Is Now A GOOD Time to buy a HIGH PRICE home ?

Asked by Maybuy, 94024 Tue Aug 25, 2009

Just plain and simple question - is NOW a good time to consider buying a high price home (Range = 1.7M -2.5M) in the so called very desirable neighborhood of bay area such as Los Altos, Saratoga, Palo Alto, Menlo Park, Los Gatos, Monte Sereno, Atherton, Etc ?

Help the community by answering this question:

+ web reference
Web reference:

Answers

20
Ashok, Home Buyer, Los Altos, CA
Tue Aug 25, 2009
If you don't mind losing your 25% down payment and be under water for the forseeable future, Sure why not?
5 votes
Steve, , Rohnert Park, CA
Tue Aug 25, 2009
Given how many nice homes you can rent for $5K-$6K in these areas, and the very real probability (inevitability?) of these home prices sliding, I can't see any viable reason to buy now.

Take a $2.25m house. 25% down, 6% on the rest.
- $562K down
- PITI = around $13K/month
- Less tax savings on $1m - about $1450/month
- Plus maintenance costs, let's call it $500/month.

Total monthly... $12K/month + the opportunity cost of a half million dollars tied up in an illiquid asset.

Or for $7500/month you can rent:
http://sfbay.craigslist.org/pen/apa/1340950580.html
... which is likely WAY more home than $2.2m would get you, and cover 25% of your yearly rent if you manage just 4% after tax on what would have been your half-million down payment.

Choice seems simple unless you fall into a "keeping up with the Jones'" mindset.
4 votes
Optimizedpri…, , Los Altos Hills, CA
Fri Sep 4, 2009
Don't listen to some of the brokers in here who are just trying to make you buy a house in their area and get the market moving. Do independent research instead (ignore ANYTHING coming from that lobbying organization known as the "NAR").

As others below have pointed out, Los Altos' price-to-rent ratio is insanely high--about double what it should be, for the most part. This means prices could fall in HALF before they adjust to economic fundamentals!

Don't let anybody fool you by saying our area is "special" or "rich" or whatever. Rents reflect TRUE demand. If there are so many rich people who are impervious to the economic downturn or will pay "anything" to live here, then why are rents so low compared to prices?

If you do the research you'll find that we're facing another giant wave of foreclosures on the high-end. You'll read how the former high-end market was driven by "upgrades"--people trading a lower end house they made a lot of money on for the down payment on a more expensive one. Now with negative equity in their existing home, there's no way these people are moving anywhere. That's perhaps 70% of the demand for the high-end G-O-N-E.

Oh, and Baby Boomers are moving our of their big expensive house. Rich immigrants (big-time Bay Area driver) are going back home because there are no jobs here. Fewer and fewer buyers for these homes + more and more sellers = lower and lower prices.

It takes a long time for the high-end to move for many reasons, but everything you read says it absolutely WILL correct to at least 50% from peak JUST LIKE THE REST OF THE BUBBLE AREAS ACROSS THE COUNTRY. (Read REAL research not bozos with mindless anecdotes like, "California real estate always goes up").

Oh, and by the way, buying when interest rates are as low as they will ever be is retarded: it means that they will only go UP in the future which means your home price can only go DOWN.

If you plan to live in your home for 10+ years... then you can rent for about one more year until the correction finally works its way through Los Altos and then live in the house of your dreams. Don't make a long-term decision like that on a whim need. Save your cash. You'll just end up underwater and miserable if you buy now.


OP
2 votes
Ulli Rieckma…, Agent, Los Altos, CA
Tue Aug 25, 2009
Hi Maybuy,

The answer is very simple: yes. Interest is still very low even for jumbo loans and home prices are down. Also, as most higher priced homes take longer to sell, the sellers are usually willing to negotiate.

Use a qualified Realtor of your choice and get what you want.

Happy house hunting.

