Housing Market California

[HellonWheels]

Looking for some prespectives on my situation.

I have been saving my penny's and chose to purchase a new home in California. It is currently in the process of being built. I have signed all the pre-limb paper work, but not the final. Completion date is the 1st part of Nov. I was very excited about getting my first 'new' home.

The last few days I have been seeing some disturbing reports on the housing market, and where it is going in California. My question is: Is this still a good financial choice to purchase this home? If I back out I'm only out the 5k good faith money, they would have to return all the cash that I have paid for upgrades. I'm not a financial guru, but I can balance my check book...lol...I just don't want to be putting money in a losing proposition

All thoughts would be helpful.

 

[LEYKIS101]

What city/area are you building in, Hell on Wheels?

 

[ClipJoint]

What city/area are you building in, Hell on Wheels?

That was going to be my question as well.

 

[HellonWheels]

It is in North Fontana. It is a tract home. That area has built up at a crazy pace. 210 FW now runs through there....All the old grape vinyards are now bought by housing developers. There is still a lot of building go on out in this area. Sorry to sound stupid, but it is only a loss if I sell correct. The chances if I stay there for say 10 years for me to lose money is slim to none correct?

 

[LEYKIS101]

Hell on Wheels,

Congrats on looking at the 10 yr. future of the investment/property, that's the right frame of mind. If you were looking to buy and flip I'd be a lot more worried for ya, as I think there's a decent chance prices for the next few years could drop or stay where they are. I don't think builders are having such an easy time getting rid of their inventory and the thought of all the ARM and Interest Only loans amortizing soon could also lower prices in general.

I work with a guy who has used his HELOC to keep his former lifestyle, now he's thinking he might have to leave his house altogether(involuntary foreclosure). He'd like to sell and just get out of the debt(even though his home has more than doubled in value since his purchase, he has little or no equity now thanks to his poor use of his HELOC). He says the newer houses, for sale by the builders, are now cheaper and better than his, lowering his asking price to below what he owes.

If you're gonna live close to Fontana and not commute all that far it should at least break-even for you in the 10 yr. future, but nobody knows for sure. Yes, you can lose money on the deal over the 10 yrs., it can happen, just ask homeowners in Japan.

Personally, just my opinion, I don't think theres all that much upside for the next few years. A primary house should first be viewed as shelter and not strictly investment. If you're there for 10yrs. you get all the deductions and pride in ownership and save from 10 years of rent payments that you'd never see again.

Good luck whatever you decide to do, but I'd think prices will stay about the same for quite sometime, who knows for sure though?

 

[LEYKIS101]

Hell on Wheels,

Sounds like you're for sure coming to California(says you're in Costa Rica now). If you are you've gotta live someplace. Rent for a comparable place would probably run you roughly $1500(that's just an estimate and probably a low one and doesn't take into account any raise in rents). If you were to pay rent for 10 years @ $1500 per month you're looking at $180,000 down the drain to rent. Of course you never know, but I'd guess your house wouldn't be 180k less in value in 10 yrs. Even if it did happen to be close to it you could always rent it out for a few more years to hopefully ride out the cycle(if it does go South).

Of course youre not getting into the housing market at the best time, but long-term it's tough to not come out ahead with buying anytime(provided you can wait it out an undetermined amount of time).

Maybe you can shop other tracts that builders have, save yourself more than your 5k deposit and get an even better place. If not, Id just buy your soon to be built home, much better than rent Id have to think.

:drink:

 

[winbet]

Leykis,
good to see you around, you seemed to have vanished over the last few Months, hope all is well and good luck in the NFL. :drink:

 

[LEYKIS101]

Leykis,
good to see you around, you seemed to have vanished over the last few Months, hope all is well and good luck in the NFL. :drink:

Thanks Winbet, good to see you around too. I look over a good amount of threads, but don't post unless I feel I can add something. Some posters' like to post a lot and in a lot of threads, I prefer to watch and learn(or laugh) for the most part.

Best of luck on the upcoming NFL season, look forward to your interesting threads and views.

 

[HellonWheels]

Thanks Leykis for all the info. That is what I was looking for. Yes right now I am in CR. Making the move back in April. I did search all around the area and outside of the area. This particular house is costing me a little more than I planned on spending, but it has everything that I wanted to make it a long term home. I may be there longer than 10 years. I got a much bigger lot with this place. Put a bunch of dough down for all the bells and whistles that I wanted. When I went into this venture, I figured if I was going to bite off something like this, then I might as well get exactly what I wanted. That is what I did. I'm very excited, but I guess started getting a little nervious about my choice when I started seeing the latest reports for Cali. The way I figured it, is I'm better off paying my own mortgage, rather than renting and paying some else's. Just was looking for a little insight. You gave me the info I was looking for. Thanks again for taking the time to answer.

 

[LEYKIS101]

Glad to offer the advice Hell on Wheels. Nobody knows for sure the way the housing market will go, but if more would view their house as a place to live instead of strictly investment there wouldnt be so much talk of a housing bubble. Be careful of the loan you take out. If you go with one of the ARM's or IO loans just make sure you could make or come close to making the 30 fixed payment. Many make the mistake of buying more house than they can truely afford just to get in the market, easy to get in a lot of pressure when the teaser rate expires.

Enjoy your new house and just think of the money youre not paying to rent.

:drink:

 

[Dawoofdaddy]

Be prepared to see housing prices fall similar to the Nasdaq % drop from the 2000 high.

Also study the real estate trainwreck in Japan from 1989-2004 for another example for those who still disbelieve real estate prices cannot go lower.

In Japan, 75% drop during a 15 year period for residential and 90% drop for commercial real estate.

Leykis is correct...look at your home as a place to live and not an investment. Too many people who merely bought homes as investments are soon to have their feelings hurt.

Would also help to answer your question if you included something about your financial situation (type of loan) and the purchase price of this house.

 

[HellonWheels]

Well the loan, I was advised to take out a 30year loan. I could pay it off in 15 or less, but was told that 30 is the way to go. Purchase price is low 600's. I have already ponied up 68k in upgrades for the home. I can put anywhere for 20% (I believe that is the min) to 40%. I have been told also to put down as least as possible. Are these 2 pieces of advise correct? Go with the long term loan, and put down as little as possible? What makes me a little uneasy is right now I'm in an ok financial situation. If let's say 5 years down the road I lost my job. That is a heavy monthly payment to carry with only 20% down over 30 years. But the person that told me this also made a good point. The money I will save by putting down only 20% and paying it off in 30 years would leave money in the bank to pay my payments for a long time if I became unemployed. But on the other hand....I keep thinking about the interest that I will occur. What if I stay there for 30 years. Then it would be a bad choice correct?

 

[Dawoofdaddy]

As long as the loan is at a fixed rate, I would put down 20% and the longer mortgage.

The lower payments may be useful if you get in a financial rut and one never knows when a great investment will present itself. If you are cash strapped paying a huge monthly mortgage, you may not have any additional money to invest.

Paying the mortgage interest isnt a problem if your money is working for you elsewhere earning a better return than the interest rate.

The housing market is heading for a nosedive, but since you have aleaday put 70k into this house, walking away would cause too much second guessing your decisions. Some areas will be spared from the most significant price declines and hopefully you are buying in a great area and wont have those worries.