Author Topic: Dealing with jobs/commutes into the booming urban core  (Read 3120 times)

mandelbrot

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 34
  • Location: Austin TX
    • Return from Exile
Dealing with jobs/commutes into the booming urban core
« on: May 27, 2013, 01:00:23 PM »
Hey all,
My wife and I are still on our first-ever home buying search, here in Austin TX. I've posted here before regarding our conundrum, but as I'm gaining more big-picture awareness of the market and the problems we face, I'm here asking more questions.

First, the objective: figure out where to live in Austin (or how) while optimizing the balanced factors of A) cost and time of commute, B) overall cost of housing. The two are of course opposed but I wonder if there are better ways for me to figure out if (A) weighs heavier than (B), etc.

Our Present Situation
Jobs:
My wife and I are in our mid-20s and very much at the starts of our respective careers. We both spent 1-2 years working entry-level positions at larger companies with little opportunity for growth or development. We have now both gotten new jobs this spring(!) and now combined make about $80k a year, or roughly $6k/mo take-home. That's not tremendous but it's much better than where we were previously. And the new jobs are with smaller companies that position us much better for growth and development, etc.

Assets / Debts:
  • around $50k in assets, mainly accumulated in the last ~2 years as we started to take saving more seriously, and in the last 6 months as we got married and received some really amazing wedding gifts from distant relatives :-)
  • very little debt, mainly just $7k on my Honda Fit (0.9% financing, assumed before I knew any Mustachianism)
  • excellent credit, I believe right around 800

Expenses
These are hard to nail down right now as our expenses have been pretty turbulent in the ~5 months since we got married -- partially from furnishing our apartment together, commute lengths and job rhythms changing, etc. Suffice it to say we spend $1000/month on our apartment in a rather sub-optimal commuting location, and that rate (and all surrounding that we can see) are rising about $100-$300 per year. Aside from rent we are slowly converting ourselves toward Mustachianism in all other areas of spending, but for the purposes of this post I will presume (tentatively) that our general living expenses will be similar whether we rent or own -- notwithstanding the obvious expense changes associated with home ownership (or lack thereof) such as maintenance, insurance, property taxes, etc. In other words, I am going to ignore the monthly budget here.

With our new take home pay and an estimated PITI or rent payment of $1400/mo, we should still be saving about 40% of our earnings every month. As I said, we are not there yet, but we're learning. But, $1400/mo for rent or PITI would be nearly 25% of our take-home income. That seems pretty high and makes me sad.

Anyway, moving on ....

Transit
The wife leans more toward a slightly larger home with a better interior, whereas my first priority (and her second) is doing anything possible to get within biking distance of work. The closest and best neighborhood we could afford to buy in that is NOT within biking distance would be much cheaper, say about 30% cheaper to buy. But, roundtrip car commute from there would be 1.5hrs / 24 miles daily. Round trip bike commute would cost roughly the same as driving, but would require about 2 hrs roundtrip. Wife's commute would be proportionally about the same but roughly 75% the length of mine.

Living closer-in to the urban core would mean wife's commute would be cut to about 1/4 or 1/5 of present distance, and I would be able to make my commute 100% on my bike for a total roundtrip of 1.5 hrs / 10-12 miles. I would be real happy with that.

The Problems
Our quandary, in my present figuring, is thus:
  • When we were growing up here in Austin, it used to be a cool somewhat quiet / interesting town. Not anymore -- now it's edging toward the top 10 largest metro areas in the country, has huge job growth and top-5 growth from migration. It's booming. Unfortunately this means Austin is in the middle of a major housing shortage. I think I read an estimate recently that Austin has only 2.5 months of housing inventory right now.
  • Consequently, the market is ridiculous right now. I've written about that elsewhere, but it's just almost impossible for small frys like us to get a bite on a "decent" house anywhere close to the center of the city. We're keeping our cool and trying to be persistent at it, though. Speaking of "the center of the city" ...
  • Both of our new jobs are near the center of the city. Ouch. We would love to each be able to bike to work from our new hypothetical house, but doing so will mean that we pay between $170 - $280 per square foot on a new home. This may seem ridiculous, and perhaps it is. But essentially we're watching the quaint city of our childhood transform into a high-expense city (like this one) and if anybody wants to stay in the urban core of Austin, or anywhere close to it, the price of living goes way up.
  • As an aside, it does NOT seem like Austin is experiencing a housing bubble, per se, if I'm understanding the proper usage of the Price to Rent Ratio. That is, based on a few data points I've collected from the areas of town we're looking at, Austin's P-R Ratio is between 11 and 14. That's pretty good, and suggests that if we want to stay within bike-commute distance of our jobs, it will actually make more financial sense to buy than to rent. Someone check my math there.
  • Finally, to go into full disclosure here, we really WANT to buy a house rather than NEEDing to buy. Sure, we could rent for a few more years, continue to build our savings, and enjoy the mobile lifestyle. That being said, some elders in our lives (parents, wise old mentors) have us convinced that we should find a way to take advantage of today's historically low interest rates, while they're still low. And from what we gather, if we wait too long, we may not be able to afford to buy in this part of town at all.

