Should I wait to buy a house?

[jmcd22]

Lots of replies on here and I'm sure there is some good information. I look at buying real estate like I do the stock market....just get in. You don't lose a thing by doing that until you actually sell. I live in one of the hottest markets in the country and bought my first house 3 years ago. I just sold it last weekend for 55% more than what I bought it for. I don't say this to gloat but more to show that if I didn't get in when I did, the market would have outran me. Waiting for a downturn isn't wise in my opinion...neither is trying to time a downturn in the stock market. Just get in while you can, pay your mortgage down and be patient.

 

[ReddingArcher]

Like a lot of the other guys have said I think it largely comes down to your area. What is rent like compared to a mortgage for the same type of house? Where I am at in Northern California rent is just as much or more than mortgages in a lot of cases. I have guys that work for me that pay just as much in rent as my house payment is, although I do feel like Redding is a bit of an anomaly as far as rent goes.

At some point I think we will see a leveling off of home prices but I dont see a huge decrease in home values, this is my hope anyway. I am a drywall contractor and my girlfriend is in real estate so we both keep a close eye on whats happening.

Another thing is you have to have somewhere to live, why not have something thats most likely going to make you money? I think its a good time to buy right now as long as your comfortable in your job and rent vs mortgage numbers are close.

 

[Johnboy]

I just set up a calculation comparing the buy-now scenario with buying in 3 years. If the houses devalue by 20%, but interest rates rise to 5.22%, I break even on the devaluation on the house. So that leads to the obvious question: what are the odds of the houses in this area devaluing more than 20% and/or interest rates rising higher than 5.22% by 2023? I have no idea.

 

[Johnboy]

What is rent like compared to a mortgage for the same type of house?

This is another good question. If I choose not to buy now, I will likely continue living in an apartment that will be a good bit cheaper than the house I would've owned. If I was renting an equivalent living space, I think the choice would be much more obvious.

 

[dpat]

Why do you believe the home values will possibly drop in the area you are looking in? Loss of jobs? Its hard to go into that kind of debt but can work out in the long run. The biggest what if for you is what if the home prices go up 10% - 15% and not down then you really lose out.

 

[pods8 (Rugged Stitching)]

Just a joe blow who bought a house but I felt it likely we might see a 5-10% pull back in the next few years but not 30%. Combined with needing a new place to live, finding a decent deal during the peak of covid lock down, and low interest rates on a 30yr fixed I moved on the house. With the low rates I only put 5% down and kept some back as a rainy day and some into the down market.

 

[Mike from MO]

This is another good question. If I choose not to buy now, I will likely continue living in an apartment that will be a good bit cheaper than the house I would've owned. If I was renting an equivalent living space, I think the choice would be much more obvious.

This is all my opinion, and not advice.

Unless you have a wife and/or kids, and know you are living in the area you intend to live for at least the next 5-10 years, personally, I would not be buying but obviously YMMV

Strictly looking at valuations and spreadsheets misses your opportunity costs. For example, staying where you are and putting all your excess savings into a different investment (e.g. stock market, starting your own business, etc.) could yield much higher returns on your investment. Then, when you know you are ready to settle down somewhere you will potentially have a bigger downpayment than you would have.

Also personal opinion, but I don't think we are going to see lower interest rates anytime soon, if ever. Until/unless our currency and monetary systems collapse, the Federal Reserve has made it pretty clear that their main prerogative is protecting asset prices. The last time they tried to raise rates even 1% back in late 2018, the market crapped its pants and they immediately retreated and started lowering again. I'm not a doomsdayer or tinfoil-ist (not too much anyway ) but it just is what it is at this point. In poker terms, the Fed is pot-committed to low/zero rates with no way out at this point. So worrying about higher rates is a non-sequitor IMO, until the system breaks which isn't really worth worrying about because everyone will be in the same boat at that point more or less.

