Best in the worst or worst in the best?
July 12, 2020 9:23 AM Subscribe
How much should we care about the school system when buying a home while pregnant?
We are looking at going from renters in San Francisco to purchasing our first house in Sonoma County sometime this year. I'm also pregnant with our first child.
How much should we care about the school system at this early stage?
We are planning to buy something cheaper than we can afford (so unAmerican!) but our agreed upon budget looks like it puts us in very low scoring school districts. If you've been in this position before, would you stay thrifty and then move in 5 years to a better school district? Or would you put in more money than you really want (but can handle with some pressure) and get your first home in a better school district?
I realize this is unique to everyone's personal finances but I'd love to hear any stories from those that have had to make this type of decision before.
We are looking at going from renters in San Francisco to purchasing our first house in Sonoma County sometime this year. I'm also pregnant with our first child.
How much should we care about the school system at this early stage?
We are planning to buy something cheaper than we can afford (so unAmerican!) but our agreed upon budget looks like it puts us in very low scoring school districts. If you've been in this position before, would you stay thrifty and then move in 5 years to a better school district? Or would you put in more money than you really want (but can handle with some pressure) and get your first home in a better school district?
I realize this is unique to everyone's personal finances but I'd love to hear any stories from those that have had to make this type of decision before.
I say don't care too much about schools right now.
I'm also in California, though not in Sonoma. We bought our house, in a "bad" school area, thinking we were never going to have a kid...and then we had a kid. Short version: we looked into moving but couldn't afford it and instead did a thorough deep-dive into all of the public school options. That meant really investigating these "bad" schools (turned out to be not so bad), magnets, charters, special district permits, every possible existing program, etc. My kid's going into 12th next year and we've been in public schools all the way, very happy with how it all turned out, can't beat the price, and he's never attended his actual home schools.
posted by BlahLaLa at 9:47 AM on July 12, 2020 [3 favorites]
I'm also in California, though not in Sonoma. We bought our house, in a "bad" school area, thinking we were never going to have a kid...and then we had a kid. Short version: we looked into moving but couldn't afford it and instead did a thorough deep-dive into all of the public school options. That meant really investigating these "bad" schools (turned out to be not so bad), magnets, charters, special district permits, every possible existing program, etc. My kid's going into 12th next year and we've been in public schools all the way, very happy with how it all turned out, can't beat the price, and he's never attended his actual home schools.
posted by BlahLaLa at 9:47 AM on July 12, 2020 [3 favorites]
I would not look at the schools' test scores; my son's school has the lowest test scores in the district because we are the neighborhood where there are many more immigrants and ESL students. His experience is fine. If there are other concerns with the school--class size, safety, etc. then that's different, but just test scores I wouldn't worry about.
But I would say not to bank on your excitement about moving in five years. It's very easy to get rooted in a neighborhood (around preschool, day care, etc.) The economy could do weird things, you could have another kid and realize that moving with two small children is too much work, or any number of other things. I thought I was buying a five-year house, but I suspect this is more of a 20-year house, which is fine, but not what I planned.
posted by gideonfrog at 9:50 AM on July 12, 2020 [5 favorites]
But I would say not to bank on your excitement about moving in five years. It's very easy to get rooted in a neighborhood (around preschool, day care, etc.) The economy could do weird things, you could have another kid and realize that moving with two small children is too much work, or any number of other things. I thought I was buying a five-year house, but I suspect this is more of a 20-year house, which is fine, but not what I planned.
posted by gideonfrog at 9:50 AM on July 12, 2020 [5 favorites]
No. If you are about to have children, do NOT buy a home in an area with shitty schools unless you have money for private school or are willing to navigate magnet/charter options. Start thinking about schools now.
