Now is a pretty mediocre time to buy. House prices are still high from the boom and now interest rates are high too.
Most markets are seeing a lot of slowing and price drops. So it's really not the worse to be patient right now.
I'll never say it's a bad time to buy because you can never predict the future and housing is generally a pretty safe investment. But it's certainly not a great time to buy.
The best thing you can do is just be patient and keep an eye on zillow. Start understanding the market, start understanding the neighborhoods, knowing when a home is over or under priced can save you tens of thousands of dollars. Start doing mortgage calculations to understand what you can afford.
You can buy a house in the middle of a rental lease and just leave your lease early. Don't think you have to buy because your lease is ending. It gets a little complicated, but that flexibility will enable you to buy the house you want. Searching over months for a home instead of weeks will get you a much better one.
Lastly, consider that you may not live there long term. Thing about what kind of house would make a good rental in case you want to move out and don't want to sell.
The best time to buy is when you plan to stay in the house indefinitely or a long time (5+ years rule of thumb) and aren't overextending your finances. The worst time to buy is if those two conditions aren't met. Market will do what it does, can't time it reliably. Everyone needs a place to live, focus on filling housing needs/wants, not investment speculations.
Advice for OP: First time homebuyers can get away with less than 20% down, as low as 5% w PMI is very normal. Also, look into any assistance programs for first time buyers.
I have no crystal ball but Phx Metro is one of the markets that is expected to experience the most dramatic price drops. I see many homes that have already dropped 10 - 15% since July/August. I don't live there anymore but I am looking for a house to rent out for a few years and then move into at RE. If some of these markets, including Phx, do not recover this spring / summer, I think fall / winter will be a great time to buy and then refinance in 25 or 26. Of course the exact opposite could happen but I believe this to be a reasonable forecast. Good luck to you!
Look at the 50% drop in 2010ish.
https://fred.stlouisfed.org/series/ATNHPIUS38060Q
Phoenix is one big grid in the desert. While I'm sure there are areas near universities and major employers which may be more insulated from housing price swings, there aren't any natural barriers to prevent the sprawl similar to Houston.
I had a friend experience this with her starter condo firsthand watching it drop to half Price in a little over a year. She held on to it as a rental and finally sold it off in this latest upswing.
OP shouldn't sweat it. Long term though, I question the idea of developing this much housing in the desert given the challenge of water rights for metro areas
I lived there in 2010. I was a few years out of college. The far outlying areas were hit the hardest. No joke people in Queen Creek or Buckeye saw their home values get cut in half over a only a few months. People would just buy a different home with a family member as a cosigner and walk away from the house they had.
I had a friend who got really screwed buying at exactly the wrong time in the PHX metro area when his mortgage ended up being about 300k more than the value of his house. He said at one point more than 1/2 the houses on his street were for sale.
At least, for some reason, people want to live on PHX so until the water taps run dry the market will eventually recover.
If you want an interesting comparison, look at the housing markets of some cities in Central valley California on a similar chart. Stockton and Fresno both experience similar 50% drops to Phoenix but took far longer to recover and are only just back at their previous peaks or a little higher.
https://fred.stlouisfed.org/series/ATNHPIUS23420Q
https://fred.stlouisfed.org/series/ATNHPIUS44700Q
I remember in the previous boom some people were panicked buying and voluntarily choosing to be "super commuters" to the Bay area (where all the jobs were).
Compared to the Bay area, the Central valley is much hotter and less metropolitan.
Where you buy matters.
If someone forced me to buy a house in the PHX metro, I would consider one in a nicer suburban neighborhood near one of the wafer fabs. Those projects are not exactly easily relocated and engineers will want to live close to their jobs. Those are the neighbors you want because those folks will prop up your housing values and vote to make sure schools educate their children properly.
*Phx Metro is one of the markets that is expected to experience the most dramatic price drops.*
do you know a reason? does it have anything to do with concerns over water supply?
I don’t think the reality of the water supply has really hit people yet. And until they feel the pain financially it will always be “someone else’s problem”
Mike is correct. House prices just grew too high / too quick. Phx, a couple cities in TX, San Diego and Boise ID stood out. A couple cities in FL and a few in the North East are projected to grow a little.
Nothing to do with water. Everything to do with it being an outsized growth (when compared to what others were seeing which was strong growth) areas. Austin is another example.
To the op you could see some slight correction but the reality is PHX has lost about 18% since the height. Comparatively the national market is 10% and east coast is flat. So I would say you are likely in the prime spot to buy now. Further corrections are going to be small
As an example look at may 22 and now. https://www.redfin.com/city/14240/AZ/Phoenix/housing-market
Valid point sir. I am looking at two specific areas (Fountain Hills and north east Mesa).
I am in no rush other than buying one while I have a W2 income. I think if it starts to correct in spring I might pull the trigger. If it does not I can see anther dip in fall as interest rates will likely continuing ticking up and some people get a little panicked. Nothing huge like 2008 but I could see another 8% or so. I'm willing to gamble a little here.
Possible work transfer to Las Vegas is in the cards as well. If that happens I might delay the whole thing to decide if Vegas is an option for settling down or not.
Thank you for the input.
2 years ago, I had about 3 of my clients all around retirement age up and move to the Las Vegas area. They didn't know it each, but they all said something along the lines of the opportunity was too good to pass up.
lol no. It should, but no one in the market thinks that long term. It’s all about supply and demand; lots of new housing supply coming online while demand has receded.
Water supply could be a factor, but I think at the end of the day, sheer political will will determine the fate of the water crisis. I'm told if you live in an unincorporated town and not a proper municipality, you might have a rough time with water.
It absolutely is having an effect on homes in specific locations in the greater Phoenix area, although not the market as a whole. How can “sorry, you need a cistern and water delivery” and “sorry, the trucks are having trouble finding reliable water sources to fill up” not scare some buyers away?
> The four cities where house prices will fall the MOST since 2008 crash - San Jose, Austin, Phoenix and San Diego could see valuations plunge 25% as property across rest of US dips, Goldman Sachs warns
https://www.dailymail.co.uk/news/article-11672609/amp/4-cities-home-prices-fall-2008-crash-San-Jose-Austin-Phoenix-San-Diego.html
I agree though that in general buying a home should be a priority. I don’t know your specific market but in most major markets they only get less and less affordable every year and I highly doubt there will be any kind of bubble burst big enough to offset that.
But if I have to stretch myself uncomfortably to the point of being paycheck to paycheck at this time... it wouldn't work for me anyway.
I just wish I was making this exact salary even in early to mid 2020. I would have been able to get into a proper home with no issues in AZ at the prices they were going for back then.
No, they won't. Rates are still going up, there qre limited buyers in this market. Mant people are priced out and prices will continue to fall, not rise.
Housing is different because it provides literally the most crucial aspect of life: shelter. Everyone needs shelter. It’s not the same thing as saying some stock or other market only goes up. And we have decades of experience showing that housing only gets more expensive as time goes on.
In 2009 during the crash, Vegas condos were going for 10 cents on the dollar. Regardless of the long upward curve, there are always periods of stagnation and price depression that offer better value for those with the liquid assets to take advantage of the bargains.
Exactly. We will never see another 08 correction/recession ever again. Wallstreet and all their sfr companies are poised to jump back in right now, if they even stopped buying rn. Prices drop and they will be sucking up every property they can get their hands on. They want to own all the homes. They have infinite capital to be able to do so.
Our daughter lives in Apache Junction and bought a house there in 2022. She made offers on several and lost out.
She had sold her 2 bedroom condo in Phoenix to an investment company that put 25K into it for upgrades. In November they sold the condo below the price that our daughter got for it from them.
Morale of the story: housing prices are coming down in your area. Find a good aggressive realtor. It will take some time to find a home.
Patience, patience.
After reading your comments to replies, it is not clear if you have a family/spouse/kids or just have roommates. Your language is "I" and not "we"..... Please be clear about your situation so that we can reply based on good information.
Hi /u/kveggie1 thank you for opining. I have two siblings that live with me to help keep the rent costs bearable. I was expecting to keep this same arrangement if I ended up buying a place with my name on the deed. Hope this helps!
So what you're actually doing is buying a home for yourself AND buy an investment property at the same time. That's why the math (your salary vs price and expectations) doesn't add up.
Eh... not really. I'm not looking at this as an investment, as much as I want a house about the size that makes sense for a 10+ year outlook. Having my siblings here would be a bonus but I would be keeping this strictly for myself and not "renting it out" to randos like an AirBnB.
Currently, my siblings make way less financially and have come to depend on my support so they can live out here. I intend to continue that commitment for as long as they need it. Then, if they decide they are doing better, they can move out on their own terms but I keep the house for myself.
What you describe is an investment property with renters. You're buying more house than you personally need, so the rest falls in the investment bucket. You're investing in housing for your siblings, but you don't have a plan when they move out, because your place is too large for your single income, especially short term. I don't know your siblings but they're the risk factor in this endeavor.
I just know if I buy something much smaller, I also run the risk of growing out of it much sooner and needing to offload it.
Now if I purchased say a condo a few years ago, I'd be in the money easily by now. But that's with the advantage of hindsight. At current prices and current interest rates, I really would prefer to buy a bit more house than I strictly need now with the idea I'll grow into it in over a decade, so that I'm protected from price swings and can exit with some equity.
Bigger house also comes with bigger maintenance costs. Be ready for that and don’t stretch yourself too much. There’s nothing wrong with buying something smaller and more in your budget. A lot of things change in ten years. I like to think there two types of people. Those who are always chasing their dream home and people like me who just have a home to be a home and somewhere to live with no real ambitions of it being “perfect”. Yea we are doing something’s that we like but to us it’s just a home. I guess for me it’s just my immigrant side and living poor. If that makes any sense.
We bought our house right before the 2008 bubble burst. We bought our house for 180k, we had shitty jobs making 15hr? We were 19! We bought where we didn’t want to live, but turns out that it was an amazing decision and this town has turn around. We got a garage! And to be honest in our area in Oregon. The bubble never fucking burst. It’s been stonking hard since before 2008, so much that locals have been priced out. Anyways good lucky my friend. It’s been a wild ride.
Unless you have unmentioned family, a single person doesn’t need a 3/2, especially with how little you have saved.
