I am astounded by the housing costs in my area. I live in Northern California, and a home just four years ago would cost you about $120,000, now that same home is costing you upward of $350,000. This is a university town and many Bay area and Southern California parents are coming up here and buying houses for their Chico State university children. That in turn is raising the home prices here for the rest of us. A home right next door to my in-laws in a very nice neighborhood in Chico sold for $549,000. This house was bought for a Southern California developerÂ’s CHILDREN. In Chico you will be lucky to find a job that pays $10-plus an hour. Our local economy can't keep up with the booming house prices. There were 160 homes listed for sale two weeks ago in our paper and not one was for under $200,000. I would love to sell my house and make a huge profit, but then where would I move in California? Its really very sad and I am very lucky that we bought our house when we did or I would be living in Montana or Ohio.
Heather
Chico, Calif
There are other options. Renting. How about this 3br - 1ba Beautiful Oroville Home in Chico, CA for $1095 ?
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Sell your house and rent. You get to get out of debt and propably find a house that gives you a comparable lifestyle for about the same money every month. Don't forget to figure in the property taxes and loss of money represented in interest payments (about 72%).
ReplyDeleteNow if your one of those who brought years ago and therefore an comparable house/lifestyle may cost you more money per month. Don't forget the benefit of being out of debt, no more interst payments (on all your stuff), a big wad of money in the bank/investments. Then just wait for the buyers market to return. I think you may be able to find bargins by 2008.
A bird in the hand is worth two in the bush. Good Luck.
I want to point out that renters don't always get the same rights as landed residents (see College Park), and that, you know, once you've paid off the house, it's _yours_. You never ever get the house when you rent. Having something to leave the kids is nice.
ReplyDeleteIn any event, if housing prices don't come down soon (I know this is an utterly inconceivable notion to you), rents will go up. In equity market terms, arbitrage opportunities are brief.
-DMZ
s/equity/currency/
ReplyDelete-DMZ
great blog david. keep up the good work.
ReplyDeleteIn many areas of the country, renting is not a practical option because there are few rental homes with the attributes sought by the kind of people who would be buyers in a normal housing market.
ReplyDeleteOne of those attributes is stable long-term availability. Every time I think about selling my home and renting, I also think, "What if the owner decides to sell, or dies and leaves the home to heirs who decide to sell?". This would be especially a concern if the owner were a speculator out to make a quick killing on price appreciation -- and an equal concern in that case would be, "What if the owner can't survive the negative cash flow strain and goes bankrupt?". Moving is expensive, stressful, and time-consuming. Living in a rented home owned by a bankrupt landlord or foreclosed upon by a bank must be equally stressful.
In fact, as my close friend who works as a mortgage broker tells me, many buyers nowadays look upon buying as just a form of renting. They don't expect or intend ever to pay off their mortgage. Since they can deduct the mortgage interest and expect to profit from rising prices, and believe that home prices are unlikely ever to go down, or to stay down very long even if they do, and that even if they do they can just drop the keys off at the bank and walk away with no pain, to them it's the smart person's kind of renting.
To many of these people, the fact that home prices have declined in the past is no cause for concern. In fact, it is rather the opposite. The way they see it, that only proves that as long as you don't panic and sell out when the market turns down, you're sure to make money when it turns back up. When they read of someone having lost 40% on a NY condo or CA home the early '90s, they think rather of the fact that if those people had just held on, they'd now be rich. That real estate prices might continue falling for more than a decade, declining 70 to 80% as in Japan, and then remain low instead of soaring back above the earlier peak, is to them unthinkable. It can't happen here.
jm
"I want to point out that renters don't always get the same rights as landed residents (see College Park"
ReplyDeleteThis is very true. But renters have more flexibility to move around within the neighborhood, city or country. The transaction costs are much less. This is useful for job changes, neighborhood decline, relationship factors etc.
"and that, you know, once you've paid off the house, it's _yours_. You never ever get the house when you rent. Having something to leave the kids is nice."
Very true. :-) I'm a big believer in home ownership but at these outrageous prices in the bubble markets it probably is worth waiting.