House Hunting...

[Under FIRE]

usc_et,

Take it from another Trojan alum and ex-Angeleno here, lay off Southern California real estate for now.

Upgrade your rental to a nice(r) pad and you'll never miss the joy of*hemorrhaging $4-5k p.m. on an overpriced dwelling sitting on fragile valuation dynamics.

Horde the differential (~3k p.m.) and wait for the foreclosure carnage thats sure to come post-bubble. Heck, you may even get to pick n choose your South Pasadena dreamhome then.

My own location rule-of-thumb (for rentals): West of La Cienega Blvd, North of I-10, all the way to the coast ..... or anywhere along the coastal strip from Santa Monica to Southbay. BTW, I used to live near campus on the fringes of South-Central back in my starving grad student days at SC * ..... but thats another story.

For now, I'm salivating over tomorrow's ND game :P


Fight on .......

[laurence]

the Co Cal in me smiles on USC, but the Irish Catholic in me screams for Notre Dame! Fight on, Irish! (Plus, mom got her Ph.D from UCLA, so I'm not allowed to root for USC anyway...)

[Nords]

Quote:

Originally Posted by HaHa For way less than you would spend for a piece a junk in a neighborhood that will get you killed, you can rent a nice place in West Hollywood, Fairfax, or many other neighborhoods close to your work. It is made easier by the fact that you both work in the same neighborhood.

Maybe you could experiment for a year or two while awaiting a "buying opportunity".

For example our wildly-overpriced Oahu home is conservatively appraised to give us an equity of $450K. (We ain't selling.) If we plunked that into a bunch of five-year CDs (at various credit unions) we'd get about 5% or $22,500/year or $1875/month. Yet rentals in our neighborhood are running at $2800-$3200, so theoretically we'd do better renting it out with an ~8% yield (admittedly for a much higher risk) than selling it and stashing the cash.

You could do a similar calculation. Look at how much you'd have to spend annually owning a home, assuming that its value stays flat for a few years, and decide if that's worth the small amount of equity you'd be building. It's quite possible that you could make more money by continuing to pay rent while saving the difference and obtaining a much higher (risk-free) rate on that savings. If you had to take out an interest-only mortgage to buy the house, rising interest rates would hurt you if the house's value is flat.

Then look at the numbers with the assumption that your home rises at about the rate of inflation, 3%. (This is unlikely to continue anywhere in the CA market.) If your equity is rising at that rate, does its return on your mortgage payments exceed the return on your CDs? If your IO mortgage payment rises just as fast as the home's value, are you better off being a homeowner or a CD owner?

The risks are clear if you assume that the CA market cools off and drops your home value by 5-10%. Your mortgage payments won't drop! Even worse, an event that drops home values by that much is probably caused by rising interest rates, so you'd be squeezed between dropping equity on one side and rising mortgage payments on the other. Not a pretty picture.

The advantage of the experiment is that you can quit anytime if you need cash for an emergency. You won't have that flexibility if you're paying a huge IO mortgage during a time of rising rates. And it could hurt even more if your home value had dropped to less than your mortgage. Add in a long commute, no time together, a crappy neighborhood, and you have a recipe for disaster.

[Under FIRE]

Quote:

Originally Posted by Laurence the Co Cal in me smiles on USC, but the Irish Catholic in me screams for Notre Dame!* Fight on, Irish!* (Plus, mom got her Ph.D from UCLA, so I'm not allowed to root for USC anyway...)

Laurence, good try by the Fightin' Irish and their 80,000 screaming fans.*

But with Leinart, Bush, Jarrett, White, and gang ........ all thriving on clutch plays and many never having experienced defeat in their college careers, its too much to ask ND to end the*Trojan's 27 game winning streak.

But SC did wait till 0.03 left on the clock to snuff the Irish.*

Anyway, my hats off to both teams.*

[HFWR]

ND beat them in every aspect, but the score... :P

[REWahoo]

Quote:

Originally Posted by Under FIRE But SC did wait till 0.03 left on the clock to snuff the Irish.

So the winning team owes their victory to the fact that they fumbled with 7 seconds left on the clock. After watching football for more than 50 years I thought I'd seen almost everything...

[Under FIRE]

Quote:

Originally Posted by Have Funds, Will Retire ND beat them in every aspect, but the score...* :P

Yup, too bad only the SCORE counts.

[Eagle43]

I bet you could find some inexpensive property in New Orleans.

[wabmester]

Quote:

Originally Posted by Eagle43 I bet you could find some inexpensive property in New Orleans.*

That's the scary thing about this market. I heard speculators rushed in to buy "fixer-uppers" and the prices have been run up.

[laurence]

My heart was officially ripped out saturday! Greatest game I've ever watched, though. Fantastic, going down in history of that rivalry.

[usc_et]

I haven't been back to this site since shortly after I originally posted this. First, I can't believe the number of responses. Thank you all for that. You gave me some good perspectives and things to think about.

Second, UnderFire.... FIGHT ON! I'm still reeling over last Saturday's game. I think we have a rival to reckon with in years to come. Cracks me up that this post suddenly became "rivalry board" because of my chosen signon name.

Brief, unorganized responses to everyone:

1) The commute, and renting closer to work. I agree there are great rentals in this area. I used to rent in Park LaBrea. The prices and the apartments are decent. I'm going to stay where I am for now, and continue to save. I can stand the commute for about another 12-18 months.

2) Long Beach, Santa Clarita or any other area that might be affordable is not worth the commute for me.

3) I agree the bubble bursting is coming. Who knows when, but I plan to have significant capital to be ready to move. In addition to my current savings of 70k taxable (30k MFs, and 40k Money Market and cash alternatives to be safe and liquid), I'm putting away about 3-4k/mo in the taxable accounts. Plus the max in my 401k. I should have over 100k in taxable funds by the middle of next year. My girlfriend is also putting away $500/mo.

4) Other expenses coming: wedding ring , Wedding , my car is a '94 bmw 318i and will need replacing within the next couple of years.

So, to sum up...

Fight on! Beat the Huskies!

Keep renting until prices change or my financial situation changes dramatically.

My next posts will be obvious: wedding ring buying advice, and car buying advice. (Don't repsond now. I'll post later.)

Eric