awgee - 08 January 2009 03:58 PM

OCCOBRA - 08 January 2009 11:47 AM

Darlene - 08 January 2009 03:44 AM

This is not about Mello Roos but since there are a lot of opinions out there, I would like some of them.  You won’t offend me - so don’t try and I won’t PM you with more information.

Here’s the senerio:  You’re a middle aged person, your income is low - under $27K per year, you don’t anticipate your income going up much if at all, you rent a one-bedroom apartment in South OC, and you are presented with the opportunity to purchase a one-bedroom condo for $55K.  After a down payment of about $30K (which is your savings and retirement), your payments (mortage, association, tax) will be in the $600 range.  The condo is an affordable so there won’t be any appreciation - or possibly a little.

So do you continue to rent - hoping that your situation improves or do you go for it?  Tell me the pros and cons.

Thanks for your sincere input.

1. If it is an affordable then this will be a very long term commitment and with the some tax advantage sounds like a good deal. Go for it! Get a fixed rate and never have to worry about the rent being raised again.

What tax advantage?

I said some.

Wow! Thanks for all of the input - though I’m still not sure what would be right for my situation.  Now to be a little more clear on this matter, I was in line to purchase a very low income affordable condo.  The developers and the city did not follow the rules and actually by-passed my name - personal reasons involved.  However, I am signed up for some other affordables that will be coming up soon. 

I said that I wouldn’t take any offense by what has been said and have not.  I did not finish my education - one year short of a University degree - so what!  I am caucasian - some would say white, I say that I’m pink.  I do live in subsidized housing.  Thank you tax payers.  I pay my taxes too and have a large family that pays taxes and said that they are happy to have their taxes go to me.  Now get this, I am self-employeed.  I scrub other people’s toilets!!!!  More seriously, I have a one person domestic service.  I do not feel that I am on a lower echelon that others, nor do I feel that it is a demeaning job.  I work work mainly for the elderly but have several clients younger than I am.  My clients trust me, like me, and respect me.  I do more than clean their homes.  I look out for them and at times act as a handywoman.  A couple of times I have gone into the homes and found my clients very ill.  Had I not come along, they more than likely would have died.  One time I had to get an elderly man out of his home because he was being abused by his elderly wife.  He died two days later.  The service that I provide is much more involved than what cleaning services provide.  I took a nurses aide course - 9 hours a week for 4 1/2 month - so that I could have more to offer my elderly clients.  (It has been put to use.)

I have a little more that 22K in retirement, the remainder in a CD and checking for a total of about 30K.  Not much, but I’m proud of myself.  I can stay under the control of the housing authority and continue to receive my rent based upon 30% of my income or possible be chosen for the next affordables.  I signed up early - about 1 1/2 years ago. 

I believe that all costs associated with purchasing an affordable would be slightly higher than renting.  However, it would be something that I can affordable when on Social Security.  I would be free of gov’t control and would be self-sufficient.  I do have a disability and am doing the best that I can. 

So when the opportunity is presented again does it make since for me to purchase?  Thanks

Which cities do you work in?  Perhaps you can advertise your cleaning service here?

Looking ahead, do you have an “exit strategy” for retirement?

If you purchase by July 2009, then you would be eligible for the $7,500 first time buyer tax credit. It’s not really a credit in the sense that you pay it back over 15 years, but you would get the full $7,500 up front when you file your taxes for 2009. I wouldn’t take money out of savings. Rather, look at an FHA loan with 3.5% down and keep the rest in reserves. In fact, look and see if the city you are looking has any first time buyer programs that could assist with down payment. Some of the offer interest free loans for dp’s.

Buying a condo sounds good, but there are other things to consider.  Is the condo new construction or do you think lots of repairs will be needed soon?  Do you have family members who can help you with your mortgage if you get hurt and can’t work for a month?  After your down payment, how much money will you have left for emergencies?

Darlene - 09 January 2009 11:55 PM

Wow! Thanks for all of the input - though I’m still not sure what would be right for my situation.  Now to be a little more clear on this matter, I was in line to purchase a very low income affordable condo.  The developers and the city did not follow the rules and actually by-passed my name - personal reasons involved.  However, I am signed up for some other affordables that will be coming up soon. 

