Living in a hot housing market; do I buy now?? Help!

[Tim]

@gasdic86,
“Mainly in order to have a larger down payment. ”
“We know we’ll need a house eventually but we like the idea of putting off all the associated expenses for another year.”

Pluses:
First yr loans paid,
stuffing retirement,
saved $200k
No “want” to flex your financial muscles.
Big shovel

Minuses:
Crickets
Any move you make will probably “hurt” the nicely tuned race car you are driving. Keep it running like that for two more years and where will you be? Likely the land of “mortgage paid off” because you paid cash for the house. That brings housing down to the “apt rent level” and your still accumulating cash at a high rate.

Just wanted to give you praise for using the word “need” on housing. My crystal ball shows you might skip the mortgage in a couple years. Crap, that’s not even 5 years. Congratulations!
Strong work to get yourself in a sweet position. Exploit it while you can.

[Dont_know_mind]

What’s your execution risk ?
Your plan seems to change like a noodle in the wind. What happens to the idea of having a well thought out plan and executing that plan ?
How is your strategy different to any market timing gamble ?
You are short 1 house. You flipped heads and got it right!
So now you are going to flip a few more times to hopefully save to pay for the house in cash.
That sounds like a crap plan to me. Any housing market I’ve been interested in has a reasonable positive return over time. Deferring buying for long periods tends to have a negative expected value over 3-5 year periods.
Hard to bite the bullet.
Maybe you’ll win.
Experience has taught me not to short appreciating assets for periods over 2 years.
You are short one house or 500k-1M in house. Don’t kid yourself. If the underlying rate of appreciation is high for the area, the longer you stay short the more likely it will blow up on you.

[StarTrekDoc]

Good job for not allowing lifestyle creep over the past year and sticking to savings.

DYM is correct about market timing. You got lucky this year. No one predicted an inversion to happen. VHCOL markets wre fickle and will stall and surge in fits not unlike a growth stock.

If your ultimate goal is a house there. Do it when you're fina cially ready. Not when younthinknthe market is right to get in.

[White.Beard.Doc]

There are signs that housing is potentially at a peak and ready to come down.   Particularly in places like Seattle and San Francisco.

Don't let market timing dictate your decision, but do take it into account with other factors such as whether the house you buy will be a shorter or longer term purchase, mortgage rate trends, etc.

In other words, if you are buying a 20 year house after becoming partner in a practice, then the current state of the market is less important if the house you are buying is easily affordable.  Buy it for your family and for the stability.

However, if this is an interim house purchase, shorter term, these other factors become much more important to consider.

https://wolfstreet.com/2019/06/26/from-less-splendid-housing-bubbles-to-crushed-markets-in-america-june-update/

[Hatton]

I think it is a very good idea to not initially buy a house.  First jobs are so unstable.  I think you really need to work at least 1-2 years to decide if the job is right for you.  A house really makes it hard to change jobs.

[q-school]

hatton1 wrote:

I think it is a very good idea to not initially buy a house.  First jobs are so unstable.  I think you really need to work at least 1-2 years to decide if the job is right for you.  A house really makes it hard to change jobs.

Click to expand...

i agree in principle.  what i wonder is given the explosion of employed positions, whether the historical rates of physicians leaving remains the same or changes.  in some ways, working for megacorporation death star a or b or c may not be that different, and people may stay longer.  eventually the organizations will put in bigger golden handcuffs or penalties to moving in exchange for the higher startup salaries they are offering new grads.

curious to see how this plays out.

 

[Dont_know_mind]

Sorry about getting snarly. I have this traumatic memory about being absolutely slammed the last time I got market timing a house to live in wrong.

Market timing can probably be done, but doing it with your primary residence if your partner is set on having a house at some stage is to me super risky. No way I am ever doing it again.

The way I think about it (and it maybe wrong), is that being short a house is like the housing market in your area having you by the balls. You might pay 500k or 1M but in reality you will just pay whatever you have to.

