Do the wife and I have house fever? Want to buy 550k home

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cogito
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Joined: Fri Nov 30, 2018 2:12 am

Do the wife and I have house fever? Want to buy 550k home

Post by cogito » Sat Mar 23, 2019 2:33 pm

Hi Bogleheads community,

My wife and I are 30 year old millenials who have been followers of bogleheads principles since we got out of about 100k student loan debt 4 years ago. Through career focus and several well-timed job changes, I've taken our income from 50k to about 140k with a yearly bonus and RSUs of 30k. My wife is a SAHM with our 1 year old, with a second child due in September. I work in a tech-related field that is quite volatile, but my skills and experience are currently in-demand and could be applied elsewhere if needed. We just moved six months ago to another California HCOL area to flee Silicon Valley. I like my new job and could see us being here 5+ years. We both have been feeling more and more than we would like to settle down and have a home for our kids to make our own within the next year or two, but wanted a sanity check to make sure emotions about the current pregnancy aren't leading us astray. We both are scarred from our experiences as kids during the great financial crisis - my wifes family lost their home and spent a long period afterwards of time with job/home issues, and I (we) have vowed to not make the same financial mistakes with our family... though we do want homeownership to be a part of our lives once we are ready. She is a little more fearful/conservative than I am, but I feel like we are close to being in a position where homebuying is a safe move for us. I'll be sharing any responses I get here with the wife and talking it over with her.

The house/area we want to buy would be around 550k, possibly 600k, and add a 30 minute commute (currently 5) to my workplace. We have the 20% down between savings and taxable accounts, but I've been considering doing an 80/10/10 piggyback loan to avoid PMI and prevent having to generate capital gains by selling in taxable. When I run the numbers our PITI would be about the 2800 we are currently paying in rent for a 2 bedroom townhome. The NYT rent vs. buy calculator is right on the line for being "worth it".

Current financial position:

About 350k net worth. 60% US, 20% INTL, 20% Cash. The rough breakdown is -
160k in retirement accounts (Rollover IRA, 401k, Roths, HSA)
130k in taxable investment accounts
70k in cash/savings - down payment fund
-17k on 0% car loan thats all done in 2021
No other debt other than floating about 15k expenses on 0% credit cards that I'll be paying off with ESPP money in August.

Our yearly expenses are 55k. Every year I max my 401k, both Roth IRAs, ESPP, etc, and still put about 2k per month in taxable. Savings rate is about 50% of gross, not including employer match. I realize that our expenses would go up quite a bit with a house, but we are frugal by disposition and fairly resistant to lifestyle inflation.

The main concerns we have are:
Relying on my income alone
Buying at the top of a slowing but still expensive market
Needing to buy a second car for the wife because of added distance from my job
Being inexperienced first-time homebuyers and fooling ourselves into thinking we know what we want
Interest rates going up and keeping home ownership out of reach for longer than we want (Yes, this can't be predicted, but I see it as a real risk)

In the pros column:
We want to own a home with a yard for our kids! We really do.

Happy to add additional info if I left anything out. Are we crazy? Should we just chill and wait until after the next baby, or do it now before life gets even more hectic? Really looking for some words of wisdom from forum members here who have been down this road before.

stoptothink
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Joined: Fri Dec 31, 2010 9:53 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by stoptothink » Sat Mar 23, 2019 2:39 pm

This will be significantly increase your commute, require you buy a 2nd car, and you are looking at spending ~4x HHI? I get the "house fever", we waited until I was 34 (and had 2 kids) before buying our first home; this is probably a similar situation that most of your peers are in (I have peers with a less rosy financial picture who are buying more home), but WAY out of my comfort zone.

FWIW, interest rates are actually dropping right now, not increasing.

EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

Re: Do the wife and I have house fever? Want to buy 550k home

Post by EnjoyIt » Sat Mar 23, 2019 2:44 pm

Let me get this straight:
You make $150k/yr in a volatile industry with possible $30k/yr RSU. You are looking to take out a $480k mortgage on a $600k house and increase your commute by 1 hour each way. I realize that this is California where all logic on housing is lost, but this is not something that I would do. I would not increase my car time by 1 hour every day to be wasted away in traffic. That is 5 hours a week or 250 hours a year lost forever. Also, the extra commute costs money lets just assume 50 cents per mile driven from depreciation and fuel. Less if you are in a low cost, fuel efficient reliable car, more if you paying for something more luxurious.

