Is buying real estate a good idea 'already'? or better in a year? (Sacramento: real estate market)

[intlinterest]

we are considering buying a home in the greater folsom area, well, folsom or west thereof. what are your ideas on whether that is a good idea already? i read a lot of articles lately that say the housing market will still lose value for about a year.

anyone having gone through foreclosure because the house is worth less than what you paid for in the last 3 yrs or so, can you tell me how it came to this and how it would be possible to avoid it?

if we buy a homenow, and the prices/value depreciates more over the next year, what does that mean for us? we are first time home owners - well hopefully soon we will.

appreciate any help adn ideas.

[CityGirl72]

Depends on how long you want to be in your home. Folsom will hold it's worth a little better than some areas of Sacramento. We are going to buy in FOlsom but we also want a house we will stay in for the next 20 years.

PS - we had looked at a Condo there we really liked, and in Jan 06 it was going for 800K (which is crazy, but that's Zillow for you) and now it's about 500K LESS!

[Tim Currie]

Go here.... Sacramento Land(ing) - Sacramento Real Estate Market Blog - Sacramento Housing Market News

Take some time and read the posts AND comments. Good info and opinions here. There are people who post here who called the bust before it happened and so far have predicted most everything.

Short answer - seems there is no harm in waiting. Once prices actually stop falling....they won't immediately start going through the roof again - there will be plenty of time.

[Tim Currie]

by the way. I don't think it matters if you want to stay for 20 years or forever. Why pay 10 or 20% more and then just watch it evaporate? That's your down payment, gone.

[DyaneRiemer]

Tim has a point. However, you also want to look at the type of financing you are trying to get and what interest rate you can afford a home at. Right now, conventional financing is requiring at least 5% down, and most of the 100% financing programs have gone away, or changed drastically. Many are predicting the Sacramento market may decline another 5%. But if the loan program you need goes away, or the interest rates rise to a point that you can no longer afford to buy an entry-level home, then you won't even have a house in which to worry about. The mortgage market is extremely volitile right now, so you might want to speak to a loan officer to see which programs you qualify for and the likelihood of the program being around if you wait. That may help you make a well-rounded decision.

[Luke9686]

You can get FHA financing for 3% down. I think the interest rate is less than 6%. If the interest rates go up, house prices will tumle even further. Low rates is one factor that created this whole mess.

You asked how the market came to this point. Well, about 4-5 years ago, interest rates plummeted, and lending standards did also. This created an influx of people entering the market, that honestly had no business being there. This artificially inflated prices. This went on for a few years.

Now, the ARM loans that people got and couldn't afford, have adjusted. They can no longer afford that payment, so they have to foreclose. They can't refi, because their house is only worth half of what they paid for it. No bank wants a part of that mess, even though they partially created it.

If you buy a house, and it depreciates, that means your house loses value. If you go to sell, you will lose money. If you plan to stay for 10 or more years, you'll be fine. This is a good time to buy, if you don't mind putting in realistic offers and waiting for the right one to accept it.

[ColfaxTeri]

When you are buying your first home, I find it a good idea to think about your long range plan. Will you be staying in this house at least 5 years?, what kind of rent are you paying now? How about in 5 years? Will the home ownership tax write offs be helpful?

Right now interest rates are great, my first house was when rates were 13-18%! If interest rises, prices will have to drop even more for you to afford the same payment.

For myself the goal is to have a paid off house when I retire, that's my plan, you have to decide what you want for your life.

Find a good support team (real estate agent, loan broker, financial advisor) that can answer your questions and give you the information to make a good choice. Stick to straightforward loans, if you don't understand it, don't sign it!

Best of luck with your first home purchase and have fun doing it!