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Old 07-03-2020, 03:04 PM
Location: Sacramento CA
1,076 posts, read 222,490 times
Reputation: 2215


Originally Posted by charolastra00 View Post
I definitely feel this way.

I'm 32, make 80K a year, and have 50K for a downpayment + a 9 month emergency fund, but that will get me at best a 2 bed/1 bath condo deep in the suburbs. I might have been more OK with that when my job was more secure, but that feels much more fleeting right now. Condo fees are also exceptionally high. My region is not expected to have much of a decrease in housing costs, especially at the entry level, because inventory is so low as it is.

My hope is that I can hang onto my job through the next year and maybe my area will dip by next summer - but I'm not too hopeful. I'm also focusing on upping retirement savings since my employer match has been suspended for the fiscal year and also up my emergency savings since my field is getting hammered by the pandemic, so that means I can't really expect to increase my downpayment amount by all that much.

It's certainly frustrating. I spent most of my 20s fighting my way out of cancer and, subsequently, cancer debt but still managed to grow my career and get a master's degree debt free. I'm starting an MBA, also debt free, this fall. I hope it helps to increase my salary. I had thought by now that I would be a homeowner and it really grinds my gears that I'm not.


There is always a better deal.

Don't feel pressured to buy a house now because you fear prices will only go up and you will be priced out. House prices always cycle. Many people feel we are in the top half of a housing boom getting close to a bubble. Prices could leap up from here because bubbles over-react and prices become silly high. The higher the bubble, the deeper prices fall when they crash.

House prices cycle and I believe you do not have to rush into this high market, but that waiting will probably get you a house you want for less than today's prices.


For my detailed answer, please read below. I am such a long-winded blowhard, I wrote the above summary to save you having to read the original answer below shold you not have time or just not have desire to read it. The above summary succintly says what I said in more detail below.


All I can tell you is something my father told me decades ago, that has saved me from many expensive mistakes.

"There is always a better deal".

I have made far more mistakes rushing into a purchase than waiting for another opportunity.

Can you miss a bottom? Sure. One of the ways salesmen make you buy something is to make it sound like, if you pass on this once-in-a-lifetime deal, you will regret it because it will never come again.

But the truth is, "There is always a better deal".

Additionally, many people feel like we are nearing the top of the current housing bubble. Nobody ever knows. If you wait and houses go up 50%, you will curse the day you waited. So you have to do your own studies and make your own guess.

Are you honestly sure Boston won't have much of a decrease in home prices because you have really study historic price trends there and elsewhere, or is that just what you have heard? Or is that just what you tend to want to believe to justify buying soon?

I am not interested in talking you into anything or out of anything. You have your head screwed on straight to have savings at your age and the 9-month emergency fund is something I've never achieved, so you are light years more financially responsible than I am.

My father was right that "there is always a better deal".

It does seem like we might be in another housing bubble, and prices could jump way up before they crash way down. All I know is, it feels more topish than bottomish to me, so I don't believe you HAVE to buy now. I am convinced you have the luxury of waiting to see how much home prices go down during the trough of the next cycle.

If you emotionally want to own a home, and you want to lock into these wonderfully low mortgage rates, and you plan to be in your home a long time, then you can't go wrong. If that is the case, then you won't hate yourself when your neighbor's identical home sells for $75k less in 2025, beating yourself up that you should have waited.

Go for it if you want to buy now. But "there is always a better deal". If you don't buy now, you won't be priced out later because housing always cycles.
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Old 07-03-2020, 03:13 PM
6,975 posts, read 2,072,850 times
Reputation: 12023
Originally Posted by AndroidAZ View Post
It's foolish and old school to think not having a mortgage is superior.
It is neither superior nor inferior. it is leverage, and each of us has our own unique risk tolerance into which leverage fits.
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Old 07-03-2020, 03:28 PM
Location: Everywhere and no where
914 posts, read 915,903 times
Reputation: 1544
Originally Posted by RationalExpectations View Post
It is neither superior nor inferior. it is leverage, and each of us has our own unique risk tolerance into which leverage fits.
Right now, that leverage is at the cheapest historic rates ever. It puts perspective on risk / return.
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Old 07-03-2020, 05:57 PM
Location: NY/LA
4,045 posts, read 3,295,235 times
Reputation: 3255
Originally Posted by Berteau View Post
Amazing how ignorant people are on something as basic as taxes. No you don't save additional money by taking out a larger mortgage. Thats like saying you saved an extra 5k on deductions at the casino by losing 300k instead of 200k. So losing that extra 100k was a good thing. NO. Deductions are based on losses on the additional interest you have to pay. SO if you "save" 5k, you lost an additional 40k in interest payments. Therefore you didn't save anything. You lost more to interest.
I think the post you quoted was just saying that because of the deductions, they could have afforded a nicer house in a nicer location, and in the long run that would have probably been the better decision. I don't think they were saying that you save money by taking out a larger mortgage.
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Old 07-03-2020, 06:02 PM
Location: The Triad (NC)
31,169 posts, read 68,077,221 times
Reputation: 37019
Originally Posted by AndroidAZ View Post
Right now, that leverage is at the cheapest historic rates ever. It puts perspective on risk / return.