I said that I wouldn’t take any offense by what has been said and have not.  I did not finish my education - one year short of a University degree - so what!  I am caucasian - some would say white, I say that I’m pink.  I do live in subsidized housing.  Thank you tax payers.  I pay my taxes too and have a large family that pays taxes and said that they are happy to have their taxes go to me.  Now get this, I am self-employeed.  I scrub other people’s toilets!!!!  More seriously, I have a one person domestic service.  I do not feel that I am on a lower echelon that others, nor do I feel that it is a demeaning job.  I work work mainly for the elderly but have several clients younger than I am.  My clients trust me, like me, and respect me.  I do more than clean their homes.  I look out for them and at times act as a handywoman.  A couple of times I have gone into the homes and found my clients very ill.  Had I not come along, they more than likely would have died.  One time I had to get an elderly man out of his home because he was being abused by his elderly wife.  He died two days later.  The service that I provide is much more involved than what cleaning services provide.  I took a nurses aide course - 9 hours a week for 4 1/2 month - so that I could have more to offer my elderly clients.  (It has been put to use.)

I have a little more that 22K in retirement, the remainder in a CD and checking for a total of about 30K.  Not much, but I’m proud of myself.  I can stay under the control of the housing authority and continue to receive my rent based upon 30% of my income or possible be chosen for the next affordables.  I signed up early - about 1 1/2 years ago. 

I believe that all costs associated with purchasing an affordable would be slightly higher than renting.  However, it would be something that I can affordable when on Social Security.  I would be free of gov’t control and would be self-sufficient.  I do have a disability and am doing the best that I can. 

So when the opportunity is presented again does it make since for me to purchase?  Thanks

Thank you for sharing your story - too many people stereotype affordable housing without looking at the people who work hard and deserve to have the opportunity to have a nice place to live.

graphrix - 09 January 2009 12:17 PM

jhammons01 - 09 January 2009 07:15 AM

We can all agree that whatever rent is today….it WILL be higher in 24 months than it is TODAY or this summer. I’d like to suggest to a person that will soon be on a fixed income to lock in a mortgage that will not increase the same way a Rent would…..

We can agree with that right?

No. You have obviously never been a landlord. Rents will not be higher 24 months from now on a nominal basis, and it will be negative on a real basis. It’s time to hunker down as a landlord, and get ready for the onslaught of competition and lack of qualified tenants. Being a landlord when OC is creating jobs is great, but when OC is losing jobs… it sucks. The next two years are going to be challenging for landlords, and I predict rents will go down. Keep in mind, I have incentive that rents do not go down.

Hammons….
  I can tell ya… this is very familiar.  It will be quite a while before this recovers.  CA is just horrible for keeping good companies, its just so expensive to be here.

-bix

Darlene - 09 January 2009 11:55 PM

I have a little more that 22K in retirement, the remainder in a CD and checking for a total of about 30K.

I’m not familiar with the features of affordable housing programs so I’m not sure whether you’d be better off renting or owning.  However, the money you have in a retirement account (401k and other erisa qualified plans, IRA, etc.) are exempt from creditor claims under both Calfornia and federal law so you should not spend this money prior to retirement unless you have a compelling reason to do so.  In other words, no matter who you owe money to (hostpial bills, credit card companies, judgment creditors), they cannot reach the money in your retirement account.  In the current declining real estate market, I would be reluctant to raid my retirement funds to buy a house for fear of dissipating my exempt assets.

jhammons01 - 10 January 2009 02:11 AM

This is East Coast reporting…but even in this down markets, Rents continued to rise

The Trends: Apartment Prices, Asking Rents Receive Q3 Boost
Dec 9, 2008
By: Coreen Bailor, Research Editor

National apartment prices rose 2.3 percent from the second quarter to the third quarter, notching a score of 178.57, according to Moody’s/REAL Commercial Property Price Indices for November 2008. That mark is the highest of all property types examined; in addition to apartments, the report assesses the office, retail and industrial sectors. Apartments’ index is down 7.2 percent from its third-quarter 2007 score but up 2.5 percent from its tally in 2006’s third quarter. The sector’s prices have fallen for longer than the other property types, but its overall decline has been the lowest, according to the report.

