My wife and I were recently told that we have access too a significant sum that we can use for a down payment on a house. Anywhere besides the Bay Area or New York, maybe DC and we'd be pretty much covered for a DP. The issue is, we live in the Bay Area.
We have been peripherally checking out homes, we have stopped by a few open houses and after hemming and hawing for a few months we are actually getting pre-approved too. However, I'm pretty hesitant to buy in the current market. I actually think that long term, even if the market tanked somewhat, we would recover our investment simply because there is only so much housing here within a certain distance to the employment centers and that isn't going to change in any significant way any time too soon. As a married couple, we have a savings rate of ~45%, we are in our late 30s and we can see ourselves staying in the Bay for 5-10 more years.
Each month, rent is 50-60% of our spending. I have done the NYT "rent vs buy" calculator and it always comes down to how much we can expect our house to appreciate. If I base that on what has happened to the value of friends homes who purchased even a few years ago, then buying is certainly the correct option. We have enough cash to make a down payment happen but we might be a bit limited on cash for a bit after purchase, for improvements, etc. if we did this now. I am into buying a home that needs work and doing a fair amount of it myself. I have worked as a carpenters assistant in the past and am all about DIY. Unfortunately, these homes are prized targets around here and I'm not the only one looking for such a house.
My personal interest is to continue renting, pocket cash (in a combination of accounts, conservative Vanguard brokerage acct, online savings, etc. after continuing to max out 401ks and IRAs of course.)
An interesting side note to this question.... a family member who works in real estate for a company that flips houses all over the US received the same gift and they immediately purchased a primary residence property without much hesitation.
Thanks for any thoughts.