Feb 2010 - Time to buy in San Diego or North County? (Del Mar: low income, short sale)

[earlyretirement]

I think in the San Diego area...now is a "decent" time to buy IF you plan on staying in that same house for the long haul. I do think prices can continue to fall another year or two for a few different reasons.

- High unemployment rate that will continue to stay elevated a few more years. Close to 10% unemployment rate might be the "new normal" for a while. If people don't have jobs or scared of losing a job that affects their ability to buy a home.

- The 7 million+ homes in shadow inventory that still need to be foreclosed on. The banks are holding these back to not collapse prices and also with the shady accounting they are still trying to claim these as assets when they are liabilities and under water.

- Interest rates are heading up. They can't go much lower and now are heading up. Historically the mortgage rate is something like 8% to 9% so as rates go up.....people can't afford to buy as much house.

- Lending standards are getting more difficult. With the US government getting out of the business of propping up the real estate market and loans, you will see it standard to put 20% down payments. That will be the new norm. (which I agree with). Say bye bye to the shady FHA/VA/etc loans with as low as 3.5% down payments.

- Strategic defaults are continuing with banks in no hurry to foreclose on them. Many people haven't made a payment in 2 years.


When you look at all of these things together, you have to think twice about realtor's claims of "this is a GREAT time to buy". They yelled that at the top of their lungs during the bubble years. Then even as the bubble was deflating they still screamed, "NOW it's a great time to buy...property won't fall lower".... So forgive me if I take a grain of salt with anything a realtor says. Realistically, with the advanced technology in the next decade realtors could become almost obsolete. Or certainly their 6% commissions will be. It's already starting to happen with more people creating websites and charging lower commissions.

If you are buying for the long haul and using it as a HOME then I think now is a decent time to buy if you are negotiating a good deal. I still see some dreamer sellers trying to get the same prices as during the bubble years. It just is not going to happen...

A great website is www.patrick.net

Unfortunately THIS is the situation in much of the USA. Read the thread below:

http://patrick.net/forum/?p=632172#header

[JohnAlt]

Originally Posted by earlyretirement

Lending standards are getting more difficult. With the US government getting out of the business of propping up the real estate market and loans, you will see it standard to put 20% down payments. That will be the new norm. (which I agree with). Say bye bye to the shady FHA/VA/etc loans with as low as 3.5% down payments.

As much as I'd like to see it too, 20% being the norm will never happen. The market will completely crash if that happens and no politician will want to get blamed for it.

Unless the economy makes a quick recovery expect to see the government continue to "help" the housing market.

[earlyretirement]

Originally Posted by JohnAlt

As much as I'd like to see it too, 20% being the norm will never happen. The market will completely crash if that happens and no politician will want to get blamed for it.

Unless the economy makes a quick recovery expect to see the government continue to "help" the housing market.

John,

Actually I'm not sure if you've bought a house lately but look at the statistics... I think the average lately is around 20% down payments. Take away the sham FHA/VA loans or government sponsored loans and private lenders are mostly asking for 20% down payments. In fact, many years ago before the bubble years, 20% was standard and it will go back to that.

http://online.wsj.com/article/SB1000...et#printModeAd

I'll have to look at a URL link I read the other day but that's what most places are asking for which I agree.

Banks have done a 180. Before they gave anyone with a heart beat a mortgage...and now banks really don't want to give out big mortgages. Any special circumstance no matter how good your credit score is and it could cause a problem....

[JohnAlt]

Originally Posted by earlyretirement

John,

Actually I'm not sure if you've bought a house lately but look at the statistics... I think the average lately is around 20% down payments. Take away the sham FHA/VA loans or government sponsored loans and private lenders are mostly asking for 20% down payments. In fact, many years ago before the bubble years, 20% was standard and it will go back to that.

Banks Demand Bigger Down Payments - WSJ.com

I'll have to look at a URL link I read the other day but that's what most places are asking for which I agree.

Banks have done a 180. Before they gave anyone with a heart beat a mortgage...and now banks really don't want to give out big mortgages. Any special circumstance no matter how good your credit score is and it could cause a problem....

20% down is not the norm. My credit union is still offering 5% down mortgages with competitive rates.

