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.

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).

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)

You make good points, and to be honest, I forgot to factor in the actual payments and interest. I stand corrected in your case.

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.

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.

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.

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.