Everyone’s saying it: “Now is the time to buy!” It seems every financial show, blog, or article I encounter is telling me why Johnny and I should purchase a home in 2013. Word on the street is that housing prices aren’t going to fall any lower, so buy, buy, buy!
Johnny and I would like to be homeowners. Eventually. We look forward to the day when we buy our own home. I imagine it like a cheesy episode of House Hunters where we have our checklist of musts and find every last “walk-in closet” and “his and her sink” requirement on the list. We’ve talked it over and contemplated it over the past few months. But despite the green lights from all the financial experts out there, we’ve still got our foot on the home buying brakes.
And here’s why:
Significant Down Payment
Johnny and I would like to put down as much as possible on a home before we buy. Our minimum would be 20% to avoid having to get any private mortgage insurance. But we would hope to put down a higher percentage than that. And in our loftiest of dreams, we’d like to put down close to six figures. We want to be stone cold serious about our home purchase, and having more skin in the game seems like the way to do it.
Before we buy, Johnny and I want to make sure we’ll be there awhile. We buy into the philosophy of the “five year rule.” All it means is that only after five years does one actually start making serious progress on the principal instead of just throwing money at the interest. And while flipping homes was all the rage in the early and mid-2000’s, that’s not our style. So if and when we buy, we hope to buy a home that outlasts Johnny’s old, holey shoes that he refuses to throw away until they’re 5-10 years old.
Johnny works in a career field that can be kind of transient. There’s not much of a corporate ladder in creative advertising, so moving up usually means moving on to a new company. So while he can stay at one company as long as he’d like, it might mean not moving up as quickly as he’d like. That said, buying a house right now would mean we’d want him to stay with his current company for at least five years, which is totally within the realm of possibilities. But by us not owning a home, he’s completely open to explore his career options without the chains of a home and mortgage.
While we’re super excited for the day we have a property to call our own, we really enjoy the perks of renting right now. For instance, our over the range microwave broke a couple months ago. Two days after I wrote an email to our landlord, a new microwave was installed in our kitchen. Pretty much anything that goes wrong in our rental gets paid for by our landlord. For now we enjoy not having to budget for maintenance costs. And that noisy neighbor I mentioned a few weeks ago in this post? Our landlord is taking care of that issue as well. 🙂
So 2013 may be the year for a lot of people to make the leap into first-time home ownership, but for now we’ll still just be reading the instruction manual for our new baby and sitting this year out on the rental bench.
Is home buying in the cards for your 2013? Are you holding off like us? Or if you purchased in the last few years, what helped you make the leap? We’re all ears!
(Original photo by dno1967b)
I once bought a place that I thought would last me years, then life got in the way and I lived there for not even a year. It is still rented but you make a great point in hoping that your house will last for a long time, on top of the money reasons it is exhausting to look for a new home, decorate, move… too often.
YESSSS. Having moved four times in four years, there is so much more to consider than just finances. I don’t want to see another U-Haul truck or moving box for a good long while.
We’re in the process of buying right now, but only because the opportunity fell into our laps. We were concentrating on finding a rental when we came across the chance to buy a place. Since we aren’t married, everything is more complicated and stressful. Everything could still fall through on our short sale and we’d just be back to rental options, which wouldn’t be the worst thing that could happen.
We are putting 20% down, though. I wouldn’t even consider buying a place if we weren’t able to do that. I wish we had more though, and we are saving every penny until we get out there to make the transition easier.
I just read your post of your short sale on your blog. How exciting! We are super excited about the prospect of buying at some point, but the timing/finances haven’t been — and likely won’t be — right. One day. In the meantime, we’ll just live vicariously through your home purchase. Fingers crossed it all goes through!
We’re buying our next home in 2014 most likely. We want to save up a large down payment. We have lived in our current house for almost 4 years, but it was just a starter home pretty much.
That’s the year we’ve got pegged, too. But for us we’re looking at numero uno. AND it will likely be a starter home. So we’re basically lagging six years on you guys. 🙂
It’s very tempting to hear everyone “screaming” about how low interest rates are and how home prices are so cheap. Its hard to take a step back and say “not now.”. I have the utmost respect for you guys and all others who step back and say “this isn’t the time.”
Personally, I would love to buy right now but I don’t have the down payment to put a dent in the total cost. I can’t see myself only putting a small amount down and then paying PMI. It just gives me goosebumps.
Man, it is hard. Every morning I read some new finance article about how home sales are reaching five year highs and how interest rates remain at all time lows. But like you said, the thought of regretting a purchase that large because we didn’t have the money is enough to keep us off the market for now.
