Post # 1
I am a regular poster on weddingbee but since this is sort of personal I would rather do it undercover.
Here’s the scoop:
Fiance and I are getting married in two months. We’ve moved to Iowa from our home of the mitten last year. We both absolutely love our jobs and plan on being here for the next 2-7 years (I know broad range). We are renting an apartment and have the “itch” to get a house of our own. We will be first time home buyers and we’re in great financial shape. We are both 25.
So, the question is should we buy a house if there’s a possibility of us moving in two years? We pay about 1200 a month for rent+utilities. We are able to save everything I make which is about 2,000-2,500 a month. I do not want to be in an apartment for the next seven years but I also want to be able to move back home at some point. (Although, to be honest, there’s always the chance we stay out here).
Is it worth the risk of getting stuck in Iowa for a bit longer than planned?
Thanks for the advice bees!
Post # 3
I’m no expert (hopefully some of the real estate-savvy bees will chime in) but, I definitely think buying a home would be worth it. Real estate prices are slowly going back up so even if you sold in 2 years, you’d probably still make some money on the house (or at least not lose any).
I think making payments toward a mortgage (that you might get back when you sell) is much smarter than paying rent, if you can afford it.
I mean, you probably shouldn’t go nuts with renovating/upgrading the house if you’re only staying a few years (save that for your “forever” home), but I think it’s a good idea to get your real estate feet wet.
Post # 4
- Wedding: October 2011 - Bed & Breakfast
In my market, which is pretty flat right now, I would not buy a home without a plan to keep it for 8-10 years. Remember, you’ll likely have to pay about 6% of your selling price for realtor fees. So your house would have to appreciate at least 6% in value in order for you to break even on your purchase price. It would have to appreciate even more in order for you to recover the costs of any closing costs that you pay on the deal to purchase the home and on the deal to sell the home. Plus you would need to factor in the necessary maintenance and any renovations that you would invest into the house during that time. Your break even point would probably end up at an appreciation of about 12-15%. Like I said, the market in my area is pretty flat. there is no way that a home purchased right now would appreciate by 12-15% in the next few years. So for us, we would end up losing money on the deal, and that is not something we would be willing to do.
That said, if you live in a hot market where that sort of appreciation is well within reason, it may be a sound financial decision.
Edit: Another thing to consider when analyzing the market is the flood of foreclosures that have yet to hit the market. According to our agent, about a year ago Fannie Mae and Freddie Mac told the industry that they had a very large number of foreclosures that they would begin to release in the next 12 months. That has not happened. These homes are being held back from the market, and I would bet it is for political reasons. After the next election, if the Pres gets re-elected and the Congress is set for a few years, there will be less motivation to hold these homes back. If FM x 2 releases these homes to the market in 2013 (after the election season is done), home values will take a big hit. This could be a negative for buyers looking to purchase and sell all within the upcoming 5-7 year timeframe.
Post # 5
@undercoverhomebuyer: No, definetly not!
The first few years on a mortgage you are basically just paying interest and almost nothing towards the principle. Also, the real estate market is not picking up that fast like many people thought. We bought 2 years ago, when everyone was saying that prices are the lowest ever-buy, buy, buy! And now houses in the neighborhood are selling for even less (which tells me we are probably underwater).
It’s honestly not worth the headache to only buy for 2 years. We plan to stay in this home for 8-10 years, but realistically could stay here forever. Even if we sell, we would buy a house in the same area.
Edit: It also depends on your area. My experience is just in the Boston area, but Im sure other parts of the country are picking up quicker or weren’t hit as hard when the market crashed.
Post # 6
It really depends on what you can swing financially. When the market was good (pre-2006ish) the general rule of thumb was you should only buy a house if you’re planning to say for a minimum of 5 years. That said, I bought my first place a year ago knowing I won’t be there for 5 years. I wasn’t with Fiance then, but I figured I’d either stay for 5+ yrs or, if I moved sooner, rent it out. I ran the numbers in advance and will almost break even renting it out. For me, it made financial sense and I am still happy with my decision.
The cost of buying and selling (closing costs, inspections, etc) is likely a lot more expensive than you realize. I would expect you to lose money if you try to sell in two years, regardless of what direction the market is going. I would not recommend buying if you may have to sell in 2 years. If renting the property is an option, that might be a different story. I’d recommend finding a real estate agent and broker to run some numbers for you. They’ll be able to give you the estimated closing costs and will know how much houses in your price range would rent for. Just keep in mind it’s a rough market and they’re trying to make money too.
Post # 7
I appreciate all of your feedback! It is more appropriate to say we will be here for 5 more years but I did want advice on if we decided to move sooner. Thank you for all your thoughts! I am definitely ignorant on everything going on in the home market.
Post # 8
I’d say no.
Darling Husband and I just bought our first home and only felt comfortable getting a home that we could be in for at least the next 6-8 years (if not more).
lovekiss did a good job explaining above how realtor fees, closing costs, and maintenance will exceed any appreciation of your home if you are only there a short time.
Post # 9
@Bostongrl25: I agree.
When Mr Rugbee & I started looking to buy a house, we sat down with all the mortgage rates & amortization schedules. From our calculations, we’d gain 4-6k of principle every year. This was about equivalent to the money we’d save staying in our cheap apartment. Ultimately, we found a home we loved so we bought it & called it even.
To find out if it’s a good idea for you, you need to know how much you’ll be taking out on a mortgage, what the amortization schedule is & then calculate how much you’ll pay on principle in those 2 years. If it’s less than the money you’d save by staying put, you have your answer.
Also keep in mind moving has sunk costs: -inspection, -closing fees, -cost of movers, -new paint, -little repairs. Those should go into your calculation aswell.
Post # 10
Agreed on the “hold off” advice. You need to put at least 7 or so years of equity into your home for you to be able to sell it without a loss. Unless you know you’re going to stay there for that long, don’t do it yet. You might hear of mortgage schemes that let you bypass this, but it’s not reliable from what I’ve heard. And there’s also no guarantee that the market will shape that much up in the next 2 years to boot.
Post # 11
I think it makes more sense to buy. If you didn’t, you’d just b throwing 2 years of rent money down the drain. Even if the market goes down and you lose some money on the house, you are 100% going to lose the money if you rent.
Post # 12
I personally wouldn’t buy unless I was planning on staying at least 5 years. Fiance and I have been in our house for 2 years this month, and I cannot imagine packing everything back up and trying to sell it now. UGH! The market isn’t very good so there’s no guarantee you’d even sell it when you wanted to either. Carrying that mortgage + realtor fees, closing costs, inspections, renovations, etc and then possibly having to sell for a loss is just not a good idea IMO.
Post # 13
Thanks for all your advice guys! We have decided to continue renting and saving up 🙂
Post # 14
One thing you could do is rent a house! For me, at least, part of the reason I want a house so bad is that I’m sick of apartment living. I grew up in a house & while I’ve done the apartment thing for a few years now, I’ll never get used to sharing walls with people I’m not living with (if that makes sense?).
Post # 15
I think renting is the better idea if you’re looking at 2 years. With all the fees associated with buying/selling, I doubt you’d break even during that time. Renting a house is an great suggestion, though! It may help you scratch that itch without the commitment. 🙂
Post # 16
I’ve looked into houses around here and the cheapest I can find is a good 300 dollars a month more than our apartment. We’ve kind of came to the conclusion of just “suck it up” and think of the future! 🙂