Basically you can afford it on your income, but it would make you house poor and it would take you much longer to reach financial independence. Regarding kids. Do you think your kids would rather have a big back yard or would they rather have you around more often and less tired so that you can play with them?

stan1
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Joined: Mon Oct 08, 2007 4:35 pm

Re: Do the wife and I have house fever? Want to buy 550k home

Post by stan1 » Sat Mar 23, 2019 2:44 pm

I'll pull out the important facts: $140K/year income plus maybe a $30K bonus and a $550K-600K home in a HCOL area.

You'll get all sorts of answers including:
- Move to a lower cost of living area
- Rent forever (home ownerships is over-rated)
- On a $140K income you can only afford 2X house ($280K)
- Will you find a house you want to buy at $550-600K (good schools, etc)
- It's uncomfortable but a fact of life in a HCOL area and many people do it
- Wait for the market to drop

I don't think the economics will make sense for you, so its probably going to come down to a family first decision on what's right for you. I'd just say that there's a lot of concerns already on your list with the only pro to get a better backyard for the kids. Maybe you could rent such a home?

SanAntionetta
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by SanAntionetta » Sat Mar 23, 2019 2:57 pm

EnjoyIt wrote:
Sat Mar 23, 2019 2:44 pm
Do you think your kids would rather have a big back yard or would they rather have you around more often and less tired so that you can play with them?
+1
I have a 5 minute commute right now and it is heaven. being a working parent I want every second I can with my girl.

Also are your taxes low? Our relatively small loan of $285K has a payment of $2260 out here in CT.

There are a lot of hidden costs of homeownership. I agree if you do it to put down 10% so you have money aside for when you realize you need to tear out and rebuild you bathroom (or something less specific 😂)

ljb1234
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Joined: Wed Aug 05, 2015 5:59 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by ljb1234 » Sat Mar 23, 2019 3:03 pm

No way would I do it, but its up to you. You will be house poor. What if it starts to need repairs?

And you can make $140K/year in a lot lower cost of living area in a tech field. Lots of green grass elsewhere for half that amount of house money. Let us know what you do.
take care,

chessknt
Posts: 153
Joined: Wed Jul 13, 2016 3:15 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by chessknt » Sat Mar 23, 2019 3:06 pm

People shooting this down on your income missed the part where your piti is the same as your current rent. Unless your overall income has dropped you have managed to successfully build positive net worth and won't be changing your housing costs. You will be exposing yourself to risk for any required home repairs as well as big ticket replacements (roof, ac etc) but I can't say it's a bad idea for this reason.

The commute will wear you down over time.

If the Cali bubble bursts and your home is worth 300k in 5 years how will this affect you? Will you not be able or willing to move for better job opportunities or will it not matter?

JBTX
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by JBTX » Sat Mar 23, 2019 3:19 pm

It may be helpful to list the specific reason as to why "settling down" and "having a home of our own" appeals to you. Then you can more rationally evaluate those reasons, and also evaluate how important they are, and if they can be accomplished more economically without owning a home. It could be you are feeling pressured due to our general societal bias towards home ownership.

I would say a primary future consideration is how do you want to school your kids. If public school then school district is a primary consideration.

If you are content where you are, I'd probably wait an the couple of years until they get closer to school age. In the meantime start looking into nearby school options. Right now being 5 minutes from work is a huge bonus. Very young kids won't remember their earliest years and will likely be just as content wherever you live.

sport
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Location: Cleveland, OH

Re: Do the wife and I have house fever? Want to buy 550k home

Post by sport » Sat Mar 23, 2019 3:26 pm

Just as a point of reference:
A tech job in my area will pay about 100K. A modest house will cost about 150K, a decent house will cost about 200K and a very nice house will cost about $300K. At 400K you are in the range of luxury housing.

