When are you gonna buy a place?

April 26, 2011 · 40 comments

It took a whoppin’ 72 hours for the inevitable to happen. Someone finally asked me when I was going to buy a house. As though it were almost expected of me now that I’ve moved to Washington. Who knows? Maybe Girl Ninja and I should pop out 2.3 kids, buy a dog, name him Spike, trade in my Scion for a minivan, and start coaching little league too? Go big or go home right?

I should have known better. I mean, we do get asked at least every other day when are we gonna have kids. Why would home ownership be any different? Just so there is no confusion, and so I can direct each of those persons to this blog post, I’ve decided to list off the things that would need to occur before Girl Ninja and I seriously considered buying a house…

1. We need to save more. Sadly, $30,000 for a down payment wont go far in the greater Seattle area. We need to have at least twice, if not three times, this before we can comfortably put down 20% and maintain our emergency fund.

2. We have to hate being renters. Why give up a good thing? We loved our last place. We never would have bought it (a one bedroom condo), but it was the perfect rental. Sure renting is “throwing your money away”, but it also allows you to live in some pretty cool places for short, mid, and long terms. The flexibility of renting is something Girl Ninja and I aren’t ready to give up.

3. We have to settle down in Seattle. I haven’t lived here in eight years, Girl Ninja in six. While we plan to live here for the next 20+ years, we know that plans change. Maybe we realize we just can’t handle 9 months of rain and although Cali was freakin’ expensive, the sun made it worth it. Until we’ve adjusted and settled in to our Seattle life, home ownership will be the last thing on our mind.

4. We need something too good to pass up. I don’t want to buy a house just because Girl Ninja and I have completed steps one through three. Instead, I’d rather sit and wait for a deal I can’t refuse. We could look for a few days or it could take years. Buying our first place is something I’m not willing to rush.

I use to covet home ownership. It was my number one priority post college graduation. But as time goes on, I’m realizing that NOT owning a home ain’t half bad.

Current Homeowners: How did you know your house was The One? What would you wish you knew before you bought your place that you know now? Anyone, besides J Money, wish they didn’t buy?

Non-Homeowners: Why haven’t you bought? I gave you my four prerequisites for a purchase, what are yours?

{ 40 comments }

1 Angela

I haven’t bought yet because I’m not ready to settle down. I have epic plans for travel for the next few years and once I get back from traveling then I will start saving for a house.

Plus House Prices in Australiare are RIDICULUS! A complete dump an hour away from the local city goes for upwards of $500,000 right now, Everyone’s predicting the housing buble to burst soon so that’s also why I’m keeping away from the market.

2 StackingCash

Interesting other countries have not learned from us. I live in Las Vegas which is one of the biggest bubbles that popped. Let me tell you, it’s not pretty. However, if you have cash there are thousands of opportunities here now.

3 StackingCash

Single story, 3 car garage, a spot for my 65 inch TV and I was done for. It’s a nice small house, 1500sq ft, good on utilities, however we have been craving more luxury these days. That means at least 2500 square feet :) A spa like master bath with separate vanities, dual shower heads and body sprays, etc. An uber kitchen with granite, maple, and stainless steel. A spot for my home theater projector and THX sound system. 4 car garage. Guard gated community. Near a beach. LOL, lifestyle inflation is a b!$#%.

Bought my house before the bubble back in 1999. Watched the value of my house go from 130k to 330k back down to 130k. Will have a mortgage burning party in 2014 :) Although we might get into another one because we want bigger and better :/

4 Mo D.

I always said once the rent went over $800 for our 1 bedroom/1 bath. apt., we’d starting looking for something to buy; that happened in Fall 2003. Our pre-requisites were min. 2 bedrooms, at least 1.5 bath, and we figured we’d be better off in a condo or townhouse (as we decided not to have kids, we didn’t need a lot of extra space). We totally lucked out when we came across our condo (seller was unloading it; he had many properties); in 7 years, it’s gone up $40-50K in value given its location, size of the unit (1200sq.ft), and it’s a sought-after building. We purchased it for $130K – we could list at $175K and get multiple offers. The only renovations we’ve done were the bathrooms.