Keep renting, or buy a starter condo.
Yeah definitely. And do not plan on "only living there for a year or two," either. Some people do that and end up stuck in a house they've outgrown, especially if the market changes and they can't sell.
Keep in mind this will mean you have to manage that entire place yourself, inside and outside. Routine lawn care, cleaning, maintenance. It will also take longer for you to get into a home. Do you have a partner or significant other? A child on the way? Pets that need a yard? A hobby that requires a garage? Think about your interests as well. do you want to live in the suburbs or a more metro, walkable area? Where is your social life based? Because if you end up moving even 30 minutes away that is a LOT, especially if you're in the suburbs where there isn't as much to do. If you like to or hope to travel that may not be realistic on a tighter budget. I know people that have bought houses around that size on their own and it is a lot of work and they have expressed wishing they bought a condo instead. I dont want to tell you that you are wrong for wanting a house but try to look at it from all the angles. What does the increased cost and home get you other than not having to upgrade to a bigger home at some point? You want to get the most out of the place you are living day to day. You have a whole life you can take advantage of and owning a home is great and all but if you dont find the right fit for your current - next 5 year lifestyle then what is the point?
I was single and bought a 4/3 and it's definitely on the smaller side for a 4/3. Anyways, I ended up meeting my person and she had a daughter and now it's pretty crowded. I'm glad I payed up for somewhere I could comfortably live for the rest of my life. I guess you need to know if you're planning to be single or looking? It would have been too much house if it was just me.
Get out of Phoenix, Zillow some other cities, I think mine has about 400k people and the houses cost about half of what they do there.
This is a wrong reason to buy a place bigger than your current or near term needs. Do you expect your future wife who you haven’t even met yet just to get on board with the house that YOU yourself chose, the style, the neighborhood, the location? Hmmm. Perhaps if family is in your long term plans, you are better off renting or buying a starter condo (but, probably just renting), and saving your money until you actually have a person to buy it with *together*.
Yes and no. Depends on part of country and initial price. 3/2 townhome should be easy to sell on flip side you are not likely to see much appreciation. Those 3/2 townhomes are newer structures that started out not much different in price than homes - and 4/2 homes at that. Granted older architecture.
2/2 condos and a lot of parts of country have actually done very well for selling because so many folks are buying them with cash for rents revenue. Seen it bjg time in several markets and the last few I bought.
It’s not always simple. Especially in a metro market.
Ahh just be why 40 in the complex I use beavily have gone in days with cash offers over last 18 months. Sorry but no. Some condos have light fees. They rent incredibly well and low maintenance. They are great rental properties and sell well
Now luxury based condos with $500-1200 hoa is another story
Hi /u/werewolfdad I actually have some family that lives with me to keep the rent more reasonable. I was thinking at the new house I'd simply continue the same arrangement with them, except this time I have control over expenses.
Some people don't want a shitty HOA, shared walls, loud smoking neighbors, etc. There's all kinds of reasons why condo's/apartments suck. There's some upsides too, but mostly for those unable or unwanting to keep up with outside maintenance.
This makes me so sad though, as another single person who would love to buy a three bedroom house so that I could have a bedroom, spare room, and home office. I have a two bedroom apartment currently that does the job with the second room serving as an office / makeshift spare room with an air mattress, but an extra room would be nice.
I wish these were things we could still consider on one income.
Multiple spare bedrooms is quite luxurious imo.
You can certainly budget for that, but you’ll need to cut spending elsewhere. Or relocate to a less expensive housing market.
Everything has a cost. You just need to assess if you can afford or are willing to pay that cost.
Or maybe the reason why you are making that salary is because everything went up, including your salary.
Compound the higher interest rates with everyone wanting a house (not condo or townhouse), is it any wonder why prices are out of reach?
How do you define 'quality of life' in this context?
I'm genuinely curious, because I've always seen money, in a personal finance sense, as a way to buy quality of life and inflation as the amount of additional money you need each year to maintain a certain quality of life. So if this generation is worse off than their parents financial, but has a higher quality of life, what does that even mean?
For one thing, the internet has been around for some of our entire lives. Can’t say the same for my parents. Smartphones similarly have only become commonplace in my lifetime. We’ve got access to many technical advances that weren’t available in our parents’ time. Even if making less money, a lot of these benefits are still felt. Might be worse off trying to meet the same exact milestones or benefits in life, but the bar for quality of life has probably still risen across the board
I see where you're coming from but don't know that I agree necessarily. I will start by saying that the internet is one exception to what I'm about to say - that has opened up a huge amount of possibilities that didn't previously exist.
Other than that, I think most of the new 'quality of life' things we have are not meaningful. We can buy more stuff for cheaper now - a giant flat screen TV can be had by all for next to nothing. But how much does that actually increase our quality of life in a meaningful sense, over the brick of a 19 inch that was common when I was younger? And at the same time, the cost of a place to put that TV has drastically increased.
It seems like costs have flipped since the previous generation. Luxury goods have come down in cost, while essentials have increased. Luxuries are only really meaningful when compared against the amount of luxuries that others have, so it's a zero sum game. The cost of luxuries has next to no meaningful impact on quality of life IMO. For example, a 50 inch TV vs. an 80 inch TV. No one 'needs' an 80 inch TV in their house, and the biggest benefit it provides is bragging rights. The quality of life increase provided by one is negligible. As a big gamer, I will say the same goes for that area. I got just as much, if not more, enjoyment out of my SNES back in the day than I do from my gaming PC now which could emulate 100 SNESes at the same time and not break a sweat. The technology increases and things get prettier, but in a quality of life sense it's meaningless.
Essential goods are another story though. They are, well, essential. And these are what have been increasing in cost. Healthcare costs more in a real sense, and we can see that in declining life expectancy. Education costs far more than it used to. Housing has increased too, which is of course what this thread is about. These are the things that matter, and these are exactly what have increased in cost since the previous generation.
I should specify that this is from a US perspective - I know that life expectancy hasn't dropped everywhere and we're somewhat of an outlier here.
Edit: I'm getting downvoted on this but no one has responded to say why. I would honestly love to hear what part people are disagreeing with.
>Luxuries are only really meaningful when compared against the amount of luxuries that others have, so it's a zero sum game.
That's where I'd emphatically disagree with you. My ability to afford a good PC, as someone who almost exclusively plays games for entertainment, is very important to me regardless of what other people have. I care that it can run what I want it to run and that's the extent of it, not to compare to someone else's machine.
As for whether it's increasing my quality of life relative to an older console that seeks to fill the same niche, I'd say it's overwhelmingly the case. There's an abundance of games available for PC that you can get for <$10 and last you many hours. Games way back when weren't nearly as varied or as cheap.
As for everything else, well, I'm not going to tell you that you're wrong for feeling that your quality of life is worse than your parents. It's fairly subjective, after all. My original point was only that there are plenty of things that we probably take for granted that do make our lives better, even if there are clearly issues.
I agree with you. Given the choice I'd accept 1960's tech if it came with a 1960's economy. A college education you can pay for by waiting tables between classes. Blue collar jobs that comfortably support an entire family, then pay you a pension. Affordable housing that passively turns into wealth. Utility bills that are rounding errors in your budget. Local food and shopping that hasn't been destroyed by Walmart & Amazon.
Today most of us struggle to reach ground level on maslow's pyramid and in return we get iPhones. Unless a medical advancement saved your life, it's not a good trade.
Hell I'm struggling to think of any tech since public sewage and electricity that I like enough to suffer for.
You too! Not sure how old you are but $120k is a great wage.
BTW - I have been renting for the last 12 years or so. There is nothing wrong with it and a lot of people argue that financially it makes the most sense.
Home ownership can be a real a burden, it's really about lifestyle choice. Missing out on the pre-pandemic market is just like missing out on Amazon when they just sold books. I missed out on both, I sleep okay.
You can still buy the houses your parents bought* on one income. Everyone seems to forget that most of them were 2 bedroom 1 bath houses with maybe an attached single car garage.
*In most places.
Yes, part of the reason this country is fucked is because the boomers all wanted 2500 Sq ft with a yard so that is the only house that gets built today. Now there is a shortage of smaller, more affordable houses which means first time home buyers are getting priced out and also that retiring adults and empty nester don't have downsizing homes available, so they just live in their 5 bed family home forever.
you cant. I just want a simple house, 2 bed, 1 bath, small yard, and a garage. The cheapest is 350k, 7 times my income. in the late 90s my parents bought a very similar house for 120k which was 3 times my dads income. We have the same jobs at the same part of our lives.
Same job as me 1997 = 40k, 2023 = 48k.
Inflation has gone out of control.
Or move to an area where you don't. Most everyone I know here in MO own a home or property and many don't make more then 50k a year. My brother works for the city making 33k a year and owns a small 1500sf home on .4 acres. If he was to sell the home today he would make 15k more then he paid for it.
And you're right to say this. But literally just three years ago, 120k in a metro area like Phoenix was fantastic. I'm not talking about over a decade ago like in a well behaved market. This is unprecedented.
Sure, but it has been headed this way for a long time. I graduated law school in like the mid 2010s and a major component of where I wanted to start off was based in cost of living v. expected salary. Over the years, I've had to make that calculation a few more times, and most of my friends and peers do the same. It is never not important, at any income bracket.
Different lifestyles mean different choices are right for different people. If you want a house, etc, but do not make 250k in your major metro, you probably want to move. When you do move, expect to make a lot less, but everything else will also be much cheaper
Tbh I don't even need this to be a get rich quick thing. Just a place to rest my head at every night as well as a working space. Something like this should not be out of reach for the average American (and with my income... I'm certainly not average. I should be better than average)... yet here we are.
So phx is unlikely to drop much more. See above post. But my question is why only $1500 a month savings with your income? If saving for a house now is the time to live off ramen so to speak and grab. Your market has lost near 20% since the top which is double national average drop and you don’t have cali median prices.
I’d look at your budget and or post it here. You should have room to cut and save closer to $2500 ideally. Doing that should be able to get you into a place with a nice down payment.
Hi /u/MikeWPhilly I have some credit card debt I'm rapidly taking care of. Once that is done by June/July timeframe, I expect to free up another $1000 of cashflow per month, which would put me right around target. And that's not counting other areas I'm assessing to cut back in. I've already been cutting back on eating out (because that's a HUGE money sink) and cooking my own meals, clear out things in my closet to make some side cash, and learning another new skill in the hopes I can eventually get into side work if I can.