Rus In Urbe
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Joined: Sat Dec 09, 2017 2:12 pm

Re: Do the wife and I have house fever? Want to buy 550k home

Post by Rus In Urbe » Sat Mar 23, 2019 3:35 pm

If you are content where you are, I'd probably wait an the couple of years until they get closer to school age. In the meantime start looking into nearby school options. Right now being 5 minutes from work is a huge bonus. Very young kids won't remember their earliest years and will likely be just as content wherever you live.
+1

The Nesting instinct is particularly strong around pregnancy. But I recommend you fight it off, keep it simple, keep your short commute and spend time with your kids. Take them on short trips to the park, to museums, to playgrounds. They will be fine. When they approach school age, you'll have much more money set aside, you'll have a better idea about where you want them schooled, you'll just be further along in your career and your thinking.

You "could" do this right now; but it will be a stretch and will add immeasurable stress to your lives, not to mention the time commuting (no small factor in measuring your happiness factor). It's very easy to underestimate the costs of a new house and the costs of commuting: they are both considerable.

IMO, I suggest waiting. Since you asked . . .
I'd like to live as a poor man with lots of money. ~Pablo Picasso

buhlaxtus
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by buhlaxtus » Sat Mar 23, 2019 3:39 pm

cogito wrote:
Sat Mar 23, 2019 2:33 pm
add a 30 minute commute (currently 5)
Have you had this kind of commute before? Traffic can be very stressful. Personally I find this an immense difference and several times in life I have left a great place with 25-30 minute commute just to get back within walking distance from the office. Other people I know travel 30 min each way every day and don't give it a second thought, so I guess it is matter of taste.

runner3081
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by runner3081 » Sat Mar 23, 2019 3:41 pm

SanAntionetta wrote:
Sat Mar 23, 2019 2:57 pm
EnjoyIt wrote:
Sat Mar 23, 2019 2:44 pm
Do you think your kids would rather have a big back yard or would they rather have you around more often and less tired so that you can play with them?
+1
I have a 5 minute commute right now and it is heaven. being a working parent I want every second I can with my girl.
+1000

Less than 10 minutes here. Smaller house/yard/etc. to make this happen. BUT, being able to head out to special school parties during the day (and come back to work) is a nice perk

Also, not having traffic is probably adding years back onto my life after many years with traffic :)

mg1655
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Joined: Sun Jul 10, 2016 1:01 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by mg1655 » Sat Mar 23, 2019 3:45 pm

OP, I think you can do it. But increasing a 5 to 30 minute commute is significant.

Ultimately, buying the house is a lifestyle choice. If the calculator says that financially it's a wash, then go off of what lifestyle you'd prefer. You may want to roll your own calculator to factor in the extra costs of the second car.

You also mention that you max out both Roth IRAs but your wife is a SAHM. Roth IRAs require earned W2 income, so how are you able to do that?

FWIW, we pulled the trigger in CA VHCOL at 200k income for a 740k house a few years ago. Fast forward a few years, our HHI is now north of 300k. In some ways, it was a lifestyle downgrade as we had to buy a house in a less desirable neighborhood with longer commute times. In other ways, it was a lifestyle upgrade as CA landlords don't really put much into upkeep and we had many problems with mold, etc in rentals.

stoptothink
Posts: 5644
Joined: Fri Dec 31, 2010 9:53 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by stoptothink » Sat Mar 23, 2019 3:48 pm

runner3081 wrote:
Sat Mar 23, 2019 3:41 pm
SanAntionetta wrote:
Sat Mar 23, 2019 2:57 pm
EnjoyIt wrote:
Sat Mar 23, 2019 2:44 pm
Do you think your kids would rather have a big back yard or would they rather have you around more often and less tired so that you can play with them?
+1
I have a 5 minute commute right now and it is heaven. being a working parent I want every second I can with my girl.
+1000

Less than 10 minutes here. Smaller house/yard/etc. to make this happen. BUT, being able to head out to special school parties during the day (and come back to work) is a nice perk

Also, not having traffic is probably adding years back onto my life after many years with traffic :)
I paid a lot more for our home because it provides me a 7min walk to work, and the wife has a <5min drive. Could have purchased more house (which we don't need) for ~15% less just 10 miles away. Those commutes are the only way our insanely busy life can work. Also consider that the OP will likely have to buy another car (our move allowed us to ditch the 2nd car). If the $600k meant maintaining that commute, I'd probably say it's tight, but go ahead.

