Buy house now or wait?

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dumb_lucky_20
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Buy house now or wait?

Post by dumb_lucky_20 »

Hi,

I live in the SF Bay Area and currently rent a 2B/2BA apartment with my wife and infant son. We don't have a pressing need to buy a house but I feel like in the current market my significant down-payment fund ~1m is wasted sitting in a high yield savings account and we would be better off buying any house and benefiting from the appreciation. I understand that this idea is based on the guess that house prices will continue to appreciate. I am getting a bit antsy seeing prices go up and up and seeing my down-payment fund remain flat.

I plan to buy in the SF Penninsula in a city with good schools between Burlingame and Mountain View.

What are others' thoughts on this dilemma?
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Watty
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Re: Buy house now or wait?

Post by Watty »

How expensive of a house are your thinking about buying and how does that compare to your income and net worth?

That is important since one way that I would look at it is the impact of the house price going up or down by 33% could be a modest percentage of some peoples net worth and less than a years income. If that is your situation, and your job is real secure then if you buy the house and the value changes a lot, either up or down, then that would not be a life changing event.

For other people 33% of the homes value could be a high percentage of their net worth and it would take many years to earn that much. If your situation is more like this, or you job is not super secure, then it would be a big gamble since a big decline in the home price would be real hard to recover from.
dumb_lucky_20 wrote: Tue Sep 14, 2021 10:25 pm and infant son
There is no hurry to buy a house before your kid is ready to start school. If you might have more kids then you need to be a bit cautious if you are depending on two incomes. If the next kid has even minor and temporary health issues then daycare may not be possible or desirable so you might need to go down to one income for a while.
dumb_lucky_20 wrote: Tue Sep 14, 2021 10:25 pm between Burlingame and Mountain View.
I used to live in the Bay Area a long time ago. Be especially careful about the earthquake risk in that area because there are a couple of faults that go through that area, some of the soil may not be great for earthquakes, and some of the housing may have been built when building codes were not as strict.

When I lived there I was thinking about buying my first house and my best guess was that if I bought a house there then it might have significant earthquake damage maybe once in 200 years. (Do your own research and make your own guess.) That does not sound too bad until you realize that if you own a house there for 20 year then there is about a 10% chance this it will have earthquake damage.
homebuyer6426
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Re: Buy house now or wait?

Post by homebuyer6426 »

I would not look at a house purchase as an investment vehicle to appreciate money.

This goes especially for a high cost of living area like SF Bay. The price there is already extreme in relation to the rest of the country, and there's no guarantee that it's going to keep going up.

If you don't expect to have an overwhelming need for a house for 10-15 years, put that money into stocks/bonds, or at least CDs.
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dumb_lucky_20
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Re: Buy house now or wait?

Post by dumb_lucky_20 »

Watty wrote: Wed Sep 15, 2021 12:14 am How expensive of a house are your thinking about buying and how does that compare to your income and net worth?
I'm thinking of buying a house around 2m, this would be about 30% of my net worth
Watty wrote: Wed Sep 15, 2021 12:14 am That is important since one way that I would look at it is the impact of the house price going up or down by 33% could be a modest percentage of some peoples net worth and less than a years income. If that is your situation, and your job is real secure then if you buy the house and the value changes a lot, either up or down, then that would not be a life changing event.

For other people 33% of the homes value could be a high percentage of their net worth and it would take many years to earn that much. If your situation is more like this, or you job is not super secure, then it would be a big gamble since a big decline in the home price would be real hard to recover from.
dumb_lucky_20 wrote: Tue Sep 14, 2021 10:25 pm and infant son
There is no hurry to buy a house before your kid is ready to start school. If you might have more kids then you need to be a bit cautious if you are depending on two incomes. If the next kid has even minor and temporary health issues then daycare may not be possible or desirable so you might need to go down to one income for a while.
This is a good point, I'll definitely take this into consideration.
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dumb_lucky_20
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Re: Buy house now or wait?

Post by dumb_lucky_20 »

homebuyer6426 wrote: Wed Sep 15, 2021 7:42 am I would not look at a house purchase as an investment vehicle to appreciate money.

This goes especially for a high cost of living area like SF Bay. The price there is already extreme in relation to the rest of the country, and there's no guarantee that it's going to keep going up.

