I wouldn’t try to time the housing market… but waiting until you’re more financially stable and know where your wife is working makes sense.
Yeah what Ohai and IsThereAny said. Just wait until you feel good about the decision and don’t have these nagging questions. If there is any doubt about the finances you need to wait. Getting locked into a house with high maintenance you can’t afford can have lasting damaging consequences with crushing stress. Also, 2009 was an extreme anomaly in real estate we are unlikely to see again in our lifetime and while prices are elevated they aren’t necessarily stretched given the economics of a two income household. Exactly what Ohai said you’re likely in a bear market just to see a period of pause. But just be patient and don’t rush big decisions, in the meantime enjoy the freedom of renting. I’ve seen a number of families go from homes to renting recently and celebrating the freedom of lack of maintenance.
Not expecting a market dip, but less competition would be nice. New construction is ramping up here so might relieve some pressure. Thanks for all the good input!
The more I read about the joys of house maintenance, the less I want to ever own a house. Ever!
My rent vs own analysis showed that owning a home would be roughly 60% more expensive than renting. Factored in everything from closing costs to maintenance, upgrades, opportunity cost, realtor when selling etc. I know that i will need a home to be comfortable but i love to throw out that stat when people tell me renting is throwing away money. Dont ask about home equity lol
really. can you go over the details. i’d like to see. are these retnals and owned properties pretty ceteris paribus?
What time period are you calculating that over? In general, if you assume any amount of price appreciation over many years, owning will eventually become cheaper than renting - also assuming you can count home value as your net worth (i.e. your house will be marketable in the future). Unfortunately, the breakeven period is very long in many markets - in NY area, it’s probably 8-10 years, for instance.
Furthermore, these analyses don’t include cost of loss of flexibility. If you need to move, for instance, renting has essentially no transaction cost, but owning would have major cost. So, you would discount the savings from owning anyway, when finding the breakeven point. Stupid realtor keeps telling me that certainty of where you will be living is a benefit. What crazy logic is this? In that scenario, you didn’t move because you couldn’t move, not because you would not have wanted to.
Real estate is very local. There are certainly dips/crashes in certain markets. I wouldn’t try to time them though. Also, your point holds true in large urban centers with constrained supply. I have no idea where OP lives.
Your % return from home price appreciation is also leveraged so if you only put 20% down on a $250k house and it appreciates 5%/yr for 5 years, your actual ROI is 140% ($120k equity with only a $50k investment). Hard to beat that leveraged return with the limited downside risk as mentioned above. It’s also a great hedge against inflation long-term.
^is this the ROI if you got a 0% loan from your uncle rather than a mortgage, brah?
@OP - how old are you?
Yes good point haha. Assuming a 4% interest rate and 25% tax bracket, the after-tax cost of capital on the 80% LTV would be ~$6k/yr so adding $30k to your “investment” over 5 years gives you an ROI of 50%. And interest would obviously diminish over time. Still not bad given the risk profile.
Huh? I think Robert Shiller would disagree. Real Estate is a pretty terrible asset class for investing from an owner occupied standpoint and history shows home prices barely outpace inflation in the long run.
Greenie im 31
Ohai i should have noted that this was limited to 5 year hold. Improved a bit if longer but holding too long took a hit because you would get into doing upgrades and major systems replacements.
Nerdy it was designed to compare rent with a roughly equivalent mortgage payment with taxes and insurance which really tend to grow faster than the place would appreciate, or at least more consistently.
Ill look for the spreadsheet, i did it when considering buying on the east coast which ended up being a hard no.
You’re 31.
So with a 30 year fixed note, you could be done paying off your house by 61. Yeah, you’d still have maintenance and insurance and property taxes, but no more mortgage.
To put this in perspective, my house cost me $265k in 2010. I am over 1/4 of the way done paying it off. The payment is $2150 per month, about $1450 of which is principal + interest. This amount has not changed since 2010, not will it ever change, since I have a fixed rate mortgage on a self-amortizing loan. (Well, actually the monthly payment does increase by about $20 every year, due to increases in property tax. Very minor detail.)
Or you could rent for ever and ever and ever. And watch your rent increase every year. And never own your home. And have the risk of your lease not being renewed. Or asking for permission to do anything at your house.
^Sounds like your mind’s made up. Good luck!
Let me add, though, that not every decision in life is a financial one that can be summed up in NPV’s, discounted cash flows, and opportunity costs.
Ten years ago, I thought the same way you did. “Why buy a house when you can rent and invest?” Then my wife finally wore me down and I bought a house. And I can say that I’m glad I did. Yes, we’ve put some money into it, and will probably continue to for as long as we own the house, but there’s a certain feeling of accomplishment, call it “pride of ownership” that can’t be explained to somebody who hasn’t been in this position. (Some things cannot be explained to a virgin.)
Whatever you decide to do, good luck and God bless.
yep there was a survey for old people, anyways 10% said that their happiest moment was buying thier first house. i personally bought my first house at 23/24. so to me its like nyeh.
as kylie jenner’s obscure ex bf, tyga, once said in chris brown’s hit song ayo,
“If it don’t make dollars, don’t make sense”
also renting and investing makes more sense right now than buying. and you can time the market, its in fukkin cycles. if there was ever an instrument you should time, its the instrument where you can lever 4x to 28x ur down. lever at the wrong time and make sure you bring lube or how to default strategically.
These broad studies about real estate are basically useless for people considering buying a home:
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It is a rent versus buy decision first for owner occupied. That decision is the source of this thread.
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When you buy an owner occupied property that property does not reflect the broad real estate market. By necessity you must purchase a very small slice of the broad market (likely a single property) to live in. Saying the broad market always goes up so you should buy XYZ stock is the equivalent ridiculous conclusion for equity investing. It is very important to consider the asset you are purchasing. You could win or lose pretty majorly depending how far you are stretching to make the purchase.
Whether it is a good time or a bad time to buy depends largely on the original poster’s locality and it is very much case by case. In real estate there is some local control too. You can “build a block” or know someone who is in the process of doing so, and this provides downside protection and upside potential.