To buy new home or not

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nwa-non
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To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 1:38 pm

I want some brutally honest and impartial opinions on what people think about the following situation we're facing. A lot of details are presented here and I'd appreciate anyone who reads through and posts their thoughts!

Background:
Family of 3: Wife, husband, and elementary-school going child
Current annual income: $260k (and increasing by at least 3% every year for the past 10 years; can't see that changing)
Assets (not tied to house): $600k
Equity in current home: $100k

Situation:
First of all, we don't need a new house. Our current house mostly meets all our needs. Neighbors are great. Location and views are exceptional. Maybe we don't have a room to put in exercise equipment. Or a room to put in a drum-set! But that's fine for now. Our family won't be growing organically (read: no more kids). Child goes to school in neighboring ISD, so can't avail bus; we drive to and fro daily for about 12 miles everyday. We anticipate taking care of one set of parents in about 5-7 years, who might move in with us at that point. Current house will not be sufficient when that happens.

We've looked at a "quick move in" new construction house that we like. This place will increase livable space by 50%, plus an unfinished basement which we can customize at later stage. Cost is $490k. We can easily put down over $100k. This house is in the ISD that child goes to. Will have busing from ISD. This house would go better with the "social level" that goes with our jobs. Location is a bit farther, views not as dramatic, but still good. Layout is certainly optimal than current place to host extended family (overnight) and friends.

Main QUESTION: Should we get this place? Or should we wait for another 4-5 years and see what happens?
Secondary question: Anyone has experience on negotiating on price on "quick move in" homes from national builders?

More details on mortgage and current payments:
30-year 3.875% currently at $205k. P&I is $1,178, Taxes $322. Total monthly payment is $1,500. We make additional $3,100 towards Principal, for a total payment of $4,600 every month. On this current path, we'll be mortgage free in about a little more than 4 years.

At a 4.5% (apprx. rate now) 30-year mortgage on $385k financed amount ($490k - current equity - all selling costs), our P&I will be $1,948. I'll increase the property taxes to $500 per month, comparable to similar priced houses in the area. We'll still be able to pay ~$2,150 towards extra principal every month, keeping our monthly payment constant at $4,600. At this hypothetical rate, we'll be mortgage free in about 10 years.

What do you think? I'll try to answer any clarifications asap.
Last edited by nwa-non on Mon Jan 14, 2019 2:12 pm, edited 4 times in total.

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Watty
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Re: To buy new home or not

Post by Watty » Mon Jan 14, 2019 1:49 pm

You can afford it so it is a lifestyle choice so there is no way to judge that.

A few comments;

1) One advantage of a new subdivision is that there is often a "first owners" effect where the original owners tend to bond since they tend to be the same stage in life and tend to be looking for new friends. Sociologists have written about this. My parents bought a new house when I was a toddler and then moved to a different new house when I was in grade school. In both subdivisions they made friends that they kept for life even after people moved around and even out of state.

2) A new home does not mean there will be no problems, in fact some major problem could show up in the first few years. Be sure to research this.

3) Be sure to budget for landscaping. New homes typically have minimal landscaping and it can take ten years for the trees to develop to a be a reasonable size. If you do buy the new house then be sure to have a long term landscaping plan, and don't plant trees over the water and sewer line. :oops:

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nwa-non
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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 1:53 pm

Watty wrote:
Mon Jan 14, 2019 1:49 pm
You can afford it so it is a lifestyle choice so there is no way to judge that.

A few comments;

1) One advantage of a new subdivision is that there is often a "first owners" effect where the original owners tend to bond since they tend to be the same stage in life and tend to be looking for new friends. Sociologists have written about this. My parents bought a new house when I was a toddler and then moved to a different new house when I was in grade school. In both subdivisions they made friends that they kept for life even after people moved around and even out of state.

2) A new home does not mean there will be no problems, in fact some major problem could show up in the first few years. Be sure to research this.

3) Be sure to budget for landscaping. New homes typically have minimal landscaping and it can take ten years for the trees to develop to a be a reasonable size. If you do buy the new house then be sure to have a long term landscaping plan, and don't plant trees over the water and sewer line. :oops:
Thank you!

