Author Topic: house downpayment or buy stock  (Read 1467 times)

treesner

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house downpayment or buy stock
« on: March 18, 2020, 01:39:28 PM »
hey guys I've been holding back my vanguard total stock market index contributions for awhile to save up for a down payment of a house (house thats 400-520k). Now that the stock market is super low do you think its better to just put that down payment cash into VTSAX stock and get a rental for the time being?
It looks like interest rates have gone down and thinking maybe people will be trying to sell their houses with how the economy is..
what's the better place to put my money?

thanks

iris lily

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Re: house downpayment or buy stock
« Reply #1 on: March 18, 2020, 02:22:23 PM »
How old are you?

I would say, buy a little stock.

Keep your cash, cash is king in a depression. You can always buy a house.

ketchup

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Re: house downpayment or buy stock
« Reply #2 on: March 18, 2020, 02:30:50 PM »
I'm sort of in a similar state.  Was planning on buying a house sometime next year, and may accelerate that to this year if prices drop.  It depends on your situation right now though.  Do you *need* to buy a house soon, or is your current living situation "fine"?  That would be key in the decision.  Cash is a stable position to be in if you need to use it short-term (<1yr).

terran

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Re: house downpayment or buy stock
« Reply #3 on: March 18, 2020, 04:26:05 PM »
I guess the question is whether you'll be more upset if the stock market has a huge rally and you have less money to rally, or if the housing market has a crash and you don't have money to buy a house?

Telecaster

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Re: house downpayment or buy stock
« Reply #4 on: March 18, 2020, 04:33:05 PM »
I think the standard advice still applies:  Don't keep money you need in the short term* in the stock market


*Definitions of "short term" vary.  But I'd say if you will need it in less than a 2-3 years don't put it in the market.

Radagast

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Re: house downpayment or buy stock
« Reply #5 on: March 18, 2020, 11:25:22 PM »
I am in that boat. We saved (probably) more than strictly needed and now I am trickling 30% of it back into stocks. I have been backtesting buying the 2008-9 dip and now I am thinking I would be insane not to work it all back in. But, it is a joint decision and anyway we don't know how long this will last or how deep it will go. There might still be a further 50% loss ahead. Perhaps the virus will reverberate for a few years, or maybe the US and China will end their trading relationship. So easy does it.

Dicey

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Re: house downpayment or buy stock
« Reply #6 on: March 18, 2020, 11:56:11 PM »
If you really, really want to buy a house, don't do anything in a hurry right now. Don't buy stock f you cant afford to lose some of its value. Don't buy a house yet either. It's going to take a while, but I predict housing prices will soften as the effects of this virus ripple throughout our economy. Finally, this pandemic will result in job losses. Don't buy a house if there's any chance of losing your job.

FINate

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Re: house downpayment or buy stock
« Reply #7 on: March 19, 2020, 12:47:39 AM »
You're comparing two totally different things with different purposes. A house is a place to live (I'm assuming this will be your primary residence) whereas stocks are an investment for building wealth.

I have no idea what asset prices will do going forward. No one does. Stock market volatility can sometimes result in moves to real estate as this seems safer. I don't think it's necessarily safer, but perception matters. And mortgage rates are extremely low, may go even lower, which could buoy housing prices.

Or housing prices could soften despite lower mortgage rates due to high unemployment and stock market losses. If assets across the board are in decline this would be deflationary or at least dis-inflationary. As we saw with the financial crisis 10 years ago, I think it's unlikely that the Fed will allow deflation/dis-inflation. They will print money and inject liquidity to counteract this.

So, if you're planning on buying a house to live there long-term and your job is secure, then it may not be a bad time to shop. Be patient, look for good deals, and negotiate hard. A few weeks or months into this crisis and you may be able to get a great deal on a place with a super low mortgage rate.

But, if you want to invest and build wealth, then this is also a great buying opportunity for stocks. Just be prepared to ride out a lot more volatility in the months ahead.

Either way, it's all about holding long-term. And I think the answer lies in what your goals are: housing or wealth?

chemistk

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Re: house downpayment or buy stock
« Reply #8 on: March 19, 2020, 05:37:42 AM »
I'm sort of in the same boat. I probably have a bit less saved than you do because life happened over these past few years.

The prevailing thoughts I have:

-A market dump like this might not happen for some time. Given that I'm under 30, this easily may be the best opportunity I'll ever have to take advantage of compound interest.
-Cash is king during hard times. I don't see my job going anywhere anytime soon, but I'd hate to be out the cash we have now because we're playing the long game.
-We really are looking forward to purchasing a house, I'd hate to be without cash when prices are low.

Really it comes down to weighing the long-term vs the near-term.

