Housing Regret: Advice to a Younger Dreamer

[Montecfo]

At your stage we were rather debt averse (but interest rates were much higher then). Thinking back, each time we have moved has been due to a job relo (only 3 moves during our marriage). And one thing we did, which was quite conservative, is we kept the mortgage the same as we bought larger. In retrospect that probably cost us in terms of liquidity locked into the house, but we loved the small mortgage-under $700 payment. And we just had one son so family size was not an issue.

I think if you crave more space I would not plan to stay in your current home. But I also would not rush to trade up for another year or so. There is just very little on the market and I believe folks buying now very well may be buying at an interim market top.

I view a home as a lifestyle choice, not investment, but I prefer to buy things when the value is more apparent than what I am seeing now.

Good luck on your decision.

 

[MarieIG]

Well, you can afford a larger house/ property, but you don't seem to be in a rush. I don't think it gets better than that.

What you may want to do, is take your time and look around for your dream house/ property. It's a situation of fine if you do and swell if you don't.

Agree that a home should be looked at as a place to live.

We did not upsize, which helped us financially, but when we were your age, we had no home (five kids in three rooms - not three bedrooms - three rooms), I was just graduating from law school, and we and almost no assets whatsoever. In other words, you are doing much, much better than we were. (We bought our home at age 34 (about the same size as yours) which we paid off in seven years: which was somewhat of a help as the kiddos were expensive.)

P.S. Definitely more than one bathroom.

 

[unclemick]

This is not advice. 27 plus years of ER puts me way of date. We rented until an opportunity to buy a duplex appeared. Lived in the smaller half and the larger half rent paid the mortgage and some of the utilities/taxes. Plus the depreciation knocked some $ off my taxable salary.

Heh heh heh - back in the day when Mr Market was in the Doghouse.

 

[Freedom56]

Howdy.

Would love to hear any wisdom from the crowd. For context, neither place would make us house poor as we have solidly funded retirement accounts. Our household income is anywhere from $140k to $170k depending on bonus. My preference would be to pay the current house off in order to live debt free.

I would pay off your current home as soon as possible and build up your saving. Keep you home well maintained and up to date. Wait for the next buyer's market or downturn and start looking for a second home. If you buy in a high growth suburban area, you can build up significant wealth owning real estate.

 

[pacergal]

Our first house was approx 1100 sq ft, 3 bedroom, 2 bath. Good enough for a family of four, however the 3rd bedroom was really small. We eventually moved to another house, a 1960s ranch, approx 1700 sq ft.with a big back yard. Have been here over 30 years. It was plenty big enough for our two kids, numerous animals, parties, etc. Kids don't need a huge house to do well.
This house is single story, and we plan to age out here as long as we can.
I do not like the hassle of moving!
Your preference is to stay, pay off the mortgage and be debt free. Is there another person with a conflicting choice? Perhaps you list the pros and cons of each choice.

 

[Bamaman]

Let me first congratulate you for getting as far in life as you have in your 30's. Sounds as if your heads are on straight.

I bought my first home at age 24, and it was about 1700 sq. ft. When I married, my wife sold her home and we consolidated into 4400 square ft. with a $570 monthly payment. I've since relocated to 1 big home, 1 middle size home and then 2 big homes.

Even though your home is $500K, 1700 sq. ft. is marginal space for the long term. If your home was 2500 sq. ft., I'd tell you to stay there. But your home is essentially a starter home in many locales.

With current trends in homes, I'd be looking for a 8-15 year old home in an established neighborhood. They're often better buys as it's just too expensive to build right now.

We were fortunate to be cash buyers on the last 2 homes, and we made advantageous purchases due to having the ability to close fast. And I'm thankful that my wife absolutely loves our latest house--and she doesn't have any moves left in her.

 

[Jenna]

We are in 1800 sq feet/2 car garage. At one point we considered going bigger and so glad we didn't. Kids out of the house now and the house doesn't feel too big. We are in a sunny state without snow so we always spent a lot of time outside. I'm so happy with our choice-a larger home would feel sad and empty. Same thing with cars. We weren't into carpooling and once the kids moved out we weren't stuck with giant cars either. No regrets! Debt free and loving our just right space.

 

[socca]

I grew up ... in a 27 room house. ...

I also sometimes wonder what effect growing up in a palace has on a kid's mental development. However, since this doesn't seem to be a concern for the OP (at least in the short term), we can let that puppy lie undisturbed.

I agree with others that 1,700 sq ft seems small for a family, but that's just modern standards talking. My first house was only 900 sq ft with one bathroom & a full basement, yet the original owners managed to raise two kids there. Definitely a different world than today!

