Author Topic: Putting off buying a house until family size increases  (Read 2531 times)

MountainTown

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Putting off buying a house until family size increases
« on: February 28, 2018, 10:14:29 PM »
Per most of the advice in this forum my wife and I put off buying a house last year as we were planning a family but not sure when. We rent pretty cheap(825) a month for a 2 bed house(it's a tiny house though!). We probably live in about 800 square feet. That being said, we can do it for now. I think it would be hard when we have a baby. We are talking about trying this spring and then who knows.

I know I should resist market timing and all of that but ....I can't help but be pretty scared of interest rates. I had always thought in my head that simply if interest rates go up, real estate markets would correspondingly go down and it would be a wash. At least so far, in my local market, that doesn't seem to be the case yet. Seems like more people are rushing to buy.

Should I be worried about this and rushing to buy if that's are plan soon? Should I be switching back to saving up cash so we can get a bigger down payment? The current amount we have would not be 20% for a property here. Most ones that we are attracted to in the areas we want to live in...around $300k at least so we would do better to have another $20k at least in cash to cover all costs and maybe $30k to ensure an emergency fund is in place.

We have kept about $50k on the sidelines in cash while pouring all/most of our other income to get to a 50% to 60% savings rate. Right now we max out Tiras, 457, TSP, and another fixed state retirement plan wife has.

A brief summary of our cash flow and net worth:

$120,000 salary for both husband/wife
Current amounts going to retirement per year $11000 to TIRA's, $18,500 to TSP, $18,500 to 457, 800 to pension, $3200 to another state retirement plan that works like a 401k)
Take home pay after retirement savings and FSA: 120,000 - 57200 = 62,800

I should say after this, since we are front loading, saving much more on the side has been difficult. We may be able to do another $10k in taxable investments(or cash savings) towards end of year after wife maxes out.

0 debt
$50,000 cash
$210,000 retirement investments noted above(about $6000 is actually Roth)
2 used cars--no loans
FSA's...about 5000 year. I have a fair amount of medical expenses due to chronic health issue. (Note this is an FSA not HSA so it is use-or-lose)
Tax rate: Almost nothing with current retirement savings. I think last time I checked we were under 10% after all the deferred retirement
Credit scores: Decent 730-760 range

Total NW with cars: $276,000


2Cent

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Re: Putting off buying a house until family size increases
« Reply #1 on: March 01, 2018, 04:28:01 AM »
Unless you have family staying over with the baby, it won't take up any significant amount of space for the first 1-2 years. So don't feel like you need to do everything at once when you get a baby. You'll have at least 2-3 years notice to get a house before it becomes an issue. Just don't buy too much baby stuff.

ShoulderThingThatGoesUp

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Re: Putting off buying a house until family size increases
« Reply #2 on: March 01, 2018, 04:51:02 AM »
When you bring home your new baby youre not going to be thinking Good thing I committed to maintaining this extra 800 sf!


tomorrowsomewherenew

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Re: Putting off buying a house until family size increases
« Reply #3 on: March 01, 2018, 04:59:33 AM »
No, I would still not buy a house. It sounds like your wife is not even pregnant yet, so there is still no need even in the forseeable future for additional living space. Even if you were to have a baby, you still wouldn't need more space for about 18 months after it is born. I know plenty of people who have lived in a 1 bedroom apt who have had a baby. Babies sleep in cribs or bassinets, which are much smaller than even a twin bed, and they usually sleep in your room. Even if you were to get pregnant TODAY, you would not need a larger home for at least 2.5 years. I would cool your jets and continue on with life.

2Cent

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Re: Putting off buying a house until family size increases
« Reply #4 on: March 01, 2018, 05:55:06 AM »
When you bring home your new baby youre not going to be thinking Good thing I committed to maintaining this extra 800 sf!
Made me laugh :)
In fact you might be thinking I wish I could reduce my hours and spend some more time with my kid.

TheAnonOne

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Re: Putting off buying a house until family size increases
« Reply #5 on: March 01, 2018, 09:04:26 AM »
If you hold off buying a bigger house, you can use that money to save and invest.

By the time that you start having a kid, you have about 9 months before it arrives, PLUS another 3 years before it matters how big the house is.

So at least 4 years from now assuming you are not started yet.


Basically, plan to be rich in 4 years and don't worry about interest rates.

MountainTown

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Re: Putting off buying a house until family size increases
« Reply #6 on: March 01, 2018, 08:10:18 PM »
Thanks for the feedback!

