New Home Purchase

How is this climbing related?

Climbing the economic ladder.
A lot like a bachar ladder.
The more you work at it the stronger you get.
Or you go broke with sore elbows.

You can always try for another 15k off during the inspection period, especially with the economy on the brink of major recession. I bet the seller really wants the deal to go through.

As mentioned realtors will tell you buy now. They want their 3% of sales price.

I’m a professional in that I own 6 investment properties and have done really well with real estate. Part luck and part making good decisions. Bought my first house in 2003 when prices were on their way up. In 2010 I bought my current, much nicer home on acreage at the bottom of the market when prices were at their lowest. It’s has gone in value up a LOT. I Rented my first house out, waited for prices to go up, and then sold it in 2017 for almost double what I paid. I’m keeping 5 of my investment properties because they are in markets that don’t fluctuate much. The 6th I’m putting in the market because it’s in a place that could see significant declines.  I’m not putting my current home on the market because even though I could make a lot of tax free profit if I sold it I’d still need a place to live, my payments and taxes are low, and I love it.

Chances are you’ll either save money or get a lot more for your money if you wait a few months.

If there’s any way you can split the house and rent part of it out, or put a secondary unit on the property and rent that you can get a big part of your mortgage paid by someone else.

I would definitely wait it out.  The bottom is about to fall out of the economy & the housing market.  That is my prediction. The COV-19 pandemic will spawn an economic crisis.  The CARE Act is the largest upward transfer in the history of the world.  We should be ready to burn our congressional representatives at the stake for passing this bill.  This includes Progressive leaders (like Bernie Sanders & AOC) who called this bill shameful but then voted for it.  We are getting crumbs, while large corporations get the lions share with minimal oversight.  Sanders should have put a hold on this bill & demanded for what he already said was needed:  Universal Basic Income payments of $2,000 per month, Medicare For All & more.  Hospitals only get $160 billion of the $4-6 trillion bailout.  This bill provides bailout money for the cruise industry.  This is an industry that doesn't register a US corporation in order to avoid paying taxes & hire low wage foreign workers.

So, after months of people not being able work, there will likely be many foreclosures.  Any moratorium on rent or mortgage payments will be temporary.  The $1,200 check for everyone is a joke.    Housing prices have reached an all time high.  Wait for few months & homes may be super cheap.  I hate the thought of buying a home that someone lost due to economic hardship of this pandemic.  If you buy a home now, you may end up buying a home for much more than its soon to be lower value.

Good information

dave custer wrote: If you wait a year or two for 2 million boomers & older to perish from Covid-19 and for their estates to emerge from probate, I predict you'll find some pretty good deals...

No lie detected there.

Wife and I were ready to buy before this madness started. We are putting it on hold and keeping our savings account where it is given all the uncertainty. Truth is the economy was never as good as we thought it was. Too much debt and adding another 2T isn’t gonna help. If you really wanna learn economics. I recommend you listen to Thomas Sowell and Peter Schiff. Good luck to ya!

Real estate markets typically lag behind the rest of the economy 6-8months since it is less liquid, but Denver has a strong housing market and wasn’t affected in 2008 as hard as most of the country. South metro like Littleton, Highlands Ranch and Castle Rock we’re hardly affected at all. Now I would say that the current situation won’t be as long of a downturn and could easily recover quickly too, but it may not who’s to say. Some people were able to get 2.5%-3.0% a couple weeks back which is phenomenal and if you can get a rate under 3.25% and your down payment wasn’t in an investment account I’d buy now. Some mortgage lenders have a 2-4 month wait because they’ve gotten so busy.

If you’re looking to buy in the next year I really don’t see it changing enough to make a significant difference price wise but, if a lot of these people who were laid off aren’t able to find work again they may sell to downsize or find job in another market so maybe we will see more inventory in a few months. I wouldn’t be surprised if a lot of new build communities slow down construction or hold out on future phases. New builds likely will come down in price somewhat, these are typically the first to be affected in housing, as are mountain towns like Breckenridge, Frisco, etc. this crisis will have a very strong impact on our mountain towns that rely on tourism especially with it hitting them during the end of ski season and possibly into the summer. Personally, I don’t see this lasting too long, as in will mostly recover by end of 2020, but if housing does show an affect in 3-6 months that will be the first hint that it may be more prolonged, with new builds and tourism heavy areas being the first and hardest hit, will be a while until that will show up in markets. I predict Denver as a whole will retain values as it will still be a desirable place to live with a more robust job market than many other cities. 

If you have a lease expiring soon I think you could find some great deals on rent if AirBnB owners or investors that had renters recently move out.

TLDR: unless you have a phenomenal interest rate buy whenever you feel like it. But there is more risk now vs 3 months, 6+ months from now

Stiles wrote: I live in SW Colorado. Found a quality place l like.  10% down payment.  Cant swing 20%, unfortunately.  Here long term, first homebuyer.  

Thanks a lot for all the different insight!

Negotiated for $15k less than asking, sans realitor.

If it’s a place you really like and you have a job that isn’t going anywhere, go for it. 

If it’s a nice place and you don’t know about your job, go for it, I’ll offer you $50k less for it in 3 months. 

Stiles wrote: 
Negotiated for $15k less than asking, sans realitor.

Get a realtor.  The seller pays your agent’s fees.  Real estate markets are pretty local, but I’ve already seen anecdotal evidence that the downturn is affecting what buyers are willing to offer.  If you got the down, it’s a place you like, the rates are at historic lows and your employment is steady then I’d say most signs point to yes.

