We’ve said it before and we’ll say it again…it is a great time to be a buyer! (Yes, exclamation point necessary.) Donald Trump even said it on Larry King the other night (we searched for a copy of the interview, but can’t find it…help?)
You can talk all you want about the the bottom not being near, but we’re telling you it is a great time to buy (if you have the means, and determination). Sure, prices may continue to decline, and there are a multitude of hurdles you will face with regards to financing, but it can be done, and you gotta think long term. Not only that, but don’t think about waiting for the price to drop on the home you’ve been eyeing. Make an offer. If you’re looking at a $4,000,000 house and it’s been sitting and you think it’s only worth $3,125,000…make an offer! If you’ve been tracking sales of $800,000 condos and you have an inkling your favorite one will soon be $750,000, make an offer for $700,000. Negotiate! [And read this new post on condo lending.] Come to a price you all agree on, if it doesn’t work for you, walk away. You, the buyer, have negotiating power for any property that is currently on the market in San Francisco and the greater Bay Area. Take advantage of that power, historically low interest rates (we honestly never thought we’d see these lows again, but here they are), and the surplus of homes on the market to choose from. There are buyers out there lurking, and sellers ready to deal. Don’t believe all the crap you read on sites that love to pick rotten apples (imagine how shitty their apple pies taste with all those rotten apples they continue to pick), homes are trading, people are finding deals, and dreams are being made. It’s a great time to be a buyer in San Francisco, and we’re not just sayin’…
From the SF Biz Times:
Market watchers expect the Federal Reserve’s decision to buy U.S. Treasuries will drive down mortgage rates in coming weeks, and they are already falling.
Freddie Mac’s weekly rate report says 30-year fixed-rate mortgages fell to an average of 4.98 percent this week from 5.03 percent the previous week. The new average is just shy of the all-time low of 4.96 percent in mid-January.
A year ago, 30-year mortgages were averaging 5.87 percent.
Following the Fed’s announcement Wednesday of a new round of initiatives to speed economic recovery, yields on 10-year Treasury bonds fell about a half percentage point. That was the largest one-day decline since Oct. 20, 1987.
Reports this week suggest homeowners are already lining up to lock in new mortgages at lower rates. Fannie Mae said this week its refinancing volume surged to $41 billion in February. The Mortgage Bankers Association says applications to refinance existing mortgages jumped 30 percent last week.
There is little incentive left for homeowners or buyers to choose riskier adjustable-rate mortgages.
The average one-year adjustable-rate mortgage was 4.91 percent this week, nearly on par with fixed-rate averages.
…and cue the normal (and expected) “you’re Realtors, so of course you’ll say it’s a good time to buy…sleeze bag” comments. We’ve heard it all before, so it’s gonna have to be interesting to grab our attention.
–Mortgage rates near all-time low [San Francisco Business Times]
“Money” this month has a chart that shows the various housing markets throughout the country (don’t have it’s data source or other references handy…sorry), but it states that SF and other California cities will see a leveling out and some upward movement in housing by Q4 of 2009. I have a gut feeling that for SF in particular, I put that further into 2010, mainly because the city itself has sustain values longer than the rest of the state and has the added offset of limited supply (yes,even with new SOMA condos in the mix…a lot of these will be going onto the rent rolls, reducing some supply). The limited supply at some point will help with any correction. That said, I don’t see 2007 prices anytime in the near future.
@expert
No 2007 prices and flat growth and low rates is exactly why it’s a good time to buy. We may never see 2007 prices again which is why this site says think long term. These are not stocks. They r homes to live in and enjoy and if you hit a boom that is/was a bonus. It’s a new way of thinking now. Buy and hold. Forget flipping and making a quick buck. Back to basics. Starting from scratch.
Buy and hold, maybe in 20 years 30 years, it doesn’t matter even if 10 years later your house is still underwater, don’t worry just hold it long term. Everything eventually comes up if you just hold it long enough. Just remember to ask if your agent is also buying in this great market.
The rumor says with the new $1trillion from the Fed to buy mortgages, the rate will drop further. What’s everybody’s assessment on this? I am waiting to pull the trigger on refi.
“Buy and hold, maybe in 20 years 30 years, it doesn’t matter even if 10 years later your house is still underwater, don’t worry”
wow. great advice! you don’t think it will matter to people if they will be underwater 10years from now?!
what happens if life events come along in the next 10 years like job loss, marriage, divorce, death, kids, relocation..any of these could force a sale..
personaly, i don’t think low rates are enough of an incentive to buy now when prices seem to be dropping so fast. if people put down 20% the whole of that downpayment is at risk in my opinion – prices could easily fall a further 15% and factor in closing costs…
the biggest +/- on a hosue transaction is the buying and selling price – not the monthly mortgage. sure, you could save $1,000 a month or so by buying now rather than in the future -but a typical house could easily be 150k+ cheaper then. so again, you are looking at a long term horizon before things work out. not forgetting a) you can always refinance if you buy at a high rate, you can never reduce the cost you bought as and b) any savings in monthly interest will be offset by the reduced tax saving.
so, yes i still say it’s not a good time to buy.
