<p>My husband, our two kids, and I moved to a new town a few years ago to make a fresh start. I quit my job and went back to school for my second career.</p>
<p>After selling our house in our old city, we banked the proceeds so that our money would be available for education (both mine and that of our son, who is now a college freshman) rather than tied up in a house. We are comfortable with our middle-class income, but by no means wealthy. Basically, we put a little into my husband’s 401(k) every month and keep a buffer of a few thousand dollars in a savings account that we’d rather not touch except in an emergency.</p>
<p>But…mortgage interest rates are so darned low right now, we’re starting to worry that we may be missing the boat. By using most of our liquid cash as a down payment, we could get a nice house, and our total housing cost, including utilities and taxes, would go down by $200 a month or more. (Although we don’t have a lot of assets, our income and excellent credit should ensure that financing is available.)</p>
<p>On the one hand, if we buy a house now, and then something happens such as unexpected unemployment, we could be stuck with a house we can’t sell. On the other hand, if we wait another two to three years as we’ve planned, we could be kicking ourselves that we didn’t take advantage of the excellent buyer’s market today.</p>
<p>I know this is an issue that only we can decide for ourselves, but any insight any of you could provide would be much appreciated. Thank you.</p>
<p>Does this include your education money? How long will it be before you graduate and get a job? In today’s economy, I don’t know if I’d risk wiping out my savings when there is only one income.</p>
<p>I know the buyer’s market and insanely low interest rates are hard to pass up, but you might be getting in over your head right now. You may not need to wait 2-3 years, though. Consider spending the next year or so saving as much money as you possibly can–keep feeding the 401(k) and also beef up your savings account. That way, you would still have a substantial emergency fund if you decided to buy a house.</p>
<p>Real estate markets are extremely local in their performance. A few miles difference or moving a few towns over can make a huge difference. Heck, even moving a few streets over can make a big difference.</p>
<p>How has the market been where you are? What is the economic situation where you are?</p>
<p>While I don’t think interest rates are going to go much lower, I don’t think they will go up substantially in the next year, or even two years. So if you think prices are going to drop more, I would hold off. If your area seems to have bottomed out and is going back up, it might be smart to jump in.</p>
<p>So many factors though - local unemployment rate, local foreclosure rate, general economic conditions, location, etc. It’s very hard to make a prediction.</p>
<p>Nationwide, many so-called experts are predicting another downward movement, but it really depends on your local conditions. In my area, we have seen changes over the last few years ranging from up a few percent to down 30-40% or more, depending on what town you are in.</p>
<p>In your situation, I would buy a very small and easily affordable house that would make a good rental if you needed to rent it out… Location must be perfect. Buy very conservatively! (But I disagree that interest rates aren’t going up.) Don’t forget that what little interest you pay is still tax-deductible.</p>
<p>Every market is different, so you might want to contact a realtor to see what the housing outlook is in your area. In many places, the market has bottomed out, but that doesn’t mean it’s going up any time soon. You probably have plenty of time, maybe years, before the next upswing.</p>
<p>In general, I’m not a big fan of making a major purchase based on price panic. Especially on something that will affect your financial life this much, IMO caution is called for. Many of the people who’ve been foreclosed on in the last couple of years were people who jumped into the market in the early 00’s because they were afraid of “missing the boat.”</p>
<p>I’d buy. Most colleges don’t look at home equity as an asset; cash in the bank they do. You may qualify for more financial aid if your money is tied up on a house -and you say it is also cheaper than rent. Having a home is good!!!</p>
<p>Interest rates will go up. It will no longer be a buyers market. Homes may start selling at a fairly decent rate, depending on where you are. Real estate is not going to see the gains we did in previous years for quite some time. This was a market correction in part.
Consider how long you intend on being in the area. Consult some knowledgable real estate experts for your area. You are not going to miss a buyers market in the next year. Make sure you are buying for the right reasons, not the old way we used to look at it. It’s a new game, new rules!</p>
<p>The taxes you mention are property taxes? If not, find out how much that would be, as well as homeowner’s insurance. And of course, don’t forget to factor in a budget for repairs and maintenance.</p>
<p>I agree with the “buy small” comment. You have a college son already, and I assume both kids will be out of the house in a few years and won’t need the space. Also, the houses at the lower end of the market always sell faster, so if you were to want to move someday, a less expensive home would easier to resell. It also would be the most comfortable in the present, financially.</p>
<p>You also need to consider how long you will be in the house. If you think you will move in a few years, you have to analyze the numbers carefully. The transaction costs for real estate are pretty high - 5-7% for a commission, seller concessions, some places have transfer taxes, etc. It can add up to many thousands of dollars.</p>
<p>I agree about getting expert advice but in my experience, I can not fathom a real estate agent saying anything that discourages “buying now”. Realor Associations continuously send out press releases that, no matter the forecast, convert it to “now is a good time to buy”.</p>
<p>Can you tap your network to find people who make a living investing in RE? Or even go online for insights. For almost ever region, there are some excellent interactive forums of RE investors. I think there you will find actual market expertise, an understanding of economics, as well as objectivity. Of course no one has a crystal ball…</p>
<p>Also consider your emotional needs. Would you be happier with a house and yard you could do things to- as well as need to take care of? I agree with considering a house that fits you and your spouse as “empty nestors”. No reason to spend as much as you can, look for a house that improves your quality of living over the rented housing and still gives you a buffer financially. Buying a house is not like investing in the stock market- it involves a lot of money but is so much more than a financial decision.</p>
<p>I have not been on this board in a while, but I would like belatedly to thank all of you who offered advice. You have given me valuable food for thought. We have not made a decision yet, and I have a feeling that, because of all the uncertainties, we will probably not be buying in the immediate future. Thanks again for your help.</p>