Buying a House - From Start to Giving Up (Part 1)
This content was automatically generated by gpt-4o-mini (No human review). The original post is in Chinese.
[1/31/2022] Today, I deposited $6,000 into each of our Roth IRA accounts, marking my complete abandonment of the idea of buying a house in the first half of 2022. Over the past three months, we have looked at 30 houses, spending about 100 hours on house hunting. Buying a house is definitely not a pleasant experience; it is not only time-consuming and exhausting but also affects your mood. Giving up on buying a house has actually made me feel much lighter, and life has become happier.
Preliminary Work
The Emergence of Needs
The earliest consideration of buying a house came about because I needed to rent in SD after finding a job, and by the end of 2021, the rental market was extremely hot. The one-bedroom, one-bathroom apartment I wanted had a monthly rent of over $2,000. In contrast, a similar property priced around $400,000, with a 3% interest rate and a 10% down payment, would result in a monthly mortgage payment (including mortgage payment + property tax + home insurance + HOA) of about $2,500. Compared to this, renting seemed very unwise. Moreover, we happened to have some money sitting idle at that time, which was originally intended for regular investments in the stock market. However, after a year and a half, (due to my fear of the stock market, I had been very cautious with my monthly investments), most of the money was still sitting in the bank. Considering the need for a place to live and the diversification of investments, I began to entertain the idea of buying a house and started taking action.
Online Research
I started my preliminary work on buying a house in October 2021—online research. Here are some resources that I find quite useful.
- From here to homeowner A roadmap to help you plan The steps to buying a house; I followed this roadmap step by step.
- Redfin: How to Buy a Home in 7 Steps An article that introduces the entire process of buying a home.
- Buying a house: Tools and resources for homebuyers Learn about home buying knowledge.
- Explore interest rates Understand current loan interest rates.
- Is It Better to Rent or Buy? Which is better, buying or renting?
- Saving for a Down Payment: Where Should I Keep My Money? Where to save the down payment money.
- Mortgage Calculator Loan monthly payment calculator.
- Closing Costs Calculator Home purchase closing cost calculator.
- 房贷计算器 Lists the proportion of interest and principal each month; initially, most of the payment goes towards interest.
Steps to Buy a House
According to the above sharing, buying a house mainly consists of the following steps:
- Check your credit score, determine your budget for buying a house, and what you can afford for the down payment and monthly costs.
- Understand loan options and apply for a preapproval letter.
- Choose a buyer agent.
- View houses and make an offer.
- Compare and choose a loan offer, closing costs.
Personally, I feel that the most challenging part is viewing houses and making an offer; the most important aspect is actually the loan application. My home-buying journey only reached the fourth step this time, focusing more on viewing houses and spending less time on the loan application and lender selection. Therefore, the experiences shared in this article are mainly based on the first four steps. Of course, for me, the biggest prerequisite for buying a house is finding a proper job; otherwise, I wouldn’t be able to secure a loan.
Several Areas in San Diego
Impressions of Zip Codes
We looked at the following 8 areas in SD, and the notes are my impressions of each area. Due to commuting reasons, I did not consider areas further north of Mira Mesa. I also did not consider areas too far east because, firstly, they are far from the beach, and secondly, they tend to be hotter in the summer.
| Zipcode | Region | Note |
|---|---|---|
| 92130 | Carmel Valley | Good school district, expensive houses, small houses within budget range |
| 92126 | Mira Mesa | Transitional housing, more males than females |
| 92121 | Sorrento Valley | Limited housing supply |
| 92122 | UTC | Good school district, many students, good for renting |
| 92104, 92116 | North Park, Normal Heights | Run-down streets, many street parties, relatively low housing prices |
| 92110 | Mission Valley | Relatively low housing prices |
| 92037 | La Jolla | Good school district, many students, good for renting, expensive housing |
| 92111, 92117 | Clairemont | Popular among locals, relatively low housing prices |
How to Obtain Data for Each Area
Regarding data for each district, you can actually check the website city-data.com, which has a lot of information. By comparing the data of several zip codes you are interested in, you can get a sense of the characteristics of that area. You can look at the total population within this zip code, the proportion of renters, population density, property tax rates, age distribution, gender distribution, educational attainment distribution, unemployment rate, average commute time, the ratio of unmarried/married/divorced individuals, racial composition, median home prices, average household size, average income, and so on.
Taking 92122 UTC as an example, this webpage summarizes the characteristics of this zip code area:
- The proportion of Black and Hispanic populations is significantly lower than the California average.
- The median age is lower than the California average.
- The proportion of renters is higher than the California average.
- The number of rooms per house is lower than the California average.
- The age of houses is lower than the California average.
- The number of college students is higher than the California average.
- The proportion of individuals with a bachelor’s degree or higher is higher than the California average.
These characteristics align very well with my previous impressions of this area, as 92122 is next to UCSD, primarily inhabited by college and graduate students, which explains these data. The data on this website allows you to understand the situation in this area statistically and verify whether your previous impressions of the area are accurate. After understanding the characteristics of different districts, you also need to choose a location for buying a house based on your own situation, such as whether you need a good school district, the length of commute, and so on.