Our search only lasted a few weeks; saw 3 townouses and 3 condos, then we found our home, and took possession Jan./04.

We are looking to sell within the next year or two; we want to upgrade into a newer building. We’ll be giving up sq. footage, I’m sure, but a few more “modern” ammenties (ie: central air) will make it worthwhile. Detached homes in our city are out of our price league, and since we both work in the city we live in and have only 1 car, we don’t want to be stuck doing a commute every day.

5 Executioner

If you think you’ll be in an area for 5 years or more, I would recommend buying. Then pay off the mortgage as fast as you can. Rent-free is good, but mortgage-free is better.

6 Maggie @ Say Yes to Salad

Do you think it is absolutely necessary for financially stable people to buy a house? My husband and I have a gigantic emergency fund and our finances are in excellent health. We have debated buying, but to me (and him) it seems like buying doesn’t always end up as a better investment than staying renters. People often forget that when you buy, a whole host of other issues come into play – property taxes (in some places, like NYC, NJ, and Miami – which are where we would likely buy – those taxes can be upwards of 20k/year), the stress of owning a house, all the small little things that go wrong that you have to fix ($$), etc… I honestly think I would be happy renting for the rest of my life as long as I can find good places to rent. I hope I explained this properly. Would love if you did a post on renting v. buying for the long term! More details – we are both 24, live in a 1bedroom apt in NYC, DINKs (not sure when/if we will have a kid).

7 Rafael @ Reis Financial

I live in Vancouver and our real estate market is just as unaffordable as NYC. I did a case study analysis of renting vs. buying in Vancouver in two parts. The results were very surprising:

With a minimum down payment
http://www.reisfinancial.ca/1/post/2011/03/renting-vs-buying-in-vancouver-part-1.html

With a decent down payment
http://www.reisfinancial.ca/1/post/2011/03/renting-vs-buying-in-vancouver-part-2.html

8 Allison

So many people around me are telling me to never buy a house, that all you do is pay for repairs and upkeep. I love the freedom of renting and not being tied down. I love that when my water heater broke last month I didn’t have to pay for the new one.

I’m also not living in a place were rent is outrageous. Maybe if I was, I’d feel like I was throwing money away, but my apartment is lovely and quite cheap and I’m happy with my arrangement.

9 Laura

We get this question all.the.time. We live in an expensive area, and the houses that we like aren’t cheap. We can’t afford a house in the area that we live in now, and we LOVE this area. Our rent is reasonable, our place is super nice, and if we bought a small house in a less desirable area our costs would go up at least $700 when you include property tax (not including maintenance). Add that to the fact that we don’t care to spend a lot of time maintaining a home at this point, and home ownership doesn’t sound too desirable to us. We’re saving like we’re going to buy a house and should have 20% in about 18 months (not in the area we live in now, but close enough to it)–but at this point, we don’t know that we will chose to buy at that time. We’re happy renting, and we have a lot of extra money to do things with. People may say we have “nothing to show” for renting, but we are able to contribute a LOT of money to our retirement accounts and we’re certainly enjoying our life of frequent vacations..

10 Laura

our costs would go up at least $700 a MONTH…clearly, I haven’t had my coffee yet.

11 Joe C Skrizel

i have been throwing this idea around since last summer, seriously starting to consider it now but i just heard on the news this morning that Denver Housing could be heading for a double dip in home prices so that scares me a little but…. if you can find a decent foreclosure it would still be worth it. That being said my finances are not ideal but the prospect of paying more in interest (4.8% now vs 7% plus) if i wait a few years has me considering the buy right now especially before the fed startes to raise interest rates in late summer. i will only put 3.5% down if that, there are different programs some only requiring 1K down. I know this isnt the best idea but its likely the best option to not be priced out of an area or the entire market if home prices truly come back and interest rates rise.

the only thing keeping me from “pulling the trigger” is watching my friends work on their houses all the damn time and not wanting to be tied to my home and the constant fixes all the time

