When to buy in 2011?

[Exiled Texan]

Originally Posted by sliverbox

Then again I suppose that's awful to some people, but afterall- I've lived in the Bay Area for years and to me 30-40 minutes is nothing. big deal.

Valid point, but with Austin's growth, I can see it taking longer at rush hour....in a few years for sure.

[achtungpv]

Originally Posted by sliverbox

It takes me maybe 30-40 minutes to get to work.

And as long as you work in the same location, that's as good as your commute will get until you retire. Each year it will get worse without fail. It's fine now but wait 5-10 years.

For example, back in '99, I used to be able to get to 183/Mopac from SAN MARCOS in 45 minutes back during rush hour. Now it's easily 80-90 minutes.

[eichlerfan]

Originally Posted by sliverbox

We saw plenty of houses in South Austin that were well within the $200,000 range or less. It was relatively close to the city. In fact we met a young couple at a bar who lived there and they loved it. They paid $145,000 for their house. Literally minutes to the downtown area. The funny thing is that I hear the exact same argument from those that live in and around the Bay Area: Lord have mercy on anyone who lives in the East Bay because they all know our commutes are hell on earth.

Those same people pay dearly for their houses just to live a few extra minutes to downtown- as much as 50%-75% more. It takes me maybe 30-40 minutes to get to work. As far as what I could see from driving around the freeways at rush hour in Austin it would be about the same situation. I can live without having to live within walking distance to work. To me it looked like it would be perfectly realistic to live on the outskirts of Austin and be downtown in 30 minutes or less. Then again I suppose that's awful to some people, but afterall- I've lived in the Bay Area for years and to me 30-40 minutes is nothing. big deal.

Us Bay Area people have no problem driving 30 to 40 minutes because we are just use to it, and that's why I say the traffic here in Austin isn't so bad. But it is all what you are use too. We now live in southwest Austin and my daughter has a 9am class in northwest Austin at ACC Northridge. She decides to leave an hour early because she has to drive north on Mopac. She got there in less than 25 minutes. Do you know how long it would take to drive the 20 miles she had to drive in the Bay Area during rush hour? Well over an hour at least. And I hear you on the East Bay commute. We lived in the South Bay and my brother in the Oakland Hills. There were several times we turned down invitations to dinner on a week night. There was no way in hell I was going to drive 880 or 680 during rush hour, EVER! My husband works from home since we moved to Austin, which is still the best commute.

[bridgebat]

Originally Posted by sliverbox

Do you really think home prices are suddenly going to massively inflate to a point that you can't afford? I seriously doubt it. Not anytime soon anyway. Also- if you're really and truly on the absolute very edge of barely being able to afford a home, then perhaps saving for a bit longer might be worth considering because buying a home without any sort of cushion is risky. As others have mentioned, there is no way to determine when the best time to buy is. It all depends on your personal financial situation. Again- buy what you can afford and what you like. Simple as that.

I appreciate your concern for my finances, but I'm doing quite fine. I've noticed that it's common for people on these boards to assume that a poster asking for home buying advice is someone who doesn't know how to save money. We have well over 20% to put down, an additional eight months of emergency savings, and a true sense of the area of Austin that we're ready to settle down in. Although I know that 2011 is a good time for me to buy (there are plenty of homes in our price range available), I'm interested in opinions on when I'll have the best negotiating power and/ or shot at getting the nicest home for my money. I am where I am today because I think through each purchase I make- small and large.

[sliverbox]

Us Bay Area people have no problem driving 30 to 40 minutes because we are just use to it, and that's why I say the traffic here in Austin isn't so bad. But it is all what you are use too. We now live in southwest Austin and my daughter has a 9am class in northwest Austin at ACC Northridge. She decides to leave an hour early because she has to drive north on Mopac. She got there in less than 25 minutes. Do you know how long it would take to drive the 20 miles she had to drive in the Bay Area during rush hour? Well over an hour at least. And I hear you on the East Bay commute. We lived in the South Bay and my brother in the Oakland Hills. There were several times we turned down invitations to dinner on a week night. There was no way in hell I was going to drive 880 or 680 during rush hour, EVER! My husband works from home since we moved to Austin, which is still the best commute.

