UPDATE: Please talk me INTO or OUT OF buying this house

[tiliqdinich]

UPDATE: We offered 956. Our realtor told us seller had 5 offers and accepted a cash offer.

**********
We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

[59Gibson]

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

Financially of course you can afford it, whether it's wise, IDK. There's alot of thumbs up on this post so I guess it makes sense

[onourway]

Sounds like a .

[neverpanic]

It checks all the boxes, including some that I might personally weight heavier than others (location and flexibility). You have sufficient income and reserves to afford it.

It would be hard for me because of the property taxes - a personal pain point - but everything else you have listed makes it a go.

Enjoy your new home.

[Grt2bOutdoors]

How long are you planning on staying in said home?

House doesn't look like its worth $XXX dollars - how many years of real estate valuation expertise do you possess? There is a fair bit of art and science in every field, real estate is a particular sticky wicket because its valuation is affected by comparative sales of other similar pieces of real estate, location, location, location, demographics, interest rates and general economy that is did I mention? location, location, location? Then toss in a bit of irrational or rational speculation.

That said, I bought my house 15 years ago and I could have said the same thing - it doesn't look like its worth $xxx. Fast forward to today, its worth more than I paid for it but still less than I invested in it. I'm living in it though. Are you planning to live in it or is this a speculative purchase on your part? You can afford to buy it, so this is not an affordability question.

[bloom2708]

What was the house worth 5 years ago?

Are you OK with the value going back to that level or lower?

Will you (want to) make the payment even if the value goes down?

If yes and it checks all your boxes, go for it.

[AnnetteLouisan]

Do you want to be talked out of it? What is the total of all the mortgage interest you’d pay over 30 years? Add it to the purchase price to get the total price of the home, plus closing costs, PMI, lawyer fees and maintenance costs. Is it realistic to make the expected monthly payment for 30 years? Do you want to? Could you use that money in other ways? Is the housing market overpriced right now? Is the amount of the mortgage deduction capped? Are you in a high tax state?

I almost bought a place ten years ago for 960 but I didn’t want the stress and burden of those monthly payments. Now that I’m older (which has its own stresses!) that decision has made my finances so much better as well as my stress level and flexibility. Life is stressful enough, why add long term financial stress?

[KlangFool]

- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.

tiliqdinich,

1) What is your current annual expense?

2) What is your current rent/mortgage?

3) What is your current annual savings/investment?

Until we know the answer to question (1) to (3), we do not know whether you can afford the house. For example, you could be earning 500K but living paycheck to paycheck now.

KlangFool

[Californiastate]

More information required. Where is it located?

[exodusNH]

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

This isn't meant to be snarky: why do you want to own a house? If you want to own a house because you've always wanted one that's different than wanting to own one "because that's what adults do."

If you intend to live there for 15+ years, the price today is probably less important.

From my personal experience, I bought my house at the market peak in August 2005. It is only after the COVID run up in prices that it has a nominal value more than I paid 17 years ago. It is still below the inflation-adjusted value of those dollars without even taking into consideration the repairs and improvements.

On the flip side, after 17 years, my principal and interest payment is less than $900. Apartments that I would never consider living in are $1000. With comparable amenities, $1800-$3000.

[KyleAAA]

It seems like your judgement of home values is out of sync with the market. You could wait for the market to decrease and risk losing out on the home and others like it. Or you could buy it. It's so cheap relative to your income that I don't think it really matters all that much what you do.

[Dottie57]

I bought a condo last summer that is perfect for me. I can see from real estate records that I paid the highest price of anyone who bought last year. I really thought I overpaid but decided this would be my home until I die or need help in a care facility.

The price people are paying this year matches the price I paid last year. AndI was able live here during the year.

My suggestion is to purchase the home if it fits your needs. Just remember that the price you think it should be is not the market price.


Good luck to you.