12 Austin

Here in the Dallas area (yee-haw), most homes offer an incredible bang for thine buck. I’ve only been married for 3 months now, and we’re just not financially ready for a house. We are saving like it’s going out of style, but there are other things that we’re saving for too (besides a home). I may have to write a position post about this, but my wife and I are not shooting for the 20% down target, more along the lines of 12-15% down (the monthly PMI is not much money). It’s just too cost prohibitive to get $60K earmarked for a house (that’s right, a great house in the ‘burbs is about 200 grand!), and unlike you we are not fans of apartment life. In August we’ll sign another year lease, however, and be ready to move into a home hopefully August of 2012.

Austin

13 Heidi

Fine, I’ll pull the trigger and admit I wish we hadn’t bought. We bought our place at the very peak of the boom in July 2005 less than a year after getting married with 3% down that we borrowed from my parents. I wasn’t really sure about it, but I let others (parents, husband) talk me into it. 2 years later when we needed to move, we couldn’t sell our place. So, now I’m a landlord with a house that is still underwater 6 years later.

However, I have to look at the bright side of the issue. 1. The house was bought for $72,000, not some insane price because we lived in the middle of nowhere Indiana and prices were still reasonable. 2. We bought in a college town, so renting it is not all that difficult. 3. For the most part, it is self-sustaining. 4. It will eventually be a lovely investment property, or serve as a college fund for my (currently non-existant) kids.

We currently rent a place where we live now. I do hope to buy again eventually, but probably not until we move again when my husband gets a job with a new company. Though we won’t buy immediately, because I have no idea where we will be moving to and I’d like to get a feel for the place before I commit to buying something again.

14 This Guy

Deal we couldn’t pass up. We were able to put a down payment (w/o going FHA…. mortgage insurance is the worst) and furnish most of it w/o depleting our savings. It’s less of an e-fund, but we can build it back up in a few months. Long story short, a great deal resulted in us owning a 2300 sq. ft. brand new house while maimaintaining about the same outgoing expenses each month (maybe a $100/$200 change).

15 Eric

My wife and I live just north of Seattle and purchased a condo and got out right before everything crashed. We sold for 200K and it is now worth 140K, ouch.. for them!

We bought a house during the initial part of the crash, it is a 1,300 square foot house for 295K (it was listed at 350K), luckily the current value is right around the balance on our mortgage, BUT… We regret buying. We have since discovered that neither one of us likes yard work and we are hoping to rent a detached townhouse with a small token grass patch in the back yard.

The prices anywhere in the Seattle are are terrible, unless you want to live in the undesirable areas. I envy all of you who have low mortgage payments.. ugh, time to move out of state!

16 Stephanie

We haven’t yet, for all the reasons you listed. Though, we have a little family plan going on w/ my sister and my parents that my sister, BIL and their baby will move to my parents house, the ‘rents will build an in-law, and we’ll buy my sister and BIL’s condo…we shall see if that actually works out though. So many things to do first.

17 Ashley @ Money Talks

I honestly don’t know why we bought. My husband (boyfriend at the time) owned a house and he had been talking about getting a bigger place (not that he needed it) and we decided to buy a house together. We had been dating for 6 weeks. Seriously, I would smack myself in the head now. but I love my house, and my husband, and I don’t regret it at all. But it wasn’t the most thought out plan.

To me the benefits of ownership over renting are the fact that you can pay it off eventually. You can’t ever pay off rent. Even as a renter you are paying the property taxes and maintenance. They are included in your rent.

18 Jenna

I am a totally different story. I don’t own a house, but I can’t wait to. I grew up in the suburbs and loved having our own space (house), our own yard, driveway, etc. Possibly because I’ve grown up in a house, I have no problem with the concept of upkeep, yardwork, etc- I’m actually excited for it! I love having projects, and find such satisfaction in things like remodeling (even mild remodeling, ie repainting a room), mowing the lawn, etc. I know that there are things that are going to be a real hassle and a money suck (I still remember the Christmas Eve my family woke to a broken water pipe and a waterfall down our wall), but for me the effort is part of the fun, and well worthwhile.

