Major Purchase Now?

[Jerry1]

How would you evaluate whether or not to cancel a major purchase at this time. For example, say you were on the verge of a major home renovation and just about to sign the contract. Let’s say it’s big, $100K and that $100K is close to 10% of your current portfolio. Of course in percentage terms, it wasn’t that high when you started the planing.

In my case, it’s not as essential as a house remodel might be considered. My situation is a pool. It’s been a dream of mine and it goes along with a major landscaping project. Please don’t tell me how terrible a pool is (a hole to throw money in), I’m aware. The question is, how would you evaluate moving forward or not.

I think I’d be fine as long as things stabilize. I could even probably deal with the market going down another 20% before I’d have to think in terms of tightening my belt of taking SS a little earlier than planned. But of course, this current situation make one pause. So, how to evaluate going forward?

Note, I’d probably lose about $8K if I cancel. But of course that’s a lot less than making a $100K mistake.

 

[Fermion]

We debated over this exact thing trying to decide if we should move forward with our land purchase and build of a small house.

Since I had moved a chunk of money to cash in Jan to prepare for this purchase, it already has saved us some losses, so why not move forward with the project. I doubt building materials will get super cheap because of the virus and while there is a possibility that houses will get cheaper, it is not a guaranteed outcome.

Life keeps on ticking by, virus or no virus. Every day we delay is just a day we are getting older.

 

[Aerides]

I'd go for it based on financials, and also to make your home a better place to stay-in-place. But I'd probably just ask them to delay, with no penalty:

I'd be concerned about what to expect with permits and inspections if there's a longer term shutdown (county/city stuff etc.). Would hate to go ahead and get stuck with a hole in the ground but can't proceed because the inspection is on hold indefinitely until city staff are back in force and going out to homes. A pool takes several weeks - and that could be a lifetime in terms of what changes in daily life with covid.

ETA: If your city is more relaxed on that sort of thing, I'd be also asking for confirmation that your contractor has no sub-contractor dependencies that could be impacted. Basically find out what all the ducks are before you ask if they are all in a row.

 

[Dogpeace]

How much of a hurry are you in? If we are on the verge of a big recession, chances are this time next year your contract could be had for a lot less, if contractors get desperate for work.

 

[GreenEggs]

How would you evaluate whether or not to cancel a major purchase at this time. For example, say you were on the verge of a major home renovation and just about to sign the contract. Let’s say it’s big, $100K and that $100K is close to 10% of your current portfolio. Of course in percentage terms, it wasn’t that high when you started the planing.

In my case, it’s not as essential as a house remodel might be considered. My situation is a pool. It’s been a dream of mine and it goes along with a major landscaping project. Please don’t tell me how terrible a pool is (a hole to throw money in), I’m aware. The question is, how would you evaluate moving forward or not.

I think I’d be fine as long as things stabilize. I could even probably deal with the market going down another 20% before I’d have to think in term of tightening my belt of taking SS a little earlier than planned. But of course, this current situation make one pause. So, how to evaluate going forward?

Note, I’d probably lose about $8K if I cancel. But of course that’s a lot less than making a $100K mistake.

Can you adjust the project to lower the cost some without losing the $8K?

 

[Fermion]

How much of a hurry are you in? If we are on the verge of a big recession, chances are this time next year your contract could be had for a lot less, if contractors get desperate for work.

Is this true though? I mean there is a minimum people are willing to work for and materials seem to go up in price no matter what happens with the economy. I have never known a city or county to reduce the cost of a permit during a recession. Oil is practically free now which makes it cheaper now for shipping and construction.


The only thing that could be significantly effected is home prices. Some of the million dollar homes might get sold for half that in a severe recession.

 

[omni550]

How much of a hurry are you in? If we are on the verge of a big recession, chances are this time next year your contract could be had for a lot less, if contractors get desperate for work.

I had a boss who loved high-end things and loved to shop.

She was literally in the midst of a gi-normous kitchen remodel when 9/11 happened. Opportunistically, she went out and bought all sorts of kitchen-related things on 9/11 (and the few days thereafter), as she was able to get great pricing while everyone else was reeling from the shock. Years afterward she was still pointing out the truly amazing deals she had gotten.

omni

 

[like2]

If you know it is something you will use and enjoy, then I say do it! Myself, I love being home, and have always tried to make my home as comfortable and enjoyable as I can.

Of course, I say this as long as it doesn't put you in any financial distress and it didn't sound like it would.

 

[neihn]

Same dilemma here. We are moving from FL to OR, housing in OR is very much double in price compares to FL. We set aside money (the proceed of selling FL home + 150k) for down payment (80% down payment). We still own a townhouse in OR, which, my son and his girl friend stay and pay rent. Part of me want to move to the townhouse stay with my son wait and see what is going on with the market (stock market, housing market). My wife on another hand wants comfort in her own home.

 

[Masquernom]

I suspect the US (and global) economy are going into a recession. May be a bad one. The cost of labor and goods tend to go down in a recession I believe.