I would not attempt to market time the primary residence. Investment properties I think it is ok to try to market time.

If you do buy, Murphy's law, you have to be prepared for it to go down 30% the day after you buy.

[Infinity]

Student loan crisis reduces affordability for the first homeowners in lower end houses.  On the other hand, $10k cap in interests and property taxes affect the price increase for the higher end houses.  I think it is less likely that a short-term housing market in your area will raise much more than 6.8% (your student loan interests).  Unless you know that Amazon 2nd headquarter will be there.  I am agreeing with other posts, don’t rush, take your time.

[Duckworth]

Decided to buy, then the pandemic hit as work was being done. Things worked out ok and I dont think we could have got what we did if we had passed it up (though it was not like we needed it to survive but ultimately will be good for our family and I am glad we did it for that specific reason). My advice is to listen to what everyone else here says--do as I say not as I do. Pay off your loans first, rent as long as possible. A house for the most part is a luxury item that brings more pain than happiness.

[BCBiker]

Didn’t read all thread but wanted to comment that we just bought a house in hot market. We have liquid assets to pay for it a couple times over but got crazy low 7yr ARM at 2.3% with 30% down. The hard thing about hot market is that you will not find perfect house so you either live with things you don’t like or renovate on purchasing. We are doing the latter and it is crazy expensive. I cannot imagine doing this on loans or in situation where not in financial control, especially in training. Homeownership is better when easy and can be miserable if hard. Just stabilize further and buy what you want when you can.

[Kuratz]

I don't know how it's possible but housing prices seem like they have consistently gone up in my area much faster than inflation for the last 7-8 years. It's a bit of an unsettling feeling watching certain neighborhoods become out of reach even if it might be the "right" thing to do financially.

[Tim]

I don't know how it's possible but housing prices seem like they have consistently gone up in my area much faster than inflation for the last 7-8 years. It's a bit of an unsettling feeling watching certain neighborhoods become out of reach even if it might be the "right" thing to do financially.

Not so sure that “right” thing to do financially has a common definition. Housing and home ownership financially has many metrics. Percentages of assets, income, spending, investments? For sure, it is probably the largest consumer purchase. I would define “right” as what one needs and what you can afford. There are exceptions, but typically buying a residence is consumption, not an investment. That means, minimize the amount spent on a house.
https://listwithclever.com/research/...torical-study/
FOMO is a tough one. Take your time and get it right. Bottom line, there is no “right” financial choice.

[CordMcNally]

I don't know how it's possible but housing prices seem like they have consistently gone up in my area much faster than inflation for the last 7-8 years. It's a bit of an unsettling feeling watching certain neighborhoods become out of reach even if it might be the "right" thing to do financially.

If a neighborhood has all of a sudden become out of reach then you were probably looking at too much house.

[Kuratz]

If a neighborhood has all of a sudden become out of reach then you were probably looking at too much house.

While I agree the sentiment of looking at too much house could be true, out of curiosity I checked the median home price in our county and it has exactly doubled since 2012 (while the cumulative rate of inflation was 13% over the same time period). I'm not talking about a 10% difference in house price but rather an 87% difference. To me that's what is depressing and has caused neighborhoods to slowly exit our budget. To be specific the median home price was around $225k in 2012 and is now around $450k. Adjusting for inflation a $255k house would still fit into our budget, while a $450k house does not. We did not buy because I am a resident and my wife was in a job she wasn't thrilled about and that was probably the correct decision at the time.

More than anything I'm just lamenting how crazy the housing market has gotten in some places, especially for those of us who would like to stay close to our friends/family.

[Tim]

$450k should be achievable. 2012 to 2020.
2x gross for mortgage debt.
20% ($90k) down means mortgage of $340. Two employed adults and one a physician? Not to be harsh, there is more to the story than housing prices.
Inflation is irrelevant. You were a resident then?
What is your income plan and “when” can you afford it? Lamenting is not a plan. Basically, just encouraging you to not be impatient and figure it out.