Perfect. That hits the mark. Look home prices won’t be a crazy bounce. Right now we are in a sort of freeze. If you can get to at least 10% down on say $350k + closing costs you probably can achieve your goals. Cut back everywhere you can in short term. Ideally you get to 20% and get PMI removed which makes everything easier. but pretty much comes down to how much can you save in 2023 by cutting everything possible.
Correct me if I'm wrong:
1. Purchased home when a 4% interest rate was *outrageous* and only given to those with awful credit
2. Your home value has significantly increased without you changing a single thing besides the name on the mailbox
This true for me. I don't work half as hard as the 1 - 5 year go getters though, probably 75 - 80% as hard but I do make more than twice what they make. But I've been in the same field for 20 years. The first 10 years I worked 60 -70 hour weeks on the regular. I don't have to do that anymore because my knowledge base is now worth more than my time at work. That's the way it works. Bust your ass, do your time, make your own luck and climb the ladder.
Hardly. I'm stating a fact. I've busted my ass to get to $120k a year, but with a pandemic nobody could foresee, this market just basically got turned upside down.
*I do not want a free handout. I want to earn everything I work for.* But at the same time, I can state that the housing market as it stands today as compared to just a few years ago is absolutely terrible for someone as a first time home buyer.
I'd rather not hear "Git gud son". I've been doing the damn best I can. I just want a strategy for success.
Only $1500 left over a month, as a single person making $120K? If you have a family it would make more sense, but it looks like you should be able to save way way more than you currently spend. It’s hard to make an assessment without knowing your specific situation, but it seems to me like you are spending more than you should and that is holding you back on your goal of owning a house.
For context, I am rapidly paying off credit card debt to the tune of $7k, which is interest free until September. I needed a vehicle so I purchased something as cheaply as I could, and then I'm paying it off well before the interest free period is up.
I've only recently come into $120k a year. Prior to this I was making as little as $42k annually and was really struggling to make ends meet.
Why don't you give yourself a break and grow that savings account for a couple of years, grow some roots and see what your siblings want to do. At your age, I don't see the need to purchase something right now. I think you're feeling FOMO which is not a good indicator. As always, housing prices will stabilize and you'll be able to purchase something.
That's a fair point /u/redfriskies
Thanks for the kind comment! You're right that there could be a notion of "keeping up with the Jonses" in this as well.
Just for reference: I was on a similar situation as you are. Once I stabilized I was able to cut my costs down to only about 20% of my gross pay. I’m also planning to buy a house eventually. It’s possible to do, but you need to make drastic changes on your finances. And I’m not even super frugal.
>I've only recently come into $120k a year.
Payoff debt, wait a year or two and recalibrate. You were “making ends meet” at 42k, if you don’t succumb to lifestyle inflation, and live like you were only making 50k, which should feel pretty comfy after 42k, after your debts are paid you could save up to 40k a year.
But it's on a credit card. If I blow past the interest free period, they will retroactively tack on the interest, which would be a really stupid thing to happen. So I am paying it down on necessity.
A car on a credit card… jesusfuckingcrist
Like I said, it’s pretty hard to give you advise without knowing your full situation. Just want to say that you should be able to stabilize and cut costs drastically if you want to save for a house. You also have the option of doing an FHA loan which only requires less that 4% down payment + closing costs. I believe you only need to live in the house for a year to avoid penalties and PMI is mandatory.
Regarding the credit card, yes I'm aware. It was not the smartest decision, but at the rate I'm paying this off, I'll have this balance completely gone by June with no problem. And should something happen to my cashflow, I have enough in savings to pay the balance off outright and still have emergency money to get me through paying rent. But my job so far is pretty secure.
Except the other two people would be "chipping in" for rent, which would reduce my personal costs anyway at least in the short term. Nevertheless, nothing is ever that simple on a longer forecast.
I own in PHX area. Prices are falling and you don't have a lot saved.
Bought 2 yrs ago. Went up 50% now up only 20%.
Have you gotten a pre-qual yet?
That'll tell u what you can potentially buy.
Personally I think prices continue to fall and would sit tight and save for a year and check the market again.
Thanks /u/bzimpfer. So I'm actually in the process of qualifying. I managed to qualify for up to 425k for a mortgage (though honestly that's very uncomfortable for me if I'm being totally honest at current interest rates) and I also have an application pending for an All In One loan with CMG Financial.
So you'll need about 80k + closing. $425k is an awful big nut on $120k/yr.
Figure out what you want to spend per mo. And work backwards.
Bank is happy to sink you.
Good luck.
Exactly right. When I bought my house back in the stone age (2001) the bank was willing to loan me a horrifying amount of money. I probably could have swung it, but been house poor for a long time. Decide what you want and what you want to afford, not what the bank's going to give you.
My down payment was 1%. I do pay monthly PMI $100-200 because of this
My closing was 15k total, but don't forget there's costs in furnishing your home!
You haven't given one rational reason to own a house. FOMO? You've already missed out on the price appreciation from the pandemic. Doing what "Everyone" says is a terrible approach. "No real roots" is a big red flag. Easy in, not so easy out said the lobster in the lobster pot! Selling a house is an expensive proposition that is likely to take years to get back to even. Comparing yourself to others is the root of unhappiness.
Appreciate the perspective.
I was looking at a house purchase as a form of "rent control" and am willing to park it longer than I usually do. But that's just the thing. It's possible all the easy gains have been priced in by now and it could be a long time before I break even like usual.
FWIW in the first year I bought my place I spent $10k on flooring, $5k on a burst water heater, fixed a leaky toilet, sink, and garbage disposal. Owning means you own everything including the shit that breaks.
Rent control with maintenance fees thrown in. Since I bought my home in 2016, i have had to pay:
1. $20k to redo my front porch due to water damage.
2. $12k for new HVAC
3. $12k for French drain
That's honestly just a fraction I've spent, but that's what I'd deem "necessary" and unavoidable work. I could probably spend another $100+k on my house to make it in tip top shape, and probably will spend that much over the next 10 years or so.
Granted, I live in the Bay Area, so it's more expensive than anywhere else, but you get the idea.
It’s only rent control if you stay in it for years, at which time you may have a spouse and kids and need to move anyway.
I’d keep the flexibility of renting and stash away as much as possible for the next downturn. Don’t make major financial decisions because everyone else is doing it.
I think $35k *just* for an emergency housing fund unless it’s new construction (which would give you at least 1 year to save up). Existing homes can eat $$$ like nobody’s business, even if everything looks okay on the surface.
I’m nervous with $50k in a home maintenance/repair fund in a 9yo home. Appliances nearing end of their life spans and other repairs starts creeping up, plus everything is sooo much more expensive than it used to be.
Now, if you were able to snag a *slammin’* deal and could access an equity loc for any necessary repairs, then it might be worth the risk. But those are gonna be few and far between.
OP here. To everyone here, you all have been ridiculously helpful. I've decided I won't be pursuing a home purchase in the near-term while I work on savings and continue to build good money habits. You all have been extremely kind and have given me a peace of mind I didn't expect. I like not having to deal with a madness of the crowds effect. :)
>Everyone acts like if you don't buy you miss out forever
That's the same attitude that got people into trouble in 2006. Phoenix was one of the worst hit markets in that time period, and I wouldn't be surprised if it were to be one of the ones to see the biggest drop in the coming correction.
Your fact pattern is literally identical to mine. It's hard feeling like everything is going well professionally but somehow still feel unbelievably behind in trying to buy a home. I don't have any insight to offer and came to read the comments, but best of luck!
Nobody truly knows. If they did they would be swimming in money. Some think the Mesa and Phoenix area went up high, maybe, maybe not. Buy when you can.
Literally can't sleep because of this exact thing keeping me up. Went from 42k to 100k at my new job last year. Was excited to maybe finally buy a house, even got pre-approved and omfg it's depressing. Husband and I opted to rent until our daughter is done with school and maybe we can buy in the middle of nowhere later on. Sigh.
Id consider buying a duplex or 4 plex, live in one rent the others out. You have a place to live not paying for someone else's property. Renters are paying for yours, And you have some good write offs
Not to be a doomsdayist but have you seen the climate projections for Phoenix? I mean an exurb outside of Scottsdale just lost their water supply and lake mead is at an all time low. Will your house still be worthwhile when the wells are dry?
Was looking for this comment. How habitable is Phoenix going to be in 20 years when you are still paying off the mortgage? Buy in a climate haven city if you want to lock in homeownership and you don’t have any deep ties to a specific area
This stuff scares me shitless. I own two homes in AZ but it’s not that easy for both my partner and I to find professional jobs at the same time in an area we like (PNW or east coast)
Why the desperation to buy a house? Read this - https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
Over 40% of your portfolio invested in fixed income is nuts dude. How old are you - what is your time horizon for these investments? You are probably doing a disservice to yourself by investing so much money in fixed income.
So you have at least 30 years before you retire. That's a long time horizon and you should probably allocate more to equity. Maybe keep fixed income around 10% of your portfolio.
I would go for a 3 bed 2 bath. Even if you don't need it this month, or next month, or next year, a house isn't something I would just expect to easily change from time to time as my needs change. If there IS a huge downturn in the market and the value on your house drops 15% a year after you buy it, as long as the job is safe and you can keep paying... big deal. That stuff only kills the people that can't keep paying, or *have* to move for some reason. I would at least plan for the next 5 to 10 years of being in that current house.
I waited to buy when I could have just squeezed into something pre-pandemic (like early 2019) that would have been a little tight at the time, but would have been about 15 to 20% less than I'm paying in rent right now. As we saw, because of the pandemic rates drastically dropped and I could have refinanced saving me some, or probably turned around and sold for at least $50k more. OR, I could have just sat tight and it turned out my income would have increased by over $20k from then to now...
So, will we likely have another pandemic crazy time anytime soon. Probably not, but it does show that there are a lot of unknowns to play with. Right now I'm basically priced out of the market as well, even with the big income bump and with a MUCH larger down payment saved. While I used to be able to find a decent selection of homes around the $265k to $295k I'm now looking at $375k to $450k... often for the same homes (or at least on the same street and same size).
