Buying a House

[yennyfire]

C'mon down South! Homes are cheap here! I bought my first house at 28 (a 3bd, 2.5ba starter in the mid 300s). Met DH a few months later and sold it two years later for a nice profit when I was pregnant with our first child. Moved into a 4bd, 3.5ba house in a great school district and stayed there for 8 years. Moved to what will be our final house(same school district) til we retire 5 years ago. It's obscenely large (way larger than we need), but we got a good deal on it and it's appreciated about $300k in those 5 years. Everyone we know here buys in their mid/late 20s (condo/townhouse/starter home) because it's so affordable here. I used to travel to Pasadena/LA for work on a regular basis and I'd look at the listings in real estate office windows and my jaw would drop. I'd love to move to the West Coast, but I'm not sure we could afford it (even if we went to a 3bd/2ba)...especially if I wanted it to be newly remodeled. I'm with the group that suggested buying whatever you can afford now, rather than waiting. From what I understand, the market isn't going to get any less expensive and truly, the easiest way to "trade up" is by having something to sell. I feel for you, I really do....

 

[ac117]

Why?
To profit from rising prices instead of being screwed by staying locked out.

Start with a house that you can afford TODAY!

While I completely agree with your rationale, I know it wouldn't make me happy to come home to a house I don't love everyday! DH already owns so this will be the house we start a family in and that's important to me. But I totally get that it's easier once you jump in.

Then on one hand, I have people who encourage us to get a starter home...and on the other I have people who say moving is too much of a pain and to just go for the forever home now.

 

[madelise]

I'm of the camp that believes that even if one stuffed themselves silly with avocado toast in the Bay Area, one would still not be able to afford a house there. Yes, there are some people that spend excessively and could never afford anything anywhere, but the people that I know in SF and in Seattle aren't like that and they just can't afford anything even if they did save and save and save. They make 6 figures and I wouldn't consider them spendthrift in any means.

I saw a home for sale in Burlingame, CA (a decent Bay Area neighborhood) that was $1.4m that would be considered a "starter" home. It was a house with 3 beds and 1 bath, <1400 sq ft, and it was pretty old too (1942) and not recently updated. I just don't see how young people, likely with student debt, would be able to save the standard 20% in a decent amount of time, especially with the rents in the Bay Area also costing $4-5K per month.

So, madelise, I understand the frustration that you feel. If I remember correctly, you also live in one of these tough housing markets. I don't see housing becoming more affordable in some of these cities without some drastic economic change, and that would probably be bad for everyone.

Yup, I'm in the peninsula bay area! Are you still here, or are you in Seattle now. None of my same-aged peers in this area are buying or even thinking about buying yet. But I still feel old-school. It feels like I'm failing.

------------

We need $400-450k downpayment to get a starter home. This isn't millennial entitlement about wanting some gated community house. I'm literally looking at shacks. 1000-1500 sqft. Built in the 50s. I went to bed crying last night after posting this. I am so stressed out.


I need to learn how to let go of this 'want', I think. I just don't think it's feasible, and spending this last year saving up like crazy to just watch the target continually move higher makes me feel anxious and sad.

 

[Arcadian]

I was in my late 20's when we bought our first house. It was 239K for a house that was less than 900 sqft. That was in 1997. We both thought it was ridiculously expensive then, but it had land. We were in a great neighborhood but that house needed A LOT of work. if not for the cement walls that house would have fallen in. That meant I became a tile and electrical expert. That meant he became the plumber (I hate dealing with that type of stuff, especially toilets!) We knew a scientist who worked at one of the army labs nearby so we utilized his expertise when it came to carpentry. He's a damn good carpenter! But he was also the house inspector which allowed us to buy the darn thing for as cheap as it was.