Our current home is a brand new home we built (with a builder). Acutely aware of the extra expenses that come with owning a new home, especially in the first couple of years! Heck, I've spend $11k to build my own grand deck!

The builder is throwing in the following "free" upgrades for the new place we're considering: Sod and irrigation, blinds, all appliances including washer and dryer.
Last edited by nwa-non on Mon Jan 14, 2019 2:03 pm, edited 1 time in total.

staythecourse
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Re: To buy new home or not

Post by staythecourse » Mon Jan 14, 2019 2:01 pm

My answer is NO. It isn't about needing a new house. The only need will be when you need to take care of your parent, but A LOT can happen before that, i.e. they can die, need to be put in nursing home, their needs will influence the layout of the house you will need, etc... So right now it is only a want. Doesn't even sound like a real want more of a forced lifestyle creep based on some perceived expectations of one's social standing.

I wouldn't even look at houses if I was you or these type of thought processes keep coming up. I would take more money in my networth and have a personal brag to myself and spouse then a bigger house to impress others who don't affect you in the least.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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nwa-non
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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 2:10 pm

staythecourse wrote:
Mon Jan 14, 2019 2:01 pm
My answer is NO. It isn't about needing a new house. The only need will be when you need to take care of your parent, but A LOT can happen before that, i.e. they can die, need to be put in nursing home, their needs will influence the layout of the house you will need, etc... So right now it is only a want. Doesn't even sound like a real want more of a forced lifestyle creep based on some perceived expectations of one's social standing.

I wouldn't even look at houses if I was you or these type of thought processes keep coming up. I would take more money in my networth and have a personal brag to myself and spouse then a bigger house to impress others who don't affect you in the least.

Good luck.
Right! Thank you.

We're not looking at houses per se, just that we were driving and this one caught our eyes. I hate to admit that social expectations have a role in our thought process but it does to an extent. Most people at my level at work have homes that cost upwards of $500k, often times with single income.

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Watty
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Re: To buy new home or not

Post by Watty » Mon Jan 14, 2019 2:11 pm

One more thought.

One the point about about having the set of parents move in some day. If that is not a cultural thing for you or a financial necessity for them you might want to discount that possibility. A big problem is the typical suburban home can be very socially isolating for older people especially when they need to give up driving. If it is doable then living in some sort of senior community might work better for them since they have could have so much more social contact. It will be hard to know what is best until they actually need to move somewhere.

bloom2708
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Re: To buy new home or not

Post by bloom2708 » Mon Jan 14, 2019 2:14 pm

House shopping frequently leads to house buying. :|

The transaction costs are high, especially if your current house was recently purchased.

I would be patient. Activities will increase as the kid gets older. Moving closer to school but farther from work (how I read it) doesn't seem like a good trade at this point.
“People don’t want advice, they want confirmation.” Unknown

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nwa-non
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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 2:17 pm

Watty wrote:
Mon Jan 14, 2019 2:11 pm
One more thought.

One the point about about having the set of parents move in some day. If that is not a cultural thing for you or a financial necessity for them you might want to discount that possibility. A big problem is the typical suburban home can be very socially isolating for older people especially when they need to give up driving. If it is doable then living in some sort of senior community might work better for them since they have could have so much more social contact. It will be hard to know what is best until they actually need to move somewhere.
True. There's many a slip between the cup and the lip.

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nwa-non
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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 2:21 pm

bloom2708 wrote:
Mon Jan 14, 2019 2:14 pm
House shopping frequently leads to house buying. :|

The transaction costs are high, especially if your current house was recently purchased.

I would be patient. Activities will increase as the kid gets older. Moving closer to school but farther from work (how I read it) doesn't seem like a good trade at this point.
Thanks. Current house was purchased 6 years ago. I don't have a commute to work every day; spouse does but that will only increase by 2 miles.

stoptothink
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Re: To buy new home or not

Post by stoptothink » Mon Jan 14, 2019 2:22 pm

nwa-non wrote:
Mon Jan 14, 2019 2:10 pm
I hate to admit that social expectations have a role in our thought process but it does to an extent. Most people at my level at work have homes that cost upwards of $500k, often times with single income.
My neighborhood is littered with people who I work with. My office is a 7-minute walk from my front-door and we are the largest employer in the area (one of the largest in the state). Of our 10 closest neighbors, I work with 4 of them and 2 houses down from me, is a recently married couple; he works in the call center of my employer. We easily have 3x-5x the HHI of most of our neighbors, but it is a nice area and meets our needs. Letting this bother you is how a lot of people remain poor.

