Should I wait to buy a house?

[Johnboy]

It sounds like you are currently sharing an apartment with a roommate.

Have you thought about buying a house, and offer to rent a room to your current roommate? If the apartment roommate is paying $700, tell them $800 to rent a room in your new house. You already live with that person and are ok with staying if you don’t buy a house.

You could take advantage of the low mortgage rates and collect nearly $10,000 per year in rent from a roommate that you are already familiar with. That is a pretty good hedge against any price drops.

I bought my first house at the age of 20, and had 2-3 roommates that were friends for the first 8-9 years.

20 years later that was probably one of the best things I ever did.

Bought that first house for $140k, sold in 2012 (13 years later)after housing crash and values still hadn’t risen a lot in the Portland Oregon area for $270k.

Took my equity from that sale and bought a house for a rental in 213 that was only 2 years old for $300k. I rent it out for $2000 per month and it is now worth around $460k.

At the same time I bought the rental house, I purchased the home I live in for $419k, with is now with around $640k.

Long term I personally believe you can’t lose on a home.

Like others have said, if you would be selling in 3-5 who knows if it will work out. If you could see your self there in 10-15 years from now... no brained to buy now.

I'm currently splitting an apartment with my sister, and if I buy a house in the same general area, she'd be willing to live with me for the exact amount you suggested. That is a huge factor in this decision, and I've adjusted my search area accordingly.

But the more I research this, the more concerned I become about the market outlook (really, the world economy). Based on the following youtuber's analysis, it seems that waiting until after new year (early 2021) might be a reasonable time frame to get a feel for how things are going to progress.

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[Mauibowhunter]

It is highly dependent on area. We bought our house in December of 2018. 5k over what Redfin said it was worth. However, it appraised at 15k more than we paid. Go figure. Now Redfin says its worth almost 50k more than what we paid for it. This house needs/needed a metric ton of work and that 50k doesnt include any updates we have done to it. I wish we would have bought years earlier. We were waiting for the bubble to pop, but it just hasn't happened here. Our realtor says the market is hotter than it has ever been. I just chatted with him last weekend. He does not see it slowing down here any time soon. Again, this is for OR and not WI. If your market is hot like mine then the low interest rates cold be worth it!

As a professional in the field though my main focus is Commercial Real Estate, I always tell people that your primary residence is much different than a investment property. Yes, you want your primary residence to increase in value and yes you want to buy low and eventually sell high, however you also get to enjoy the benefits of home ownership and making a property your own during the time you own/live there. Will there be deals during this recession, absolutely. How bad will it get? We still have no idea. I know in my market it will get bad. We are at 34% unemployment. Regardless of people not being able to afford their mortgage, people will not be able to qualify for a loan in the future. This forces a stagnet market when people no longer have buying power. I think the real buys will be in18 to 24 months but not now.

 

[FishDiveHunt]

If your long term buy. You could wait a long time for markets to change in your favor

 

[JFK]

I wouldn’t listen to a guy on YouTube. You can find just as many experts that will claim there is no end in sight for raising home costs in hot markets. Many people were calling for an inevitable correction in 2017/18 when I was looking. I wanted to believe them but they were all dead wrong. The gamble you make in overpaying is short term. If you stay in the home, and especially if you make significant improvements, short term dips are meaningless and you will come out ahead in the long run. Now if you hedge on it going down and it goes up, you are faced with actually paying more or being priced out.

As someone else said, there are intangible benefits. Want to make a nice yard, remodel a kitchen just the way you want it, own a dog, etc? Just a short list of some of the benefits.

Not sure about you but I was getting murdered on federal taxes before I owned. I met with a CPA who did the math and while I certainly spend more now for a roof over my head than when I was renting, my tax burden went down by over $10k a year. Might be worth meeting with a cpa for an hour to get the full picture financially.