If you think you are gonna move in 5 years just rent for the short term and save your money.
posted by gnutron at 10:12 AM on July 12, 2020 [5 favorites]
If you think you are gonna move in 5 years just rent for the short term and save your money.
posted by gnutron at 10:12 AM on July 12, 2020 [5 favorites]
Best answer: Buy the house that you like best in a community that you like, and don't worry about test scores. Schools can change a lot in a short time, and by the time your child enters school you may have a very different idea of what you're looking for in a school. Also, test scores shouldn't be the only basis for school selection; in my experience with our Large Urban school district high test scores may be a better indicator of wealthy families and stressed-out kids than excellent instruction. My youngest is at a magnet school with decent but not outstanding test scores, but it has strong leadership, a fantastic arts program, a good parent community, and compassionate support for my kid's various medical issues - and I like this school so much more than my older kid's former high-scoring gifted school. Whether before or after you buy your house, start talking to as many parents as you can about their schools and why they like them.
posted by sencha at 10:14 AM on July 12, 2020 [13 favorites]
posted by sencha at 10:14 AM on July 12, 2020 [13 favorites]
You can take a purely mathematical approach. Price private schools and see which is cheaper—that or your larger mortgage. But remember that mortgages are fixed rate (unless they're not) and the price of schools goes up every year.
Also just looking at school scores online doesn't tell you everything. You may want to visit the schools (you know, normally, not during a pandemic) and get a feel for them.
posted by jeffamaphone at 10:16 AM on July 12, 2020 [1 favorite]
Also just looking at school scores online doesn't tell you everything. You may want to visit the schools (you know, normally, not during a pandemic) and get a feel for them.
posted by jeffamaphone at 10:16 AM on July 12, 2020 [1 favorite]
I don't know how much you should pay attention to school "quality". However, I do know finances.
The median house price in Sonoma County is $657,244 per Zillow. If there's even a chance you would move in 5 years, you should probably rent until then. If you assume a (thrifty) 2.5% sellers/2.5% buyers agent commission (saving a bit from the 6% standard commission), a 0.11% "documentary transfer tax" (in Sonoma, but outside Santa Rosa/Petaluma), $1500 in seller-paid closing costs, and $3000 in moving costs, selling your first property will cost $38,085.
An alternate way to view this is you could move to a rental that's $634.75/month more expensive than you have right now and end up the same financially as you would if you deliberately bought a house only to live in it for five years.
There are deductions for mortgage interest and property tax that may change this calculus, but that depends on your individual situation. Further, property can appreciate or depreciate over time, which also clouds the analysis.
posted by saeculorum at 10:23 AM on July 12, 2020 [9 favorites]
The median house price in Sonoma County is $657,244 per Zillow. If there's even a chance you would move in 5 years, you should probably rent until then. If you assume a (thrifty) 2.5% sellers/2.5% buyers agent commission (saving a bit from the 6% standard commission), a 0.11% "documentary transfer tax" (in Sonoma, but outside Santa Rosa/Petaluma), $1500 in seller-paid closing costs, and $3000 in moving costs, selling your first property will cost $38,085.
An alternate way to view this is you could move to a rental that's $634.75/month more expensive than you have right now and end up the same financially as you would if you deliberately bought a house only to live in it for five years.
There are deductions for mortgage interest and property tax that may change this calculus, but that depends on your individual situation. Further, property can appreciate or depreciate over time, which also clouds the analysis.
posted by saeculorum at 10:23 AM on July 12, 2020 [9 favorites]
Best answer: I probably wouldn't buy a house where you think you would be genuinely unhappy to stay more than 5 years, because the rest of your life develops around your location and it can be more difficult to move than you think it will be. (That said, around the start of kindergarten is generally a good time to make a move, and you'll have the advantage of actually knowing your child and their needs at that point.)
