To buy or wait? More housing questions... (Pittsburgh: apartments, lease)

[BrianTH]

Some people live in "starter homes" all their lives. I'm thinking of the sorts of 3BR houses you can find in lots of neighborhoods, including around Regent Square--if it turns out you always live as a single, I'm not sure why you would need more than that.

Of course that's just my two cents--and truth be told we ended up buying a lot more house than we needed just because it met our other criteria and we could comfortably afford it.

Edit: By the way, I'm not sure I would say we "like debt", but debt which is cheap enough may be preferable to tying up your capital in home equity.

[NoSwingForYou]

Originally Posted by BrianTH

Some people live in "starter homes" all their lives. I'm thinking of the sorts of 3BR houses you can find in lots of neighborhoods, including around Regent Square--if it turns out you always live as a single, I'm not sure why you would need more than that.

Of course that's just my two cents--and truth be told we ended up buying a lot more house than we needed just because it met our other criteria and we could comfortably afford it.

Edit: By the way, I'm not sure I would say we "like debt", but debt which is cheap enough may be preferable to tying up your capital in home equity.

I know anything is possible, but at this point I think 3BR sounds perfect (and max) as far as my current situation and possibly the near future. I think the main reason I paid off my debt was a mental thing too. The student loans had a pretty low interest rate, so they weren't high priority by any means.

[alleghenyangel]

Originally Posted by BrianTH

Edit: By the way, I'm not sure I would say we "like debt", but debt which is cheap enough may be preferable to tying up your capital in home equity.

Good point. Having a good chunk of cash in the bank, even if you have a moderate amount of debt, is probably more secure than using the cash to pay off the debt and thus having a very small (or insufficient) emergency fund. Having enough money in the bank to cover yourself for at least eight months without a job is the way to go (according to Suze Orman, at least).

[Bong477]

Fear credit card debt. Not a mortgage at 4%. Or go with a 15 yr and have it be even lower.

[greg42]

Originally Posted by Bong477

Fear credit card debt. Not a mortgage at 4%. Or go with a 15 yr and have it be even lower.

Yeah, this. It's not like with a healthy downpayment and such low rates that you're getting into anything ridiculous here. You are in fine financial shape to buy a house, much better than most.

But, I'm just going to throw this out: despite Pittsburgh being a stable market and all, don't treat this like an investment as so many people did over the last couple decades. Go through all the reasons you want to own a house other than "I'm throwing away money on rent" (which, to be fair, you didn't say, but I'm suggesting keep that thinking out of it). There are good reasons, from being able to set up things exactly how you want to having a greater choice in some types of housing. (You don't get too many single family houses for rent around here.)

Now the negative: it gives you a certain inflexibility, which maybe doesn't matter to you now, but might in a few years or several. Just something to keep in mind. Obviously it won't affect everyone, but I can tell you after buying a house 8 years ago at age 32, I have at times over the last few years wished I didn't buy it. It goes back and forth; heck right now I'm actually doing work on a patio out back, and we fully intend to stay here and enjoy it for a couple years at least. It affects other things I do as well. The house was about 3x my income back then (though not as high as yours; the mortgage was $118k) and I don't have trouble paying this sub-$1000 mortgage at all especially given that my income has increased. But if I didn't have the house, I might consider blowing up my work situation, or even moving to another city, things I wouldn't even have considered when I bought the place. And while we could just put it up for sale, I hate to sell it as is because certain aspects while fine for living in wouldn't exactly sell that well. A little bit of our own sweat into it and we should be able to make it more appealing, both to us and to anyone else.

As problems go, it's far from the worst in the world, but it is, IMO, worth noting.

Good luck with it.

[Q-tip motha]

Originally Posted by NoSwingForYou

Hi!

I'm a big fan of these forums and a common lurker, I love seeing the discussions and find them usually pretty informative. I especially like the awesome back and forth posts of the likes of curtis and Brian (I consider them opposites, and arch nemesis in a nice sort of way). Annnnyways... I finally decided I need some advice myself so I decided to post. I'm a 30 year old female, not married and don't have kids. I have reached the time where I've started recently thinking about buying a house. Right now I'm renting inside the city (by the east end) and rent isnt too bad (650 a month). I have been pretty content renting, but my small rental agency got bought out by a giant one shortly after I moved in. While they arent terrible, I went from a 1 page lease and 2-3 month notice when I want to leave to a 30 page lease, and 6 months notice if I'm thinking about leaving (you have to resign 6 months in the year).

