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Given the longer term history of Michigan I would be reluctant to assume that "older areas" will have any particular appreciation. The unfortunate lack of care that many cities have neglected to put into their infrastructure could be a GIANT problem going forward -- Flint's Water Crisis Just Became A Double Emergency
Further, there are often big differences between the pool of folks that are renting when they start their careers / family vs the residents that have lived in older areas for decades and vote against things like new schools, improved recreational facilities and other amenities that are more appealing to younger people...
The bigger issue is one that goes well beyond the "cash flow" issues, namely when you consciously choose to purchase in an area that is far below your peers you really set yourself up for a whole range of limitations that can hinder your career, negatively impact the options you have for recreation with your family (everything from not wanting to go on date nights with your spouse to worrying if your kids ought not play in youth sports because the options are so bleak) and ultimately result in a worse overall "life outcome" for yourself and your kids.
As somebody that has been a school teacher, landlord and real estate agent I always encourage folks to find the most affordable home in the NICEST area they can manage -- that might mean something like this: 1410 Bedford Rd, Grosse Pointe Park, MI 48230 | Zillow
Definitely an older home, and not at all excessively large, but neither is it in some area that is has a history of "shift workers" that might have rowdy habits...
Given the longer term history of Michigan I would be reluctant to assume that "older areas" will have any particular appreciation. The unfortunate lack of care that many cities have neglected to put into their infrastructure could be a GIANT problem going forward -- Flint's Water Crisis Just Became A Double Emergency
Further, there are often big differences between the pool of folks that are renting when they start their careers / family vs the residents that have lived in older areas for decades and vote against things like new schools, improved recreational facilities and other amenities that are more appealing to younger people...
The bigger issue is one that goes well beyond the "cash flow" issues, namely when you consciously choose to purchase in an area that is far below your peers you really set yourself up for a whole range of limitations that can hinder your career, negatively impact the options you have for recreation with your family (everything from not wanting to go on date nights with your spouse to worrying if your kids ought not play in youth sports because the options are so bleak) and ultimately result in a worse overall "life outcome" for yourself and your kids.
As somebody that has been a school teacher, landlord and real estate agent I always encourage folks to find the most affordable home in the NICEST area they can manage -- that might mean something like this: 1410 Bedford Rd, Grosse Pointe Park, MI 48230 | Zillow
Definitely an older home, and not at all excessively large, but neither is it in some area that is has a history of "shift workers" that might have rowdy habits...
The house you can afford. I wouldn't stretch into a bigger house than would be comfortable, so depends what you're comfortable with which varies. Lender guidelines don't really tell you what would be comfortable for you. For example, if you're 29 paying off student loans, daycare expense, two car notes to drive cars you feel entitled to because you went to college and need to differentiate yourself from the blue collar what you can comfortably afford may be less than what you can get approved for. A lot of it is just personal preference to. Bank lending limits would say I could afford about $2,000/mo for a mortgage. I'm definitely not comfortable with that. For me $1,500/mo would be stretching it.
Agree with this^^^ 1000 sq feet might not be so bad with one kid, but with two I think you will not be happy in that small a house and will be wishing you bought the bigger house within a couple of years. It's not as if the house you want is a Mcmansion that will stretch your budget to the max.
However, it's really more about the neighborhood. There's a world of difference in the comfort level of living in a good neighborhood versus a not so good neighborhood. The value of having good neighbors who work hard for their money and take good care of their houses and neighborhood is priceless. The schools also have a big impact; it's much better for kids to be in a better school system where parents have the time, money and desire to participate in their kid's education.
IMO, you should pick the bigger house as long as it is in a better neighborhood and in a better school district as long as you can afford the payments on just your salary since your wife may or may not be working in the next few years.
Location: Chapel Hill, NC, formerly NoVA and Phila
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My opinion is to buy a neighborhood/town, not a home. Look around carefully and find a neighborhood that you love and want to live in for a long time, and then buy a house that you can afford in that neighborhood. Most people set out and say something like, "I want a 4-br,2 bath home for $250K. Where can I afford that?" So they find a home they love, but not necessarily the location. And I think that's a backwards way of looking at it. Find a town/neighborhood you love and then look for a house in that town/neighborhood. If the homes you can afford in the town that you love are on the small side, then look for ones that have the opportunity to be added on to easily - have some land, are ranch homes, etc.
We did it this way - found a town we loved and bought a small, 1950s 3-br rambler. But we didn't care because we LOVED the town! When our "surprise" 3rd child came along, we only looked at bigger houses within our town because we didn't want to move out of our terrific town. But as others have alluded to, the costs were pretty high to make the move, and we truly loved our old, cozy 1950's rambler, so we added on to our home rather than move.