Momus
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by Momus » Sat Mar 23, 2019 4:02 pm

Another perspective, I live in San Diego, CA. 30 mins one way commute is NORMAL. Literally, everyone you know will have 20-30 mins commute anywhere in metro CA.

550-600k house with 140k income is also quite NORMAL. Your rent probably about the same as your mortgage. I'm guessing your PITI will be somewhere around $2700.

You actually get quite a crappy house for 600k around here but I think you can afford it.

Katietsu
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by Katietsu » Sat Mar 23, 2019 4:40 pm

mg1655 wrote:
Sat Mar 23, 2019 3:45 pm

You also mention that you max out both Roth IRAs but your wife is a SAHM. Roth IRAs require earned W2 income, so how are you able to do that?
Not a problem. Some people would call it a spousal IRA. But for a married couple the collective earned income is used to determine contribution limits.

Shallowpockets
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by Shallowpockets » Sat Mar 23, 2019 4:43 pm

Momus wrote:
Sat Mar 23, 2019 4:02 pm
Another perspective, I live in San Diego, CA. 30 mins one way commute is NORMAL. Literally, everyone you know will have 20-30 mins commute anywhere in metro CA.

550-600k house with 140k income is also quite NORMAL. Your rent probably about the same as your mortgage. I'm guessing your PITI will be somewhere around $2700.

You actually get quite a crappy house for 600k around here but I think you can afford it.

Normal does not mean good, even in an abnormal place.
Boglehead-ism is out of the normal and the OP has managed to do that.

EnjoyIt
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by EnjoyIt » Sat Mar 23, 2019 4:48 pm

chessknt wrote:
Sat Mar 23, 2019 3:06 pm
People shooting this down on your income missed the part where your piti is the same as your current rent. Unless your overall income has dropped you have managed to successfully build positive net worth and won't be changing your housing costs. You will be exposing yourself to risk for any required home repairs as well as big ticket replacements (roof, ac etc) but I can't say it's a bad idea for this reason.

The commute will wear you down over time.

If the Cali bubble bursts and your home is worth 300k in 5 years how will this affect you? Will you not be able or willing to move for better job opportunities or will it not matter?
There is more to the cost than just mortgage and taxes. Once you own, there is the 1-2% upkeep costs that another $6k-$12k a year. mowing lawns, water bills, commuting costs. Furniture to fill up the extra rooms. Remodeling that you will desire. All of that adds up. But again, the biggest downside to all this, is needing to buy a second car and increasing commute by 5 hours a week.

Momus
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by Momus » Sat Mar 23, 2019 4:52 pm

Shallowpockets wrote:
Sat Mar 23, 2019 4:43 pm
Momus wrote:
Sat Mar 23, 2019 4:02 pm
Another perspective, I live in San Diego, CA. 30 mins one way commute is NORMAL. Literally, everyone you know will have 20-30 mins commute anywhere in metro CA.

550-600k house with 140k income is also quite NORMAL. Your rent probably about the same as your mortgage. I'm guessing your PITI will be somewhere around $2700.

You actually get quite a crappy house for 600k around here but I think you can afford it.

Normal does not mean good, even in an abnormal place.
Boglehead-ism is out of the normal and the OP has managed to do that.
Tell me where you can rent anything less than 2.5k decent neighborhood, with great school rated 9-10 in SD.

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teen persuasion
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by teen persuasion » Sat Mar 23, 2019 4:57 pm

mg1655 wrote:
Sat Mar 23, 2019 3:45 pm
OP, I think you can do it. But increasing a 5 to 30 minute commute is significant.

Ultimately, buying the house is a lifestyle choice. If the calculator says that financially it's a wash, then go off of what lifestyle you'd prefer. You may want to roll your own calculator to factor in the extra costs of the second car.

You also mention that you max out both Roth IRAs but your wife is a SAHM. Roth IRAs require earned W2 income, so how are you able to do that?