Regardless I'm sick of moving, and this whole thing has put a bad taste in my mouth now regarding renting. I've started recently thinking about buying a house. In 5 months the lease renewal form will probably come in the mail and if I dont sign it I have until the summer to find a place or...move again I guess. I really like the regent square area, although I dont think I can afford regent square proper, so I've kind of been thinking about the edge suburbs close to its borders (wilkinsburg, edgewood, swissvalue). I think my financial situation is OK. I make about 65,000, and have my car (not brand new but not terribly old) and student loans paid off and no real debt otherwise. I live pretty well in my means and I also have about 31,000 saved up.

My questions are
1) Based on the experiences of real people, what house ranges do people think the average person with those credentials can afford? I was thinking around 175,000 MAX but I don't know if that's absolutely crazy or not. Also I'm thinking in 4 months I should have a little over 20% if I did have a 175,0000 house. I really want a good rate, and want to avoid paying PMI as it seems like a waste.
2) This is kind of related to #1, but should I be concerned I'm cutting it too close if say I only have 40k saved up? Should I just wait another year? I hate to tie myself into another year lease though, and by that time I'll probably have 50k+ just lying around as I'll be waiting to buy a house.
3) I'm a little concerned about the timeframe of my situation. Is 6 months usually enough time / not enough time to get a housing situation straightened out?
4) Does anyone from that Regent Squareish area know what are the general taxes around the the areas I listed above?
5) Should I be worried about reassessments? I get this feeling I'm going to buy and a week later get a notice my taxes went from 3000 to 6000.

I know this is a lot of questions and a lot of these them are "it depends", and I totally get that, like I said before, I'm just looking for some other's advice/experiences. Any other advice is welcome!

Thanks everyone!

I would think that job security would be the key issue, as you lose the ability to quickly relocate should you need to for work when you own a home. Assuming that isn't a problem the next step is to know what neighborhood you want to live in, and I mean really get to know the city.

Regent Square might be your ideal neighborhood, but its proximity to the park is going to drive up real estate prices/taxes and you may very well be just as content if not happier somewhere else and not even realize it. I say this because my wife and I had no clue that our current neighborhood was as pleasant as it is (shameless plug) until we decided to kill time by exploring it one September afternoon. By November we owned a home here. While you're looking it may not be the best idea to limit your search to just that neighborhood/area. A friend of my wife's has been house hunting for the past few months. She simply had to find a place in either Dormont or Mt Lebanon, but as anyone can tell you the prices for the homes in either neighborhood can be a little higher than the city average. Her/our former realter suggested that she broaden her search, and upon doing so she found a quaint little place in Carnegie that she adores.

I wouldn't worry too much about reassessments. Much is made about property taxes increasing, however if it did double as you've suggested it isn't going to break the bank if you make $65k a year or something comparable. My guess (and I'm by no means an expert.) is that with that amount of income and few debts (especially student loans) you could probably afford something up to around $175k, if not $200k. Especially if you put down a sizeable downpayment.

As for what kind of house you're looking for, I would resist the urge to jump at the first house you like. Really be honest with yourself as to how much space you need. Some of the larger 5 or 6 bedroom homes might really look nice. That is until you move in and realize that you reside in a very large building with many rooms to clean, and that much more space to heat and cool. If its just you it probably isn't a good idea to invest in more than 2 bedrooms. If your family grows you can always sell and move again later.


Something else to think about is that most of the homes in this city are extremely old. With that you're going to have to deal with some obvious problems right away, and some not so obvious ones as they arise. While you will probably have far fewer problems to initially deal with in a house that costs $200k as opposed to one that is closer to $50k, there are still going to be some issues that need to be taken care of. While those two homes probably look very different, everything behind the walls is probably very similar. Odds are good that the previous owners never bothered to hire electricians to run new wiring so you have a potential fire hazard that may need to be dealt with immediately.