 

[lacofdfireman]

I may be off but I think what we saw in 2008 in a way resembles what’s going on right now but differently. 2008 the banks were giving anyone that had a pulse a loan and typically a no interest loan and everyone was qualifying. Well at one point about 5 years later (2008) their no interest loan comes due and now they have to refi into a conventional loan and they quickly realized their payment was much higher than they could afford and eventually working 50-60hrs per week for a home loan isn’t fun anymore and they start defaulting.

Fast forward 12 years and I’m seeing home prices across the nation higher than they have ever been before. From what I’ve seen wages aren’t keeping up with the inflated home costs but the low interest rates are allowing people to buy these over inflated priced homes because they are getting such a good rate. You can buy a more expensive home when interest rates are low. I think at one point the novelty of working crazy hours for an expensive home despite the good rate will once again become a chore and people will start defaulting again. I mean really who can afford some of these homes. I live in Utah and the wages are low. A School teacher makes maybe $50-60k if you’ve been there for along time but home prices for a 2500 square foot home are north of $500k. A $500k mortgage can be made for awhile at that wage but your going to be working for a home and nothing else. No vacations, new cars, toys etc. After awhile you make a choice. Is it worth living in this house when that’s all we can do or have?

I’m thinking there will be a housing correction at one point. Not sure how much but it’s hard for me to believe it can go up much higher considering the unemployment numbers and commercial real estate mortgage defaults from which i hear are higher than they have ever been in history since the Great Depression. And the way COVID is going it’s not going to get any better anytime soon. Someone has to make that payment. The banks can’t let them default forever. If commercial Real Estate bombs housing won’t be far behind. Of course these are my opinions and I could be 100% wrong. Personally I’d wait to see what happens with the election. If Biden wins I think the bottom will fall out of the market.


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[Rich M]

We were talking about how folks do better than others and it is risk taking.

If your job is solid, you can easily afford it, and you plan long haul, go for it. My home value went up about 125 % in the past 20 yrs.

There is no way to figure out what anything is gonna do. No reason the stock market and home values are as high as they are. Will we feel the effects?? No idea.

 

[Marble]

For the OP...buy a house you can afford on a 15 year fixed if you will be in your current location for 5 years or more.

The housing market continually rises over time. Timing the housing market is like trying to time the stock market. It's gambling. Slow and steady aggressive payments to a mortgage is a good basis to build future wealth.

 

[BrokenArrow]

Johnboy, good to see you in another thread besides “dip in the market”.
This thread is just as awesome. Thanks for starting it during these uncertain times.
I will tell you I bought a house 2 1/2 years ago and just refinanced. It was worth it cause I’m in so early.
besides fixing things to my style, my place has a 1600 sq ft shop. My lady does whatever she wants to the house. I can man cave the shop and work on our vehicles. That alone is worth it to me. Basically, knowing something is yours and building equity just has a very satisfying feel. Money won’t be there when you’re gone and my daughter will have a place in the Mtns to do with as she pleases.
When you find the one that feels good. Do it if you want to be there for a while. You’ll justify the terms

 

[Johnboy]

I really appreciate the various perspectives everyone has offered here. Thanks for all of the input! I have some more pondering to do. Good thing is, I think time is on my side. My current circumstances are stable all around. It's a good place to be, all things considered.

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[Trial153]

I am waiting to close on two pieces of property. Buying assets is always a good idea providing they are priced right. From a historical perspective when isn't quality assets expensive? At the time they always seem expensive. Though when we look back we recognize value in retrospect.
And if you need leverage, you will be be hard pressed to acquire it at lower rates then where we are at.

 

[COOPDUCK]

I started typing up a detailed explanation, but my question really boils down to this: will the housing market experience a significant pullback in the next 3 years? Any experienced housing market people here have any opinions or insights?

Appreciate any wisdom/experience you can share.

nobody can predict the future. Owning a home is a great way to build an asset. Rates are lower than ever. No better time than now. Don’t buy more than you can comfortably afford. It’s a great feeling having an easily affordable mortgage and lots of money for the future and toys for today.