FWIW, we pulled the trigger in CA VHCOL at 200k income for a 740k house a few years ago. Fast forward a few years, our HHI is now north of 300k. In some ways, it was a lifestyle downgrade as we had to buy a house in a less desirable neighborhood with longer commute times. In other ways, it was a lifestyle upgrade as CA landlords don't really put much into upkeep and we had many problems with mold, etc in rentals.
Spousal IRA.

OP, we bought and moved into our first house when I was expecting DD3. Ugh, never again, wait till later.
We bought when DD1 was approaching school age, to escape bad city schools where we rented. It was only after the kids advanced in school that we realised we should have bought closer to the school (and library, church, parks), we are just a bit too far to make biking/walking to school (for sports practices, club meetings, etc.) easy. Meant I was always taxiing somebody somewhere. Location, location, location. The closer to your daily/weekly haunts, the better.

stoptothink
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by stoptothink » Sat Mar 23, 2019 4:57 pm

Momus wrote:
Sat Mar 23, 2019 4:52 pm
Shallowpockets wrote:
Sat Mar 23, 2019 4:43 pm
Momus wrote:
Sat Mar 23, 2019 4:02 pm
Another perspective, I live in San Diego, CA. 30 mins one way commute is NORMAL. Literally, everyone you know will have 20-30 mins commute anywhere in metro CA.

550-600k house with 140k income is also quite NORMAL. Your rent probably about the same as your mortgage. I'm guessing your PITI will be somewhere around $2700.

You actually get quite a crappy house for 600k around here but I think you can afford it.

Normal does not mean good, even in an abnormal place.
Boglehead-ism is out of the normal and the OP has managed to do that.
Tell me where you can rent anything less than 2.5k decent neighborhood, with great school rated 9-10 in SD.
That would be a tall order, but I'm not sure how its relevant considering all we know about the OP is they moved from Silicon Valley to another area of California.

chessknt
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Joined: Wed Jul 13, 2016 3:15 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by chessknt » Sat Mar 23, 2019 5:59 pm

EnjoyIt wrote:
Sat Mar 23, 2019 4:48 pm
chessknt wrote:
Sat Mar 23, 2019 3:06 pm
People shooting this down on your income missed the part where your piti is the same as your current rent. Unless your overall income has dropped you have managed to successfully build positive net worth and won't be changing your housing costs. You will be exposing yourself to risk for any required home repairs as well as big ticket replacements (roof, ac etc) but I can't say it's a bad idea for this reason.

The commute will wear you down over time.

If the Cali bubble bursts and your home is worth 300k in 5 years how will this affect you? Will you not be able or willing to move for better job opportunities or will it not matter?
There is more to the cost than just mortgage and taxes. Once you own, there is the 1-2% upkeep costs that another $6k-$12k a year. mowing lawns, water bills, commuting costs. Furniture to fill up the extra rooms. Remodeling that you will desire. All of that adds up. But again, the biggest downside to all this, is needing to buy a second car and increasing commute by 5 hours a week.
We rented single family homes before we bought (unclear if op does too) so bills and lawn upkeep didn't change either. Neither did furniture. The 2% figure is complete garbage in my experience--the only costs you generally incur as a homeowner that you don't as a renter in a sfh are repair and replacement costs. When you buy you have a good idea of what these will be in the next 5 years but otherwise a 10k roof and 15k ac spread over 20 years doesn't even come remotely close to 2%. Remodeling is hardly a required expense nor is it a financially wise one.

petulant
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by petulant » Sat Mar 23, 2019 6:18 pm

I agree with many others not to do it right now.

-Your children have outdoor opportunities with parks and SAHM.
-Surprise costs as homeowner will be bigger than just PITI.
-Commutes are really, really bad. Also they can be more expensive with gas costs, second car.
-Moving a family is expensive.
-What if education plans change in the next five years? Moving a family twice in five years with house-levels amount of stuff is expensive.

I suggest you start investigating the optimum education strategy 1-2 years before oldest starts school.

Bacchus01
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by Bacchus01 » Sat Mar 23, 2019 6:20 pm

Could you? Probably.

