socaldisneydude,

I grew up in Fresno. Then, lived in Laguna Hills after I was married so I'm familar with the areas you're speaking about.

Rent-to-own is a product of a slow housing market. If folks could sell...then they would. They can't so they've created this rent-to-own thing. A portion of your rent will go towards a down payment, most likely. Of course, they'll raise the rent to compensate. It will take years & years & years to build-up enough dollars to actually purchase the home. Then, in all likelihood, the market will have turned around yet again & prices will be rising...you'll still be priced out. The seller won't hold a set price for, say, 5 years while you build-up dollars. They might hold it for a year but you can't save enough in just twelve months. It's always worth a phone call to see how they've set the program up but don't get excited until you hear what they have to say.

As a first time home buyer & with $50K year salary, ultimately, you may need to leave the CA area to afford a home. That's not the end of the world. For instance, right now in the Denver metro area...well, let's just say that they're having a "sale" on condos. It's because of the many foreclosures due to escalating ARM's that were written 2-3 years ago. It's that "sub-prime collapse" you keep hearing about on the evening news.

Denver is only a short flight to John Wayne Airport. There's a varied economy for jobs. It's not a bad place to live. (I spent 10 years there so I speak from experience.) There's housing opportunities there right now for young people that may not exist again for a decade or longer.

Here's a link to realtor.com for Aurora, Colorado. Aurora is a suburb of Denver (a nice suburb). I already plugged in a price range of $125,000 to $175,000 & there are over 300 properties to choose from! If you click on "details" for each listing it will show an estimated monthly payment. I checked the first $125,000 listing & it showed a monthly payment of $589/month.

There are other areas in the country that are affordable also. I just chose the Denver area because I'm familar with it. I currently live in Connecticut & it's not affordable for young families but lots of places are.

Good luck...call on the rent-to-own but also consider other locations. Once you own a home, it gets easier because of a home's appreciation over time...you can, in effect, transfer equity in a starter home (condo?) into a larger home...the basis of the American Dream.

Tricia

Here is a link that might be useful: Aurora, CO condos

Several years ago my sister was priced out of the Chicago housing market, well not totally priced out but priced out of decent areas. She came across a "rent to own" opportunity and decided to go that way. In her instance, $200 of her monthly "rent" applied to the down payment. So at the end of the year she had accumulated $2400 towards the down payment. But her rent on the home was more than she would have paid to rent another similar home. The price of the home was not locked in when she rented it, it was to be determined after a one year lease period. In her case the home had appreciated substantially in that year and she couldn't afford it. I'm sure each "rent to own" situation is different, check the details of the particular house you're looking at.

I do sympathize with you. Most of my friends are priced right out of ever being able to buy a house even with zero-down mortgages, 110% mortgages, and other "creative" financing schemes, unless a Great-Uncle Morty they never knew existed croaks and leaves them sole heir to a potful of cash. For a long time we didn't think we were ever going to be able to buy either, we lucked out for a short while.

Anyway... If it's that much cheaper to rent, I would just rent for now, and put aside however much money you can toward your down payment while figuring out whatever you can about what your future is going to hold - where can you live, what's your job situation expected to be, if you'll have kids, blah de blah. Some people do choose never to buy because they just don't want the hassle and potential grief of homeownership (real estate doesn't always appreciate, for one thing!), and that's OK, because everyone's life is different and we all have different goals. I know, it seems almost un-American to say that, doesn't it? :-)

Relocating may be a possibility for you to consider but I do understand reluctance to just drop everything and leave your entire support network behind. Some people have the personality where they can do that, some don't - I don't, I've done it several times and it was a disaster every time. If you're relocating it may be a good idea to rent there for a year or so while you get an idea of where you want to buy so you don't accidentally end up across the road from the new landfill that wasn't there when you put in the offer (see the thread on disclosures). Suze Orman wrote a really interesting article on making the buy vs. rent decision from a financial standpoint; I disagree with her on a few points but mostly I think she's right on.

Wow....thanks so much for that article johnmari. I thought we were ready for home ownership but apprently we are not.