 

[RetireeRobert]

My folks raised me and my brother in a two bedroom one bath house of about 900 square feet. When I was a teen my dad had an addition added for laundry/storage and stairs to an upper room which would otherwise have been attic space (sloped roof). Total square footage afterwards still under 1300. Worked fine for us. Today's standards are definitely different, with family rooms for large screen TV's, huge kitchens with islands, formal dining rooms and informal breakfast rooms, master suites the size of small house. Nice, all that, but definitely not needed for a happy life.

 

[BoodaGazelle]

On shows like House Hunters, people seem to think that each toddler needs their own bedroom with ensuite. I would agree that if you can make it work, stay put. Or consider an addition. Or put a yurt in the backyard.

 

[Gumby]

The largest place that my family of 5 ever lived in while I was growing up (and the only house we ever lived in - as opposed to apartments and trailers) was 1000 sqft. I lived in it for 8 months before I left home.

 

[pjigar]

First of all, let me congratulate for thinking about this and asking these question! Have I done that, I would have been able to reach FIRE 5 years sooner!

You got most ideas from the wise people here. So I will just repeat what everyone has already said. Yes, I regret it whole heartedly moving from a perfectly nice house to a bigger one costing 60% more. My saving rate tanked when it mattered the most (time value). The extra space was not a source of enjoyment but rather extra upkeep and expenses. Finally we are out of that house to a much smaller house and we couldn’t be happier. Less things to clean and fix. I hate Joneses.

 

[stepford]

Here's a bit of a contrarian view. I bought my little starter home 30 years ago never intending to stay there. I was looking to move a couple of times in the last 15 years, but somehow never found another house that caught my eye enough to make me move. So now DW and I are still in a somewhat cramped 1200 sf. It's just the two of us so we don't NEED more, but we'd both like more space for our various toys/hobbies/crafts.

Financially it's been a big plus. Paid off the mortgage years ago and property taxes are low - neither of which would be true if we'd upgraded. But still, we could have easily afforded a larger home and after a few years the financial sting would have faded. On balance I kind of wish we'd moved up to a 2000-ish sf place years ago. There was just never a sufficiently compelling reason to move.

So here we still are. If that scenario doesn't appeal to you perhaps you should consider striking while the iron is hot and buying the house you want.

 

[tb001]

We moved up to what will be our forever home when our kids were 3 and 9 months. We may downsize at some point, but hopefully it will be because we want to.

In our case, we doubled our sq footage and our acreage and LOVE having the extra space. Especially during the pandemic. We were able to do so without sending our property taxes higher, which was key for us. Also, because we moved from a VHCOL area to a just HCOL area, much of the regular maintenance costs didn’t necessarily double. Our day to day life is so much more pleasant now.

That said, it’s a very personal decision. We’re homebodies and were close to our RE target when we made the decision. If it were going to delay our RE goal by 5-10 yrs I don’t know that I’d make that trade off.

I would also say that layout matters as much as sq footage. Our last house had 1/3-1/2 of the sq ft in a downstairs level that we literally almost never used. And we were completely fine with the living space we had then. So in effect we’ve gone to 3-4x the sq ft because we now use almost all of our space. The big issue that drove our decision to move was the lack of a good third bedroom for DS and no real outdoor space.

 

[martyp]

My wife & I bought one house in 1983. It was a small 2 bedroom, 1 bath house on a 40 x 60 ft lot in a nice location. We never had kids. We worked for the same university for 30+ years. We did a few remodeling home improvement projects over the years. We were completely comfortable and happy in this small nice house.

Mortgage interest rates were huge in the early 80’s. Our initial rate was 12%. Over the first 15 years we got it down under 5% and back onto the original 30 year schedule. We paid off the mortgage in 30 years. We saved a lot of money by not buying a bigger house. House prices skyrocketed but we benefited from the lower property tax rates secured by Proposition 13 in CA.

I ER’d 10 years ago at 55 years of age.

We were able to do this because we chose to stay in the small house and make small investments to make it a nicer living space. We didn’t need more space because we didn’t have children. We stayed at the same jobs and didn’t have to relocate for work or to get into a better school district. We chose a house in a nice location in the beginning.

 

[Letj]

I fired early in part because I kept the same mortgage payment for 21 years until I became financial independent.

 

[triangle]

If you already have a significant capital gain on the house you could look at selling to reset the cost basis as a positive factor in financial calculation. Of course real estate appreciation varies by location but in a couple of decades the home could double in value and if you then if sell in your peak earning years (and higher tax bracket) you could be subject to some capital gains tax on your home. Making it harder decision to sell later if can't roll all that home equity into another home or assets to retire on. But that would also mean that buying a 700K home now that is worth 1.4M later is an even bigger capital gain issue.

I could be wrong about that, I need to research this more myself, but I think the exclusion limit now is 250K single (divorced/widower??) and 500K married. Making it wise to move every decade or so to continually reset the cost basis, rather than keep the same home until your golden years. I wish I had known this earlier, as I thought the tax rule was if you bought another house within a year or so at the same price or higher there was no capital gain, but when causally looking into this recently I could not find that exclusion.

