Steve

Sit on the cash and keep renting. Build up your cash.

Home prices are being propped up by super-low interest rates. That fact is the very reason the Fed has been buying mortgage backed securities -- artificially lower mortgage interest rates to artificially prop up home prices. That, along with $8K bribes, stalling foreclosures and financing anyone with a heartbeat for 3.5% down are the only remaining supports in this house of cards. These low interest rates don't necessarily hurt borrowers substantially but, for cash buyers, it means you'll be paying too much for the home itself.

Look at the market carefully. Fed-sponsored absurdly low interest rates and easy/cheap credit for borrowers flooding the market via FHA. Your cash position is substantially weaker as a result. Wait til the tide at least *begins* to turn in your favor before throwing hundreds of thousands into this mess. - Thu Nov 26 2009, 23:02

It's your price point. Not saying you're asking too much (no idea), but it's a tough sell for the category.

The market is dominated by first-time buyers, few of whom will qualify for that size mortgage, and to a lesser degree investors - and it'll be tough to rent a 60-year old 3b/2 for enough to be profitable on a half-million plus purchase. Thus a $540K home doesn't really appeal to the majority of the current buyer pool.

Your demographic is move-up buyers -- but that market is dead. Far too many existing homeowners in the area are upside down in their mortgages whereas you need the exact opposite, a would-be buyer who has a ton of equity in their house already. Perhaps given the location some cash-laden retiree couple may be interested as well.

Bottom line: you need a buyer with either a ton of cash and a healthy income (say, $200K to put down and $100K annual salary) or no real debts and a substantial income ($160K-$180K/year). Not many of those around, especially in Sonoma which isn't exactly a hub of high-income jobs, hence it'll take time or lower prices. - Mon Nov 9 2009, 13:23

Bear in mind most areas in the state had some pent-up demand. A fair number of would-be first-time buyers stayed out of the market when prices hit absurd levels, and remained out as prices plummeted.

The situation is clearly different now, as it can be quite competitive. I'm of the opinion the lower prices and tax credit not only have lured that pent-up demand into the market, but have also pulled what would be future demand into the present market. It's my belief that that first-time buyer pool will end up tapped out and the employment situation is so bleak that the 'refilling' of that buyer pool will be much slower than typical. I'm of the opinion the pool of households with enough income to handle a home purchase, who *do not already own a home*, is not large enough to compensate for the pending foreclosure and organic home sales. That would lead to more drops in prices.

That's my belief, at least. The market is completely out of whack due to government intervention and I highly doubt it can support itself once that intervention recedes. Others believe differently, however. - Fri Oct 9 2009, 21:34