There’s NOTHING wrong with renting. We bought our home mainly because a friend of ours is a mortgage broker and manged to get us a locked in interest rate we couldn’t turn down and the prices of apartments around here is super expensive. Knowing we’d be having a baby meant moving into another apartment where the rent is about what our mortgage now is. Yes I realize we now have maintenance etc etc but it was just time for us. We knew we wouldn’t be moving anywhere.
It sounds like everything aligned perfectly for you guys to buy. We’ve lived in a few markets where renting was comparable or more expensive than buying. But we didn’t have the money AND we knew we wouldn’t be there long term. It’s a never ending carousel for us. 🙂
Sounds to me like you guys are making a wise decision all the way around, given your current situation. Yours is a terrific example of why it’s not always right to own, even in what seems like the “perfect” market. Another reason: once Baby Girl gets a bit older, you might have a totally different idea of what kind of house you’d like. I know that was the case with us.
That’s an awesome point about changing needs. The type of place we’d be able to realistically afford would probably only last Baby Girl (and possibly a sibling) 5-10 years. Ideally, we’d find a place that we could all grow into as our family and babies grow.
There is nothing wrong with renting. We have friends that managed to score a nice house in the country for $600. If they ever move out I think I might sell our house and move in. Considering they have no taxes, and no maintenance costs I think they should stick it there until they can buy a house outright 🙂 And maybe then they should think twice invest the cash, and stay in their sweet situation.
No kidding! That sounds like an awesome setup. $600 is a steal. In our current rental market, we’d be living in a pretty lousy place for $600. But I can’t even imagine how nice it would be to save all that extra money each month. Buying a cash outright in 5-10 years would be a real possibility.
We are also renting and have NO plans on buying now. I’m with you on putting-a-huge-down-payment-on-a-house thing. I’ve worked in real estate as an office manager and have seen buyers purchase $800K homes. 100% cash money. Although I doubt that would ever be us, I still hope we can save enough to put down a six-figure payment.
We’re living the renter’s dream together! Don’t sell yourself short. We never thought we’d pay off our debt in 18 months, either, so who knows, maybe we’ll both be throwing down six figures on a mortgage in a few years. 🙂
We are on the fence about purchasing in 2013. We want to move because we dislike the neighborhood, it deteriorated a few years after we moved in. We want to move a little closer to family since we have the baby now, but still in the same city. I pay PMI now and hate it, so we want to put a lot down in order to stop that madness. It takes a long time to save up that much money, so I just don’t know if 2013 will be our year.
Stop the madness! Seriously though, having a baby changes everything. We’ve enjoyed living a few time zones away from family the last few years, but now that Baby Girl’s in the picture, we see ourselves wanting to move closer to family so she can have future cousin friends. These babies totally mess with plans.
I think that you guys are wise to wait until you can better afford to buy a house. We’ve lived in a home for many years and eventually paid off the mortgage but one aspect that many potential home buyers overlook and/or underestimate (and which I don’t see in your reasons for not buying a home right now) is the various ongoing expenses associated with home ownership. It is not just an appropriate down payment that you need to concern yourself with.
I won’t itemize all of these expenses here but I would certainly recommend that you first consult with your parents and/or friends, that already do own homes, to provide this information along with general guidelines as to the amount of each expense. Too often people buy houses but later find that their budgets are terribly overextended.
In time I figure that you will indeed be able to afford to purchase a home but at that time I would make one more recommendation: buy below what you think that you can afford, for safety sake.
Spot on as usual, Rob. Up until a few years ago, I naively thought that buying a house meant paying a mortgage. Finito. Done. Little did I realize all of the other bills, taxes, insurance coverages, etc. etc. etc. It’s awfully deceiving for young folks to think they can afford a home because they can pay off the mortgage every month. They’ll be treading financial water in no time.
We’ll definitely take your “buy below what you can afford” to heart. I’m sure we’ll be tempted to get near our ceiling when the time comes, but it’s worth the safety net and relief in knowing there’s breathing room by buying lower than we’re able.
We won’t be buying in 2013 either – actually probably not until 2017 maybe. We don’t yet live in the city we want to be our lifetime city (San Diego) and have 2 job transitions to go through before we get to that point. Oh, and to save up a CA down payment we need CA salaries, which we of course don’t have yet!
San Diego’s on our “lifetime city” list, too! I’m from LA, but the weather’s nicer the further south you get. Maybe we’ll be new house neighbors in 2017!
My husband is from LA and that’s where we went to college (well, the suburbs) but I convinced him SD would be better career- and lifestyle-wise. 🙂 See you there!!