If you don't expect to have an overwhelming need for a house for 10-15 years, put that money into stocks/bonds, or at least CDs.
I plan to buy in the next 5 years so I feel like for such a short time window only high yield savings or short term CDs make sense
DidItMyWay
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Re: Buy house now or wait?

Post by DidItMyWay »

You're right. There is no guarantee that prices will continue to appreciate. Some think they will stay flat or decrease over the next few years. In your shoes, I would probably leave the $ parked where it is and have a goal to buy and by settled somewhere before your child starts kindergarten. I wouldn't be in a rush due to this current crazy housing market. Look around, and if you find something that you love, then make a decision whether or not to make an offer. Just don't get caught up in the current frenzy/FOMO.

Best of luck!
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fallingeggs
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Re: Buy house now or wait?

Post by fallingeggs »

I would generally go with others that I’d prefer to sit tight until you “need” to move for school, etc. BUT, if a 2m house is only 30% of your net worth (ie, you nw is +6m) and you plan on working for the foreseeable future, YOLO and buy what you want. You can afford to make a bad investment on a house if you otherwise love it. What’s the worse that can happen? Your paper nw is a few 100k below what it other wise would have been? With still have a nw of 6m, I would still sleep very well.

Benefits of being wealthy is that you don’t need to care so much!
fortunefavored
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Re: Buy house now or wait?

Post by fortunefavored »

For the bay area, I'd focus more on your salary. As long as your salary is outpacing most everyone else.. you can afford to wait and buy when you need a house. There's little risk you will be "left behind" - yeah, maybe you'll miss out on appreciation (if any) but there's a lot of downside risk in home ownership too.

If you were at the end of your career, or your career had a definite stopping point.. maybe you should buy immediately while you can.

Assuming you're both in tech, it is unlikely you will not stay ahead of (or at least on par with) the market.
vfinx
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Re: Buy house now or wait?

Post by vfinx »

I would just invest the house fund into the market and see what happens. That would not be appropriate for most folks, but in your case you’re not that desperate to buy a house (other than fomo), and you still have millions in equity vesting every year. If and when you find a house you fall in love with, it’s highly unlikely you’ll have any difficulty making the down payment. Selling some stock to buy a house is not the end of the world, even if you have to recognize some capital gains/losses.
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Watty
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Re: Buy house now or wait?

Post by Watty »

dumb_lucky_20 wrote: Wed Sep 15, 2021 3:04 pm I'm thinking of buying a house around 2m, this would be about 30% of my net worth
So if you buy it at the market top and prices and home prices drop by a third you would lose about 10% of your net current worth. That would sting but it would not be a life changing event.

If your employment is steady then your income might even be building your net worth faster than the home prices drop so your net worth could stay the same or even go up during a housing slump.

The same math is roughly true in that if you do not buy the house now and you have to pay 33% more a few years from now then you could handle that without too much pain too.

Assuming that you have proportionally high incomes that are relatively secure then you have lots of reasonable options that are not obviously a terrible choice.

I would suggest making a large enough down payment so that you could make the mortgage payment with just one income if you needed to.

It is not realistic but even if the house is destroyed by an earthquake and you had to walk away from it, that would be a big setback but you would not be in a dire financial situation since you would still have a high net worth.

There are lots of opinions but in some situations an argument could be made for just paying cash for the house since that would only be an additional 15% of your net worth.

I think you can do pretty much anything you want to do since your choice is not really a critical financial decision where you need to worry about mistake screwing up your life.

One big question though is if you really want to stay in the Bay Area since there are a lot of challenges with raising kids there, and if they are still there when they are grow up it can be rough for them to afford to live near you.

There are lots of places where $2 million will basically get you a mansion(not a McMansion) if that is your cup of tea. For example here is what you can get for that in the suburbs of Atlanta.

https://www.realtor.com/realestateandho ... 0114-94515

(Note: the 12,111 square feet is the house size, not the lot size. :shock: )

I'm not saying that you should move to Atlanta, or live in a monstrosity like that, but probably 80% is the country is priced more like that. One of the big problems with Bay Area housing is not just that it is so expensive, but you also do not get much for your money so it would be good to keep that in mind.

Cashing out and moving by the time your kid starts school would be an option that you might want to keep an open mind about.
Ron Ronnerson
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Re: Buy house now or wait?

