Dear Patrick,
Im 42. Always rented. Still I get people saying "now is a good time to buy". My first son is coming in 12 weeks. Wife wants the nursery painted. I can tell if we stay in our 1bed apt. With a full finished awesome basement. This gives us 1800 sq ft total for $1390/month. We have a good income 170k total and we are saving 3k a month for down payment. 33k so far. We found an ideal house in 07922 with 4bed 2 bath good basement great location. Top 20 school in state (out of 320). Price is listed at $435k. I won't pay over 399. Should I even bother. Realtor says it would rent for $2800/month. Anything cheaper is junk tiny cape that we won't take. This is a ranch. We like it. I'm still seeing reductions in this town but this house is better than those. Like a 500k house here we still don't like even if they drop it 100k. I'm scare that my 385ish home will be 299 in the next year or 2 or worse. I can afford the mortgage easily on my income alone. Wife's income is treated as
safety and savings and so on. Thoughts?
What to do?
By lazstan Follow Mon, 16 Apr 2012, 4:11pm 6,890 views 58 comments
In Berkeley Heights NJ 07922
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lazstan says
Try and find a home owner that has that savings rate. You won't. 3k/month savings is a great setup. Why would you change things? To me, taking on 30years of debt better have some quality of life changes verses me just renting. The flexibility as a renter is amazing and you can't beat the savings rate right now. I can buy or do anything I want and not worry. Throw a 30 yr note on my back and things will not be the same.
If you are unhappy for whatever reason then take 1K/mth and go rent a nice vacation rental for a week and live it up. The amount of things you can do would be amazing. Think about it.
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StoutFiles says
If you can't discuss the financial negatives of a decision with your significant other, then you might want to take some of that savings rate and work things out. Happy couple means happy couple. Period.
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Danville, CA
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lazstan says
Happy wife = happy life. There are some things far more important than timing the exact bottom of the housing market.
My advice would be to be sure that, whatever you are buying, you will be happy there for 10 years. Even if the prices fluctuate wildly, it's a reasonable conservative bet that prices in 10 years will be at or above today's prices. What that means is that this had better be a house you really like, and in the neighborhood you both really like.
If there are even better neighborhoods that you would prefer to be in but are a little too expensive today, you might be better off renting for another year or two to see if those prices come down at all.
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gregpfielding says
Right and one of the most important things in life is providing a commission to a grinning hyena.
Loved the comment about robo-signing not hurting anyone because the foreclosure victims were all deadbeat scum, anyway. Any answer to the question about the Wells decision in Louisiana? Every foreclosure was bogus and were completely up to date. Short-changing the foreclosure process didn't hurt them, right? The Realtor® answer is who gives a fuck because those dogs already provided a Realtor® with a commission which is their reason for breathing, right?
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gregpfielding says
High house prices = happy Realtors
High house prices = happy bankers
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lazstan says
I always feel safe trusting my gut instinct.
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San Clemente, CA
Wait, so you've been saving for whopping total of 13 months? That's not very impressive... Given your savings rate you should have a 25% down payment together in less than 2 years.
I think the choice is pretty clear. Stay were you are till you have a "real" downpayment saved up. Prices won't go up till then and if you're lucky they'll even go down. Seems like a no-brainer to me. Tell your wife to chill.
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Menlo Park, CA
gregpfielding says
I would bet that far more divorces are caused by buying a house on the edge of affordability than by waiting and saving.
Once the inevitable financial setback happens and you can't make the mortgage payments, the fights will start, and the blaming:
"Well YOU wanted the house, I bought it for YOU."
"Well YOU just aren't successful enough, are you?"
These things do not happen to renting couples with lots of money in the bank.
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Here are my humble opinions. My first bit of advice is to not seek advice on a forum for such important decisions. My 2nd is to maybe talk to a banker or broker to see what you could afford and whether you can buy. That's a start. When you mentioned you'd saved 33k, is that total for your savings? In general you need to have at least 6 months of "emergency funds" saved up. In the Bay Area, that probably means at least 30-40k.
