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My wife and I bid on a home in San Diego, CA early this week and it was accepted. While we like the home, we initially walked away from it when first seeing it because it was outside of my budget. With both our incomes we can afford it, however my wife wants to quit her job in about a year once we have our first child so we're basing what we can afford on my salary alone. We eventually put a bid on it later after being pressured to bid on the property from family and our real estate agent. Their thinking is that since we are in San Diego where there is little to no new construction going on and it is a highly desirable area, it will appreciate greatly in the next few years.
We are uncomfortable with this situation because once we do have a child and my wife stays home and it comes down to just my income to support us, we will be losing money each month. Digging a hole of about 400-500 each month. We would have to sell after 4-5 years if nothing changes on my end in terms of a better pay rate or better paying job. Family and the real estate agent are aware of this fact, but still insist this is a good decision. This feels like a big gamble to me and I don't share their certainly and enthusiasm.
Those who are familiar with real estate in Southern California, do you think it's reasonable to assume, in this market, a home will appreciate enough in 4-5 years to justify digging a hole 400-500 a month (about 20k-24k when all is said and done)?
The home was listed at 460k and a bid was accepted at 441k. It's in escrow now and we still have time to back out.
You have built added a 'pile of extraneous detail' to a pretty simple question:
"Will this $441K (plus costs) house appreciate to at least $525K? within the next 4-5 years?" (That's about 20-percent or 4-5-percent per year; hardly an unreasonable expectation).
If the answer is "Yes" (and you both want and can afford the house), it may be a reasonable investment. Whether you have a child, one or two jobs, a $25K 'debt hole' -- or not, does not seem like a major part of this question ... unless you don't believe you will be able to continue to make the payments.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Your home is not an investment! It's a place to live. If it appreciates, how nice for you. If it doesn't, darn it. You still have a place to live.
Having said that, you are the best judge of what the future holds for you, and having attained a ripe old age, I'll tell you your guess about the future will be wrong. Perhaps much better, perhaps not. You will survive.
Your home is not an investment! It's a place to live. If it appreciates, how nice for you. If it doesn't, darn it. You still have a place to live.
Having said that, you are the best judge of what the future holds for you, and having attained a ripe old age, I'll tell you your guess about the future will be wrong. Perhaps much better, perhaps not. You will survive.
Good Luck!
This. And go with your gut. Stop listening to family. They are NOT paying the bills or living your life.
Thanks everyone for the quick replies! And sorry if there were too many details leading up to the question. But yes, there is a fear that we would not be able to make payments after 4-5 years if my financial situation stays the same. That's why it doesn't make sense to us unless there's a big chance for a very nice payoff 4-5 years down the road.
My wife and I bid on a home in San Diego, CA early this week and it was accepted. While we like the home, we initially walked away from it when first seeing it because it was outside of my budget. With both our incomes we can afford it, however my wife wants to quit her job in about a year once we have our first child so we're basing what we can afford on my salary alone. We eventually put a bid on it later after being pressured to bid on the property from family and our real estate agent. Their thinking is that since we are in San Diego where there is little to no new construction going on and it is a highly desirable area, it will appreciate greatly in the next few years.
We are uncomfortable with this situation because once we do have a child and my wife stays home and it comes down to just my income to support us, we will be losing money each month. Digging a hole of about 400-500 each month. We would have to sell after 4-5 years if nothing changes on my end in terms of a better pay rate or better paying job. Family and the real estate agent are aware of this fact, but still insist this is a good decision. This feels like a big gamble to me and I don't share their certainly and enthusiasm.
Those who are familiar with real estate in Southern California, do you think it's reasonable to assume, in this market, a home will appreciate enough in 4-5 years to justify digging a hole 400-500 a month (about 20k-24k when all is said and done)?
The home was listed at 460k and a bid was accepted at 441k. It's in escrow now and we still have time to back out.
Any help you guys can give would be great.
Thanks!
Jason
I wouldn't buy if that's your plan. You have no idea what the market is gonna be in 4-5 years ( when you wanna sell). Nobody does. Right now house prices are IMO at peak. The prices are already coming down a lot. I'm seeing about 10% drop fir sellers. Well the ones that want to sell. The head in the clouds sellers still think its 2013 and a bidding war is right around the corner. Look at the house you live in as a HOME. You want a investment rental go buy a investment rental. Home "equity" is bs smoke and mirrors to make people feel better about buying a house. You only unlock it when you sell. That's it. And you better hope the market is up when you do otherwise you may walk away with little to nothing. Borrowing against the equity is just debt and another payment. And if the house market/selling price isn't higher than what you paid for it and paid down on principal you're making nothing. And remember you're giving up 6% off the top. And that's off the total sale price. And that's gonna eat really into the equity. Bank gets remaining loan balance to satisfy loan, agent gets 6% of sale price ( which comes out of the remaining balance) and you get whatever crumbs are left over. That's if the house appreciates. If it doesn't well then you may get your deposit.
If I were you in the position you describe
1. Either your wife has to keep working after the baby so you can still make the payments
2. Wife stays home you keep working and get a higher paying job to make up the loss of her income
3. You keep renting. Take the money you would put on the house and invest it. Save it and add to it so when you are truly in the position to buy you are comfortable.
Good luck man. I am a huge advocate of owning your own home. But not if it means financial disaster later.
Buy a house to live in it and have a payment that doesn't go up whenever the wind blows.
Just about the worst financial plan ever. Not only does it need to go to $525K just to break even, that doesn't factor in the 6-7% you'll have to clear for selling costs.
All to break even. That's not a "nice payday"
The fact that it's not even selling for list price doesn't bode well for your $100K+ it needs to appreciate. Just to break even.
If you want to gamble on housing prices, why not just gamble on something you can afford indefinitely? Use the money leftover while your wife still works and buy Case-Shiller options if you really want to gamble on housing prices going up. Transactional costs on the 4 year time scale will eat at any profits. Uprooting a three year old isn't great fun either, I'd imagine.
Your agent is pressuring you because he wants his paycheck now.
There are plenty of examples of people who bought during the peak in 2006-2007, assuming their house value would go up fast, and 8 years later, they still haven't broken even.
Based on the zillow chart, SD prices are now 93% of bubble prices. Who knows if it keeps rising or stagnates.
If you want to be conservative, look at the past 15 years pricing, and go by the trend line, disregarding the housing bubble.
Eventually it should reach bubble prices from long ago, but who knows when that will be.
I would encourage you to live on your salary right now and bank your wife's income. That way, when the babies come, you will be used to that style of living plus have a little cushion in the bank.
Homegrown children are well worth it.
Good luck.
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