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Is it a good time for my girlfriend and I to buy a condo?

by gobacktotexas Mon Jan 21st, 2008 at 11:01:40 AM EST

My girlfiend and I have noticed some pretty good deals on real estate lately, but I was wondering whether this is a good time to buy.  


We live in Cincinnati, OH.   We've been looking at some apartments which are downtown.   We've got limited income, but Cincinnati is one of the few major cities where you can buy a condo for less than 100,000.00 right in downtown.     Even better, now you can buy one for less than that, maybe 90,000 or less.  Downtown Cincinnati is an area that has long been somewhat depressed, but which has recently begun a revival, which I predict will really take off if plans to build a streetcar system are carried out.  

Cincinnati never got a big boom out of the real-estate market bubble, but it is experiencing somewhat of a bust.    One big advantage in buying a condo right now is that at a decent interest rate (less than 6.0 percent), purchasing the condo would be considerably less expensive than renting.  

But I am wondering about some things.   In the short term, it seems real estate prices might even further, along with interest rates.   But if the other shoe falls in the financial crisis, no matter how low the interests rates, it is possible that it may be very difficult to borrow money even for the most credit-worthy buyer.  

And in the longer term, if inflation continues its upward tick, interests rates would eventually have to follow.   If we get hyper-inflation, then we might have cheap real estate with very bad financial terms.  

So what is the rational thing to do: buy now, or wait a few months (assume that it is a good idea for me to live with my girlfriend in the first place)?

Poll
What would you do?
. Buy now 10%
. Wait a while 60%
. Wait a long time 10%
. Unsure 20%

Votes: 10
Results | Other Polls
Display:
What is the rental market like for similar condo's?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Mon Jan 21st, 2008 at 11:12:39 AM EST
You could rent such a place for around 1000 dollars a month, definitely no less than 900 based on my experience renting in the area.    A 5.5 percent thirty year mortgage payment on 90,000 would be just over 500 dollars   a month, plus maintenance fees of 100 dollars a month.  
by gobacktotexas (dickcheneyfanclub@gmail.com) on Mon Jan 21st, 2008 at 11:20:35 AM EST
[ Parent ]
Are there other outlays you would have to cover as an owner? Property taxes, insurance, utilities - stuff like that?

Regards
Luke

-- #include witty_sig.h

by silburnl on Mon Jan 21st, 2008 at 11:28:15 AM EST
[ Parent ]
I understand utilities cost about 50 dollars a month.   I  understand the property is likely to qualify for a 15 year tax abatement on most of the value of the property. I would need to take a closer look at other hidden costs.    
by gobacktotexas (dickcheneyfanclub@gmail.com) on Mon Jan 21st, 2008 at 11:32:49 AM EST
[ Parent ]
You should ask for copies of utility bills for the last year.

The seller should be willing to provide those if they do.  Also, look at the windows and insulation, particulary if you're in an older building.

I'm in a 1888 building here, with what I think are original windows, and they leak like a sieve, so I have to tapes them shut.  Still $200 in January for a 456 sq ft place.  Of course I rent.  If you buy you have to think about the cost and convenants (in a condo situation external repairs may have to be approved by the condo board.) involve din making it habitable at a reasonable monthly cost.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Jan 21st, 2008 at 12:11:56 PM EST
[ Parent ]
Also, what transaction costs would you expect to pay when buying (realtors fees, legal and survey costs etc)? Combine this with how long expect to be in the property to get an idea of the monthly amortisation of these costs.

For example we've just recently bought a place in London and (what with having to shell out on surveys for a couple of properties which didn't go the distance) our transaction costs were nudging up towards £30k when all was said and done.

Regards
Luke

-- #include witty_sig.h

by silburnl on Mon Jan 21st, 2008 at 11:41:07 AM EST
[ Parent ]
How high can interest rates get before you can no longer afford the mortgage payments?

We have met the enemy, and he is us — Pogo
by Carrie (migeru at eurotrib dot com) on Mon Jan 21st, 2008 at 11:15:37 AM EST
They probably could go up several points, but I would be looking for a fixed rate.      
by gobacktotexas (dickcheneyfanclub@gmail.com) on Mon Jan 21st, 2008 at 11:17:02 AM EST
[ Parent ]
Have you got a market for fixed rate mortgages ? they are very desirable when inflation expectations are high. About timing the bottom, check this

Pierre
by Pierre on Mon Jan 21st, 2008 at 11:26:26 AM EST
do you think it is reasonable to suspect (as I do) that inflation is likely to go up in the future?
by gobacktotexas (dickcheneyfanclub@gmail.com) on Mon Jan 21st, 2008 at 11:28:24 AM EST
[ Parent ]
I expect most of the developped world to re-enter stagflation...

Pierre
by Pierre on Mon Jan 21st, 2008 at 12:00:41 PM EST
[ Parent ]
Stagflation is a fancy way of saying economic collapse.

aspiring to genteel poverty

by edwin (eeeeeeee222222rrrrreeeeeaaaaadddddd@@@@yyyyaaaaaaa) on Mon Jan 21st, 2008 at 10:34:51 PM EST
[ Parent ]
Here are some links that will probably be helpful:

Price and inventory trends.