Okay phew. Thanks for reading all that. My sincere apologies for this being a bit of a ramble. Try to sort from the information above anything useful that you might see.

Hope I've laid out all the relevant factors here. The bottom line question is: what would you do here?
We are open to most answers. I will be resistant to the proposition of living further out in the 30%-cheaper zone, but if someone can convince me that the time-cost of my commute will somehow be justified, I might acquiesce.

On the other hand if someone can convince me that even in spite of the PR Ratio it's still better to save right now and continue renting even at a slight premium, I could go that way.

Or any way in between. Just needing the experience of others who have gone before me here.

kh

  • 5 O'Clock Shadow
  • *
  • Posts: 46
Re: Dealing with jobs/commutes into the booming urban core
« Reply #1 on: May 27, 2013, 01:17:44 PM »
Have you thought about the Shoal Creek corridor?  I'm not sure what your price range is looking like or how far downtown you're going, but that is a gorgeous bike commute with relatively easy access to the west side of downtown.  I used to make the trek between Hyde Park and 183/Burnet along that route fairly regularly, and it's a great 10 mile ride.  Also, look into how incorporating bus routes might expand your range - sticking your bike on those front bus racks might dramatically increase your bike commuting potential.  For instance, I was fine with a 10 mile ride, but the 20 miles to do a round trip was often a little much (yeah I'm a wuss).  So I'd take a bus north/uphill, and coast downhill on a bike on my way home.

I know what you mean about the crazy-making rents, but the commutes in Austin can take years off your life.  Look at your gas costs, and imagine what it would be like to put those on rent instead, and gain an extra hour (?) a day.  What sorts of neighborhoods would that put you in?  I lucked out and lived in a beautiful 1-bedroom in Hyde Park that was part of a house for $850, and I spent maybe $30/mo on gas because I was close enough to take my bike almost everywhere - work, groceries, bars.  Did it drive me nuts to watch those low interest rates passing me by?  Of course.  But I would have been much more annoyed to have to try to sell a house to take a great job offer in NYC, instead of just not renewing my lease.

mandelbrot

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 34
  • Location: Austin TX
    • Return from Exile
Re: Dealing with jobs/commutes into the booming urban core
« Reply #2 on: May 27, 2013, 01:32:04 PM »
Hey Kh,
Thanks for the thoughts on this. Some thoughts of my own:

1) The Shoal Creek area may have once been a neat little urban jewel of moderate-affordability and excellent bike transit-topia. It certainly is still the latter, but it is NOT the former. I just looked on the MLS and there is only one house in that whole neighborhood on sale for less than $400k. It's $395k, and 1120 sq ft, aka almost $350/sq ft. Ridiculous. Yeah, Shoal Creek is now rich-person land I'm afraid. Would love to live there, but it's way out of our league.

2) The bike/bus combo is an interesting idea that I've toyed with, but it's fraught with risk. The reason is, there are only two bike mounts on the front of a CapMetro bus, and if you're commuting on a major / express route during peak hours, it's very likely those two mounts will already be used up by other passengers before it gets to you. In my post-college days I tried this for a while and it really only half-works. The other half of the time, one ends up having to ride the bike the whole way, or wait several intervals (20 - 40 min) for a non-full bus. Stupid Austin mass transit.

3) You're totally right, the commutes in Austin suck. It's really sad how this fair city has become so clogged up. It's still fair, but effing crowded..

Anyway, the funny thing about driving a Honda Fit, and Austin still being a relatively small city, my fuel costs commuting from the 30%-cheaper zone would only be about $60/mo. Wear and tear on the car is estimated at another $100/mo, though, so I guess that starts to stack up.

Still, your suggestion about renting in central Austin is one that's on our radar. We'll have to continue skimming the market and, as our patience and lease runs out, and possibly as interest rates rise, perhaps that option will float to the top of our list. We'll see.