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Old 07-03-2020, 09:33 PM
2,110 posts, read 2,141,897 times
Reputation: 2352
Originally Posted by spencgr View Post
Well, you do what every generation before Millenials did when buying their first house; you compromise. While HGTV seems to push the idea that your first house needs to be perfect, it does not. "Starter house" is a term that refers to your first house, that is not your ideal house. So, you aren't really priced out; you're just trying to jump to a different level.
This right here ^^^. I bought my first house at age 29 in 2001. It was a 550 sq ft. cinderblock 2/1 in the rough part of a college town. No washer dryer, no dishwasher, linoleum countertops. I lived in it, then moved back with my parents and rented it out. Four years later, I sold it for 160% of what I bought it for and bought something else in a different city.

It was what I could afford at the time and buying it set me on my way to owning a better house later.
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Old 07-03-2020, 09:39 PM
2,110 posts, read 2,141,897 times
Reputation: 2352
Originally Posted by AndroidAZ View Post
Right now, that leverage is at the cheapest historic rates ever. It puts perspective on risk / return.
Rising rates can sometimes dampen appreciation (as $$ becomes more expensive), so it's not the end of the world if he waits a minute. Also, OP may want to wait to see what happens with all the people who can't pay their mortgages right now. . .
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Old 07-04-2020, 07:30 AM
158 posts, read 47,463 times
Reputation: 232
Where does OP live because sub 200k for a decent house is nigh impossible to find in most good real estate markets.

OP, you seem too fixated on Dave Ramsey's ratios. Throw him out the window. He's no help to you.

Take out a 30 year mortgage, not 15. Put 10% down, not 20. You'll get a decent house. IF you keep postponing buying a house because you need to save more, the house can easily appreciate faster than you can save. Therein lies the problem.

It does sound like you live in a pretty cheap market, however.
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Old 07-04-2020, 09:53 AM
329 posts, read 176,910 times
Reputation: 376
Originally Posted by Coloradomom22 View Post
I did Dave Ramsey's "Peace University". His program is good, but I always disagreed with his super-conservative approach to buying a house. When I listened to him I thought yeah, you are in a cheap area of the US (at the time Tennessee) but good luck following your rules if you live anywhere else that is expensive.

The reality is most metro areas in the US the minimum price for a decent starter house runs on average $400k. To follow his rule of only buying on 15 years/20% down is impossible for most unless mom and dad help you with the down payment. I believe there is no shame to buy on 30 years especially with the low interest rates we have now. The alternative is paying high rent which gets you nothing in the long run. And you can always refi later, or throw extra money toward your principle to pay it down faster.
Define decent starter home? How many square feet what condition and what sized lot?

Home prices are out of control, but $400K for what I would view as a starter home. Out of control prices would be an massive understatement? Out of control is in the $200K range. I define decent starter home on 6000 square foot lot with home size about 1000 to 1200 square feet.

Even in Metro Detroit (Notice I said Metro, not city of Detroit which is still a wreck except for the booming down town) But the suburbs are nice and home prices have gotten out of hand here starting around 2013-2014 and a decent starter home even in most decent or better areas of Detroit Area is no where near $400K for 1000 to 1200 square feet. Its closer to the $200Ks which is still ridiculously high.

I do not think that square footage is anywhere close to $400K in most metro areas except for LA, San Diego, Bay Area, Seattle, Boston, Washington DC, NYC, and maybe Portland. Although those metro areas are actually much higher than $400K for a decent starter home and were $400K for a decent starter home at very beginning of prices starting to escalate again around 2013-2014. Those metro areas are dramatically more expensive than almost every other Metro in the United States.