PS. My husband has since been transferred and we had to move out of state, and because costs are lower in our new state, we were able to buy a bigger, newer, shinier home, and I still miss our great old town with our small old home.
I feel like I expressed the quality of the neighborhoods poorly. They are both good neighborhoods. They both have median household incomes in the 70-80k range. They both have low crime rates (well below national average, according to City Data) and both have highly educated populations with good school systems. I really like both areas, but for different reasons. One is more young, trendy and affordable, the other seems more established and has nicer homes and properties.
The expensive neighborhood is just ever so slightly better, mostly due to being older. (Mostly 50 year old professionals vs. 30 year old professionals)
One is just older and full of 1950s post-war homes (and a handful of modern tear-down/reconstructions) and the other is newer and full of 1970s/1980s colonials and bigfoot ranch styles.
Am I correct that the 1000 sqft house with a basement does not include the basement sqft in the 1000?
Yes, basements typically add about 500-750 square feet to the homes in those neighborhoods. I wouldn't buy a 1000 ft^2 home on a slab. Most of the 2000 ft^2 homes also have 500-1000 ft^2 basements. So if we were to count basement footage it'd be more like 1600 vs 2750.
I'm mostly just typing out my thoughts here, but any input is certainly appreciated!
Last year my wife and I sold our house and moved across the country for a new job. We timed things well and made a slight profit out of it (30k) and now we're feeling ready to buy a second home. We moved to an area with semi-affordable real estate (Detroit Metro), so unlike where we came from (Salt Lake metro), we can actually afford the home we want, but... do we want to? We're 29, we have one kid and we'll have a second one in a year or two. We won't have three kids (unless we get surprised with twins or something).
All we really need is a 3 BR, 1000 sq.ft bungalow with a basement (for an office) and a detached 1 car garage (2-car if we're lucky), in a safe are with good schools near nice parks to play in. (This would be Clawson or Berkley for those familiar with the area). Well, with 30k down, we can get that for ~$650 a month, or ~$900 on a 15 year loan, with no PMI and I'd have a 15 minute commute. The things we could do and money we'd save with a $650 a month house payment... Wow!
But if we got the house we want we'd have a 2000 sq.ft. 2-story colonial with the necessary bedrooms, plus an office for each of us, two family rooms, an attached 2 car garage and a big private yard to play in, also in a safe area but with even better schools (Rochester Hills or Utica/Shelby for those familiar with the area). Unfortunately with 30k down we're pushing the maximum of we can afford and looking at a ~$1500/mo house payment. That would include PMI, higher taxes, but not increased transportation costs, as I'd double my commute. We can afford that, but that's a lot of money not being saved.
When I write it all out like that I feel like splurging for the house I want would be a terrible idea, but man I'd love some of those houses we've looked at in the outer suburbs. The post-war bungalows, while quaint and perfectly sufficient, are kind of boring. They'd make me feel like, "I went to college, got a STEM degree and all I live in is a house built for factory workers in 1950s? What am I doing wrong?"
I'm sure many of you have come across this first-world-problem before. How have you handled it? Do you wish you'd have done it differently?
You should be focusing on school quality. Buy whatever you can afford in the best school district. If you have to sell quickly you'll be glad you did. You also increase your chances for building equity, which will enable you to buy a nicer home down the road.
Forget the bells and whistles, buy what you can afford in a highly rated school district at 30% of gross income while still being able to contribute significantly to your 401k. Don't be foolish. Don't get trapped into comparing yourself to others.
I'd also add: What you wrote about living in a house built for factory workers spoke volumes about your insecurities and possibly character. Listen up: You are not special. No one is. Karma can be unkind. With your "better than" attitude, you are setting yourself up for a huge emotional crash when you fail in the future. And you will fail at something....something that matters. We all do.
The expensive neighborhood is just ever so slightly better, mostly due to being older. (Mostly 50 year old professionals vs. 30 year old professionals)
One thing you might want to consider when making your decision is which neighborhood you feel your family is going to fit into better. Which neighborhood will offer more kids for your future little ones to play with? Which one will best fit you and your wife's interests? A young couple in a middle-aged neighborhood may feel rather out of place (and visa-versa - one of the reasons I'm selling my current house is that I'm a 50-something single and the neighborhood is a families-with-kids sort of place).
Also, don't under-estimate the value of a shorter commute! Long commutes get old quickly, particularly when the weather is bad, and what's the point of having a great house if you spend much of your off-work time commuting and don't have much actual free time left to enjoy the place?
I second the suggestion to either look for a slightly larger property in the 1500-1600 square foot range, or to find a property you could add on to later. In the town where my parents live, a lot of people are buying small 50s ranches and converting them into 2-story homes; could that be an option for you in the future when your income and your need for space have both increased?
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