 

[RetiredAt55.5]

A pool is a very discretionary purchase.

I agree with the others that said waiting will likely get you a very good deal, since pool companies will be challenged to find new customers in a bad economy.

 

[Ready]

In Southern California all non-essential work has completely stopped so even if we had planned to add a pool the work could not commence until after the ban on non-essential work is lifted. By that time we may have a better idea of where the stock market is headed and how bad any recession may end up being.

If the virus peaks in a few weeks and then begins a gradual decline we may go back to a relatively normal life as we knew it. But if the virus infections continue to grow for months, things could get really bad. At that point I would not want to be thinking about major purchases that were not necessary.

 

[pb4uski]

I think I might wait.... in 3-4 months you may be able to have that work done for a lot less than $100k.

 

[Jerry1]

I'm of the belief that time will not get me a better deal. I have the following as a basis for that belief:

1. The company is a great company. I don't think they'll be hurting for work. I guess if I re-shop, maybe a better deal.
   
2. The customer base is probably one with more funds than me. I'm thinking they won't be getting many cancellations.
   
3. I don't see material cost going down significantly.

Plus, if I lose my deposit, that's about 8% of the job. Does it seem reasonable that the price would go down 8%?

Of course I don't know. I've never been through anything like this before, certainly not with any major purchase in the works.

 

[SumDay]

In early February, we signed a contract to have some windows and a couple of doors replaced by Renewal by Anderson. We've already put 50% down, and the rest is due next week when they install. If I knew then what I know now, I wouldn't have this work done.

I agree with pb4uski - I'll bet if we'd started looking at these windows in a couple of months, we'd save a bunch. I made the IRA withdrawal for this when the market was way up, so at least there's that.

I think contractors are going to be hurtin' for certain pretty soon, with only emergency/essential work being done.

 

[REWahoo]

Of course I don't know. I've never been through anything like this before...

If you had you would know that after 2008/2009 all three of your statements would be incorrect to one degree or another.

 

[socca]

One option: call the contractor and ask whether they would be willing to delay starting the project by X months in exchange for a $Y contract change fee. For example, paying Y=$1k now to delay the project start by X=6 months could be well worth it.

Other than that, it looks like you're in the gray zone between 'obvious to continue' and 'obvious to cancel'. These are often the trickiest decisions to make. Good luck!

 

[capjak]

Do you have stable income?

If I had stable income paying most of my bills than I would move forward. I would think about how it would be if as much as a 50% decline from here in market happened.

 

[Ready]

If the workers get sick they won’t be able to install a pool. All it will take is one worker to get the virus and everyone else will need to quarantine. It’s just not practical for them to be doing non essential jobs while the virus is rapidly expanding across the country.

A month ago the airline industry was booming. Now planes are flying with a handful of people on them and the industry needs a bailout. Nobody would have predicted this and we have no idea what could happen to this pool company or any construction based company. These are unprecedented times.

 

[Moemg]

Things can get a lot worse so unless I had a decent pension and the ability to sleep no matter what happens I would wait . After the 2008-2009 drop companies were giving deals like crazy .

 

[FIREd]

If I had a solid pension covering my needs and more, I'd go ahead with it. If I was living solely off my investments, I'd wait.

 

[38Chevy454]

I think the shutdown of things will cause a natural delay on your pool project. I would suggest talking to the contractor and see what he says about delaying. He will not want to as that is his income stream, but also he knows that if he can't get permits and inspections and materials, it may be inevitable.
As for paying for it using the funds that have reduced in value thanks to the market drop - how about changing to a HELOC as the funding source? That way keep finds in your account and wait for the recovery and pay it back once you are not so negative.

 

[Jerry1]

So a couple answers to some points made:

I have a pension for about 1/3 my spending. In 3 yrs DW will be FRA and we plan on starting her SS for another 1/3. Then 4 years after than, I'll be FRA and the other 1/3 will be met. At that point, my budget will be met with a less than 1% withdraw rate. That's if we don't tighten our belts.

As for the cash, I just signed papers to borrow $100K for 2.75% so I will not be taking immediate cash. The load is still cancellable until about the end of April. Also, I don't expect the pool to start until about that time assuming good circumstances. Our hope was to have it running for half the summer.

 

[pb4uski]

....Now planes are flying with a handful of people on them .... These are unprecedented times.

On the first part I heard that flights are 25-50% full but that is on a reduced schedule of flights.

On the second part.... totally agree.

 

[pb4uski]

I'm of the belief that time will not get me a better deal. I have the following as a basis for that belief:

1. The company is a great company. I don't think they'll be hurting for work. I guess if I re-shop, maybe a better deal.
   
2. The customer base is probably one with more funds than me. I'm thinking they won't be getting many cancellations.
   
3. I don't see material cost going down significantly.

Plus, if I lose my deposit, that's about 8% of the job. Does it seem reasonable that the price would go down 8%?

Of course I don't know. I've never been through anything like this before, certainly not with any major purchase in the works.

Well, since you're so sure, by all means go ahead.