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Old 06-26-2017, 05:51 AM
 
4 posts, read 2,875 times
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Hey,

My fiance and I are looking to move from our high rent NoVa apt to a townhome(preferably) or Single Family Home that has a close commute to DC. This would be our first home. In short, this thread is seeking advice from homeowners who've made similar decisions, and people who live in the area or are currently also looking in these areas to buy a home that are in our predicament.

The most important things to us are safety, short commute times into DC for work(metro accessible), and schools. We don't have any children right now and don't plan on having school aged children for 10 - 13 years so the school preference doesn't bear as much weight right now. We plan to live in the home for 10-13 years and then move(We would love to rent our sell the home at a profit). We would be approved for a little over 500k, but given that it's just the two of us for a while and we don't need the space we don't want to spend over 375k but we can go to 425k for the perfect place. The perfect place is at leats 3 bed and two bath with a garage and 2000 square feet plus but willing to go down to 1750 square feet.

We've visited all new construction townhomes in the HoCo (1 subdivision), MoCo (1 subdivision), and PG County (several subdivisions) areas. We really love the new construction and I don't see us buying an older home unless its completely renovated.

In a perfect world we would live in the Silver Spring area close to the metro and have the best of all worlds, metro accessible, safe and good schools with shopping. However, the prices are on the higher end of our threshold.

There are a lot of subdivisions that we really love in PG County (Woodmore Town Center and BeachTree specifically. However, we are concerned about the school system. Though the plan would be to move into HoCo or MoCo in about 10-13 years into a single family home. By that time the kids would be in the middle of elementary school.

What we've noticed:
The new townhomes are priced at about 396-398k in BeachTree, 350's in woodmore, and 450's in Silver Spring(this is only the new subdivision going up by GlenMount). My concern is how much are these homes really worth. I don't want to overpay for the home and then we're underwater in a few years.

Questions:
1. Where would you choose to live?
2. Are there any other area's specifically in these counties or NoVa that we should take a look at in our budget?
3. Do you think the new townhomes are over priced? What's the max you think we should pay to not be under water?
4. Any other thoughts are comments are welcome, things we should consider, etc.
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Old 06-26-2017, 06:12 AM
 
Location: The Triad (NC)
32,585 posts, read 76,025,157 times
Reputation: 40399
Quote:
Originally Posted by intentional1 View Post
396-398k in BeachTree, 350's in woodmore, and 450's in Silver Spring
My concern is how much are these homes really worth.
The homes are worth less than half the price being asked (and received).
Look in other areas of the country for a similar property... and see for yourself.

Quote:
I don't want to overpay for the home and then we're underwater in a few years.
It comes down to how many weeks of net pay you're willing to spend on housing each month.
And then to how much else you deduct before getting to the net (eg 401K/IRA, HI, HSA, 529,etc)

As to a budget... I suggest limiting housing costs to a 1:1 ratio (including utilities).
But that should be the case if you're renting as well.
If you can manage this end then of the equation it's just a matter of keeping the good job(s) you have.
---

There are a LOT of people who can't afford DC Metro (or LA or SF or NYC) real estate prices
who choose to remain there for other reasons. Some reasons make sense. Some don't.
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Old 06-26-2017, 07:43 AM
 
4 posts, read 2,875 times
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Quote:
Originally Posted by MrRational View Post
The homes are worth less than half the price being asked (and received).

It comes down to how many weeks of net pay you're willing to spend on housing each month.
I agree wholeheartedly. However, there is a premium price on location. A DC row house would be considerably less in a different city. However it's all location. I bet these new homes are less than 250k in the Midwest and south. However, due to the proximity to DC, and other major cities the price is much higher. Plus the median home price is much higher in the DC metro area and surrounding counties compared to the south and Midwest where the price of the same home is considerably lower. It's just a difference in cost of living. Maybe I shouldn't have worded the question what the houses are worth but more so would they hold the value in terms of what one is willing to pay to live in the area.

How much of a price cut do you think the builders are taking based on the sticker price? We would love to pay a lower price.

Quote:
Originally Posted by MrRational View Post
As to a budget... I suggest limiting housing costs to a 1:1 ratio (including utilities).
But that should be the case if you're renting as well.
If you can manage this end then of the equation it's just a matter of keeping the good job(s) you have.
Thanks for the budgeting advice. To clarify are you referring to one weeks worth of pay to one months worth of housing cost?
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Old 06-26-2017, 09:19 AM
 
Location: The Triad (NC)
32,585 posts, read 76,025,157 times
Reputation: 40399
Quote:
Originally Posted by intentional1 View Post
Thanks for the budgeting advice.
To clarify are you referring to one weeks worth of net pay to one months worth of housing cost?
Yes. 12/52's ... 23%ish of net income after the whole slew of deductions.
It's tough to do and frankly few can but it is still a valid target.
(check with your midwestern friends for input)

The other budget number is price or mortgage amount vs annual gross income.
3:1 used to be considered high. It still is objectively (absent substantial down payment cash)...
and it's hard to do in DC (or SF or LA or NYetc)

Quote:
I agree wholeheartedly. However, there is a premium price on location.
We would love to pay a lower price.
You and everyone else out there.

