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  1. #1
    Join Date
    Apr 2011
    Posts
    29

    Unhappy Real Estate Prices vs. Affordability Index

    I would like to buy my first "old home" fixer right now for several reasons including wanting to grow my own food, having privacy, being closer to bus lines than where I rent (gas prices - yikes!), and needing a home office for the business I own. However, I'm worried about house prices going down to a more reasonable "affordability index" here, which would put my mortgage "underwater." This town (on Northern California coast) has several eccentricities that I worry will effect the market here more than other places, including:

    -The mortgage + insurance + taxes on a 2 or 3 bedroom home are less expensive than RENTING the same homes.

    -BUT the rent here is exorbitantly high, as compared to wages. This is the kind of area where as many people cram into a home as possible. And many homes for rent sit vacant for a long time until a few suckers decide to spend 50% of their income on rent and share a single bathroom.

    -This area has a high unemployment rate compared to state average, and has been in its own recession since the 1980s, when it lost most of its timber and fishing industry jobs. The largest staffed sector of the economy here is social work. Many people on unemployment, food stamps, drug rehab programs, homeless shelters, or living on the streets. There's no infrastructure to support modern businesses like internet companies (no truly high-speed connections).

    -There is an "underground" economy here that may explain why rents and house prices have shot up so high compared to stagnant wages and increased unemployment. Many houses are converted into "grow houses" for marijuana cultivation. The growers tend to have higher incomes than people who work legally. This area is known all over the world for this.

    -This "underground" economy is about to bite the dust if California legalizes weed, which means house prices will drop even more than they have already.

    -So...Am I a complete sucker for buying a house now, if I can get one at what *seems* like a reasonable price? I just read a N.Y. Times article that said house prices have to drop another 40% to reach historic affordability. Maybe more so, here?

    I know everything I've said makes this place sound awful, but believe me, if you've ever lived here, it is a gorgeous place with potential, right on the coast, surrounded by redwood trees, w/ mild weather in summer and winter... Has a lot going for it, aside from a lack of living-wage jobs... I just feel so stupid for wanting to buy *now* rather than waiting! But I also feel stupid spending even more on rent, and having nothing to show for it! Anyone else had a similar dilemma?

  2. #2
    Join Date
    May 2011
    Posts
    251

    Default Re: Real Estate Prices vs. Affordability Index

    Is this a place ot live or an investment? I know sometime they are both, but ultimately if it's fits into your bidget and your lifestyle, then it's worth it if you have a stable income and good job security. Sounds like it's cheaper ot purchase than rent in thsi area anyway.

    I say go for it, but make sure you can afford the repairs on thsi fixrupper project home.


    That town sounds similar ot hte one I live in except rents are really low.... even lower tha nhome prices. Its' jsut a economically depressed area where there's a surplus of homes and low average incomes.

  3. #3
    Join Date
    Jul 2010
    Location
    SoCal
    Posts
    5,438

    Default Re: Real Estate Prices vs. Affordability Index

    Before buying real estate, you must look at 3 things: location, location, location. Every real estate agent can tell you that.
    By "location" they mean a good home, in good shape, in a good solid area, with good demand for homes.

    If you find a beautiful area like you describe, but you are surrounded by homes that don't sell, unemployment, homeless and shelters, etc - where is the value in this location?

    location also means your personal situation: factors like your job now and in the future, age, health, family and so on.

    One day you will need to sell, will you be able to even get your initial downpayment back?

    So you see, there are many things to ponder, and nobody can do this for you.

    I stay away from properties in like this situation. There are many other communities, just as nice, but with better values.

    As far as prices, communities like this will see more price "adjustments", meaning, lower home prices, at least for the near future, there is no doubt about that.

    Good luck.

  4. #4
    Join Date
    Apr 2011
    Posts
    29

    Default Re: Real Estate Prices vs. Affordability Index

    Thanks, motoguy and dj1. I do personally like this town, despite it being sometimes referred to as "the armpit of northern california," heh. It's still one of the few places on the coast that hasn't been taken over by ugly strip malls and condo developments that all look the same. It's still mostly Victorian houses on large lots, block after block, with some Craftsmans thrown in. Beautiful downtown area with lots of charm even though there are too many empty shopfronts (like most places since the internet took over retail). And I plan to stay here for a while if I can, since my mother and one of my sisters live here, and I own a business in the next town to the north. It just has a bad reputation for zombie-like speed freaks wandering the streets and talking to themselves... Oh, and no jobs, unless you open a business and make one for yourself! Just waiting for Silicon Valley to move up here for the comparatively cheap commercial rents, the mild coastal climate, and the scenery... Maybe waiting forever, haha. But this place really does have its charm - it doesn't look like modern, every-town-is-the-same California at all. Hope it stays that way!

  5. #5
    Join Date
    Jul 2010
    Location
    SoCal
    Posts
    5,438

    Default Re: Real Estate Prices vs. Affordability Index

    This is why, after all those years, California is still dreaming...

  6. #6
    Join Date
    Jun 2011
    Location
    USA
    Posts
    3

    Default Re: Real Estate Prices vs. Affordability Index

    Hi,
    I know sometime they are both but ultimately if it's fits into your bidget and your lifestyle then it's worth it if you have a stable, income and good job security. Sounds like it's cheaper, ot purchase than rent in thsi area anyway.
    Last edited by Seeley; 06-23-2011 at 03:48 AM.

  7. #7
    Join Date
    Dec 2007
    Location
    Tennessee
    Posts
    1,419

    Default Re: Real Estate Prices vs. Affordability Index

    For most of the country, the housing market has probably hit bottom, a lot depends on the economy in general over the next two years or so. Even though it is probably at or near the bottom, it won't be going up anytime soon.

    But your area sounds more volatile than most of the country, so buying a home as an investment would be a gamble. You say that there are a lot of vacant rental properties. If that is so, the laws of supply and demand would dictate that the rents would have to come down, unless most of the rental property is owned by a single entity. If that is the case, I would buy.

    If you have a stable and secure long term income, buying rather than renting would be the way to go. It is already cheaper than renting, but if you had to move for some reason, you could take a loss that might exceed the total additional cost of your rent. If you are going to stay in the area for a long time and have the income and security, then buy. You may get upside down in the short run, but long term you will come out ahead.

    When rents are high in an area with a high vacancy rate, that does indicate that the rental property is owned by a single entity or consortium. If that is the case, then this entity or consortium is planning on developing the area. When that happens, the property values will rise dramatically. If you own a house, you stand to see its value rise, but the downside will be all the development that you abhor will be right next door. The area will lose its charm. But then you could sell at a handsome profit and find another depressed area with scenic beauty and charm and move in.

  8. #8
    Join Date
    Dec 2012
    Location
    India
    Posts
    1

    Default Re: Real Estate Prices vs. Affordability Index

    Their are many places affordable but you also need to compromised with many facility..

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