Buy a home or wait out this insanity?

[Tim]

• “I am in my first year out of training”
• “Combined income with me working part-time is 263K annually, monthly gross 22K (13K from me, 9K from spouse). This could drop to 237K annually (20K monthly) if I drop my hours slightly for a year or two with second child which I would like to do”

I’ll leave the family decisions and employment decisions to you and your spouse. Where I see it, you haven’t reached a stable earnings point yet.
Options yes, but … not yet there.
You won’t like this, your needs and earnings are probably more important than the housing prices and interest rates.
- If you need a job because of the move, I would suggest getting that lined up first.
- Rent for a year
- The big kicker is starting a private practice, especially part time, could put a major dent in the income for awhile AND the amount lenders will approve for two years.
- If you can’t arrange continuing with the same employer, a guaranteed comp, your career path may blowup your plan.

With the part time currently, have you gotten any pre approvals? I am more concerned how much you will earn and whether you will get financing and if you will continue.
Lenders usually require two years of earnings history. You are in your first year. Buying may not be an option. Rent would be the default.
Who commutes is one of the benefits of renting.
I think the major issue is your being in your first year out and building a stable earnings record.

Personally, I would get your employment situation settled and then buy . You income is the big question and how it is documented.

[mercredis]

Just curious, when would folks consider their employment situation to be settled? Past the probationary period? A minimum certain number of years at the job? Or more of a “when you know, you know” kind of feeling?

We’re not financially ready to buy yet (VHCOL), but it’s on the back of our minds. My SO has been at his job for almost 2 years now, I’ve been at this job <1 year.

[Hank]

Just curious, when would folks consider their employment situation to be settled? Past the probationary period? A minimum certain number of years at the job? Or more of a “when you know, you know” kind of feeling?

We’re not financially ready to buy yet (VHCOL), but it’s on the back of our minds. My SO has been at his job for almost 2 years now, I’ve been at this job <1 year.

At least a year, preferably two years, with a warm and fuzzy feeling from both employee and employer that this is a good fit. No need to give your employer excess leverage over you by stretching and buying too much house too early.

[lakeswim]

I think renting is hard on growing families because there is a barrier to putting down roots, feeling settled, etc. We bought a new construction a year ago, and it has already gone up in value more than 20%. I'm thankful we got into the market even though we'll likely move in a year or two. Community is important when you have young kids.

I would just pull the trigger and get the house you want in a good area with good schools, especially at the budget you mentioned. I just can't imagine a 350K mortgage is going to stress your budget.

I'm also part-time (3 kids under 5), and my husband makes quite a bit less than I do. The vast majority of our expenses go toward childcare, which is where our financial stress comes from. I do feel some pressure to work more, but it is what it is. This is just an expensive time of life.

[Tim]

“In order to confirm your income, a mortgage lender will request a few documents. A good way to remember the documentation you’ll need is to remember the 2-2-2 rule:

• 2 years of W-2s
• 2 years of tax returns (federal and state)
• Your two most recent pay stubs

Seriously, getting a mortgage or refinancing a student loan is going to be problematic.

OP wants a home and can likely afford it. How do they get financing given OP is in the first year out? Without a mortgage, rent. Physicians and professors don’t get a pass. The underwriter will likely completely disregard OP’s income.

[Jaqen Haghar MD]

In my neighborhood, houses are selling in ~6 hours for ~$75k over asking price, and prices have gone up 50-100% in just a few years depending on the house. Several of my neighbors have sold just because they “can’t turn down the money” right now.

”It’s a seller’s market” doesn’t even begin to describe it. I’d have a hard time buying in this type of environment. Prices may not fall a lot, but six offers in the first day, isn’t going to last forever.
I think it’s a great time to wait. FOMO and emotional buying is a big factor here.

[tulipsarepretty]

Thanks all for the additional feedback. I appreciate that there are a range of perspectives but do feel the overall consensus is that I am being conservative enough unless we were attempting to retire ASAP. Also is helpful to hear multiple times that it is impossible to know what is going to happen/time the market - I've had this feeling that if I just read enough and thought hard enough about it I should be able to think myself through what is going to happen, so realizing that's not realistic is a bit of a load off. We do feel committed to this city for five years and really would like to put down roots, as another poster with a young family pointed out, and I think we are financially prepared based on my numbers and the board's feedback, so it's just a matter of finding the right house in our budget now. I do appreciate those who pointed out there is some risk with my job situation. Perhaps I have been discounting that, but given that I trained with the system as well, I've worked with them for 5 years and think there is a good likelihood it will work out for me to move to my role to this other location. If that doesn't work out, I could be stuck commuting a few days a week and/or looking for a new job, which would not be ideal but that risks feels small enough and manageable enough to be worth the upsides.

I'm intrigued that some thought we would have difficulty getting pre-approved - we have been pre-approved by three lenders and the one we spoke with at length was clear we could have been approved for much more house than we want to buy. My earnings from residency seem to have also "counted" in this regard - I don't know if this is typical or if it's because I stayed on with the healthcare system where I trained, but me being in my first year out and working part-time have thus far not been barriers at all. Perhaps because the houses we are looking at could theoretically be afforded on a much lower salary as well it's not an issue?

Thanks all; this has been a great sounding board and my stress level is lower Really appreciate your time and thoughts!

