Author Topic: Is it a bad time to buy real estate?  (Read 4176 times)

Helena

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Is it a bad time to buy real estate?
« on: May 26, 2017, 08:38:20 AM »
We are looking into buying a house/townhouse in a the Chicago suburbs. Prices are high now especially in suburbs with good schools. Would you wait to see where the market goes? Rent?
« Last Edit: May 26, 2017, 08:48:51 AM by Helena »

waltworks

  • Magnum Stache
  • ******
  • Posts: 4368
Re: Is it a bad time to buy real estate?
« Reply #1 on: May 26, 2017, 08:53:51 AM »
Run some buy vs. rent scenarios? The NYT calculator is great for this and lets you input expected appreciation/inflation for both renting and buying.

I personally think we're in bubble 2.0. But I'm far from an accurate predictor of the future.

-W

bacchi

  • Walrus Stache
  • *******
  • Posts: 5133
Re: Is it a bad time to buy real estate?
« Reply #2 on: May 26, 2017, 09:30:11 AM »
"San Francisco, which in recent years had the biggest home-price gain in the U.S., was the country’s weakest market in the first quarter, with values falling for the first time since 2011."

Uh oh.

The housing market will likely decline when the economy halters. That'll happen...eventually.

Of course, lumber prices are now higher (Thanks, Trump!), and workers are scarce, and millennials, the largest demographic, are starting to purchase homes.

Who-the-fuck-knows.

apricity22

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Age: 42
Re: Is it a bad time to buy real estate?
« Reply #3 on: May 26, 2017, 11:36:26 AM »
Nobody knows for sure but I sort of get that feeling too. I've completed the NYT calculator for my situation (relocating to Denver soon) and it tells me to buy. The problem is there are a lot of undesirable homes in my price range. When a nice one comes up it has multiple offers immediately and while the less desirable ones sit there a little longer they are selling too.

My plan is to continue looking to buy something that we really like that is within the parameters we want to spend. If that doesn't happen then I suppose we will have to rent and continue looking. If it still doesn't happen we will probably decide Colorado was a bad idea and relocate somewhere where we can afford to buy something we like. My philosophy is I'm willing to chance the market going down if I'm getting a house I really like at a price I can live with. I really don't want to settle for something that I don't like because I'm driven by fear that prices will continue to go up. It would be horrible to get stuck with a home that you settled on and then have to wait out a bad market.

Maybe you could use the same philosophy in the Chicago suburbs? Determine what you can reasonably spend. If you find something that you like and is within budget, make an offer. Don't settle for something you don't like. Don't get caught up in the market hysteria/fear and overspend on something you do like. I feel like a home purchase is a major life event that will impact you for years to come. Am I naive to think this philosophy will eventually work in a hot market?


SwordGuy

  • Walrus Stache
  • *******
  • Posts: 7357
  • Location: Fayetteville, NC
Re: Is it a bad time to buy real estate?
« Reply #4 on: May 26, 2017, 12:42:51 PM »
It depends on the location, the neighborhood, the cost, the condition, the long or short term suitability for your needs, how long you expect to stay there, how the economy goes, what the interest rates are, etc.


rubybeth

  • Handlebar Stache
  • *****
  • Posts: 1402
  • Location: Midwest
Re: Is it a bad time to buy real estate?
« Reply #5 on: May 26, 2017, 12:48:31 PM »
Nobody knows for sure but I sort of get that feeling too. I've completed the NYT calculator for my situation (relocating to Denver soon) and it tells me to buy. The problem is there are a lot of undesirable homes in my price range. When a nice one comes up it has multiple offers immediately and while the less desirable ones sit there a little longer they are selling too.

My plan is to continue looking to buy something that we really like that is within the parameters we want to spend. If that doesn't happen then I suppose we will have to rent and continue looking. If it still doesn't happen we will probably decide Colorado was a bad idea and relocate somewhere where we can afford to buy something we like. My philosophy is I'm willing to chance the market going down if I'm getting a house I really like at a price I can live with. I really don't want to settle for something that I don't like because I'm driven by fear that prices will continue to go up. It would be horrible to get stuck with a home that you settled on and then have to wait out a bad market.