We hired out what we couldn't fix. Basically though,it was beyond fixer, it was nearly a gut job. We had to replace the sills, get all the nuts that the wild life had stuffed behind the siding, redo all the insulation(everywhere) and the electrical was OMG it needed a pro. So we hired a guy and I was his helper

We almost moved in 2006 because it was pretty much top of the market and we had just paid the house off. Houses in our neighborhood were going well over the 1mil mark. We found NOTHING under 700K and what we did find needed a lot of work. No thanks. So we stayed. We decided to tack on additional 2k sqft to it because we had the space (1k of it was basement space which doesn't really count as living space), and to save money along the way we did most of the work ourselves sans what the town wouldn't allow. We also added solar. All said and done we paid into the house an additional 250K. The house sold well over asking. A smidgen over 600K.

When we moved to FL it was because I can live just about anywhere given the type of work I do and he needed more sunlight because he was becoming pretty much suicidal in the darker months. SAD is extremely detrimental to some, and it couldn't be ignored anymore. By the time we moved here permanently he was already living here and Panama 6 months of the year. I have it as well but not to his degree.

So now we...our own house....lol I have some work stipulations and he was rather keen on keeping the house we originally purchased here. So the way it work is he lives with me during the week, I live with him on the weekends. And of course between the houses the dog has 8 beds... My house reflects my style, and his house reflects his. But if he gets on my nerves I tell him to go home.

 

[kenny]

We need $400-450k downpayment to get a starter home.

If $450,000 is a 20% down payment, the house costs 2.25 million dollars for a STARTER home.

That's nuts.
I'd move to a cheaper city, or look at tiny condos.

 

[madelise]

If $450,000 is a 20% down payment, the house costs 2.25 million dollars for a STARTER home.

That's nuts.
I'd move to a cheaper city, or look at tiny condos.

You can't buy a house with 20% anymore. Everyone's been telling me 40%. And yes, 1.5M is starter home pricing here. Cheaper city = driving an hour to work.

 

[madelise]

The condos across the street from me are 700-800 sq ft and selling for $800k. With monthly HOAs I am not okay with, since you can't control how much they increase over time.

 

[madelise]

OMG I JUST FOUND SOMETHING.

 

[SMC]

OMG I JUST FOUND SOMETHING.

GOOD LUCK!

I'm in Seattle now but my family is from (and still lives in) the Bay Area. Some of my best friends also live there. I can see how it might look hopeless too, when these shacks are going for $1.4m all-cash and 20% above list.

 

[kenny]

OMG I JUST FOUND SOMETHING.

I got my fingers crossed for you.
Good luck!

 

[Dee*Jay]

You can't buy a house with 20% anymore. Everyone's been telling me 40%. And yes, 1.5M is starter home pricing here. Cheaper city = driving an hour to work.

Everyone = mortgage professionals or is this info anecdotal? I.e., "Well Sally said no one can buy a house without X down."

And anxious to hear about what you just found!

 

[kenny]

The condos across the street from me are 700-800 sq ft and selling for $800k. With monthly HOAs I am not okay with, since you can't control how much they increase over time.

I'm not arguing, and respect your decision.

Just sayin, if you bought that condo and it went up 10% the first year that's $80,000 in your pocket in just the first year.
That will WAY more than pay any HOA fee increase, but most-importantly would stop the financial bleeding now.

Not buying anything because of HOA dues uncertainty is like getting stepped on by an elephant to avoid a mosquito bite.

 

[tuffyluvr]

We bought a duplex in a semi-crappy neighborhood in Los Angeles in 2009, we were 27 or so. Our plan was to get a cheap FHA loan live here for a year or two, buy another multi unit and then a single family. But of course the market blew up and we have been looking for another place for years, and we're still stuck living in a place we don't like, in a semi-crappy neighborhood. We have been chasing that moving target too. We have plenty of money in savings for a downpayment, but we would either have to blow it all on a fixer-upper in a great neighborhood and be super house-poor with no savings, or we would have to buy another place we don't want to live in, in yet another semi-crappy neighborhood. My husband and I are both from the LA-area, but the neighborhood we grew up in has become so expensive, we can't afford to live there. It really seems like an impossible conundrum.