The plumbing may be an issue as well. Its unlikely that the previous owners hacked into the walls to replace the old cast iron sewage pipes, or the copper water pipes so that may be something that you'll have to deal with sooner rather than later. Especially if the previous owners over the home's many years of existance believed that the various drains throughout the house were some magical portal in which they could dispose of any number of items...including cooking grease. I'll never forget peering down into the basement sewer line cleanout as our plumber vigorously snaked the main line out from another point in the basement, only to see softball sized globs of rancid solidified oil come to the surface and then disappear out into the street. *shudder*

I would also assume that you'll be replacing the furnace, water heater, or both. Just call it a hunch.

God help you if the previous owners did all of the repairs themselves, and were by no means competent enough to do so. I've spent countless hours cursing the name of the little Croatian woman we bought our place from. Especially last March when I spent a solid week gutting two bedrooms of 110 yr old horse hair plaster that instead of patching and maintaining they had decided at some point to cover with paneling . No doubt at some point in the distant future someone will be attaching my name to a string of expletives as well.

Anyhow it may not be the worst idea to buy a fixer upper for far less, and pump some of your savings into it. At least that way you know what you're getting in terms of the things that you can't see.


When you find a place that you're interested in, in addition to having it inspected it wouldn't hurt to bring a friend along to see the place if said friend has experience in buying/owning a home. You'd be surprised how much they might pick up on that the inspector could miss. If said inspector also seems like he/she is a little too optimistic and does nothing but shoot rays of sunshine up your backside about the place it might be time to get a second opinion.

Be sure that you take the seller to the cleaners as well, and don't trust them to fix any issues that the inspection reveals on their own. Get an estimate to have it dealt with, and request a credit or deduct that amount from your asking price. You don't know whether they're having reliable work done, or whether they're going for a bargain.

Good luck.

[tranceFusion]

Originally Posted by BrianTH

Pittsburgh Metro standard is to pay closer to two times gross salary than three.

I was going to suggest this without knowing it to be any sort of standard, for the following reasons:

1) Higher property taxes then a lot of other areas
2) Older housing stock, generally higher maintenance costs (obviously situation dependent)
3) Slower appreciation.. it's not really worth stretching yourself since you likely won't have the gains you can expect in a lot of other markets. Housing is more of a functional purchase around here.

[Bong477]

Originally Posted by tranceFusion

I was going to suggest this without knowing it to be any sort of standard, for the following reasons:

1) Higher property taxes then a lot of other areas
2) Older housing stock, generally higher maintenance costs (obviously situation dependent)
3) Slower appreciation.. it's not really worth stretching yourself since you likely won't have the gains you can expect in a lot of other markets. Housing is more of a functional purchase around here.

Wait... where are these multiple other markets out there where you can expect these big gains? Is this post time warped from 6 years ago?

Your property will very likely not appreciate at a high enough rate anywhere to counter the roughly 4% interest, 2% taxes, and maintenance costs you'll encounter. Thinking of buying a home as a money making proposition is dangerous, its only "profitable" because of how it compares to the alternative, renting. Owning has costs, but (at least in Pittsburgh) is cheaper over the long term than renting and has other benefits like pride of ownership, stability, fixing at least the bulk of your housing payment (taxes can still change and might make up 25-30% of your monthly payment), etc.

Buying has drawbacks too for sure, but for someone who wants to stay in the area indefinitely and is in a fairly good financial situation for their income level, it makes total sense to me.

[BrianTH]

Incidentally, one of the other nice things about not pushing the boundaries of what you could afford is that it reduces the downsides of buying, such as potentially having (or wanting) a change of circumstances that would mandate a sale.

[BrianTH]

Originally Posted by tranceFusion

I was going to suggest this without knowing it to be any sort of standard, for the following reasons: 1) Higher property taxes then a lot of other areas

Note this is really two sides to the same coin. People here don't spend as much of their income on housing. That means housing prices are lower, which means millages have to be higher in order to generate the necessary revenues.

And that's why if you instead look at something like property taxes as a percentage of income, we end up being more in the middle. But as you point out, that nonetheless gives you a financial incentive to stick with the local norms in terms of how much income you spend on housing.