Maybe you could use the same philosophy in the Chicago suburbs? Determine what you can reasonably spend. If you find something that you like and is within budget, make an offer. Don't settle for something you don't like. Don't get caught up in the market hysteria/fear and overspend on something you do like. I feel like a home purchase is a major life event that will impact you for years to come. Am I naive to think this philosophy will eventually work in a hot market?

Same boat here. Especially the part I bolded! I feel the same way. We saved up and were hoping to buy this past winter, but not a lot of good options. Now that it's almost summer, nice houses are getting listed but going quickly, but I also feel like all the people with ugly houses have heard it's a seller's market and are listing a ton of them. We have made two offers and got outbid on both, but we weren't willing to spend more just because we liked the houses--they both had issues that we were going to have to deal with and would have cost more money than just the list price. We don't want to bust our budget, might be willing to go over it a bit for the exact right house, but we are also willing to just keep renting until the right thing comes along. If it doesn't, maybe we aren't meant to buy.

apricity22

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Age: 42
Re: Is it a bad time to buy real estate?
« Reply #6 on: May 26, 2017, 01:46:50 PM »
Same boat here. Especially the part I bolded! I feel the same way. We saved up and were hoping to buy this past winter, but not a lot of good options. Now that it's almost summer, nice houses are getting listed but going quickly, but I also feel like all the people with ugly houses have heard it's a seller's market and are listing a ton of them. We have made two offers and got outbid on both, but we weren't willing to spend more just because we liked the houses--they both had issues that we were going to have to deal with and would have cost more money than just the list price. We don't want to bust our budget, might be willing to go over it a bit for the exact right house, but we are also willing to just keep renting until the right thing comes along. If it doesn't, maybe we aren't meant to buy.

Which market are you looking in?

Another thing I thought of is that if we settle on a house and it appreciates quickly we are still stuck in a house that we settled on until we sell. If we sold we would be back in the same exact situation we are in today. I suppose we could then use that equity and move to an area with more sanity but I'm looking to buy a home that I like living in not one that I just tolerate in the hopes that I can cash out someday.

englishteacheralex

  • Handlebar Stache
  • *****
  • Posts: 2474
  • Age: 41
  • Location: Honolulu, HI
Re: Is it a bad time to buy real estate?
« Reply #7 on: May 26, 2017, 02:25:48 PM »
You know, I kind of looked at buying our condo the way I look at buying a car. For cars, my question goes this way: what's the cheapest way I can meet my real transportation needs without sacrificing too much convenience? A bus pass doesn't work in our situation. Neither does a bike. My husband is decent at car repairs, so we have two ancient, high mileage compact cars, one of which is a hatchback. Their combined value is <$5k. They get the job done and don't cost us much gas.

We took the same approach to buying our place. As veteran stock investors, we know the perils of market timing. Don't get me wrong, dread about the real estate market certainly crept into our thoughts at times. We're in Honolulu; it's a really weird market. I'm enough of a crackpot to be sucked into anxiety about climate change ruining the real estate market out here, not to mention the more quotidien fears about the economy, real estate bubble 2.0, etc.

In the end, we figured we could afford something <$370k and that if we could find an acceptable 3/2 with two parking within 10 miles of work, buying at that price point would be a better deal than renting a similar place for the foreseeable future. We had the down payment, found a place that met our requirements, and bought with confidence that even if the market completely tanked, we could keep living in the place until it rebounded. No sense waiting around in a dither about whether the market would rise or fall. Might as well just jump in.

We don't really look at the place as an investment. More just the most financially efficient way to have a place to live based on our location. It's a bet we could lose. But we're ok with that, and though we'd take a hit financially if a black swan event occurred, well, that would probably be the least of our worries in that case.

apricity22

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Age: 42
Re: Is it a bad time to buy real estate?
« Reply #8 on: May 26, 2017, 03:36:30 PM »
You know, I kind of looked at buying our condo the way I look at buying a car. For cars, my question goes this way: what's the cheapest way I can meet my real transportation needs without sacrificing too much convenience? A bus pass doesn't work in our situation. Neither does a bike. My husband is decent at car repairs, so we have two ancient, high mileage compact cars, one of which is a hatchback. Their combined value is <$5k. They get the job done and don't cost us much gas.