I'd rather 20% became the norm because it would clear out a lot of the competition, but it isn't happening.

[earlyretirement]

John,

That's great that your credit union is advertising 5% down mortgages but you should know that is not the norm these days.

Banks Demand Bigger Down Payments - WSJ.com

Also, keep in mind that many banks still advertise specials or rate then when you go in to actually apply, that offer is not available.

Like you, I'd love to see that become the norm. My feeling has always been if you don't have 20% to put down, you shouldn't be buying a home and can't afford it.

[JohnAlt]

I doubt 20% is the norm here or any other market that bubbled. Low down payments are part of what's propping those markets up still.

[MovingAloha]

I'm a Realtor in a very high end market here in Hawaii, and 20% down is NOT the norm. What is helping a good portion of the market here are the VA guaranteed loans being used by the Active Duty Military and those with that benefit. This is a great benefit and not a sham as I've read from one of the pp (What a CROCK). If you can and choose to put 20% good on you; but because someone chooses to take advantage of other programs does not make them less worthy to own a home.
What does need to continue to occur is self dispcipline on individuals, and only purchase what you can afford and by Real Estate professionals by being honest and realistic with their clients.

[Luke9686]

Originally Posted by MovingAloha

I'm a Realtor in a very high end market here in Hawaii, and 20% down is NOT the norm. What is helping a good portion of the market here are the VA guaranteed loans being used by the Active Duty Military and those with that benefit. This is a great benefit and not a sham as I've read from one of the pp (What a CROCK). If you can and choose to put 20% good on you; but because someone chooses to take advantage of other programs does not make them less worthy to own a home.
What does need to continue to occur is self dispcipline on individuals, and only purchase what you can afford and by Real Estate professionals by being honest and realistic with their clients.

Whose more likely to walk away from a mortgage, someone who put 10-20% down, or someone who gets a 3% FHA loan? Someone who has $100,000 invested from the moment they sign the papers, or someone who has only put a few thousand of their own money down?

[shmoov_groovzsd]

Originally Posted by MovingAloha

I'm a Realtor in a very high end market here in Hawaii, and 20% down is NOT the norm. What is helping a good portion of the market here are the VA guaranteed loans being used by the Active Duty Military and those with that benefit. This is a great benefit and not a sham as I've read from one of the pp (What a CROCK). If you can and choose to put 20% good on you; but because someone chooses to take advantage of other programs does not make them less worthy to own a home.
What does need to continue to occur is self dispcipline on individuals, and only purchase what you can afford and by Real Estate professionals by being honest and realistic with their clients.

I agree with you MovingAloha about the loans and 'worthiness' of owning a home but I do see what earlyretirement was getting at in regards to being sound on making purchases.

Lets get back to real problem with housing which was a credit problem, not so much a housing issue. Credit is a good thing and by standard measures is a welcome dynamic to a stable economy. But we all know the outcome of abuse not just here but all over the world that were using large banks and financing institutions hedging massive bets on growth.

VA loans are great as are FHA for the right buyers. I am glad to see that banks are showing incredible restraint at approving loans. They should be dictating as they are now, who has truly shown the ability to manage credit. Our veterans also having oppt after their service via VA or USDA loans is a fair instrument. Its not like these loans are subject to million dollar properties.

[MovingAloha]

Originally Posted by Luke9686

Whose more likely to walk away from a mortgage, someone who put 10-20% down, or someone who gets a 3% FHA loan? Someone who has $100,000 invested from the moment they sign the papers, or someone who has only put a few thousand of their own money down?

If that were the case, Veterans would have been walking away at record levels all along. I believe, that during the early and mid 2000s some Veterans like others got in over their head and became enamored with the hipe of buys way more house than they needed. The people I deal with regularly are hardworking, ethical and are desirous of homeownership as much as the folks with the larger down payments. As I stated earlier, its up to the individuals, the RE professionals and the lenders to ensure the buyers is ready, willing and able - Yes!
I've bought several homes using VA, and I'm a solid, contributing member of the community! I've just assisted two other Military families into homes here over the past couple of months and they were very diligent in keeping to their budget and plan for how much home they could afford.
Again, painting everyone with lower down payments with the same broad and inaccurate brush is just reckless.