We've been considering buying a home in Los Angeles. Actually, more than considering... we looked for a few months last fall, bid on a couple houses... one we really wanted, but didn't get.
Here was the situation:
The home was listed for $599K. We really liked it and knew that they already had multiple bids, so we bid $631K. The sellers put out multiple counteroffers for $640K, with the add-on of removing the appraisal contingency*. We responded to the counter accepting the increased price and agreeing to pay up to $20K over the appraisal price in cash, if the home didn't appraise for $640K. Well, the sellers ended up going with other buyers. Who can blame them? They chose the buyers who had ALL CASH. Crazy. Who has $640K in cash lying around to buy a house? I can only assume people who just sold their own homes in this crazy market... And this is a fairly typical scenario in the Los Angeles housing market the last year or so.
After that, Jason's job was a little tenuous and we knew there was a very good chance the company would run out of money (being a fairly new start-up). So, we took a break during Christmas to re-think everything.
And now we're back. Starting to look at houses again. When we're at these open houses, we see kids younger than us (get off my lawn!), browsing the same houses we are and I think to myself, how can they even afford this house? We have a good down payment saved up and decent paying jobs and even then, we're like "wow, this is going to be a stretch!" I just don't know how they're doing it.
I'm so tempted to stay in our apartment. I have the added bonus of being the apartment manager and only paying $950 in rent! So it's hard to imagine going from that to over $3,000/month with the mortgage, taxes and insurance. I keep crossing my fingers that a 2 bedroom will open up in my building and allow us to move within the building (keeping the building manager discount).
As it stands now, we're looking. It took almost three months last year to find one we both really liked, so who knows how long it will take this year. We can bide our time, waiting for the right home to pop-up. Or maybe that two bedroom apartment will open up... :-) Either way, I'm going to enjoy my below-market rent while I can.
*Side note: The appraisal contingency is there to "protect" buyers from overpaying. If you bid $900K on a house worth only $500K, you can use the fact that it didn't appraise for enough to either back out or renegotiate your deal with the sellers. And if you're financing the home with a mortgage, then you're pretty much stuck because the bank isn't going to lend you more than the home is worth and not getting financing is definitely a way to back out of a real estate deal because there are usually financing contingencies as well.