.

Then I told him I might want to sell.

Then he told me now is a great time to sell.

Well, that settles it. Now is a great time to buy. And now is a great time to sell. And, of course this must be true, because real estate agents always tell the truth.

What more could anyone want?

[Cardiff Kook]

Originally Posted by wymore

Agreed. I just moved here from Kansas and had a better offer rejected on a place because another buyer with cash said they would be able to close escrow in 14 days.

Last summer the same thing happened to my parents about 4-5 times before they narrowly landed a house (that also had a cash buyer making a lower offer)