Need advice:Condo and SFR in Stonegate

[nobody]

Hi all,

We are recently considering resale and new built houses(3+bed) in Stonegate. However, given the listing price of detached condo as saratoga tract at high 800k and all new built SFR over 1 million, they are almost out of reach with our budget. Do you think it is worthwhile to dive in right now or it is better to wait some time after stock market pick up the pace? Since we don't have kids yet, we are not really urgent buying a house at this poinet.

Thank you for your reply in advance,

 

[Perspective]

Hi all,

We are recently considering resale and new built houses(3+bed) in Stonegate. However, given the listing price of detached condo as saratoga tract at high 800k and all new built SFR over 1 million, they are almost out of reach with our budget. Do you think it is worthwhile to dive in right now or it is better to wait some time after stock market pick up the pace? Since we don't have kids yet, we are not really urgent buying a house at this poinet.

Thank you for your reply in advance,

No kids & no urgency = no real reason to buy today, especially if you're considering pushing your budget to its limits. Why not wait to see if mortgage rates can creep up a bit and whether China's economy implodes, both of which should put downward pressure on Irvine house prices?

 

[paperboyNC]

Tradeoff is between buying and renting so you compare the two. http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

Out of the box, the NY Times says that buying a $850K home is the equivalent of paying $2,785/mo to rent that same home. Since rents in Stonegate are over $3,000/mo for a detached home, you should buy.

I played with the NYT's numbers and it shot up to an equivalent of renting for $3,444/mo. The point is that right now renting and buying have virtually identical cost IF you plan to stay in the home for at least 5yrs and have 20% to put down (to avoid PMI).

With the costs being virtually identical to rent and buy. Here's the questions to ask yourself?
[list type=decimal]
[*]Can I afford 20% down? If no, wait
[*]Am I 90% certain that I can stay in the home for 5+ years? If no, wait
[*]Are we comfortable with the leveraged risk of owning a home (downswings/upswings in value)?
[/list]

As interest rates rise, renting becomes more attractive even if 30yr mortgage rates remain around 4% (which I expect). Housing prices continue to rise and often continue until buying is 20-30% more than renting.

 

[momopi]

Over the past decade I've seen the market value of one my condo in Irvine go from $450K to $230K to $400K.  I have a SFR in Norwalk that went from $530K down to $240K then up to $430K.  I would not recommend buying at today's prices around here unless if you have a really good reason to do so.

When you walk into a house and you get the right "feel", you know you'd wake up every morning happy living in that specific house, then it's worth a premium.  Same rule apply to buying burial plots.

If all the numbers on a house looks right and profitable, but it just doesn't feel right to live there, then it might work for investment but never a primary residence.

 

[irvinehomeowner]

Why not wait to see if mortgage rates can creep up a bit and whether China's economy implodes, both of which should put downward pressure on Irvine house prices?

I've said this many times before but prices never go down proportionately to mortgage rates.

Someone can do the math, but I'm pretty sure the delta/rate of dropping prices is never quite as much as rising financing costs.

I've tried to time the market for the last 20 years, I've bought and sold at both peak and low, and the one thing I've learned is that the best time to buy is when you can afford it.

 

[Perspective]

Why not wait to see if mortgage rates can creep up a bit and whether China's economy implodes, both of which should put downward pressure on Irvine house prices?

I've said this many times before but prices never go down proportionately to mortgage rates.

Someone can do the math, but I'm pretty sure the delta/rate of dropping prices is never quite as much as rising financing costs.

I've tried to time the market for the last 20 years, I've bought and sold at both peak and low, and the one thing I've learned is that the best time to buy is when you can afford it.

Great counsel. "Afford" to me means 20% down and closer to a 20% front-end DTI than a 30% DTI.

 

[sgip]

Ibid on the budgeting advice above. Assuming you may have already gone through that piece, it would be helpful to know the "why" reason behind buying.

Is it because you might be priced out? That's what many people said in 2006, only to get wiped out in 2008, able to re-buy in 2010 at lower than 2006 prices. Prices don't climb forever, nor do they fall by 50%. Sometimes patience is in order when the price question is pressing.

Is it because rates may rise? making any home at any price less affordable? We've heard "rates are going up" every year since 2009. Even if rates go up, there are always alternatives. Buying just for rate issues isn't a concept I can stand behind.

Is it because of tax benefits of home ownership. 1st recommendation - get another tax advisor.  Home ownership can help as well as harm your tax position. Give 2-3 financial advisors your data and see what might work best.

While I fully support the proposition that home ownership is a good idea, it's not for everyone. Renting in some of these neighborhoods can often determine if it's the area you want to set down deeper roots into. If you buy, and your neighbor is soundchecking his garage band at 2:00 AM, you could get stuck in an investment with no clear way out.

Good luck with your decision. It's a struggle, but one that will come to clarity faster than you might expect.

My .02c

Soylent Green Is People.