Thx for the feedback again!

kh

  • 5 O'Clock Shadow
  • *
  • Posts: 46
Re: Dealing with jobs/commutes into the booming urban core
« Reply #3 on: May 27, 2013, 01:46:40 PM »
Depends on how far north you're willing to go, and how open-minded you are about what you're looking to buy.  North of W. Anderson, houses drop into the $200K's, as the neighborhood gets a little older.  You might also look at buying an apartment or condo - get in on those great interest rates, but in the low- to mid- 100K's.  It might not fit exactly with your wife's idea of cute house, but could be a potential compromise.  I've found scoping around on Zillow to be a good way to pick out those subtle price divide lines I didn't really notice when driving around.

I've run into the bus rack issue you've mentioned, and find it highly variable by route.  I almost always had problems on the 1M/L, but almost never on the 5 or 7, or most of the UT lines, so maybe check out some different lines to see if one works better than what you're currently using.  Trying out that crazy light rail that goes nowhere also might be an option to combine with the bike.

Snow White

  • Stubble
  • **
  • Posts: 171
  • Location: Texas
Re: Dealing with jobs/commutes into the booming urban core
« Reply #4 on: May 27, 2013, 08:42:21 PM »
What...you don't want to buy an $850,000 one bedroom apartment in the Austonian or the Spring and live downtown?  ;)

Check out neighborhoods West of South Mopac between William Cannon & Slaughter.  You should be able to find a nice three bedroom house between $225,000 - $300,000 although they sell VERY fast after listing.  Good schools, lots of trees, great HEB and other shops at Slaughter and Escarpment.  If you leave by 7:00 am you can be downtown in 15-20 minutes...takes longer if you leave later.  Biking would be more of a challenge but possibly doable in the future as a new bike paths are being added.

Austin traffic has definitely made life challenging here and it can make your life miserable if you live too far from where you work.  Good luck with the house search.

beeth_oven

  • 5 O'Clock Shadow
  • *
  • Posts: 39
Re: Dealing with jobs/commutes into the booming urban core
« Reply #5 on: May 27, 2013, 11:48:29 PM »
It's hard to say if you should buy or not without seeing all the numbers. What kind of down payment will you be able to make with just 50k in assets? Will you have enough of an emergency fund after? With brand-new jobs, buying seems risky to me.

But really, you should do the math. Check out this rent vs. buy calculator:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

Hit the blue 'advanced' button and fill out all the numbers as accurately as you can.

mandelbrot

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 34
  • Location: Austin TX
    • Return from Exile
Re: Dealing with jobs/commutes into the booming urban core
« Reply #6 on: May 28, 2013, 05:58:13 AM »
Snow White:
Haha, no I'm not particularly inclined toward those new yuppie-penthouses going up in downtown :-)

The southwest neighborhood you pointed out is *slightly* more affordable than the other places we're looking, but it's not much of an improvement over the "30%-cheaper zone" I identified earlier, which would be the Braker / Kramer Lane neighborhood up north of 183. Leaving at 7am, even from that far north, I could certainly get to my destination in 15 minutes. [Actually my office is on MoPac just south of the river, and the wife is commuting to just east of downtown, where 38th St hits Airport Blvd]

Trouble is, neither of us have enough control over our schedules yet where we can head to work at 7am and expect to get any benefit out of it. This will happen eventually as we ramp into our positions and gain more autonomy, but may take 6 months or a year.

Meanwhile, as you said, it appears that biking is currently impossible from the southwest neighborhood you mentioned -- or if not impossible, rather impractical. Especially for the wife.

Thanks though, I appreciate the encouragement.

mandelbrot

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 34
  • Location: Austin TX
    • Return from Exile
Re: Dealing with jobs/commutes into the booming urban core
« Reply #7 on: May 28, 2013, 06:02:10 AM »
BeethOven,
You might make a good point here. We'll have to see. We were initially hoping to purchase in the 150k - 200k range, in which case our 50k stash will be adequate. At least, if we did this at the end of the summer, anyway, because with our new paychecks rolling in for the next few months, we'll be able to save about $2600/mo. So, that stash will continue growing through to the end of our apartment lease, which is early in the fall.

But, it may still not be enough for 20% down on a house in the 200k - 250k range, which is probably what we'd need to pay if we're going to try to buy into the heart of the city as I've described.

As for the NY Times calculator -- I've used that a bunch of times, and the most recent iteration suggested that buying will become much cheaper than renting by 1-2 years in the future. It seems pretty "convinced" that buying is the right move, thus corroborating my calculations of the Price-to-Rent Ratios on the types of houses we've been looking at.