I think what it all boils down to is that everyone has their own specific requirements and rules as far as what they think is acceptable to them. The way I look at it is that there's no real right answer. Sure- there are really convenient closeby places in the Bay Area and more often than not it costs a small fortune to live there. We commute to our jobs because houses near work cost anywhere from $3,500-$5,000 a month to rent and anywhere from $650,000-1 million to buy. Our rent is a fraction of that. Either decision is going to have negative outcomes: Live in a "desirable" neighborhood and you'll pay a lot of money for that privilege. But you might be closer to work and as they old saying goes- time is money. Lord knows I'd love to be able to have a 10 minute or less commute.

Then again just because you live further out or in a not as convenient area means things have to be bad either. There are just as many ways and methods to avoid the traffic and long commutes. For example, my parents live about 25-30 miles outside of their city in TN. As a result they own 15 acres and live in the sticks. Every since I was a kid they always got up at 5:30AM and left by 6:00AM. There was hardly any traffic so they got to work in maybe 20-30 minutes. They also left work early. My wife and I do the same thing: We get up early and leave for home early. As a result we're at work by 7:00 and home before 5:00. Not bad really. We avoid traffic both ways. But then again, to some people this would be intolerable.

Our priority is to buy a house for under $200,000. I realize that might mean living in a not-so-perfect area. But to me paying anything more is simply too much of a financial liability considering the tax situation there. Living in a not so perfect area I believe will be perfectly fine for us because that's how we've always lived.

[austin-steve]

Originally Posted by jobert

Doesn't that actually mean that the house is overpriced, and will need to sit until it's monthly interest+tax burden becomes more competitive with the rent price? I am assuming that .8% is an acceptable return, because of the principle getting socked away (the other .2%)

0.8 has become an acceptable return for rental investors, though it's a lot worse investment compared to what we could achive 10-15 years ago. For example, as recently as 2004 it cost about $375 to swap out a 40 gal gas water heater. Today it's $800-$1,200 depending on code requirements. Same story with HVACs, roof repairs - everything. So, where an average rental would factor 8% to 10% annually, over time, in maintenance and repairs, today it's crept up to 10% to 15% annually.That, combined with tighter rent/value ratios should have pushed all but the most sophisticated and financially sound investors out of real estate by the mid 2000s. Instead, the credit bubble cause a manner of rank armature investors to flood the market on speculation, and drive values up beyond reason in those bubble areas (really about 20 Counties nationwide were respnsible for 80% of the bubble though)

But this did trickle into Austin from 2005 through 2007, but whatever minor excess values that got pumped in have already been squeezed out and we're back to normal economic factors, except that rents are still deflated compared to sales values.

Someone would have to take out a mortgage with 6K-7K/month in taxes and interest on that house for that price, and if they rent it out at 5K/month, they are taking a big hit. Why would anyone buy it for 1MM if that was the case? It would need to fall to $800K, or else it wouldn't make sense to own it unless your reason is based upon speculative grounds.

Most of the higher end rents are not investment properties but rather owners who want to keep for later return, or who refuse to cry uncle and sell at current market value, so they rent out and wait for market improvement. That actually worked perfectly for failed sellers in 2002-2004 who waited until 2006-2007 to sell in Austin.

If one wants to elimate the speculation from the price of real estate in any given area, all they need to do is look at the comparable rent prices.

This is where the "rubber meets the road" so to speak. Sales prices have too much speculation built into them, and an area's rental rates gives a "real-time" assessment to a property. I think this is a worthy topic to start a thread about - to point out these areas in town.

I agree to some point, but in areas where land value itself is the driving factor for higher sales prices - central lots, waterfront, or other areas where the location is intrinsic, there will always be a separation in rent/value ratios. In most typical suburban track home or PUD developments, your rationale holds true though. It's just a matter of deciding which side of the equation is out of balance - the rents or the values.

I am of the opinion that values are fine (based on % of median income buyers who can afford a median priced home - which is very good in Austin) and that rents are artificially low still, and will climb steadily in the coming years.

Steve