Post by Ron Ronnerson »

If you can afford the house, plan to stay in it for a good while, and want to buy it because of your growing family’s needs, then go ahead. If it’s because you’re feeling like you might miss out on price appreciation, that’s not a good reason. No one knows what home values will do in the years ahead. Buy when it’s the right time for you based on your situation and keep it just that simple.
harrychan
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Re: Buy house now or wait?

Post by harrychan »

We were in your position 12 years ago. Although not Bay Area, we had a crazy surge in home prices heading into 2008. We had a toddler and another one on the way. Our combined income was barely over $100k. We did the math and it didn't make sense to pay upper $400k's for a condo so we really stretched and got a SFH. We found the monthly payment we were comfortable with and decided to find a home which we knew we would be happy with regardless if the home appreciated or depreciated. I think the home did depreciate slightly for a year after we bought it since the crash but it has since appreciated.
This is not legal or certified financial advice but you know that already.
Wannaretireearly
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Re: Buy house now or wait?

Post by Wannaretireearly »

dumb_lucky_20 wrote: Tue Sep 14, 2021 10:25 pm Hi,

I live in the SF Bay Area and currently rent a 2B/2BA apartment with my wife and infant son. We don't have a pressing need to buy a house but I feel like in the current market my significant down-payment fund ~1m is wasted sitting in a high yield savings account and we would be better off buying any house and benefiting from the appreciation. I understand that this idea is based on the guess that house prices will continue to appreciate. I am getting a bit antsy seeing prices go up and up and seeing my down-payment fund remain flat.

I plan to buy in the SF Penninsula in a city with good schools between Burlingame and Mountain View.

What are others' thoughts on this dilemma?
My thought is you need to really look at school districts and understand them well. Pros and cons of highly rated schools/districts. Talk to parents at all levels.
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cchrissyy
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Re: Buy house now or wait?

Post by cchrissyy »

in the current market my significant down-payment fund ~1m is wasted sitting in a high yield savings account and we would be better off buying any house and benefiting from the appreciation.
I plan to buy in the next 5 years so I feel like for such a short time window only high yield savings or short term CDs make sense
The money you have in mind for a down payment is so much above the usual percent to put down, you can afford to invest it for a better return and no matter if it goes up or down while you're looking, you can still buy the same places.
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willthrill81
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Re: Buy house now or wait?

Post by willthrill81 »

In very high cost of living areas, like the Bay area, owning makes virtually zero financial sense for most people. Renting is the way to go, especially if you don't have a pressing need to own.
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dumb_lucky_20
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Re: Buy house now or wait?

Post by dumb_lucky_20 »

willthrill81 wrote: Wed Sep 15, 2021 9:52 pm In very high cost of living areas, like the Bay area, owning makes virtually zero financial sense for most people. Renting is the way to go, especially if you don't have a pressing need to own.
I think renting in the short-term makes sense but eventually we would like to have a permanent place. My wife is sick of moving every 1-2 years
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dumb_lucky_20
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Re: Buy house now or wait?

Post by dumb_lucky_20 »

Watty wrote: Wed Sep 15, 2021 5:31 pm
dumb_lucky_20 wrote: Wed Sep 15, 2021 3:04 pm I'm thinking of buying a house around 2m, this would be about 30% of my net worth
One big question though is if you really want to stay in the Bay Area since there are a lot of challenges with raising kids there, and if they are still there when they are grow up it can be rough for them to afford to live near you.

There are lots of places where $2 million will basically get you a mansion(not a McMansion) if that is your cup of tea. For example here is what you can get for that in the suburbs of Atlanta.

https://www.realtor.com/realestateandho ... 0114-94515

(Note: the 12,111 square feet is the house size, not the lot size. :shock: )

I'm not saying that you should move to Atlanta, or live in a monstrosity like that, but probably 80% is the country is priced more like that. One of the big problems with Bay Area housing is not just that it is so expensive, but you also do not get much for your money so it would be good to keep that in mind.

Cashing out and moving by the time your kid starts school would be an option that you might want to keep an open mind about.
We have considered leaving the bay area but there are too many factors keeping us here, community, quality of life, air quality (for most of the year).

That house in Atlanta is insane though
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willthrill81
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Re: Buy house now or wait?

Post by willthrill81 »

dumb_lucky_20 wrote: Thu Sep 16, 2021 10:52 am
willthrill81 wrote: Wed Sep 15, 2021 9:52 pm In very high cost of living areas, like the Bay area, owning makes virtually zero financial sense for most people. Renting is the way to go, especially if you don't have a pressing need to own.
I think renting in the short-term makes sense but eventually we would like to have a permanent place. My wife is sick of moving every 1-2 years
Is renting forcing you to move that often?
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Jovby
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Re: Buy house now or wait?

