Peter, nice post, thumbs up 2 U!

There have been many good issues already discussed, the most significant of which is the short hold time. Appreciation would have to be pretty good to compensate for the transaction costs. For someone intending on 5+ years, then it is a good time to buy.

Especially with the short hold time, you can evaluate rent vs buy by using a tool like FinestExpert.com which is designed for investors to find cash flow positive properties. If it is cash positive, then it is good for the owner. So, for your case, after you weigh in the transaction costs, those would be possible buy signals. However, if the property is negative cash flow, then it is definitely far better to rent.

Robert T. Boyer, Ph.D.
Real Estate Investor Advisor
America's Finest Real Estate
San Diego's Finest Real Estate http://www.SanDiegosFinestRealEstate.com
SanDiegosFinestRealEstate.blogspot.com

Hello M,

While you may not see any direct impact on the real estate market from the budget crisis, one might argue that there might be indirect ones. And while it might not depress further the value of houses because we may be close to the bottom, it might on the other hand, however, slow down the speed of the recovery.

For example, will California increases taxes to cover for the deficit, and thus reduce the take home income of its residents and impact demand? How about corporations, will the state want to increase taxes on companies doing business here and in the process scare new businesses away?

Will the state cut further jobs and push further up the unemployment rate? Will the state run out of money to pay for unemployment benefits and not be able to extend this program?

Will this reduce the quality of our schools and education system? Will this impact our API scores, which are tide to house values?

While one might argue that it not impact the housing market, it would be hard also to argue that it would. If I had to take a guess, it would just put more people on the cautious side and moderate the degree of our recovery.

Poway, Rancho Bernardo and Rancho Penasquitos have always been desireable because of the school district. I taught in the Poway District for 10 years so understand the draw to the school district. Depending on where you purchase in the area, purchasing may be the answer. Mid-priced homes tend to sell. It is the higher end homes you need to be careful of in purchasing.

People tend to be in their own world and the California budget crisis is irritating because we have clowns for legislators but people think more of day to day issues about paying bills, etc. Prices in our market have decreased enough to make purchasing comparable with renting. Work the numbers. Figure out how much you will pay in rent for three years and compare with a mortgage at today's rates along with tax credit and tax write-offs. Let the numbers tell you if it makes sense. If you are military and use your VA loan, you won't be putting any money down other than closing costs and your chances of recouping your minimal investment go up. Rates are at the lowest in my long-time career, so go with your gut. If you feel comfortable purchasing mid-range, then buy. If it makes you too nervous, then rent.

Sharyn

Hi M, my gut has me agreeing with Jeffery's point below, it will be difficult for you to have enough appreciation in the next 3 years to sell and make a profit when considering all costs. However, I’m not familiar with the local economies of the areas you are interested in.

Knowing when it’s the “right time to buy” is different for every homebuyer. Some take a quantitative, and perhaps short-term, view (weighing whether a profit can be made over a certain targeted timeline); others are more qualitative (can I get a great home in a fantastic location that will pay dividends in the long run). For those with a quantitative view there is one primary “data point” to monitor as far as an aid to help know “when to pull the trigger”: Net Jobs Growth Rate:

The local net jobs growth rate (local jobs growth rate – local unemployment rate) is THE early predictor for housing recovery in a specific area. The greater the positive result, the greater the "velocity" of a recovery in an individual area. With jobs creation comes a heightened demand for housing. As this result moves from negative to positive housing prices stabilize, and then recover. Buyers who want to use this metric to aid in any purchase decision should not use statewide figures; they should use the most local statistics you can find for the area you are interested in. Most importantly, they should also consult with a local Realtor who “has their feet on the ground” in the geographic area of interest.

Best, Steve

Personally, the budget will never be balanced. It's just the cold truth! What I can say, is that prices of homes have come down to an affordable price, whereas in the past, it got a little out-of-hand. Of course, location within the county will determine the prices. If you like, I can share with you some homes that are currently available in the Poway area (or others) to give you an idea of current market prices. Just click the link below:

Dear M,

I don't think the California budget has a direct effect on the market, but certainly an indirect effect with employment issues.

If you are only going to be in California for three years it may be best for you to rent instead of buy. It is probably difficult for you to have enough appreciation in the next 3 years to sell and make a profit, of course no one really knows how soon the market will rebound. If your income is really high and you need some right offs you may want to discuss with your tax accountant.

Consider your individual situation and needs, but this is a market to be very cautious in.