Has there ever been a worse time to buy in the East Bay than right now? (Sacramento: for sale, condos)

[HockeyMac18]

Thread title should really read: "Has there ever been a worse time to buy in the Bay Area than right now?".

[beb0p]

This place has always been expensive. I remember looking at houses in Daly City with my parents in the 90s and their jaws dropped and eyes dazed by the sticker prices.

Adjusted for inflation, a typical house would have been $411,000. Today, that same house is easily $700,000.

So housing is only getting more and more expensive. I can see someone looking back twenty years from now and say, "Damn, houses in Walnut Creek were so cheap! Even adjusted for inflation."
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[shooting4life]

The difference between now and 2006 is buyers are qualified to purchase now, often with large down payments.

I don't see a large collapse any time soon, maybe a leveling off and the usual seasonal corrections.

[Bisaro TMF]

Originally Posted by Chuck5000

Easy to explain. There are a ton of high income earners (like your friend, although 250k is not that high here) and buying right now is actually cheaper than renting - if one can come up with a downpayment.

A ton of these people want to stop renting. I think your friend's struggle is probably about not being able to save much. He/she will be fine with payments if they don't overspend on dumb stuff. 250k is a good "bottom level" income. (Yes, that's crazy.)

Plus, if you have children, there are strong incentives to get stability (not worrying about losing your lease, wanting to make improvements, wanting to stay in one school district, etc)

So given that buying is cheaper, even one loses a bit on home value, as long as one will be staying in the area for 10 years+, buying makes sense. So a lot of people earn enough and want to do it. And there's not nearly enough supply, for 20 different reasons.

When you say buying is cheaper than renting, meaning what? That you never have home repairs ever again and that you don't have to come up with a 20% down payment? Buying is not cheaper than renting. Even if you're lucky enough to find a 500K house you need 100K cash to put down on that. How many people have that lying around?

[Chuck5000]

Bisaro, loans are very cheap now, and apartments are more expensive to rent monthly than to buy. I'm talking about monthly payments. I'm talking about what motivates people who can buy to want to buy, despite prices. Of course, if you read my post, you see that I mentioned the part about needing to pay a downpayment...in the very first sentence. In know way do I think that we are not in a major affordability crisis in the region, and I'd pay higher taxes to fix it.

[Bisaro TMF]

Originally Posted by Chuck5000

Bisaro, loans are very cheap now, and apartments are more expensive to rent monthly than to buy. I'm talking about monthly payments. I'm talking about what motivates people who can buy to want to buy, despite prices. Of course, if you read my post, you see that I mentioned the part about needing to pay a downpayment...in the very first sentence. In know way do I think that we are not in a major affordability crisis in the region, and I'd pay higher taxes to fix it.

What good are those lower monthly payments if you can't even get to that step to begin with. The average House out here is going to cost you over 100K just to put down. Not to mention the other all cash offers foreign investors and rich people are buying up.

[justinbro2002]

Originally Posted by Bisaro TMF

What good are those lower monthly payments if you can't even get to that step to begin with. The average House out here is going to cost you over 100K just to put down. Not to mention the other all cash offers foreign investors and rich people are buying up.

You can get an FHA for only 3.5% down plus 2.5% ufmip which I believe can still be rolled into the loan. So no you don't need 100k in your pocket to buy a 500k home probably around 18k plus closing cost. I believe that conventional loans have dropped the down payment to 5% now

[Lockdev]

Originally Posted by justinbro2002

You can get an FHA for only 3.5% down plus 2.5% ufmip which I believe can still be rolled into the loan. So no you don't need 100k in your pocket to buy a 500k home probably around 18k plus closing cost. I believe that conventional loans have dropped the down payment to 5% now

I think this is what's helping fuel the astronomical prices. Interest rates are determined by the feds for the rest of the country. Right now, the economy is booming in this area, combined with ridiculously low(almost free) loans, has caused a skyrocketing in the prices. The rest of the country is fine with the near 0 interest rate. This area isn't.

Realtors shout from the rooftops that "interest rates don't affect house prices".

We all(hopefully) know this isn't true. A realtor's job is to sell right now for the maximum price possible, so of course their opinion on this will be biased. I remember in 2004/2005 when they were screaming "there is no housing bubble!". Well, there was, the worst our country has ever seen.

I think that there's a bit of "scared prices will go higher" buying going on as well.

Most people don't base their decision to buy a home on pricing trends, market intelligence, etc.

Some do, sure. Most 'average' people just have to answer one question: "How much home can I afford?"

In other words, "What's the most I can pay a month?"

When interest rates rise, their buying power decreases.

They don't look at a house and see $800,000. They see a "I can afford a $4,000/month house payment".

These dum-dums don't realize that buying a house is normally a 30 year commitment, and they're committing to being stretched insanely thin for a good 5-10 years.

[beb0p]

Originally Posted by Lockdev

When interest rates rise, their buying power decreases.

I think interest rates will have to go up a lot more for it to affect prices in this area. During the housing bubble, 30-yr fixed interest rate was at 6%, we are at around 4%. It could go up another 1.5% and is still historically low.

Housing is about the economy and supply/demand, much less about interest rates. There are tell tale signs of when housing is about to crash and those signs aren't visible yet.
.

[Lockdev]

Originally Posted by beb0p

I think interest rates will have to go up a lot more for it to affect prices in this area. During the housing bubble, 30-yr fixed interest rate was at 6%, we are at around 4%. It could go up another 1.5% and is still historically low.

Housing is about the economy and supply/demand, much less about interest rates. There are tell tale signs of when housing is about to crash and those signs aren't visible yet.
.

I agree. The economy here is strong and the demand is far outpacing the supply. Interest rates probably won't have a huge effect for at least a few years, but I do see them having at least a little impact. Nothing huge though because the fed will likely only raise .25% at a time, and the effect it has on the mortgage rates takes some time.

There really is a "bubble in the making" though.

There's no way you'd catch me buying right now. It really does seem like the market has leveled off at a very high price for homes. With the interest rates going up, and a slight stagnation in the market, the only place to go is down in the next few years.

I'd rather move out of here than pay $800,000 for a 3 bedroom house that's really only worth 1/2-2/3 of that price.