As readers have no doubt noticed, my posting has become more and more erratic and eventually fallen off of a cliff.
Part of that is because my professional life has come to the forefront since it is firing on all cylinders; advancements in that area come with a price tag, and the other part is because I have been diligently seeking a home for my family. With a third addition to our family, we have decided that while there is still a great deal of danger in the housing market, we have decided to purchase a home. Make no mistake, I am not advocating buying a house at the present time for financial reasons, I think we have a lot of malaise at the present time, but after all is told, it is about the same price as renting, since interest rates are very low. I intend to occupy the house for a long period of time, making my entry point less important to my longer-term emotional and psychological well being of my family.
If anyone wondered, yes the house is a foreclosure, and yes it requires a lot of work. I highly recommend having a good agent in your corner, since negotiating without one doesn’t strengthen your position, and my agent, Brad Davidson offers a rebate of a portion of his commission to offset your efforts in finding the house. If you’re in the market, I recommend contacting him at WeHelpUBuy Realty. He’s a good friend and excellent agent.
In the end, we waited over 6 years before becoming homeowners again, we found that the emotional decision to buy a home is quite powerful for people that have already owned; it was for us.
Feel free to ask any questions that you might have in the comments; I will be as honest as I can, keeping my identity private.
Any thoughts?
Congratulations! I’m in a similar situation but have yet to have the stars align to get the home I plan to stay in (hopefully forever). I feel with current market conditions we’re on the last leg down but affordability will probably be about the same as prices come down and interest rates go up (over the next year and on). There’s nothing wrong with taking the plunge if it makes financial sense for you, I wish you well on your new purchase and hope you make it your castle. Thanks for all your informative posts, I hope you still can enlighten us every now and then.
Good to see you back Chuck.
I too bought 2 years ago to the day. Certainly no investment. I think of all the money I could be “paying myself” with rentals in my area about 75% of the average mortgage. Throw in the maintenance, taxes and insurance and it boggles my mind. I almost called the bank the other day to let them know they owe me $1200 for their %75 share of the rotten front porch I just replaced for them (LOL).
Long-term though, owning is a form of rent control (assuming you dont go HELO or something). The $X,XXX I pay a month right now will be peanuts compared to the going rents in 10+ years. Especially if inflation his as many are predict (I live in that camp). And Like Chuck, made the decision when baby #2 came along. At that stage it is important to me to knock walls down etc. in “my” house.
“At that stage it is important to me to knock walls down etc. in “my” house.”
Well, if you’re making mortgage payments to a lender then it’s not really “your” house is it. Stop making your mortgage payments and we’ll see whose really owns “your” house.
Their balance sheet shows “my” house as their asset.
Thats why I put “my” in quotes. In any other business deal, the guy that is 51+% ownership is the assumed owner. Yet I pay 100% of the taxes, 100% of maintenance and 100% insurance on their 75% share of the house.
Congrats, I am in escrow in OC as well. Foreclosed on last year.
Monthly costs are well below equivalent rent even though interest rate risk is significant.
Yes, risks are still high. Especially interest rate risk.
But, I don’t think rates are going anywhere for a long time. Monthly costs are not below equivalent rent in my case, if you factor in opportunity cost of investment (I am returning 20%+ per year, nearly every year).
However, emotionally for my family, it is the right thing to do, and I am buying a foreclosed on house that several years ago would have sold for 70% more (or just over 40% off of peak pricing). I figure that’s good enough for me. Orange County is still very expensive, but It’s only expensive, not ludicrous expensive any more. It’s a big house on a very big lot in a great established neighborhood with good schools. It’ll be a good move long-term, which is what a house purchase is supposed to be, not a flipping mechanism to get rich quick, which is what it was 5 years ago.
If rates go up, so will most people’s income as well, you know, inflation. Hopefully, if California can fix its entitlement systems and pension reform, we’ll have a strong state financially again.
Chuck
What are you invested in that’s returning 20% these days?
The house I am in escrow on was foreclosed on last year.
I almost gave up the strength of holding out. I was in escrow but pulled out last minute after I saw the report on 26% house sales and a 10%-30% future drop is in-store. I sold in late 2005 and If I waited another 6 months I would have netted another 40k. I believe another year will yield another 100k in the 600k market unless there is an earth quake. I hope this is worth the wait! 6 years!
It is often on the road to avoid our destiny that we meet it.
Good luck.
Hi Chuck this is completely off the subject of your site here but this is where the link led to respond to your post on poverty and religion. You said “yes we are blessed and I hope it stays that way” or something close to it. I must ask having lived and still living in what we call third world countries, I have seen poverty and some contributing factors have to do with the fact that we live the lives we do in the “first world “, a life of excess by most standards, by what we gain from developing countries.
Even if you disagree with this statement I still have to ask if you truly believe that the creator of the universe has smiled on us more kindly than the rest of the planet? Are we really so much more virtuous? I really hope I misinterpreted your comment.