Is anyone concerned about rising interest rates though?

And while I hear everyone...I have to say that my wife is pushing me as she thinks she might like a mom or two to stay for awhile. I also do work from home now and it sorta helps with some chronic pain issues. I will counter that and say I don't have to work from home...I do still have an office in town. It's just nicer/easier for me to do so.

But maybe it's crazy talk anyways...thinking I can work from home while baby is here.

MrUpwardlyMobile

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Re: Putting off buying a house until family size increases
« Reply #7 on: March 01, 2018, 08:21:18 PM »
When you bring home your new baby youre not going to be thinking Good thing I committed to maintaining this extra 800 sf!
Made me laugh :)
In fact you might be thinking I wish I could reduce my hours and spend some more time with my kid.

We have a 700ish sf apartment and its fine for a newborn.  Im thinking we wont need bigger until the kid is approaching 2. At that point, baby upwardlymobile might need another 100 sf.

vivian

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Re: Putting off buying a house until family size increases
« Reply #8 on: March 02, 2018, 08:53:47 AM »
It’s really hard to anticipate how your life will change with a kid. We had a 3 bedroom house that we thought was great to raise a family. But once the kid was mobile, we realized it wouldn’t fit the bill. Also, you assume you will get pregnant exactly when you want. It may take longer than expected.

As for moms staying “a while,” how long is that exactly? One month each? If you have a two bedroom place, there is a second bedroom for them. The baby is in your room for first several months anyway.

I’m not concerned about interest rates. You never know what will happen in future.

I will differ slightly from some advice here to say, if all goes as planned, you would be looking for a house for your family with a toddler in 2.5 -3 years. Since you don’t have enough down payment for your area, I would direct savings after retirement towards cash savings rather than investment. Three years is in the time frame to start to ensure money is accessible not tied up in investments you may not want to sell.


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Tuskalusa

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Re: Putting off buying a house until family size increases
« Reply #9 on: March 02, 2018, 09:57:29 AM »
I tend to think that buying a house when the market is in a frenzy is the worst time to buy. I tend to let everyone fight for houses in those times, and I wait for a downturn. Someone will have bought a house for more than they can afford, and then they sell when the economy stalls. THATS the time to buy.

So Id recommend saving your cash and waiting. Larger down payments and great credit can go a long way towards getting good interest rates, so Im not too worried about rates rising.

Another option would be to rent a larger place if you feel you need one more bedroom for family. This could give you more perspective on what you actually need when you do make a decision to buy.

brycedoula

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Re: Putting off buying a house until family size increases
« Reply #10 on: March 02, 2018, 02:04:58 PM »
Not a comment about interest rates, but related to family planning and "trying": it MAY happen right away...or it may not. The first time I got pregnant was approximately three weeks after I removed my IUD. I was expecting it to take at least 6 months, and it took one cycle. A few years later it took us seven months to conceive (when OF COURSE I was expecting it to happen ASAP).

So I wouldn't rush to put the cart before the horse, so to speak. If you and your wife don't conceive right away, and especially if one (or both) of you needs ART (assisted reproductive technology) to start your family, you will want the extra $$$ for that, not for higher property taxes & utility bills.

MountainTown

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Re: Putting off buying a house until family size increases
« Reply #11 on: March 02, 2018, 07:37:55 PM »
Thanks for the advice everyone. I feel it may be harder to convince my wife...but I will just have to do a better job cleaning out junk and setting up this guest bedroom/nursery :)

Any thoughts on the $50k in cash? Right now it's in a CD at 1.75%. I am tempted to throw some of it into VTSAX. As I have had it on the sidelines awhile...been painful the last few years. Is that foolish?

CindyBS

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Re: Putting off buying a house until family size increases
« Reply #12 on: March 03, 2018, 04:21:54 PM »
Something else to think about - if you don't move now, understand that packing and moving with a baby/toddler will be much more difficult. 

Also, for every story of "it could take you a lot longer than you think to get pregnant", that also goes the other way.  Our son was premature, so between fast conception and early delivery - it was less than 8 months from the day we started trying until the day he was born.  That was significantly faster than we thought it would be and many projects/upgrades we expected to get done while trying/pregnant didn't get done. 

We moved into our house 1.5 years before we started trying for kids and bought a bigger space knowing we wanted them.  Although, where we live houses are cheap enough it doesn't typically make financial sense to rent unless you don't plan to stay or don't have the income.   With our fast entry into parenthood and having a baby with medical needs, I was happy we were settled in our house before he was born.  I later went on bedrest while pregnant with our younger son and moving with a toddler while on bedrest would have been extremely difficult to nearly impossible. 