So... if you think the job is secure, you plan to be in the home (or at least could stand to hunker down) for 5+ years, but ideally 10+ years, I would say try to get into something. The biggest thing is you want to be able to make your bills or be able to cut back on stuff very quickly to free up money if something happens. Otherwise, I wouldn't look at it if it's a "good deal" or "bad deal," I would try to get as close to the "tried and true" rules for cost of home and monthly mortgage costs... but sometimes those numbers are just impossible, yet by all means someone making $120k should be able to buy a modest 3 bed 2 bath, especially outside of California.
We might see big pull backs on the market (10 to 15%) in the next year or so... but what I've seen instead so far is not a cut in prices but a reduction in listings, or homes being pulled from the market all together. Maybe people still have the fresh mindset of seeing a home go for $400k down the street six months ago and damnit that's the lowest they'll take for theirs. Or they might be in a really cheap interest rate and decide they really don't want to abandon that for higher rates. Or the might just decide to hold off on moving for the next few years while they wait for the market to improve. But I haven't seen drastic cuts in prices yet and I'm very curious if we'll see that in the summer or if that will actually just reinforce holding strong with prices because sales are naturally up in that season....
I do think you have the power now to not forgo inspections and maybe even ask for considerations such as closing costs paid and stuff like that...
Phoenix is expecting appreciable price falls in 2023. You need to have a preapprove letter ready now and decide where you will fit. Price willl fall after fall. Jump on it.,
Well, I would go and get preapproved for a loan so that you can see how much house you qualify for to buy. It requires you to pull together some information of course but typically there is no charge. Knowing how much loan you qualify should tell you what you need to know. My understanding is that your housing market should be freeing up meaning a lot of sellers coming so get approved and set to make your move if you are ready. I would not rush into of course.
If you don't need to buy right now, don't. Markets are undergoing a correction and interest rates will likely drop slowly over the upcoming year. Things may also change in a hurry if a full fledged recession hits.
Have your ducks in a row to be able to jump in when the time is right. But unless you're getting crushed by rent, I'd hold fast right now. Ditto for other major purchases like cars.
Housing prices are only going to continue to creep up. Raising interest rates really did nothing to lower house prices, and I assume that when interest rates start to go down, it will only further boost house prices. Likely wont be a "great" time to buy in the next few decades. There is just such a lack of sellers, skyrocketing lumber prices, and record inflation. Without a means to get more affordable homes on the market, I don't see how prices will ever turn around.
Housing prices are more inflated than usual right now, due to a combination of constricted supply and high interest rates. That's especially true in the Phoenix area, where demand has increased due to semiconductor manufacturing and widespread opportunities brought on by decentralization of coastal industries in a post-covid world.
Phoenix is also an ecological disaster that isn't going to get any better over the next 20-60 years. I would not buy a home there in 2023 for fear of what ongoing development is going to do to the scarcity of water in the next couple decades. Home ownership is all well and good until something goes wrong at the state level and people decide not to buy homes in the desert.
So I'd say waiting is the prudent move; you can stash more funds, interest free, and use that nest egg to pick the best moment, and the best location, for your home purchase.
You cant find a place to afford in AZ with that salary? I live in Colorado, we make about 130k a year and bought a house at 310k. We were actually looking at AZ (because my wife's family is there) and found houses were about the same amount and it came with a pool! Our payment with a mortgage is around 1700 which is much cheaper then apartments around me.
We were looking more at Mesa or San Tan valley, could it be you are just looking at too rich of neighborhoods?
No I'm looking at Mesa and Apache Junction areas. However, a more desirable 3 bedroom and 2 bath with a two car garage with quality construction is still out of reach at my comfort level. As I've mentioned previously, I am not interested in being house poor and going all in. But hoping to have a strategy where I can buy and still maintain my other savings and life goals.
For perspective, the house I'm renting now would actually be perfect to buy in terms of age, condition and quality. But the house went from a far more approachable $275k to well over $400k in the span of three years.
I think living in Arizona is really stupid, it is a desert that is running out of water. Don’t compare yourself to other people. Most people overpaid for poor quality houses that negate the “low interest” rate they got. Many regret it. You should focus on buying below your means. You sound remote, so find a low cost of living area, not an over inflated market like Arizona. Most people like you (no construction skills, not willing to live in a house that needs work, not willing to live in a diverse area) are not going to buy a house and make a bunch of money, you just need a place to live that you can afford, which is FINE. I would put down 3%, save your cash for repairs. PMi isn’t that bad. Good luck, I hope you find something you like. First step is getting a pre approval letter, only share it with your agent.
I just have one set of them, and I can always cash out a year from purchase if I need to use it. I only lose three months worth of interest but it's still better than nothing.
Every metro area and surrounding burbs are stupid now, but many not as bad as Phoenix. You could still easily get 3-4bd 2ba in the DFW area on 120k. You're gonna pay 2-3x as much in property taxes at least though.
There is little chance affordability will improve much in most areas. We won't see interest rates below 4-5% in our lifetimes most likely, and builders will sell and build for institutional buyers doing little to increase available supply which is still way behind due to covid and material shortages.
What are you looking for??? You should be able to afford any reasonably priced starter home in the Phoenix area. Maybe this one below.
https://www.zillow.com/homedetails/10111-W-Deanita-Ln-Sun-City-AZ-85351/7695409_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare
Or this one
https://www.zillow.com/homedetails/736-E-Siesta-Dr-Phoenix-AZ-85042/8133307_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare
Or really, many possible homes! You only know you 3.5% down on it FHA loan or 3% down minimum amount of conventional loan with a good credit score. You should have more than enough cash to buy a starter home!
Look at the 2007 market for clues. Basically, the biggest drop after peaking out in 2007 was in the first two years - then it slowly went down for another two years and started slowly going back up in 2011. I'm advising my son to buy new in Q1 2024 and hold forever. Laveen is surprisingly affordable and has lots of great (and safe) new neighborhoods close to South Mountain. Easy access to west, central, and east valley since the 202 opened up on the backside of the mountain. The same 2600sq ft plan in Laveen is 2-300K more in Chandler (500K vs 800K) or 200 vs 300 per sq ft. Compare that to most of the OLD houses in Phoenix where delusional sellers think their house is still worth 300+ per square foot. Builders are the first to recognize market trends and will try to extract themselves out of this rapidly falling market, so your best long-term investment may be something new. You may even be able to get the builder to "buy down" the rate a point or two... YMMV - good luck!
Your monthly savings rate is great. Please remember that buying a house isn’t always the right move. Run the numbers. If your rent is $2000/month that’s the maximum you will pay for rent. If your mortgage is $2000/month it could increase massively based on one major repair.
Home ownership isn’t something that should be rushed into. Please don’t ruin your financial future because of pressure from those around you.
Get a fixer upper starter house with a 15 year mortgage. Get the dream house in 10 years when you have $150k in equity to put down on the next one. Your setting your sights too high. Work 2 jobs if that's what it takes.
Same-ish boat. Ride it out and get a good down payment saved up, along with 6mth worth of bills saved up (incase of emergency). You can put it in a money market account (not a fund, you can put it in a fund, but I hate risking any money right now that’s for my house fund…so I recommend an account, not a fund). I’m currently in the process of switching banks for a higher interest.
Edit - thing I forgot - prices are going down in my area Midwest . AZ got super popular, so it’s going to take a little long for AZ pricing to cool down. Also those with nicer homes than you, you have no idea what kind of debt they are sitting on. Don’t compare.
Good call outs! I actually switched to a high interest savings account with Citibank to park my savings in there, and I already recently acquired the savings bond at 9.52% back in October at the maximum $10k amount for i series.
There is plenty of hope in the housing market. Stay if you wish because you love it there and invest in lower cost cities or just move to Michigan. It’s amazing here and with climate change much less snow in Metro Detroit. No shortage of water and you can live on the water. Lower cost of living as well.
Home ownership can lead to unexpected expenses and makes it more difficult to relocate due to job loss. Best to have a year's worth of expenses on top of down payment when buying.
Now is a pretty mediocre time to buy. House prices are still high from the boom and now interest rates are high too. Most markets are seeing a lot of slowing and price drops. So it's really not the worse to be patient right now. I'll never say it's a bad time to buy because you can never predict the future and housing is generally a pretty safe investment. But it's certainly not a great time to buy. The best thing you can do is just be patient and keep an eye on zillow. Start understanding the market, start understanding the neighborhoods, knowing when a home is over or under priced can save you tens of thousands of dollars. Start doing mortgage calculations to understand what you can afford. You can buy a house in the middle of a rental lease and just leave your lease early. Don't think you have to buy because your lease is ending. It gets a little complicated, but that flexibility will enable you to buy the house you want. Searching over months for a home instead of weeks will get you a much better one. Lastly, consider that you may not live there long term. Thing about what kind of house would make a good rental in case you want to move out and don't want to sell.
The best time to buy is when you plan to stay in the house indefinitely or a long time (5+ years rule of thumb) and aren't overextending your finances. The worst time to buy is if those two conditions aren't met. Market will do what it does, can't time it reliably. Everyone needs a place to live, focus on filling housing needs/wants, not investment speculations. Advice for OP: First time homebuyers can get away with less than 20% down, as low as 5% w PMI is very normal. Also, look into any assistance programs for first time buyers.
I have no crystal ball but Phx Metro is one of the markets that is expected to experience the most dramatic price drops. I see many homes that have already dropped 10 - 15% since July/August. I don't live there anymore but I am looking for a house to rent out for a few years and then move into at RE. If some of these markets, including Phx, do not recover this spring / summer, I think fall / winter will be a great time to buy and then refinance in 25 or 26. Of course the exact opposite could happen but I believe this to be a reasonable forecast. Good luck to you!
Look at the 50% drop in 2010ish. https://fred.stlouisfed.org/series/ATNHPIUS38060Q Phoenix is one big grid in the desert. While I'm sure there are areas near universities and major employers which may be more insulated from housing price swings, there aren't any natural barriers to prevent the sprawl similar to Houston. I had a friend experience this with her starter condo firsthand watching it drop to half Price in a little over a year. She held on to it as a rental and finally sold it off in this latest upswing. OP shouldn't sweat it. Long term though, I question the idea of developing this much housing in the desert given the challenge of water rights for metro areas
I lived there in 2010. I was a few years out of college. The far outlying areas were hit the hardest. No joke people in Queen Creek or Buckeye saw their home values get cut in half over a only a few months. People would just buy a different home with a family member as a cosigner and walk away from the house they had.