I consider Metro Detroit to have average home prices nationally as I live here and prices are out of hand here and nationally overall. I do not think nationally even with badly out of hand prices it is quite the exosphere outrageous $400K for a starter home of 1000 to 1200 square feet.
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Old 07-04-2020, 01:30 PM
Location: Arvada, CO
13,627 posts, read 26,010,974 times
Reputation: 13750
Originally Posted by whatsgoingon4 View Post
Honestly, every article I read from realtors is almost depressing, when they say how prices will continue to rise and there will be no decrease, even with this recession and pandemic among us.

It seems those of us that tried to take the route of high equity and lower debt are always slapped by this. Everyone is pushed to take on high mortgage debt, because despite the low interest rates, the prices are getting so high and continue to climb. The monthly payment might be lower, yes, but I don't want to be on the hook for $100k when I only make about $40k a year.

I feel like there's no way out! I keep saving but can't out save the rise in prices, because my income isn't increasing to offset it. The only way I can offset it is to sink a huge amount of savings into the down payment, which I'm not particularly happy about. Then I've sunk money into the house to try to get the monthly payment more affordable, and that's money I can't get back. If prices drop and I have to sell? Well it's gone.

Dave Ramsey says your monthly payment on a 15 year mortgage (including property taxes and home insurance) should be 1/4 of your monthly net income. If I can't get the payment under 1/4 for a particular house, then I either need a bigger down payment or not as nice of a house. I don't see how most people are able to do that. Most people I know my age (I'm 31) already have houses around the $200,000 range. It's none of my business, no, but I don't understand how they're able to do that. Either I'm making a lot less than they are or they are scraping by month to month.

I have around $120k in assets, but I don't want to put all of that into a down payment. It takes around $170-180k now to buy the kind of house I want (3/2/2, relatively new, in good neighborhood). But I'd have to put $100k down minimum plus closing costs to make the numbers remotely work based on the 1/4 rule. And even then it would still be over it on a 15 year mortgage. But I don't want to sink $100k into a house that I can't get back if I need it.

The other thing I see is I could always refinance for a lower rate, but you cannot refinance to lower the balance amount.

So, do I keep saving until I can get $150-200k in savings, and prices reach even higher or what?
I like the idea of purchasing something for cash. Is it just you? If it is, why do you need or want a 3/2/2? Are these people you see dual-income? Do they make more than you? Can you get your income up? A 15-year fixed on $180K with 20% down should be $960-$1000/mo, no?

I'll tell you my story. I was 30 when I purchased my first home, which I am still in (age 36 now). We live in metro Denver.

I did Dave's plan to get out of debt. I think I had $40K in debt at the max when I discovered him/his plan in 2009, when our household income was $52K. It took until at least late 2011 to get my wife on board, and we were completely out of debt by the end of 2013. By then, we also had about $25K in the bank.

My credit was stellar, my wife's was not (in fact, it was about as bad as it could get). Trying to qualify for a mortgage with my wife would have gone against our favor, so when we went to get pre-qualified, we only used my credit and income. At this point, my income alone was $52K, and hers was $52K as well (but we couldn't use it to qualify). The bank approved me for up to $278K.

I couldn't believe it, but it was what it was. It was some first-time home buyer program the bank had where you only had to put 5% down (looking back, it was quite stupid, but it seems to have worked out okay), 30 year fixed, 4.875%.

We hit the pavement looking for homes under $225K (in early 2014, you could still find plenty of nice homes in that range in Denver), and of course managed to find our way to an open house with a listing price of $250K. And of course, that was the one we fell in love with, the one we put an offer on, the one we got in a bidding war on, and the one we won. Final sale price was $262.5K.

I believe our initial payment with tax/insurance was around $1616. It is now $1773 (we have had some property tax increases). Officially, the payment has never exceeded 1/4 of our take-home, even though it's a 30 instead of a 15. Our household income has remained relatively flat, it fluctuates between $100K-$120K each year, but it's all on me now officially. We've rented out part of the basement to a family member since 2015 for extra income we don't really need. The house is now worth at least $450K, with about $225K left on the mortgage.

We've thought of doing several things:
-cashing out and moving eastward and buying something for cash
-selling, and downsizing
-selling, and upsizing (I REALLY don't want to do this)
-refinancing to a 15.

Our income is projected to jump another ~$60K 3rd quarter 2021, so we're not going to do nothing in the next couple of years. My goal is to get in a better position than we are, which is really good as is.

If I'm you OP, I'm doing something, but it should be whatever you feel best about.
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