There is no “one-size-fits-all” answer to this question. We did buy a home last Fall and are pretty happy with teh decision. Renting was fine, but there were many things that we disliked about it. We are happy to have our own place and we are locked into a rock-bottom interest rate for the next 30 years. While we could have saved up more money, we technically will be paying less owning this house than renting because our rent went over $1k. Even with PMI, our rental setup in the basement gives us an additional $525/month that brings our mortgage down a couple hundred below what we would be paying as a renter. We bought a house that could use some cosmetic work (and have spent our fair share on tools) and have ben putting in some “sweat equity” that should help raise the value a bit. Overally it’s probably comparable to renting as far as expenses, at least for now – because of our investments into the rental studio, the house, etc. It’s really up to the individual or couple what they want to do. I honestly would have no problem renting again if the situation was right and would happily rent our house (I estimate we’d make about $300 profit by renting, which we’d reinvest into the house). Speaking of that, I know quite a few people who are now renting their first house and have purchased a second one (or moved into their spouse’s house after both having a property), which is something I also would consider doing….anyway sorry for rambling.
Just because we’re not buying doesn’t mean the market isn’t sizzling hot and ready to strike like you guys. That’s awesome that you bought with a rental option in mind. Smart thinking. And that’s funny you mention the renting the first house and buying a second. While it’s overly ambitious for us right now, we did think that a possible solution to address the fluidity of my career would be to buy a home that would work for us for five years or so here, then rent it out once my job takes me somewhere new, rent there for a few years, and then buy again while maintaining our first home as a rental.
Anyway, look forward to following the progress of all the “sweat equity” you’re putting into the new place. Congrats!
No, I live in LA, so home buying won’t happen this year…or next…or the year after that. I’ve resigned myself to thinking that if I stay in LA I’ll never be able to afford a home. OK, negative thinking…but I’m OK with renting for now.
I’m from LA, so believe you me, I know your pain. I’d LOVE to move back and be closer to friends and the beach, but it’s frustrating how insanely expensive it is. And don’t get me started on CA taxes…
It makes sense for me to buy in the market I’m in. Average rent is like $1,200 a month. For the same house or better you can buy for $120k – $150k. We have an AFB a mile away so our renters take full advantage of the BAH they get. I think it’s sort of sickening but that’s capitalism. So my mortgage payments for the exact same house would be roughly $700-$900 with PMI. I’m waiting a little longer until my CD is matured to buy something with 20% so my payments will look more like $600. What do you guys think about buying a house when you’re single? Everybody that is talking about home buying recently has a significant other.
Yeah, that sounds like a buyer’s market for sure. I think you’re smart to wait until you clear the PMI requirement and bring that payment down a couple hundred bucks.
I have a few single friends who recently purchased homes and love it. I think all the same rules apply, whether single, married, etc. The only consideration you might look into is the five year rule, since finding a significant other might get in the way of staying in the same place for that amount of time. BUT if the money’s there, the market’s right, the deal/home’s right, no point in waiting and living for tomorrow. Get that bachelor pad I never had. 🙂
Now is the right time to buy…ONLY if it fits with your specific needs. Rates are great right now, but a great rate will do you no good if it just is not a fit for you. I wish we would’ve waited longer before we bought our first house, but we have learned our lesson. I think for many of the reasons you listed it’s great to be more hesitant and make sure you do it at the right time for you.
“Rates are great right now, but a great rate will do you no good if it just is not a fit for you.” Truer words have never been spoken. 🙂 A good rate does you nothing if you still can’t afford it comfortably.
We definitely plan on buying a house, but I don’t think we’ll be waiting until we have 20% down. That could easily mean we’ll be saving until we’re in our 40’s or 50’s trying to come up with a six figure down payment–hats off to you though for being able to do that.
Right now, we’re just waiting for my husband to land a full time firefighter job. Then we’ll work on paying off our student debt, and finally saving up for a house. If he gets hired within the next year (we hope!), then we’re looking at maybe three to five years from now…
Who knows what we’ll end up putting down. Impatience might get the best of us. 🙂
Best of luck on your husband landing a firefighter gig! I’m too far down my career path for now, but I’d love to do some sort of volunteer crew in the future.
We bought our house in 2009 when the housing drop happened but then it shot right back up again. We can sell our house for about 100 k more than we paid now. We would not sell and buy up right now simply because of the market and the uncertainty. We would rather sit put but really we are happy in our home. Probably one of the best things we did that led us to be mortgage free ( although we haven’t paid it off yet we have the cash) is that we rented until we had a large enough amount of money to put down on the house. I believe is was 32% of $265,000 although that was only a portion of what we saved. We wanted to get in and get out with a mortgage as the numbers were scary and long term wasn’t what we wanted. I think you are smart waiting and saving, but that’s just me.
