Would you wait to buy a house in my shoes? Explain why

Amazon
72ndbaiK

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72ndbaiK
Feb 20 55 Comments

I'm in a situation where I have some substantial savings but with a new job, I can save much faster, maybe faster than housing prices will appreciate, which will cut down on principal in the future. I've gotten less comfortable with rushing into a house with higher interest rates, but I figure that higher rates will slow price growth in my HCOL area.

Current savings available: $50k down + $20k closing costs + $10k moving costs = $80k for house
Current interest rate for me: 4%
Savings rate for house fund (excluding FIRE/retirement accounts): $65k/yr

Location: DC
Price range of target townhomes: $620k-700k. Not considering 2 BR apartments for now but I may change my mind.

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TOP 55 Comments
  • The best time to buy a house was 2 years ago, the next best time is now
    Feb 20 5
    • Amazon
      72ndbaiK

      Go to company page Amazon

      72ndbaiK
      OP
      It's not an exact term. I don't know how to make those predictions but this is a guess based on the idea that price rises will slow as interest rates rise.
      Feb 20
    • Apple
      siliconbay

      Go to company page Apple

      siliconbay
      That’s a big assumption right there. My 2 cents when it comes to stocks or house investments, live in the present
      Feb 20
  • Amazon
    watdawat2

    Go to company page Amazon

    watdawat2
    What’s your TC?
    Feb 20 6
    • Amazon
      72ndbaiK

      Go to company page Amazon

      72ndbaiK
      OP
      My pre-approvals already qualify me for mortgages as low as 5% down, and 20% down only saves $2k on PMI
      Feb 20
    • NVIDIA
      tacqueria

      Go to company page NVIDIA

      tacqueria
      Yep. Amazon's reason is really not that great. If this is your primary house, there is really no best or worst time to buy it. Buy it as soon as you can. All calculations/costbasis comes into play only for secondary homes.(except bayarea/NYC and other high principal areas)
      Feb 20
  • First, there is quality of life related to buying, especially if you have kids. Now, as an investment, there are many parameters you didn’t disclosed. For example, if you buy a townhouse, the gain is more limited because the appreciation is mostly on land. Secondly, if you live alone, maybe a 1 bedroom apartment would be much cheaper to rent than buying a larger townhouse (3 bedroom). The difference in saving may offset any gain . Finally, if you wanted to rent the townhouse you want to buy, how much would you pay ? This is the equivalent of the P/E in stock. If you can understand the valuation compare to historic trends, it is much better than figure out what would happen in the future regarding interest rates and inflation. Even Phd in economic cannot figure this out.
    Feb 20 4
    • Amazon
      72ndbaiK

      Go to company page Amazon

      72ndbaiK
      OP
      So are you saying just the interest plus escrow should match rent? Or saying all that plus principal on 30 year fixed should match rent? If the former, i should have no trouble. If latter, that's not happening in my area.
      Feb 20
    • You can build a complex spreadsheet. But the easy calculation is based only on interest+ local tax. The interest is deductible from tax, so reduce that. Then you add local taxes ( school, etc). Leave out the principal. The principal is money going back to you. It is not a cost. Now, the main thing is what to do with downpayment. I leave it out for back of the envelope calculation as I am thinking that price appreciation is really the return on my down payment. If interest on your loan (minus the tax saving) and monthly tax on the value of house is higher than comparable rent of a similar townhouse, it means you are over paying.
      Feb 20
  • Amazon
    randy_andy

    Go to company page Amazon

    randy_andy
    80k is not substantial but a good start. For that range in nova, with strong offers you will need 20% down
    Feb 20 3
  • New
    no eyes

    New

    no eyes
    Wait for the interest rate hike.
    Feb 20 1
    • This make sense. The best time to buy is at peak high interest. The price is low (because payment are high with interest). Then as the fed reduces interest, you refinance. The property increase in value from lower interest because the payment is the same. The only thing is that houses are great inflation hedge. If you can sniff the diamond in the rough, then buy it no matter the interest
      Feb 20