 

[davismills]

My late Father was a home building contractor circa 1950-1980. The average house size in his business area was probably between 1000 and 1500 sq ft.

His repeat business would be people in their 40s with 2-3 teenagers and they usually wanted MUCH bigger houses because they were feeling cramped.

Once their new houses were built, the kids moved out in short order to college and beyond.

Many of these customers admitted regret as the house was now too big with the fledglings gone.

 

[eytonxav]

This might be one of the worst times to move from what I read...

Agree, easy to sell but hard to buy the next one, unless you might be looking to move to a different location with a weaker real estate market.

 

[athena53]

My best advice to you is to view your home as a place to live and not as an investment even though it has aspects of an investment.

I agree with this. If your retirement plan includes "make a huge profit on the house when we downsize" it may not happen. DH and I barely broke even on our McMansion when we downsized in 2015 and we'd put a lot of improvements into it. Our eyes had been dazzled by the change in housing prices from NNJ, where we'd been, to the KC area, where we'd moved for my job. A house that size had never been in our budgets in NNJ. We still bought FAR less than we could afford but eventually it was too many bathrooms to clean, a pool to maintain, living in 3 levels... we just didn't need it and the attendant utility bills and property taxes. Fortunately, because we had a lot of savings and hadn't gone overboard on buying in KC, I was able to retire at age 61 (he was 15 years older and retired at 65).

Think about WHY you'd want a larger house and whether you'd enjoy it more. Don't think about potential gains that may or may not materialize.

 

[Markola]

^^^^^ That advice seems a tad too conservative in my experience, because so much depends on the neighborhood desirability, local area growth trends, the fit of one’s house for what’s desired by the market, and how long a person plans to own it so that it can compound before downsizing. We are on our 4th house, have made money on all of them after sweat equity, and I am reasonably confident we will come out ahead in this desirable, leafy college town, state capital neighborhood when we plan to downsize in 15-20 years. I see historic condos around here that we would enjoy and could pay cash for that cost equal to approximately the amount of equity we have after 7 years in this house. Obviously, I do include some home equity in the long term plan, even if as a safety valve. YMMV.

 

[anothercog]

My house is 2100 sq ft on a small lot with a driveway just big enough for 2 cars. It's 4 bedrooms so each of my 3 kids have their own (smallish) room that is used only for sleeping. Our attached 2-car garage has been converted to the kids study/play room so no cars go in there.

Over the years I have lamented not having a bigger house, preferably with an extra bedroom, more storage and bigger garage. However, it has been a blessing to my FIRE plan.

As George Carlin said, a house is a place for your stuff and the bigger your house, the more stuff you'll accumulate. Before you know it, you have too much stuff so you buy a bigger house and fill that too. We have remodeled to make the best use of our space but not having extra space prevents us from buying extra stuff we don't really need.

I have no space for a boat, rv, sports car, etc. so I don't own any of them. Also, less house to maintain is also more money saved. Lastly, it's a very comfortable floor plan for when we are empty nesters so no need to downsize if/when the kids move out.

 

[Scuba]

If you grow your family and feel tight in the space - do you have room to do an addition?

Do you foresee the possibility of relocation due to work? I'm in my third home - but the first two were sold because I moved out of the area for work.

Changing houses doesn't just change the amount borrowed... it adds transaction costs. (realtor fees, transfer taxes, points/mortgage fees, etc.) Those can add up. So moving frequently can hit savings hard.

Also depending on where you live, buying a more expensive home permanently increases your property taxes. When I was a lot younger, DH and I sold a property that would have been perfectly adequate for the two of us. We moved out of state and moved back a few years later, and bought another property similar to the one we had sold. The market had appreciated considerably and our property taxes are three times what they used to be.

 

[stedmakr]

A comfortable house, safe neighborhood, good school district and a low mortgage - if this is your scenario then enjoy it. All neighborhoods are different but we will look back on this time frame as a housing bubble. Suggest caution about making a large financial transaction during a bubble.

I've never understood the enjoyment of owning a house free and clear, especially if this is achieved by making extra premium payments. I always thought it wiser to put investable funds in the market.

 

[Markola]

I've never understood the enjoyment of owning a house free and clear, especially if this is achieved by making extra premium payments. I always thought it wiser to put investable funds in the market.

I don’t want to open up the mortgage/no mortgage can of worms that is never resolved, with good arguments on both sides. I will say that I always assumed we’d knock out the remaining mortgage balance once it gets down to $100k or so. However, the retirement math seems even more compelling for a 30 year mortgage if we were to instead refinance it at the 20 year mark, stretching that balance out for another 30 years. Of course, who knows about interest rates then, repairs we might want to finance and whether we’ll be ready to live somewhere else.