When to Buy a House

Adulting 0 Comments

I can’t tell you what house to buy or when. There’s a lot of risk. Lots of variables. I do have opinions on why you should buy a house, and why you shouldn’t. My source for this is the experience we’ve had owning three homes – one I regret, one meh, one tentatively good. Full disclosure: we’re relatively risk averse. Our families didn’t have the money to help us get a home, we’ve never made crazy money, and houses where we have chosen to live are crazy expensive. High stakes.

The first thing I would say is buy a house for the right reason. You know why we bought our first place? Because we were supposed to. That’s what adults do right? Get a career. Get married. Buy a house. Have kids. Yes there is the (valid) don’t “throw your money away on rent” thing, but that wasn’t in our head. We wanted to get a place because we assumed it was an important life milestone.

In my mind there are only two good reasons to buy a house. First, you plan to live there for a long time. Second, you think it will make you money or is a stepping stone to get you to where you want to go. On that last one, proceed with caution. More to come on that.

Regardless of why you’re looking to buy, my main advice is don’t buy a house you can’t afford for the foreseeable future. Remember the big real estate bubble around 2007? A little before that, we were house shopping. I remember looking at a house that was too expensive for us. We would have really struggled to manage those payments. And if anything had gone wrong, if any unexpected expenses came up, if either one of us lost our job – there is no way we could have managed it.

That didn’t stop the bank and our real estate agent and everyone else from pressuring us to buy it anyway. They were more than happy to give us the loan and throw us in the deep end. But we did the math like adults and turned it down. Years later when people started losing homes they couldn’t afford, my sympathy was limited. If you take on hundreds of thousands of dollars in debt, it’s on you to understand and manage your risks. Sorry not sorry.

Building upon this, don’t buy a house assuming the value will go up. Sometimes real estate values go up. Some people I know have had fantastic outcomes related to buying the right thing at the right time and selling it for a big profit. *Very* happy for those folks.

But I would never risk it.

Too many things can go wrong. What if you lose a job or run into big unanticipated expenses? What if the market crashes? What if interest rates go funky or something happens to your credit? What if the timing is off on your variable rate mortgage? What then?

I’d also recommend not buying a house after you’ve relocated for a new job. I’m a professional and in my world, people move for jobs. We’ve done it. I’ve seen scores of other people do it. And a large number of them buy homes in the new place they move.

Which is great, so long as the job works out.

What if it doesn’t work out? What if it’s a bad fit and you get fired? What if it’s a bad fit and you’re miserable? What if something happens to the market and your house value goes down?

This happened to us. We moved to another state for a job. It was a great job for a long time. I met some amazing people, personally and professionally, for whom I have deep love and appreciation. My career saw tremendous growth. I don’t regret the move or my time there.

But it wasn’t for us long-term. The job eventually went south. We became very unhappy. We wanted to move back home. Except we had bought a house. Bought it at the top of the market, and then the market went down. We were trapped. Which made us more unhappy.

It didn’t end well. We eventually sold at a loss, walking away with about half of our original investment. We moved back home. I lost my job 7 months later, and we spent the rest of our money. We’d been working over 10 years. Had two kids. And now we had nothing. I don’t regret the move. I do highly regret the fact that we bought a house. The fact that we recovered and own a home today is a miracle, but we had to decimate a 401k to do it. One problem solved, another (retirement) on deck.

That “other State” adventure brings up more things.

Don’t buy more house than you need. That house we bought after we moved for a job? It was a freaking McMansion. Almost brand new. Full mother-in-law suite with kitchen, laundry, high ceilings and two bedrooms on the lower level. Separate heating/AC zones on every floor. Big rooms on the main levels and lots of them.

But it was more than we needed. A big yard we didn’t use that much. Rooms we never went into. More things to upkeep. Had we gotten the house that fit what we actually needed, our loss would have been less. Since then we’ve had smaller houses, and have never regretted it.

Another lesson I learned was don’t buy a house in a small job market. We bought that afore-mentioned house in a relatively small metro area. I had a good job at a good company making decent money. And again, we got the biggest and best thing we could afford.

The problem was that had I lost my job, the chance that I’d be able to find another one near the same income level was pretty low. I do specialized work for large companies. If I drew a 50 mile circle around that house, there were *maybe* 10 companies I could work for,  with one position at each of those companies I could fill. The chance that one of those positions would be open when I needed it was very very low. Mitigating this risk was one of the biggest reasons we took the loss and moved home.

That’s all I’ve got. We bought a house two years ago, and we feel great about it. Why? Because it meets the checklist outlined here:

  1. Right Reason: We’re going to stay in this house for a long long time.
  2. We Can Afford it: It’s not a huge % of our income.
  3. Future Value: We don’t care what happens to the value. We’re in it for the long haul.
  4. Not for Work: We live here because we love it here, not because we have jobs here.
  5. Right Sized: Our house is the perfect size for us. Not too big, not too small.
  6. Good Job Market: If we lost our jobs, there are other we could find in this area, in a reasonable amount of time, with similar income expectations.

First home we owned? 3/6. The second one (the problem child where we lost big)? 1/6. This last one? 6/6. Third time’s a charm.

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