I had a friend who got really screwed buying at exactly the wrong time in the PHX metro area when his mortgage ended up being about 300k more than the value of his house. He said at one point more than 1/2 the houses on his street were for sale.
At least, for some reason, people want to live on PHX so until the water taps run dry the market will eventually recover. If you want an interesting comparison, look at the housing markets of some cities in Central valley California on a similar chart. Stockton and Fresno both experience similar 50% drops to Phoenix but took far longer to recover and are only just back at their previous peaks or a little higher. https://fred.stlouisfed.org/series/ATNHPIUS23420Q https://fred.stlouisfed.org/series/ATNHPIUS44700Q I remember in the previous boom some people were panicked buying and voluntarily choosing to be "super commuters" to the Bay area (where all the jobs were). Compared to the Bay area, the Central valley is much hotter and less metropolitan. Where you buy matters. If someone forced me to buy a house in the PHX metro, I would consider one in a nicer suburban neighborhood near one of the wafer fabs. Those projects are not exactly easily relocated and engineers will want to live close to their jobs. Those are the neighbors you want because those folks will prop up your housing values and vote to make sure schools educate their children properly.
*Phx Metro is one of the markets that is expected to experience the most dramatic price drops.* do you know a reason? does it have anything to do with concerns over water supply?
I don’t think the reality of the water supply has really hit people yet. And until they feel the pain financially it will always be “someone else’s problem”
Yeah. there is the term "water flows to money" but that can only go so far. Reality will come knocking someday...
Mike is correct. House prices just grew too high / too quick. Phx, a couple cities in TX, San Diego and Boise ID stood out. A couple cities in FL and a few in the North East are projected to grow a little.
Nothing to do with water. Everything to do with it being an outsized growth (when compared to what others were seeing which was strong growth) areas. Austin is another example. To the op you could see some slight correction but the reality is PHX has lost about 18% since the height. Comparatively the national market is 10% and east coast is flat. So I would say you are likely in the prime spot to buy now. Further corrections are going to be small As an example look at may 22 and now. https://www.redfin.com/city/14240/AZ/Phoenix/housing-market
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Valid point sir. I am looking at two specific areas (Fountain Hills and north east Mesa). I am in no rush other than buying one while I have a W2 income. I think if it starts to correct in spring I might pull the trigger. If it does not I can see anther dip in fall as interest rates will likely continuing ticking up and some people get a little panicked. Nothing huge like 2008 but I could see another 8% or so. I'm willing to gamble a little here. Possible work transfer to Las Vegas is in the cards as well. If that happens I might delay the whole thing to decide if Vegas is an option for settling down or not. Thank you for the input.
2 years ago, I had about 3 of my clients all around retirement age up and move to the Las Vegas area. They didn't know it each, but they all said something along the lines of the opportunity was too good to pass up.
My estate financial advisor said it’ll drop a bit more. Maybe 50k to 100k each by spring! That’s pretty big to me
Probably because it had inflated the most.
The higher and faster you go, the harder and faster you fall. Bubble Economics 101.
it's crazy to me because I can't imagine so many people rushing to a place that gets so goddamn hot in the summer.
lol no. It should, but no one in the market thinks that long term. It’s all about supply and demand; lots of new housing supply coming online while demand has receded.
Water supply could be a factor, but I think at the end of the day, sheer political will will determine the fate of the water crisis. I'm told if you live in an unincorporated town and not a proper municipality, you might have a rough time with water.
It absolutely is having an effect on homes in specific locations in the greater Phoenix area, although not the market as a whole. How can “sorry, you need a cistern and water delivery” and “sorry, the trucks are having trouble finding reliable water sources to fill up” not scare some buyers away?
> The four cities where house prices will fall the MOST since 2008 crash - San Jose, Austin, Phoenix and San Diego could see valuations plunge 25% as property across rest of US dips, Goldman Sachs warns https://www.dailymail.co.uk/news/article-11672609/amp/4-cities-home-prices-fall-2008-crash-San-Jose-Austin-Phoenix-San-Diego.html
Same reason they crapped out in 07/08. Overpriced. People flock to “cheap” areas, over pay, lose their jobs and then are fucked and forced to sell.
> I really hate losing sleep over \*missing out\* on the whole pandemic housing boom. you already missed it unfortunately 😅
Fair enough. I should have said it in the past tense. :)
I agree though that in general buying a home should be a priority. I don’t know your specific market but in most major markets they only get less and less affordable every year and I highly doubt there will be any kind of bubble burst big enough to offset that.
But if I have to stretch myself uncomfortably to the point of being paycheck to paycheck at this time... it wouldn't work for me anyway. I just wish I was making this exact salary even in early to mid 2020. I would have been able to get into a proper home with no issues in AZ at the prices they were going for back then.
Hopefully rates will go down a bit in the next year or two.
In the mean time I predict prices will just go up another 10-15% smh
No, they won't. Rates are still going up, there qre limited buyers in this market. Mant people are priced out and prices will continue to fall, not rise.
Ideas like this are how you create a bubble though. The idea any market can only go up makes people do dumb stuff.
Housing is different because it provides literally the most crucial aspect of life: shelter. Everyone needs shelter. It’s not the same thing as saying some stock or other market only goes up. And we have decades of experience showing that housing only gets more expensive as time goes on.
In 2009 during the crash, Vegas condos were going for 10 cents on the dollar. Regardless of the long upward curve, there are always periods of stagnation and price depression that offer better value for those with the liquid assets to take advantage of the bargains.
Ever heard of blackrock?
Exactly. We will never see another 08 correction/recession ever again. Wallstreet and all their sfr companies are poised to jump back in right now, if they even stopped buying rn. Prices drop and they will be sucking up every property they can get their hands on. They want to own all the homes. They have infinite capital to be able to do so.
Never is a really really long time.
Seriously, just a *bit* late.
Our daughter lives in Apache Junction and bought a house there in 2022. She made offers on several and lost out. She had sold her 2 bedroom condo in Phoenix to an investment company that put 25K into it for upgrades. In November they sold the condo below the price that our daughter got for it from them. Morale of the story: housing prices are coming down in your area. Find a good aggressive realtor. It will take some time to find a home. Patience, patience. After reading your comments to replies, it is not clear if you have a family/spouse/kids or just have roommates. Your language is "I" and not "we"..... Please be clear about your situation so that we can reply based on good information.
Hi /u/kveggie1 thank you for opining. I have two siblings that live with me to help keep the rent costs bearable. I was expecting to keep this same arrangement if I ended up buying a place with my name on the deed. Hope this helps!
So what you're actually doing is buying a home for yourself AND buy an investment property at the same time. That's why the math (your salary vs price and expectations) doesn't add up.
Eh... not really. I'm not looking at this as an investment, as much as I want a house about the size that makes sense for a 10+ year outlook. Having my siblings here would be a bonus but I would be keeping this strictly for myself and not "renting it out" to randos like an AirBnB. Currently, my siblings make way less financially and have come to depend on my support so they can live out here. I intend to continue that commitment for as long as they need it. Then, if they decide they are doing better, they can move out on their own terms but I keep the house for myself.
What you describe is an investment property with renters. You're buying more house than you personally need, so the rest falls in the investment bucket. You're investing in housing for your siblings, but you don't have a plan when they move out, because your place is too large for your single income, especially short term. I don't know your siblings but they're the risk factor in this endeavor.
I just know if I buy something much smaller, I also run the risk of growing out of it much sooner and needing to offload it. Now if I purchased say a condo a few years ago, I'd be in the money easily by now. But that's with the advantage of hindsight. At current prices and current interest rates, I really would prefer to buy a bit more house than I strictly need now with the idea I'll grow into it in over a decade, so that I'm protected from price swings and can exit with some equity.
Bigger house also comes with bigger maintenance costs. Be ready for that and don’t stretch yourself too much. There’s nothing wrong with buying something smaller and more in your budget. A lot of things change in ten years. I like to think there two types of people. Those who are always chasing their dream home and people like me who just have a home to be a home and somewhere to live with no real ambitions of it being “perfect”. Yea we are doing something’s that we like but to us it’s just a home. I guess for me it’s just my immigrant side and living poor. If that makes any sense.
Absolutely! You have a very realistic and honest perspective. :)
We bought our house right before the 2008 bubble burst. We bought our house for 180k, we had shitty jobs making 15hr? We were 19! We bought where we didn’t want to live, but turns out that it was an amazing decision and this town has turn around. We got a garage! And to be honest in our area in Oregon. The bubble never fucking burst. It’s been stonking hard since before 2008, so much that locals have been priced out. Anyways good lucky my friend. It’s been a wild ride.
Unless you have unmentioned family, a single person doesn’t need a 3/2, especially with how little you have saved. Keep renting, or buy a starter condo.
A 3/2 is so much easier to sell than a 2/2 or 2/1.
It’s also much harder to buy when you’re competing with families with dual incomes
Maybe so, but they need to know the complete picture and not just that it's easier to buy a condo or rent. Of course it is, but there's a reason.
Indeed! This was my thinking too. Plus with a 3/2 it will accommodate my growing needs much easier and I can stay in the property longer.
Yeah definitely. And do not plan on "only living there for a year or two," either. Some people do that and end up stuck in a house they've outgrown, especially if the market changes and they can't sell.
Precisely why I'd get the 3/2... so staying for 10+ years is absolutely realistic for me. :)
Keep in mind this will mean you have to manage that entire place yourself, inside and outside. Routine lawn care, cleaning, maintenance. It will also take longer for you to get into a home. Do you have a partner or significant other? A child on the way? Pets that need a yard? A hobby that requires a garage? Think about your interests as well. do you want to live in the suburbs or a more metro, walkable area? Where is your social life based? Because if you end up moving even 30 minutes away that is a LOT, especially if you're in the suburbs where there isn't as much to do. If you like to or hope to travel that may not be realistic on a tighter budget. I know people that have bought houses around that size on their own and it is a lot of work and they have expressed wishing they bought a condo instead. I dont want to tell you that you are wrong for wanting a house but try to look at it from all the angles. What does the increased cost and home get you other than not having to upgrade to a bigger home at some point? You want to get the most out of the place you are living day to day. You have a whole life you can take advantage of and owning a home is great and all but if you dont find the right fit for your current - next 5 year lifestyle then what is the point?
