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 SituationJobs: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
ExpensesThese 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 ....
TransitThe 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 ProblemsOur 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.