[Apathizer]

I want try to talk you out of this particular house, but will as you reconsider buying a house in general. While I like my house I hate being a homeowner. For me it's like any other product purchase in that after the novelty wears it becomes just another tedious condition of life. Here's a thorough, balanced comparison of owning vs renting.
https://www.youtube.com/watch?v=q9Golcxjpi8

[tiliqdinich]

- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.

tiliqdinich,

1) What is your current annual expense?

2) What is your current rent/mortgage?

3) What is your current annual savings/investment?

Until we know the answer to question (1) to (3), we do not know whether you can afford the house. For example, you could be earning 500K but living paycheck to paycheck now.

KlangFool

1/ I don't know the exact amount but I just went through our combined checking account and it appears we spent YTD about $10k/month. A sizable portion of it is for travel that we can reduce somewhat. We also gift a good amount. We can cut back some on this too. Overall, if we were to be careful about our spending, we can take it down to $7.5/month. We were spending about $6k during Covid lockdown.

2/ We rent a very small apartment for $2k. We would like to have more space and are also tired of renting. So this rental amount should not be used as a comparison for buying a house. They are not comparable at all.

3/ This part I know very well. We have several pre-tax accounts and max out everything, plus some in taxable account. All in, it is about 250k. Edit to add: We will likely reduce our savings rate if we buy this house.

[tiliqdinich]

How long are you planning on staying in said home?

We would not voluntarily sell and move, so I would say very long?!

[KlangFool]

- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.

tiliqdinich,

1) What is your current annual expense?

2) What is your current rent/mortgage?

3) What is your current annual savings/investment?

Until we know the answer to question (1) to (3), we do not know whether you can afford the house. For example, you could be earning 500K but living paycheck to paycheck now.

KlangFool

1/ I don't know the exact amount but I just went through our combined checking account and it appears we spent YTD about $10k/month. A sizable portion of it is for travel that we can reduce somewhat. We also gift a good amount. We can cut back some on this too. Overall, if we were to be careful about our spending, we can take it down to $7.5/month. We were spending about $6k during Covid lockdown.

2/ We rent a very small apartment for $2k. We would like to have more space and are also tired of renting. So this rental amount should not be used as a comparison for buying a house. They are not comparable at all.

3/ This part I know very well. We have several pre-tax accounts and max out everything, plus some in taxable account. All in, it is about 250k. Edit to add: We will likely reduce our savings rate if we buy this house.

tiliqdinich,

Why renting the 900K house is not the right option?

KlangFool

[exodusNH]

- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.

tiliqdinich,

1) What is your current annual expense?

2) What is your current rent/mortgage?

3) What is your current annual savings/investment?

Until we know the answer to question (1) to (3), we do not know whether you can afford the house. For example, you could be earning 500K but living paycheck to paycheck now.

KlangFool

1/ I don't know the exact amount but I just went through our combined checking account and it appears we spent YTD about $10k/month. A sizable portion of it is for travel that we can reduce somewhat. We also gift a good amount. We can cut back some on this too. Overall, if we were to be careful about our spending, we can take it down to $7.5/month. We were spending about $6k during Covid lockdown.

2/ We rent a very small apartment for $2k. We would like to have more space and are also tired of renting. So this rental amount should not be used as a comparison for buying a house. They are not comparable at all.

3/ This part I know very well. We have several pre-tax accounts and max out everything, plus some in taxable account. All in, it is about 250k. Edit to add: We will likely reduce our savings rate if we buy this house.

What aspect of renting are you tired of? I understand the space issue.

[jharkin]

Sounds like a .

....

Less than 2x gross income and you could put almost 25% down... is not even a question. You could afford a lot more and you know it.

[Watty]

Please talk me INTO or OUT OF buying this house

You are asking the wrong question. You should be asking;

Should I buy this house or (insert your plan "B" here").

Since you can easily afford the house the big question is what you will do if you do not buy it.

The next biggest question is what your spouse(if you have one) wants to do and I would also give give that a lot of weight.