Also, because I plan on having kids someday, I like the idea of putting my money into something tangible. Money spent on a mortgage is money that is paying off a purchase. Something you own, and can either keep for 50 generations or sell and use the money for new dreams. Even if the value of the house is cut in half, it’s still a house, and property, and it’s mine! Renting would certainly be easier and cheaper, but at the end of 30 years renting, I would have literally nothing to show for all that money spent.

Because I can’t wait to get my money paying off an actual purchase instead of just vanishing into my landlord’s pocket and paying off HIS investment, I’m considering making my first purchase a fixer-upper. It will depend on where i am in life when i can finally afford the house (if I have kids by then, no way will i have time to remodel a house), what the market looks like, etc.

But it takes all kinds, and as i’ve also been considering finding a place that has a unit I could rent out, I’m thrilled to see there are so many rent-happy people out there :)

19 krantcents

Thanks to the federal government subsidizing my mortgage and knowing we wanted to live in this city for some time (more than 5 years). It was an easy decision! Add the fact that you own an asset that is growing is a plus. Owning versus renting is a stabilizing choice. You are taking on additional responsibility and expenses.

20 Brian

Well, I wish I knew the housing market would tank before I made my purchase… At least my car note and credit cards are at a zero balance.. My goal is to have everything at a zero balance sooner than later :)
The housing market made it a little tough.. Only thing with renting is that the rent will never go away. So its just up to the person. Maybe you should buy a house in a few years when home prices get even cheaper.

21 Investing Newbie

I haven’t bought a house yet because I haven’t moved out of my parent’s house yet.

POW.

I think the first step would be to move out to an apartment first. Then, after I get bored with renting I can look into homeownership.

22 Rafael @ Reis Financial

Great article! My partner in crime and I have similar prerequisites; however, another reason why we don’t own (aside from the ridiculous Vancouver list prices) is because we want to travel and also try living abroad for a few years. We just came back from a month away in Thailand and we came back to our downtown, one bedroom apartment where we were proud to say we were home. I really believe home ownership comes with too many responsibilities, that I will admit, I am not willing to dedicate time towards.

Before I incorporated my business, I was the Financial Controller of a real estate development company that also had a service division. During the time I was employed, I realized the unforeseen financial obligations that come with home ownership. I remember one home owner who needed some standard HVAC work done, only for the electrician to discover the wiring behind the drywall was not up to code; therefore, what was originally a $8,000 quote turned out to be a $47,000 bill for the home owner (one discovery led to another).

23 Jake

My wife and my situation is kind of interesting. We were done with our rental agreement and I tried to negotiate price with the homeowner for another year, since we were good tenants. Instead of negotiating he wanted to increase our rates, so I told him no thanks. Little did we know the homeowner was going into foreclosure so we would have been screwed if we stayed. We found a cool rental home for a good price and filled out the application and were getting ready to move in. Our realtor, convinced us to look at homes to buy just to do it. So we found one in an awesome neighborhood, and a good price. In fact, the price was going to be cheaper than renting. So we took the plunge. Honestly we thought we would be renting for the rest of our lives just because it was cheap and flexible. Sometimes it just makes sense to buy, especially when you live in Arizona. I don’t think there is anything that I would change about the buying process. My advice would be to do research and learn real estate language and terms used, it seemed to help me in talking to my realtor and mortgage company.

ps: the day we were moving out of our rental home they posted a foreclosure notice on the door, so we got out in the nick of time.

24 Happy Homeowner

I’m a self-proclaimed winner of the “foreclosure lottery,” and I wouldn’t change a thing. I scored a hell of a deal from Fannie Mae, and I’ve been in my place for just about one year. A 2BD/2BA fully renovated condo in a safe Boston neighborhood for less than $250K?? You’d have to be crazy or know you’re leaving the city to not take advantage of the opportunity. I also closed in time for the 1st-time homebuyer’s credit which was a cool chunk of change.