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nwa-non
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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 2:33 pm

stoptothink wrote:
Mon Jan 14, 2019 2:22 pm

My neighborhood is littered with people who I work with. My office is a 7-minute walk from my front-door and we are the largest employer in the area (one of the largest in the state). Of our 10 closest neighbors, I work with 4 of them and 2 houses down from me, is a recently married couple; he works in the call center of my employer. We easily have 3x-5x the HHI of most of our neighbors, but it is a nice area and meets our needs. Letting this bother you is how a lot of people remain poor.
It doesn't bother us. As I mentioned, we really like our neighbors. Moreover, though there is no quantifiable way to prove that, I'm pretty sure we're about the top 1% of earners in my neighborhood! What we think about is when we want to have my boss over for dinner or something. The industry I work in has a bit of a reputation of sucking up to your bosses and maintaining certain unwritten codes such as an appearance of "being successful". I know, it sounds strange just typing that out!
Last edited by nwa-non on Mon Jan 14, 2019 2:34 pm, edited 1 time in total.

Nowizard
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Re: To buy new home or not

Post by Nowizard » Mon Jan 14, 2019 2:33 pm

It is not a need at the moment, but you are in a position to sort between a current "want" and what will quite possibly be a future "need." Financially, you can afford it, and you are becoming quite well established and have made an excellent start on preparing for a solid financial future. As such, it is common to begin to move to a different stage psychologically that involves "wants" more than needs and changes that require awareness of psychological changes internally. For example, you "hate to admit it" but social issues are a factor. Well, that is consistent with what you have achieved, whereas where you are now was quite socially acceptable with where you were.

Speaking personally, when we were at the same stage, considerations became comfort and convenience interacting with finances. It resulted in our moving a relatively short distance of about five miles and building in order to obtain an excellent school district, to be closer to work and in consideration of our two children since we were in a beautiful, but more isolated, place previously. It was the right decision for us, though not a need, but we always strived for balance in our lives. Not that others do not seek the same, but the degree to which purely financial decisions affect major changes varies from person-to-person when they have choices. For example, do you have financial "pressure" emanating from expectations based on you or your wife "having had more" when growing up than you have now, or have you equaled or exceeded those expectations? One may result in "pressure" to be even more financially successful, one may free you from that but actually involve initial guilt about your good fortune. Forgive me if being overly psychological on what is primarily a financially based site, but the two do interact.

Tim

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nwa-non
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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 2:48 pm

Nowizard wrote:
Mon Jan 14, 2019 2:33 pm
It is not a need at the moment, but you are in a position to sort between a current "want" and what will quite possibly be a future "need."

Forgive me if being overly psychological on what is primarily a financially based site, but the two do interact.

Tim
Thank you, @Nowizard Tim, thank you!

In my mind I know it isn't about the financial decision, as I know we have the resources to pay off the new mortgage in under 10 years, while increasing non-home related wealth at the same time. It's the psychological aspect that we are grappling with. Are we conflating a future need with current want, and spinning the story in our own heads that it is actually a good move?

Both of us have achieved far more in our current adult lives than we ever saw in our growing-up years. Part of it might be we really want to give our parents back certain comforts at older age. Giving back to extended family who don't have to stay in a hotel when everyone comes in to town. Again, I realize it doesn't make whole lot financial sense to get a bigger place for those 2 weeks in a year.
Last edited by nwa-non on Mon Jan 14, 2019 3:26 pm, edited 1 time in total.

stoptothink
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Re: To buy new home or not

Post by stoptothink » Mon Jan 14, 2019 2:58 pm

nwa-non wrote:
Mon Jan 14, 2019 2:48 pm
Nowizard wrote:
Mon Jan 14, 2019 2:33 pm

Both of us have achieved far more in our current adult lives than we ever saw in our growing-up years. Part of it might be we really want to give our parents back certain comforts at older age. Giving back to extended family who don't have to stay in a hotel when everyone comes in to town. Again, I realize it doesn't make whole lot financial sense to get a bigger place for those 2 weeks in a year.
We are in the exact same boat. And, despite the fact that we'll have our home paid off in about 3yrs (in <6yrs total) and it completely meets our needs, the next goal is to spend the next 6-7yrs saving to buy the "forever house" in cash. A very large reason for planning a future move is because my in-laws will be forced (due to financial reasons) to live with us within the next decade.