That said when I have been looking for a house to live in I have always taken the approach that within my budget it is better to find a great house at an OK price than settle for a just OK house at a great price. As long as you expect to live there 10+ years then finding a house that costs 10% less but does not "check all of your boxes" is a poor trade off.

It is even possible that you could live there the rest of your lives so that any financial impact will mainly impact your estate some day.

As others have said you can easily afford it. Even if you find a $700K house and buy it instead, if the housing market colipases then you will be hurt just about as bad. In fact in a down housing market your "ideal" house might even hold up better than a house with a lot of compromises.

[tiliqdinich]

You are asking the wrong question. You should be asking;

Should I buy this house or (insert your plan "B" here").

Since you can easily afford the house the big question is what you will do if you do not buy it.

The next biggest question is what your spouse(if you have one) wants to do and I would also give give that a lot of weight.

That said when I have been looking for a house to live in I have always taken the approach that within my budget it is better to find a great house at an OK price than settle for a just OK house at a great price. As long as you expect to live there 10+ years then finding a house that costs 10% less but does not "check all of your boxes" is a poor trade off.

It is even possible that you could live there the rest of your lives so that any financial impact will mainly impact your estate some day.

As others have said you can easily afford it. Even if you find a $700K house and buy it instead, if the housing market colipases then you will be hurt just about as bad. In fact in a down housing market your "ideal" house might even hold up better than a house with a lot of compromises.

All good points.

1/ We don't have a clear Plan B you mentioned above. Perhaps early retirement? We want to have an option to retire in our 50s, say in 15+/- years. Another alternative is one of us to go 0.75FTE. We believe both are possible, even with this house, barring life curveballs.

2/ Spouse and I discussed alternative scenarios far too many times and every time we end up at the same place. a/ live a relaxed life and don't focus too much on the corporate ladder, b/ have a community (family, friends, etc.), c/ gift as much as we can afford, d/ travel to different places while we are physically able, e/ have a nice (but not too big) home in the nicest walkable part of town, f/ etc. So yes, we talked about it and we are on the same page.

3/ Thanks for reminding me about living in the house you like with an OK price vs. the reverse. That is a motto I live by when I buy other things (furniture, car, clothes, shoes, etc.) but forgot to apply it to home buying. Thank you for reminding me!!

[JoeRetire]

So what is the matter? Well, I think the house is too expensive.

What do you think?

I think it's your money and you shouldn't spend it on something you feel is too expensive.

[chipperd]

If you have been looking for 2 years and you think 95% of the homes listed are to expensive, then your thinking doesn't match the market. One has to give for you to purchase this home and it ain't gonna be the market.
You can afford it, the question is will the quality of life be enough to overcome your beliefs about the housing market?

[chazas]

- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.

tiliqdinich,

1) What is your current annual expense?

2) What is your current rent/mortgage?

3) What is your current annual savings/investment?

Until we know the answer to question (1) to (3), we do not know whether you can afford the house. For example, you could be earning 500K but living paycheck to paycheck now.

KlangFool

1/ I don't know the exact amount but I just went through our combined checking account and it appears we spent YTD about $10k/month. A sizable portion of it is for travel that we can reduce somewhat. We also gift a good amount. We can cut back some on this too. Overall, if we were to be careful about our spending, we can take it down to $7.5/month. We were spending about $6k during Covid lockdown.

2/ We rent a very small apartment for $2k. We would like to have more space and are also tired of renting. So this rental amount should not be used as a comparison for buying a house. They are not comparable at all.

3/ This part I know very well. We have several pre-tax accounts and max out everything, plus some in taxable account. All in, it is about 250k. Edit to add: We will likely reduce our savings rate if we buy this house.

tiliqdinich,

Why renting the 900K house is not the right option?

KlangFool

In my experience SFH rental inventory is often limited and vastly inferior, and while you’re not responsible for all the expenses of maintenance, you can’t make it “home” in the same way. For many folks (me included) it’s not a purely economic decision.