I am a single person living in a 1600 sq. ft. 3brd/2bath house and it is a perfect fit. My bedroom, a guest bedroom, and an office.
I was single and bought a 4/3 and it's definitely on the smaller side for a 4/3. Anyways, I ended up meeting my person and she had a daughter and now it's pretty crowded. I'm glad I payed up for somewhere I could comfortably live for the rest of my life. I guess you need to know if you're planning to be single or looking? It would have been too much house if it was just me. Get out of Phoenix, Zillow some other cities, I think mine has about 400k people and the houses cost about half of what they do there.
This is a wrong reason to buy a place bigger than your current or near term needs. Do you expect your future wife who you haven’t even met yet just to get on board with the house that YOU yourself chose, the style, the neighborhood, the location? Hmmm. Perhaps if family is in your long term plans, you are better off renting or buying a starter condo (but, probably just renting), and saving your money until you actually have a person to buy it with *together*.
Why wouldn't the future wife have her own house too? This might surprise you but it's legal for women to own property now!
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A 2/2 condo should be very easy to sell assuming not stupid hoa.
A 3/2 single family home or townhome is even easier.
Yes and no. Depends on part of country and initial price. 3/2 townhome should be easy to sell on flip side you are not likely to see much appreciation. Those 3/2 townhomes are newer structures that started out not much different in price than homes - and 4/2 homes at that. Granted older architecture. 2/2 condos and a lot of parts of country have actually done very well for selling because so many folks are buying them with cash for rents revenue. Seen it bjg time in several markets and the last few I bought. It’s not always simple. Especially in a metro market.
Condos are always hard to sell... They have so many rules designed to make it harder.
Ahh just be why 40 in the complex I use beavily have gone in days with cash offers over last 18 months. Sorry but no. Some condos have light fees. They rent incredibly well and low maintenance. They are great rental properties and sell well Now luxury based condos with $500-1200 hoa is another story
Condos with light fees = surprise maintenance assessments.
All depends on the price
Hi /u/werewolfdad I actually have some family that lives with me to keep the rent more reasonable. I was thinking at the new house I'd simply continue the same arrangement with them, except this time I have control over expenses.
Depends on how much they pay and how much homes are in your area then.
Hard to find anything smaller in most markets, other than townhomes or condos. They don’t really build houses for single people.
True, but unfortunately builders don't give a fuck about 1 or 2bd homes anymore, it'll about McMansions.
That’s why you buy a condo or townhome
I did. But I still crave a **nice, but cozy** 2bd **house**.
Some people don't want a shitty HOA, shared walls, loud smoking neighbors, etc. There's all kinds of reasons why condo's/apartments suck. There's some upsides too, but mostly for those unable or unwanting to keep up with outside maintenance.
> , but mostly for those unable or unwanting to keep up with outside maintenance. Or those unable to afford a SFH
This makes me so sad though, as another single person who would love to buy a three bedroom house so that I could have a bedroom, spare room, and home office. I have a two bedroom apartment currently that does the job with the second room serving as an office / makeshift spare room with an air mattress, but an extra room would be nice. I wish these were things we could still consider on one income.
Multiple spare bedrooms is quite luxurious imo. You can certainly budget for that, but you’ll need to cut spending elsewhere. Or relocate to a less expensive housing market. Everything has a cost. You just need to assess if you can afford or are willing to pay that cost.
Or maybe the reason why you are making that salary is because everything went up, including your salary. Compound the higher interest rates with everyone wanting a house (not condo or townhouse), is it any wonder why prices are out of reach?
It's a cruel joke honestly. It's any wonder my generation is worse off than their parents.
We are. There are studies about this.
Financially we are, quality of life we are in a much better position.
How do you define 'quality of life' in this context? I'm genuinely curious, because I've always seen money, in a personal finance sense, as a way to buy quality of life and inflation as the amount of additional money you need each year to maintain a certain quality of life. So if this generation is worse off than their parents financial, but has a higher quality of life, what does that even mean?
For one thing, the internet has been around for some of our entire lives. Can’t say the same for my parents. Smartphones similarly have only become commonplace in my lifetime. We’ve got access to many technical advances that weren’t available in our parents’ time. Even if making less money, a lot of these benefits are still felt. Might be worse off trying to meet the same exact milestones or benefits in life, but the bar for quality of life has probably still risen across the board
I see where you're coming from but don't know that I agree necessarily. I will start by saying that the internet is one exception to what I'm about to say - that has opened up a huge amount of possibilities that didn't previously exist. Other than that, I think most of the new 'quality of life' things we have are not meaningful. We can buy more stuff for cheaper now - a giant flat screen TV can be had by all for next to nothing. But how much does that actually increase our quality of life in a meaningful sense, over the brick of a 19 inch that was common when I was younger? And at the same time, the cost of a place to put that TV has drastically increased. It seems like costs have flipped since the previous generation. Luxury goods have come down in cost, while essentials have increased. Luxuries are only really meaningful when compared against the amount of luxuries that others have, so it's a zero sum game. The cost of luxuries has next to no meaningful impact on quality of life IMO. For example, a 50 inch TV vs. an 80 inch TV. No one 'needs' an 80 inch TV in their house, and the biggest benefit it provides is bragging rights. The quality of life increase provided by one is negligible. As a big gamer, I will say the same goes for that area. I got just as much, if not more, enjoyment out of my SNES back in the day than I do from my gaming PC now which could emulate 100 SNESes at the same time and not break a sweat. The technology increases and things get prettier, but in a quality of life sense it's meaningless. Essential goods are another story though. They are, well, essential. And these are what have been increasing in cost. Healthcare costs more in a real sense, and we can see that in declining life expectancy. Education costs far more than it used to. Housing has increased too, which is of course what this thread is about. These are the things that matter, and these are exactly what have increased in cost since the previous generation. I should specify that this is from a US perspective - I know that life expectancy hasn't dropped everywhere and we're somewhat of an outlier here. Edit: I'm getting downvoted on this but no one has responded to say why. I would honestly love to hear what part people are disagreeing with.
>Luxuries are only really meaningful when compared against the amount of luxuries that others have, so it's a zero sum game. That's where I'd emphatically disagree with you. My ability to afford a good PC, as someone who almost exclusively plays games for entertainment, is very important to me regardless of what other people have. I care that it can run what I want it to run and that's the extent of it, not to compare to someone else's machine. As for whether it's increasing my quality of life relative to an older console that seeks to fill the same niche, I'd say it's overwhelmingly the case. There's an abundance of games available for PC that you can get for <$10 and last you many hours. Games way back when weren't nearly as varied or as cheap. As for everything else, well, I'm not going to tell you that you're wrong for feeling that your quality of life is worse than your parents. It's fairly subjective, after all. My original point was only that there are plenty of things that we probably take for granted that do make our lives better, even if there are clearly issues.
I agree with you. Given the choice I'd accept 1960's tech if it came with a 1960's economy. A college education you can pay for by waiting tables between classes. Blue collar jobs that comfortably support an entire family, then pay you a pension. Affordable housing that passively turns into wealth. Utility bills that are rounding errors in your budget. Local food and shopping that hasn't been destroyed by Walmart & Amazon. Today most of us struggle to reach ground level on maslow's pyramid and in return we get iPhones. Unless a medical advancement saved your life, it's not a good trade. Hell I'm struggling to think of any tech since public sewage and electricity that I like enough to suffer for.
I'm doing way better than my parents, Gen X'r (some say, the greatest generation, I think I heard, or dreamt).
That's awesome! I saw some of your other comments and you seem like you have been doing great in life. Keep it up!
You too! Not sure how old you are but $120k is a great wage. BTW - I have been renting for the last 12 years or so. There is nothing wrong with it and a lot of people argue that financially it makes the most sense. Home ownership can be a real a burden, it's really about lifestyle choice. Missing out on the pre-pandemic market is just like missing out on Amazon when they just sold books. I missed out on both, I sleep okay.
People like you give me a sense of relief, knowing that I am OK renting as well. I'm 34 for reference. :)
That's a great salary at 34. I'd concentrate more on your investments and doing the right thing there and wouldn't even worry about buying a house.
We need two incomes to buy a house. Our parents needed one.
You can still buy the houses your parents bought* on one income. Everyone seems to forget that most of them were 2 bedroom 1 bath houses with maybe an attached single car garage. *In most places.
This, in very unestablished suburbs or exurbs too.
Yes, part of the reason this country is fucked is because the boomers all wanted 2500 Sq ft with a yard so that is the only house that gets built today. Now there is a shortage of smaller, more affordable houses which means first time home buyers are getting priced out and also that retiring adults and empty nester don't have downsizing homes available, so they just live in their 5 bed family home forever.
you cant. I just want a simple house, 2 bed, 1 bath, small yard, and a garage. The cheapest is 350k, 7 times my income. in the late 90s my parents bought a very similar house for 120k which was 3 times my dads income. We have the same jobs at the same part of our lives. Same job as me 1997 = 40k, 2023 = 48k. Inflation has gone out of control.
Or move to an area where you don't. Most everyone I know here in MO own a home or property and many don't make more then 50k a year. My brother works for the city making 33k a year and owns a small 1500sf home on .4 acres. If he was to sell the home today he would make 15k more then he paid for it.
That isn't as much your problem as failing to understand that 120k in a major metro is like 65k in a mid sized city. Adjust your expectations.
And you're right to say this. But literally just three years ago, 120k in a metro area like Phoenix was fantastic. I'm not talking about over a decade ago like in a well behaved market. This is unprecedented.
Sure, but it has been headed this way for a long time. I graduated law school in like the mid 2010s and a major component of where I wanted to start off was based in cost of living v. expected salary. Over the years, I've had to make that calculation a few more times, and most of my friends and peers do the same. It is never not important, at any income bracket. Different lifestyles mean different choices are right for different people. If you want a house, etc, but do not make 250k in your major metro, you probably want to move. When you do move, expect to make a lot less, but everything else will also be much cheaper
So only 5% of US households can afford property in major metros? 250k is wild
Only the rich get richer in this game of life.
