Shall I buy?

[uksho]

There is the answer...

Lordosis , you are a wise man! 😀

[White.Beard.Doc]

Mortgage rates are soaring. It seems plausible that housing prices are primed for a correction in the coming months. I just reviewed some of the latest economic data from the attached article. Some of their points make a lot of sense.

They argue that once the panic buying stops due to a lack of availability of low mortgage rates, price growth will moderate and prices may fall. Maybe it is a good time to wait for the likely correction? The risk to waiting is that even if home prices fall, with rising interest rates, that monthly costs might continue to rise. If you wait and buy with a lower price and an expensive mortgage, hopefully you will have the opportunity to refinance at some point in the future if rates come back down. We bought our first house when mortgage rates were at 10%. We refinanced repeatedly as we followed rates down, then eventually just paid off the remaining debt.

https://seekingalpha.com/article/4498666-us-housing-is-a-dead-man-walking

[wideopenspaces]

Thanks, to give you context current house: 2000sq feet, 2 floors , 2 garage
potential offer : 3700 sq feet, one floor , 3 garage
more importantly, spouse wants to upgrade .

Hahaha well your current house is also pretty much my current house ( you have one more car space) but I have no wish for so much more space! In your shoes I'd stay put especially since kids will be gone in a blink of an eye but I think you can swing it financially if it's what your partner wants. I definitely understand the importance of compromise in a relationship. Good luck, let us know if you get the house!

[uksho]

Mortgage rates are soaring. It seems plausible that housing prices are primed for a correction in the coming months. I just reviewed some of the latest economic data from the attached article. Some of their points make a lot of sense.

They argue that once the panic buying stops due to a lack of availability of low mortgage rates, price growth will moderate and prices may fall. Maybe it is a good time to wait for the likely correction? The risk to waiting is that even if home prices fall, with rising interest rates, that monthly costs might continue to rise. If you wait and buy with a lower price and an expensive mortgage, hopefully you will have the opportunity to refinance at some point in the future if rates come back down. We bought our first house when mortgage rates were at 10%. We refinanced repeatedly as we followed rates down, then eventually just paid off the remaining debt.


https://seekingalpha.com/article/449...ad-man-walking

Interesting article . Lot of respect for your experience and wisdom .

If I get a house, I can only hope that the prices remain up for 1-2 months till I sell my current house

Too many unknowns , I was convinced in 2020 and then 21, that it’s temporary . Not sure about anything now.

My thought process now is “ we invest in stocks with a risk of 50 percent drop , so probably can buy a house with risk of 10-20 percent drop . I don’t think we will see another crash like 2000s.

I have a knowledge of another city in another country with similar rise in prices for 10-15 years . When dust settled , prices remained similar or slight increase, but never crashed . Now they are increasing again slowly .

I am not trying to rationalize and I really want this craziness to end , but this time , I think prices will just stabilize or minimally decrease , but not crash

could be completely wrong . And yes, I might be making a big mistake , but as said before , you make compromises.

I would have never thought of upgrading , but for my spouse.

Time will tell. But if this offer doesn’t get accepted, I am out of this market .

[White.Beard.Doc]

Interesting article . Lot of respect for your experience and wisdom .

If I get a house, I can only hope that the prices remain up for 1-2 months till I sell my current house

Too many unknowns , I was convinced in 2020 and then 21, that it’s temporary . Not sure about anything now.

My thought process now is “ we invest in stocks with a risk of 50 percent drop , so probably can buy a house with risk of 10-20 percent drop . I don’t think we will see another crash like 2000s.

I have a knowledge of another city in another country with similar rise in prices for 10-15 years . When dust settled , prices remained similar or slight increase, but never crashed . Now they are increasing again slowly .

I am not trying to rationalize and I really want this craziness to end , but this time , I think prices will just stabilize or minimally decrease , but not crash

could be completely wrong . And yes, I might be making a big mistake , but as said before , you make compromises.

I would have never thought of upgrading , but for my spouse.

Time will tell. But if this offer doesn’t get accepted, I am out of this market .

If you plan on staying in the house for a long time, it’s probably ok to buy something you can afford at pretty much any time.

[Dont_know_mind]

Mortgage rates are soaring. It seems plausible that housing prices are primed for a correction in the coming months. I just reviewed some of the latest economic data from the attached article. Some of their points make a lot of sense.