[irr]

As others have said, you can afford it and it sounds like it checks all of your boxes. If you're going to live there for 5+ years and don't see a way you'd outgrow it or move, I say go for it

[GP813]

$500k x 2 or 2.5 = $1,000,000 - $1,250,000.

Yes, you can afford it. You are actually below the financial guidance rule of how much house you can afford. I just read today that homes selling under $250K are down in price but homes selling for more than one million are actually up and there is still inventory pressure at that price range.

[Dave55]

Based on all your thumbs up and your ability to afford it as mentioned (less than 2X gross income), don't hold back, buy it.

Dave

[retiredjg]

It checks the boxes. Just how likely is it that you will find something that checks so many boxes at a lower price? Either buy it or stop looking.

The problem is that your expectations have not kept up with reality in your area.

[delamer]

How is your job security?

[tiliqdinich]

How is your job security?

Very secure for both of us. Plus income is split in the middle, so technically can afford to cashflow the mortgage for sometime with only one income but it will be tight.

[KaskadeForever]

Go for it. I was recently in a very similar situation. I have been watching the housing market for a couple years, waiting for it to cool off because I thought prices were high. But then I realized that was just a form of market-timing. Just like I don't try to time the stock market, I decided to stop trying to time the real estate market. So I went for it and got a contract for the house. Who knows how I will feel in five years if there's a real estate crash, but I plan to stay there a long time and loved the house, so I went for it.

[momvesting]

To me, the biggest thing I'd like to know is this: Is this house a unicorn that miraculously checks all the boxes?? If so, then buy it ASAP. Or, is this house in an area where 50% of the houses in the area would check all the boxes? If that is the case then I'd probably wait and see if either prices or mortgage rates go down in a year or two.

[mikejuss]

OP, don't buy the house if you don't want to. That said, if you don't buy it for $900,000, someone else probably will. And then, yes, the house will be worth $900,000.

[z3r0c00l]

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

What do you think?

I live in NYC. The idea of worrying about a 900K house on a 500K salary with 250K down and 1.25M in savings feels silly. Of course if you don't like the house or don't need it, that's another issue. But the numbers are very clear, you can afford this easily.

Send me a link to the home itself if you want a real opinion on the price.

[Normchad]

Buy it. It checks all your boxes, and isn’t expensive relative to your income.

[dxwg2020]

My family are in a similar life stage and are renting a house similar to what you described: perfect for us, tax rate 2%, market price 900K - 1M (maybe already 1.1M this year). If the landlord sells it to us at 900K, we'll happily buy it for sure, with a similar down payment as mentioned. Putting ourselves into your shoes, I say go for it!

(250K down payment for 900K house is nice: I learned that a mortgage > $650K qualifies as Jumbo loan and therefore a better rate right now.)

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

[tiliqdinich]

The home came on the market today. Offered asking 900k with escalation clause going 5k higher than the best offer up to 950k. Wish me luck

[mikejuss]

The home came on the market today. Offered asking 900k with escalation clause going 5k higher than the best offer up to 950k. Wish me luck

Good luck!

[LiveSimple]

The house looks suitable for your income, wish you that your offer is accepted, spend some $100 K to remodel to your needs and stay in the same home for next ten twenty years !!!

[delamer]

How is your job security?

Very secure for both of us. Plus income is split in the middle, so technically can afford to cashflow the mortgage for sometime with only one income but it will be tight.

That sounds like a very good situation.

When we bought our early houses, I was either not working or working only 3 days a week which gave us a cushion if my husband was unemployed.

[DebiT]

I’m born and raised in Southern California, where property mostly just goes up, and up, and up.

We bought our first condo in 1982, first house in 1983, “moved up” in 1988. We were on track to have the house paid off right about now, and that was after several refi’s to fix less than stellar business decisions on my late husband’s part. After he died suddenly, I finished paying it off, and later moved to be near grandkids, paying cash (in early Covid, not fun).