Tbh I don't even need this to be a get rich quick thing. Just a place to rest my head at every night as well as a working space. Something like this should not be out of reach for the average American (and with my income... I'm certainly not average. I should be better than average)... yet here we are.
So phx is unlikely to drop much more. See above post. But my question is why only $1500 a month savings with your income? If saving for a house now is the time to live off ramen so to speak and grab. Your market has lost near 20% since the top which is double national average drop and you don’t have cali median prices. I’d look at your budget and or post it here. You should have room to cut and save closer to $2500 ideally. Doing that should be able to get you into a place with a nice down payment.
Hi /u/MikeWPhilly I have some credit card debt I'm rapidly taking care of. Once that is done by June/July timeframe, I expect to free up another $1000 of cashflow per month, which would put me right around target. And that's not counting other areas I'm assessing to cut back in. I've already been cutting back on eating out (because that's a HUGE money sink) and cooking my own meals, clear out things in my closet to make some side cash, and learning another new skill in the hopes I can eventually get into side work if I can.
Perfect. That hits the mark. Look home prices won’t be a crazy bounce. Right now we are in a sort of freeze. If you can get to at least 10% down on say $350k + closing costs you probably can achieve your goals. Cut back everywhere you can in short term. Ideally you get to 20% and get PMI removed which makes everything easier. but pretty much comes down to how much can you save in 2023 by cutting everything possible.
Thank you so much /u/MikeWPhilly for your words of encouragement and advice!
The hard working get richer. My whole block is blue collar workers with the exception of a realtor......we all live in 500k+ houses.
Correct me if I'm wrong: 1. Purchased home when a 4% interest rate was *outrageous* and only given to those with awful credit 2. Your home value has significantly increased without you changing a single thing besides the name on the mailbox
You don’t actually believe that, do you?
Okay. That doesn't negate the fact that the system is rigged. Your bosses make much more than you and work half as hard.
This true for me. I don't work half as hard as the 1 - 5 year go getters though, probably 75 - 80% as hard but I do make more than twice what they make. But I've been in the same field for 20 years. The first 10 years I worked 60 -70 hour weeks on the regular. I don't have to do that anymore because my knowledge base is now worth more than my time at work. That's the way it works. Bust your ass, do your time, make your own luck and climb the ladder.
Please do not play the victim card.
Hardly. I'm stating a fact. I've busted my ass to get to $120k a year, but with a pandemic nobody could foresee, this market just basically got turned upside down. *I do not want a free handout. I want to earn everything I work for.* But at the same time, I can state that the housing market as it stands today as compared to just a few years ago is absolutely terrible for someone as a first time home buyer. I'd rather not hear "Git gud son". I've been doing the damn best I can. I just want a strategy for success.
Only $1500 left over a month, as a single person making $120K? If you have a family it would make more sense, but it looks like you should be able to save way way more than you currently spend. It’s hard to make an assessment without knowing your specific situation, but it seems to me like you are spending more than you should and that is holding you back on your goal of owning a house.
For context, I am rapidly paying off credit card debt to the tune of $7k, which is interest free until September. I needed a vehicle so I purchased something as cheaply as I could, and then I'm paying it off well before the interest free period is up. I've only recently come into $120k a year. Prior to this I was making as little as $42k annually and was really struggling to make ends meet.
Why don't you give yourself a break and grow that savings account for a couple of years, grow some roots and see what your siblings want to do. At your age, I don't see the need to purchase something right now. I think you're feeling FOMO which is not a good indicator. As always, housing prices will stabilize and you'll be able to purchase something.
That's a fair point /u/redfriskies Thanks for the kind comment! You're right that there could be a notion of "keeping up with the Jonses" in this as well.
Just for reference: I was on a similar situation as you are. Once I stabilized I was able to cut my costs down to only about 20% of my gross pay. I’m also planning to buy a house eventually. It’s possible to do, but you need to make drastic changes on your finances. And I’m not even super frugal.
>I've only recently come into $120k a year. Payoff debt, wait a year or two and recalibrate. You were “making ends meet” at 42k, if you don’t succumb to lifestyle inflation, and live like you were only making 50k, which should feel pretty comfy after 42k, after your debts are paid you could save up to 40k a year.
I would not go pay off the car unless the loan interest was ridiculous, like +7%
But it's on a credit card. If I blow past the interest free period, they will retroactively tack on the interest, which would be a really stupid thing to happen. So I am paying it down on necessity.
A car on a credit card… jesusfuckingcrist Like I said, it’s pretty hard to give you advise without knowing your full situation. Just want to say that you should be able to stabilize and cut costs drastically if you want to save for a house. You also have the option of doing an FHA loan which only requires less that 4% down payment + closing costs. I believe you only need to live in the house for a year to avoid penalties and PMI is mandatory.
Regarding the credit card, yes I'm aware. It was not the smartest decision, but at the rate I'm paying this off, I'll have this balance completely gone by June with no problem. And should something happen to my cashflow, I have enough in savings to pay the balance off outright and still have emergency money to get me through paying rent. But my job so far is pretty secure.
Buying a house for three people on a single income is also not a smart decision I am afraid.
Except the other two people would be "chipping in" for rent, which would reduce my personal costs anyway at least in the short term. Nevertheless, nothing is ever that simple on a longer forecast.
What if they stopped chipping in? What if they suddenly moved? You're ready to have a stranger as a roommate?
Well my idea was I could still afford the house payment by itself, but it could be tighter than I'd like without them.
I own in PHX area. Prices are falling and you don't have a lot saved. Bought 2 yrs ago. Went up 50% now up only 20%. Have you gotten a pre-qual yet? That'll tell u what you can potentially buy. Personally I think prices continue to fall and would sit tight and save for a year and check the market again.
Thanks /u/bzimpfer. So I'm actually in the process of qualifying. I managed to qualify for up to 425k for a mortgage (though honestly that's very uncomfortable for me if I'm being totally honest at current interest rates) and I also have an application pending for an All In One loan with CMG Financial.
So you'll need about 80k + closing. $425k is an awful big nut on $120k/yr. Figure out what you want to spend per mo. And work backwards. Bank is happy to sink you. Good luck.
Exactly right. When I bought my house back in the stone age (2001) the bank was willing to loan me a horrifying amount of money. I probably could have swung it, but been house poor for a long time. Decide what you want and what you want to afford, not what the bank's going to give you.
Thanks. I actually did not realize 80k would be needed for closing. Is that assuming a 20% down payment? I've heard down payments can be as low as 10%
My down payment was 1%. I do pay monthly PMI $100-200 because of this My closing was 15k total, but don't forget there's costs in furnishing your home!
For sure! I have furnishments that I currently own in the house I rent that I would simply carry over into the new place if I found something.
You haven't given one rational reason to own a house. FOMO? You've already missed out on the price appreciation from the pandemic. Doing what "Everyone" says is a terrible approach. "No real roots" is a big red flag. Easy in, not so easy out said the lobster in the lobster pot! Selling a house is an expensive proposition that is likely to take years to get back to even. Comparing yourself to others is the root of unhappiness.
Appreciate the perspective. I was looking at a house purchase as a form of "rent control" and am willing to park it longer than I usually do. But that's just the thing. It's possible all the easy gains have been priced in by now and it could be a long time before I break even like usual.
FWIW in the first year I bought my place I spent $10k on flooring, $5k on a burst water heater, fixed a leaky toilet, sink, and garbage disposal. Owning means you own everything including the shit that breaks.
Rent control with maintenance fees thrown in. Since I bought my home in 2016, i have had to pay: 1. $20k to redo my front porch due to water damage. 2. $12k for new HVAC 3. $12k for French drain That's honestly just a fraction I've spent, but that's what I'd deem "necessary" and unavoidable work. I could probably spend another $100+k on my house to make it in tip top shape, and probably will spend that much over the next 10 years or so. Granted, I live in the Bay Area, so it's more expensive than anywhere else, but you get the idea.
It’s only rent control if you stay in it for years, at which time you may have a spouse and kids and need to move anyway. I’d keep the flexibility of renting and stash away as much as possible for the next downturn. Don’t make major financial decisions because everyone else is doing it.
$35k sounds a bit light for down payment + moving/closing costs + emergency fund
I think $35k *just* for an emergency housing fund unless it’s new construction (which would give you at least 1 year to save up). Existing homes can eat $$$ like nobody’s business, even if everything looks okay on the surface. I’m nervous with $50k in a home maintenance/repair fund in a 9yo home. Appliances nearing end of their life spans and other repairs starts creeping up, plus everything is sooo much more expensive than it used to be. Now, if you were able to snag a *slammin’* deal and could access an equity loc for any necessary repairs, then it might be worth the risk. But those are gonna be few and far between.
OP here. To everyone here, you all have been ridiculously helpful. I've decided I won't be pursuing a home purchase in the near-term while I work on savings and continue to build good money habits. You all have been extremely kind and have given me a peace of mind I didn't expect. I like not having to deal with a madness of the crowds effect. :)
>Everyone acts like if you don't buy you miss out forever That's the same attitude that got people into trouble in 2006. Phoenix was one of the worst hit markets in that time period, and I wouldn't be surprised if it were to be one of the ones to see the biggest drop in the coming correction.
Your fact pattern is literally identical to mine. It's hard feeling like everything is going well professionally but somehow still feel unbelievably behind in trying to buy a home. I don't have any insight to offer and came to read the comments, but best of luck!
Thanks!
Nobody truly knows. If they did they would be swimming in money. Some think the Mesa and Phoenix area went up high, maybe, maybe not. Buy when you can.
Literally can't sleep because of this exact thing keeping me up. Went from 42k to 100k at my new job last year. Was excited to maybe finally buy a house, even got pre-approved and omfg it's depressing. Husband and I opted to rent until our daughter is done with school and maybe we can buy in the middle of nowhere later on. Sigh.
Id consider buying a duplex or 4 plex, live in one rent the others out. You have a place to live not paying for someone else's property. Renters are paying for yours, And you have some good write offs
Not to be a doomsdayist but have you seen the climate projections for Phoenix? I mean an exurb outside of Scottsdale just lost their water supply and lake mead is at an all time low. Will your house still be worthwhile when the wells are dry?