LD_TAndK

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Re: house downpayment or buy stock
« Reply #9 on: March 19, 2020, 07:55:10 AM »
I'm in the exact same boat.

For the time being I've decided on 50% VTSAX, 50% towards the down payment. It'll delay being able to buy a house until mid 2021, at which point I'll hopefully be able to take advantage of a depressed housing market due to all this.

MountainTown

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Re: house downpayment or buy stock
« Reply #10 on: March 19, 2020, 10:49:25 PM »
Same boat here! Difference is we are expecting.,...two. Twins. My wife and I have lived in a great, cheap, small rental for some time so my wife is definitely feeling the need to nest and move on. Given that our family size will double i can't argue much. though if it were my choice i would like to stay a bit longer and see how things go.

Anyways, I'm super bummed because I have been waiting for a market crash for years to dump money in. Of course i have just continued to DCA every year and max out retirement accounts either way. However this is the first year where we seriously reduced investing so we could build up more of a cash down payment...boy it stings. In fact i sold a little bit right before the crash. Lucky me...it was down 2% that day from the February highs and i felt stupid...boy I had no idea!!

In my situation--my wife really wants a house. It's super important to her and we don't have much time before the due date--3 months. The timing sucks. I would love to dump more into the market and I feel like it will take more than 2 months for the real estate market to crash. I also feel like winter is a better time for deals. But aside from convincing her to stay in our small rental which could be hard on our relationship what can I do? I think I will just defer investing for now and hope that the real estate market at least takes a slight dip or plateaus and we can pick up something that's not a ripoff.


chemistk

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Re: house downpayment or buy stock
« Reply #11 on: March 20, 2020, 05:27:17 AM »
Same boat here! Difference is we are expecting.,...two. Twins. My wife and I have lived in a great, cheap, small rental for some time so my wife is definitely feeling the need to nest and move on. Given that our family size will double i can't argue much. though if it were my choice i would like to stay a bit longer and see how things go.

Anyways, I'm super bummed because I have been waiting for a market crash for years to dump money in. Of course i have just continued to DCA every year and max out retirement accounts either way. However this is the first year where we seriously reduced investing so we could build up more of a cash down payment...boy it stings. In fact i sold a little bit right before the crash. Lucky me...it was down 2% that day from the February highs and i felt stupid...boy I had no idea!!

In my situation--my wife really wants a house. It's super important to her and we don't have much time before the due date--3 months. The timing sucks. I would love to dump more into the market and I feel like it will take more than 2 months for the real estate market to crash. I also feel like winter is a better time for deals. But aside from convincing her to stay in our small rental which could be hard on our relationship what can I do? I think I will just defer investing for now and hope that the real estate market at least takes a slight dip or plateaus and we can pick up something that's not a ripoff.

Honestly, I'd wait. In my state, real estate offices are now required to be closed, so the home buying process is going to quickly slow down. I can definitely see a similar policy adopted in other places.

We're going to wait this out, now mostly because we have to, but before because we were (and still are) hoping for a dropoff in house prices. Our rent is thankfully below our area's average for a house our size and although we're uncomfortable, our current house meets nearly all of our needs.

FrenchToast

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Re: house downpayment or buy stock
« Reply #12 on: March 20, 2020, 07:23:01 AM »
Same boat here! Difference is we are expecting.,...two. Twins. My wife and I have lived in a great, cheap, small rental for some time so my wife is definitely feeling the need to nest and move on. Given that our family size will double i can't argue much. though if it were my choice i would like to stay a bit longer and see how things go.

Anyways, I'm super bummed because I have been waiting for a market crash for years to dump money in. Of course i have just continued to DCA every year and max out retirement accounts either way. However this is the first year where we seriously reduced investing so we could build up more of a cash down payment...boy it stings. In fact i sold a little bit right before the crash. Lucky me...it was down 2% that day from the February highs and i felt stupid...boy I had no idea!!

In my situation--my wife really wants a house. It's super important to her and we don't have much time before the due date--3 months. The timing sucks. I would love to dump more into the market and I feel like it will take more than 2 months for the real estate market to crash. I also feel like winter is a better time for deals. But aside from convincing her to stay in our small rental which could be hard on our relationship what can I do? I think I will just defer investing for now and hope that the real estate market at least takes a slight dip or plateaus and we can pick up something that's not a ripoff.



While the urge to nest is real, I totally get it, I have a little one.  It will pass and honestly you don't need more space until at least a year+. It's truly better to have a smaller house at the beginning--less to clean, the comfort of normalcy and routine. Moving changes everything, commutes, grocery stores etc. You already have a bunch of newness going on, there is more comfort than you realize knowing what aisle the dish soap is on.

