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  Sept. 30, 2008 6:09 p.m. petegossett Dork

  So, would you guys say now is a good time, or bad time to buy a house?

  A bit of info:

  I've been commuting 100mi/day round-trip for work over the last 1.5-years(in addition to driving up to 100mi/day for work). My wife just got a job here in town & we're thinking of moving much closer. We know we can't sell our present home w/o taking a huge hit(and cashing in one retirement to pay it down), so we're planning on 2-mortgages & possibly renting the old place at a loss, just to offset the expenses somewhat.

  The real-estate market near work is in a similar slump: We just looked at an old victorian house that appraised for $150k a couple years ago. It's now $50k. Granted, it needs $25k of work to be in tip-top shape, but still, that's a damn good deal for around here. And we've already looked into financing, our credit is great & the banks have said OK to the deal.

  So, would we be complete fools to think about buying a house? Or is now the right time?

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  Sept. 30, 2008 6:21 p.m. ignorant SuperDork

  if you can get a loan go for it.

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  Sept. 30, 2008 6:29 p.m. Nashco SuperDork

  If you can afford two mortgages (without renters in the second place) and think that holding out will earn you more than unloading at a loss now, go for it. If you get renters in the old place, that's gravy...don't rely on it, just take it as a bonus when things are going well. Housing values can only depreciate so much, $50k for a house you really like is nothing. As you know from your current house (from the sounds of it) you can lose $50k pretty easily in a more expensive home, but if you start at $50k it's hard to lose much more money on the deal. Beware that it may take a long time until you can sell your old place at a profit, so be careful about holding out...run the numbers on your monthly payment and see how long you could hold out before you're better off just selling at a loss.

  Bryce

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  Sept. 30, 2008 7:01 p.m. RX Reven' New Reader

  I wouldn’t worry about the loss on your existing home as your next home will be discounted as well making it a draw +/- if you’re moving up or down.

  I’d go after the element that you have the least control over and presents greatest uncertainty which is the liquidation of your existing home first.

  It’s a buyers market and the situation isn’t likely to change much short term so have cash in hand, no contingencies relating to the sale of your existing home, and press your lender to give you the longest possible loan lock at little or no additional cost.

  This will put you in an extremely advantageous negotiating position with the seller of your new home.

  Good luck…

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  Sept. 30, 2008 7:14 p.m. foxtrapper SuperDork

  Right now is a relatively good time to buy a house. Prices are down, though they are still rather inflated. I expect prices will continue to slide downward for a while.
  

  Financing will be steadily more difficult. The longer you wait, the harder it will be to get, and the more expensive it will be.

  Selling your current house now is not a good idea. Unless you absolutely need to take the hit, I wouldn't do it.

  Renting is a very good thing to do, but learn the game. Depreciation is your friend. To that end, there is no reason to take a loss on the renting of the house.

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  Sept. 30, 2008 7:24 p.m. carguy123 HalfDork

  If you are in Texas I can get you a loan for it so that isn't an issue. If you are in Texas then value's not a problem.

  Here's the problem with buying homes in times of change, will they continue to change (downwards) after you buy?

  If you were buying a home in Michigan then now would not be a good time to buy as values will continue to drop and you'd lose money.

  So I guess what I'm trying to say is that each market may have a different trends so you need to research what's happening in your area.

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  Sept. 30, 2008 8:09 p.m. Datsun1500 HalfDork

  $50K here is a car not a house... Where can you get a house for $50k?

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  Sept. 30, 2008 8:21 p.m. Jensenman SuperDork

  It's hard to answer this question without knowing just how big a hit you'll take on the existing house. $10k-$15k, not so bad. $50k, hmmm... carguy also makes a good point about different markets having different criteria.

  Going from $150k to $50k is a HUGE drop, meaning the area took a big hit and the average value of the surrounding similar houses will be close to that unless something really crazy is going on with this particular house (ancient Indian burial grounds, crap like that). Add another $25k for upgrades, you now have $75k in a $50k house in an area of $50-$70k houses which may take a long time to recover enough to cover your investment. It's never good to have the most expensive house in the 'hood. Find out the real value of nearby houses.

  What's your time horizon? If you are looking at 30 years till retirement, that's a lot different than, say, 10 years. Making a 'loss move' like this with 10 years to go could be financial suicide.

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  Sept. 30, 2008 9:04 p.m. Xceler8x Reader

  I'm with Nashco.

  The g/f and I are in the same deal. Saw a house we liked, bid, approved, the deal is on. My old place we're going to rent out. We ran the numbers to see if we could float both places on our own. We could. After seeing that we know that when worse comes to worse we aren't reliant on other people to pay our bills. We can pay both with some to spare.

  If you can do that I saw go for it. That way you won't be suffering if other people, aka renters, let you down.

