Too much house?

[StateOfMyHead]

A walk out basement sounds nice but it really does not offer very much. It is another door to secure. From intruders (not our problem) and from escaping children (our problem).

My first thought is water coming in. And it sounds like OP has already signed a deal?

[Tim]

Basement with a door is not what it is cracked up to be. Especially when they reach middle school and high school.
The way I know is somehow my parents let me claim the basement for living quarters. BIG mistake.

[Ab1981]

We gave a design deposit 7 months ago, but refundable if price came out over 2M.

[Tangler]

Your question: Too much house?

Answer: Yes.

others have discussed why already.

[Tangler]

I honestly thought the price for that house was a joke when I first saw it.

Bubble? Perhaps just overpriced? We will see what happens to prices when interest rates rise?
All people look at is the monthly payment.
Pain soon.

[uksho]

My motto is it's not what you make, it's what you spend that really matters - that is where it all starts. One of the most important facts we don't know is your standard of living. I've worked with planning clients at your income level spend <$100k/yr and those who spend double that. It really makes a difference in future net worth because what is not spent, especially for the frugal ones, is typically saved.

You have much more experience than I have, but still every-time I hear this, it makes me think! Someone making 800K, whether they spend 100 or 200K, they will be fine
But someone making 300 K should not be spending that much

So, how does the income not matter? I definitely get the point that if you spend it all, you will never increase your networth
At this stage in my life, the only way I can save more is my increasing my income or by living poor (which I don't want).

[jfoxcpacfp]

You have much more experience than I have, but still every-time I hear this, it makes me think! Someone making 800K, whether they spend 100 or 200K, they will be fine
But someone making 300 K should not be spending that much

So, how does the income not matter? I definitely get the point that if you spend it all, you will never increase your networth
At this stage in my life, the only way I can save more is my increasing my income or by living poor (which I don't want).

I d/n say the income d/n matter. Impo, though, it is secondary to your spending. I also d/n say they w/b fine. I would not go there without a realistic plan in place.

It may not matter in the least whether you increase your net worth. What matters is that you have defined and prioritized your goals and determined whether you have made the appropriate decisions to reach them. If you haven’t, figure out an alternative or redefine your goals. Don’t believe I’ve ever worked with a client who was down to only a binary decision..

[Tim]

And talks about outdoor cameras. As if someone is eyeing their TV and sound system.

The whole lot itself is only 7500 sq feet. Whenever they use the word charming, you know it is piece of crap. And I suspect the fencing is to prevent the occupants from escaping out due to claustrophobia.

Here you can get a 7500 sq foot house for 1/2 to 2/3 the price.

House properties in Austin are location specific. The off campus housing demand is basically an investors dream. Buy 4 lots and build a 10 story apartment/condo project. I haven’t been to UT in 10 years. With the low interest rates, you have sophisticated national money buying property with a longer term plan. That block of houses disappears. The house is not what you are buying.
Location, location, location.
I can throw a tennis ball (over the brick wall) and hit houses that are worth 1/2 the cost per square foot. But they don’t have a lake stocked and walking paths. Depends on the neighborhood and traffic.

[mamaham]

Sometimes I wonder why people ask a question(s) when they have already made up their mind?

seems to happen a lot…

[Tim]

You have much more experience than I have, but still every-time I hear this, it makes me think! Someone making 800K, whether they spend 100 or 200K, they will be fine
But someone making 300 K should not be spending that much

So, how does the income not matter? I definitely get the point that if you spend it all, you will never increase your networth
At this stage in my life, the only way I can save more is my increasing my income or by living poor (which I don't want).

Follow this: comp -taxes-retirement (20%)=spending
ANYTIME you need a loan think 5 times. You are reducing future spending. A physician will not be or live poor. There are three big rocks: student loans, cars and housing. Have those under control and you will be free of money issues.
The biggest purchase and a 30 year loan commitment is not living poor at $2.5m. Housing is so tempting because you can. Not because you really want to reduce your other spending for 30 years.
If you protect your future spending by controlling these items with your plan, you will be rich and never have any money problems. How soon, is your choice. Long term debt has a big impact on future after tax and retirement savings spending is the point for you to chew on.

[White.Beard.Doc]

If the RE market holds up, you could always get out by selling if it turns out this is too much house for you, if one of you wants to work less. If the RE market does not hold up with rising interest rates, then you will not get out of this house without major financial pain. You will be prisoners of your jobs and will need to maintain the high incomes x2 for the long term to service that multi-million dollar mortgage.

The future inflation situation is unknown. If inflation comes under control relatively easily, then future interest rate rises should be reasonable and contained. If inflation gets very much out of control, then rate rises will be incessant until the asset price pain becomes extreme. No one knows, but runaway inflation is within the realm of possibility.

I remember the 1980s, when peak mortgage rates reached 18.5% due to runaway inflation. It was impossible for almost anyone to buy a house. If that type of runaway inflation occurs again, which is a possibility, then the RE market will get turned completely upside down before major asset price adjustments occur and it all ends in a very messy fashion.

[StateOfMyHead]

Another consideration and anecdotal based on my area/perspective is that in times when the real estate market cooled it seemed the lower and moderately priced homes still sold albeit slower and for lower prices while the high end inventory tended to languish.

It will come down to OPs financial plan. My homes were historically purchased as investments but later in my career when I decided to do a new build I considered it a luxury item.

[Ab1981]

appreciate all the feedback...we decided to move ahead. In the end, I felt that it was worth stretching financially to be able to enjoy the house/school disrict/neighborhood as the kids grow up. We'll see how it goes

[StarTrekDoc]

Congrats on the decision OP. Many folk here in Cali's VHCOL make this decision every day. The hard part of this equation that I have is how is your school district location unique in a wide open state with no real limits on the next town over attracting major industry and quality workforce and build newer homes -- that saps YOUR home ownership appreciation and ultimately -- your exit plan from your house.

That's the single redeeming benefit of the VHCOL of most California areas of desire-- price appreciation.

Will that be the same for you as you stretch your budget now?

Remember to budget for new stuff for a semi-custom home --- landscape , furniture, furnishing.

[White.Beard.Doc]

appreciate all the feedback...we decided to move ahead. In the end, I felt that it was worth stretching financially to be able to enjoy the house/school disrict/neighborhood as the kids grow up. We'll see how it goes

Thanks for the update.

It would be interesting to hear how the building process goes. Typically there are some interesting things that come up, and some challenges as well.