MountainTown

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Re: house downpayment or buy stock
« Reply #13 on: March 21, 2020, 03:33:19 AM »
I wish I could. My wife is seriously serious that we need to move. Did I mention twins.? The corona isnít helping with both of us now working from home. Iím hoping if I can hold off even two weeks we could see a drop. Iíve presented the whole babies are small argument and it doesnít play well to her. I get it. To a certain extent it has felt cramped at times...and given the money we make we have deferred some luxuries.

The nesting thing is pretty real. I wish I could persuade her that even a few months in that extra bedroom would be ok. While I think we can find real estate we can afford....I am a bit concerned about taking a 20% haircut right after the buy.

Dicey

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Re: house downpayment or buy stock
« Reply #14 on: March 21, 2020, 09:38:31 AM »
I wish I could. My wife is seriously serious that we need to move. Did I mention twins.? The corona isnít helping with both of us now working from home. Iím hoping if I can hold off even two weeks we could see a drop. Iíve presented the whole babies are small argument and it doesnít play well to her. I get it. To a certain extent it has felt cramped at times...and given the money we make we have deferred some luxuries.

The nesting thing is pretty real. I wish I could persuade her that even a few months in that extra bedroom would be ok. While I think we can find real estate we can afford....I am a bit concerned about taking a 20% haircut right after the buy.
At least where I live, all real estate showings have been cancelled. I understand that reasoning with pregnant women can be challenging. If she doesn't understand the risk she's putting on herself and those babies by house hunting during this pandemic, you're going to have to be the one to take a stand. Call her doctor if you have to, or maybe her mom. Her fantasy of a perfect nursery is going to have to wait. There are lives at stake.

MountainTown

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Re: house downpayment or buy stock
« Reply #15 on: March 21, 2020, 10:10:09 AM »
Nothing yet. Open houses cancelled. I think outside of certain states you will find a much more chill attitude....not condoning this though.

Like I say itís a dealbreaker. I even suggested a new build that would be finished August of 2020. Month after her due date and it felt very insulting to her. I dunno... I know I am preaching to the choir here. But also my point is Iím not sure how to influence her without it harming our relationship. And...I really feel for her and want her to have this fun nesting time. I mean I think she is really bumming now because her baby shower is likely cancelled. Ten months ago she never would have let on that sh even wanted one but now it seems pretty hard on her or quite a disappointment.

Ugh and like I say...this working from home thing is the double whammy. Before that my plan was to sell the desk, bed, and filing cabinet and just make the room for a nursery ďjust in caseĒ thought if she could see for her own eyes...

wellactually

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Re: house downpayment or buy stock
« Reply #16 on: March 21, 2020, 10:50:59 AM »
@MountainTown
I mean if you were seriously serious you wouldnít have waited to start looking for a home until three months before your twins are due. Iím due with one baby in three weeks and while ďnestingĒ is somewhat of a real hormonal drive, itís not actually experienced until further along than 6-7 months. Panic about being ready (esp with twins) is somewhat rational at any point!

With twins, only like 40% of moms go past 35 weeks or something. You donít have time to find a house, close and move within the next 8 weeks, especially right now when things are shut down.

Now, as someone looking at a completely different experience of the final weeks of pregnancy and first weeks with baby, I do understand her feeling completely out of sorts right now. We were just told that we shouldnít even have our parents come visit until at least 3 days after we get home from the hospital. My mom is now watching my niece full time at her home two hours away because my sister who works in the same town as me is a healthcare worker. So the plan for my mom to come help us at the beginning is out.

Having baby showers cancelled, not having a nursery set up at all, and everything going on right now is causing anxiety. Itís mostly not about ďnestingĒ but the fact that you all could have two babies in the next few weeks and all your plans are out the window. All the diapers and wipes and registry items she thought sheíd be getting are no longer coming. You did not plan for the babies to be at the current place and now the options are narrowing.

You need to take this seriously, but the house is a red herring. Sit down and figure out together what you need to get done to be as prepared as possible in various possible outcomes. Maybe someone can store your 2nd bedroom stuff until you can sell it. Buy some basics off your own registry just in case showers donít happen. Hopefully you all get the full amount of time left and we get to a new normal before then, but you donít have time anymore for a house to be a realistic option before then.

treesner

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Re: house downpayment or buy stock
« Reply #17 on: April 02, 2020, 11:28:34 AM »
How old are you?

I would say, buy a little stock.

Keep your cash, cash is king in a depression. You can always buy a house.

30

treesner

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Re: house downpayment or buy stock
« Reply #18 on: April 02, 2020, 11:30:32 AM »
I think the standard advice still applies:  Don't keep money you need in the short term* in the stock market


*Definitions of "short term" vary.  But I'd say if you will need it in less than a 2-3 years don't put it in the market.

