I'd like to jump in here if I may...I'm in a very similar situation financially and can afford around the same amount. I've been looking all over in the peninsula as well for my first home without success (just way too expensive for what you get) and moved my search over to the east bay where I currently live. My commute from union city to downtown palo alto is approx. 20 min on a good day...40 min on a bad bridge traffic day. considering how close it is and the price difference, am I still better off buying a condo on the peninsula rather than a townhouse in fremont (ardenwood area)? I plan to keep this place for at least 5 years...I figure the nice thing about real estate here is that if you hold on to it long enough, it'll eventually go up...
I don't know your specific market area but I do know real estate.
It's a buyer's market right now and you have great credit - I am sure there are many sellers who are very ready to make a deal with you. My advice to you is to hire a good buyers agent to work for you (I can probably help you find one if you don't know of someone) and then find a property you like with a motivated seller and get the best deal you can. Interest rates are great right now - combine that with a buyers market and the tax breaks and the choice available - it can be a real win for you.
What a great place to be in life! I think you should give yourself a high-five for being as young as you are and having a good job, money in the bank and a great FICO. My guess is that you didn't get there by accident, but by careful and conservative planning. In planning for your next phase you have to decide how conservative you want to be. It's an investment risk where no one has a crystal ball. The buyers we are working with right now are fairly aggressive buyers who invest with the mindset of "buy low, sell high." It's a phrase we have all heard and understand in theory, but it's something completely different when it's our money on the line.
In the end, I'll tell you the same thing I would tell my best friend... when you rent you pay someone else's mortgage and get none of the tax benefits or appreciation. And yes, properties are still appreciating if you buy in the right part of the South Bay. If you wait until you can afford a house there's no guarantee that prices won't have gone up, effectively putting you into the same position you are in now. Another benefit is that the interest rates really good right now. If you wait a few years you might not be able to afford that much more and you will pay more interest. Given your background, I think you should consider starting with a condo in a good area. Look for good schools and make sure the development is well funded. The good schools will help hold your value because they are usually the last to go down in price and the first to go up. A well funded development will have reasonable HOA dues and plenty of reserves so that your house warming present isn't a bill for "x" thousand dollars for a new roof, let's say.
Either way, enjoy the process. You worked hard to get here.
P.S. Feel free to check out the link below to a good condo vs. home article.
Let me know if i can help.
If you want to stay in the city area you may have a harder time finding anything more than a condo.
Hope this helps.
I wonder about the reaction to this statement, if we ask the thousands of people who have been foreclosed in California over the past six months...
I appreciate your comments about real estate always going up in the long run. I felt the same way until I read Robert Shiller's book, IRRATIONAL EXUBERANCE.
Shiller shows hundreds of years of evidence that home prices do not keep up with the pace of inflation. I grew up in the Bay Area, so I know that market and how bad it will soon be, but don't take my word for it.
Case-Shiller's Home Price index is the most accurate reading on prices of homes in the major metropolitan areas by nearly any account. (same Shiller who wrote the book) Take a look at what is going on with the Case-Shiller index right now:
As for the investment potential you are almost always better off purchasing a home, but as you probably already know location is truly the key.
I'm ready to rock and roll and purchase a place.
I've researched and seen a number of homes in the area I would like to purchase. In the area I seek, $400/sq foot is a fair price considering: 1) rental values, 2) historical prices, and 3) income in the area.
Yet those properties sell for over $1000/sq foot.
And during the peak of the boom, they were selling for $1200/sq foot if not more.
I appreciate your optimism, but nothing is selling, more foreclosures pop up everyday, prices are plummeting, and even the investment banks have started to concede that we are in for a major price correction over the next three years.
Waiting is the best thing for me. And I bet if Jason waits (as well as all prospective purchasers), they will feel amazing about it in 18 months.
But here's a question for you: do you think it's possible for me to offer someone the fair price of the property, 40 percent of their listing price? Do you think they would accept?
The reason I'm asking is because I'm also eager to purchase, and I'm in similar shoes (out of grad school recently). But all the research I do tends to lead me away from buying. One of my rules of thumb is to look at the places I would like to purchase and figure out what the corresponding rent would be. Then I multiply that by 100 and 120. That's the range of what the price of that particular property will be in a market that is back to normal (according to Robert Shiller's book). In LA, unfortunately, I can rent a place I really like for $2000, but buying that same place would cost me over $6000 a month (including the tax incentive). Prices in LA (and the bay area) are still way too high according to every statistical measure--but recently they have started to plummet.
For me personally, I don't see any reason to purchase when I can rent for one-third the price and put the difference in my pocket, especially considering that when home prices have historically fallen, they tend to stay on a plateau for several years. It's highly, highly unlikely that prices will stop falling anytime soon---a logical conclusion after viewing these New York Times charts:
Even if they did stop falling, you would have years to purchase the home you like at the same price.
Anyway, I wish you luck. I'm no fortune teller--all I count on is unbiased facts and statistics.
Would love to get your feedback on why you are buying...
Merrill Lynch announced that home prices are going to fall 30 percent by 2010. Home prices have fallen significantly in the past year across the country, and are finally starting to fall in the bay area. Mortgage rates are resetting and foreclosures are popping up, even in the best parts of the bay area. The economy is either in a recession or on the verge of a recession depending on whom you speak with...Also, if you look at any of the most fundamental charts about home prices, they will show that homes are way overpriced based on home prices vs rent prices, and home prices vs. income.
In spite of the horrible state of the market, what would drive you to buy anyway?
Really, I'm not trying to be disrespectful or rude. I'm actually very curious why you would buy in light of all the evidence that housing is a terrible place to put your money right now...
Also, will you have room mates, how many bedrooms, baths, do you want/need garage. Are you conservative in your spending and willing to forgo amenities for price? I have lots of thoughts for you but really, too much to write here.
Since you are a first time home buyer there are special programs out there for you, such one offered in San Jose in certain redeveloping areas. There are new condos/townhomes being built which qualify for these programs.
It's a great time to buy, as your competition is low, we don't know when this will change. I've seen the market switch what appeared to be overnight. Email me or visit my website for more information.
In any event enjoy the process, owning your first home is a very exciting and can be rewarding experience.
Read a book called IRRATIONAL EXUBERANCE by Robert Shiller (the same Shiller of the Case-Shiller Home Price Index). It would be a good introduction to the current state of housing prices and a nice primer on homes as an investment...
If you want more info, I'm happy to pass it along...
What are your specific needs and have you started looking? Areas are endless in the south bay...
Visit my web site http://www.yvettemcavoy.com and start a search. I specialize in Cambrian, Campbell and surrounding areas of San Jose/Silicon Valley. Click on the community link at the right of my site and review the communities. Email me and we can talk, have a great day:)