Regards from Guatemala, Denis
Denis,
You’re reading too much into my comment. I said that our country had been blessed, and I hoped it stayed that way. There was no comparison to other countries. I wouldn’t think too much on it, I don’t. We are very lucky in the US to have clean water (for the most part), clean air (for the most part), and decent education (for the most part). It is not out of arrogance that I state that, and it is not relative in my mind. We have pretty good lives here.
Chuck
I’ve seen mortgage rates dropping.
That is really good news in this economy.
Congrats, Chuck. My family also recently bought a foreclosure property after a 6-year wait and a 2.5-year search with Brad Davidson. You’re right — he’s the best (and most reasonable-priced) real estate agent I’ve ever known!
Good luck with your escrow and the potential new home.
Out of curiosity – you’ve mentioned your professional life’s really picking up.
I’m not interested in your identity, but what field of work are you in? Just wondering since it seems most folks are talking about their professional life slowing down these days.
I don’t think it’s the field I’m in (slow as I can ever remember), but hard work and perseverance pays off when you’re interested to grow yourself.
Wow. Congratulations. I’ve been following your blog for a couple of years now. I owned a home for 10 years and have now been a renter for four. It has been really tough. As you say, the emotional pull to own a home if you’ve had that privilege in the past is really strong. We also just had a baby… We are going to try to tough it out for another year and see what happens. We’d probably buy now if we weren’t hoping to leave Orange County within the next five years. We’re just not sure we want to commit to being here for the long haul.
Hi, I love this blog- I found every thing you have like Wynn’s rant before. We are 40, I am finishing my degree now that my kids are able to do somethings for themselves ages 10 (twins). My husband has a “safe job” and we moved from Monrovia Ca. in March of this year to Charlotte N.C. to “better” ourselves. We F*&^%^&*G hate it ! It is expensive with high crime and no good restaurants. We are moving home to Ca. next year, we really want to buy a house. Is it safe? I just don’t want to pay for the ridiculous high prices everyone else seemed to fall for over the last seven or so years. Any thoughts on what to do? We were priced out in 2004- frankly it was easy to spot the bubble,(history- late 80′s)so we didn’t buy. On what? We paid to relocate with cash-we paid off all credit cards three years ago and never looked back. We are at a loss-jump in? or Not? thanks holly
I need thoughts-we have nearly no debt,
It depends on where. Where are you moving to? Monrovia?
Have really enjoyed this blog, though the content has been painfully real. What about buying in a brand new development now? Good idea/bad idea?
Buying a house is a personal choice, and while there are many pitfalls to be aware of, you have made the best decision for yourself under your own set of circumstances.
You watched the housing bubble forming and its bursting, but you wisely and patiently waited for just the right time and just the right circumstances before buying, unlike so many millions who are now paying the price for their financial folly.
You did what was best for you and you alone, you have not strong armed anyone else to buy, you ignored Suzanne’s research back in 2004 (I wonder what Suzanne is doing now for a living, or maybe I shouldn‘t ask) you did not make anyone else feel inferior for not buying, especially at the peak of the market, you bought when the time was best for you, as all future house buyers will do, buy when the time and price is right.
Good Luck Chuck and God Bless.
I think it’s great that you’re a home owner again. As a Realtor I am always promoting the different reasons that any specific time is a good, but the bottom line is that it depends on your specific situation. For instance, you plan on owning for a long time. Glad I came across your post.
I am thinking of buying a foreclosure too. What are some of the pitfalls you have experienced?
There is no negotiating with banks. They’ll just move along to the next buyer if you put anything that is not to their benefit in the offer (at least in Orange County).
Foreclosures have usually been vacant for a while, and often poorly taken care of for some time before that. You won’t get a home warranty. Most everything will be broken, so plan to fix nearly everything.
Chuck
Chuck – hate to say it but you are a total traitor. Starting 18 months ago, when this little blip started, I watched other RE blogs start dropping like flies. Yet, you remained, commited to the cause, certain that a MASSIVE second leg down was going to hit SoCal real estate. I was right there with you (and still am).
Its obvious now that much of what you recently wrote was a fraud. Take this chart from 6 months ago
http://www.socalbubble.com/201.....dence.html
If you TRULY believed (like I do) that the 2009 blip was just a “bear trap”, then there is no way in hell you would buy now. Sure you now say a 5-10% drop is manageable long term, but look again my friend. By that “dead cat bounce” chart, YOU posted we have another 50% – 60% drop left to go!!!
No one in their right mind would buy if they truly thought another 50% drop was headed their way. Thus, like your name implies, you are nothing but a fraud – likely posting graphs like that to scare away other buyers so that YOU would have less competition!!!
Im a long time reader & commenter. I am writing under the name “dave” because im ashamed I used to believe in you. By buying now, we know you didnt believe in that chart, or in alot of what you wrote. Well guess what my friend your day is coming. We are NOWHERE close to the bottom, and by buying now, you stand a good chance of losing your home in the next 3-5 years. When that day comes, I will be here, laughing at you, and your foolish knifecatching purchase.
Thanks for nothing!!!
People buy for all kinds of reasons. Mine was not financial.
