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New attending home purchase. Time housing market?

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  • New attending home purchase. Time housing market?

    -Background: new attending ~1-1.5 years out of training. Have been renting since finishing up residency ensuring job/life situation is stable. All signs point that direction. We have one child and another on the way in about a month. This will likely be our last child so our family situation should be all set. At this point I really enjoy my job so don't envision a change anytime soon (although I can't of course predict changes 5+ years down the road) and it pays well. The practice is also very close to family so no need to move in the future.

    -Current financial stats: early 30s, stay at home spouse, 2 kids (w/in next month). Student loans paid off. ~700k in investments. Income 600-650k (all 1099) first full year out. Likely will stay in that range for foreseeable future (no partner option). Saved ~45-50% of gross income first full year out, all in index funds (WCI disciple). Currently invest additional money when I get it without looking at the market. Usually investing 10-35k/month maxing out all tax advantaged space and then the rest going into Vanguard brokerage account (all VTSAX).

    -Scenario: given the information above, we are looking to purchase our first...and hopefully, forever home. We've only just started the search as our lease doesn't end for another year. We are unsure new vs previously owned construction but we want to start things early as we know things can take time. Live in MCOL area, home purchase probably in the 700k-1.1million range. Although this is A LOT of money in my eyes as we've always lived well below our means, it definitely would fall under keeping mortgage <2x income.

    -Question 1: I've never been a market timer with investments. Get money--> invest money. However, I've never purchased a home before. From everyone I've talked to (family, realtors, friends), housing is currently expensive (although mortgages are good). Option 1 would just be to purchase a home in the next year (realistically starting the process this winter/spring) regardless of what the market is doing and save up accordingly (200k-300k down payment). Option 2 would be to save that money and just invest it in the stock market as I have been and wait longer than the 6-12 months to purchase the home for things to "cool off". We would just extend out our current lease longer. Essentially this is "market timing" but in a different way and it's not like the money wouldn't be going towards a good use. Obviously there's no way to know the future of the housing market (just like the investing market), but as WCI likes to say...there's no called strikes. I think that is applicable here as I don't have to purchase of course.

    -Question 2: do you think the house is affordable for us (although from what I could read on this site, likely yes). Just looking for additional input

     

    TLDR: what are people's thoughts on holding off buying a home because a market is expensive and essentially "market timing" but not in reference to stocks/bonds.

     

     

  • #2
    I think you should buy a house when it suits your family best. Sounds like over this next year would be best for that.
    You could get a better deal if the housing market tanks but when will that happen? It could be 5-10 years from now in your area. Would you want to wait that long? Would you get tired of waiting and buy in 3 years at an even higher level then today?

    I don't know about your area but million dollar homes sit on the market a while here even though the market is super hot right now. There are just not that many buyers in that range. So if you find something that you like and it has been on the market for a few months maybe you can negotiate hard.

    Good luck to you. I am sure you are going to do fine no matter what you choose since you have more then a years salary invested in just a year out.

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    • #3
      Don't worry about timing it. You have high income and very good net worth for age, when you find house you want id get it. I wouldn't delude yourself into calling it the forever house though. It's just a house. Could it be the forever house? Maybe. Maybe not.

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      • #4
        You seem to be doing well and could afford the home.   A previously lived-in home will always be cheaper.  I think the sweet spot is about 10 years old.  The landscaping is mature.  The appliances still should be ok.  It is easy to shop these days via Zillow and Trulia and screen what you want.  I bought a house recently this way.  I like the sizable downpayment idea.

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        • #5
          Ignore timing the stock market.
          Ignore timing the housing market.

          Your choice is when to increase the after-tax funds from savings accumulation to housing in the long term.

          • Definitely run through the house hunting and decision making process. So many plus/minuses that are purely family preferences and really just trimming options down to strong preferences vs nice vs no value.
          • Your “edge” is flexibility on the actual house you want to buy. Quick sale or sale with a longer closing date (new house under construction). The challenge is to find that opportunity and take advantage.
          • Don’t set a “time” that removes your “edge”. Just attempt to be a smart shopper and buy what you need. Resist the temptation to over buy. It’s very strong.

          Good luck with your first purchase, in a year or 2 or 3!.