Best regards,

Ulli
2 votes
Denise Welsh, , Los Altos Hills, CA
Sat Jul 10, 2010
Maybuy,

When in doubt - "Don't"! I recommend that clients evaluate their situation, identify their motives and determine whether what they want is available for a price they can afford! As Dave indicated, prices are still soft at the high end. But, if you find exactly what you want, for a price less than you could build the home for - it may be a good deal FOR YOU! It is really not a simple question to answer. We still expect to see some of the people who have managed to hang on, using savings and other resources, let go. However, at the high end, homes tend to be custom and each is unique. It is hard to duplicate some of the well-built homes over $2M. It is hard to put a dollar value on the time, skill anad forethought that was employed in the design and build of these homes.
Web Reference:  http://www.denise-welsh.com
1 vote
Ashok, Home Buyer, Los Altos, CA
Wed Sep 2, 2009
Here's a recent article on luxury home sales in one of the most desirable areas in the bay area

http://realestate.yahoo.com/promo/americas-most-expensive-zi…
1 vote
Mark Burns, , Cupertino, CA
Tue Aug 25, 2009
Yes. People buy those homes for neighborhood, amenities, schools, neighbors, friends, entertaining, prestige, etc. They typically have a very large down payment (or just cash) and expect to live in their home a very long time. That type of property is a destination, not necessarily an investment.

Therefore; the decision to buy in those areas is not primarily based on financial issues. I'm not saying that is not important, it's just that it tends to be secondary.

An extreme analogy would be buying a Ferrari. People that buy that type of car are not expecting a great return on their investment. On the contrary; the value drops like a rock, the insurance is expensive, registration is another huge expense, and you don't want to park it anywhere. They buy them because they expect to enjoy the car.

The good news is a house in the areas you mentioned should do a whole lot better than an exotic car. And you get to live there too.

With this in mind, a buyer in the $1.7M to $2.5M price range should be more concerned with finding the 'right house' rather than timing the market. Why buy a home that seemed like a $2M bargain based on all the numbers, that you didn't like?

You emphasize 'high price' by capitalizing it. If you are thinking about buying in those neighborhoods and look at everything as high priced then you might want to rent in those high priced neighborhoods instead. It certainly makes strict financial sense to rent instead of buy. Your commitment would be all of $6K-$8K-$10K a month. You can keep the down payment in the bank and be free to leave at the end of the lease. If Ashok is correct, then you could lose $600K or spend $240K on rent for 2 years instead.

You may be in the alternative minimum tax range. You may get little or no benefit from writing off the property taxes and the interest you pay on the mortgage(s) that lose their tax benefits over $1.1M as well. How much more is that beyond the $600K Ashok thinks you are going to lose vs. just renting?

It's interesting he has 2 thumbs up and everyone else has zero.

I disagree with Ashok. No one knows where the market will go for 'high end' homes in the West Valley/Peninsula area. Over the long term they have always done well. And if the home does really well in the next 20 years, only $500K of gain is going to be exempt for a couple, so you'll pay taxes on the rest anyway.

It's about buying the home you want or not buying the house you want; that's all.

Mark Burns, Realtor
Coldwell Banker Elite
President - PRDS, Contracts and Forms for Silicon Valley Residential Real Estate 2008, 2009
President - Silicon Valley Association of Realtors 2007
DRE #00896552 licensed since 1985
Web Reference:  http://www.markburns.com
1 vote
David Blockh…, Agent, Los Altos, CA
Tue Aug 25, 2009
Maybuy,

It is not a "just plain and simple question" because there isn't a plain and simple answer. Would I consider buying a higher priced home in any of these cities....yes. Is now the time for it...probably not. I think prices in the higher price points within each city are likely to continue to come down. That said, would I buy a home in Los Altos at 2.5m with the hopes of "timing the market"? No. I think homes in Los Altos at 2.5m or above still have some softening to do. I would be more likely to buy a home at 1.7 than 2.5m, but it would depend on why I am buying in the first place.

What are your reasons? Are you looking at the home strictly as an investment? Are you looking at the purchase as a lifestyle decision (schools, quaint , safe area to raise a family)? Are you even a buyer?