megabad
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Re: To buy new home or not

Post by megabad » Mon Jan 14, 2019 4:00 pm

nwa-non wrote:
Mon Jan 14, 2019 1:38 pm
Main QUESTION: Should we get this place? Or should we wait for another 4-5 years and see what happens?
You seem to have primary needs covered with the current place. You seem to have enough room and you are in the school district you want to be in. These are the two most important goals. You seem to have an unknown with respect to a set of parents moving in sometime in the future. These things lean me toward staying until the parent situation is settled. Also, sometimes the best school districts can change from elementary to high school over time so you may want to move districts in the future. I would stay a while if it were me, but if you value the additional space highly and you think this is your forever home than I guess go for it.

Secondary question: Anyone has experience on negotiating on price on "quick move in" homes from national builders?
In my experience, if the developer is still selling homes, there is likely a minimum price they are unwilling to go below since it would affect other home sales in the neighborhood. This would only come down in a disastrous market. However, if you are option happy, I have found a developer we used to be willing to negotiate on the price and quality of upgrades. I also made specific demands (wrt plumbing, HVAC) that were not published options that they agreed to when I attempted to haggle. The more cash I paid (for options), the more I could negotiate. The only other time we got a deal from a developer was on a model home. They cut the price by a nominal amount when our agent asked but they demanded it come in the form of covering closing costs. It was the last home sold in the neighborhood (by developer).

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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 5:15 pm

megabad wrote:
Mon Jan 14, 2019 4:00 pm

Main QUESTION: Should we get this place? Or should we wait for another 4-5 years and see what happens?
I would stay a while if it were me, but if you value the additional space highly and you think this is your forever home than I guess go for it.

Secondary question: Anyone has experience on negotiating on price on "quick move in" homes from national builders?
In my experience, if the developer is still selling homes, there is likely a minimum price they are unwilling to go below since it would affect other home sales in the neighborhood. This would only come down in a disastrous market. However, if you are option happy, I have found a developer we used to be willing to negotiate on the price and quality of upgrades. I also made specific demands (wrt plumbing, HVAC) that were not published options that they agreed to when I attempted to haggle. The more cash I paid (for options), the more I could negotiate. The only other time we got a deal from a developer was on a model home. They cut the price by a nominal amount when our agent asked but they demanded it come in the form of covering closing costs. It was the last home sold in the neighborhood (by developer).
Thanks for your input @megabad. The thing about the quick move in house is that nothing is left to be customized. It's a built house, ready to be moved in. The quoted price of $490k is apparently the walk out of door price.

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Watty
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Re: To buy new home or not

Post by Watty » Mon Jan 14, 2019 5:48 pm

nwa-non wrote:
Mon Jan 14, 2019 2:33 pm
What we think about is when we want to have my boss over for dinner or something. The industry I work in has a bit of a reputation of sucking up to your bosses and maintaining certain unwritten codes such as an appearance of "being successful". I know, it sounds strange just typing that out!
Your boss already knows your salary so that is a lot different than dealing with customers.

It can vary a lot by industry and what part of the country you are in but if you are frugal in some situations that could actually be a plus if part of your job involves purchasing or negotiating contracts. Within reason if you were a CEO who would you rather do your purchasing, someone who has a reputation for being tight with their own money or someone that overspends?

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Re: To buy new home or not

Post by nwa-non » Mon Jan 14, 2019 6:30 pm

Watty wrote:
Mon Jan 14, 2019 5:48 pm
Your boss already knows your salary so that is a lot different than dealing with customers.

It can vary a lot by industry and what part of the country you are in but if you are frugal in some situations that could actually be a plus if part of your job involves purchasing or negotiating contracts. Within reason if you were a CEO who would you rather do your purchasing, someone who has a reputation for being tight with their own money or someone that overspends?
It's more to the effect of "Do you belong in our club?" After a couple of promotions, I'm looking at a partner level in the firm.

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