DW and I went new house INSANE, but recovered in time.

laurence

laurence

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To a lesser degree DW and I have similar concerns about our neighborhood that CFB has had about his. Renters moving in, a ton more cars parking on the street, things looking distinctly troubling. So on a lark DW and I went to check out some new homes in a Master Planned community just to the west of us. 50%+ open space, distant ocean views, trails, tricked out (if somewhat Disneyfied) town center-we've looked and only dreamed before. Well, the RE market crash is definitely on in San Diego. They had a house with 4 bedrooms with a loft, 3 baths, 2500 sq. foot, LARGE corner lot, Granite countertops and a slew of other things like that standard for 100k less that a year ago - only $629,000! :p

To avoid dropping the price more, they were throwing in some huge incentives. First, they were selling contingency, then they were selling your old house for you for free, then they were buying 4 points on your loan, and there was still credit left over to put in 20k worth of additional upgrades. We were woefully tempted, especially since there would be no financial penalty if we could sell our house for what we needed to get.

Every key button got pushed on us (mostly by ourselves) " Dang it, I work hard and have worked my way up with education and career to a high level, I deserve this!". Better schools for the kids, yadda yadda. It's only when we said, "O.K. to make this work we'll need to do a 5 year ARM" that we started to sober up. The nail in the coffin ( or sign from above) was DW getting an email yesterday stating that the company she is in a long term consulting agreement with is being bought out (for $30 more a share than current trading price, and we sold the last of her shares in the company a month ago - that could be another thread!). So it's definitely out now.

(Sigh), loved that house though. It even had a private courtyard with the living room, a hallway, and dining room wrapped around three sides with french doors....oh well. Maybe next year.

I'm fine with generic brand jam, used cars, wardrobe by costco, and all the other little sacrifices to LBYM, but I'm a sucker for a nice home. Our house is o.k. - no, it's great, really - but the thought of having that kind of home waiting for me after work is intoxicating. We'll just have to wait. On the plus side, our current mortgage pays $1k in principle off the mortage every month, so maybe in 4 years.....

....anybody testing the RE market right now? Anybody have a kryptonite that's in their way to ER?
 
Laurence:

That might seem like a great deal, however I suspect that in a year or three that same house just might sell for $429k rather than what they want now for it.

Yes - That's my prediction, SoCal home prices will drop by a third or so.

- You read it here first !
 
I always feel free to take advantage of an open house. Sometimes I see a house that I like, but its always the same:

Better houses cost more money!

I'm on the outskirts of the Boston area, so prices here were run way up. Prices are comming down now, but when I do my affordability checks, the prices are still about 2x too high. I *know* that people can't afford these prices. They will come down more.

Lately, the houses I've seen appear to be on sale because of too much cash-out refinancing. How can I tell? These houses have every home-improvement in the book! Its blindingly obvious how these improvements were financed. The problem is that the sellers are trying to get enough money to pay off their creditors. That's why prices are still high now.

My gut feeling is that we're just seeing the tip of the iceberg on foreclosures. Am I waiting to swoop in like a vulture? Sure. On the other hand, my current house isn't so bad, so if I'm stuck here then so be it.

-Mike
 
Where was this in San Diego? $629k for the kind of house that you describe means you're far away... houses far away are the first to fall in a recession...
 
Closer than we are now, but deep in North County. And it has fallen a lot already, our house has dropped 50k and this house is selling for 100k less than phase 1. It's in San Marcos on the Carlsbad/La Costa border.

Yeah, anything in Carmel Valley like that would run 1.2 Mil and up....
 
L -

Is it common for neighborhoods to change quickly in Cali? Around here it kind of happens slowly - like 5-10 years - but I suspect it has something to do with the rate at which new houses are built.
 
Well, we were close to the last house built in the neighborhood, and we've been there 5.5 years. It's not a bad neighborhood, certainly safe, kids playing in the street etc. It's just obvious the residents aren't feeling as wealthy as they once did. Lawns looking a little rough, more cars (rented rooms?), just a little bit of a junkier feel... I'll get over it.
 
We've got reverse kryptonite. We want the home, but are deciding that rather than try and stay in CA (Bay Area), we're going to move out of state. We can drop $100-$150k off our mortgage and still get home twice as large.

We intend to stay in said home until we have enough assets to build our dream home from the ground up, and FIRE.
 
Congrats for resisting. I know that feeling of insanity well. My finance and I managed to pull back from the brink in time, but it was not easy. We lusted after a spectacular remodeled home in a prestigious neighborhood with amazing views. Seller was asking only $750K! What a steal! We would have been totally house-poor. We bought a $330K house instead, and feel great about it. It needs work, but we're okay with that. It's just so nice not being scared of my monthly mortgage payment.
 