What makes this more depressing and frustrating is that when we consider that our rent will more than likely go up at the end of the year when the lease is up, we will have to move further away to where we can afford to live. However the commute will eat into the extra money we "save" by moving to a cheaper place because of the outrageous gas prices. So in the long run we will never get ahead because the cost of living is climbing so much higher and faster than our wages.

It just keeps me awake at night knowing that we throw away 15,000 a year on rent when it could have gone towards a home.

Any other advice or suggestions from anyone?

Well, this is a bit of a stretch, but if you're ready to own a home, there are some areas of the country where making 50K will buy you a really nice house in a cute neighborhood and friendly neighbors.

This one's an hour outside of Atlanta:

Here is a link that might be useful: Newer single family home on a cul de sac for 119k.

"It just keeps me awake at night knowing that we throw away 15,000 a year on rent when it could have gone towards a home."

Well, it really depends on how you look at it. Unless you're planning on staying for a long time, at least over five years, it might actually make more sense to be renting than buying a house from a financial perspective.

For one thing, you can rent a much nicer place than what you'd get if you were to plow that same amount into a mortage. The increase in rent in the SoCal market has not kept up with the costs it takes to buy a house. In other words, you could rent a nice condo in OC for X dollars. But, if you were to buy that same condo, the mortage alone each monthy would end upcosting you double to triple that monthly rent.

And, that's just for the mortgage alone. Once you start accounting for other costs such as property taxes, the down payment, agent fees, etc.., it makes owning a home that much more expensive than renting. In that light, in LA, for a homeowner to come out ahead of a renter, housing prices would need to increase around 5% each year.

But, we're witnessing a market adjustment where prices have started to fall where in the worst case scenario, prices would continue to fall, and in the best case sceanrio, prices would stabilize but not increase. From a financial point of view, it would be better to invest your money in other markets, such as stocks, where you'd get a greater return than in housing.

You home and family are where and who you make them. Yes, it's traumatic to move, but if you'll never get what you want where you live currently, then you are letting location determine your dreams rather than your dreams determine your location. There are a LOT of areas in this country that 50K a year will buy a nice house. Even if you are unable to keep the same salary level when you move and have to accept even half, there are plenty of places that even $25K a year will buy you housing that isn't in the projects (like many locations in the South and Midwest). You just have to think beyond the box you've created for yourself by limiting your search to CA.

If your combined income in southern California is $50K, isn't it likely to be lower in an area with lower real estate prices?

It seems to me that your focus should be in raising your income rather trying to afford to buy a house. That may involve changing careers, going back to school, or moving to a different area.

socal - I don't know the Cal market. I assume that real estate can be an investment there unlike anywhere I've ever lived. But even so, with closing costs, interest, property taxes, maintenance etc. you are not really throwing away 15,000. Or at least that might not be true. I just had an accountant tell me he would never recommend anyone buy a house as an investment, it should be a lifestyle choice. Again, I assume he was speaking more of the mid-west market. So don't despair. Spend your engergy trying to do the most with any money you do manage to free up for investments. Meanwhile it doesn't hurt to scrutinize any lease to own deals - just to see if there are reputable ones vs. scam ones out there. Also foreclosure lists. In Michigan years ago during the recession something called a Land Contract was common but I don't know if that would help you either. You rented to own with some portion of your rent going towards a down payment then at some time period you had to buy, i.e. get all the rest of the money from a bank/mortgage, deceased relative:) whatever. So it sort of allowed someone to come up with the downpayment slowly. I think this was before all the newer 0 down options they have now. Maybe something worth negotiating for if you crunch the numbers and think it will help.
Good luck,

Mary,

Prices in SoCal have skyrocketed in the past few years, yet that doesn't mean SoCal is not immune to the cyclical nature of real estate. In the 90s, you also saw prices drop as much as 40%.

Here is something else I forgot to mention about the market here in So. Cal.

There have been a record breaking number of people losing their homes due to foreclosures. These people who have lost their homes are flocking to apartments to live while they try to recover from their loss.

Apartment managers are seeing this trend and there is suddenly a large demand for apartments. Demand equals a drastic rise in rents. Those of us who have been renting the past few years are going to suffer even more because this demand is making our rent go up much faster and sooner than under normal circumstances.

Rising fuel costs. Rising housing costs. No change in wages.

something needs to happen.