My only words of wisdom would be to do a thorough check of your neighbors (I inherited quite the crazy first-floor neighbor–but she’s since been evicted due to foreclosure) and take your time when searching. I had looked for months and when I walked in the front door, I just knew it was The One.

25 Momninja

We had our choices down to 2 places and went back at night 1 had an amazing view of the state prison and it’s bright shiny lights so we opted for the that did not

26 Jenna, Adaptu Community Manager

I’m a non-homeowner because I’m still looking for the house that is too good to pass up on.

27 Jeff

I agree. Not owning a home isn’t bad at all. No lawn care expenses…etc. However, home prices are low now and close enough to the bottom.It’s all about personal opinion.

28 Tom

I bought my home in January. It was a new inventory home (about 1500 sq ft) built in late 2010. I got it for a sales price of 148,000. After putting money down and paying closing cost I have a 30 yr loan with a starting balance of 119,000. It’s about 1,500 a month to live in (Mortgage + Escrow + Utilities). I like my city and plan to live here for quite a while (I’m rather simple), so buying just made sense to me. While I have the mortgage, it will probably be no net gain compaired to renting, but after that mortgage is gone, I will enjoy an easier life.

I think it is best to think of a house like a retirement account. If base rent was $800 a month for a similar place and you paid $200,000 over the course of your life to buy it (principal + interest), then each year after you pay it off, your return is a modest 4.8% for the rest of your life (800*12=9600, 9600/200000=.048). Furthermore, as rents go up relative to increases in your property taxes, your return on investment will go up (e.g. If rents increase by $600/year and your taxes go up by $400/year, you win!)

Just some thoughts, but only get a house when you are ready to say “I’m ok with living here until I die.” If you can’t be ok forever, then homeownership may not be for you.

29 NDChic

We live in the country and we wanted to buy because we wanted to do stuff to our place. This is our second house and we were looking for more acreage. We want to have a garden and a place to have a bonfire without complaints from our neighbors. In short, we just wanted to own our land and wanted a few acres to call our own.

I certainly wouldn’t be rushed into buying a place, especially not in a high priced area like Seattle. People need to learn when to keep their mouth shut when asking or insinuating that they know whats best for you and Girl Ninja.

30 thewanderingbudget

We’re just going through the home-buying process now. We’re doing this essentially because (1) we found a house in a fantastic location at a great price ($87,500), (2) my father is retired and is looking for a project, and (3) my partner lives in Australia, so when he visits (and eventually moves here) and I’m working he also needs a project. It’s definitely a fixer-upper but we’re all up for the challenge!

I wasn’t interested in buying for a long time because I travel a lot and move around a bit, so buying felt like settling down. This house, however, will give us a low mortgage in a great rental market so I feel confident we can rent it out if we leave for at least twice the mortgage cost. House prices are relatively stagnant in my hometown so I think renting will be our greatest investment opportunity with this house.

31 Colette

I bought in 2000. I made a list of must haves (e.g. decent commute to work, close to buses, affordable), wants (e.g. 2 bathrooms), and “would be nice”s (e.g. fireplace, A/C) and looked at houses that fit at least the must haves and wants. I found my place quickly – but it wasn’t so much “the one” as “yeah, this’ll work”. I still love the place and have no plans to move. If I were doing it over, I’d pay more attention to the other expenses involved – property tax, utilities, repairs/renovations, maintenance costs (for snow removal, for example), getting a housesitter when I’m out of town. It turned out to be a good financial decision as well as a good lifestyle decision, but it could have gone wrong.

That being said, I like spending time at home. I don’t mind the extra maintenance and can afford the expense. It’s not for everyone, though.

32 bethh

I rent and don’t anticipate buying. It’s not appealing given my situation. First of all, I live in the Bay Area so yeah, it’s expensive, but also I’m not committed to staying here. Of course I’ve already been here five years, so who knows how long I’ll stay! Secondly, it’s most important to me to have low responsibility, high walkability, and a short commute. Finally, the options aren’t great: I could buy a house but would have to live in a suburb and commute an hour each way; I could buy a condo that is not as nice or as well-located as my apartment, or I could (in theory only) buy something as well-located as my apartment but would have to triple my expenses. I think I’m better off saving for retirement and enjoying a stress-free life.

