Need perspective: Buy now or wait? (Boston, Billerica: rent, mortgage, credit)

[Simi.me]

We have been in MA for about 2 years now. Currently renting for about $2300. Two kids in elementary school. Thinking of purchasing a home may be in Essex or Middlesex areas, mainly due to proximity to work and greater familiarity. Thinking in price ranges of $350 to $450K with a 5 to 10% down payment. Any inputs on pros and cons of waiting a couple of years more vs buying in 2019 will be helpful. Not sure if we can save for 20% down payment in the next 2 years or so. Will programs like one mortgage be better than conventional lenders? Really need a reality check and external perspective.

[mwj119]

Originally Posted by Simi.me

We have been in MA for about 2 years now. Currently renting for about $2300. Two kids in elementary school. Thinking of purchasing a home may be in Essex or Middlesex areas, mainly due to proximity to work and greater familiarity. Thinking in price ranges of $350 to $450K with a 5 to 10% down payment. Any inputs on pros and cons of waiting a couple of years more vs buying in 2019 will be helpful. Not sure if we can save for 20% down payment in the next 2 years or so. Will programs like one mortgage be better than conventional lenders? Really need a reality check and external perspective.

You won’t lose much/any money via devaluation on a $400k house in this area, even in a full blown recession. That bracket is too hard to come by, and demand will not diminish. So, buying now shouldn’t be an issue. And though things are slowing down, I don’t expect any seismic shift in pricing even as inventory goes up. The local economy is just too strong.

Of course, with PMI, rates, principal mortgage, property taxes, you’ll end up around $2.9k per month on that $400k house if your DP is 5%. So, the higher the DP, the less house poor you will feel. But, at least that money is going somewhere, right?

I prefer Credit Unions. DCU does a stand-up job. Go see them about options, and then do some shopping to compare. Gaurunteed Rate is very easy to work with, though they are a behemoth. Shant Banosian is like the countries leading lender.. Call him directly with questions, he encourages it.

EDIT: You seem flexible on where you’d like to buy. My suggestion would be to find the sh*ttiest house that’s still livabe in the nicest community possible within 495. Find a good inspector if that’s the route you take.. Have them beat the crap out of it head to toe. The upside is with a little TLC and side cash you can get to 20% a lot quicker. Of course, it’s up to the appraisal. In Middlesex, I’m betting on towns with close proximity to Burlington and with a commuter rail stop. New high schools and good school rankings are important too.

Chelmsford? Acton? Maybe Billerica (if the new high school can shake its reputation fast enough)? To the east, I’d guess Wilmington? North Reading? Just look at dumpiest house that falls in the nicest areas in these towns, and you’re golden.

[rethcir]

This quarter is probably a good time to start looking. I agree with mwj's approach. If you can catch the slingshot out of the downturn in a couple years, plus some sweat equity, you hopefully will be sitting pretty to cash out and move to a higher budget house.

[bugelrex]

If you have kids and want them to settle into schools. Buy now...

[tysmith95]

I'd say if you plan on settling down in the same town for more than 3 or 4 years, i'd buy. I wouldn't worry too much about timing the market. A house should be purchased to live in, not to make money.

[Shrewsburried]

In the sub-$400K range, I think you're pretty safe even with the downward pressure of rising rates, a mortgage interest deduction cap, and a slowing economy.

If you're confident you'll be staying in the Boston job market for an extended period, I don't see the COL of owning at entry level losing out to the COL of renting for an 8+ year period. High end housing not so much.

Why do I believe this? Two things - population and migration/labor trends. We're 20 or so years out from peak population - those believing a boomer die off will free up housing are hopelessly delusional as the amount of pent up housing demand from gen-X, millenial, and gen-Z should easily absorb the inventory. Unless we dramatically build or people transition behavior to generational units, the sheer numbers suggest a housing crunch. Additionally, U.S. migration and labor trends continue to show that fewer and fewer major metros are benefiting from 'brain drain' and job market growth - Boston CSA being one.

Do I think house prices will flatten and maybe inverse in the near future? Sure, but will the inverse be worse than paying x-years of rent? Will rent inverse as well? Assuming 8+ years of renting a SFH vs. owning a SFH, my approximate napkin calcs suggest I could eat over 35% of depreciation and still break even (this includes ~12% of appreciation, so my actual margin is more like 47%). That's a gamble I'm willing to take.

[tysmith95]

Originally Posted by Shrewsburried

downward pressure of rising rates, a mortgage interest deduction cap, and a slowing economy.

Rates won't rise if the economy starts slowing. And the economy hasn't started slowing, yet.

[BosYuppie]

Originally Posted by tysmith95

Rates won't rise if the economy starts slowing. And the economy hasn't started slowing, yet.

Yes it has

[tysmith95]

Originally Posted by BosYuppie

Yes it has

In what way? And the stock market doesn't accurately reflect the economy.

2018 was actually the best year of growth in over a decade. Although 2019 will likely be worse. No economic contraction or recession has been declared yet.

[GeoffD]

Originally Posted by tysmith95

In what way? And the stock market doesn't accurately reflect the economy.

2018 was actually the best year of growth in over a decade. Although 2019 will likely be worse. No economic contraction or recession has been declared yet.

The consensus growth forecast for the 2nd half of 2019 is at or below 2%. There was a minor growth blip from the fiscal stimulus of the tax law change but it didn’t last long. Enonomists get forecasts wrong but that’s what is likely to occur this year. It’s already priced into the bond market. You don’t see yield curve inversions unless people think a slowdown is coming.