I looked at some housing prices this weekend. I’m not really in the market but I like to keep tabs on where things are. I have noticed that there are a lot of new “For Sale” signs going up in and around the Pasadena area. I think most of this is people getting ready for the summer selling season. I think a lot of people held off trying to sell in the weak market that we have had in the last year but people can’t wait anymore so here comes the inventory.
But when I look at housing, I think about the saying with regard to the dehydrated man stuck in the middle of the Ocean. “Water, Water everywhere without a drop to drink.” While I am interested in housing and there seems to be a lot of inventory, there really is nothing to buy. How did I come to this conclusion?
I just did the math. I pay $1700 for my two bedroom apartment. I admit that it is a pretty good deal when you factor in where I live but I don’t want to be spending way more than that right now. Doing the math backward, I looked at houses with mortgage if I paid $2000 per month. That comes out to a $300K mortgage. Factor in a down payment, and you get a house of around $350K.
My search criteria was simple. Find me a single family starter home in the $350K range located in Pasadena that has at least 3 bedrooms. I think there was something like 3 listings. All the close neighborhoods east are worse as they are even more expensive so there were no listings there. West in the Burbank area? Only a handful there too.
No way housing should still be this high. All I want is a decent starter home and there is nothing within a halfway decent range. So I’m staying out of the market looking for something to do with all this cash.
Give the cash to me
I kind of looked at it like the compound interest argument that you have used several times when you’ve talked about saving for retirement; the early you get in, the more equity you’re going to have later. With rent, you basically hand that money over to the owner every month.
I bought a condo because I was tired of renting. What I bought is not the greatest place, it needs some work, but it’s not a terrible place either. I didn’t want to live outside of my means so I searched within a certain price range, I ended up moving in with my girlfriend, and I am actually spending about the same as when I was living in an apartment. My plan is to keep saving and sell it in 3-5 years and buy a house.
Also, there’s an $8k tax credit from the Government for first time home owners that you do not have to pay back, which helps. That was another reason that prompted me to buy.
And yeah, the $300-499k market is the hottest housing market right now, because most couples can afford that, so it’s going to be picked over. My girlfriend’s brother and family sold their house a year and a half ago and are now looking for a house in the low to mid $400k range. There’s not a lot of inventory and the few open houses they’ve gone to have been feeding frenzies.
There’s a show on HGTV called “Property Virgins” that I was watching while I was looking and it’s an interesting show because it basically proves the point that first time home owners want everything and they don’t want to pay a lot for it. And it’s all about sacrificing something; you either pay for what you want and sacrifice something you like to do to pay the mortgage every month, or you sacrifice something in regards to the house to fit your budget. And that’s pretty much how I ended up in a condo, I was getting outbid on townhouses and any house I could afford would have been a massive fixer (which would have been too much work for me) in the ghetto. I’m not 100% happy with the place, but I think it will be ok until I’m ready to sell it.