Quote:
How much of a price cut do you think the builders are taking based on the sticker price?
Somewhere between zero and the minimum they might have to.

At the micro level of location factors things like access to the Metro & shopping (or schools)
are what determine just how little they need to do in order to find a qualified buyer.

If you are a qualified buyer then you have good jobs which pay better in DC
than they would in other markets. The rest is the calculus of the incremental differences.

Is the increment of the wage gain (and experience?) worth the higher RE costs to be there
and/or a greater number of hours commuting to find your affordability level (to you) ??
These aren't RE questions really...

Last edited by MrRational; 06-26-2017 at 09:28 AM..
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Old 06-26-2017, 12:49 PM
 
Location: Tucson
341 posts, read 373,429 times
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"...one weeks worth of net pay to one months worth of housing cost..."


That's a very restrictive rule of thumb in my opinion. If your cars are paid for and you don't have kids and watch your bottom line, you can go higher... it just depends on your situation. I say this as being financially conservative.
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Old 06-26-2017, 04:29 PM
 
Location: The Triad (NC)
32,585 posts, read 76,025,157 times
Reputation: 40399
Quote:
Originally Posted by Baghead View Post

"...one weeks worth of net pay to one months worth of housing cost..."


I say this as being financially conservative.
I agree... that is exactly what it is.
It's also the discipline needed to have the other nice things in your life
rather than working just to pay rent, car payments and groceries.

If you're one of the people who has set themselves up to pay more...
what are you forsaking to make that happen?
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Old 06-27-2017, 05:01 AM
 
Location: Tucson
341 posts, read 373,429 times
Reputation: 281
Quote:
Originally Posted by MrRational View Post
I agree... that is exactly what it is.
It's also the discipline needed to have the other nice things in your life
rather than working just to pay rent, car payments and groceries.

If you're one of the people who has set themselves up to pay more...
what are you forsaking to make that happen?
A car payment and more than 1 vacation a year. I value putting funds into principle on property more than the "nice things." The nice things will come, they are merely deferred.
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Old 06-27-2017, 06:32 AM
 
Location: It's in the name!
6,843 posts, read 8,583,259 times
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Quote:
Originally Posted by Baghead View Post
A car payment and more than 1 vacation a year. I value putting funds into principle on property more than the "nice things." The nice things will come, they are merely deferred.
I agree to a certain extent. I always thought the rule was your housing costs should be no more than 28% of your monthly income. This includes mortgage, insurance, heating, cooling, and water.

Having said that, I do believe that you should set aside some funds throughout your life for meaningful experiences like travel, or fulfilling hobbies. Other people donate to causes they believe in.

I never believed in living a life of toil cramming money into a mattress only to enjoy it when you're on 5 different medications, Depends, and can't enjoy different activities and foods. I started traveling heavily when I was 30.

To wrap this around to the OT, size should matter little, for an area like this it's location, location, location. You would do well living within 3 miles of a Metro station.
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Old 06-27-2017, 07:47 AM
 
Location: Tucson
341 posts, read 373,429 times
Reputation: 281
Quote:
Originally Posted by adelphi_sky View Post
I agree to a certain extent. I always thought the rule was your housing costs should be no more than 28% of your monthly income. This includes mortgage, insurance, heating, cooling, and water.

Having said that, I do believe that you should set aside some funds throughout your life for meaningful experiences like travel, or fulfilling hobbies. Other people donate to causes they believe in.

I never believed in living a life of toil cramming money into a mattress only to enjoy it when you're on 5 different medications, Depends, and can't enjoy different activities and foods. I started traveling heavily when I was 30.

To wrap this around to the OT, size should matter little, for an area like this it's location, location, location. You would do well living within 3 miles of a Metro station.
I exceed this by a large amount. By your rule, if one is truthfull about how much it costs to live in DC Metro, you'd need to earn, what, $200K a year to justify buying a $300K house?
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Old 06-27-2017, 08:00 AM
 
Location: It's in the name!
6,843 posts, read 8,583,259 times
Reputation: 3607
Quote:
Originally Posted by Baghead View Post
I exceed this by a large amount. By your rule, if one is truthfull about how much it costs to live in DC Metro, you'd need to earn, what, $200K a year to justify buying a $300K house?
It's not my rule. lol I was referencing a standard rule. I exceed that too. But lately, I think my salary has increased enough to where my housing costs have fallen pretty close to 28%.

Here the article mentions 30%. But that was always the general rule. And no, I don't agree with it. Usually, housing costs in the more expensive areas, approach 50% of incomes.


https://www.bloomberg.com/news/artic...s-near-useless
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