Million Dollar Question - Buy or Wait? 2022 Edition (Plano, Orange: rental market, low crime)

[SyZ]

The property tax issue is the largest by far.

I could comfortably make my mortgage payment 2 years ago on a 277 loan at 3%, while single.

Got married, got a new job at 27% salary increase, and am waiting to sell this home for ~ 130-140 more than what I paid, and then move to the new house.

However, the new loan (assuming 20% down) is going to be around 300-310, and that's probably going to be at 5%.

From a strict monthly payment perspective, that's doable given the increased salary. It's just a flat amount extra a month which comes directly out of the increased salary. Roughly even trade.

However, when you factor in that the taxes are now ~ 50% higher and will never go down but only up, it's arguable that I can't even move forward anymore without seriously jeopardizing the financial well-being of my family.

But, hey, at least I don't pay state taxes so it's all for the best, amirite?

Good thing I got that 1% 'merit increase' this month.

[apple44]

After reading all of the posts, especially the ones against buying, I still say: BUY! (I know the all cap looks like screaming, and if you are a close friend of mine, I will have screamed at you

With your income you can easily buy a house! If you are worried about leverage, property tax, maintenance, etc., try to buy a smaller house or move farther out, etc.

Look at the big picture -- one of the most important ways for wealth accumulation is through homeownership. With your income, you can easily own a house, perhaps a smaller one, but the most important thing is: own a house, stop paying rent!

[Wile E. Coyote]

Originally Posted by Wittgenstein's Ghost

Yes, this is a real effect. We live in an $800k house with a $2k mortgage. I can't imagine ever giving up that payment on this house -- even if we decide to live somewhere else.

Granted, I live in Colorado Springs, which has extremely low property taxes. But still, that is an insane mortgage payment for a house of this value.

My sister, 17 years my senior, was living in Monument for about 20 years. They are back in Texas now (they were there for Harvey and had to rebuild two houses). I loved that Monument house they had... My brother and I really believed they should have held onto it.

[apple44]

Also, for those of you that really hate the property tax -- maybe think of it in another way, as a combination of property tax and state income tax, then you'll feel the taxes you are paying are much more reasonable.

I used to live in New York City, and there's a 10% state and local income tax. Other states and cities may not have such a high income tax rate, but most states do impose some level of state income tax. Texas property tax rate is high, but not that high, if you think of it as a combination of property and income tax.

I know this doesn't help you in terms of real numbers, but may help with you accepting it psychologically. It helped me at least......

[Wile E. Coyote]

I learned the other day that Canadians cannot lock into a 30 year mortgage. They have to refinance every 5 years. Think how much worse things could be. And, their prices are on the high side, right? I guess you'd have to pay for the house in 5 years or you will have several refi's.

[TurtleCreek80]

Originally Posted by apple44

After reading all of the posts, especially the ones against buying, I still say: BUY! (I know the all cap looks like screaming, and if you are a close friend of mine, I will have screamed at you

With your income you can easily buy a house! If you are worried about leverage, property tax, maintenance, etc., try to buy a smaller house or move farther out, etc.

Look at the big picture -- one of the most important ways for wealth accumulation is through homeownership. With your income, you can easily own a house, perhaps a smaller one, but the most important thing is: own a house, stop paying rent!

I agree that OP can buy a house, just not a $1M one unless the $370k HHI is very new (like just graduated from med school) and not a spending problem.

[TurtleCreek80]

Originally Posted by Wittgenstein's Ghost

Yes, this is a real effect. We live in an $800k house with a $2k mortgage. I can't imagine ever giving up that payment on this house -- even if we decide to live somewhere else.

Same. We refi-d down to $1900 mortgage in the high 2%’s during Covid….on what is now apparently a $1.2M house. Let’s just say we’ll be remodeling instead of moving when the time comes. At least we bought a house on a gorgeous tree-lined lot in a great neighborhood…even if the house ain’t perfect.

[Xalistiq]

This is the absolute worst time in US history to buy a house.

I can’t believe there are people actually advocating to do so when: prices are at all-time highs, inventory is at historic lows, and interest rates have risen at the fastest clip in nearly 30 years — and are continuing to rise.

And all of that is not taking into account how competitive it is once you actually put an offer in on a house. Many winning offers end up waiving all contingencies (including inspections) and pay 10% or more over ask at already over-inflated values.

Many of you continue to assert homeowners with locked-in lower interest payments are disincentivized to sell because they’d have to then buy a house at a higher price and a higher rate.