Post by Jovby »

Why wait?

Sounds like you are planning to buy a house in the next 4 years, for school for the little one. I don't see housing being cheaper then. Even in 2008 SF housing prices didn't really drop much and they certainly recovered sooner then 4 years. I'd say the odds are you will pay more in 2025 then you will now. Even if there is a correction, you can just ride it out. If your budget supports it, I'd definitely go for it.
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dumb_lucky_20
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Re: Buy house now or wait?

Post by dumb_lucky_20 »

willthrill81 wrote: Thu Sep 16, 2021 11:16 am
dumb_lucky_20 wrote: Thu Sep 16, 2021 10:52 am
willthrill81 wrote: Wed Sep 15, 2021 9:52 pm In very high cost of living areas, like the Bay area, owning makes virtually zero financial sense for most people. Renting is the way to go, especially if you don't have a pressing need to own.
I think renting in the short-term makes sense but eventually we would like to have a permanent place. My wife is sick of moving every 1-2 years
Is renting forcing you to move that often?
Yeah, we've moved frequently due to changing needs in space or rent rate increases.
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dumb_lucky_20
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Re: Buy house now or wait?

Post by dumb_lucky_20 »

joverby wrote: Sat Sep 25, 2021 8:22 pm Why wait?

Sounds like you are planning to buy a house in the next 4 years, for school for the little one. I don't see housing being cheaper then. Even in 2008 SF housing prices didn't really drop much and they certainly recovered sooner then 4 years. I'd say the odds are you will pay more in 2025 then you will now. Even if there is a correction, you can just ride it out. If your budget supports it, I'd definitely go for it.
That's my general feeling that prices in this area will only continue to go up even in the case of a 2008 like event, especially if we buy in a place like Palo Alto
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willthrill81
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Re: Buy house now or wait?

Post by willthrill81 »

dumb_lucky_20 wrote: Sun Sep 26, 2021 10:10 am
willthrill81 wrote: Thu Sep 16, 2021 11:16 am
dumb_lucky_20 wrote: Thu Sep 16, 2021 10:52 am
willthrill81 wrote: Wed Sep 15, 2021 9:52 pm In very high cost of living areas, like the Bay area, owning makes virtually zero financial sense for most people. Renting is the way to go, especially if you don't have a pressing need to own.
I think renting in the short-term makes sense but eventually we would like to have a permanent place. My wife is sick of moving every 1-2 years
Is renting forcing you to move that often?
Yeah, we've moved frequently due to changing needs in space or rent rate increases.
If you have had 'changing needs in space', then buying won't solve that problem.
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Somethingwitty92912
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Re: Buy house now or wait?

Post by Somethingwitty92912 »

dumb_lucky_20 wrote: Tue Sep 14, 2021 10:25 pm Hi,

I live in the SF Bay Area and currently rent a 2B/2BA apartment with my wife and infant son. We don't have a pressing need to buy a house but I feel like in the current market my significant down-payment fund ~1m is wasted sitting in a high yield savings account and we would be better off buying any house and benefiting from the appreciation. I understand that this idea is based on the guess that house prices will continue to appreciate. I am getting a bit antsy seeing prices go up and up and seeing my down-payment fund remain flat.

I plan to buy in the SF Penninsula in a city with good schools between Burlingame and Mountain View.

What are others' thoughts on this dilemma?
A house isn’t an investment unless it’s a rental which is a different calculation.

Homes are expense items. You use them like you do a bottle of water. You must live somewhere. The question is where do you want to live.

If I were in your situation, I’d take that money an buy a house elsewhere an… retire. That’s me through you got other life goals.

You could spend 1/5th of that “down payment” and buy a mansion is some small towns around the states that have good schools and nice communities.

An alternative, would be to take the bare minimum of your 20% down, and place that into a CD or something similar. Then take the rest and throw it into the market. But, from the way I am reading this 1 mill is your 20% which I just have a hard time reading.

It’s my opinion that this is the new bottom for the real estate market. I don’t see waiting helping anyone. Alternatively, I’ve spoke. To some people who seem to think a market correction may come in 2023. Either way is a bit of a gamble, at the end of the day… you need to live somewhere. Best pick that place an move on in.
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