THE REAL REASON FOR THE QUESTION:

Something, me thinks, is amiss with the question raised. Hummm, new "home buyer" with no profile and no other comments. Yet this buyer wants an answer to a highly specific (and based on how the question is posed, apparently easy to answer) question.... GOOD TIME to buy a HIGH PRICE home. Me thinks the answer lies in the question. It's never a good time to buy a high price home.
Web Reference:  http://www.losaltoshomes.com
1 vote
John Bender, Agent, Corona, CA
Tue Mar 13, 2012
LOL. Debra, this question was posted almost 3 years ago. I think the agents that posted an definitive "yes" probably are no longer in the business.
Web Reference:  http://inlandfinancial.net
0 votes
Debra Ahn, Agent, Los Altos, CA
Tue Mar 13, 2012
It will depend on your situation and what your long term goals are. If you look at certain markets, even through the down turn, it was not heavily affected. However, those same markets have already rebounded significantly from the brief bottom. So if your goal is to own a property for the long term in these areas, you should at least consider buying or talk to an area specialist and get a feel for the market. Also, the current interest rate environment should be an important factor in your decision, if you are planning to get a loan.
If you are not looking at the purchase as a long term goal, and maybe in for the schools, then you really need to consider the cost of purchasing a home. If you would like, I can refer you to a financial advisor that can help you look at all these options, financially.
0 votes
Bryan Robert…, Agent, Los Altos, CA
Thu Dec 16, 2010
It's been a long time since anyone updated this with new information about the market. It's an excellent question and targets a price segment in Los Altos that has had a lot of difficulty in the last 3 years.

In short, YES, it's a good time to buy a high-end home (in that price range) in Los Altos. That segment of the market has increased in price since the beginning of the year and based on the rate of sales, days on market, and other measures prices should continue to move up in 2011. The price increases are not out of control and what you get for your dollar is still more than what you could 4-5 years ago. The entire market is still off its peak.

In the price segment under $2 million, most homes in Los Altos are selling in less than 60 days (under $1.5 million they sell much faster) and multiple offers are the rule instead of the exception. Once you go over $2 million, the time on market goes up steadily. However, in 2010 versus 2009, most homes are getting 98+% of their asking prices even in this price range.

In Palo Alto, this market segment is even stronger and there is more demand usually driven by schools. The same can be said for each of the other markets. Where the school scores are strong, prices have gone up and sales are steady. Where scores are poor sales are flat.

A good example is Saratoga in the areas where you get the Saratoga address but you get Campbell schools. Those areas have been weaker than areas with Saratoga or Cupertino schools.

If you ask most local agents, they'll say that 2011 will be good but that growth in the high-end will be slow to moderate. The good news is that the market is up and appears it will continue to be so.
0 votes
, ,
Mon Aug 16, 2010
Lenders are not shying away fro Jumbo Loans. If they were, I would be out of business, or forced to change my business model.

For a $2MM loan amount with a 760 mid-FICO Score with 20% down on a 45 day lock with an Escrow Waiver our rates today on a 30 Fixed product is 6.000% / 6.085% APR. On $1.5MM a 30F is 5.625% / 5.724 APR.

I'm not that familiar with your market area, here in SoCal I provide "Feature Sheet Websites" for several of the Realtors that refer me. I've been given price reductions as high as 15% from original Listing Prices. Although, some must have been priced right from the get-go, because they sold fairly quickly, and I deleted the Featured websites. There are great values in your price range. And, you don't have to go the REO route. Normal listings. .... Happy funding, Rudi
Web Reference:  http://www.umboc.com
0 votes
Holder Real…, Agent, Menlo Park, CA
Sun Aug 15, 2010
Hi there.

You should note that any Realtor's opinion is based upon the present day conditions. They won't speculate on the future and if they do, they have no real basis for proving where prices will go. With that in mind, you will see a lot of answers quoting low interest rates and motivated buyers.

Although those facts can matter, they are hardly the full picture when it comes to whether or not you buy now or later.

If you don't think you should buy then stick with that until you can convince yourself its the right time. There are motivated sellers out there in those price ranges, but there are also a lot of unmotivated sellers just testing the waters.