But if you aren't married with kids, or expecting them soon, I personally would never consider buying. Beyond the opportunity costs I described above, and other potential better investments to make while you rent, your "calculations" also completely ignore the costs of ownership that you don't have to deal with as a renter. Let me assure you, as a multiple-time homeowner, things are always breaking, need replacing, property taxes, etc. etc. Even just ONE major or slightly major unexpected expense in the next three years will more than offset whatever "profit" you may have been factoring. Certainly there are many good reasons to own (eventually), but do not rush yourself into that earlier than you need to.

 

[Trial153]

Depends on the market. In my area there is very little inventory so demand is relative to supply is high.
If you plan on staying in the house awhile I cant see you really having to worry considering how low rates currently are.

 

[tdhanses]

I just set up a calculation comparing the buy-now scenario with buying in 3 years. If the houses devalue by 20%, but interest rates rise to 5.22%, I break even on the devaluation on the house. So that leads to the obvious question: what are the odds of the houses in this area devaluing more than 20% and/or interest rates rising higher than 5.22% by 2023? I have no idea.

And what if the house price increases 20% and interest is 5%+?

 

[Johnboy]

And what if the house price increases 20% and interest is 5%+?

I haven't come across any speculations that prices will increase. Seems like the general consensus is prices will decrease with rising interest rates and higher inventory.

 

[tdhanses]

This is all my opinion, and not advice.

Unless you have a wife and/or kids, and know you are living in the area you intend to live for at least the next 5-10 years, personally, I would not be buying but obviously YMMV

Strictly looking at valuations and spreadsheets misses your opportunity costs. For example, staying where you are and putting all your excess savings into a different investment (e.g. stock market, starting your own business, etc.) could yield much higher returns on your investment. Then, when you know you are ready to settle down somewhere you will potentially have a bigger downpayment than you would have.

Also personal opinion, but I don't think we are going to see lower interest rates anytime soon, if ever. Until/unless our currency and monetary systems collapse, the Federal Reserve has made it pretty clear that their main prerogative is protecting asset prices. The last time they tried to raise rates even 1% back in late 2018, the market crapped its pants and they immediately retreated and started lowering again. I'm not a doomsdayer or tinfoil-ist (not too much anyway ) but it just is what it is at this point. In poker terms, the Fed is pot-committed to low/zero rates with no way out at this point. So worrying about higher rates is a non-sequitor IMO, until the system breaks which isn't really worth worrying about because everyone will be in the same boat at that point more or less.

But if you aren't married with kids, or expecting them soon, I personally would never consider buying. Beyond the opportunity costs I described above, and other potential better investments to make while you rent, your "calculations" also completely ignore the costs of ownership that you don't have to deal with as a renter. Let me assure you, as a multiple-time homeowner, things are always breaking, need replacing, property taxes, etc. etc. Even just ONE major or slightly major unexpected expense in the next three years will more than offset whatever "profit" you may have been factoring. Certainly there are many good reasons to own (eventually), but do not rush yourself into that earlier than you need to.

So you think it’s bad for single people to invest in a home?

 

[Akwoodchuck]

Buy and hold, equals gold....

 

[tdhanses]

I haven't come across any speculations that prices will increase. Seems like the general consensus is prices will decrease with rising interest rates and higher inventory.

Yeah I feel we’ll see prices flatline with maybe a slight decrease but we’ll see interest rates increase.

You’ll always feel like your overpaying, I have with every home I’ve bought, yet they all have increased in value. The housing market isn’t going to crash like it did in 2008, the predatory lending just isn’t out there and I doubt there are interest only mortgages being handed out like candy that created that situation.

Only thing that will create a large decrease in values is an economic collapse in my view.

 

[Johnboy]

Why do you believe the home values will possibly drop in the area you are looking in? Loss of jobs? Its hard to go into that kind of debt but can work out in the long run. The biggest what if for you is what if the home prices go up 10% - 15% and not down then you really lose out.

This cuts to the core of it. Apparently 30% of housing payments were missed/skipped in the June report. Foreclosures/emergency selling will flood the market, and increased supply will drive prices down similar to the bubble in '08. At least that's what I've read. But who knows? That's the big question.

 

[Dustin the wind]

If you are ready for a house and your finances are doing well then yes is your answer, just make sure it’s a longer term investment. If you plan on selling after a few years then maybe no. Housing is always on an upward trend if you look at the stats over a more lengthy period of time.