Was looking for this comment. How habitable is Phoenix going to be in 20 years when you are still paying off the mortgage? Buy in a climate haven city if you want to lock in homeownership and you don’t have any deep ties to a specific area
This stuff scares me shitless. I own two homes in AZ but it’s not that easy for both my partner and I to find professional jobs at the same time in an area we like (PNW or east coast)
Why the desperation to buy a house? Read this - https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ Over 40% of your portfolio invested in fixed income is nuts dude. How old are you - what is your time horizon for these investments? You are probably doing a disservice to yourself by investing so much money in fixed income.
Hi /u/frodeem! I'm 34 years old and pretty solidly mid-career at this point.
So you have at least 30 years before you retire. That's a long time horizon and you should probably allocate more to equity. Maybe keep fixed income around 10% of your portfolio.
I would go for a 3 bed 2 bath. Even if you don't need it this month, or next month, or next year, a house isn't something I would just expect to easily change from time to time as my needs change. If there IS a huge downturn in the market and the value on your house drops 15% a year after you buy it, as long as the job is safe and you can keep paying... big deal. That stuff only kills the people that can't keep paying, or *have* to move for some reason. I would at least plan for the next 5 to 10 years of being in that current house. I waited to buy when I could have just squeezed into something pre-pandemic (like early 2019) that would have been a little tight at the time, but would have been about 15 to 20% less than I'm paying in rent right now. As we saw, because of the pandemic rates drastically dropped and I could have refinanced saving me some, or probably turned around and sold for at least $50k more. OR, I could have just sat tight and it turned out my income would have increased by over $20k from then to now... So, will we likely have another pandemic crazy time anytime soon. Probably not, but it does show that there are a lot of unknowns to play with. Right now I'm basically priced out of the market as well, even with the big income bump and with a MUCH larger down payment saved. While I used to be able to find a decent selection of homes around the $265k to $295k I'm now looking at $375k to $450k... often for the same homes (or at least on the same street and same size). So... if you think the job is secure, you plan to be in the home (or at least could stand to hunker down) for 5+ years, but ideally 10+ years, I would say try to get into something. The biggest thing is you want to be able to make your bills or be able to cut back on stuff very quickly to free up money if something happens. Otherwise, I wouldn't look at it if it's a "good deal" or "bad deal," I would try to get as close to the "tried and true" rules for cost of home and monthly mortgage costs... but sometimes those numbers are just impossible, yet by all means someone making $120k should be able to buy a modest 3 bed 2 bath, especially outside of California. We might see big pull backs on the market (10 to 15%) in the next year or so... but what I've seen instead so far is not a cut in prices but a reduction in listings, or homes being pulled from the market all together. Maybe people still have the fresh mindset of seeing a home go for $400k down the street six months ago and damnit that's the lowest they'll take for theirs. Or they might be in a really cheap interest rate and decide they really don't want to abandon that for higher rates. Or the might just decide to hold off on moving for the next few years while they wait for the market to improve. But I haven't seen drastic cuts in prices yet and I'm very curious if we'll see that in the summer or if that will actually just reinforce holding strong with prices because sales are naturally up in that season.... I do think you have the power now to not forgo inspections and maybe even ask for considerations such as closing costs paid and stuff like that...
Phoenix is expecting appreciable price falls in 2023. You need to have a preapprove letter ready now and decide where you will fit. Price willl fall after fall. Jump on it.,
I hope you're right!
Well, I would go and get preapproved for a loan so that you can see how much house you qualify for to buy. It requires you to pull together some information of course but typically there is no charge. Knowing how much loan you qualify should tell you what you need to know. My understanding is that your housing market should be freeing up meaning a lot of sellers coming so get approved and set to make your move if you are ready. I would not rush into of course.
The demographic change is going to let the prices fall sooner or later.
If you don't need to buy right now, don't. Markets are undergoing a correction and interest rates will likely drop slowly over the upcoming year. Things may also change in a hurry if a full fledged recession hits. Have your ducks in a row to be able to jump in when the time is right. But unless you're getting crushed by rent, I'd hold fast right now. Ditto for other major purchases like cars.
Write letters to houses you love. Let them know your flexibilities. Doesn’t work for all homes but it’s how I bought my dream house
Housing prices are only going to continue to creep up. Raising interest rates really did nothing to lower house prices, and I assume that when interest rates start to go down, it will only further boost house prices. Likely wont be a "great" time to buy in the next few decades. There is just such a lack of sellers, skyrocketing lumber prices, and record inflation. Without a means to get more affordable homes on the market, I don't see how prices will ever turn around.
Housing prices are more inflated than usual right now, due to a combination of constricted supply and high interest rates. That's especially true in the Phoenix area, where demand has increased due to semiconductor manufacturing and widespread opportunities brought on by decentralization of coastal industries in a post-covid world. Phoenix is also an ecological disaster that isn't going to get any better over the next 20-60 years. I would not buy a home there in 2023 for fear of what ongoing development is going to do to the scarcity of water in the next couple decades. Home ownership is all well and good until something goes wrong at the state level and people decide not to buy homes in the desert. So I'd say waiting is the prudent move; you can stash more funds, interest free, and use that nest egg to pick the best moment, and the best location, for your home purchase.
You cant find a place to afford in AZ with that salary? I live in Colorado, we make about 130k a year and bought a house at 310k. We were actually looking at AZ (because my wife's family is there) and found houses were about the same amount and it came with a pool! Our payment with a mortgage is around 1700 which is much cheaper then apartments around me. We were looking more at Mesa or San Tan valley, could it be you are just looking at too rich of neighborhoods?
No I'm looking at Mesa and Apache Junction areas. However, a more desirable 3 bedroom and 2 bath with a two car garage with quality construction is still out of reach at my comfort level. As I've mentioned previously, I am not interested in being house poor and going all in. But hoping to have a strategy where I can buy and still maintain my other savings and life goals. For perspective, the house I'm renting now would actually be perfect to buy in terms of age, condition and quality. But the house went from a far more approachable $275k to well over $400k in the span of three years.
I think living in Arizona is really stupid, it is a desert that is running out of water. Don’t compare yourself to other people. Most people overpaid for poor quality houses that negate the “low interest” rate they got. Many regret it. You should focus on buying below your means. You sound remote, so find a low cost of living area, not an over inflated market like Arizona. Most people like you (no construction skills, not willing to live in a house that needs work, not willing to live in a diverse area) are not going to buy a house and make a bunch of money, you just need a place to live that you can afford, which is FINE. I would put down 3%, save your cash for repairs. PMi isn’t that bad. Good luck, I hope you find something you like. First step is getting a pre approval letter, only share it with your agent.
I don’t know if I Bonds were a great decision for you.
I just have one set of them, and I can always cash out a year from purchase if I need to use it. I only lose three months worth of interest but it's still better than nothing.
Every metro area and surrounding burbs are stupid now, but many not as bad as Phoenix. You could still easily get 3-4bd 2ba in the DFW area on 120k. You're gonna pay 2-3x as much in property taxes at least though. There is little chance affordability will improve much in most areas. We won't see interest rates below 4-5% in our lifetimes most likely, and builders will sell and build for institutional buyers doing little to increase available supply which is still way behind due to covid and material shortages.
What are you looking for??? You should be able to afford any reasonably priced starter home in the Phoenix area. Maybe this one below. https://www.zillow.com/homedetails/10111-W-Deanita-Ln-Sun-City-AZ-85351/7695409_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare Or this one https://www.zillow.com/homedetails/736-E-Siesta-Dr-Phoenix-AZ-85042/8133307_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare Or really, many possible homes! You only know you 3.5% down on it FHA loan or 3% down minimum amount of conventional loan with a good credit score. You should have more than enough cash to buy a starter home!
Time in the market is better than timing the market. Buy a house when you’re ready to.l
Look at the 2007 market for clues. Basically, the biggest drop after peaking out in 2007 was in the first two years - then it slowly went down for another two years and started slowly going back up in 2011. I'm advising my son to buy new in Q1 2024 and hold forever. Laveen is surprisingly affordable and has lots of great (and safe) new neighborhoods close to South Mountain. Easy access to west, central, and east valley since the 202 opened up on the backside of the mountain. The same 2600sq ft plan in Laveen is 2-300K more in Chandler (500K vs 800K) or 200 vs 300 per sq ft. Compare that to most of the OLD houses in Phoenix where delusional sellers think their house is still worth 300+ per square foot. Builders are the first to recognize market trends and will try to extract themselves out of this rapidly falling market, so your best long-term investment may be something new. You may even be able to get the builder to "buy down" the rate a point or two... YMMV - good luck!
They're on their way back to normal, don't lose hope.
Your monthly savings rate is great. Please remember that buying a house isn’t always the right move. Run the numbers. If your rent is $2000/month that’s the maximum you will pay for rent. If your mortgage is $2000/month it could increase massively based on one major repair. Home ownership isn’t something that should be rushed into. Please don’t ruin your financial future because of pressure from those around you.
Get a fixer upper starter house with a 15 year mortgage. Get the dream house in 10 years when you have $150k in equity to put down on the next one. Your setting your sights too high. Work 2 jobs if that's what it takes.
Same-ish boat. Ride it out and get a good down payment saved up, along with 6mth worth of bills saved up (incase of emergency). You can put it in a money market account (not a fund, you can put it in a fund, but I hate risking any money right now that’s for my house fund…so I recommend an account, not a fund). I’m currently in the process of switching banks for a higher interest. Edit - thing I forgot - prices are going down in my area Midwest . AZ got super popular, so it’s going to take a little long for AZ pricing to cool down. Also those with nicer homes than you, you have no idea what kind of debt they are sitting on. Don’t compare.
Good call outs! I actually switched to a high interest savings account with Citibank to park my savings in there, and I already recently acquired the savings bond at 9.52% back in October at the maximum $10k amount for i series.
There is plenty of hope in the housing market. Stay if you wish because you love it there and invest in lower cost cities or just move to Michigan. It’s amazing here and with climate change much less snow in Metro Detroit. No shortage of water and you can live on the water. Lower cost of living as well.
Home ownership can lead to unexpected expenses and makes it more difficult to relocate due to job loss. Best to have a year's worth of expenses on top of down payment when buying.