I feel your pain, welcome to my world! :( While our home in Phoenix has appreciated 125% in the last 7 years (50% in the last 2!), my DH's income has not! Matter of fact, due to lay offs, it's gone down!

socaldisneydude,

Actually, we're not seeing record number of foreclosures. Its been in the news because percentage wise its been such a huge jump but that's because the number of foreclosures had bottomed out in 2005. This year's first quarter, we saw around 500 foreclosures in Orange County. To me, those numbers aren't large enough to really drive up the rents. Indeed, even as foreclosures have increased, we've actually seen the rent increase in LA and Orange County growing slower than previous years. In LA county, this quarter saw a 1.5% increase in rent, two consecutive quarters where its been below 2%. We're seeing more inventory due to people having trobule selling their condo, and those condos are reverting back to apartments or owners are renting out their condos.

socaldisneydude - You're going to drive yourself crazy worrying about this. If you can't afford a home where you're living, the only logical thing to do is to move to a more affordable area, especially if you can get jobs in your field.

You stated in an earlier post that you spend $15K/year on rent. Just think if you moved to a place where your rent was half what you pay now, then you'd be $7500 closer to a down payment on a house.

Why will you continue to worry about this? Because it sounds like you and your fiance really want to have your own home and you're prohibited from living your dream. It will turn out to be one of those life long regrets people have.

There are lots of things you can do to make your dream come true. Instead of worrying about it, take action and do what it takes for you to get what you want.

I don't think somebody needs to move to the Central Valley to find affordable housing.

First of all, housing even in Central Valley has gotten more expensive over the past few years. Just check out the prices for Gilroy and Fresno. You're not going to be able to rent that same place for $500 anymore.

And, there are still plenty of places in SoCal where people have been not been priced out of. Riverside has been a popular choice for people wanting something more affordable. And, then there's Oceanside- even though that's a coastal city its prices have always been considerably cheaper than SD and OC and LA.

Marvelousmarvin, I have been checking exclusively at ads posted on Craigslist for Merced, CA, a much smaller city than Gilroy or Fresno and there are actual HOMES I can rent for anywhere from 500-1000 per month depending on the area, size of house etc..I thought about Riverside but that is too far of a commute for us. We lived in Grand Terrace for a short time and were commuting back and forth to Anaheim Hills and we were commuting nearly 80 miles per day and this was last year when gas was still in the mid 2 dollar per gallon range. There is no way we could afford a commute like that with the current gas prices. Metrolink is out of the question because the trains do not run at 9PM so we would have no way to get home.

Sparksals, you are absolutely right. The only real reason why we are down here in the first place is because my friends and family live down here and I wanted to live closer so we could see each other more often. Unfortunatly my friends are too busy with their own agendas so we don't really hang out anymore. My parents are very glad that we have moved down here and they like the fact that we come over every sunday evening for dinner. Unfortunatly, even though having us living closer makes my parents happy, my fiance and I are financially struggling and barely have our heads above water and I think things will get worse as time goes on.

Moving to Merced will allow us to actually LIVE rather than scrape by. Money saved by not wasting it on rent would go in our savings and can be used in the future for a downpayment on some land so we can eventually put our own home.

Besides, it's only a 5 hour drive to visit my folks or we could take Amtrak, which I believe only charges 35.00 per person each way. It ends up not only being cheaper than driving but also much more relaxing too.

Thanks to everyone for their advice.

You have to go where you can afford to live. 14 years ago, I moved 1 1/2 hours from my parents. Since my dad & I worked together since I was 11, and I was still working for him when we left, it was a hard decision, but if we wanted to own, it wouldn't be in North Jersey.

My poor dad struggled after I left, couldn't find decent help. He eventually retired and built a house by me. 1 month before closing on his new home he was diagnosed with cancer. Living down here made it easier for me to be his main care giver, driving him to appointments.

Depending on how much family you have in the area you can't afford, your moving will either matter or not. If there is no one to help with your parents, they have the option to relocate closer to you. Myself a parent to a 14 & 22 year old(s), I know I may eventually have to relocate because the market has gone up considerably in the last few years here. I don't see how either of my kids can afford to purchase around here.