 

[kenny]

We bought a duplex in a semi-crappy neighborhood in Los Angeles in 2009, we were 27 or so. Our plan was to get a cheap FHA loan live here for a year or two, buy another multi unit and then a single family. But of course the market blew up and we have been looking for another place for years, and we're still stuck living in a place we don't like, in a semi-crappy neighborhood. We have been chasing that moving target too. We have plenty of money in savings for a downpayment, but we would either have to blow it all on a fixer-upper in a great neighborhood and be super house-poor with no savings, or we would have to buy another place we don't want to live in, in yet another semi-crappy neighborhood. My husband and I are both from the LA-area, but the neighborhood we grew up in has become so expensive, we can't afford to live there. It really seems like an impossible conundrum.

Gotta ask ...
Why don't you sell the duplex you bought before, as you say, the 'market blew up'.
That means the value of your duplex blew up too.
Sell it and use the proceeds to live in an area you like more.

Perhaps, like others, your strategy is to never sell real estate (especially rentals) and retire on the income.
A good strategy, if you don't mine being a land/lady/lord.

 

[tuffyluvr]

Gotta ask ...
Why don't you sell the duplex you bought before, as you say, the 'market blew up'.
That means the value of your duplex blew up too.
Sell it and use the proceeds to live in an area you like more.

Perhaps, like others, your strategy is to never sell real estate (especially rentals) and retire on the income.
A good strategy, if you don't mine being a land/lady/lord.

Yes, that's the plan. To hang onto the rental units forever. Once we move out we will have positive cash flow of about $1500 per month, at current rental rates. Without even raising the rent that will bring in about $400,000 in positive cash flow between now and when it's paid off. It will be paid off about 8 years before we retire, and then after it's paid off it will be bringing in even more. We don't mind being landlords--we've done it for 8-9 years already, and the (usually small) headaches are worth the passive income.

 

[madelise]

Everyone = mortgage professionals or is this info anecdotal? I.e., "Well Sally said no one can buy a house without X down."

And anxious to hear about what you just found!

We have family and friends in real estate. So not mortgage specialists, but in real estate. As well as friends who've been buying lately (in other areas- not bay area).

 

[madelise]

I got my fingers crossed for you.
Good luck!

GOOD LUCK!

I'm in Seattle now but my family is from (and still lives in) the Bay Area. Some of my best friends also live there. I can see how it might look hopeless too, when these shacks are going for $1.4m all-cash and 20% above list.

AH. I found it because it was previously listed as 1.7M and outside of my search parameters. The owners dropped it to 1.2M and now it popped up. It's still Zillow-estimated to be worth 1.7M so it's a tactic to get people to come in droves to bid above asking price.

If it sounds too good to be true, it is too good to be true. Le sigh.

 

[SMC]

AH. I found it because it was previously listed as 1.7M and outside of my search parameters. The owners dropped it to 1.2M and now it popped up. It's still Zillow-estimated to be worth 1.7M so it's a tactic to get people to come in droves to bid above asking price.

If it sounds too good to be true, it is too good to be true. Le sigh.

Dang, that happens a lot in Seattle too. Homes go above list and most of them get multiple offers. We bid on 7 homes before we bought our current home. Our old home received 4 offers and sold for above list as well.

Would you consider looking for a new job in the "cheaper" parts of NorCal? I'm not an expert in the real estate in the area beyond what I hear from friends & family, but it seems like East Bay is more affordable.

 

[madelise]

Dang, that happens a lot in Seattle too. Homes go above list and most of them get multiple offers. We bid on 7 homes before we bought our current home. Our old home received 4 offers and sold for above list as well.

Would you consider looking for a new job in the "cheaper" parts of NorCal? I'm not an expert in the real estate in the area beyond what I hear from friends & family, but it seems like East Bay is more affordable.

Husband's job is in the heart of the peninsula, so no can-do. The east bay is cheaper, but I'd probably also lose $20k salary per year too, and add on that hubby will have a longer commute.