We took the same approach to buying our place. As veteran stock investors, we know the perils of market timing. Don't get me wrong, dread about the real estate market certainly crept into our thoughts at times. We're in Honolulu; it's a really weird market. I'm enough of a crackpot to be sucked into anxiety about climate change ruining the real estate market out here, not to mention the more quotidien fears about the economy, real estate bubble 2.0, etc.

In the end, we figured we could afford something <$370k and that if we could find an acceptable 3/2 with two parking within 10 miles of work, buying at that price point would be a better deal than renting a similar place for the foreseeable future. We had the down payment, found a place that met our requirements, and bought with confidence that even if the market completely tanked, we could keep living in the place until it rebounded. No sense waiting around in a dither about whether the market would rise or fall. Might as well just jump in.

We don't really look at the place as an investment. More just the most financially efficient way to have a place to live based on our location. It's a bet we could lose. But we're ok with that, and though we'd take a hit financially if a black swan event occurred, well, that would probably be the least of our worries in that case.

Englishteacher, I couldn't agree more with the way you approached your situation and I am glad you found a place that you like and meets your needs.

It sounds like fear can work against us in two ways. Fear of not buying and missing the gains in a hot market leads you to an impulse decision and a house you don't need or like. Fear of buying because of a possible market correction leads you to pass up on finding a house you like and you keep paying somebody else's mortgage.

I think the important thing is to take control over the things that you can and not worry about the things you can't control.  I can control not buying a house bigger than we need or a place more expensive than we can afford. I can control not getting impatient and settling for something that doesn't meet my needs. I do not have any control over the real estate market so I am not going to worry about that.

YttriumNitrate

  • Handlebar Stache
  • *****
  • Posts: 1078
  • Location: Northwest Indiana
Re: Is it a bad time to buy real estate?
« Reply #9 on: May 26, 2017, 03:48:23 PM »
Well, as someone who recently purchased a house in the Chicago suburbs, the answer for me was to buy a house in the nice parts of Northwest Indiana (ie, not Gary). The way I figure it, every time property taxes in Cook county go up, my area becomes more appealing. The area I am in is still down about 25% from the peak in the late 2000s so there is a fair bit of room for appreciation.

Blindsquirrel

  • Pencil Stache
  • ****
  • Posts: 661
  • Age: 2
  • Location: Flyover country
Re: Is it a bad time to buy real estate?
« Reply #10 on: May 26, 2017, 04:29:34 PM »
  I think YN3o9 has the right idea, in almost any market, there are foreclosures and distressed properties to be had. The tax flight from Chicago will probably accelerate in the coming years.

rubybeth

  • Handlebar Stache
  • *****
  • Posts: 1402
  • Location: Midwest
Re: Is it a bad time to buy real estate?
« Reply #11 on: May 30, 2017, 12:20:38 PM »
Same boat here. Especially the part I bolded! I feel the same way. We saved up and were hoping to buy this past winter, but not a lot of good options. Now that it's almost summer, nice houses are getting listed but going quickly, but I also feel like all the people with ugly houses have heard it's a seller's market and are listing a ton of them. We have made two offers and got outbid on both, but we weren't willing to spend more just because we liked the houses--they both had issues that we were going to have to deal with and would have cost more money than just the list price. We don't want to bust our budget, might be willing to go over it a bit for the exact right house, but we are also willing to just keep renting until the right thing comes along. If it doesn't, maybe we aren't meant to buy.

Which market are you looking in?

Another thing I thought of is that if we settle on a house and it appreciates quickly we are still stuck in a house that we settled on until we sell. If we sold we would be back in the same exact situation we are in today. I suppose we could then use that equity and move to an area with more sanity but I'm looking to buy a home that I like living in not one that I just tolerate in the hopes that I can cash out someday.