However, "bad" school districts can be relative. Definitely don't base everything on test scores, which tend to correlate much more to overall affluence than actual educational quality. The elementary school in my zone and the elementary school in the zone next to us have similar stats but everyone in the neighboring zone seems to be really happy with their school and for whatever reason the school in my zone has a lot of administrative and teacher turnover. So asking around about the actual experience of the schools can be helpful.
posted by The Elusive Architeuthis at 10:34 AM on July 12, 2020 [3 favorites]
However, "bad" school districts can be relative. Definitely don't base everything on test scores, which tend to correlate much more to overall affluence than actual educational quality. The elementary school in my zone and the elementary school in the zone next to us have similar stats but everyone in the neighboring zone seems to be really happy with their school and for whatever reason the school in my zone has a lot of administrative and teacher turnover. So asking around about the actual experience of the schools can be helpful.
posted by The Elusive Architeuthis at 10:34 AM on July 12, 2020 [3 favorites]
If you are about to have children, do NOT buy a home in an area with shitty schools
Shitty test scores do not equate to shitty schools.
posted by DarlingBri at 10:36 AM on July 12, 2020 [16 favorites]
Shitty test scores do not equate to shitty schools.
posted by DarlingBri at 10:36 AM on July 12, 2020 [16 favorites]
Read everything Nicole Hannah Jones has written for the New York Times about school quality. Sit with the feelings that come up while you are reading.
Buy the home you can afford most easily. Do not pay more money for a home where the difference boils down to “is in a whiter neighborhood with bigger tax base.” Be a good Neighbor when you move in, advocating for and truly supporting the schools ASAP. This means attending meetings and listening more than you talk for the first year or two.
posted by bilabial at 10:51 AM on July 12, 2020 [24 favorites]
Buy the home you can afford most easily. Do not pay more money for a home where the difference boils down to “is in a whiter neighborhood with bigger tax base.” Be a good Neighbor when you move in, advocating for and truly supporting the schools ASAP. This means attending meetings and listening more than you talk for the first year or two.
posted by bilabial at 10:51 AM on July 12, 2020 [24 favorites]
I decided school districts didn't matter, and put my kindergartener in the local low-performing school. Worst mistake of my life. The kid did worksheets all day and the staff did not work with me to figure out his learning disability. When it turned out he needed an IEP, they were actively hostile.
We moved to a much nicer school district and the difference has been astounding. It's less about the quality of instruction, which is certainly higher, and more about how well the staff works with us instead of against us. So from my personal experience -- it matters.
posted by woodvine at 11:07 AM on July 12, 2020 [7 favorites]
We moved to a much nicer school district and the difference has been astounding. It's less about the quality of instruction, which is certainly higher, and more about how well the staff works with us instead of against us. So from my personal experience -- it matters.
posted by woodvine at 11:07 AM on July 12, 2020 [7 favorites]
Best answer: In your position, I would not buy a house where the elementary school situation was unworkable for me. I think the values that a school teaches are important and would need to be in line with (or at least not conflicting with) mine, the school would need to have a good attitude to bullying and other related issues, and not have a 'rote learning' attitude to education. Grades at elementary level would be less important.
posted by plonkee at 11:16 AM on July 12, 2020 [4 favorites]
posted by plonkee at 11:16 AM on July 12, 2020 [4 favorites]
We don’t even have kids but tried to buy in a good school area because we knew it would help with resale value and also aid in the quick turnover if we find ourselves needing to move.
We have also owned in an area with poor schools - our taxes were still high with the ongoing efforts to “turn around” the schools, and we know buyers definitely paid attention to the school factor....
posted by Tandem Affinity at 11:32 AM on July 12, 2020 [2 favorites]
We have also owned in an area with poor schools - our taxes were still high with the ongoing efforts to “turn around” the schools, and we know buyers definitely paid attention to the school factor....
posted by Tandem Affinity at 11:32 AM on July 12, 2020 [2 favorites]
You need to dig more to see why the schools are bad. Here’s the thing about averages: a school with 20 kids who score 100% on a test, 43 kids who score 70%, and 37 kids who score 0% will have the same rating as a school that has all its kids score 50%. There are two ways you can view the school with the higher variance, but the lower variance school is probably not a good school. The question with the higher variance school is, what accounts for the variance? Is there something different in how the 20 high achievers are treated? Is it reproducible? And will your kid be able to be treated that way?
