A couple of years ago, when property values plummeted, I was inspired to finally begin the journey towards purchasing a home. I live in an area of very high property values compared to the rest of the nation, hence why I waited so long. I knew I had to do three things: improve my credit, pay down my debt, and save for a down payment. I’ve completed two of these three things with the last one being a bit more challenging for me. However, I know I should buy a home in the near future before things swing the other way.

Why is now a good time for me to buy?

Zestimate Historical Data Chart

Housing prices have fallen to an all time decade low while rent has continued to shimmy up. I currently pay a hefty price for a rental when I could instead be paying one-third less and own something in a comparative neighborhood. If I were to continue living in the area I currently reside, there’s one neighborhood in particular I’d choose; it’s the neighborhood in which I grew up in. It’s still a safe, primarily residential, middle-class neighborhood.

Using Zillow to focus on this neighborhood’s housing prices, I selected one property for sale to focus on to analyze buying viability. This particular property is similar in square footage to my apartment, almost 1,600 square feet, and has been updated with granite counter tops and refurbished wood floors. It’s definitely a “starter” home but not considered a fixer-upper. Using Zillow’s Zestimate chart, the property I analyzed has dropped over 10% in value over the past 10 years. That’s a huge drop considering this same property increased 35.22% by the end of 2002. It’s currently selling for a reasonable price of $345,000; steep for a “starter”  home in most states, but a deal in Southern California.

Of course, this is a short-sale home, meaning there’s a lot of messy paperwork surrounding this sale I’m sure. Researching the sales history, this home sold for $315,000 in 2003 and then $540,000 in 2005. Ouch! That was a 71% increase in two years. However, at $345,000 with a 20% down payment and a 3.75% interest rate (lowest interest rates in history!), the monthly mortgage payment would be $1,510 including tax and insurance – that’s $700 less than what I pay in rent.

So Why Am I Not Buying Just Yet?

I can’t predict what will happen to property prices over the next couple of years; they could go down or they could go up. Yet, that’s not why I’m hesitating to purchase property. My two biggest roadblocks to my decision are: 1. I still don’t have my down payment saved yet. As much as I’d like to save 20%, my goal at the moment is to save up 10% of $350,000 and I’m just not there yet. and 2. I may not be living in my current neighborhood within two years. Crime, graffiti, population increases, and the lack of job possibilities have made me rethink the area I live in and I don’t know if I want to live here another 10-20 years. If I purchase a house, that’s the minimum amount of time I’d live in it.

So for now, I’ll continue to rent, work towards my savings goal, and keep my eye on property values. If I see them begin to inch up at an alarming rate, like it did in the early 2000’s, I know I will have missed the boat…again. However, I think it’s safe to say we won’t be seeing that kind of increase anytime soon.

Are property values in your area declining or reversing?


  1. Money Beagle Reply

    Our reported value (through Zillow) stabilized last year for the first time since we bought the house in 2007. Hopefully that trend continues. When we re-financed, the bank appraised our house much higher than I thought it would come in at. Not complaining but it definitely helped the re-fi go through a little more smoothly.

    • @Money Beagle – That’s a good thing. I think every area is different and is responding differently to the market. The area I live in increased so drastically, it was eye-popping. It makes sense that homes have come down quite a bit and are stabilizing. If things remain stable over the next couple of years, I think I’ll be able to get into the market. If they take off again, I’m screwed!

  2. I applaud your resolve to save up at least 20% before buying a house. That is a better strategy than to time the market but pay hefty PMIs by putting little down.

  3. No regrets! You are right. If even one of those reasons are present you should not buy. You would lose any profits anyway.

    • @Krantcents – That’s a good point. If I can meet my goal in the next 2-3 years I’ll definitely buy, if not, I’ll wait.

  4. retirebyforty Reply

    I agree with your decision. If you may move, it’s not worth it to buy right now. In this environment, cash is king so keep saving. Good luck!

    • @Retire by 40 – It’s really going to depend on where the jobs are. For right now, there are very few in my area. Moving is an option.

  5. Financial Samurai Reply

    Where do you think you’ll be in 2 years?

    Interesting perspective on knowing you should buy, but not.

    I need to take a trip to Vegas, Seattle, or maybe southern Florida. So much opportunity!

    • @Financial Samurai – Since Mr. LH won’t leave California, we’ll be somewhere in CA. Northern CA is looking like a prospect, but we’ll have to see what happens over the next couple of months. Vegas is a great area to buy rental property in, if that’s what you’re thinking. I’d also recommend AZ!

  6. Hunter - Financially Consumed Reply

    I like your logical approach to homebuying LH. Most people have very short memories when it comes to this experience, but it was only 3 years ago when the wheels fell off the housing market and this exposed a lot of buyers to negative equity risk, and now we’re still trying to clear the backlog of foreclosures. Even though it’s possible to finance 97% of a home purchase, it’s not necessarily a wise move.

    We bought in 2008 and property values have depreciated since then. When is it going to stop? Military cutbacks are shrinking our local economy here in Hampton Roads so we won’t be selling anytime soon. We’re gearing up to rent this house when we relocate in the summer.

    • @Hunter – I’m guessing housing prices will begin to stabilize in areas where foreclosures are slowing down. There’s so many foreclosed properties in the queue that it’s really hurting the market. I think renting your property is a good option, especially since you could probably rent it out to another military family. Good luck with the relocation this summer! Do you know where you’re heading?