33 Sara

That’s pretty much what I said below! :)

34 Marie at familymoneyvalues

We own. My biggest regret – waiting 4 years to buy! What I wish I had known: how fast our area was growing – it got noisy about 5 years into ownership due to cars, trains and planes.

35 Tabitha

One of the reasons I like renting is not paying for the upkeep and everything that can go wrong in a home. If I need something fixed, I make a call, and it gets done. There are certain things I just cannot do because of physical issues, so renting works best for me.

36 David

Homeowner here. Bought relatively young – I was a little over 25 when I bought a few years ago, right before the crash.

I knew it was *the one* because after I looked at it, I didn’t have that “it was great, but…” sentiment about it. There was no lingering doubt, nothing I wanted to change. I’d make sure you have that feeling. If you’re going to be there for a long time (I know you’re a buy-and-hold type), make damn sure it’s exactly what you want.

One thing I wish I knew – how much time and money our property required. Not the house itself, but the property. We live on a large, sloped property that doesn’t drain well. We’ve been doing drainage and lots of hardscaping projects (retaining walls) to redirect water flow.

So make sure you really consider the maintenance costs you’ll have after you move in.

Also, make sure the price is reasonable for how you actually feel about the house. Not what you think it could be worth, not how much it used to cost. It is reasonable for what you want?

We bought right before the bubble burst, but didn’t get hit that hard because we weren’t speculating.

37 Sara

Unless we start paying a lot more for rent (we pay $1400 for a 2 bedroom now), I don’t see it as necessarily ever being a good idea to buy a house here in San Diego. I messed around with this NYT calculator (http://www.nytimes.com/interactive/business/buy-rent-calculator.html), trying out all sorts of options and since even my dad’s house, which is a humble 3-4 bedroom/2 bath house in East San Diego (by SDSU), is valued at over $500k, I don’t see buying as an option. If we wanted to buy, we’d need a house that’s closer to $350k, and that’s just not happening in the areas we want to live. If we move waaaay up to Oceanside (45 min north of San Diego proper), for instance, where our friends recently bought, you’re faced with other expenses like a 1 hour + commute to work (with these gas prices!), less options in regards to purchasing (we currently live near every single grocery store chain in SD), etc – none of those are things we want to sacrifice just to own a house. My ideal has gone from wanting some big house one day, to realizing I don’t need it to be happy, and in fact not having all of that makes me MORE happy. So why mess with a good thing?

38 Justin @ MoneyIsTheRoot

I like your last point, you truly need to find something that is just too good to pass up. I went through the same scenario last year, and I still have seen prices fall even lower, and thats considering the 8k tax credit I received.

39 DebtorX

I bought a house when I was still in college, just before I got married. I financed 100% because, well, house prices always go up and I could always refinance in a couple of years when the loans reset. (That’s what they told me!) Then life happened and that didn’t end well. I’m a huge advocate of renting now due to the lessons I’ve learned from my homeownership experience! There are many additional benefits to renting that you didn’t mention, such as the complete lack of maintenance headaches. What people often gloss over when talking about how you should buy a house is the huge transaction costs. You will pay THOUSANDS of dollars to buy and sell your house.

40 Jay @ Sterling Effort

Hey man i’m over in the UK, just turned 26 and have owned a house for 8 Months.

My situation is a little different. I happen to be very good friends with a builder (its not what you know? right?) who was looking to move out from the family home also and so instead of us both buying our own ‘dream’ properties we decided to go in together and buy a house to renovate, live in for a while (until the house prices pick up) and then sell for a profit.

6 months later and things are going well, i’ve now been living in a freshly renovated house for 2 months, and am enjoying nice low mortgage repayments (thanks to bigger house deposit and splitting the monthly repayments down the middle).

I would suggest that people should not always look at houses as a ‘next’ or ‘final’ step but potentially another tool to increase your profits depending on your set of skills and spare time. It seems to be working for me, and although it won’t suit everyone its certainly something to consider.

Jay

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