Lastly, in comparison, my wife and I are only now starting to look at houses and we have been saving for years and years, have rented for well over a decade, and have saved up a lot of cash. Many times over what you've saved. You would think we were all set but even in our situation- granted we are conservative with our money- I wouldn't feel comfortable paying more than 400k-500k max for a house here and even then, that basically gets you a starter home with close to a $2,000 a month mortgage even with a 20% down, of which we intend to pay up front. Its also important to note that we don't have any kids. I guess what I'm saying is that it takes an extraordinary amount of effort to buy a house here and often that takes years of saving and planning. It took us well over a decade to do this. That's just sort of how it goes.
So in my opinion ( again- this is an important decision) I would at least talk to some financial professionals in order to get a better understanding of what you can do with what you've saved.
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Patrick says
A+ post.
Even if the house payments remain manageable, there may well be some resentment due to the loss of disposable income. I would be pretty pissed if my fiancee pushed me into buying a house that we could make payments on, but have little money left for having FUN. The whole point of getting a house is to enhance your enjoyment of life, or at least it is supposed to be. If you are house-poor, I guess you can sit on a folding chair in the living room and stare at the wall for enjoyment. (???) Lots of people seem eager to become house poor to "get their kids into the best schools." Well, good luck with that. Hopefully the "great schools" can provide all of the life enrichment experiences that you can't afford because of the house! That's what high API scores mean, right?
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edvard2 says
Only if you hire them by the hour, which is very expensive.
To take advice from a broker or a financial advisor that stands to make a financial gain from your decision is foolish.
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Ross, CA
Patrick says
Stress in marriage can be caused by lots of things. Bottom line is that all decisions in a marriage -- including financial -- have to be mutual and well thought out.
As for renting, there can be downsides. My brother's family thought they had a long term rental but the house had to be sold and he had to move his kids out of the school district. It was very stressful on the whole family and his wife was pissed at him because they did have enough to buy, but he thought that prices would fall more. In the very short time frame they did have to look, they found nothing (not even a rental!)
Maybe prices will continue to fall, but I believe in the nicer hoods with good schools in the BA, the decline will be negligible.
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Murrieta, CA
At $3000 savings a month you could buy a $500,000 house in less than 14 years with the cash stuffed under a mattress.
If you had $500,000 in the bank would you buy a house in cash? I bet you would not Because you would then realize the house is really not worth that amount of money or risk. I'd imagine that being house rich and cash poor really sucks too.
how can leveraging yourself with a mortgage be any better of a situation?
BTW,..50 percent chance the wife is just going to take the house anyways.
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B.A.C.A.H. says
But he can rent that same thing for ever and still come out ahead then buying the same for 800K.
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Rent4Ever says
At some point you have to talk to "somebody" if you plan on buying something because you have to get approved first, which means presenting things like tax returns, getting your credit checked, and so on. Some of these things are dirt-cheap. It cost me $1 to get my credit report for example.
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gregpfielding says
Same old realtor tactic to pursuade some one to buy!
No debt = happy life.
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Belmont, CA
Life in the USA and especially in the Bay Area is starting to suck. hard. Cost of living out of control, schools suck, traffic is bad, jobs are only paying slightly more than other places at this point.
Why buy into this dying garbage dump? The innovation dream is dead here, its all corporate now. Time to move on. Its sad watching this go from innovation central to banker/corporate sweat shop.
Sucks.
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Mick Russom says
Mick Russom says
Early signs of the start of cannibal anarchy!
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At 440, plus closing costs you are going to have a payment that will be very difficult to maintain. You want to live your life, not to live in order to pay for a house.
You should find something a lot cheaper if you want to be financially secure.
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Katy Perry says
So true. When you have the 500K and feel the freedom that kinda money gives you, it is very very hard to give it away for a 4000 sqft crap piece of land holding a 1000sqft cottage next to the freeway. People play with credit way too freely in this country.
Love the post, glad others have this type of thinking. Sometimes I feel alone, until I see posts like this.