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          • #6
            Come on now. You know the answer to this. There is little you can do to screw this up. With no loans and high salary and low spending. If you can’t buy this house, what are you saving all your money for?

            With regards to timing housing markets, my business partner sat on the sidelines for 3 years because housing was at its “peak.” He finally bought this year, and guess what? The market is still high and he probably cost himself 50k waiting for prices to come down. If you are planning on being there for a long time, it shouldn’t really matter anyway.

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            • #7
              Buy when you find what you want.

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              • #8
                I would start looking now and take your time in finding the right house. I wouldn't worry about housing prices overall as it's all relative anyway.

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                • #9
                  Best way to mitigate risk is to buy the house you want to stay in for the foreseeable future.  Buying a starter home exposes you to market risk if you want out in 3-5 years.

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                  • #10
                    I think the only market timing that could work is to buy in the fall and winter when school has started. You may have less inventory, though.

                    The thing in your favor is that you don't currently "need" a home and you have cash stores to buy when you want over the next few months.

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                    • #11




                      I think the only market timing that could work is to buy in the fall and winter when school has started. You may have less inventory, though.

                      The thing in your favor is that you don’t currently “need” a home and you have cash stores to buy when you want over the next few months.
                      Click to expand...


                      This is a thing, pay attention to it.

                      Trying to decide what is going to go on with the market as a whole is a losing game, but if you are ready to look and buy right now as we head into October you stand a very real chance of being a rare buyer in a buyer's market. Someone who has been on the market for a while might be ready to make a deal.

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                      • #12
                        We bought a forever home when our child situation was like yours is now, one young'un and another in the oven.  I was one year into attendinghood and the job was a keeper.  We had been renting and were ready to put down roots.  It worked out well.

                        A few random thoughts:

                        1) Start looking at houses to get a feel for the market and to see what you will get for your money.

                        2) Pay attention to schools when you buy your house.  The kids are very little now, but the schools are key to your future wants.

                        3) Don't invest your downpayment in the stock market, you could need to withdraw to buy the right house when the market tanks.

                        4) Finding a used home or a new one already built on spec can be a lot less stressful than building a new construction house, and also a lot cheaper.  New construction tends to cost 10-20% more than even a brand new, already built spec house.  It is somewhat like a new car, it depreciates 10% the day you move in and it becomes a used house (although this somewhat depends on your particular local market and the supply/demand issues in your local market).

                        5) Yes, prices are high right now, but mortgages are super cheap.  Those 2 things are clearly related.  If you stay for a long time like we did, it is the monthly payment that matters, P/I and property taxes.  We lived in our "forever house" for 22 years. When we sold, our 100k downpayment had turned into 1.25M in cash at closing, simply by paying off the mortgage over those years that we lived in the house.

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                        • #13
                          Money is cheap right now, it's a great time to purchase.  The housing market in your price range moves a bit slower than anything under 650K.  So, you have time to choose wisely.  Look at school ratings, neighborhoods, go online and gather info on the area.  Where ever your down payment and closing costs are coming from, make sure they are in your account a minimum of 60 days prior to application for a loan.  That way the funds do not need to be sourced/documentation required from origin.  If they will come out of any investment account you will need to provide full account documentation along with guidelines for withdrawal, etc.  Just minimizes documentation requirements if in your checking or savings if there over 60 days.

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                          • #14







                            I think the only market timing that could work is to buy in the fall and winter when school has started. You may have less inventory, though.

                            The thing in your favor is that you don’t currently “need” a home and you have cash stores to buy when you want over the next few months.
                            Click to expand…


                            This is a thing, pay attention to it.

                            Trying to decide what is going to go on with the market as a whole is a losing game, but if you are ready to look and buy right now as we head into October you stand a very real chance of being a rare buyer in a buyer’s market. Someone who has been on the market for a while might be ready to make a deal.
                            Click to expand...


                            Other than not buying when the market is clearly inflated this is as far as I tend to go with attempting to time the housing market. In my experience it seems sellers are willing to negotiate a bit more around Thanksgiving rather than sit on it until after the first of the year. Not sure if that is area specific though.

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                            • #15




                              Money is cheap right now, it’s a great time to purchase.
                              Click to expand...


                              There's much, much more that goes in to determining a great time to purchase than 'cheap money'.

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