This argument is true right now.

But that argument assumes that runaway inflation (getting worse, not expected to slow), a recession (looking more likely everyday), or some unknown black swan event won’t knock down this perilous “house of cards” economy.

Yes, employment levels are at all-time highs, but most salaries are not increasing fast enough to offset the highest inflation we’ve seen in 40 years.

Lots of people are living on the edge, paycheck to paycheck, just as they always have. Even if they were not struggling, sustained higher prices for food, gas, goods and services will absolutely put pressure on most households.

Here’s what I think happens next: Fed increases rates throughout 2022 to curb inflation, but consumer prices still remain at elevated levels.

A recession ensues.

Certain sectors of the economy are affected, and people lose their jobs. Homes hit the market and inventory increases significantly, but buyer demand is reduced due to economic uncertainties. This puts downward pressure on prices.

[apple44]

Originally Posted by Xalistiq

This is the absolute worst time in US history to buy a house.

I can’t believe there are people actually advocating to do so when: prices are at all-time highs, inventory is at historic lows, and interest rates have risen at the fastest clip in nearly 30 years — and are continuing to rise.

And all of that is not taking into account how competitive it is once you actually put an offer in on a house. Many winning offers end up waiving all contingencies (including inspections) and pay 10% or more over ask at already over-inflated values.

Many of you continue to assert homeowners with locked-in lower interest payments are disincentivized to sell because they’d have to then buy a house at a higher price and a higher rate.

This argument is true right now.

But that argument assumes that runaway inflation (getting worse, not expected to slow), a recession (looking more likely everyday), or some unknown black swan event won’t knock down this perilous “house of cards” economy.

Yes, employment levels are at all-time highs, but most salaries are not increasing fast enough to offset the highest inflation we’ve seen in 40 years.

Lots of people are living on the edge, paycheck to paycheck, just as they always have. Even if they were not struggling, sustained higher prices for food, gas, goods and services will absolutely put pressure on most households.

Here’s what I think happens next: Fed increases rates throughout 2022 to curb inflation, but consumer prices still remain at elevated levels.

A recession ensues.

Certain sectors of the economy are affected, and people lose their jobs. Homes hit the market and inventory increases significantly, but buyer demand is reduced due to economic uncertainties. This puts downward pressure on prices.

You are trying to time the market. Investment 101 is don't try to time the market!
It's like investing in the stock market, look at the long run. Forget about whether the stock will tank tomororw. See 2008 -- even if you bought stock right before the market crashed, at the highest point, you would still have got 8%+ returns per year if you waited for 10 years. That's a huge gain!

Same thing for the housing market. Just look at the long run. There might be a recession coming, so what? DFW is growing. If you are in Detroit or Russia I won't advise you to buy. But you are in DFW! This city is expanding, and your housing price will go up. Get used to it. There will be new highs after new highs...

Again, just buy.

[Wittgenstein's Ghost]

Originally Posted by apple44

You are trying to time the market. Investment 101 is don't try to time the market!
It's like investing in the stock market, look at the long run. Forget about whether the stock will tank tomororw. See 2008 -- even if you bought stock right before the market crashed, at the highest point, you would still have got 8%+ returns per year if you waited for 10 years. That's a huge gain!

Same thing for the housing market. Just look at the long run. There might be a recession coming, so what? DFW is growing. If you are in Detroit or Russia I won't advise you to buy. But you are in DFW! This city is expanding, and your housing price will go up. Get used to it. There will be new highs after new highs...

Again, just buy.

While I generally agree, particularly when talking about a primary residence, I think you are underestimating the severity of the historical examples of when things went bad. For example, had you bought into the S&P in 1966, you would have seen a cumulative drop of 65% in your investment over the next sixteen years. Yes, the market was 65% lower in 1982 than it was in 1966.

In housing, using the national Case Shiller index, peak 2006 levels weren't hit again until January 2017. That's over ten years to get back to the bubble levels. Maybe DFW would outperform the nation, but maybe it wouldn't. Generally speaking, markets that were the hottest prior to 2006 took the longest to recover. For example, Phoenix didn't get back to 2006 levels until 2020!

Again, I'd probably buy if I were in the OP's position. The benefits of owning a primary residence are myriad. But there are significant historical examples of "just buy" being bad advice that wasn't quickly made right, and I think most would agree there is an elevated chance of this being such a moment.