Rent vs Buy in San Ramon>Question Details

Nrv, Home Buyer in San Ramon, CA

Rent or buy in San Ramon, CA (relocated from out of state, now working in San Ramon)

Asked by Nrv, San Ramon, CA Mon Mar 24, 2008

My job offers me 2 different programs to help reduce housing costs in this area. The 1st program is for buying a home, and has three parts - 1. a $50,000 lump towards a down payment, 2. an $80,000 amount spread over 5 yrs to buy down the interest rate, 3. a $100,000 interest free loan for the first 5 yrs of ownership. The 2nd program is for renting a property, and offers $45,000 payment spread out over three years. All amounts stated above are taxed at the state/federal level and are included in payroll distributions. I can only choose one of the 2 programs, and I have until March 2009 to make my selection.

I think downward pressure on prices will strenghten once many of the ARM's start resetting later this year leading to more foreclosures. Despite the generous home purchase assistance, I'm thinking that the renters assistance might be a better choice, considering I don't see bottom until mid 2009 at least, with flat prices until 2011. Agree or disagree with my thinking?

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Check realtytrac.com for foreclosure information in and around San Ramon. I counted pre-foreclosure (NOD) average 50 filings per month in San Ramon. That rate is getting worse recently. The NOD is a leading indicator of future foreclosure which strongly correlated to house price downward movement. Within 6 months, about 30 out of these 50 NODs (some of them are duplicate, and some will manage become current again) will eventually join already large distressed property inventory (either REO or short sale). That will be accounted for 50% of total re-sale homes in San Ramon per month. House price will not stabilize as long as distressed property inventory is till high.
0 votes Thank Flag Link Tue Jun 17, 2008
I agree with you on the downward trend as many home owners are walking away from their homes in san ramon also since they can buy the same plan across the street for 250% less than what they paid for. Look at the Avg house price in san ramon which is in steep decline.

I agree the san ramon schools are great and many families are moving due to school system but the schools are overflowing (elementary) and many home owners have to send their kids to schools that are not in the area. I have yet to meet a an agent (last 10 years) who said "this is not a good time to buy"

Happy house hunting.
0 votes Thank Flag Link Tue May 27, 2008
I would say that don't rush to buy. Take your time to test the market and find your dream house. I don't worry that much about the loan written in 2005/2006. Most of my friends in SR got offer from their lenders to extend another 5 years program with rate between 5% and 5.5%. The lender only charge 500 for it. So as long as you pay the mortgage on time, you got great chance to survive out of this downturn. Just my 2cents.
0 votes Thank Flag Link Tue May 27, 2008
Recent delines of 10-35% in listing and selling prices are being seen in SRV,Dublin, Danville, so these areas are not immune to a real estate downturn. Increased FHA limits don't mean anything as long as lenders are not willing to lend without large downpayments (20-50%) and higher rates. Federal reserve interbank rates don't have anything to do with mortgage rates. (set by short term treasury rates) Danville/SRV/Dublin etc will see large declines as Alt A and ARMs written in 2005-2006 come to resets in 2008-2009. Dont' buy. Thanks.
0 votes Thank Flag Link Sun May 18, 2008
I think the question is whether you could recoup the forfeited incentives through waiting. Given the area, it is unlikely. Although I will agree if you plan on moving within five years you should not buy as you would not recoup the realtor cost, plus best case scenario, the rate of inflation. San Ramon is a great place to live and the schools are good if you have kids. You need to evaluate your options in light of your personal needs rather than the frenzy of the past several years relating to real estate.
0 votes Thank Flag Link Fri May 16, 2008
I'm on the same boat as you are - my employer will pay for closing costs, and will provide home purchase assistance such as SHA, BHD and DPA as part of my relocation package. The problem is, you need to put int 25% to 30% downpayment for the lender to do the DPA (not to mention I am limited to 3 approved lenders only). I might go with the Renter's Assistance and hope for prices to go down further in the year to come, or get an incentive from the builder if I go with their mortgage provider.
0 votes Thank Flag Link Thu May 15, 2008
Dear Nrv,