All this to say the goal was to end up with a paid off house, just as my parents did. I feel secure knowing I don’t have to worry about rents going up in So Cal. My mother sold her house 2 years ago at 88, is now renting, and will probably not need to ever worry about paying for assisted living should she need it, unless she outlived every relative by an unheard number of years.

I would not rent want to rent for life. YMMV

[technovelist]

I would not buy any real estate right now. In my opinion, we have just passed the crest of possibly the biggest real estate bubble in history. Of course no one can foresee the future reliably, but I would expect real estate prices to drop substantially, 50% or more, at least in those locations where they have doubled in the past couple of years.

[mikejuss]

I would not buy any real estate right now. In my opinion, we have just passed the crest of possibly the biggest real estate bubble in history. Of course no one can foresee the future reliably, but I would expect real estate prices to drop substantially, 50% or more, at least in those locations where they have doubled in the past couple of years.

From your lips to the real-estate gods' ears.

[DebiT]

I’m born and raised in Southern California, where property mostly just goes up, and up, and up.

We bought our first condo in 1982, first house in 1983, “moved up” in 1988. We were on track to have the house paid off right about now, and that was after several refi’s to fix less than stellar business decisions on my late husband’s part. After he died suddenly, I finished paying it off, and later moved to be near grandkids, paying cash (in early Covid, not fun).

All this to say the goal was to end up with a paid off house, just as my parents did. I feel secure knowing I don’t have to worry about rents going up in So Cal. My mother sold her house 2 years ago at 88, is now renting, and will probably not need to ever worry about paying for assisted living should she need it, unless she outlived every relative by an unheard number of years.

I would not want to rent for life. YMMV

[Valuethinker]

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

Location matters. And things like school district.

Prices seem to be marking down. So whether you bid asking price or not is over to you.

Given your income you can surely afford it. At a guess you will spend around $50k in additional costs - renovations & replacements, moving expenses etc?

[junior]

With 500k of income you can afford to make mistakes so even in the worst case scenario you don't need to overthink it.

[JBTX]

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

The way I looked at it with a much smaller expenditure (major home remodel) was how much of it could I view as a dead weight loss and still be ok with it due to the intangibles? I figured if we only got 50% out of the additional expenditure if we chose to sell it would be worth it.

So how far could the house drop in value, and you be able to be ok with it because it is your dream home? If you think you could stomach the hypothetical loss, then you should be OK.

[amoeba]

you can certainly afford it. As to whether you should buy it or not, how would you personally feel if you bought it and in a year its market value went down to 750k ?

If you are mentally ok with this, then I would go ahead.

By the way, is this in Austin?

[barberakb]

We have been looking to buy a house for ages and we finally found a house that has everything we possibly want.

- location?
- number of bedrooms and bathrooms?
- two living spaces (one for tv and another without tv)?
- open floor plan?
- one large bedroom in the loft for two office desks ?
- updated house?
- did I say location?
- garage?
- a neighborhood with life flexibility (kid vs. no-kid)?
- school district? good enough so I would say
- not too-big not too-small yard?

So what is the matter? Well, I think the house is too expensive. However I tend to think (nearly 95% of) the houses I was interested in were too expensive and most sold higher than listing price. We have been searching for for a house two years now.

- Home is listed at 900k.
- Property taxes are 2.3% of market value.
- We have about $250k cash.
- Early 30s and 40s.
- Current combined income is about 500k. Possibly additional 100k in a year or two, after one of us change jobs.
- About 1.25m in taxable and retirement accounts.
- Home does not look like a $900k house but that is how much houses in this neighborhood sell.

What do you think?

How much does a comparable house rent for? How does that rent cost compare to what your mortgage payment will be?

[HMSVictory]

Yes buy the house and stop being a cheap-skate.

[tiliqdinich]

is this in Austin?

not in Austin. These days every city in the country has overheated housing market.