My thoughts were more along the lines of…do you buy now if you could have bought in 6 months and got a better deal. Not flipping, not worrying about increase in value, but when’s the best time to buy in the near term? From my perspective, if you can get a loan, have 20% down, etc, AND importantly like the house/condo/neighborhood etc, buy now and live long term.
That same Money magazine had a good statement about real estate — view it as a savings account — it forces you to save at least your monthly payment (not including interest), so that over time you are banking some savings in your very own asset, instead of paying “the man” to rent, unless of course you have the ability to rent and put an equivalent amount of $$ into some type of savings/investment.
dothemath
“what happens if life events come along in the next 10 years like job loss, marriage, divorce, death, kids, relocation..any of these could force a sale..”
Should I extend your reasoning to not marrying because you could divorce 5 years from now, not having kids, because they could be killed in a freak car accident at 18yo? and not buying any car, because actually, if you total it within 15 days of purchase, you have lost everything.
Again – compare to a bit more.
Buying a HOME (not a investment property) is MORE than buying a HOUSE.
Waking up after a good night sleep and enjoying a nice hot shower in a pleasing bathroom is not a financial investment, it’s a cost to improve your daily life.
For the specifics: we just spent some money we cannot recoup on our house – changing and improving some structural work. If we were to sell, we’d get ZERO – but we don’t care because we feel better knowing that this specific part will outlast our kids jumping on that part. (and most accuratly, it wont crumble down blocking the escape route from the children bedroom in case of the “it will never happen” big earthquake). And this safety is PRICELESS (and valueless re resale value – because it has value only for me).
Also – why would anybody invest in SF with the risk of an earthquake, a fire, landslides, high tides or tsunamis … and MUNI buses driving into houses?
Again. It’s “cool” to do a DILIGENT math work on your wallet and family finances – but you can write life with numbers and predictions and stats.
Should I extend your reasoning to not marrying because you could divorce 5 years from now, not having kids, because they could be killed in a freak car accident at 18yo? and not buying any car, because actually, if you total it within 15 days of purchase, you have lost everything.
not really.
I haven’t fallen in love with any house like I did with my wife, and haven;t taken any vowss in church to live with and in my house ‘until death do us part’. i predict i will have at least another 4 or 5 houses over my lifetime – i like the flexibility – but hopefully only one wife.
but yeah, i can see some analogy with the renting/buying girlfriend/wife thing for sure.
but not for having kids – again a house will never have the same hold of commitment over me my (on the way) kid will have. Nor should it.
as for a car, well I have chosen not to buy one – I rent one (from zipcar or others) as and when I need one. Plenty of others do too, in SF.
as for
“Waking up after a good night sleep and enjoying a nice hot shower in a pleasing bathroom is not a financial investment, it’s a cost to improve your daily life.”
well, rental places have showers too – and you can live somewhere for alot cheaper doing that in SF and still get your shower – and afford a better bed with your lower monthly payment as compared to buying.
@dothemath,
Have you ever thought about the cost to rent over that period? Submedian has a good chart for it. Forget every other expense, write off, deduction everything, let’s just look at what your rent “costs”. What if you spend $2500/month rent for 5 years? That’s $150,000…wasted. Ten years, $300,000 lost. You’ll never get it back, ever, no chance, never, not in a million years, that money is gone. When you own, you not only have the chance (I emphasize chance) at above average appreciation, but you get a roof over your head, you can change your kitchen and baths as much as you like, you can add a garage, you can move and rent it out, you can put in recessed lighting, you can convert your fireplace to gas. All of these are examples of course, but all things you cannot (typically) do as a renter. It’s better to buy, nothing else to it.
perhaps some of the time, just not now. I am not against ownership, indeed I have owned in the past.
you cant get rent back – true – but i have never heard of someone getting mortgage interest or property tax back either (excluding the tax rebate of course).
monthly holding costs of ownership (interest, property tax etc) far exceed rent even before any principal.
for the financially disciplined renter this gives a chance to invest more in total then they would be able to under a house purchase.
but then there is leverage (fairly unique to housing), which is great on the way up but awful on the way down – which I think is where we are at the moment.
i am not against house purchase period- i think it can be a great way to make money (with 5% down on my first house I made 20x my albeit small initial investment) but on the way down you can lose everything.
and i think we still have more to go downwards – i just don’t see that the risk is worth taking at the moment tbh.
i mean, lots of people are losing their shirts because of their house purchase – 1 in 7 or 8 sales in SF itself right now are because people have lost everything, and this % is only going to go up.
doethemath,
You make good points, and to be honest, I forgot to factor in the actual payments and interest. I stand corrected in your case.