Minnesota but not the Minneapolis/St. Paul area. The seller's market fever has hit our area, though. I'm now totally burned out on looking at listings and going to showings and open houses. It's totally lost its appeal. I've decided I'm going to take a break from it for at least a week, maybe more. It's been exhausting. :/

MoneyStubble25

  • 5 O'Clock Shadow
  • *
  • Posts: 13
Re: Is it a bad time to buy real estate?
« Reply #12 on: May 31, 2017, 02:12:45 PM »
I'm going through the same process now in the Chicago suburbs, looking for a moderate house, close to the metra, in a good school district. My wife and I have decided it's a good time to buy for us and are under contract for a house in Park Ridge. While prices have come up and inventory is tight in nice areas, with a few exceptions prices in the Chicago suburbs are still below what they were at the peak. Combine that with lowish interest rates, a long term ownership horizon, comfortable monthly payments below 30% of our take home and a 20% down payment, for us it made sense to buy, especially considering our other options.

We are in the city now, and rents are at an all time high and condos/homes are selling in a matter of days. We thought about staying in the city for a closer commute to work, but talk about a bubble! Millennials and younger Gen X couples are buying up 3-bedrooms at 600 - 750K. I just don't see those increasing in value, especially once millennials start having kids and need to send them to a struggling and under funded Chicago Public School District. I know there are plenty of good schools and teacher in CPS, but it can be a struggle to navigate the system. Demographics don't support another cohort of young buyers coming in either, the generation behind the millennials is actually smaller, and I expect the city's selling and building boom to pop in the next 5 to 10 years.

I agree the Cook County property taxes are scary...but what are the options? Either pay the high property taxes in the burbs or pay high rent prices, high home prices, and possible private school tuition in the city. I didn't even mention the surge in property crime all over the city. Maybe NW Indiana is an option for some, but we really don't want to commute 2+ hours each way to our jobs in the loop. Salaries are still high in Chicago, often competitive with cities with much higher COL like NY, SF, and LA. I've kicked around the idea of going to a smaller city, but our job prospects are not as good. Definitely something to explore when we get closer to FIRE.

There's a chance prices could come down a bit as taxes and interest rates go up but that will likely be a wash on your monthly payment. Also, while there's a lot of press about Chicago's population declining, much of that has impacted low income areas while many of the "nicer" areas' population has increased. Combine that with an overall lack of open land to build more single family homes due to the cities age and natural barriers (ie-Lake Michigan), and I just don't see prices decreasing all that much for properties in the right locations over the next ten years or so.

patchyfacialhair

  • Handlebar Stache
  • *****
  • Posts: 1113
  • Age: 31
Re: Is it a bad time to buy real estate?
« Reply #13 on: June 02, 2017, 12:24:38 PM »
We bought in February because we plan to stay in our city, and in this house, for at least 20-25 years, possibly til we die. We're expecting our first child any day now which prompted the move in the first place. All this despite prices having increased dramatically over the last few years.

Worst case scenario: we both lose our jobs and can't recover, we burn through savings, and have to short sell the house and/or foreclose in a down market. While it would be a possibly traumatic experience, as long as we have family and each other there are worse things that can happen. That's why I'm not too concerned about the market doing weird things like it is now.


Larsg

  • Stubble
  • **
  • Posts: 127
Re: Is it a bad time to buy real estate?
« Reply #14 on: June 03, 2017, 01:10:02 AM »
Make sure you factor in the HOA's for any development or condo. They only go one way which is "Up" and restrictions are  impossible to negotiate. In no time, you are paying a car payment to monthly maintenance fees that you cannot control, negotiate down or get back. Lots of rationalization about how it saves time, how you hate cleaning gutters, yard work and so on but again, a car payment for an HOA that only goes up. There are also special assessments that you have to pay. For example, when I was in a Chicago condo that I loved (Assessments started out at 250, within five years, they were at 400+), and every couple of years there came an overall building maintenance issue that required special and expensive assessments like replacing all windows that had been installed before 19xx with a special assessment of $900 for that year. Also, if the economy tanks and foreclosures happen in your building or development, all of the remaining buyers have to absorb the maintenance expenses until the banks take ownership which can be up to 1.5 years for each unit. We eventually moved out and made the second mistake of buying into a development because we thought it was the only thing we could afford. What a terrible mistake and never again. I have posted out here before after two very hard lessons from my youth - NO HOA's...NO DEVELOPMENTS. You can never get that money back and you can do much better with some elbow grease. If you have kids...put them to work for their allowance around the house and yard. It's a great way to teach them about money, investing, responsibility, etc. Good luck.