Surprisingly, Austin, Texas ranks number one for the most overpriced housing area in the nation. Los Angeles metros rank number two according to Trulia.com. And for more “good” news, rent in my area has been increasing every quarter and expects to increase another 8.2% over the next two years. Lucky me.
Now, of course, many people will scratch their heads and say, “Why don’t you just move?” That’s easier said than done, and believe me I’ve thought about it. But, I have a very solid plan in place that I think will unfold nicely if I can afford a home in 12-16 months from now. In the long run, my plan is to move out of the state, but many years from now…unless California is actually in a 100-year drought, in that case I might just pack up and move east. This desert-like weather is really grating on my nerves.
But what about that home? The only silver lining is that home sales have slowed down, which means home prices may stagnate or dip a bit between now and late next year. If that happens, I’ll be in a pretty good position to buy something at a decent price. Home prices in California have historically risen over time, unless a home is purchased at the peak of a boom cycle – then home values are harder to gain back over a decade. Using the appreciation of the home, I should have a little left over from a sale in 15 years to use towards a down payment on a home out of state.
I just have to time the market, which is a bit scary considering it’s looking like we’re in a bubble again.
I’ll be keeping a very close eye on home prices over the next year and considering all my options.
Did you buy at the peak of the housing boom?
13 Comments
We’re in Michigan, and we bought about one-third the way into the big downturn during the great recession. The upside is that I also sold my condo, so even though the value of our home dipped after we moved in, the place I sold actually would have dipped more (it was a condo). Obviously the best strategy would have been to sell my condo, rent for awhile, then buy later, but hindsight is 20-20 and there was no way of knowing at the time.
@Money Beagle – Sounds like you fared well over all. It’s difficult to time the market and be prepared when it dips. We saw the market bottoming out in 2011, but we weren’t ready to buy a home yet. Now, I’m kinda kicking myself and wondering if I need to wait longer.
The short answer to your question is: no. We bought our house when property prices in the UK were pretty much at rock bottom. Which, combined with the fact that our house is really large, nice and in a great area, means that in twenty years the value of our house has inclresed four-fold. Great position to be in, I think.
@Maria – Sounds like you bought at the perfect time. I’m hoping prices dip a bit so that we can afford something, or we’ll have to wait longer.
I’ve avoided buying at peak values, but really that was just a matter of overall timing. Thankfully! Realistically, it can happen to many folks, as it’s often hard for people to predict prices (just like with stocks, it seems).
@Tie the Money Knot – Many home purchases that were made during the housing boom have rebounded back to their listing price, or close to it. But I’m not so sure those prices will hold out.
Ugh, we did buy a home at the peak of the housing boom in 2009 (well, maybe that wasn’t the peak, but suffice it to say the home is worth less now than it was when w bought it). We subsequently ended up moving after we’d only lived there for three years and we still have not been able to sell it. We have been renting it out, which has helped, but we’d really like to get rid of it soon. We’ll probably take a loss. Major lessons learned there.
@Dee – We are really hoping to avoid buying at a peak. That might mean waiting longer to buy a house, but we’re not changing our plans just yet. We’re going to see what prices are like a year from now and reevaluate.
I bought at the peak in PA and I doubt I will ever see the prices get back to what I paid. Luckily I’ve turned my house into a rental, so I can earn an income from it, but I’m doubtful that I will see a gain from appreciation on the house.
We bought a couple years before the top, 7 years ago. Our house is _almost_ back to being worth what we paid for it…
The good news is we had significant equity at the time we purchased, and have been making big payments to knock our mortgage down — should be paid for in another 2 years. It’s always been important to us to be able to afford our house on one income, which means buying less home compared to our income than some do.
We’ve always taken the stance that a) our house is not an investment, so b) we should buy cheap and get it paid for as quickly as possible. Since we don’t consider it an investment there is no expectation of a gain –> if we get one, nice, but it’s not factored into our retirement plans. Similarly, if a home isn’t an investment there’s no rationale for buying the most house we can afford –> we’d rather have a nice medium-level home and funnel the extra money into real savings and investments. (and we avoid 30-year mortgages like the plague…)
@Jean – Those are good points. I definitely sticking to a budget, but we’ll definitely need two incomes to afford a home out here. Unless, of course, we move sooner than planned. 😉
@Claire Middleton – I like the idea of affording a home on one income, but that’s not going to happen while we live in CA. We are toying with the idea of moving sooner, but that’s a whole other decision.
I bought back in 2007 which was probably the worst time of my adult life. I was young at the time so I just thought buying a home was a good thing, I didn’t even know that there were significant housing cycles to follow. My parents who helped me at the time apparently didn’t know much about that either.
Good luck with your journey and I hope you have better timing than I did!