We almost bought a house in our neighborhood that was worth twice as much as the one we live in now. It had a huge 1300 sq ft shop behind the house that was very cool and the house very nice as well. To get into this house would have meant selling our current home (at the price we wanted) and almost all of our mutual funds to get the mortgage down to a reasonable level that would fit our budget. We were also in the process of getting married that same week. We added major stress upon major stress.

I wrote the good faith check and entered into the contract, but backed out the day before the option period ran out. It would have been a financially dumb move and I'm glad we didn't do it. It would have been a great house for us. A bigger house for us will come out of necessity. It's very easy to be mesmerized by "bigger is better".
 
Here's a good housing bubble site for the San Diego market:

http://piggington.com/

If it were me, I would wait until the next recession bottoms out and starts to recover. In the meantime, it certainly doesn't hurt to look. The high-end markets tend to get hit the hardest, so start browsing La Jolla or Del Mar. :)
 
Lawrence, step away from that 5 year ARM before you hurt yourself.

I am assuming San Elijo Hills? I have a couple of colleagues living in that development and both would sell tomorrow if they could. Not because they don't like living there, but they don't like how much it is costing them each month for repayments/property taxes. Both fondly remember the days when they were living in smaller condos with smaller payments.

When we moved back to SD in 2005 we were considering buying, however we could tell the market was on the downturn at that time despite what BS was being spouted by the media. It's going to be interesting to see how low it can go. We have friends who have just listed their house in Clairemont looking for a 25% appreciation over when they bought it 3.5 years ago. Will be interesting to see how many offers they get.
 
Laurence said:
Closer than we are now, but deep in North County. And it has fallen a lot already, our house has dropped 50k and this house is selling for 100k less than phase 1. It's in San Marcos on the Carlsbad/La Costa border.
Click to expand...
Nice area! How's the commute?

Spouse and I went through something similar in late 1990 and ended up losing $5K deposit money. Looking back over the last 16+ years, it was the best tuition we've ever paid. If we'd bought that place back then, with all the financial shenanigans we'd have had to go through, we'd just now be getting our heads back above water.

Upgrade math is much more compelling when the market tanks. If you sell your $500K home (just to put a number on it) to buy a $629K home, you're ponying up at least $129K. (Plus commissions, taxes, Prop 13 tax increases, and so on.) But if the market goes down 20% then you're selling your $400K home to buy a $504K home and your upgrade cost just dropped to $104K-- you "lost" a phantom $100K on your home sale but you actually saved $25K on the upgrade.

So give the realtor your card (plus a second card in case they drool on the first one and ruin it) and tell them you'll keep in touch! If this retrenchment is anything like Hawaii went through a while back, San Diego will drop for five-six years, go sideways for another five-six years, and finally start to recover. There's plenty of time.

Speaking of low-interest loans, how much interest would you be willing to pay the board members if you raised it here? Just kidding. I think.
 
Every once in a while, the hubby will have the itch to look at a newer and larger home than we have now. All, and I mean all, of our friends and hubby's employees have much nicer homes than we do. It's safe to say that their homes cost 3 to 4 times as much as ours. We'll go to a party and the first thing that he says when we get home is, "we live in a garage!"

I tell him, "ok, let's get a bigger house...I didn't realize you wanted to work until you're 70."

All of a sudden our 22 year old, 1800 square ft home looks pretty darn good. ;)
 
DangerMouse - Yep, San Elijo Hills it is! Yeah, those extra fees are a killer. I put the ARM down and placed my hands outside of the vehicle. :)

Nords - That's a really good point. The upgrade math wasn't factored in yet spefically, but we discussed it tonight and decided to wait a year, see where my salary is, what her employment looks like, and where the RE market is here. Goodness, I would just be happy to have the property tax bill reduce! You can't pay that off!

Oh, and there is NO WAY I'm borrowing money from the people on this board, you all didn't RE by being softies with your money! :LOL: Rates are still 6% or lower if you shop around, everybody here can get better than that I'm sure.

The commute would be longer, but by about 5 minutes. What it would do is shave about ten minutes (off an hour commute) to the rest of the companies I could work for with my skill set. I got lucky and found a company near my north county boondocks neck of the woods, but one layoff and I'll be begging for work from companies much farther away. Why not shave more off the potential commute? Even now that would quickly shoot me up towards and beyond a million. :p
 
take a deep breath!

my parents home looked glorious when they bought it thirteen years ago, now - not looking so hot. i think you have to look carefully at the new developments cuz they put them up quick and make them shiny, but a few socal shakes and cracks start to show up in funny places! the new appliance age etc...

definitely a good time to wait and see rather than jumping in, especially since you already have a good situation now...
 