Affordability measures.

Cinci actually looks incredibly affordable.  Prices are only 2.3x income, and mortgage payments at only 76% of rents.  The percentage of income requirement look very, very good.

Prices do look like they're falling pretty quickly, but inventories are falling, too.  It's not a bad time to buy, I'd guess.  The city seems to be in good shape.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jan 21st, 2008 at 11:46:58 AM EST
Note, though:  Given the state of the economy, it might be a good idea to wait until you know what it's going to look like in the near future.  If we go through a serious recession, prices may well fall more.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jan 21st, 2008 at 11:51:50 AM EST
[ Parent ]
My view is that Cincinnati looks like a good buying opportunity, given the underlying rental values - but as Drew says - not quite yet.

I reckon a max of 3 months wait should see:

(a) where interest rates are going;

(b) whether the street cars are going ahead (a great supporting factor).

After 3 months all bets may be off, with dollar credits all but impossible to get.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Jan 21st, 2008 at 01:30:49 PM EST
[ Parent ]
Ah, great call on the street cars.  This is the kind of thing that's important, because I don't know what's happening with development on the ground.

Prices are cheap, but I'm also mindful of the fact that I see low prices and think of crime, as that tends to be the reason for low prices in the cities I've spent a good amount of time in (Greater Miami, Atlanta and Washington).  $100,000 in Washington signals to me that you're probably going to be dealing with breaking-and-entering now and then, and perhaps much worse.  That may well not be the case in Cincinnati.

I'm just not very familiar with the city.  I flew into it once on my way to Salt Lake City.  The pollution made for poor visibility, and the smell was awful, but that was several years ago.  It may be much better these days.

And it is the Chili Capitol of the World.

The fundamentals look good, but, again, maybe not quite ripe.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jan 21st, 2008 at 01:58:56 PM EST
[ Parent ]
Most international analysts believe that the good people of Terligua, Tejas would be quite "incensed" over even putting Cincinnati in the running.  Not to mention Austintatious.

(A continuing series of attempted jokes to ease the panic of market meltdown day.)

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Tue Jan 22nd, 2008 at 07:34:39 AM EST
[ Parent ]
It's their claim, not mine.  I'm from Florida, so my vote is with the Mexicans.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Jan 22nd, 2008 at 08:00:22 AM EST
[ Parent ]
I don't think the interest rates are too big a deal, though.  He's looking at a fixed rate, and below 6% is pretty good.

Another consideration, as MfM discussed above:  Condo Commandos.  I've learned this living in Florida.  Need to know what the condo association has say on, because he doesn't want to wind up with some little Nazi giving him shit for everything.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jan 21st, 2008 at 02:05:32 PM EST
[ Parent ]
Yes, read through the condo association's regulations carefully. Many have restrictions on the use of your own space, such as no vegetable gardens or outdoor clotheslines. If you're looking at "apartment-style" condos (stacked up one on top of the other, no backyard/green area by the door) that may not be as much of an issue, but there could be restrictions on what you place on your patio/balcony.

Also factor in general household repair costs. Even newer appliances can malfunction and drains stop up; if you can't fix it yourself you'll have to call and pay for a repair person to do it. It may not affect the overall decision, but it's something you need to set money aside for.

by lychee on Mon Jan 21st, 2008 at 03:46:13 PM EST
[ Parent ]

After 3 months all bets may be off, with dollar credits all but impossible to get.

That's my impression as well from all the financial trends I've been seeing, I've not heard anyone actually coming out and saying "in a couple of months, you might not be able to find any money to borrow", so thanks for the confirmation.    
by gobacktotexas (dickcheneyfanclub@gmail.com) on Mon Jan 21st, 2008 at 07:45:54 PM EST
[ Parent ]
Do you have a stable job or stable income - ie do you expect to be able to make the mortgage payment on an ongoing basis even if prices still go down? Can you get insurance to cover your payments if you're unemployed? (that's very common in France)

Do you plan to stay in the area for long (if not, and prices go down, you might have to take the loss)?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 21st, 2008 at 03:40:07 PM EST
Get married, you bounder!

Qui vit sans folie n'est pas si sage qu'il croit.
by FPS Doug on Mon Jan 21st, 2008 at 03:53:32 PM EST
Don't listen to him, he's just living in the last century.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Jan 21st, 2008 at 04:16:06 PM EST
[ Parent ]
Ratings all over the map for my comment: 4,4,3,0.

Maybe I should have said "cad."

Qui vit sans folie n'est pas si sage qu'il croit.

by FPS Doug on Mon Jan 21st, 2008 at 10:26:19 PM EST
[ Parent ]
If the mortgage would be half the prevailing rents as you say this is an easy call, buy it.  There's no way it goes below 70k, say, even in a worst case scenario.  The 5.5 fixed 30 year is a historical aberration absolutely worth taking advantage of.  8-9% fixed rates were very common for most of the last 60/70 years and over the three decades you'll come to appreciate how good a deal you got in this era.  

