The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: chiconix on August 12, 2015, 02:21:33 PM
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Hi all and especially Colorado Mustachians,
My wife and I just moved to Denver. We'd really like to buy a house, although I confess I have no idea if it makes financial sense. I just hate renting for a variety of reasons. Currently we're living with friends, and tomorrow we're moving into a short-term rental which will last until the end of October. So we've got a little time to make some decisions.
As much as we'd like to own our place, it seems like this is a bad time to buy -- housing prices are really high but there's a ton of construction happening, so it seems like prices will drop in the near future. Am I thinking straight? I don't know anything about real estate, so I'd appreciate any advice you guys can give.
Thanks!
Edited to say that my wife has about 50k in savings, and while we're still job hunting we're hopeful for salaries around 60k each. If that matters.
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Just a note for Denver housing prices... nearly everything is going for over asking price. I'm not talking a few thousand over. More like 10-30k over asking price. Best of luck if that's what you'd like to do.
I'm hoping prices are in a bubble because they've been going up faster than I can save for a downpayment. Its sickening to see places go for 100k more than they were sold for only 1-2 years prior with no upgrades since. I've only been really looking at downtown Denver and the immediate neighborhoods across I25. Suburbs may be a different story.
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I'm hoping to leave the Denver area in the next year or two, so I'm hoping the bubble doesn't burst until then. We bought a fixer upper in Aurora and are hoping to take advantage of increased equity through both market inflation and improvements we are making.
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If you are planning on staying put for at least 5 years, consider buying. You will need a strong downpayment and credit, since you will be competing with buyers who are coming in with cash and/or the means to complete a deal even if the appraisal falls short of the contract price. While the market has moved up here, it is still a bargain compared to a lot of competing markets (NYC, Boston, San Francisco, Southern California, Chicago, etc.) especially when you factor in how absurdly low property taxes are. The caveat is that a lot of this is driven by low mortgage rates. Will they go up? Everyone has been waiting for that for years, no clue when or if it will happen. If it does, expect the market to slow considerably. That is a long-winded way of saying that if you are buying a home for the long term, great. If not, you missed the lows and be prepared to take a haircut if you sell sooner rather than later.
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A bubble maybe... But it could also be like San Francisco 20+ years ago where everyone thought it would burst but it just kept growing and now even if it devalues somewhat, people who bought when there was a suspected bubble will be ahead.
That being said, there are some value properties in neighborhoods that are turning around. But when I say value properties, I mean low $300ks not sub-200k, like you might see in midwest, rust belt, and the South. These "value properties" probably need a fair amount of work on exterior, landscaping, and kitchen; so you would need to factor that in.
I am happy we have our house that was purchased many years ago. We have a ton of equity and I am throwing some sweat equity into it. I hope to hold onto it forever, even if we move out of Denver, because the rent to mortgage rate basically guarantees cash flow.
It is definitely a gamble buying in Denver right now. The other thing to keep in mind is that rents are at all time highs and rising like crazy so renting may not be that safe either...
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It is definitely a gamble buying in Denver right now. The other thing to keep in mind is that rents are at all time highs and rising like crazy so renting may not be that safe either...
Yeah, this is kind of how I'm leaning right now -- getting a sort-of high mortgage payment and an opportunity to fix a place up, rather than a definitely-high rent payment and nothing to show for it down the road.
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I first bought in Denver in 2008, about 2 months before the housing crash. Even through the crash, my property retained its original purchase value. Since purchasing, values have increased steadily year over year, insanely big over the past two. To be fair, this was in the Highlands, arguably Denver's most buzzed/hyped neighborhood.
While I do think there will be a "correction" (hopefully not a bubble/crash again), the lack of inventory and huge increase in jobs point to values increasing over the next couple years.
From what I understand, it's still cheaper to buy in Denver than it is to rent. I don't see that changing anytime soon. In that case, I'd recommend you save like crazy and buy when you find the right place.
Tough technically not "Denver", I'd check out Glendale. A lot of exciting development going on there and still decent prices. More condos than houses, however. There are still some great houses/prices to be had in Wheat Ridge and Edgewater as well.
Good luck. Feel free to PM me for more insight, I'm in Denver native.
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Thanks M_K!
Your story is encouraging -- I think we are leaning towards buying as quickly as possible, though with only two months left on our lease I think we'll have to rent at least one more time before it can happen. But in general it seems like buying is the answer, even though it's expensive.
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Tough technically not "Denver", I'd check out Glendale. A lot of exciting development going on there
I hear the brand new Shotgun Willy's is quite spectacular...
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I'm up in Fort Collins. From our house buying experience, winter is definitely an easier time. We started looking just before Thanksgiving 2012, we found a house by Christmas, and closed Feb 1 2013. We had plenty of houses to look at, and while we did have sort of a crowd of people on Saturdays all trickling in and out of the same houses, we offered under asking price on a house we love, after a week of thinking about it, and still were accepted.
Conversely, a few different friends bought in Summer 2013. One of our friends put in a backup offer on a house (higher than asking price, and within 30 minutes of looking at it), and only got the house because the initial offer fell through. His realtor called him at like 6:30 am, said "Their offer fell through! Come meet me at the house so you can tell them you have cash!", and he put in his offer again by 8 am. My other friends had similar experiences of having to put in an offer literally as soon as you walked through a house you like.
I'm sure the market has changed since then, and housing/apartment vacancy rates in northern Colorado are a little ridiculous (<2% around campus in FoCo), but if nothing else, rent a little longer and look for a house this winter. You might have a slightly easier time of it. Good luck!