Home Buying in San Jose>Question Details

Tuan, Home Buyer in San Jose, CA

1/ Should i wait to the end of this year to buy the house? 2/ zipcode 95116 is it good area to buy the house?

Asked by Tuan, San Jose, CA Wed Jan 21, 2009

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Hi Tuan, I recently responded to a fellow Realtor's question basically regarding how long Buyers think the market will continue to drop, as follows:

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Haven’t seen any polls on this topic, but suffice it to say that most of the general public gets their news from the TV, so when the newscasters start to parrot a recovery I think that’s when you see a consumer sentiment shift. That said, to say that we are in uncharted waters would be an understatement concerning the housing market and its recovery. From an agent perspective the following may be of interest in helping to identify subject matter you may want to keep in mind as you listen to the news:

Local net jobs growth rate (local jobs growth rate – local unemployment rate) is THE early predictor for housing recovery in any specific area. People don’t buy homes when they are uncertain if they will be getting a paycheck next week. The larger the “net jobs growth rate“, the greater the "velocity" of the recovery in an area. With jobs creation comes a heightened demand for housing, allowing prices to stabilize. Eventually, housing appreciation will develop. Barring any successful government intervention, the end of 2011 is when the brunt of “questionable loans” is flushed from the financial system. By Jan of 2013 it’s all gone, but my sincere hope is housing appreciation occurs well before 2011 and with enough zest to allow some homeowners to refinance out of these final loans and into more affordable loans prior to the currently projected reset schedule (which can be viewed via the link in the next two paragraphs). While the predominate amount of foreclosures tied to “subprime” loan products has passed, we're not in the clear. This chart shows scheduled reset loan volumes for different loan categories:
http://docs.Steven-Anthony.com/Resets.pdf

As the chart shows, Subprime loans have pretty much run their course; however, Option/Alt-A/Unsecuritized ARMs are the next phase to provide a destabilizing affect. We have taken on some of the projected Option ARM pain earlier than is shown in the reset schedule. This is because Option ARMs have valuation based "triggers" that can cause resetting to occur sooner than originally planned (due to property devaluation and an owner's payment selection of a minimum or interest-only payment). The following chart shows how the resetting of these loans has shifted due to valuation based resetting and I have also provided an explanation.
http://docs.Steven-Anthony.com/OptionArmResets.pdf

Historically, since 1968 (this is how far the available data from CAR goes) there has only been one time where California housing had consecutive years of price decline. That would be 1992-1996 (see chart link below). Note that after this period the entire decline had been made up within the following two years (92-96 total decline of 12.2%, 97-98 total increase of 12.5%). While past performance is not a 100% predictor of future performance, I believe in the resiliency of California as an international destination location for work and living.
http://docs.Steven-Anthony.com/200XCAAnnualDataChart.pdf

I'm suggesting that my buyers hold their cash at least until the end of Q109 and then reassess the direction of the economy. I don’t see anything concrete indicating Q2 will be better. The resulting reduction in jobs will lead to less demand for purchase housing (and will also lead to more distressed supply).

There’s been quite a bit of attention concerning the $700 billion Troubled Asset Relief Program (TARP) approved by Congress. That certainly is a large amount of money; however, what most people do not realize is that the “maximum commitment” of programs targeting an economic recovery currently amounts to 8.5 trillion!
http://docs.Steven-Anthony.com/Bailout.pdf

President Obama will most certainly fund public infrastructure projects to immediately help create jobs and spur local economies; however, the specific localities that will receive this funding is unidentified at the moment. One thing is for sure, if the new currently proposed Stimulus plan is passed (with Obama’s current momentum I think this will happen – really like the Bill’s provision for tracking all spending), along with all that other “bailout” money that’s been pumped into the system we had better see some “recovery”! Here’s a list of where the new proposed money would go:
http://docs.Steven-Anthony.com/NewProposedStimPlan.pdf
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Tuan, I’m not sure whether you have been formally Pre-Approved. As far as buying, this is your first step (not a pre-qualification, see:. http://www.Steven-Anthony.com/default.aspx?pp=39377 for the difference between the two) so you can be ready to act when you need to, or be aware of any issues that may prevent you from buying when you want to.

Best, -Steve
0 votes Thank Flag Link Thu Jan 22, 2009
Hi Tuan,
That all depends on your finances and what you can afford. Personally I don't think you should wait until the end of the year, but I don't think you will be hurt much if you do wait. There are " deals" out there right now with great interest rates. All I'll say about zip code 95116 is that the prices of the homes reflect how much demand there is to live there, since most of the homes are very inexpensive that should tell you it is NOT a desired area so although you'll get an inexpensive home resale value will take a long time to come back up.
Then again if that is all you can afford I recomend that you drive around the neigborhoods so you get a feel for the areas and you might possible find a decent street or area in which to make a purchase.
If you need any further assistance or have any other questions feel free to contact me or log onto my web site to check me out and you can also put in a free property search for reo's and regular sales.

Sincerely,
Allyson
(408)705-6578
allyson@homesbyallyson.com
0 votes Thank Flag Link Thu Jan 22, 2009
Tuan,
That depends on your readiness. When you see something you can afford and like go for it.
Homes are long term investment for years to enjoy.
No one has the crystal ball to advise if home price will drop, stay put or moving up. Get pre-approved loan before anything.
0 votes Thank Flag Link Thu Jan 22, 2009
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