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  Oct. 1, 2008 12:40 a.m. curtis73 Reader

  Datsun1500 wrote:

  $50K here is a car not a house... Where can you get a house for $50k?

  I'm looking at a couple 3bed/2ba houses here in downtown Austin TX for $79,900

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  Oct. 1, 2008 6:52 a.m. petegossett Dork

  Thanks for the replies! I'll add a few details:

  When I bought my present house in '03, it was already in a economically-depressed area(my hometown), so I knew going in that I'd have to stay a while to get my money out of the house. Since that time I went through a divorce(& refinanced to get my ex off the mortgage), and then refinanced again last June(my mortgage broker screwed me on the previous refi). I owe $76k, it might sell for that, but it may take over a year. I think it would sell in 6-months or less if I pay it down to ~$68k or so. My mortgage w/everything escrowed is $711/mo. In an area where the average rental home is leasing for $350-$400/mo, I think the most I could probably get for rent is ~$600, and that's just because I have large corner lot, large garage & shed, and a little larger house than most rentals. Keep in mind, most people in this area probably couldn't get financed for a home...at least, not one over $50k. Selling on contract is something else I'm considering too, but I won't get into that here...

  The house we're looking at is a 3100sq/ft Victorian, located in a small town about 7mi from Purdue University. It's a Hud forcloseure(a friend actually knows the people who used to live there & the history of what happened), and as I mentioned at the top, it needs about $25k in paint(or siding)& a roof. The house is solid though, and while it's a bit more footage than we really need, we do need a 4-bedroom and a lot of storage space.

  And no worries, I've been crunching numbers - I won't do this unless I'm POSITIVE we can carry both homes indefinitely!

  Thanks!!!

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  Oct. 1, 2008 11:53 a.m. NYG95GA Dork

  Old victorian houses are fraught with problems, but the emotional payback is good once they are fixed right. The attention to detail, quality of construction, etc, is much higher than in modern homes.

  True that it's a buyer's market now, and if you have the funds for 2 mortgages, you can go for it, just be aware that the 25K you think it will take to fix it will creep up; it's the nature of the beast with those old houses. I'd say rent a copy of "The Money Pit" and sleep on it awhile.

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  Oct. 1, 2008 12:32 p.m. Jensenman SuperDork

  It's definitely a buyers' market, no doubt about that. It cuts both ways; you can get killer deals but that also means the sale price of your existing house is down as well (as you have seen).

  3100 square feet for $50k is a KILLER deal. That's 14x70 mobile home on 1/4 acre of sand money down here

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  Oct. 1, 2008 2:00 p.m. CrackMonkey Reader

  I know I'm shopping for a vacation home right now. Probably won't pull the trigger unless I can convince a friend to go halvsies, but I am looking.

  Edit - looking around Lake Anna, VA, in the low $200,000 range.

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  Oct. 1, 2008 3:33 p.m. ClemSparks SuperDork

  My experience about the market, at least in my area (which might be a similar midwest, not-too--close-to-metro-area as yours) is that It's A) Hard to sell a house right now...and B) hard to get a loan to buy a house right now.

  That makes buying houses and owning rentals a good combination for long term investment.

  Clem

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  Oct. 1, 2008 3:35 p.m. MadScientistMatt HalfDork

  They're on sale; of course it's the right time to buy if you can afford it. Trouble is, it's a bad time to sell and you usually end up doing both at once.

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  Oct. 2, 2008 5:10 a.m. foxtrapper SuperDork

  In your math you forgot depreciation. Depreciation is income. Many folks lose track of that. It's income because it reduces your income tax liability. If you're good with your records, you can many times reduce your income tax payment to zero. Now, figure that income into the equation.
  

  You're looking at buying an old vicky, ok. Be realistic with yourself about the restoration work. Will you really do it, if will you end up letting the place fall down around your ears? Similar the expense. You say $25k, do you have a real basis for that number?

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  Oct. 2, 2008 9:40 a.m. Jack SuperDork

  Renters will be gravy, but in many markets, the rental market is ripe. You may be surprised at what you can get in rents, with the housing market as scary as it is now.

  If you have good credit, the loan will not be a problem. We have a (good) ARM (4.5% for five years), that expires in March, so we have been looking at refinancing for the past few months. Nothing has changed with regard to us getting a loan with any of the lenders we are talking with.

  We were contemplating letting our ARM roll into a 30 year fixed, as the rate is tied to the one year, daily LIBOR rate + 1.75%, so if nothing changes (HA!) we would be just under 6%, with ZERO closing costs, but it will be adjusted every March, based on the LIBOR and the LIBOR is in a mild state of flux right now. Any other refinancing would involve approximatlely $4k closing costs. Tough choices in this volitile market.

  Jack

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