The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: MountainTown on March 31, 2016, 07:18:03 PM
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I live in a town that used to be one of those quiet little mountain towns and now it seems to be booming. We love it her and have no intention to leave. I recently got married. Combined we make $103k and probably save $50k a year. That has been about 15% in retirement savings and the rest going to down payment(not including matches). We have $50k saved up for our down payment. Much to our dismay, it's really hard to find anything here less than $250k in the bikeable/commuting distance we want. We just bid on a house and gave them asking price and we were outbid by two other offers. We have found it pretty tough...and unreasonable.
On top of that, we actually pay pretty cheap below market rent. We pay 825 for a two bedroom house below the mountain. Most people would probably be paying 1000 to 1100 a month--maybe more. Our landlord also doesn't raise rent--ever. So as inflation rises, we just enjoy cheaper rent. She's great and we have no complaints.
However we are starting to outgrow the place. It works but it is a little tight in terms of space efficiency and we do long for our own place.
Does anyone have any suggestions? We are so frustrated with this market I almost just want to say to hell with it and throw that $50k in a Vanguard Total Stock Market Index...
-Fell
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Keep renting. Keep saving. Wait for the next good buy. Otherwise with the savings you'll soon save your way into the market.
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sit and wait for the right opportunity. Living expenses are cheap for you right now. There are sometimes good sales in off seasons. Also keep a good relationship with your real estate agent, and make sure you're seeing anything new that comes up right away. Also ask around, and see if any elderly people you know may be selling their house/downsizing soon. they may wish for a hassle free sale and may want to avoid real estate agent fees.
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Have you worked it out mathematically, by checking out the NY Times Rent vs Buy calculator (http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0)? Once you know the numbers, all that's left is an emotional decision. Is buying now worth whatever changes this will trigger in your financial future? Will this push back retirement by 6 months? 6 years?
Deferring expensive decisions has a nice side effect of allowing investment compounding to take effect. Obviously, leaving that $50k out in a (1%?) savings account means it's not going to compound so much. Are the numbers convincing enough to put buying a house on hold at least 5 years? If so, maybe invest it understanding the risks - the money may not have grown yet since it's a short timeline. If that happens, you have two options - start rebuilding the down payment fund now while the $50k moves into invested assets, and in 5 years time, see what the rent vs buy picture is, as well as how the two of you feel emotionally about the decision at that point.
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My suggestion is, if it doesn't feel right, don't do it. You've got cheap rent. I've got to believe the rent you are paying is way cheaper than the true cost of a home. 1% on 50K, sux, I know. If you are doutful about buying anything soon, maybe move the downpayment to a balanced fund (some risk, but not a lot of risk...) for now?
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You have dirt cheap rent! Right now we have what is called a "housing bubble". Keep saving your cash and when the next crash happens you can have your pick of the cheap houses and ride equity up for another 5-10 years!!
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Can you see if you can make the space you have work better for you?
Decluttering, rearranging furniture?
It sounds like you have a sweet deal, why give it up?
I don't know where you live, but most markets I have been looking into lately,
have had tremendous price increases with people bidding over asking price.
I'd hold off and wait for a really great opportunity, while you can save more and stay flexible.
I also highly recommend this read:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
I recently sold my house and am so very happy to not have one anymore.
No more yardwork, no more pool maintenance.....
So very liberating ;)