I think I would like to buy a house in the next 2-3 years. guess I was thinking the housing prices might drop in the next year. thing is I still have a high paying job so can save up a downpayment again

treesner

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Re: house downpayment or buy stock
« Reply #19 on: April 02, 2020, 11:34:24 AM »
If you really, really want to buy a house, don't do anything in a hurry right now. Don't buy stock f you cant afford to lose some of its value. Don't buy a house yet either. It's going to take a while, but I predict housing prices will soften as the effects of this virus ripple throughout our economy. Finally, this pandemic will result in job losses. Don't buy a house if there's any chance of losing your job.

yeah I guess I'm trying to understand when the housing market will dip down and make it a good time to buy. I was work from home before corona, now my whole company is but it seems like its working out fine as work from home company so hopefully no job loss in the future

treesner

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Re: house downpayment or buy stock
« Reply #20 on: April 02, 2020, 11:40:09 AM »
Same boat here! Difference is we are expecting.,...two. Twins. My wife and I have lived in a great, cheap, small rental for some time so my wife is definitely feeling the need to nest and move on. Given that our family size will double i can't argue much. though if it were my choice i would like to stay a bit longer and see how things go.

Anyways, I'm super bummed because I have been waiting for a market crash for years to dump money in. Of course i have just continued to DCA every year and max out retirement accounts either way. However this is the first year where we seriously reduced investing so we could build up more of a cash down payment...boy it stings. In fact i sold a little bit right before the crash. Lucky me...it was down 2% that day from the February highs and i felt stupid...boy I had no idea!!

In my situation--my wife really wants a house. It's super important to her and we don't have much time before the due date--3 months. The timing sucks. I would love to dump more into the market and I feel like it will take more than 2 months for the real estate market to crash. I also feel like winter is a better time for deals. But aside from convincing her to stay in our small rental which could be hard on our relationship what can I do? I think I will just defer investing for now and hope that the real estate market at least takes a slight dip or plateaus and we can pick up something that's not a ripoff.

Honestly, I'd wait. In my state, real estate offices are now required to be closed, so the home buying process is going to quickly slow down. I can definitely see a similar policy adopted in other places.

We're going to wait this out, now mostly because we have to, but before because we were (and still are) hoping for a dropoff in house prices. Our rent is thankfully below our area's average for a house our size and although we're uncomfortable, our current house meets nearly all of our needs.

my relator in California said she can not show houses and inspectors aren't inspecting

treesner

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Re: house downpayment or buy stock
« Reply #21 on: April 02, 2020, 12:37:18 PM »
I just heard that relators can work again

Dicey

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Re: house downpayment or buy stock
« Reply #22 on: April 02, 2020, 01:44:47 PM »
I just heard that relators can work again
Depends on what state you're in.

FINate

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Re: house downpayment or buy stock
« Reply #23 on: April 02, 2020, 01:45:48 PM »
The rules are different in every state. As of now, realtors can work in California. But things like open houses and broker tours are out, and agents are very selective about showings. Lots of virtual/3D tours and things of that nature, and interested parties have to be very serious before even being considered for a walk through...no looky-loos.

In my area some deals are still going through, but also some pending deals fell through (cold feet or financing pulled due to job loss). Inventory is exceptionally tight. Lots of sellers have pulled properties and others who were going to list have decided to wait. In CA there's a 90-day moratorium on mortgage payments due to COVID-19 related hardships. This isn't debt forgiveness, but rather an extension of the mortgage term.

The situation is still very fluid and changes daily. I wouldn't expect a surge of distressed properties hitting the market for at least a couple of months. In May or June we may see unemployed folks with mortgages eager to sell before the 90 day moratorium expires, so maybe there will be deals to be had at that time? But by then a stock market recovery may be well underway. Again, I think your long-term goals should be your guide: Do you want to perhaps get a great deal on a house you plan to live in for a long time, or are you more interested in buying stocks for cheap? I don't think anyone can predict which choice will end up being more lucrative.

Either way, as mentioned up thread, cash is king. And you should be careful not to get overextended (have emergency reserves). But holding on to a bunch of excess cash doesn't do any good if you don't put it to use when everyone is freaked out and asset prices are low.
« Last Edit: April 02, 2020, 05:02:20 PM by FINate »

chemistk

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Re: house downpayment or buy stock
« Reply #24 on: April 03, 2020, 05:53:44 AM »
I'll tell you what, each successive week being 'stuck' inside the house gives much greater clarity on what would likely be the best decision [for my family at least].

After the dust begins to settle on the lockdowns and (hopefully) once housing prices begin to fall, I really think we're going to be seriously looking at a house. Every day draws more ire toward our rental - much of it wouldn't be an issue if we owned.