Buying in a crazy market?

[easternblockbabe]

Hi Clever Mustachians,

The area we live in (Boston) has extremely high real estate costs and they have been going up-up-up for the past 5 years or so. Our family of 3 (daughter starts Middle school this fall) owns a 925-sf two-bedroom one-bathroom condo, and we would love to upgrade to a single family.  Living with the third set of neighbors with screaming toddlers in the unit above us is wearing our stoicism thin!

We live in a popular town that has high demand and low offerings for real estate, particularly in a Mustachian's price range.  $600k  is considered entry level home!!! Surrounding towns are even worse; and to get a decent priced home we'd have to move even further from work (my commute on combo commuter train, subway, and walk is already about 1 hour each way).  Houses get snapped up after the first showing with bidding wars going; and contractors pay cash for the slightly cheaper fixer-uppers; so our chances of buying a decent home for less that $600,000 are not that great.

Should we sell our condo first (possibly netting $180 - $200k) and then hope and pray on scoring a single before we close the sale on the condo; or should we buy a single first with 10% down payment and then sell the condo, adding the net proceeds to the mortgage principal?  The risk of not selling our condo is in my mind much lower than the risk of not being able to buy a single...  but our realtor advises us differently.  I'd hate to lose our condo and have to settle for a crappy home just because the timing was not right.

Are we being crazy for even trying?  Does anyone have tips on buying in such an overheated market?  Should we sit and wait for the bubble to burst (it has happened), or should we move somewhere else  - Longmont, CO comes to mind ;-)

I hope you guys could  give me some mustachian advice, encouragement, and perhaps tough love.

[GuitarStv]

It's a tough choice to make when considering a home in an expensive market (trust me, I own a home in Toronto).

First, you have to decide if your market is really overheated or not.  Just because prices are high doesn't mean that they're overpriced.  Look at demand, ease of access to financing, historical pricing, future population growth, crime statistics, etc.

Next, check what the price of renting a place similar to what you're considering buying is.  It may well work out that renting makes more sense in an overheated market situation.

Finally, before you buy you need to plan out exactly what's important to you.  Have you lived with a long commute before?  It can be pretty miserable.  How many years will purchasing this home set you back on the FI path?  What happens to your cash flow situation if you lose your job?  Is there similar work that you could find near where you're thinking of buying?

[Dali had a wicked stache]

I don't know what you do for a living or how critical your current location is to your lifestyle, but have you considered moving? You might be surprised what amenities can be had with a single family home if you look farther afield.

I was surprised to find all that I did in Northwest Arkansas, but I would be happy to tell you more if you wish. Until a few years ago I didn't give Arkansas the second thought and I grew up 20 minutes north of the border!

At the very least I suggest a road trip (screw planes) that covers lots of ground. Do the pacific Northwest, New England, The old South. Cover some ground. When you see an area that captures you heart, open up the realty app on your phone and check the median home price. Even if the trip simply reaffirms that you are already living in the place of your dreams it will be worth it. Trust me.

[easternblockbabe]

That advice sounds great - I always check the Zillow / Realtor apps whenever we travel.  Finding a job though may be a challenge- both me and my husband are considered "mature workers" (I'm in my late 40s, hes over 50) and age discrimination is real. 

We should definitely try to do a few longer road trips and perhaps line up some informational interviews where we go.

[ysette9]

Since you only mention the noise being an issue with you and you own the condo, could you cough up some money to do remodeling and sound proof the heck out of your place instead? With a child in school combined with an expensive(-ish) housing market, I would advise you to think long and hard about what you really want. Sit down and write up a list of needs, wants, and desirements and talk about them together. We've been through that thought exercise a few times and it has always been beneficial to wait and reflect, no matter how much my impulsive nature wants to jump on something *now*.

[Dali had a wicked stache]

Not to mention, your retirement savings can go a lot longer in some parts of the country than others. If you're healthy and fit a little home renovation may still be in your wheelhouse - I helped my grandfather build his current home when he was 65 and he did most of the work. Peoples' capabilities will obviously vary later in life, so it may pay to investigate average hired labor costs when you travel as well.

[waltworks]

I'd look hard at moving.

If not, I'd look hard at dealing with a year or two of toddler noise, they'll grow out of it and you'll have saved a ton of money.

-W

[Landlady]

You could try looking for a duplex in which your family occupies one half while renting the other. This would get you more house and your renter could pay your mortgage for you since the Boston rental market is hot.

[Dali had a wicked stache]

The planning commisioner of Palo Alto gets it:

http://www.zerohedge.com/news/2016-08-12/friday-humor-palo-alto-planning-commissioner-quits-due-high-cost-housing

[Dali had a wicked stache]

Here is a new term I discovered: Marginal Buyer

These actors seem to play a central role in pricing on the markets, but they have a dark side. This article does a good job highlighting who today's marginal buyers are and why they matter.

http://www.peakprosperity.com/blog/100798/marginal-buyer-holds-pin-pops-every-asset-bubble

[clarkfan1979]

The planning commisioner of Palo Alto gets it:

http://www.zerohedge.com/news/2016-08-12/friday-humor-palo-alto-planning-commissioner-quits-due-high-cost-housing

Interesting article. My only question is about the graph. In a really expensive market, how is it possible for the median house price to be higher than the mean house price? Isn't it supposed to be the other way around?

[fishnfool]

The planning commisioner of Palo Alto gets it:

http://www.zerohedge.com/news/2016-08-12/friday-humor-palo-alto-planning-commissioner-quits-due-high-cost-housing

Interesting article. My only question is about the graph. In a really expensive market, how is it possible for the median house price to be higher than the mean house price? Isn't it supposed to be the other way around?

I can only guess that it's because homes are selling for more than asking price. Which is why this housing market appears to be once again forming a bubble that is going to pop at some point.

I enjoyed the article about marginal buyers and how these bubbles start deflating.  But in our local housing market there is still a strong market of supply vs demand. I really think the so called "housing bubble" is more related to locality this time around and will be more affected by the local economy,  jobs, rents, housing demand etc.

But regardless it's a better time to be selling vs buying right now. So you really have to be paying attention to possibly overpaying in a particular location right now even though the current  interest rates are very attractive.

[former player]

The first big thing you need to do is get top dollar for your condo.  So work out the best way to do that.  Once you've got a big price for the condo, you have more options.

If you are buying in an expensive market most of the cost of the property lies in the plot rather than the building.  So look for a good plot/position in your desired location because that's where your money is mostly going: everything about the house can be changed, almost nothing about the plot can be.

[fishnfool]

OP, I would be very hesitant on buying in the Boston real estate right now. But it would be a great time to get maximum dollars out of selling your condo and renting until your ready to make a move out of the area.

good info in here...http://bostonbubble.com/forums/