  7. I think you’re approach is just find and valid. I would be doing the same as you if I were in your situation.

    Property values seem to have bottomed out where I am. In New Haven, the more desirable places to live weren’t affected much at all in the last few years, so there are less deals to be had. I’m simply not willing to live just anywhere, so I’m not sure there’s too much pressure to buy now.

    • @Jeffrey – I’m with you; I’m not willing to live just anywhere. There was a time I thought I fixer upper was a good idea, but now I’m not so sure. We lived in a run down rental house for quite a few years and the work we put in was grueling (and expensive) and didn’t really make the living situation better. I don’t really think we want that experience again, even if it’s our own house.

  8. If you know you will be moving in five years, a balloon mortgage or an ARM may be beneficial to you. It could help you reach your savings goals a lot more quickly and get you into a home. But if you will not be moving in that short window of time, it is often too expensive to consider. I’m also not sure how much the rules have changed since I left the mortgage industry, so it would take some research to determine if the option is right for you.

    • @Christa – The balloon mortgages scare me! I think this is what got a lot of people into trouble. I think I’ll just wait. 😉

  9. Aloysa @ My Broken Coin Reply

    Saving 20% of down payment is a great way to go. I wish we could do the same. So far even 10% seems a little excessive for us. 🙂
    Las Vegas properties are really cheap (I think) right now. If anything owning a rental there would be fine. But who would want to live there?

    • @Aloysa – We have friends who live in Vegas and they are constantly telling us we should move there since property is so cheap. But Vegas is just NOT my style of town. And, the weather in California is hard to compare. What can I say, I’m spoiled!

  10. As a recovering financial advisor, I would have told you that I love reason number 2. Reason number 1 isn’t a reason not to talk to real estate pros and find out viability. Remember, there’s no cost to talk to people. Often, I found that people were afraid of the process more than the final product. I love prices now. There may be creative ways to buy using a long term loan and still not be over your head.

    That said, I love the Warren Buffett quote, “there’s no such thing as a called strike in investing” (or something like that). He’s right. You don’t have to buy today. There will always be a next opportunity.

  11. Looking into historical data charts can surely help us make better decisions. They can provide as a great view on price movements and what can possibly take place in the future. I hope you finally get the house you want at a good price.

    • @Jennifer – Thanks. I love charts, so historical data is right up my alley. It also gives me a clearer picture of where prices should be and where they might go from here.

  12. That is the great thing in doing research and gathering data. Market data can provide us with valuable information we can use in making better investment decisions.

    • @Jeff – I like doing extensive research before any large purchase and a home is definitely the largest purchase I’ll probably ever make! For now, I’ll wait and shoot for my 10% goal!

  13. Fiscal Phoenix Reply

    You are smart to wait to save up more. I have people continually tell us we are wasting money by renting, but we know we aren’t ready for the high property taxes in our area as well as the (still) high cost of homes. Even though you may pay 1/3 less a month if you own a home, you would still have to contend with property taxes and repairs. I think you are making the prudent financial move right now.

  14. Clare @ Young and Thrifty Reply

    Your second reason for not buying is probably the best reason to make that step yet. If the conditions in your area continue it will have a negative effect on the value of your property and 10 years is a long time to be uncomfortable. Best of luck in finding your first home 🙂

  15. I think that #2 is really the biggest reason why not to buy. Housing prices are falling still where I live as well and my monthly housing expenses (including property taxes and HOA dues) are going up about $200 with buying, but I’m locking them in more and I’m buying a slightly bigger place than what I’ve been renting for the last couple of years. The kicker for me was that I plan on staying in this city for awhile, even retiring here, so I’ve bought a two bedroom condo and I’m super excited to move in and live in a place that I own, using appliances that *I* own.

    It sounds like you made the right decision for you though your rent is INSANE! $2,210 for rent? I’m guessing you’re in a 2 bedroom apartment. My monthly housing costs should be about $1,800 in my 2 bedroom condo. Good luck with working towards your savings goal!

  16. If you’re going to move in the near future, making the house-buying commitment may not be right for you. I have friends who are moving *yet again*, and think nothing of it. For us (well, more for Mrs. 101) the moving in and getting the house ‘just right’ with regards to color, furniture, remodels, etc, is such an arduous process that it’s negative factor in the decision scale.

    • @101 Centavos – Moving in general is NO FUN! Just thinking about packing (yuck!) and lugging stuff is scary. However, job prospects are elsewhere. 🙂

  17. Paula @ Afford Anything Reply

    I think that not having enough of a down payment, and not knowing if you’ll still be in the area in 2 years, are both fantastic reasons to delay buying a house.

    It’s almost impossible to “time” the market and buy at the very bottom. That involves predicting the future, which is impossible.

    As long as you’re getting a good deal, that’s all that counts. Warren Buffet never buys at the very bottom or sells at the very top — he simply buys when it’s a good deal, and sells when it’s a good deal.

  18. Money in Training Reply

    Great post!! I just wrote a similar article outlining the reasons why we (my fiancee and I) decided not to buy right now. Buying is slightly more expensive than renting at the moment, but our main reasons are – 1. we don’t have 20% aved up yet, and 2. I didn’t want to exhaust most of my RRSPs, when I didn’t have close to $25,000 in there (we live in Canada).

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