Why move when you’re content where you’re at? Sounds like you played the market just right. But you’re right about this market’s volatility. They’re talking about the market having already bottomed out, but given how crazy it’s been the last few years, I wouldn’t be surprised to see it take a few more dives and climbs before it normalizes a bit.
I like your advice. Renting does have its advantages. Also down payments can be high. It’s a good idea to wait.
And wait we will. Thanks, Brett.
I would love the simplicity of renting some days. Picking up the phone and telling someone that the shower has developed a slow leak and it has damaged the dry wall in the storage room. I wouldn’t have had to lug all that drywall out to the curb or cut up all the ruiined carpet in to little rolls so that I could sneak bits of it in to the weekly garbage.
Problems aren’t so big when they belong to someone else. Some days I get tired of being a home owner.
Just finished watching a great episode of The Big Bang Theory that featured the one and only Levar Burton.
Ughhh. I’ll make sure to not take for granted our landlord these last few years. I’m sure my landlord will thank you. 🙂
The only reason I refuse to allow Levar Burton to comment here is I’m afraid his awesomeness would break our site and the rest of the Internet. He just has that sort of power.
Thank you for this post! My husband and I rent and we live in a city that we don’t see ourselves in long term (more than 5 years). We’re looking to move again this summer and find a single family to rent instead of living in an apartment. Sometimes we need to remind ourselves that renting is the right decision right now despite the low interest rates and buyers market.
I just started reading your blog a few weeks ago. Congrats on your little addition!
Thanks, Caitlin! We’re loving having a baby! If Johnny weren’t around to stop me, I’d just post pictures of her on here all day long 🙂
This post was a good reminder to us as well. It’s hard to hold off on buying sometimes, but when we finally do buy, it will be nice knowing we waited until the time was right!
I applaud you guy’s discipline, most home buyers severely lack it. Paying for a house outright is the best way to go and is definitely possible. By renting and living well below your means this could be possible within 4-5 years. Like you said at the very least you can put a substantial amount of money down to alleviate the PMI and mortgage payments.
Also don’t forget when you buy your home you’ll be on the hook for insurance and real estate taxes 😉
Oh, good point! I forgot about insurance and real estate taxes. Blegh! When we do buy someday, hopefully finally being able to paint my walls whatever color I choose will make those extra expenses easier to swallow! 🙂
I’m firmly in your housing camp Joanna for much the same reasons. In the meantime we are saving up as much as possible so that when we do feel it’s the right time for us to buy that we’ll have more than enough to cover 20% plus closing plus a healthy maintenance fund. For now, renting is the best option given our current lifestyle.
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Sounds like you are definitely making the smart choice for you and that’s admirable considering all the pressure to buy. We bought in 2010 knowing we’d be okay with staying put for 5 years and because we were dying for space. It’s really expensive to rent a home the size that we wanted to live in here and I’d lived in five too many crappy rentals by that time. Using the VA Loan benefit meant we did not have to put any money down or pay mortgage ins. Without a down payment we really could only as much house as we could afford and we did. Every now and then I miss that possibility of being able to just up and move but I’m happy with our decision.
It sounds like you played your cards right. That’s awesome that you were able to avoid a down payment AND PMI! That’s quite the deal. We’re in our first not-completely-crappy rental in five years, so we’re actually pretty content renting right now. But we’re still definitely itching to be in our own house in the not too distant future.
I think your career moves is certainly a viable reason to not buy a place and continue to rent. I truly believe interest rates will go up in 2015, as Bernanke says they will keep rates low through 2014. With so much Quantitative Easing (AKA money printing and bond buy-backs) interest rates have to go up. They are doing their best to make us believe the economy is improving, but once they are out of bullets, look out inflation! Get long term money while it is cheap, if and only if, you can lock in for 20-30 years, because we will look back on these rates when 10-12% interest is the norm and renting may be the only option.
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We live in Denver, and I am terrified to buy a home right now. Prices are rising at alarming rates. Many of our friends are buying but only with 3-5% down. That gives me chest pains. I think one of the reasons I’m so gun-shy about buying is because the reason I couldn’t find a job in my field was in part due to the housing crash and subsequent economic downturn (2009-2011.) I know home ownership can be wonderful and a great way to go, but if I’m truthful, it still scares me to death.
I love your blog. Thanks for the great post!
Hey Natalie! Thanks for commenting. Know that you’re not alone in having that fear. It’s been a little while since we wrote this post, but we still feel those same chest palpitations that you do when we think about home ownership. We’re better prepared financially for home ownership now, but it still doesn’t make it much easier to swallow parting with sooo much dough.