House price vs. commute

[secondcor521]

Hi all.

My DS26 is a soon-to-be first time home buyer.  He has a good college degree and a good first time job.  No debt, good credit, decent income.  Living at home, maxxing out 401(k) and ESPP and Roth IRA, and saving 99.9% of the rest of his take home after tax into his down payment fund.

He does not have a drivers license but may choose to get one soon.  He is very much in favor of EVs.  Pretty much refuses to buy a regular ICE.  A hybrid might be acceptable.

As a consequence of the above, he wants to live within walking distance of his employer.  However, the houses around his employer go for about $300/sqft because there are few houses within walking distance, and a very small percentage of those are going up for sale at any given moment.  Much like the rest of the country.

There are pockets of housing that are further than walking distance but within a reasonable commute (10-30 minutes).  These pockets of housing appear to be more affordable - equivalent houses are about $180/sqft.  There also appears to be more supply (judging by number of homes on the market) and less demand in those areas (judging by how fast they go from "new" to "pending").

How do you view the tradeoff between housing prices and commute?  Any tips / tricks / hacks in this arena?

[jeromedawg]

Hi all.

My DS26 is a soon-to-be first time home buyer.  He has a good college degree and a good first time job.  No debt, good credit, decent income.  Living at home, maxxing out 401(k) and ESPP and Roth IRA, and saving 99.9% of the rest of his take home after tax into his down payment fund.

He does not have a drivers license but may choose to get one soon.  He is very much in favor of EVs.  Pretty much refuses to buy a regular ICE.  A hybrid might be acceptable.

As a consequence of the above, he wants to live within walking distance of his employer.  However, the houses around his employer go for about $300/sqft because there are few houses within walking distance, and a very small percentage of those are going up for sale at any given moment.  Much like the rest of the country.

There are pockets of housing that are further than walking distance but within a reasonable commute (10-30 minutes).  These pockets of housing appear to be more affordable - equivalent houses are about $180/sqft.  There also appears to be more supply (judging by number of homes on the market) and less demand in those areas (judging by how fast they go from "new" to "pending").

How do you view the tradeoff between housing prices and commute?  Any tips / tricks / hacks in this arena?

How is the public transport in his area? Maybe taking the bus/train and walking between is a good trade-off? Has he considered biking or running into work? It sounds like his work is *butt-in-seat* 5 days a week? Are there amenities/shopping centers/etc close to even the homes that are cheaper that would be convenient whether walking, biking or driving?

[nereo]

Seems like a good time to review this:
https://lifehacker.com/the-true-cost-of-commuting-you-could-buy-a-house-price-5855550

[SunnyDays]

A lot depends on the kind of house 300K versus 180K buys, which of those kinds of houses are more suitable (given ongoing costs, neighbourhood demographics, and your son’s likes/dislikes).  It also depends on what the commute is like - traffic density is just as important as length of time it takes.

If the more expensive houses are more desirable overall, roommates can really keep the cost down.  Whether that is worth it to him to have a walkable distance, only he can say.  There are also the options of biking or carpooling from further away.  Or public transit if that’s an option.

You would need to crunch all the numbers for various scenarios if the decision is just a matter of mathematics, but usually there are other factors that come into play, so the value of spending more or spending less on housing has to be calculated too.

Also, if this isn’t going to be a long term job, then proximity to it is less important in the long run.

Good luck making a decision.

[Metalcat]

Also, would a 300K home put him under financial stress?

The lower stress of having no commute disappears pretty quick under the added stress of carrying too high a debt load. He'll have to calculate what that monthly cash flow difference would mean in terms of quality of life.

If it were me, I would try renting in the further location before committing to buying there if that's what I was seriously considering.

[secondcor521]

Replies:

In general, the prices quoted in the OP were *per sqft*, not house prices in kilobucks.  Sorry for the confusion.

@jeromedawg, he works 12 hour shifts 3 days or 4 days per week.  Public transport is nonexistent.  He owns an electric bike that he could use, but not really in the winter.  Amenities as far as he is concerned are probably equal regardless of house location - he really just needs a grocery store, maybe a gas station, and those are available in any of the prospective areas.

@nereo, it turns out that the $16K per mile from work is about the gradient I'm seeing.  There's a lot going on with the numbers in that infographic, which I won't get into.  Right now the minimum distance from work he might end up would be 2 miles, and the furthest would be about 10 miles.

@SunnyDays, probably hoping it's a longer term job (5 to 10 years).  Roommates are definitely an option for him to consider.  Again, it's not just the raw prices of the house, it's the price per square foot.  So a 2/2 1000 sqft condo might be $300K within walking distance or $225K five miles away.