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bubblesitter says
You buy when everyone else starts wanting to rent. :) Never, never follow the masses. It'll be a sure way to be mediocre at best.
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RentingForHalfTheCost says
In this country that will never happen.
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RentingForHalfTheCost says
Oh you're definitely not alone. Not on Patnet anyway.
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Katy Perry says
It wouldn't be wise to literally stay in cash for 14 years, because of inflation. Put that cash in stocks and bonds. But I get your main point: don't get in a huge amount of debt.
At the very least, you should have a down-payment large enough to make your monthly mortgage interest lower than your monthly rent. If that means saving up $250,000 for a downpayment and mortgaging the rest, do it.
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Are YOU prepared for CANNIBAL ANARCHY?
bubblesitter says
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Berkeley Heights, NJ
English is fine... Typos happen using a thumb and iPhone. .. Low savings due to tuition for masters is 50k cash out of pocket, and a guess of 80k on 19 vacations with the wife the last 10 years... Yup we traveled and stayed in very cheap places..I know people that lost that and more on the house they bought in the frenzy..so I can say I traveled for free.. Not really I know..renting the 1 bed is not fun for company and entertaining.. The houses are in top areas as we know we can get stuck for a time..I learned from others.. Locations we like can be for 30 years easy.. Mortgage can be covered by rent if we had to move..there are things I need a house to do, gardening, build an electric car, store food for the collapse of the dollar, get solar power and a generator as power outages leave u helpless in an apartment complex. I also am getting a house suitable for our moms as they age..renting this house costs $2500 and all that goes away. If I buy, then 2000 goes to the toilet in interest and taxes while 500 is ours.. Waiting some more I know helps me in dollars but costs me in reasonable human happiness..not in debt..driving a civic.. Nothing lavish..just a home that's cheaper than renting it, today...
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APOCALYPSEFUCK is Tony Manero says
LOL. I am ready. Hey,thanks for those critical survival tips. :)
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FortWayne says
I'm betting that we have no choice in this country. Greed drives the majority and once the majority realizes that renting is the ultimate greed, then they will scurry like lemmings. I am the greediest MF around and am already here. ;)
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bubblesitter says
The whole idea behind being financially successful in life that no one has brought up yet is that you know you are making the right financial decisions when you MINIMIZE OPPORTUNITY COST! That does not always mean the same things to all people, and will change along the life path of an individual.
Happy Wife = Happy Life?? B.S., that's just allowing emotions to control finances, which leaves you screwed, and not in the good way. You're happy because she's happy? Not likely. As a couple you should be able to sit down and make financial decisions about where to live (either renting real property, or renting money to purchase real property, or paying cash for real property to rent from the government). The most important thing to remember is to work on removing the emotional BS aspect from the decision making process. That doesn't mean settle for some shit hole in a crappy neighborhood, but don't let it force you into buying a place beyond your means (or that would adversely affect your opportunity costs) either.
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male
I would put my money into Tax Lein Certificates and make some good money on the interest, and if there is a chance you could end up owning a house out right morgage free. Sell it below market price, in other words unload it fast and take the profit from the sale and use that as a down payment on your new home. Just remember that you are working and earning a fairly good wage which gives you great advantage to having your money work for you and not make the mistake of having you work for your money.
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Moraga, CA
I would keep renting. If you need more room find a 2 bedroom. A one bedroom is fine for a couple and an infant. In Moraga I see a lot of families move in when the kids are school-aged and the family wants good schools; Sometimes they move when the kids are in jr high or high school - when school starts to count more. You have a lot of time before you need to worry about good schools and I believe bay area prices for good school districts will continue to fall. The bubble went up for seven yrs (2000 - 2007) and I think it will go down for seven yrs - in the bay area. If you continue saving and wait until 2014 you should have close to $100K to put down - and I think prices will be 20% lower by then. The rule of thumb is don't buy if the housing price is higher than 15X the yearly rent for the same property. Moraga is still way above that - but it was less than that when I bought years ago and will be at that level again in my opinion. good luck with your decision.
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bubblesitter says
I agree. But if he wants to buy for that "reasonable" price forget it, there too many Greater Fools.
