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Here’s my situation. I own a house outright. I had a Realtor do a CMA that valued it at about $215k (A year ago, it would have been $270k). It is a modest, but nice house, that is currently adequate for our needs. However, lately it seems like the neighborhood is going downhill somewhat. There are some run-down areas a couple miles away, and I think some of that influence is creeping in. Two weeks ago, our nice white vinyl fence was “tagged.” The police came out and said the symbols were gang-related, but most likely kids trying to look tough. Additionally, the area is a working class area, and a significant number of the kids in the schools do not seem to be college bound. So I would like to move my family to a somewhat more upscale neighborhood with better schools, where their friend’s families are more likely to share our educational goals and values.
I have done some searching, and there are great deals on construction foreclosures in some of the nicer areas of town. For $280k (pre-negotiation), I can get a home that is significantly newer and nicer in a more desirable area. That means I would be able to get into such a place with an $80k mortgage on my income of $70k. Easily within our means.
But I am really conflicted. I really enjoy the security of not having a mortgage, even a small one, given the economic climate. My office has not had a lay-off in years. That said, my company is dependent on military and NASA funding, and given our current political and economic climate, I could see cuts occurring. As people more versed in the current economic situation, would you ride out the storm or take the leap to a place more suitable in the long-term for my family?
If the LOCATION that your current home is in is LIKELY to deteriorate and the LOCATION of the home you can afford is far better than this may be an excellent time to improve the HARDEST negative to overcome in ANY real estate deal!
As to your own job/financial status you ultimately must decide what makes sense for you. Few would suggest there are any eminent cutbacks in general military/NASA type spending. There is widespread agreement that high tech is vital to the recent success in quelling rampant violence in Iraq, expanding our intelligence gathering in Afghanistan, and generally putting less soldiers in harms way. If that is the sort of thing you do, and you have skills that others will respect, I would be very confidant in your long term career prospects.
A small mortgage ought to weigh far less on your mind than the prospect of owning a home in a troubled area...
Yes ... I asked a question in the RE forum a few days ago. I just can't decide. I'm probably too conservative with my finances for my own good. Then again, it's allowed us to be in a financial situation few others my age are. In any case, I appreciate the insights in both cases
I would not characterize a hesitation to upgrade in the current situation as "too conservative", it is prudent.
The maxim of real estate has/is/will always be LOCATION LOCATION LOCATION -- if you can get into a better (or best) neighborhood that is pretty much as smart a move as you can make.
Look, I am financially conservative as well. I can understand wanting the best for your family. But isn't there just the teensiest bit of wanting to "upscale" yourself and family??? I detected that. I think a better neighborhood is definitely advisable, especially for your kids. But consider "downscaling" the type of house. Better neighborhood, smaller house. Do without the granite countertops and whirlpool spa in the bath. Maybe you'll find one that does not have a 3-car garage.
YES I advise a move to a better neighborhood if you have kids and there are signs of gangs moving in. You don't want that for the kids. But you don't want to jeopardize your mortgage-free status, either. My advice: do a LOT more looking around. Substitute "upscale" for "safe". Find a house that will be an even exchange or better yet, put some cash in your pocket.
Remember - houses are hard to sell right now. Whatever you do, be sure you have your present house sold before buying the next one. If you don't, and opt to take out a 'temporary' mortgage instead, your family could be left with a mortgaged home in the event that you die.
Ordinarily, I'd say "go for it", but these are not ordinary times. You may want to consult your attorney about all the details (yes, attorney) before making this move.
Those are good points. There might be a bit of upscaling desired, but I really wouldn’t want to downscale the home from what we have. We have 1700 sq feet, 4 bedrooms. We have two young kids and are looking to adopt another. I’d like to at least keep the same size and maybe upsize a little bit. But you are right – granite countertops and 3 car-garage are luxuries, not necessities. We actually have the whirlpool spa, but I could live without that – I’ve used it about two times since we’ve lived there
Our current yard is awesome – quarter acre totally fenced, and it’s great for the kids to play in. I’d like that too, but some of the houses I’ve been looking at have smaller lots and slightly more room inside. Those kinds of trade-offs I’m good at making. It’s the financial commitments in the uncertain times that are harder for me. Even the similar houses in the nicer neighborhoods would require a small mortgage of maybe $40k once I paid the transaction fees and the premium of the better neighborhood.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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IF you can sell your current house... upgrading areas would be advisable. Your house size is not extravagant. I would try to find a spot next to a nice park, as that really helps resale and it is nice to have the city mow your playground. Since you are conservative, I don't need to stress not buying a "California Special' (4+ bedrm, 3+ car garage, $500k+). While there are tons of those very cheap at the moment... high property and income taxes in the future + a shrinking family size demographic dictates these types of homes will be tough to unload in the future.
IF you can sell your current house... upgrading areas would be advisable.
I agree. You'll get more bang for your buck upgrading in a down market, assuming that you buy something that will be in demand again when the market turns.
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