Should you? I would advise against it. If your career keeps moving this won’t be your last home. Wait until you have more settled and buy a home you really like. The commute, the cost, the volatility of the job, those all say to me that you should wait.

tibbitts
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by tibbitts » Sat Mar 23, 2019 6:33 pm

How are you measuring the commute time (one-way I assume?), and have you actually done the longer commute or know someone who does? To me part of the issue is that sometimes a 5 minute commute takes ten minutes, but sometimes a 30 minute commute takes an hour. Sometimes a 30 minute commute this year will take 40 or 45min a few years from now. Without knowing your area it's hard to say. I"ve had 30+ minute commutes and also lived where I could walk about 200ft to work. The difference in quality of life is significant.

H-Town
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by H-Town » Sat Mar 23, 2019 6:47 pm

cogito wrote:
Sat Mar 23, 2019 2:33 pm
The house/area we want to buy would be around 550k, possibly 600k, and add a 30 minute commute (currently 5) to my workplace. We have the 20% down between savings and taxable accounts, but I've been considering doing an 80/10/10 piggyback loan to avoid PMI and prevent having to generate capital gains by selling in taxable. When I run the numbers our PITI would be about the 2800 we are currently paying in rent for a 2 bedroom townhome. The NYT rent vs. buy calculator is right on the line for being "worth it".

Current financial position:

About 350k net worth. 60% US, 20% INTL, 20% Cash. The rough breakdown is -
160k in retirement accounts (Rollover IRA, 401k, Roths, HSA)
130k in taxable investment accounts
70k in cash/savings - down payment fund
-17k on 0% car loan thats all done in 2021
No other debt other than floating about 15k expenses on 0% credit cards that I'll be paying off with ESPP money in August.

Our yearly expenses are 55k. Every year I max my 401k, both Roth IRAs, ESPP, etc, and still put about 2k per month in taxable. Savings rate is about 50% of gross, not including employer match. I realize that our expenses would go up quite a bit with a house, but we are frugal by disposition and fairly resistant to lifestyle inflation.
Where is KlangFool when we need him?

@OP: terrible idea on the house. Wait until you meet your financial goals, i.e. save $2M, $4M, whatever the amount you need to be financial independence, then let's plan to buy your dream house. Note that, you'll still need to continue to work to pay for your house although you already meet your "early-retirement" number.

sport
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Location: Cleveland, OH

Re: Do the wife and I have house fever? Want to buy 550k home

Post by sport » Sat Mar 23, 2019 7:04 pm

tibbitts wrote:
Sat Mar 23, 2019 6:33 pm
How are you measuring the commute time (one-way I assume?), and have you actually done the longer commute or know someone who does? To me part of the issue is that sometimes a 5 minute commute takes ten minutes, but sometimes a 30 minute commute takes an hour. Sometimes a 30 minute commute this year will take 40 or 45min a few years from now. Without knowing your area it's hard to say. I"ve had 30+ minute commutes and also lived where I could walk about 200ft to work. The difference in quality of life is significant.
In addition to this, there is more to commuting than the time. 30 minutes across the countryside is much less taxing than 30 minutes on a crowded freeway. Just something else to consider.

EnjoyIt
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Re: Do the wife and I have house fever? Want to buy 550k home

Post by EnjoyIt » Sat Mar 23, 2019 9:20 pm

chessknt wrote:
Sat Mar 23, 2019 5:59 pm
EnjoyIt wrote:
Sat Mar 23, 2019 4:48 pm
chessknt wrote:
Sat Mar 23, 2019 3:06 pm
People shooting this down on your income missed the part where your piti is the same as your current rent. Unless your overall income has dropped you have managed to successfully build positive net worth and won't be changing your housing costs. You will be exposing yourself to risk for any required home repairs as well as big ticket replacements (roof, ac etc) but I can't say it's a bad idea for this reason.

The commute will wear you down over time.

