Every Penny Counts

It's six months into my saving scheme for a down payment. In taking stock, I realize I've done pretty well. Except this month with the purchase of a new car and attendant costs that have wrecked my budget. I expect to get back into shape in the coming months. I've relinquished both my credit and debit card to my mother for safekeeping. I admit that I'm suffering a bit of fatigue, depressed by the still-high price of real estate in California and the reality of delayed gratification that goes with long-term planning. There was a discussion over at the Sacramento Landing blog about the XY generation and our general lack of wherewithal to save. So, when I read this NY Times article about people my age who worked to save enough for a house payment, in New York no less with little help from parents, it was a dose of encouragement.

When Janey Lee and Pablo Agüero were struggling freelance Web designers, buying an apartment in Manhattan seemed like a dream, one clouded by credit-card debt, student loans that had to be repaid and the bills for their wedding. Their combined salaries of just over $100,000 qualified them for a mortgage, but it took a lot more for them to come up with the down payment. In a city synonymous with luxury and spending, Ms. Lee, 30, and Mr. Agüero, 35, decided to do without. They gave up smoking to cut costs, they stopped meeting friends after work for beers, they didn’t buy new clothes, and they stashed away tax refunds and as much of their earnings as possible. Whenever they wanted to buy drinks, gadgets or cookware, they asked each other: “Do I want an iPod or a house? Do I want a latte or a house?”

Plankton Theory Revisted

Remember some time ago, I referenced Plankton Theory which likened first-time home buyers to plankton, the essential life force of the real estate food chain. Price them out of the market, and a chain reaction suffocates the rest of the market. This Press Enterprise article quote shows that force in action.

“Inland Southern California’s home sales last month were the worst in a decade in Riverside County...We have seen rising foreclosure activity through the year and no sign it is done climbing, and we are now seeing some real steep declines in prices. It is very difficult to say where bottom is,’ said Andrew LePage, analyst for DataQuick."

The news that Forbes ranks Sacramento as the third riskiest housing market in the country - and the riskiest investment in California-quickens my heart. Sacramento's share of adjustable-rate mortgages exceeds 50 percent. Which means that the market has nowhere to go but down.

Window Shopping II

Checked out a few more new build communities last weekend. It's become a rather interesting hobby. The places we checked out included Astoria townhouses by Centex, The Discovery, Sunrise, American collections by Beazer, and the Carriages and Isla del Lago communities by K. Hovnanian. It was a lot of houses in one day. The Astoria townhouses had great curb appeal but no models. We toured a unit under construction though and didn't like the flow. A 1562 sq foot plan 2 bd/2.5 bath went for $309,990 at $198.46 a square foot. The deal breaker, however, is the $340 HOA fee. The Mello Roos of course was also steep but I forgot how much.

Of the Beazer collections, the only one that made an impression was the Discovery collection, new "pull apart" townhouses connected only by the garages. Their website still show them as single-family homes. It was cheaper at $181.75 per sq foot. My friend and I both loved the 1,568 3bd/2bath plan at $284,990. It had a great open floor 1st floor that wowed us at the door and nice sized rooms. The drawbacks were a tiny postage sized yard and an alley garage. With two dogs, I have to have a nice sized yard. Sure, my pookies are toy poodles but they still need to run. The HOA is $83 and the Mello Roos is $120.

The Carriages had horrible floor plans with the kitchen completely separate from the rest of the house and dinky rooms. Isla del Lago was another story. Though halfplexes, the models had huge backyards and represented a good value. The largest plan, the 3bd/3bath San Miguel, could be had for $345,365 for 2100 sq foot, working out to $164 a sq foot. Out of our price range even though the per sq foot price is lower and too large for a single homeowner. But..but..but...that didn't stop us from lusting for all that space. The HOA is $35 and Mello Roos is $138.

It will be interesting to compare these prices in six months. Every builder we questioned said their properties were selling briskly (Beazer's the Landing community is sold out for example) and implied that price was going to go up and inventory down. If I were in the market right now, I'd be tempted to look seriously at the Beazer Discovery townhouses and the Isla del Lago halfplexes. Good for me that I don't have the down payment now and can't be pushed to jump the gun.