Comments on: Southland Homes Sales Perk up: Market Now Being Carried by Distressed Sales.

By: oc bear

oc bear — Thu, 22 May 2008 19:04:39 +0000

If there is even a hint the prices are stabilizing (based on comps from foreclosures) then the banks will start foreclosing on more people that are “coasting” rent-free. Those homes will hit the market and keep prices down or cause a further decline. Just like farmers when everyone is growing the same thing nobody makes money.

By: gael

gael — Wed, 21 May 2008 17:00:25 +0000

When I was dropping off my fabulous wonderful son (yeah, I know all mom’s feel this way about their sons…) at school today several of the parents were talking about trying to sell their homes (again) saying things should pick back up this summer. Two were underwater but confident prices would zoom back up as the economy gets back to normal this summer and that they would all upgrade into nicer homes in good school districts and avoid the rise in tuition at our little montessori school. I worry about them. I kept my big fat contrarian mouth shut.
When I look on homes.com for zip codes in my neighborhood seems like there are many foreclosures and pre-foreclosures and only one or two homes for sale. How accurate is that information anyway?
And these home auctions….who is buying these homes? Investors? Or people looking to actually live in the home?

By: AnnScott

AnnScott — Wed, 21 May 2008 15:12:18 +0000

Adrian - you can NOT afford a $400,000 -500,000 house. CAN NOT DO IT - no matter what the Used House Sellers say. You write that your income is $72,000 a year of $6,000 a month. What you can afford is a monthly payment of $1,860 for mortgage (principal and interest), real estate taxes and insurance. With a 6% 30 year mortgage (and assumiing about 1% of property value for real estate taxes annually and insurance at around $50 per $100,000 of insured value), that $1,860 will only cover a mortgage of $247,600. To avoif Private Mortgage Insurance (PMI) you have to put down 20%. With a $247,600 mortgage, that means putting down $62,000. Total price you can afford = $62,000 + $247,600 = $309,600.

***** Nearly 30 years ago, we were at the age you are now and had just about the same household income (actually about 15% more.) Our mortgage, insurance and taxes were $1300 a month - and it took careful budget management. We were not taking 2 week vacations or ski trips - and forget Europe and new cars. Houses EAT money - furnace at $2000, water heaters at $1000 (parts and labor), roof needs repaired ($5000 +), fertilize the lawn, powerwash the deck, ……….. What happens if you have to pay for your own health insurance? What happens if you marry and your wife loses her job and you have to pay her COBRA to keep her coverage? What happens if you lsoe your job and only have around $28,000 left in your savings after buying the house? (And don’t say it can’t happen - it does hapen regularly.) You would have what - 6 -7 months or so spending at $4000 a month for mortgage, taxes, insurance, car insurance, food, utilities, COBRA and other necessities - before you are flat out of money. Better to save up at least 1 years living expenses that would also cover a mortgage, taxes, insurance and upkeep plus paying your own health insurance through COBRA. With a $1,860 PITI, that means having at least $50,000 - 55,000 left in the bank AFTER the downpayment.

******There is a lot of talk about mortgage, taxes and insurance not exceeding 31% of gross income. 10 years ago the rule was not more than 28% of gross income. 20-30 years ago it was not more than 25% of gross income - the standard we had to meet back then. And 25% was a lot more manageable than 31% - but still meant careful management.

****Sit down and make up your real budget. Assume you have to pick up your own health insurance (typically $350-600 a month.) Put in everything - car insurance, electric, saving 10% of gross income and then see what you can REALLY afford. These formulas of 28 or 31% of gross income or buy only 2.8 times more than your income ALWAYS end up saying you can buy more house than you can actually afford when you look at your real expenses.

**** Being retired, I now have the time for good works which include mortgage foreclosure counseling for my county. The income and proposed purchase prices which you gave in your post bear a strong relationship to some of the cases in the foreclosure counseling program.

By: TheOTHERSteve

TheOTHERSteve — Wed, 21 May 2008 14:24:23 +0000

I can only comment sighting anecdotal evidence in the Lakewood/Long Beach area….
There are more and more For Sale signs and VERY few SOLD signs popping up. Also see many ‘Reduced Price’ signs attached to those that are sitting. For example, one nice area (about 20 homes total) went from 1 home listed at 699k to 4 listed in a period of 2-3 weeks. Looking at one of the foreclosure sites, it seems that a couple more will be hitting the market soon.
Another interesting thing is that more and more of the for sale homes are vacant and looking more run down each week. Also seeing more vacant homes just sitting there. Walk aways?

I seriously question reports like these when my own eyes tell me otherwise.

By: surfaddict

surfaddict — Wed, 21 May 2008 14:17:06 +0000

Jes
You seem to agree with me, that Adrian should rent for now.
You also make good (basic) point that property should be solvent business case. As an owner, I believe my payment should reflect equivilent rent regardless of house being owner occupied, or a rental. I own because I have been prudent, and want to be able to modify my home as I see fit, but I have kept my mortgage payment in line with potential rents. This way, If i lose my job for example, I could KEEP my house just by renting it out.