If the Cali bubble bursts and your home is worth 300k in 5 years how will this affect you? Will you not be able or willing to move for better job opportunities or will it not matter?
There is more to the cost than just mortgage and taxes. Once you own, there is the 1-2% upkeep costs that another $6k-$12k a year. mowing lawns, water bills, commuting costs. Furniture to fill up the extra rooms. Remodeling that you will desire. All of that adds up. But again, the biggest downside to all this, is needing to buy a second car and increasing commute by 5 hours a week.
We rented single family homes before we bought (unclear if op does too) so bills and lawn upkeep didn't change either. Neither did furniture. The 2% figure is complete garbage in my experience--the only costs you generally incur as a homeowner that you don't as a renter in a sfh are repair and replacement costs. When you buy you have a good idea of what these will be in the next 5 years but otherwise a 10k roof and 15k ac spread over 20 years doesn't even come remotely close to 2%. Remodeling is hardly a required expense nor is it a financially wise one.
I think you have been lucky or we have been unlucky, but since moving into our house I had to replace the plaster on our pool, We had to replace the dishwasher, and fridge. We have 3 AC units and 1 of them will be replaced this year and another next year at the cost of $12k-$15k each. Still looking at pricing.

Although remodeling is not necessary, for some reason it just keeps happening. Repaint rooms, replace carpets, stuff always crops up. I think the 2% is pretty legit.

Topic Author
cogito
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Joined: Fri Nov 30, 2018 2:12 am

Re: Do the wife and I have house fever? Want to buy 550k home

Post by cogito » Sun Mar 24, 2019 9:22 pm

I just wanted to say thanks to everyone who responded, over the weekend we read through all of the replies and spent quite a bit of time talking with each other through various scenarios.

Both of us were homeschooled, and plan to homeschool both of our children, so school districts would not be a primary consideration, but I still wouldn't totally discount it as a factor - plans can change. It is however one of the reasons we would rather purchase now, and not wait until the kids are entering school. Our philosophy is that education starts at birth and never ends, and having a home with more space really would help facilitate that for our kids in many ways.

The one thing I really underestimated was how many people have agreed that an increased commute is an enormous stress add, even at 30 minutes. I have had longer commutes before and they never really bothered me, but that was before kids... so losing that extra time and availability probably is something I should weigh more heavily. Making living close to work has indeed been a wonderful quality of life decision for us, and perhaps I've started to take it for granted.

Right now I feel that everyone here has reinforced what we both felt in our guts. We "could" make it work financially and continue to save, it would probably not end in disaster, but the wisest course is likely to continue focusing on financial independence, and banking as much as possible for as long as possible until we really feel the "need". I still have a worry that if we end up staying in CA for another 7-8 years, which is very possible, then I'll regret having put off homebuying so long.

Currently the plan is to wait until after the pregnancy, possibly another year, and reassess our needs. I'll have a much clearer view of my career plan in the new position, probably a better financial cushion, and less daylight between our net worth and the home purchase price. Maybe we'll get lucky and the market will tank in our favor, in which case I might make the call to try and go for it.

Not to change the subject on myself, but what do bogleheads do with a large cash downpayment fund and so much uncertainty about a future home purchase? Leave it in short term bonds or CDs? Cash? Back into Intermediate Term Bonds, where it was before (in my 401k)? Tax exempt Bonds? Big emergency fund before the baby arrives? Right now it represents the 20% Fixed Income portion of our portfolio, which I was mostly going to leave replaced with our mortgage when and if we ever got one. Or is it not materially significant this early in our wealth-building journey?

sport
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Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Do the wife and I have house fever? Want to buy 550k home

Post by sport » Sun Mar 24, 2019 9:50 pm

Even if you do not plan to use the school system, you should still consider it when choosing a house. When the time comes to sell that house, the desirability of the school system can have a large effect on what you can sell it for.

harrychan
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Joined: Sun Nov 14, 2010 9:37 pm
Location: Pasadena

Re: Do the wife and I have house fever? Want to buy 550k home

Post by harrychan » Sun Mar 24, 2019 11:54 pm

Glad you came to this conclusion. I was crafting a response in your head that you are on the low end of savings and if you need a new car, that'll eat I to your down. We still didn't discuss the loan you have on your current vehicle! Cut your expenses and save like a madman. Then you will get a true picture of your expenses, saving rate and ultimately your home.
This is not legal or certified financial advice but you know that already.

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