Are we in over our heads with trying to buy?

[takemewest]

New to this forum, so my husband and I could use a reality check if necessary about our current situation. The big picture:

The house:
We bought a house in September for $224k with $20k down. Last month, we were BOTH offered dream jobs in another state, closer to family. Couldn't say no. So, we realize we're going to lose most of our down payment selling this place to move.

The finances:
1. We aren't expected anything back from the house sale, and we'll be making around $95k combined income in our new jobs, which start next month.
2. We have no debt other than the house that we're selling (which is financed via a VA loan).
3. We have $20,000 in an emergency fund.
4. We have $9,000 in a moving fund.
5. We have $32k in a TSP, $73k in a Roth IRA, and $5k in a trad. IRA

The question:
Is it crazy to try to buy again right away? We don't have the typical buyers remorse with our current situation because we loved it, love the city, and expected to stay (because who really gets TWO dream job offers in the same place, ever?!). So this situation was never on our radar, and what can you do? We're trying not to beat ourselves up over it. At 31 years old, we feel we have time to recover from this.

 But, since we're moving to a place with ideal work and family situation, we plan to stay awhile and are considering buying right away. Is this idiotic? The logistics of doing this so fas (versus, say, renting for a year), bring up the following hurdles:

1. We won't have enough for 20% down payment (which we'd pull from our e-fund)
2. It will take time to get our VA loan eligibility back to finance the other house, so that's not an option unless we want to be drifters for a few months while things shake out
3. Selling and buying in such a timeframe sounds like a nightmare
4. Renting, however, will likely be more expensive to the tune of $200 more per month than it would be to buy a similar house.
5. We'd still be able to save quite significantly if we rented for a year and would be in a much better position with a down payment, but we're afraid of the lost investment potential for a year (and the market improving in a year, pricing us out of some homes).
6. Renting short term isn't an option with our jobs--it's buy now, or rent for a year because of significant travel and other job duties.

Now that I spell it out, it seems clear that renting for a year is the best option, but am I missing something? Thanks for the honest feedback.

[Beaker]

So the only downsides to renting are that it might cost you $200/mo more, and the market might go up and houses cost you more next year.

Those downsides aren't even certain. Are you sure that renting will cost more once you factor in maintenance, opportunity cost, etc? It's pretty common for renting to be cheaper. It's also possible that the housing market tanks over the next year and you can buy for less than it costs now. Do you know enough about the local economy and housing market to know which is more likely?

Plus the standard warning about buying in a new area - if you don't know the area you're pretty likely to buy in a suboptimal place just because you don't know any better.

That seems like a pretty clear case for renting.

[Another Reader]

I'm surprised you did not learn anything from your last purchase, where you are going to lose your entire down payment in selling costs.  At this stage in your careers, you clearly need to be mobile, as demonstrated by the unexpected move you are making now.  In your shoes, I would rent.  And I would rent something inexpensive, as you will be traveling and too busy with your jobs to maintain a house.  Wait to buy until you are sure you will be settled for a minimum of 5 years.  Save up the down payment and wait at least a year after you think you are settled before buying, or you could very well lose another down payment.

[WerKater]

4. Renting, however, will likely be more expensive to the tune of $200 more per month than it would be to buy a similar house.

Have you actually done the math on this, using real-life assumptions? Meaning, have you compared an actual example of a house that you could rent with an actual example of one you could buy, using a mortgage that you could actually get? In the end, this is largely a game of numbers. You have no way of predicting whether house prices will decrease or increase, so I would not worry about that.
I have no idea what VA loan is but if it is a loan that is somehow cheaper than a regular one, it would make even more sense to rent for now. You should also explicitly compare all three situations: rent forever, buy new house now (regular loan) or rent for a year or two and then buy a house (VA loan).

[takemewest]

Good points, Beaker. Our concerns are definitely not necessarily guaranteed. We are both from the city and visit often, so we are well aware of the places we'd want to buy, the best parts of town, etc. But the things we perceive to be concerns with renting might not actually materialize.

And I take your point, Another Reader. Our careers actually aren't as mobile as they sound. We both work in academia/higher ed (now), and the only reason we moved last year was because my husband separated from the military, so we followed my job for once :). This year my husband hasn't been working, so finding these two jobs at the same university is actually quite rare, and not something we expect to happy again. That, and it's in Colorado, which is the state we've always hoped to someday return to. That someday just came much sooner than we expected, so in that sense, the "mobility" isn't at play as much as it sounds. But still, like I said, point taken, especially on the maintenance part. I expect the travel to die down in a year after a research contract is up, but that could be a biggie reason to rent.

As for the real-life rental market, we have run those numbers with actual scenarios, and the $200 plus is pretty accurate for wanting to live close to our jobs.

[Another Reader]

Is your or your spouse's employment tied to the research contract?  Lots of research jobs at university are contract-dependent and I would be extremely cautious if mine or my spouse's were governed by a research contract. Unless I were sure I had nailed down permanent employment, I would not buy a house, no matter how much you like Colorado.

[takemewest]

Nope, the research is a free-lance gig, in addition to my job. Both our jobs contracts are as stable as things get these days.

[Beaker]

Colorado is an interesting place these days, especially the Denver area. Are you landing near there?

Short version: rents have been going up very fast, circa 9% per year. House prices have also been going up very fast in many places. Everyone just got their new tax assessments, and they're pretty much all up ~30% from the prior assessment two years ago.

All that conspires to mean there's a *lot* of construction going on, which might lead to an overshoot & crash in a few years. Or maybe not, if immigration continues to run at a breakneck pace. Prognostication is a tricky business.

[zephyr911]

Renting short term isn't an option with our jobs--it's buy now, or rent for a year because of significant travel and other job duties.

What's the difference between moving again in 3 or 6 months, and 12? Are your duties going to change?
If it were me, I'd get on Craigslist and try to hustle for a deal... find a cheap shitty house and suck it up for 6 months, make a deal with a landlord (do some improvements in exchange for flexibility on lease terms, etc). Do Not rush into buying in a market you're not familiar with, while short on capital. Danger Danger Danger. But don't let yourself get locked in for a year based on bad assumptions either.

[takemewest]

Tried to update earlier, but it didn't work, so here goes:

We did some more sleuthing and networking, and it turns out we have friends with a rental property that's vacant while they do some work. So, they'll let us rent it month to month and under market rate for as long as we'd like. Win win!

Thanks for the feedback, everyone. I think we always knew renting was the right choice but got swayed by all the family/friend voices about "the market never being better for buyers." We feel much calmer and more settled about renting, so I think it's absolutely the way to go.

[thedayisbrave]

Sounds like the closest thing to a perfect solution as you can get.  Good work!!