I have no idea where we go from here, we could go down alot, or we could go sideways, or even up from here. Now is uncertain; 2004 and 2005, the direction was clear. I doubt inland California will see much lower prices, if at all. Coastal properties never made sense to me, and still don’t. At this point, government intervention has changed market dynamics; history rhymes, it doesn’t repeat.
It might well be a bear trap; and I could be a fool financially. On the flipside, still have quite a large amount of savings that I earned on that money while waiting. I could easily survive a 50% price crash from here, so “certaining” my future payments while upgrading where I live seems like a fair trade for that risk; at least I’ll live better than where I did before.
You can’t please everyone all the time. I would definitely ask for a refund from the owner of the blog.
Dave, I think Chuck may be onto something. Assuming another huge drop (which I firmly believe is coming), Chuck could simply stop paying his mortgage, recoup his downpayment (if any) since he’s not paying a mortgage anymore, and simply wait for two years before the bank finally gets around to kicking him out.
If things don’t drop so much, well then Chuck can just keep paying and stay put for the long haul, which seems to be his plan. No harm there.
I’ve considered this strategy myself as well, but my financially conservative upbringing keeps me from doing so – there’s a little voice in the back of my head telling me that’s not a risk worth taking. With 3.5% downpayments, it’s essentially a no-risk proposition, especially in non-recourse states like CA.
So what about the Option Arm Tsunami? You noted over and over that this thing was going to hit with a thunderous roar in 2011. Why not wait a mere 6-8 months from now til that one came crashing down???
The option arm tsunami has been stretched and flattened with near zero interest rates. There will be high foreclosures for a long time, but inflation heals many wounds.
Predicting the future is not as easy as it sounds.
Good luck on your home purchase. I guess I do have a question since you stated you would answer any questions… How long did it take you to save up for a down payment? Personally buying is not a priority for me since I plan to stay unmarried and don’t want kids. Since it’s just me renting or even living with roommates (much cheaper) will be fine indefinitely. I do realize that for a lot of people with families buying a home is a big deal and an emotional process.
I didn’t really “save”. I bought a house in ’99 with 3% down FHA. The bubble doubled the value of my house, which I then sold in 04 and waited just over 6 years. During that time, I more than doubled my money in investments. After paying taxes, I was able to take all of the original amount I got from my first sale while maintaining a little more than that as a buffer.
The original amount was a little more than the 20% I used as a down payment. Along with some of that, and the rebate I got from Brad Davidson is being used to fix a boatload of stuff on the house.
Saving 20% down with a family is nearly impossible in the current environment. I don’t know how someone would do it.
Prices are high in the area, and if it is comparable to rent, I have no bones about someone buying. I also have no bones about someone stretching to buy a better house than they could normally rent.
Chuck
I don’t blame you for buying. I’ve said for years that virtually everything we buy goes down in value. If you know the risks and can live with them- why not buy a shirt, a sofa, or even a house? It’s only uninformed optimism I object to. I never dreamed back in 2005 when I sold my house that I’d still be renting in 2010, but it’s still not the right time for me.
So will you continue to post erratically, or is this your “swan post”? The “robo-signing scandal” shows that there’s still a lot of interest in the housing bust, and my blogroll is getting awfully short. I hope you stick around.
Probably erratically.
I still think homes are overvalued. However, unique properties like what I bought don’t come around every day… it’s not just shelter that I am buying so I was more compelled than normal.
chuck
I’m glad you’ll be around. : )
virtually everything goes down but not leveraged loses. Bad analogy of everything loses value.
AIG sold credit default swaps to cover defaults on 400 billion worth of the CDO bonds that included sub prime preditor loans. So when the bonds went into default, they needed to pay for the bonds, and they didn’t have the money to do it. Think of swaps as being insurance, but insurance is regulated, so they didn’t call it that—classic Orwell 1984 double speak—and it is a lot more like insurance fraud if you cannot pay out, huh?
If the guy that writes the blog just bought a house, it’s time to buy. These are the real buy signals, not all the stats you on the financial channel. Buy, buy, buy and buy cheap. Let’s get this country out of this mess and get a good deal at the same time.
maybe he got sick of the doom and gloom. This whole mess IS quite depressing.
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risk is risk, the blog tells me that Chuck is paid by realtards, or switches to kind of IHB, to me it becomes worthless. But I understand why they did this folks,…………….watch where money goes
Risk is risk. And my move is risky.
I have taken big risks in the past 6 years. The first one was not following the crowd about buying a house at the peak. The others followed naturally. Once you break from the pack, you can fly high or crash. I don’t know which one will happen to me, but I have enough reserves that if housing does crash, I’ll still be covered.
There is a cautionary tale I learned from the person who lost the house to foreclosure that I bought (after talking to neighbors and viewing records). Commit only so much to a single venture. putting all of your chips on red is a recipe for disaster. Real estate should only be a portion of your assets and not tied to the rest, that if one goes down the tubes, you’ve still got other resources to lean on. No one knows the future.
Chuck
Why not take advantage if financially you can afford it. What a better time then now when the interest rates are so low?
where is the spam filter on this blog? NAR
Well congratulations for your deal, it is great to hear it. Now a days buying a house is not an easy thing but after reading it i realize that that you should deal with it properly.