The risk of loss on a need to sell and dropping property values is not that huge in terms of real dollars.  If you eat 20k on it that's really not so horrible.

What are HOA fees?  mortgage vs. average rent is a great way to look at the value of an apartment/condo purchase in the US.  Rents have a way of not falling, you know...

by paving on Mon Jan 21st, 2008 at 04:58:35 PM EST
Why don't you come to St. Paul/Minneapolis, MN and buy my house?

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Mon Jan 21st, 2008 at 06:31:01 PM EST
Because although Minneapolis is a wonderful city, it is a bit too cold for my tastes, and I don't want to have to mow a lawn or keep a garden.  
by gobacktotexas (dickcheneyfanclub@gmail.com) on Mon Jan 21st, 2008 at 07:38:49 PM EST
[ Parent ]
Do y'all even have houses that far North?  I thought it was all igloos and ice-fishing and stray Canadians that far North.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jan 21st, 2008 at 10:58:03 PM EST
[ Parent ]
No. You don't get permanent snow fall and igloos until you hit the 49th parallel. Ice fishing is usually pretty good, but with global warming there has been some problems in late June through August. Fortunately, Environment Canada posts warnings on the short wave so we all are fore warned. (Thank god for those new hand cranked radios. It beats firing up the sled to warn the neighbors.)

aspiring to genteel poverty

by edwin (eeeeeeee222222rrrrreeeeeaaaaadddddd@@@@yyyyaaaaaaa) on Mon Jan 21st, 2008 at 11:16:28 PM EST
[ Parent ]


We have met the enemy, and he is us — Pogo
by Carrie (migeru at eurotrib dot com) on Tue Jan 22nd, 2008 at 03:50:42 AM EST
[ Parent ]
New units are going up near my apartment here in the bay area. Whenever I drive by the sales office I'm tempted to walk in and offer to buy one of the townhouses for $10k on the spot.

I might end up in Minneapolis for a bit if my employment prospects are nil upon return from my double-secret trip.

you are the media you consume.

by MillMan (millguy at gmail) on Tue Jan 22nd, 2008 at 03:00:35 AM EST
[ Parent ]
Give it a year.  They may take the offer in the Bay Area.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Jan 22nd, 2008 at 04:57:08 AM EST
[ Parent ]
Maybe in the east bay. The real estate market is overpriced here, sure, but it is and should be more expensive than every market in the US with the exception of New York. It's a desirable place to live and is one of the world's economic engines.

you are the media you consume.

by MillMan (millguy at gmail) on Tue Jan 22nd, 2008 at 05:33:39 PM EST
[ Parent ]
The link to the condo unit looked great and for less than 100,000 US$, wow! That should be roughly 70 thousand Euros. Looks like a nice unit. What's 800 sq feet in sq meters by the way?

(Did you know that for that price, you don't get anything bigger than a converted chambre de bonne in Paris center, not exceeding 12 sq meters floor area, nothing like what's shown in the link at all. Last August, an American friend was visiting and was thinking of buying a pied à terre in Paris and when I showed her what her 150,000 US$ could buy in Paris 10th district--  which isn't even a posh district in Paris, a studio measuring not more than 18 sq meters, she almost fainted...)

If and when you buy, think of an important factor too: location, location, location; building history too should count, etc.

Since you are going for fixed interest, I think there's less risk of buying this year but Jerome's remark is also an important factor when buying on a loan: "Can you get insurance to cover your payments if you're unemployed? (that's very common in France)"

Posted by: Mrs 3rd Column

by The3rdColumn on Mon Jan 21st, 2008 at 08:45:28 PM EST
What's 800 sq feet in sq meters by the way?

Divide by ten is a good rule of thumb. So 80 sq m.

Regards
Luke

-- #include witty_sig.h

by silburnl on Tue Jan 22nd, 2008 at 12:27:29 PM EST
[ Parent ]
There is a nice but perhaps slightly unknown feature in Google, namely the calculator:

type in "800 sq ft in sq m" on the normal google line and instead of page links you get "800 (sq feet) = 74.322432 sq meters". It will also do calculations, even "800 ft + 12 m"

by GreatZamfir on Wed Jan 23rd, 2008 at 05:09:41 AM EST
[ Parent ]
All such decisions are ultimately based on personal needs.

I am looking to buy in Canada. We are definitely waiting a few months. Then again Canada is still in a housing boom.

(And for those who are selling in Minneapolis - no, I am not moving to Minneapolis. Don't even ask :)

If you wait three months and things don't work out how disappointed are you going to be?

If you buy now, and in 3 months you loose 50% of your investment how disappointed are you gong to be?

A scenario that has not been talked about is - if official credit dries up, will there be a corresponding increase of home owners who will hold the mortgage?

aspiring to genteel poverty

by edwin (eeeeeeee222222rrrrreeeeeaaaaadddddd@@@@yyyyaaaaaaa) on Mon Jan 21st, 2008 at 10:47:48 PM EST


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