Would you buy your first house in 2021, if you had to start over?

[Mmm_Donuts]

I bought my first place in my 20s, which was about 20 years ago, and it was affordable - the mortgage payments were on par with rent. Now - I don't believe this is the case and there is the threat of mortgage rates going higher, which would make owning even more unaffordable. But... perhaps Canada is a unique case.

You can't just do a static analysis.  Higher interest rates won't simply add to housing prices, because the demand curve (i.e. how many people can afford what monthly payment) hasn't shifted.  It'll just mean that the selling prices for homes will drop in order for those same buyers to be able to buy.

I meant that higher mortgage rates will result in higher payments. Canada only has short term fixed mortgages (usually 5 years, sometimes 10).

[StashingAway]

On the flip side, I don't think you should assume you're selling a house every 5-10 years because, if you are, or think you might, then you shouldn't be buying houses in the first place.  They make zero sense to own in the short term, and even into the medium term.

It should still be accounted for as a realistic possible scenario. Prepare for the worst, hope for the best kind of thing. In general overestimate how much use they get out of things because they don't account for hedonistic adaptation.

Most people overestimate how much they will use a new mountain bike or bread mixer or table saw or house. Not all of them all of the time, but it is a very innate thing. We assume we will have the same job or interests or friends or whatever in 10 years because we can't imagine it different (until it actually happens).

But if we look at the data (and realize that despite feeling special, we ARE the data), the average homeowner tenure in the US is not very high. Most people should assume that this is a possible scenario, because on average it is the most probable scenario:
https://ipropertymanagement.com/research/average-length-of-homeownership

This isn't unlike buying car insurance. No one plans to get in an accident, but it's realistic to make sure that you're not completely underwater should it happen. Same for buying a house.


 

[roomtempmayo]

Great quotes in this thread:

@Malcat "Lol, I've seen some pretty fancy mental gymnastics done to justify some batshit renos."

@StashingAway "despite feeling special, we ARE the data"

To @anni 's original question, yes, I'd still buy my house at today's prices.

Reasons:
- It would be tough or impossible to rent a comparable house
- Even at today's prices, it's cheaper to own our house than rent anything in the same category
- Our city, and particularly our neighborhood, are very stable because buying is driven by employment in legacy institutions (government, health care, universities) where employment tends to be extremely stable
- We have an indefinite time horizon

If any of the above weren't the case, I probably would think twice about buying right now.

[StashingAway]

Great quotes in this thread:

@Malcat "Lol, I've seen some pretty fancy mental gymnastics done to justify some batshit renos."

@StashingAway "despite feeling special, we ARE the data"

To @anni 's original question, yes, I'd still buy my house at today's prices.

Reasons:
- It would be tough or impossible to rent a comparable house
- Even at today's prices, it's cheaper to own our house than rent anything in the same category
- Our city, and particularly our neighborhood, are very stable because buying is driven by employment in legacy institutions (government, health care, universities) where employment tends to be extremely stable
- We have an indefinite time horizon

If any of the above weren't the case, I probably would think twice about buying right now.

I was actually supporting the "buy now" with indefinite time horizon, only considering that you may leave in 5-10 years. The math still works out for a lot of people (I like to DIY, so the expense of home ownership is less for me than someone who hires it out). Heck, I bought my current house knowing there was a very real chance we'd move out in 3-5 years.

The REAL answer, I think, is that buying a house should only be a partially financial decision. It is, first and foremost, a place to live. If houses were 2x the cost (and rent 2x the cost), most people would still live in some sort of house, just a much smaller one. Or live with more roommates, etc. At the end of the day, it's shelter and security and at the end of the day those things often get lost when comparing the value of renting vs owning. I'm not making any hard claims about either, mind you.

[StashingAway]

Financially, home buying is actually more like the opposite of insurance.  With insurance, you pay a small amount to cover a potential large future expense that you would be unable to ever cover yourself. 

I'm in complete agreement with that one

[CupcakeGuru]

I know that pretty soon, I want to "stay still" and start putting down some kind of roots and create an actual home for myself.

Don't.  At 25, your greatest advantage in the job market is flexibility and the ability to move to new opportunities.  Wait until you're at least 30 to do anything other than be on the hunt for the next opportunity anywhere in the country or world.

Between the ages of 22 and 35, I had 11 addresses.  That movement was the best career decision I made, by a mile.

Another Don't do it vote. Between the ages of 25 and 35, I had 5 addresses in 3 cities. Wait until you are ready to put down roots.