 

[TREE ‘EM]

The housing market has been caught in a revolving door high low 20 year +- cycle for about a century now.

If you don’t have much cash on hand and are thinking fairly long term such as 20 years you can buy at the high side and still come out good in the end.

If you have cash and you’re looking for investments you wait for the low portion of the cycle.

Every realtor and investor I know is worried that if Biden gets in the White House, the housing market will tank and rates will skyrocket. I completely agree with that sentiment.

 

[Taylor19]

the market is absolutly crazy rn, i have been looking for a while now and not much luck.

 

[JJMoody]

Definitely a sellers market. Even with the ‘Rona crazy. We’re out of our house and “full time RVers” tomorrow lol.... different areas are having different experiences right now. Every Californian and Seattle-(un, on, its,an??...) is flooding north Idaho, making the market crazy. Can’t help but feel like it’s a big-ol bubble about to pop.

 

[Trial153]

I am not worring about rate hikes nor tanking real estate prices regardless of the election outcome.. will hovering around 0 for quite a few years

 

[ChromeKype]

For the OP...buy a house you can afford on a 15 year fixed if you will be in your current location for 5 years or more.

The housing market continually rises over time. Timing the housing market is like trying to time the stock market. It's gambling. Slow and steady aggressive payments to a mortgage is a good basis to build future wealth.

This is good advice, and what I am planning to do.


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[Lawnboi]

Sounds like your in a similar place I was a couple years ago.

In process of buying our first right now. We have watched prices for the same damn house raise 20% in the last 3 years and it just keeps going up. Thought the rona would help us.... nope, opposite.

We got lucky and found what we think we will be in for a very long time. Got a low interest rate, and paid probably more than we should have.

But we didn’t have a choice really. We have been waiting to buy a house to start a family. Houses in our price bracket were all going within 24 hours of being listed. 3 years of looking felt like a joke. Everything selling over asking. Buying a fixer upper for top dollar didn’t make sense. Rent skyrocketing with almost no vacancy anywhere.

Just a shit time to be middle class and looking for a home I guess. I’ll feel better after we close.

I wish we could have waited for the market to come down, but we were done putting a hold on life.

 

[jjgrow]

IMO with the covid-induced WFH trend set to continue, people realizing the need for more space, and no reason for interest rates to spike upwards, there will be strong continued demand for single family housing.

 

[NDGuy]

We got lucky and found what we think we will be in for a very long time. Got a low interest rate, and paid probably more than we should have.

But we didn’t have a choice really. We have been waiting to buy a house to start a family. Houses in our price bracket were all going within 24 hours of being listed. 3 years of looking felt like a joke. Everything selling over asking. Buying a fixer upper for top dollar didn’t make sense. Rent skyrocketing with almost no vacancy anywhere.

You will never regret finding your potential forever home with sub 3% interest rates. Even if housing prices drop, not like they will tank forever. And if you aren't selling what does it matter?

We are closing on a house we could live in forever that has ample room for our growing family, is in a great neighborhood, good school district, and no shitty apartments or run down homes near it. Don't regret it one bit!

If you bought a house at any point in the last 12 years you are cackling to the bank with all the equity you gained. My current house I bought 4 years ago appreciated 25%. We sold for full asking & no closing costs.

 

[Lawnboi]

You will never regret finding your potential forever home with sub 3% interest rates. Even if housing prices drop, not like they will tank forever. And if you aren't selling what does it matter?

We are closing on a house we could live in forever that has ample room for our growing family, is in a great neighborhood, good school district, and no shitty apartments or run down homes near it. Don't regret it one bit!

If you bought a house at any point in the last 12 years you are cackling to the bank with all the equity you gained. My current house I bought 4 years ago appreciated 25%. We sold for full asking & no closing costs.

We got lucky on the area, not so lucky on the condition of the house. Still crazy that prices continue to climb. I’m sure we could sell right now and make money. The sellers market is nice if you’re selling but still a kick in the balls to an average income family.