 

[Dee*Jay]

AH. I found it because it was previously listed as 1.7M and outside of my search parameters. The owners dropped it to 1.2M and now it popped up. It's still Zillow-estimated to be worth 1.7M so it's a tactic to get people to come in droves to bid above asking price.

If it sounds too good to be true, it is too good to be true. Le sigh.

With all due respect, Zestimates aren't worth the paper they're printed on. Don't get hung on on that info (and I use the term "info" loosely in the context of a Zestimate).

 

[Dee*Jay]

We have family and friends in real estate. So not mortgage specialists, but in real estate. As well as friends who've been buying lately (in other areas- not bay area).

Unless the people you're talking to are Mortgage Professionals don't rely 100% on what they are telling you. I am a *real estate professional" and what I DON'T know about mortgages and mortgage options compared to someone who generates mortgages for a living would fill an ocean.

 

[arkieb1]

This is not a personal attack just general strategies of what any person that invests in real estate will tell you - If the area is that expensive and popular perhaps you would be better buying a unit or apartment as a "starter" place in the best area possible, paying off as much of it as you can, renovating it if needed or buy one that is as nice as possible, and then a few years down the track rent it out let the people renting it pay it off and then using the equity in it to buy a house. Both will still go up at market value, that is how people with sound financial plans enter the property market irrespective of location. And you can sell the unit or apartment down the track and help pay down the house.

If that isn't an option look on the periphery of close places to where you want to buy that are still not too far away but not as expensive. Sometimes literally a few streets over in the next suburb or area will be substantially cheaper.

If you have friends in real estate get them to contact you with any new places that are being listed, phone real estate agents and ask to be placed on lists of any fire sales, bank sales and anything new that comes up so that they text you before they are being listed so you can literally get the jump on everyone else looking for a property in the same area.

Be willing to compromise. I assume most young people are not born with wealthy parents that will automatically help they buy a house that is the amount you are suggesting for a starter home. Most typical first home buyers are not automatically going to be able to afford a million dollar+ house, and perhaps it is unrealistic to assume this is normal.

 

[mochiko42]

I live in Hong Kong and they are selling 130 sq ft "micro" apartments (yes no joke, that's 10 x 13ft, so sqft is about or smaller than a parking space) for US$400,000. Even a regular size apartment (ie more than 500 sq ft) is a dream for most people in this city. DH and I sometimes joke we should move to NYC because housing is cheaper there!! Lol..

http://time.com/4581230/hong-kong-apartments-property-sale-rent-small-housing/

 

[madelise]

I live in Hong Kong and they are selling 130 sq ft "micro" apartments (yes no joke, that's 10 x 13ft, so sqft is about or smaller than a parking space) for US$400,000. Even a regular size apartment (ie more than 500 sq ft) is a dream for most people in this city. DH and I sometimes joke we should move to NYC because housing is cheaper there!! Lol..

http://time.com/4581230/hong-kong-apartments-property-sale-rent-small-housing/

LOL.


Okay, so I've been looking about 5 cities north of me because it's closer to SF city proper, where I like to spend my free time, and because it's cheaper.

I just looked into my own city. 1 bedroom 1 bathroom condos, over $1M. Houses for $2.5M-3M.


Someone's literally renting out their living room space, with given hour schedule they're allowed to have it to themselves vs as common space with other roommates.. for $1200/month.










IM DONE.

 

[lovedogs]

DH and I just bought our first house about 1.5ish years ago. We were able to get our house with only 3.5% downpayment (first time homebuyers, using a bank my family has been with many years, and paying stupid mortgage insurance). My family helped with the downpayment, but if they hadn't we could have saved over a few years. I was shocked by the fact that 20% down was expected (obviously this comes from someone who had never look into houses before). We can afford our mortgage without issue, but there would have been no way to afford 20%--not even close.

I feel your frustration. We were in grad school in San Diego, and there was NO WAY we ever could have afforded to live there, even with the jobs we have now. We are now in Inland southern CA, where the houses are significantly more affordable.