I can see the reasoning behind your thought process, however, I would suggest that you keep a couple of things in mind.
1.) San Ramon (Dublin, Danville, Walnut Creek, Pleasanton) is a lot more stable compared to some of the other areas that have been impacted by the declining Real Estate market (i.e. Brentwood, Antioch, Tracy, etc.)
2.) The increased FHA LOAN Limits are only good through the end of 2008. As part of the Economic Stimulus Act of 2008 HUD's Federal Housing Administration (FHA) has temporarily increased its loan limits and insured larger mortgages at a more affordable price in high cost areas of the country. For Contra Costa and Alameda counties, the new Jumbo-Conforming limit is $729,750. Previously, that amount was maxed at $417,000.
3.) Lenders are getting more and more stringent about their requirements and its getting harder and harder to qualify borrowers.
4.) Long-term Fixed Rates are likely to go up. The Fed has just recently cut an additional 3/4% but don't expect mortgage rates to go down too. Consider recent history. The Fed issued an emergency cut of short term rates in early January and then trimmed more just a few days later, but the 30 year fixed mortgage rate has responded by bouncing up from 5.6% to 6.4%. Also, inflation drives long-term fixed rates. When the Fed cuts short term rates, the intent was to lower borrowing costs for corporations so that they'll invest and hire. But this economic growth can lead to inflation. That in turn leads bond traders to demand higher rates on their long-term bonds, and that drives up mortgage rates too.

Bottom line is that you have to consider the entire picture vs. just the price of the home. I would also suggest looking in Dublin as there are some very good prospects there.

I am one of the partners of Platinum Club Realty Team (California Realty Group), which provides end-to-end Real Estate services to clients such as yourself. Please feel free to e-mail me if you have any questions. ochernyak@upgfinancila.com
0 votes Thank Flag Link Thu Apr 3, 2008
It is quiet obvious even to a novice like me that the wild speculation and increases in prices in the last 6 yrs had no fundemental backing. Avg home prices = 3x average income, historicaly. SRV has median household income of around $100,000. AVG home should be around 300K. But since it is a nice area and has many amenities. Will will say $400K. Max. Whatever you do, remember; you won't ever go wrong renting.
0 votes Thank Flag Link Wed Apr 2, 2008
you concluded the rent option
because there is no risk
i think you're correct
wait for the bubble to burst completely

anyways

good luck
0 votes Thank Flag Link Wed Apr 2, 2008
Hi Nrv,
I am in the same boat - just relocated here from out of state. Although housing prices are a key consideration, I suggest that you also consider the following to help you determine which way to go:

(1) Is it likely that you may relocate again with your employer in the next few years? If so, it may not give you enough time to recoup if you buy now and the market goes down over the following year (unless your employer will also cover you for such losses should they move you again);

(2) Is it likely that you will stay in the area, but leave your employer? Then, if you buy, you need to think about how you will handle the second $100k mortgage; and

(3) Are you (is your family) the type of person/people who want to make their home their own? In other words, would it drive you crazy to live in rental where you can't paint a wall without permission, etc. Or, are you seasoned renters who prefer renting vs. owning?

Hope this helps with your decision.
0 votes Thank Flag Link Wed Apr 2, 2008
Wow--sounds like you have great relocation programs. As a prospective buyer (4Br SFR), I've been watching San Ramon/Dublin/Pleasanton prices & supplies regularly for the past year, and I would agree with your sentiments. East Bay (including San Ramon with its abundance of new constructions and many homes with ARMs) has been hit hard especially since a large part of its economy depends on the real estate/mortgage industry. But if I were you, I'd wait to see what's happens next winter before making up your mind. Nothing in life is a guarantee. Maybe Bernanke can pull a rabbit out of his hat or maybe we'll face a serious decade-long stagflation.
0 votes Thank Flag Link Tue Mar 25, 2008
Hello Nrv,
I am a REALTOR in Danville and have lived in San Ramon since 1987. I know the area well. I can send you charts and numbers that represents home sales in San Ramon for the last 14 months. Send me an email and I will send these charts to you. Joanne@JoanneLiotta.com
Web Reference: http://JoanneLiotta.com
0 votes Thank Flag Link Tue Mar 25, 2008
Hi Nrv, I would do your research in San Ramon. I am an Architect that has worked in that several times and I have found that home owners in San Ramon are staying put because of the cost of moving and adding on to their homes because they have alot of equity. I have not done research, but I know that the home owners in San Ramon have a higher income and the area appears to be pretty stable. In fact the area around (Dublin, Pleasanton, Alamo($$$) etc..) San Ramon is very desirable and wanted. So this period may be a great time to buy a very nice house at a price that is high but leveling out (not dropping) and will take off again when the economy starts running again. Good Luck, Mike
0 votes Thank Flag Link Mon Mar 24, 2008
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