@Malcat, not really.  It sort of depends on how "house poor" he wants to be for a couple of years.  but he can afford it pretty easily as long as he keeps his job.  Good thought about renting as a trial.

[PMJL34]

I bike to my office so take my 2cents with a grain of salt if you wish.

Given the information thus far, I fully support your son wanting to live as close as possible to his job.

It sounds like your son would be happier knowing that he walks to work instead of polluting the earth with a car.

Even if homes closer to city center/work are more expensive, if he needs to sell, it will be a higher sell price. Plus he can afford it.

Its a win win for your son.

[SunnyDays]

So even the closest house would be 2 miles from work?  That's a long walk, especially before and after 12 hour days.  And in the winter.  To see if it's sustainable, maybe he could get a ride to/from that distance and walk it for a while to see how he feels about it.  But if he has no car at all, he would be walking/biking for every errand all the time, year round.  Is he up for that?

[secondcor521]

So even the closest house would be 2 miles from work?  That's a long walk, especially before and after 12 hour days.  And in the winter.  To see if it's sustainable, maybe he could get a ride to/from that distance and walk it for a while to see how he feels about it.  But if he has no car at all, he would be walking/biking for every errand all the time, year round.  Is he up for that?

Yeah, probably about that far.

He's wanting a place on his own, and I think the practicality of going *everywhere* on the e-bike is striking him as not realistic in the long term.  So he's been talking about a car more lately, which would probably start off as a supplementary form of transportation, and depending on how he ends up thinking about it, could become his main transport.

[curlyfry]

I'd choose the closer place hands down! Such an amazing lifestyle to be close to work.

For 9 years I lived 1 km (5 minute bike /10min walk) from work & it was amazing.

1 year ago I switched to a new job 20min bike ride away (but what I didn't realize is that 20min bike ride actually takes 40min each way -  adding in time for changing clothes, remembering all the things, locking my items up etc.   (or stressing about parking)

That ease of just cruising to work nearby on foot is priceless!   Sounds like it will always be worth more as well so good investment

[PGSD]

Assuming his job is fairly secure (and he likes it), pay the $ and live close to work (are there other similar companies nearby in case he's laid off?). While he might want to live alone, he should consider buying at least a 2/2 so he could get a roommate if he needed one to make ends meet if things get tough (or, to help the first few years).

Depending on your area, a house with a livable basement with outside access could work very well for a non-intrusive rental. Heck, he could rent the basement out AND a room (or two) in the house and really do well financially. That extra income would also allow him to buy in a better location (the three top things in real estate). Then he can reduce the number of roommates as his career ($) and life (wife/partner) advances.

Pay attention to schools. He might not need them now but future kids (or buyers with kids) will want good schools. Location, location, location.

If he's unsure about locations, he might try renting for a year to get the feel of a neighborhood.

The market is pretty ridiculous everywhere right now so I'd be real tempted to wait a year or two as I think we'll see a correction soon. Mania is the hallmark of a market top...
 

 

[windytrail]

Buy the condo closest to work or rent. How are the rent prices in that area compared to buying a condo?

You can use the price-to-rent ratio which is, [available home price / (available rent * 12)]

Trulia established thresholds for the ratios as follows: a price-to-rent ratio of 1 to 15 indicates it is much better to buy than rent; a price-to-rent ratio of 16 to 20 indicates it is typically better to rent than buy, and a price-to-rent ratio of 21 or more indicates it is much better to rent than buy.

For example, I am currently in a 1/1 unit paying $1,800, and the cheapest available condo in my area with similar size is $450,000. Doing the math results in a price-to-rent ratio of 20, which suggests it's better to rent.

Also, if your son is truly interested in living in a sustainable way, please consider that suburban areas are much worse for the environment in ways that  cannot be cured by purchasing an EV. Suburban areas:
- Require many more roads and infrastructure (sewers, etc.) which is carbon intensive
- Result in loss of habitat for animals
- Use much more energy and water per capita than urban areas
- Decrease water uptake by soil and increase flooding

Furthermore, EVs still pollute our air and water from micro-particle pollution coming off tires and brake pads, which is a serious global problem (https://airqualitynews.com/2020/04/16/air-pollution-from-brake-dust-may-be-as-harmful-as-diesel-exhaust-on-immune-cells/, https://www.greencarreports.com/news/1131916_report-microplastic-pollution-from-vehicle-tires-is-a-serious-global-issue). Not to mention how the mining of heavy metals for EVs is unsustainable.