Our kryptonite (sometimes mine, sometimes DH) is not larger or nicer houses, but improvements to the modest ones that we've lived in. Spending less on housing is key for our FIRE strategy, but twice so far we've ended up with smaller homes several decades old that are on the verge of needing new carpets, fixed up landscaping, general updating. Our tough decisions are about whether it's worth spending the money (will there be any return on it, how much more will we enjoy the house) versus spending on other things or just saving the $.

We decided to keep our last house and rent it out when we moved, so we put in new windows, refaced the kitchen cabinets, and repainted everything inside and out. What a difference! So now that we're in another older house, but one that we are definitely planning on selling in a couple years, it's the same thing - it would be really nice to put about 10K or so into new windows, new carpet, maybe a new kitchen countertop. But we've resisted so far, because the market is such that we're unlikely to get any return on it, and there are other things we want more.

As OP said, maybe next year...
 
WM said:
Our kryptonite (sometimes mine, sometimes DH) is not larger or nicer houses, but improvements to the modest ones that we've lived in. Spending less on housing is key for our FIRE strategy, but twice so far we've ended up with smaller homes several decades old that are on the verge of needing new carpets, fixed up landscaping, general updating. Our tough decisions are about whether it's worth spending the money (will there be any return on it, how much more will we enjoy the house) versus spending on other things or just saving the $.

We decided to keep our last house and rent it out when we moved, so we put in new windows, refaced the kitchen cabinets, and repainted everything inside and out. What a difference! So now that we're in another older house, but one that we are definitely planning on selling in a couple years, it's the same thing - it would be really nice to put about 10K or so into new windows, new carpet, maybe a new kitchen countertop. But we've resisted so far, because the market is such that we're unlikely to get any return on it, and there are other things we want more.

As OP said, maybe next year...
Click to expand...

I like the upgrade idea, but in the context of upgrading the various features of your current house, as opposed to upgrading to a different house altogether. I've seen several friends' homes that were upgraded with new carpets, crown molding, hardwood floors (or high-quality Pergo-type flooring), ceiling fans, new appliances, fresh paint, new banisters, new driveways, etc.... Walking into those types of upgrades might make you think you're walking into a totally different house -- and you are. So why bother with buying a new house?

I guess I look at upgrading houses as I do in terms of upgrading cars, with the obvious difference that one is generally an appreciating asset while the other is not. No matter, since many of the issues are the same. All of these assume your car is relatively sound and well-engineered. If your car's paint looks dingy, scratched and dented, take it to a quality body shop and have them do the work. If your stereo sounds like an old AM radio, buy a new one and some speakers to go with it. If the tires are bald and cracked, buy a new set of 4 all-season radials, and maybe some new rims/hubcaps. At the end of the day, you can make a 20 year old car look brand new, and get quite a few more years of enjoyment out of it. In the case of some luxury cars, you may actually find that people look at you with envy because of the uniqueness of your car, as well as the fact that you didn't drop another $25k on a new car when $5k was sufficient.
 
Nords said:
Schools, neighbors, & crowding...
Click to expand...

Duly noted. But why bother with buying a BIGGER house at a higher price tag than your current one, just to avoid those problems?
 
Ah, the allure of a nice new home is a newly developed area with all the nice shiny appliances, granite countertops, jetted garden tubs, 3 car over-sized garage, state of the art wiring, home theater set up, etc.

We went through that a couple of years ago when just after we got married. It was a "mine" vs "our" house issue. I bought the house with my late wife so it reflected my late wife's tastes. My new wife has somewhat different tastes and the result was internal conflict because of it. She sold her small condo when she moved in with me. She has been doing a fair amount of redecorating to make it "home" to her but there are some large issues that can't be addressed inexpensively.

We have looked at a couple of houses in a less expensive area but they were not what we are looking for. We know that we will downsize in the next few years but we are no longer shure we will stay in this area. The market here is still quite warm if not hot. Values continue to climb and even the higher end homes are moving off the market in a month or two. We could cash in on the run up but really don't want to move yet. So we continue to keep the 18 year old house up to neighborhood standards so when we do sell it will be up to snuff.
 
We live in the midwest. Of course property values are not as high here as they are in California and some of the cities in the Northeast.... However things are relative. We were going to build a house on a private drive with about 1.5 acres of land about 6 years ago. The cost was fairly high for this area of the country. The costs kept escalating to the point that we began to question whether or not we wanted to spend the money... We could have afforded it easily, but it was more than we felt we needed. We wound up buying a different house and spent about $150k less. The funny thing... 7 years later I feel like we still wound up buying more house than we need (even after the downward adjustment). We have about a 3400 sq ft house.

Everyone has differnet priorities... for us, a big and/or fancy house is not one. I am planning on selling our house in a few years. We are considering a condo or maybe a lando.
 
chinaco said:
Everyone has differnet priorities... for us, a big and/or fancy house is not one. I am planning on selling our house in a few years. We are considering a condo or maybe a lando.
Click to expand...

What's a "lando"?
 
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