They argue that once the panic buying stops due to a lack of availability of low mortgage rates, price growth will moderate and prices may fall. Maybe it is a good time to wait for the likely correction? The risk to waiting is that even if home prices fall, with rising interest rates, that monthly costs might continue to rise. If you wait and buy with a lower price and an expensive mortgage, hopefully you will have the opportunity to refinance at some point in the future if rates come back down. We bought our first house when mortgage rates were at 10%. We refinanced repeatedly as we followed rates down, then eventually just paid off the remaining debt.


https://seekingalpha.com/article/449...ad-man-walking

It all depends on your inflation expectations.
What do you expect inflation will average in the next 5 years (p.a) ?
Do you think that increases in rents will keep up with inflation ?
Do you think that real estate prices will keep up with inflation ?

Most of my investments are in industrial land development, so I don't have a deep understand of residential.
I do follow the resources capital cycle closely though and tend to think that it has a further 5-10 years to go. This inputs into everything.

The compounded effect of inflation on real asset capital values and cashflows Vs the borrowing rate.

At current negative real rates, I would tend to think this is an accellerant to real assets and I suspect that it has only really just started.
I doubt that wage inflation will remain below inflation for long, so I don't think the world will end.

IMO, there is a world of difference behaviourally between being short housing (to live in) and investing in RE (optional).

[CordMcNally]

Interesting article . Lot of respect for your experience and wisdom .

If I get a house, I can only hope that the prices remain up for 1-2 months till I sell my current house

Too many unknowns , I was convinced in 2020 and then 21, that it’s temporary . Not sure about anything now.

My thought process now is “ we invest in stocks with a risk of 50 percent drop , so probably can buy a house with risk of 10-20 percent drop . I don’t think we will see another crash like 2000s.

I have a knowledge of another city in another country with similar rise in prices for 10-15 years . When dust settled , prices remained similar or slight increase, but never crashed . Now they are increasing again slowly .

I am not trying to rationalize and I really want this craziness to end , but this time , I think prices will just stabilize or minimally decrease , but not crash

could be completely wrong . And yes, I might be making a big mistake , but as said before , you make compromises.

I would have never thought of upgrading , but for my spouse.

Time will tell. But if this offer doesn’t get accepted, I am out of this market .

Just go into it expecting prices to crater and you’ll probably be better off. I don’t think telling yourself ‘this time is different’ is ever a good move.

[uksho]

Just go into it expecting prices to crater and you’ll probably be better off. I don’t think telling yourself ‘this time is different’ is ever a good move.

Good advice

[Tim]

Hahaha well your current house is also pretty much my current house ( you have one more car space) but I have no wish for so much more space! In your shoes I'd stay put especially since kids will be gone in a blink of an eye but I think you can swing it financially if it's what your partner wants. I definitely understand the importance of compromise in a relationship. Good luck, let us know if you get the house!

Compromise in a relationship is a big consideration. HOWEVER, in 5 years your partner has every right to change or clarify their opinion. Accept it that they actually revise how decisions were made.
So many “wants” and “preferences” that the partner expresses are not really “needs” in their opinion. “Partner wants” is not “I/we need to spend that much on a house.” Try “requirements” and then decide.

[Marko-ER]

Can you renovate or add rooms to your current house?

It sounds like you are short 1/2 or 1/3 a house, but not as much as someone who doesn't have a house.

I guess with the future path of house prices in the future, no one knows. The best time to upgrade is during a recession and the last one was in 2020. I guess there could be another one in the next 2 years, but who knows, it could be in 5, 10 or 15 years. The longest period between recessions of any OECD country in the post-war period is 28 years. I guess it is also within the realm of possibility that house prices could also decline without a recession.

Yeah, I concur with what's been said. I know the lot may be small, but perhaps if there is a will, there is a way? Maybe building a small studio above the garage?

We have an almost acre lot but very hilly, and we need space for wife to have privacy to work from home and as a space for a nanny part-time. So we are exploring small manufactured houses, perhaps even putting one on stilts like a half-elevated tree-house:

https://www.dropstructures.ca/holoplus

There's lots of options out there if you are being creative.

[uksho]

Thanks all. I am realizing I sleep better with saving some post tax cash , whether I invest or not . Also typing this all made me realize that this upgrade would tie me up.

whether it is new car, maintenance, travel , would stress me .

So , I am NOT going ahead .

Appreciate the wisdom . I have considered the prices might keep on going up , but if I am not buying , shouldn’t make a difference

To answer the other question, there is no way we can add, we already have a room over the garage . We have enough rooms , till we get a guest staying with us , which is infrequent


I Just hope this craziness ends. Just to give you an idea, we used to pay 80 $ for housekeeping . Asked for a new quote after that person left . For the first visit they asked $1000 to clean ( can you believe it? ) and then 200. We usually keep everything clean , this was just for deep cleaning .

I said thank you , we will clean ourselves . Amazing times . Mortgage payment = cleaning