In addition to city-data.com, you can also check data from Zillow research and Redfin, such as:
On-Site House Viewing
At the beginning, I mentioned that over the past three months (November, December, January), I have viewed a total of 30 houses in person. Below are some statistics from my house viewings.
Distribution of On-Site House Viewings by Area
| Area | Count |
|---|---|
| Carmel Valley | 4 |
| Mira Mesa | 7 |
| Sorrento Valley | 1 |
| UTC | 5 |
| North Park | 6 |
| Mission Valley | 4 |
| La Jolla | 1 |
| Clairemont | 2 |
The area I viewed the most was Mira Mesa, mainly because there were more listings within my budget. My personal favorite is still La Jolla.
I have recorded the information of the 30 houses I viewed in a table and categorized them into five levels based on my preference. The worst houses received a score of 1, typically because they had aspects I really disliked; houses rated 2 are just average, often leaving no impression on me after viewing, and I felt indifferent; houses rated 3 had some features I liked, but there were significant drawbacks or several aspects I wasn’t satisfied with; houses rated 4 were quite good, and I would start considering whether to make an offer; houses rated 5 were ones I absolutely loved, with no flaws except for the high price.
House Sale Price/List Price Ratio and Preference Level
| Scores | Average Sold/List Price |
|---|---|
| 1 dislike | 105.75% |
| 2 neutral | 104.64% |
| 3 like a little | 113.30% |
| 4 like | 114.23% |
| 5 like a lot | 112.12% |
From the table above, it can be seen that my taste is quite good. The houses I hate and have no interest in have an average sale price that is only about 5% higher than the listing price, while the houses I like have a sale price that is 13% higher than the listing price.
Time Sacrificed for House Viewing
| Date | Time | Activity | |
|---|---|---|---|
| 10/2/2021 | Saturday whole day | kayak | La Jolla Coastal Paddle |
| 11/5/2021 | Friday Afternoon | ||
| 11/9/2021 | Tuesday Afternoon | running | |
| 11/12/2021 | Friday Afternoon | running | |
| 11/13/2021 | Saturday morning | kayak | San Vicente Lake paddle |
| 11/14/2021 | Sunday morning | hiking | |
| 11/23/2021 | Tuesday Afternoon | running | |
| 11/30/2021 | Tuesday Afternoon | running | |
| 1/4/2022 | Tuesday Afternoon | running | |
| 1/14/2022 | Friday Afternoon | ||
| 1/15/2022 | Saturday Afternoon | hiking | |
| 1/23/2022 | Sunday Afternoon | hiking | Orange County |
Absolutely Won’t Buy vs. Must Have
After looking around, I’ve summarized my requirements for a self-occupied home.
| Red Flag: Situations I Absolutely Won’t Buy | Must Have |
|---|---|
| Close to roads or railways, noisy | Quiet |
| Apartment building, no private entrance | Private entrance, entrance on the first floor |
| Poor layout, more than 2 stories, low ceiling height, dark lighting | Single story, or townhouse |
| Complex with more than 8 units (usually poor sound insulation) | Has a garage |
| No place to store a kayak, inconvenient access for the kayak | |
| Building is too run-down, outside hallways and streets are too shabby | |
| Only 1 parking space | 2 car garage, attached to the house |
| Very old renovations, especially in the kitchen and bathroom | Remodeled kitchen and bathroom |
| Exceeds budget too much, or price increase over 15% | |
| Neighbors have garages below, neighbors above | Top unit |
| Commute by car exceeds 30 minutes, considering traffic time |
Basically, after reviewing the above conditions, the reason I haven’t bought a house is very clear: I am actually considering it for self-occupation (rather than investment), and my requirements are quite strict (mainly because I have a kayak). A house that meets my requirements generally costs over $600,000 or even $800,000, which does not align with my expectations and budget.
Others
Investment and Finance YouTube Channels
I follow a few YouTube creators who focus on investment, finance, and real estate, and their views on the real estate market in 2022 are quite different.
Let’s Talk Money Sister Qian’s channel doesn’t cover real estate much, but I’ve learned a lot of basic investment and finance knowledge from her. Regarding buying a house, she currently lives in a rental and believes that housing prices in the U.S. are too high right now, so she is investing in the stock market instead.
Finance with Arjun This channel doesn’t really focus on buying houses; it has more videos on other aspects of investment and finance, which I think are quite good.
Connie Takes You to Invest in Real Estate Connie is a real estate agent, so she definitely has a vested interest. Her perspective for 2022 is certainly to continue investing in real estate.
Reventure Consulting This guy is very persistent; he uploads new videos about the potential collapse of the U.S. real estate market almost every day. After watching a lot of them, I found that the content is almost repetitive. Although he lists some data in his videos to support his views, it feels like each of his videos is too emotional and not calm enough. How should I put it? When I can’t buy a house, I go watch his videos mainly for psychological comfort and to pray that housing prices will indeed drop significantly in the coming years, just as he claims.
Time to Write a Blog
There are still many experiences about buying a house that I can share, but unfortunately, the pace of life is too fast, and there isn’t enough time to write blogs. Many experiences and thoughts that I originally wanted to share have gradually been forgotten over time. The main content of this blog was written on January 31, but due to too many things happening, it was delayed for 2 months. I decided to publish it first, and I will write the remaining parts when I have time later.