 

[tdhanses]

This cuts to the core of it. Apparently 30% of housing payments were missed/skipped in the June report. Foreclosures/emergency selling will flood the market, and increased supply will drive prices down similar to the bubble in '08. At least that's what I've read. But who knows? That's the big question.

I think you’ll see though that will reverse as people go back to work, that blip is due to the mass short term layoffs that are already slowly reversing, I doubt any bank will foreclose on anyone this year due to the bad pr that would create and people aren’t leaving their homes/areas as they will be going back to work.

 

[Mike from MO]

So you think it’s bad for single people to invest in a home?

I'm sorry if that was your takeaway from my post. I went out of my way to try to make it clear that I was giving my PERSONAL OPINION which is completely based on my values, not yours, or even the OPs. Me, as a single person, never considered purchasing a house. There are pros/cons of either route. The OP was soliciting opinions, I merely offered mine.

 

[tdhanses]

I'm sorry if that was your takeaway from my post. I went out of my way to try to make it clear that I was giving my PERSONAL OPINION which is completely based on my values, not yours, or even the OPs. Me, as a single person, never considered purchasing a house. There are pros/cons of either route. The OP was soliciting opinions, I merely offered mine.

Oh no I took it as your opinion, just was wondering why you came to that conclusion or how values relate to it? I’m not knocking your opinion, just interested in the why. I bought my first house at 22, rented it out for many years and it has doubled in value. When I got married bought another house that after 2 years was worth about $100k more then we had paid. To me a house is just an investment and will change with life changes just like your holdings in the market will change the closer you are to retirement, sometimes at a gain and sometimes at a loss.

 

[Mike from MO]

Oh no I took it as your opinion, just was wondering why you came to that conclusion or how values relate to it? I’m not knocking your opinion, just interested in the why. I bought my first house at 22, rented it out for many years and it has doubled in value. When I got married bought another house that after 2 years was worth about $100k more then we had paid. To me a house is just an investment and will change with life changes just like your holdings in the market will change as you are closer to retirement, sometimes at a gain and sometimes at a loss.

Gotcha. Sounds like you have had a great plan and executed well.

For me, flexibility and liquidity were/are my highest priorites, and my background is as a stock analyst so I always felt more confident in my ability to earn a return in the stock market than real estate. And I liked the relatively ease of ownership of managing a stock portfolio than a rental portfolio in the sense I can do it easily from wherever, whenever and never have to worry about tenants, repairs, etc.

But if I were to have bought a house as a youngin' and pursue real estate investments, it would have been almost identical to what you did and are doing now. It's just not the sector that was a natural fit for me, especially as a single lad.

 

[WCB]

IMO...I wouldn't commit to either not buying or buying...keep your eye out and look. If something comes up that you really really want or is exactly what you are looking for no reason not to buy in my opinion. I really don't understand people who buy a house with a plan to sell it in the near future 3-5 years (unless it has to do with job situations/relocation). The hassle doesn't make it worth it at all.

Right now talking to realtor friends and our realtor there is no sign of it slowing down. However, the state of the world right now it can obviously change over night. I wouldn't bet on prices dropping more than 5-10% or only leveling off. Remember this "downturn" is not related to financial problems like mid 2000s. I think you may see a few more properties hit the market for people that were stretched thin before and have now lost their jobs or ours were greatly reduced but I don't think price will change.

I am in the don't rent ever unless it is short term or it is really cheap where you can save money to eventually buy. At least here the rental prices are well above mortgage prices. Granted your not "tied" to it and out down payment etc. but you will never gain anything by renting.

We are currently looking to move but don't "need to move" becuase we are in a great position. We lucked out and bought our house in 2012 on a short sale and paid $124K for it, financed 100,000 ish...besides new carpet, paint and counter tops we have put nothing significant into it and could sell it tomorrow for $250K+. Hardest part for us is our total payments with insurance is about $800 (we are 30min north of Minneapolis MN). But family is growing and I need some land to play on.