[StarTrekDoc]

The hard part is timing the market - you never know where one is in the cycle.-- either up or down. If you were in this very situation last year on the up and deferred -- you're 'behind' another 20-30% in just a year. Same concept goes between house and equity market -- you're timing it when on the sidelines. You're in it, or not. Everything else is timing.

For those selling, they have to have an exit plan in place too. So unless you're end of ownership cycle, there's little reason to 'sell for the money' as a primary house unless there's a real plan in place -- like mobile home and travel the country for next two years type of plan.

Yes, the stakes are much higher, hence the basic tenant applies -- are you in it for the long hold for primary residence? If so, dive in - get in the market.

[uksho]

The hard part is timing the market - you never know where one is in the cycle.-- either up or down. If you were in this very situation last year on the up and deferred -- you're 'behind' another 20-30% in just a year. Same concept goes between house and equity market -- you're timing it when on the sidelines. You're in it, or not. Everything else is timing.

For those selling, they have to have an exit plan in place too. So unless you're end of ownership cycle, there's little reason to 'sell for the money' as a primary house unless there's a real plan in place -- like mobile home and travel the country for next two years type of plan.

Yes, the stakes are much higher, hence the basic tenant applies -- are you in it for the long hold for primary residence? If so, dive in - get in the market.

we didn’t buy last year , now prices are at least 10-15 % higher , mortgage rate is higher too . There are houses we thought about , they resold for a 100-150 K higher in less than a year .

So, Now I agree with you to buy a house when you need it . For us it’s a want rather than need , so we keep looking to find the right one . We are not renting

For OP, it’s at a price range , where it will not be devastating even if prices drop slightly or remain stagnant . So I would buy .

I doubt there will be any downward trend in this housing market in near future . I am always amazed how much money people have . These days realtor are always asking if we have cash !

next few years would be interesting .

[Tim]

The majority of lenders use 28% as a benchmark percentage for the front-end (debt-to-income) ratio and back-end ratio (net debt-to income) ,regular expenses could include car loans, rent, credit card debts, child support, alimony, and student loans of 36%.

No clue how long your hubby or you have worked of generated income. I think you might be a little over optimistic on a academic/hospital practice setting up a new clinic in a new location. At a minimum, they will need to replace you and get the costs of a new clinic and a new physician approved, considering a part time basis. That is no small task in budgets. It's not a matter of the past relations, it is a budget numbers game.

Pre-approvals often change. For sure, you have risk if you end up starting your own practice you need to get the house purchased first. You have a lot of moving pieces in your plan that need to fall in place. That is actually a great goal, but rather difficult to achieve. You can get there, but maybe not in your first year.
Good luck. Not a critical, but it will be tough to pull off .

[mamaham]

The hard part is timing the market - you never know where one is in the cycle.-- either up or down. If you were in this very situation last year on the up and deferred -- you're 'behind' another 20-30% in just a year. Same concept goes between house and equity market -- you're timing it when on the sidelines. You're in it, or not. Everything else is timing.

For those selling, they have to have an exit plan in place too. So unless you're end of ownership cycle, there's little reason to 'sell for the money' as a primary house unless there's a real plan in place -- like mobile home and travel the country for next two years type of plan.

Yes, the stakes are much higher, hence the basic tenant applies -- are you in it for the long hold for primary residence? If so, dive in - get in the market.

exactly, I am looking at the amount of money that we could make if we sell. makes me want to sell BUT where would live then???

[Tim]

exactly, I am looking at the amount of money that we could make if we sell. makes me want to sell BUT where would live then???

I have been planning on downsizing. I have an anchoring problem. You want that much!
Definitely has tested my desire for a value exchange. I wish I could sell a fractional share or 49% of my house. Not interested in house hacking.

[StateOfMyHead]

If considering the likes I'm not feeling a true "consensus" that supports what the OP appears to have been seeking. The good news with high earners is it really doesn't matter if financial decisions aren't always optimal. We are fortunate in that regard.

[White.Beard.Doc]

This particular moment in the market has people panic buying. Everyone who is thinking about buying a house some time in the next 2 years wants to buy NOW!

As a result of the observation that interest rates are rising and based on the expectation that rates are expected to rise continuously and significantly, the panic buying sets in. Eventually, all these buyers have bought, or the interest rates get so high that people throw in the towel and give up on their wish to buy. And at that moment, the market pressure recedes. The current market pressure can stop softly, with more gently rising prices, or it can stop abruptly, with prices falling. Where that balance lies, between the downward pressure that will come with rising rates, and the upward pressure due to the great migration of remote work and the growing population of household formation of those in peak buying age groups, that is the unknown.

[StarTrekDoc]

This particular moment in the market has people panic buying. Everyone who is thinking about buying a house some time in the next 2 years wants to buy NOW!

As a result of the observation that interest rates are rising and based on the expectation that rates are expected to rise continuously and significantly, the panic buying sets in. Eventually, all these buyers have bought, or the interest rates get so high that people throw in the towel and give up on their wish to buy. And at that moment, the market pressure recedes. The current market pressure can stop softly, with more gently rising prices, or it can stop abruptly, with prices falling. Where that balance lies, between the downward pressure that will come with rising rates, and the upward pressure due to the great migration of remote work and the growing population of household formation of those in peak buying age groups, that is the unknown.

This is Greenspan speak....and exactly the fuzzy math the Fed is trying to thread with a piece of yarn.