My wife and I have lived in our current home for about 5 years. We always knew that this home would not be a long-term home for us, because of its small size. Now that we have a child, we’re starting to feel like we’re running out of room, and since we’re hoping for another child before long (and maybe one after that …) we’re making plans to buy a larger home.
I know the housing market is sinking. I think house prices will still come down another 10 – 15% in my area (NYC metro) whether through actual price reductions or by prices staying flat over the next few years while inflation eats away at the real cost. But at some point in the next year, we want to buy a new home regardless of where the market is at; there are solid reasons we need to move, and I’m not big on trying to time the market anyway.
We’ll also be moving to a new town, not far from where we are, but a town that’s we think is a better fit for us. So there is the variable of us moving to a new town and possibly not really knowing the town all that well yet. But we think it’s a good fit based on the research we’ve done.
There are two ways we could go with a new home:
(1) buy “just enough” home to suit us now (e.g. with 1 or maybe 2 small kids) and expect that we would likely move again within 7 years or so, or
(2) buy a house that will fit all of our projected future needs now, even though it’s more than we currently need.
I’m torn between the two options. Using the old rule of thumb, we could probably find an “enough for now” house under 2x our annual gross income; a bigger house would still be about between 2x – 3x our annual
gross income, probably about 2.6x.
We found one home that we really like – it falls into the “bigger house” category. It has everything we’re looking for: enough size, a good yard, walking distance to public transportation and a little downtown area, good natural light, and it’s an older home so it has some aesthetics that appeal to us. In fact, it’s sort of unique in that we’re trying to stay close to downtown, so that we can walk more and drive less, but this house is larger than most houses/lots nearby (not necessarily a good thing for the house value, I know) so it still has a nice yard, which we really like.
We haven’t yet found a “just enough” house that we really like, although we’ve only been looking for about a month or so.
My heart is telling me to go ahead and buy the bigger house; it just feels right, and my wife and I can both picture us living there. My LBYM head is telling me to look for a smaller house. (On the other hand, my financial head is also leery of buying a house in this market knowing that in 5 or 6 years I will probably want to sell it to buy a bigger house.)
Here’s how the numbers would look with the two options:
Big House
Purchase price = 2.65x annual income
Monthly payment = 38% of NET monthly income; 24% of GROSS monthly income
Smaller House (when we find one)
Purchase price = 2x annual income
Monthly payment = 30% of NET monthly income; 20% of gross monthly income
Right now we save a significant portion of our income, and while we’d still be able to fully fund our retirement accounts, we’d definitely have to cut back on our savings rate if we went for the bigger house, at least for the first few years.
Buying any house will slow my plans toward FIRE, but it's a not unexpected event. I guess the question just comes down to how much it will affect my FIRE plans.
When you bought your house, how much of your then-income was it? What percentage of your monthly gross income were your mortgage payments? How much did the emotional "feels right" factor influence your decision?
I know the housing market is sinking. I think house prices will still come down another 10 – 15% in my area (NYC metro) whether through actual price reductions or by prices staying flat over the next few years while inflation eats away at the real cost. But at some point in the next year, we want to buy a new home regardless of where the market is at; there are solid reasons we need to move, and I’m not big on trying to time the market anyway.
We’ll also be moving to a new town, not far from where we are, but a town that’s we think is a better fit for us. So there is the variable of us moving to a new town and possibly not really knowing the town all that well yet. But we think it’s a good fit based on the research we’ve done.
There are two ways we could go with a new home:
(1) buy “just enough” home to suit us now (e.g. with 1 or maybe 2 small kids) and expect that we would likely move again within 7 years or so, or
(2) buy a house that will fit all of our projected future needs now, even though it’s more than we currently need.
I’m torn between the two options. Using the old rule of thumb, we could probably find an “enough for now” house under 2x our annual gross income; a bigger house would still be about between 2x – 3x our annual
gross income, probably about 2.6x.
We found one home that we really like – it falls into the “bigger house” category. It has everything we’re looking for: enough size, a good yard, walking distance to public transportation and a little downtown area, good natural light, and it’s an older home so it has some aesthetics that appeal to us. In fact, it’s sort of unique in that we’re trying to stay close to downtown, so that we can walk more and drive less, but this house is larger than most houses/lots nearby (not necessarily a good thing for the house value, I know) so it still has a nice yard, which we really like.
We haven’t yet found a “just enough” house that we really like, although we’ve only been looking for about a month or so.
My heart is telling me to go ahead and buy the bigger house; it just feels right, and my wife and I can both picture us living there. My LBYM head is telling me to look for a smaller house. (On the other hand, my financial head is also leery of buying a house in this market knowing that in 5 or 6 years I will probably want to sell it to buy a bigger house.)
Here’s how the numbers would look with the two options:
Big House
Purchase price = 2.65x annual income
Monthly payment = 38% of NET monthly income; 24% of GROSS monthly income
Smaller House (when we find one)
Purchase price = 2x annual income
Monthly payment = 30% of NET monthly income; 20% of gross monthly income
Right now we save a significant portion of our income, and while we’d still be able to fully fund our retirement accounts, we’d definitely have to cut back on our savings rate if we went for the bigger house, at least for the first few years.
Buying any house will slow my plans toward FIRE, but it's a not unexpected event. I guess the question just comes down to how much it will affect my FIRE plans.
When you bought your house, how much of your then-income was it? What percentage of your monthly gross income were your mortgage payments? How much did the emotional "feels right" factor influence your decision?