“i mean, lots of people are losing their shirts because of their house purchase – 1 in 7 or 8 sales in SF itself right now are because people have lost everything, and this % is only going to go up.”
Absolutely. But DoTheMath, you should agree that MANY of those people did not do the math, and were NOT counseled with professionalism (realtors and mortgage brokers alike).
In 2005, we had to have a fight with our broker to refuse and refuse and refuse again an ARM in favor of a fixed rate. And we are educated and we have the knowledge and capacity to use the above spreadsheet (and/or do much more complex calculation) (and for none of us what is our first buy in a high competitive market with equally high risks). In 2005, while buying our home, we predicted the financial storm (and still cannot understand how it lasted so long before the downfall) – but I have to say that we are “safe” on our house. BECAUSE we did the math.
(and for the possible and unfair death – that’s what death insurance is made for, and it’s part of the planning).
I believe that no matter the market, you can buy and be somewhat safe. In some cases that means not buying now but putting your money in a piggy bank for a delayed action.. but unless you look at the market regularly and plan and replan regularly to buy, you’ll be out of the market forever. And the flip side is that if you planned to buy say for 2 years while you were not in a position to buy, by now your bonds or whatever safe piggy bank makes you the prime buyer with more power and leverage than anybody else.
If you make an offer at 650K with 150K down (your 10% down payment in 2007 plus 50K of extra savings and bonuses accumulated in the mean time etc) on a 800K house – you should beat any offer at 700-750K with only 20% down and an edgy financing. In the mean time, you get away with a 500K conforming loan at crazy rate compared to a 2007 900K jumbo loan readjusting in a couple years and no hope to refi – on the same house you were looking at 2 years ago.
You are totally right that it’s not the time to buy if you just decided for the first time of your life to buy. But if you have been saving to buy and looking and being bitter and outprized for a few years, there are great opportunities to buy AND have an excellent chance at not being outbidded.
(and I have to say that loosing 200K on your zillow simply doesn’t compare to loosing 200K in the stock market… for the first one I’m sad but I’ll survive. for the later, I’m mad and could kick myself)
“i mean, lots of people are losing their shirts because of their house purchase – 1 in 7 or 8 sales in SF itself right now are because people have lost everything, and this % is only going to go up.”
take a marina foreclosure at 5M.
5M is 30.000 a month (assume 6%) in MORTGAGE + 5.000 a month in property taxes.
I’m sorry, but I have no compassion for a foreclosing family who willingly took on a $35.000/month home cost. At that price, just rent a suite in a hotel at 1.000/day and get the maid and the valet parking and not risk liquefaction!
If however that family did a reasonable buy with 4M down and 1M in tax-purpose mortgage… I don’t see how they can foreclose. (a short sale would get them with at least 1-2M in cash – plenty of cash to restart somewhere else, and a loss in line with the stock market lost at the same time).
that to say that
– yes, there is a large group of people who are foreclosing due to the unprofessionalism of the RE industry (in a general sense: everybody is co-responsible, from bank CEO to dumb-a## agents)
– but there is also a not so small group of people who DECIDED to take the risk and now should pay for the consequences of their acts.
that doesn’t mean that there are not people in between who did not do right and will not weather the storm well – or at least OK.
(and I do believe that this blog is one of the tools we can use to EDUCATE people and limit some of the collateral damage).
I’m not sure if I have this correct but if the house goes below the 80% Loan to Value price of the property, couldn’t the bank call you out to pay the difference to get it back to 80% current market value because after all, the property is what the bank is using for collateral and they want to make sure it’s always worth 80% of the market value for their own protection. Similar to how a margin call is done on investments if what you buy goes 33% below maintenence levels.
Sophie is right though. I for one a few years back didn’t have enough cash to purchase the house in part which is why I am shopping now because not only do I have more cash than the price of the house even after losing $300k (30%) of my gains in the stock market with my long term holdings which I am still holding for the past 11 years. But I’ll do the 20% down and then mortgage the property instead when I find one, even though you and everyone else already know what my target property is from reading the blog here. So basically I have my bases covered as I have the cash to cover the mortgage in cash anything happens and ofcourse, I am using my existing money to make more money which will atleast exceed the 5% interest and I’m still getting 2.4% on all my money for any balance amount $0.01 and higher so my net cost is really 2.6% which is cheap. And then let’s not forget that when the Fed raises interest rates, we may see 5% interest earned or even higher and basically, I’ll pay the difference so if it’s 5%, that means my loan is free and if it’s 5.25%, I’ll actually be making 0.25%.
Speaking about which, has anyone ever used Amerisave as they seem to have low rates but I don’t know what their points are even though it shows the fees.
And speaking about which, does Jumbo Conforming loans allow a non-occupant co-signer because it seems like some mortgage brokers said Fannie Mae doesn’t but banks never had anything against it when I asked.