 

[Queenie60]

Hi Madelise - wishing you all of the best in finding a place to live. We met at the GTG with Gypsy last fall. I encourage you to continue looking. You will find something eventually in your price range. Wishing you luck.

 

[SMC]

If you have 20% saved, you should still try to bid. We lucked out with our current house and were able to get it at list because it was listed on a holiday weekend and there was less foot traffic than usual.

If you don't think you can be as competitive because you are taking out a larger loan, our agent advised us to waive inspection and financing (which we did). You probably know this though.

 

[Trekkie]

I'm of the camp that believes that even if one stuffed themselves silly with avocado toast in the Bay Area, one would still not be able to afford a house there. Yes, there are some people that spend excessively and could never afford anything anywhere, but the people that I know in SF and in Seattle aren't like that and they just can't afford anything even if they did save and save and save. They make 6 figures and I wouldn't consider them spendthrift in any means.

I saw a home for sale in Burlingame, CA (a decent Bay Area neighborhood) that was $1.4m that would be considered a "starter" home. It was a house with 3 beds and 1 bath, <1400 sq ft, and it was pretty old too (1942) and not recently updated. I just don't see how young people, likely with student debt, would be able to save the standard 20% in a decent amount of time, especially with the rents in the Bay Area also costing $4-5K per month.

I'm in my mid-30s. The only people that I know who have bought in the Bay Area within the past 5 years have all received help from their parents.

We were lucky that my husband bought his first house in Seattle right around the time of the 2008 recession. We were able to sell it this year for almost twice what we paid for it and buy a newer, bigger home. Buying a home in Seattle was tough too - we bid on 7 properties, all of which went for above list price, before we finally got one.

So, madelise, I understand the frustration that you feel. If I remember correctly, you also live in one of these tough housing markets. I don't see housing becoming more affordable in some of these cities without some drastic economic change, and that would probably be bad for everyone.

Ah, but places like the Bay Area and NYC are anomalies, aren't they? I remember DH and I looking at the home buying process in the US a year ago when we were looking at moving there and it seemed pretty straightforward as long as you had a down payment and reasonably good credit.

I don't live in the US, so our situation is slightly different. Here properties are far less expensive, the standard is 10% down but 100% mortgages are a fairly regular occurance, and until fairly recently 105% mortgages were not unheard of. There's no PMI.

The people I know who complain about not being able to buy a house tend to drive cars with payments that are equal to my mortgage payment (cars are 1.2-2 times more expensive here, financed at MUCH higher interest rates, and everyone seems to want a BMW/Mercedes Benz/massive SUV), and with a bit of strategic budgeting they could easily afford to buy property.

A couple of years ago I sat down with a friend and calculated that her car payment, coffee expenditure and payment on a retail account would literally cover the mortgage on a 3 bed, 2 bed house. That's just HER expenditure, not counting her husband's, not even counting what she is currently paying in rent. Did she listen? Nope. Still renting, still complaining about not being able to afford to buy, and recently she bought an even more expensive car.

Anyway. I'm rambling, but yes, I am sympathetic to people who live in high COL areas (hell, I lived in Cape Town, and if I moved back now I'd need a miracle to buy in the neighbourhood I lived in before), but for the average person in my circle it's a question of priorities.

 

[Dancing Fire]

When did you buy your first house? And how old were you? For those of you who have adult children, are you seeing a trend in a delay or nonexistance in home ownership?

Ya. Moving target. It's disheartening.

In 1986.
I was 28 yrs. old.
DD #1 bought her house when she was 26 yrs old.
DD #2 (29 yrs. old) is looking at houses now, but IMO the market is way too high.

 

[acebruin]

IM DONE.

That's what I said about moving back up north. My brother just bought a brand new townhouse in Martinez in mid 500s. Almost 2k sqft. I also have a couple of friends who moved to Sacramento to have a better quality of life. It's just too expensive in SF. Blame it on the Engineers.