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B.A.C.A.H. says
Time is our best friend in today's market. Greater fools will dry up like every bubble. Did you see the sales figures lately? They are also scarce and prices are still falling.
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RentingForHalfTheCost says
Yep,everyone is holding out on increase in home prices pretty soon or they expect a miracle to happen after election 2012. Good luck on both of it.
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Danville, CA
gregpfielding's website
bubblesitter says
It's easy on forums like this to pretend that everything is an absolute - it's either right or wrong, good or bad, black or white. Reality, for Lazstan and the rest of is shades of gray. And if the wife wants to start putting down roots for the family, that is absolutely an important factor. I'm guessing anyone flippantly disregarding that nesting instinct hasn't done the whole wife-and-kids-thing yet.
And if you actually read my entire post, I cautioned against buying if it wasn't their dream house they would be in for 10 years and even suggested renting for a while longer.
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Los Angeles, CA
Lets remember the 2009 spring buying frenzy to get the 'free 8k' from the feds.
It dried up and prices continued downward spiral.
Now we are in an election year, obviously all the factors keeping prices up are pedal to metal max overdrive this year if the dems are able to control them.
I predict a slightly up in prices then down again the next 2-3 (repeat of 2009 pattern)
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PockyClipsNow says
Down is the new up. ;)
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Mountain View, CA
bmwman91's website
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gregpfielding says
I hear this a lot. So Many people seem to think that having kids is an excuse for irrational behavior, and at times, outright stupidity. A house and a home are two disparate things. We are always talking about how important it is to exercise rational thought and judgement over emotion and instinct. Is the "nesting instinct" the exception? I bet that a good, rational analysis of one's "nesting instinct" would reveal that it is driven by the same irrational fears that drive a lot of other things.
I know plenty of successful folks that moved a lot as kids, just as I know a lot that grew up in one house. Having kids is not an excuse for stupidity, and it is often to the kids' detriment in the long run.
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Sunnyvale, CA
lazstan says
Renting does not preclude renovations. With the landlord's permission my wife and I removed the carpets, had the underlying hardwood floors refinished, put new vinyl in the kitchen, and installed new window coverings.
Over the 3 years we lived there we saved $7,000 - $17,000 over renting a nicer place that was already fixed up (but probably wouldn't allow pets).
Talk to your landlord and remember that compromise gives something to both parties. Offer to return the nursery with a fresh coat of paint in its original color when you leave and if that's not enough suggest an additional damage deposit large enough to cover a painters' services (get a couple of quotes so that's accurate).
Your fear is well founded. Depending on your cost of renting (not what _that_ property would rent for), likelyhood of you moving for work, etc. that may or may not be an issue.
Plus your wife's health insurance (if she's getting it through her work; that runs me $5000/year), plus health insurance on the munchkin (would add $5000/year to my group plan bill), plus life insurance so your family can sustain its current lifestyle if you die ($2500/year), plus money to educate your children (college costs were going up 4X inflation) in a world where a bachelors degree is not enough (I know young people who graduated summa cum laude but lack jobs after over 500 applications) and starting salaries aren't enough to live off of (supporting children in their odyssey years living in a different city/state where they can work in their field is less expensive than school but still not cheap), plus living expenses for a substantial time period in case you go through a period of unemployment (perhaps for both of you if your wife is staying home with the child)/disability?
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bmwman91 says
You don't understand, to a hyena every breath that a human being takes is relevant to only one thing: providing a commission.
The hyena waits and stalks, grooming the weakest marks, cajoling them, lying to them about the condition of the market ('prices will double in a week, a few days . . . '; 'there are 32 other offers, all cash and 17 of the wives offered me unlimited oral sex for a change to make an offer'), sometimes pretending to be objective, but in every interaction, grooming them for them for the final grotesque betrayal much the way a pederast lures and disorients a young child.
It hears nothing of reason. It has no instincts of conscience. It is as obsessed with the acquisition of a commission as a cannibal is insane with a lust to eat human flesh.