MountainTown

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Re: Putting off buying a house until family size increases
« Reply #13 on: March 03, 2018, 06:10:33 PM »
Yea...totally get that Cindy. Unfortunately on the rent ratio we are about the opposite. Currently we are below market 825 a month where the going rate for this place would be 1200 or 1300. To get a house here would be about $250k for a 2 bed in our hood if it was an older place.

Kyle Schuant

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Re: Putting off buying a house until family size increases
« Reply #14 on: March 03, 2018, 06:41:18 PM »
Unless you have family staying over with the baby, it won't take up any significant amount of space for the first 1-2 years.
Correct. We bought our first place a couple of years before we had a child - it was a 2BR unit of 88m2. It was fine. Then having paid that off before our first was 2yo, we bought a 3BR unit of 135m2, and a while later had our second child. That's fine, too. We have a bedroom with ensuite, and they have a bedroom each with a separate bathoom and toilet. I'm writing this from my 30m2 double garage where I run my home business. If anything, it's all bigger than we need.

Some people worry about having a big yard for the kids or entertaining. But if your area has good parks and restaurants, as ours does, that's not a big deal.

Honestly, if you have any corners collecting dust and needing to be cleaned regularly, then it's more space than you need. Dust means nobody touched it for a while.

solara

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Re: Putting off buying a house until family size increases
« Reply #15 on: March 04, 2018, 12:21:44 AM »
I tend to think that buying a house when the market is in a frenzy is the worst time to buy. I tend to let everyone fight for houses in those times, and I wait for a downturn. Someone will have bought a house for more than they can afford, and then they sell when the economy stalls. THATS the time to buy.

So Id recommend saving your cash and waiting. Larger down payments and great credit can go a long way towards getting good interest rates, so Im not too worried about rates rising.

Another option would be to rent a larger place if you feel you need one more bedroom for family. This could give you more perspective on what you actually need when you do make a decision to buy.
Certainly, but without a crystal ball it is hard to know when a downturn may be. I was not in a position to purchase a house until recently, and would like to wait until the next one, but wonder about how long that may be (a strange worry to have perhaps, and one that for the good of others I would hope doesn't occur, but know will eventually).

I am in a similar position to the OP (although with higher rent and much lower income), and have been looking at buying a home. Would like to wait until a downturn or correction, but not sure when this will be in my area, which has been growing very, very fast for the past several years after the down turn, and shows no signs yet of slowing down in the near future. Of course, that is what it looked like in 2006 too I suppose.

I am not about to get into a bidding war to purchase a house, but thoughts on: (1) Getting a not-great-but-accceptable deal for now with current interest rates, and (2) buying a second house/rental property during the next downturn? My fear is in the interim year(s), the market will at least keep even in this area and I am worse off renting in that time given that I can't rent anything similar for much cheaper and I would not be building equity. There will eventually be a correction, but without knowing when that will be, thoughts on navigating renting vs. purchase in market where both purchase and rents are high?

Tuskalusa

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Re: Putting off buying a house until family size increases
« Reply #16 on: March 04, 2018, 10:35:54 AM »
Hi Solara. I see your point. I think the most important thing is to stay out of situations where there is a bidding war. Ti often escalates prices to ridiculous levels that seem totally unsustainable. (Here in the Silicon Valley, there was a house listed in the mid 800s that closed for 2m. Insane.

If your market is crazy now, Id say its best to wait for some kids of lull in the insanity before you buy.  Until the, keep saving cash so you can be in the best position possible. Opportunities will up as you get in a more solid position.

solara

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Re: Putting off buying a house until family size increases
« Reply #17 on: March 04, 2018, 01:14:34 PM »
Thanks for the advice.

Unfortunately most relatively affordable houses here seem to be purchased within a day or so, and/or sell for quite a bit more than asking, so bidding looks likely for now. Fortunately not to Silicon Valley levels, but prices are sometimes triple what they were 5-8 years ago. For now my choices seem to be either stay in place for another year or so and keep on the lookout for deals during the winter, move to a not great neighborhood and commute via bus (I bike everyday now, so that would be a bummer), or move abroad. Options 1 and 3 sound much better to me, although my guess is that barring a major economic drop prices here will keep going up for the next few years.

Thanks for the the advice.