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Sheryl, Renter in Lincoln, CA

In area for 5 years; buy or rent? WHICH neighborhood?

Asked by Sheryl, Lincoln, CA Fri Nov 5, 2010

We are transferred into the area; have been here 2 years & rental went into foreclosure (we had to move, then). Got another rental in Lincoln, with likelihood of being here 5 years; now owners are coming back (another move coming up.)
Should we consider buying, even though we will have to sell in 5 years (we don't want to manage from a distance) or consider renting (and moving) again?
We still are confused on the variation of the areas...Liked Lincoln, but it seems so far north. Interested in being a little more central to Sacramento, but unsure of areas (Fair Oaks? Gold River? Elk Grove?)
Please, give me some honest advise, as you always do!

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Byron Streitz’s answer
Hi Sheryl,

Your question is an excellent one, and there are a lot of people in similar circumstances wondering whether they should buy or rent. Since you are asking about buying or not and location, let's look at them separately.

Buying: with interest rates at or near their lowest point and house prices low, but starting to move up a bit, buying a home as affordable as it is likely to be in the foreseeable future. In fact, in some cases it is less expensive to buy than rent, especially when you factor in the savings from tax deductions.

The market is heavily influenced by short sales, foreclosures and government policy, making it very difficult to predict future prices. Several sources agree homes prices will start to rise, and will be at the more traditional 4 to 6% range sometime in 2012. With the uncertainty in the market at this time, I highly recommend buying decisions be based on the benefits of home ownership vs renting and not based on an expectation of making a lot of money from the sale in 2 to 3 years.

Location: You mentioned a wide range and geographic spread of areas from Lincoln to Elk Grove to Fair Oaks and Gold River. Some things to consider as you get started are: proximity to work; driving a long commute makes for a long day and increased gas bills, it's OK form some and not for others. Schools; if you have children, good schools are important and there is a lot of good information available to compare them. The link below takes you to a link on our web with several useful links for comparing schools. Age of the home and neighborhoods; here there are pros and cons. Older neighborhoods are established, typically have larger trees and you can see how well the neighborhood is maintained. Newer neighborhood homes are typically more energy efficient and have newer heating and cooling as well as newer appliances, which can help with the energy costs of running your home.

In the end, it boils down to your situation and personal preferences. the great news is housing has is very affordable than it has been, so you have more options available to you when choosing your new home.

Hopefully this is helpful - best of luck in your search for the best housing for you and your family.

With Kind Regards,
1 vote Thank Flag Link Fri Nov 5, 2010
rent. Closing costs and realtor fees along with amortization costs will eat you alive.
0 votes Thank Flag Link Fri Nov 5, 2010
I say no. Not for that short a duration.

Look at the red line on the linked chart. Prices still seems quite high for the region, especially given it's the hub of a state that's broke.

Plus added pressure relative to today's pricing if mortgage rates are back up in the 7%-8% range in 5 years.

Plus you're gonna get tagged with ~7%-9% worth of transaction fees to complete a buy and sell cycle.
0 votes Thank Flag Link Fri Nov 5, 2010
It was obvious in 2004 that real estate prices were in a bubble and a purchase at that time had huge downside risks. Yet, even those of us who recognized that bubble did not all realize it would crash for four years.

After the pricing crash slowed in 2009, we have not noticeably recovered. The devastation was so deep and widespread from the time period aligned with the second GWBush administration.

Until 2004, Past experience after World War II had shown that holding property for five years, if well maintained, usually resulted in price appreciation.

The 2004 through 2009 period became the awful exception to that rule.

I personally have bought 4 rental houses since the 2008 general election. I am buying a fifth today. I believe that five years will work for me. So my advice based on the economics of buying is that it should be worth doing. Especially for an owner occupant who is able to get the record low interest rate that is available to A+ credit borrowers today.

Oh, I like Roseville, of course. For a more central location: Carmichael or "Arden Arcade" (even though that is not a city)
0 votes Thank Flag Link Fri Nov 5, 2010
Jim Walker, Real Estate Pro in Carmichael, CA
Hey Sheryl,

The housing market should be trending upwards(not a lot - but some) over the next 5 yrs, plus the advantages that come with owning ie: the tax benefits, Interest rates in the low 4% range, piece of mind knowing you don't have to move unexpectedly are all things to consider. Location is a personal preference, great "bang for your buck" in Lincoln, other cities you mentioned cost more per sq ft and homes will most likely be older, if that's not an issue then I would advise to drive through a few neighborhoods. If schools are needed check out the greatschools web site as well. It all comes down to a personal preference. I just helped a buyer in Lincoln Crossing over 1700 sq ft for 205k and payment was same as rent if not less! Let me know if I can help in anyway.
0 votes Thank Flag Link Fri Nov 5, 2010
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