Meanwhile, a report from third-party property management company Sunrise Management & Consulting examined the multi-family landscape in several Northeast markets. All evaluated markets in Connecticut, Maine, Massachusetts, New Hampshire and Vermont experienced modest gains in average asking rents, and Rhode Island reversed a year-long pattern of decreasing levels to realize a $21 jump in average asking rental rates. The company segmented New York into nine regions, seven of which recorded increases in average asking rents. (The report does not include New York City.) Sinking home values, coupled with many homeowners’ inability to keep up with mortgage payments, are among the leading factors that have spurred enhanced interest in renting.

Rents are FALLING, not RISING.  Nationally, locally, internationally.  Fact.  End of story.  The below is the summary of the SoCal market, taken from the report quoted by the author of the article above.

SOUTHERN CALIFORNIA – PROPERTY TYPE INDICES: APARTMENT MARKET
SUFFERING

As in the other annual indices, all four property types in the Southern California market experienced
declines in value. Apartments were the worst performer in the region with a value decline of 8% from a
year ago, putting prices back to the levels seen at the end of 2006.

BTW, keep in mind that these indices mimic the CS, “repeat sale” methodology, and are primarily focused on the commercial sector.

Look, if she can get an affordable living condo for $55K, it’s not going to get much better than that. She has the certificate, so her rent isn’t going to vary that much… it’s one third of her income. If she buys the affordable living place now, in 30 years she’ll have a place that costs her property tax, HOA and maintenance. It’s a condo, so maintenance isnt’ that much. It will be a bit of a stretch initially, but she will have her own place and open up the certificate to another person in need of it.

I think the thing she needs to consider is her disability. If she can no longer work, she’ll be on SSI, which is about $700/mo right now based on her levels of income. She won’t be able to afford the place if she becomes permanently disabled and she’ll be REALLY tight with her certificate. Rent increases don’t mean anything when you have one of these certificates…. your rent is 1/3 your income. It doesn’t matter what market rent is.

Darlene,

how much more is it for a two bedroom and could you qualify for it? If so, that might be your better bet as you would be able to have a roommate. Even if you become permanently disabled, your roommate would cover most of the housing costs, particularly 10 years up the road.

Darlene,

Sometimes it’s pretty simple, sometimes we don’t even need to think about the time value of money, opportunity cost, rent versus buy, deflationary/inflationary economic cycles, etc.  In your situation, the single most important point that you should take away from the discussion is that any opportunity that requires you to invest your entire life savings is NOT an affordable opportunity.

You don’t need to “own” a property to validate yourself as a productive member of the community or society.  You’ve already done that quite well as a “lowly renter”.  And at the end of the day, you’d really just be transferring from one form of “government control” to another.  So please, don’t let the emotional appeal of “ownership” make you ignore the economic realities, and put yourself into a truly precarious situation.

Have you ever spoken with ACORN?  A name that always draws plenty of emotional responses. ;-D You’ve done a lot of research and background work so you may know/know of them?  Give ‘em a holla girl!

The affordables are new - my plan was to stay there until the Good Lord calls me home.  I have a lot to think about now - if they are such a good deal for my situation after all and to decide if it really is the correct decision to tie up all of my money.  Thanks again for all of the input.

Hi,

Just wanted to say I recently read up on affordable housing for sale, which I was unaware of.  I only read the Irvine website for such programs, and as far as Irvine is concerned, I think it seems like a great program.  Of course, details matter, so just make sure you know what you are getting into by reading the documents and asking questions. I’m sure you have already seen the site im talking about, here: http://www.cityofirvine.org/depts/cd/planningactivities/affordablehse/projects.asp. I am also now interested and anyone with info please, do tell.

Good luck with everything. Just so you know how unfortunate the market for mortgage backed securities is, a rumor is that investors refuse to pay more than 55 cents on the dollar. How those are related to first hand mortgages seem to be part of the risk in the market. They are ambiguous, it seems.  Point is, cutting the risk and everything coming down to the property seems that at least a 20% discount should be reflected from the peak, which probably already is the case.

Darlene -

55K for a condo is a very good deal. However, I’m not sure about your mortgage. I’m trying to refi at 4.5% right now and at that rate your payments on a 50K loan would be about 260/month. They require 25% down and excellent credit, as well as some points for that rate; but, even if you don’t have all that, rates are really low right now and your payment should be too.

I agree with Stepping_Up that, given your limited reserves you shouldn’t put *all* your money into *anything*, though. If you have to use everything for the down, or even almost everything, don’t do it.