Creative Financing & Your SJ Homes (San Jose, Riverside: foreclosures, leasing, condo)

[MtnSurfer]

Ok,

It is no secret that homes are *outrageously* expensive in SJ. So everyone asks the Q. how do people do it, especially first time buyers or people moving to the area?

I would imagine there are a lot of very creative financing tricks going on. How about interest only loans, 40 year loans, low variable rate loans from 'wannamakeahotdeal mortgage brokers' and I am sure there are more.

With all these crazy prices it makes one consider if moving to the area is even 'sane.' It at least gives pause for thought. Of course wages are a bit higher in the SV for high tech jobs. But they really do not fill in the gap. Even making ~150K/Yr. doesn't seem to make a real dent on a $750K+ 'basic' home mortage.

How creative do you think folks get with their financing in SJ just trying to buy an average home?

Here is what $235K bought us in Colorado (4db/3bath, full basement, mountain view). Would we even be able to buy a trailer park modular for that in SJ


Geez, I miss the coast sometimes. But C'mon guys these prices seem rediculous. I know, I know ... economic 101, supply and demand right? So is it really worth it I ask myself.

[Luke9686]

You can buy a trailor (they depriciate by the way) for around $175,000. Add about $1200 per month on top of that for the lot rent though.

I'm sure most of the homebuyers that have purchased in the last couple years have those crazy loans. Either that or they make a lot more than $150K per year.

It's not worth it to me. I just moved, but I didn't grow up in Cali so... You can't even buy a 1 bedroom condo in SV for what you paid for your beautiful home.

[sissy910]

[quote=Luke9686;2535835]You can buy a trailor (they depreciate by the way) for around $175,000. Add about $1200 per month on top of that for the lot rent though.QUOTE]

The manufactured homes in Sunnyvale cost anywhere from $140k to $200k. Everyone I know that has owned one, sold it for more than it cost them. It's market value and that doesn't depreciate. When conventional housing prices go up, more people buy manufactured housing (and some are REALLY nice). Lot rent runs anywhere from $700 to $1k per month.

There is the interest only option that is really popular here (because the interest is tax deductible), some people actually like that option. We bought our home a few years ago, and are looking to move back East where the cost of living is more affordable.

[MtnSurfer]

Thanks guys,

I was really only mentioning trailer parks and modulars in a sort of tongue in cheek manner. But it may actually be a step up from renting when considering the potential tax incentives. Plus some of those newer 'Double Wides' can look pretty sweet, especially when comparing them to 'fixer' homes costing 3x-4x as much.

I kind of look at interest only loans as leasing in the sense that it will never be payed off. But as long as a home is purchased at a 'good time' one could still realize equity gains and thus potentially profit. But of course there is the flip side to that equation as well, which is why I think we are seeing so many foreclosures on the market.

[sonarrat]

I was considering a doublewide as recently as a month ago. The woeful lack of insulation and poor quality in their "model" made me think twice, so I'm just going to keep renting and monitor the market. It's a waiting game - either prices have to come down, or wages have to come up. It's one or the other. Now that the bubble has burst, and people aren't buying POS homes for outrageous prices just because they're close to Google, it's only a matter of time.

[DMenscha]

A clarification for you all; There are 3 types of homes that are built off site.

A mobile home (what has been referred to here as a trailer) They generally are made with 2" thick walls aluminum siding and the interior wall finishes are generally paneling. They don't sit on a foundation, but are supported by screw jacks and have skirting around the outside. They are considered motor vehicles. They usually end up in mobile home parks.

A manufactured home is manufactured in a factory and transported to the site on axles which are removed and the home is placed on a foundation. The walls are standard 6" thick and the home looks and feels much more like a stick built home. They are usually found on single family lots.

A Modular home is also constructed in a factory but is delivered to the site on a truck and lifted by a crane onto it's foundation where the modules are connected. They are much more likely to look like a custom built home and can be 2 stories even. Lenders like modular homes more than manufactured ones.

[MtnSurfer]

Thanks for that clarification DMenscha,

So if mobile homes are considered 'motor vehicles' then there may be no tax right off or incentive in purchasing/owning them.

I would imagine that manufactured or modular homes would have similar tax incentives as standard built homes.

Does that sound generally correct?

Lastly my brother-in-law actually has a newer three bedroom 'Double Wide' in Riverside Ca. in a trailer park. It has 6" walls with aluminum studs. I guess that might be classified as a modular or manufactured home based on your definition of construction. However it is simply resides inside the mobile home park vs. a SF lot.

I joke with him sometimes about his 'Double Wide in Riverside.' But it is actually rather nice inside.

[gsilver]

I'm moving to the area in a week, and don't plan on owning at all until moving away. The price of renting a room isn't too outrageous, and with the money left over, if properly invested, I can probably afford a decent place once I leave.

[MtnSurfer]

What?!?

Not even a double wide? LOL...

Actually I think a lot of people rent out there right now.

You can save a lot of money renting, especially if the market is still weak and continues to drop.

But once it becomes leveled off renting is just paying for someone else's investment. And you have no tax incentive at all. However given the current set of circumstances in SJ it still might be the best thing to do.

[moovin]

There are lots of high-tech engineers living in the Bay Area / San Jose that make roughly on average 100k/yr. That's the driver for the home prices. Add 2 tech incomes to a household and you get 200k/yr. That makes a 750k home somewhat workable. A lot of foreigners living here have their whole family tree living in one home - more income earners contribute to the mortgage.