Is there room for prices to go down further? Yes, anything's possible. If the possibility of prices falling more is your main concern than you will likely be better off playing it safe and waiting until prices start rising again - which may be several years away. If you do that, it will be less likely that you will buy your home at the absolute bottom, but also less likely that you will suffer unexpected drops.
Web Reference:  http://www.atlistings.com
0 votes
Sam Shueh, , San Jose, CA
Sun Sep 27, 2009
Most of these homes the sellers are more motivated than ever. They do not get many offers and take an offer quite seriously. The reasons are many. One is they are bogged down with their mortgage and often want a less mortgage themselves. The bottom line is your mortgage is probably as low as you will see. (Interest was 9% not long ago)....
0 votes
Dallas Texas, Agent, Dallas, TN
Wed Aug 26, 2009
I recommend to contact your CPA who can review all financial records. Determined based on short / long term goals, lender shy away from jumbo loans.

National Featured Realtor and Consultant, Mortgage Loan Officer, Credit Repair Lecturer
Follow me on Twitter: http://twitter.com/Lynn911
Lynn911
Web Reference:  http://www.lynn911.com
0 votes
Bill Eckler, Agent, Venice, FL
Wed Aug 26, 2009
Maybuy,

Simple questions deserve simple answers.....any time is a good time to purchase real estate provided the subject home is the perfect property, in your ideal location, and being offered at a price you can't afford to walk away from........

The only mistake buyers can make in this market is to not be looking and exploring options......there are many out there but, you need to find them...it's unlikely they will find you.

God luck
0 votes
Norman Aless…, Agent, San Jose, CA
Tue Aug 25, 2009
Hi Maybuy,
Generally speaking NO it is not a good time on the high end, prices are still coming down. If you really have to buy now wait until the fall because generally buyers slack off then and the homes that are active over the holidays REALLY want to sell. ( also I would price in any expected decline in my bid's).
Be aware that the market on the low and middle ends are stable and in some areas going up ! ! !
This may affect the high end areas but I have not seen it yet, still I would keep track of this fact if I were you. The market can change VERY quickly witness the low and middle markets, so be PREPARED.
I hope this helps,
Regards,
Allyson
408-705-6578
allyson@homesbyallyson.com
DRE# 01397256
0 votes
David Tapper, Agent, Burlingame, CA
Tue Aug 25, 2009
Based on what we know today, maybe. I say maybe because it depends on why you are buying. If the home you are looking for is meant to be your principal residence and you plan on living there for the next 5-10 years, then I say it's a good time to buy because we know two things for sure, today.

1. Home prices are down, and the market is soft, and the supply is higher than the demand. This gives today's buyer leverage.

2. Money is cheap. Rates are low, and will probably go up within the next year or so. They have to because of inflation.

If I were you, I would find an experienced agent who is a deal maker in the areas you are looking. Focus on finding the home that will make you happy. A home where you will enjoy coming home to everyday.

In this market, you can afford to be picky. If you find the "right" home, and get a good price, then go for it. If not, sit back and be patient.

No one person has the ability to say when the market will go up, or down. That's why I said to focus on finding the right home for yourself.

Cheers,

Dave "Tap" Tapper
Realtor
Cashin Company
http://www.DavidTapper.com
650-403-6252
Web Reference:  http://TeamTapper.com
0 votes
Glen Mitchell, Agent, Half Moon Bay, CA
Tue Aug 25, 2009
It's always a good time to buy a house if you get it for the right price. Clearly if I said you could get one of those 2 million houses for $500k you would do what ever you could to buy it. As the price gets higher and higher to its true value the deal gets less attractive. A good broker can help show you were values have been for similar houses and where they are selling now. You can determine a fair value and if you pay less you know you are getting a great deal. Most people end up falling in love with a home and make an emotional decision versus figuring out what the property is truly worth. Always do your own homework and as I mentioned get someone good(broker) to help check your work.

Glen
Web Reference:  http://www.maui4rent.com
0 votes
Eric Trailer, , Palo Alto, CA
Tue Aug 25, 2009
Good afternoon,
Presuming that your holding preiod is 5 years or more, 40 years of housing pricing history in the cities you mentioned have proven that buying in any market works to your financial advantage. Combine that information with the fact that we are at the most attractive prices in recent memory in the price range mentioned, and combine further available financing at historicallly-low rates, and it's actually more prudent to buy sooner than later.
Best wishes on finding an ideal home soon.
Kindest regards,
Eric Trailer
650.543.8001
etrailer@absolutemortgage.com
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more