The seller pays the realtor fees out of what YOU pay for the house. 6% was fine when houses were $100K ($3k per agent) and the buyers agent drove you around, and they sellers agent did a lot of marketing. With a $500K house an agent an makes agents $15K each. Ridiculous. And buyers often find the house themselves online. The industry is ripe for disruption. And they are trying hard to maintain it. That said as a first time buyer you want someone in your court, to make sure the contract is written with your interests in mind. A discount realtor like RedFin can save you half but the other parties agent may want full commission or at least 2.5%.

I’d say most signs point to no. Only select markets won’t be hit if there’s a (likely) decrease. And even if the economy does well, things are at peaks, in most markets they don’t have room to go up and would be flat. How much does an average house cost compared to average income in your market? If it’s already maxed out it’s not going higher. 

What’s the downside or upside of waiting?

Stiles, Were in SW Colorado are you? My girlfriend and I just met with financial adviser to starting the home buying process (First time buyers) We are in Durango and the prices are as high as they will ever be. Also the inventory is complete shit... nothing in our area is on the market. 

I found a solid spot l like alot in a great location, that l'll be at for a couple of decades, at a fair price, and my job is ultra secure.

I have been renting for 17 years meow.  I am gonna go ahead and buy this house, because it will improve my quality of life significantly, and the long term will level out.

There’s a lot to be said for owning your own home meow. Once you’re in escrow you can always negotiate the price down meow. Anything you find during inspections you can negotiate over. If prices are dropping the seller will be motivated to complete the transaction meow. If you don’t they have to start over and find another buyer, it could set them back weeks or months, while prices are dropping meow. 

Just a note that from where I'm sitting, it looks like a lot of former Air BNB properties and second homes are being put on the market and they aren't moving super fast. If you're considering a location that has / had a lot of those, it's worth checking out the listings and watching them for price drops. 

Just thought I'd post something I wrote in better times that might help inform the home-buying decision for anyone out there. Even with ultra-secure income in these times, there are definite opportunity costs to consider for the rent vs buy debate. If there's any doubt whatsoever on solid income going forward, I'd give pause. FWIW, I'm a happy home owner for intangible reasons, but I'm aware of the opportunities I passed up. Hope this helps. Should I Buy a Home?

Clipping Chains wrote: Just thought I'd post something I wrote in better times that might help inform the home-buying decision for anyone out there. Even with ultra-secure income in these times, there are definite opportunity costs to consider for the rent vs buy debate. If there's any doubt whatsoever on solid income going forward, I'd give pause. FWIW, I'm a happy home owner for intangible reasons, but I'm aware of the opportunities I passed up. Hope this helps. Should I Buy a Home?

Good article that covers a lot of the factors you want to consider. However I would do the math for home investment return on my actual cash investment (down payment, repairs, interest payments, etc) not on the increase of the price of the home. Also you have to account for taxes. Mortgage interest is deductible if you itemize deductions. If you do sell a married couple can make up to $500K tax free. Among the best tax benefits available. 

For House or stock market you of course want to buy low and sell high. Right now most housing markets are still high, the stock market is low... and I expect both to go lower. Stocks before housing. 

House hacking or ADUs are awesome. I own two homes on 12 acres. The rent on the second home pays 70% of my mortgage. But I bought low so results are not typical. Of all rentals I own my return on investment on that house is by far the best. ADU = accessory dwelling unit. Many municipalities let you add them to help with the housing crunch in many areas. 

I just bought a house in Ned and paid over asking price 2 days after it went on the Market. Selling my secluded house in Lefthand Canyon very soon, open to a private sale before I list. 2bd / 2bath, 1300 sq ft on 5 acres with private mtb trail. PM me for details.

Glowering wrote:

Good article that covers a lot of the factors you want to consider. However I would do the math for home investment return on my actual cash investment (down payment, repairs, interest payments, etc) not on the increase of the price of the home. Also you have to account for taxes. Mortgage interest is deductible if you itemize deductions. If you do sell a married couple can make up to $500K tax free. Among the best tax benefits available. 

For House or stock market you of course want to buy low and sell high. Right now most housing markets are still high, the stock market is low... and I expect both to go lower. Stocks before housing. 

House hacking or ADUs are awesome. I own two homes on 12 acres. The rent on the second home pays 70% of my mortgage. But I bought low so results are not typical. Of all rentals I own my return on investment on that house is by far the best. ADU = accessory dwelling unit. Many municipalities let you add them to help with the housing crunch in many areas. 

Thanks for the feedback. I think we're talking apples and apples on the return analysis. My attempt was to refute the common assertion that "I bought for X, it's now worth X+Y, so my investment return is Z yearly appreciation". I wanted to capture all expenses (those you mentioned -- which are often ignored, forgotten, not catalogued, etc), model a perceived selling cost, and then calculate yearly return. That's why I brought my return down from a back-of-the-napkin 8% down to a paltry 2%, which isn't even keeping up with inflation. 

I haven't sold, so it's all moot for now. We were going to sell, but I guess I don't want a bunch of randoms in and out of my house right now for obvious reasons. But once you're in the market, you're in. If we sell for lower than desired, the next place will also likely be lower. Unless you hope to sell high and rent, you're likely buying the next place high too. Something about tides and boats...;)

You are absolutely correct on the taxes. I briefly considered modeling taxes, got a headache, and called it a day. However, the new 2017 tax law and associated standard deduction limits a lot of the previous homeowner benefits. Not many folks are itemizing anymore.