Because I speak from experience: I went to low-average high-variance schools, and I’m extremely glad I did. Quite a few of my classmates went on to Ivy League colleges, several have Ph.D.s, and, as I’ve mentioned in similar threads, one has an EGOT. That said, I also have at least two classmates who have been convicted of murder. It didn’t matter much to us at the time, though, because the high-achiever school was almost completely separate from the low-achiever school, despite being in the same building. We existed in our own high-achieving bubble, only ever really being aware of the other side when we’d get locked down for drug or weapons searches. I would actually recommend this approach over a “better” school, because we got the benefits of a good school while still being exposed to people of different classes and backgrounds.
So yeah, look beyond mere scores. I was discussing my EGOT acquaintance with a college friend once, and he (the college friend) became convinced that performing arts programs are the key to evaluating school quality. A school with an outstanding performing arts program will almost certainly be well-funded, and there will almost certainly be hands-on teachers willing to go beyond the curriculum on behalf of students. On the flip side, it helps you see if a school with high test scores is actually a good school or is just fortunate to have students who are more likely to score well on tests (i.e., rich kids).
posted by kevinbelt at 11:37 AM on July 12, 2020 [2 favorites]
Because I speak from experience: I went to low-average high-variance schools, and I’m extremely glad I did. Quite a few of my classmates went on to Ivy League colleges, several have Ph.D.s, and, as I’ve mentioned in similar threads, one has an EGOT. That said, I also have at least two classmates who have been convicted of murder. It didn’t matter much to us at the time, though, because the high-achiever school was almost completely separate from the low-achiever school, despite being in the same building. We existed in our own high-achieving bubble, only ever really being aware of the other side when we’d get locked down for drug or weapons searches. I would actually recommend this approach over a “better” school, because we got the benefits of a good school while still being exposed to people of different classes and backgrounds.
So yeah, look beyond mere scores. I was discussing my EGOT acquaintance with a college friend once, and he (the college friend) became convinced that performing arts programs are the key to evaluating school quality. A school with an outstanding performing arts program will almost certainly be well-funded, and there will almost certainly be hands-on teachers willing to go beyond the curriculum on behalf of students. On the flip side, it helps you see if a school with high test scores is actually a good school or is just fortunate to have students who are more likely to score well on tests (i.e., rich kids).
posted by kevinbelt at 11:37 AM on July 12, 2020 [2 favorites]
Our child is two and currently we are buying or first house. School conciderations are a part of it, but not too much. Partly this is that there is opportunities to go to non neighborhood schools and there is some income where we can consider charter/private school if needed, though we would prefer public education and would likely only default to non neighborhood if things really were not working out for some reason. More of a concideration was commute times to and from those places, and commute times to places of employment. We are buying in a area with a high percentage of esl students which really changes test score numbers, and we really value an experience of diversity in education. We did not look beyond elementary school education statistics at all.
posted by AlexiaSky at 11:42 AM on July 12, 2020
posted by AlexiaSky at 11:42 AM on July 12, 2020
A lot of this is going to depend on emotional factors like your willingness to sell your house and move in five years. As previous commenters said, I'd also encourage you to dig into why the one school district is under-performing (perhaps it is just socioeconomics rather than bad teachers or poor funding, etc.), and whether your child is likely to get a good education there or not.
But just from a more number-oriented standpoint, if I were in your shoes, I'd think about what house prices are doing in the area where you're thinking of buying now, and in the area(s) you're thinking of moving to in five years:
- If the latter are appreciating faster than the former (and if they seem likely to continue to do so), you'll likely be priced out in five years, so you'd be wise to move to the home in the better school district now and simply suck up the extra cost.
- If they're appreciating at a similar rate, you could move to the cheaper area now, as long as you're willing and able to pay the cost to sell your house and move in five years (6% to realtors, plus associated costs of moving - staging your house potentially, repairs, and the actual cost of moving your stuff). I'd be pretty wary of this, simply because selling houses and moving are expensive, disruptive, and stressful, especially if you're trying to do it on a tight schedule of trying to do it the year before your kid enters school.
- If we're likely to enter a recession that will impact real estate prices, or if California real estate in particular appears to be overvalued and the bubble is likely to burst, I'd continue to rent and wait to buy anything until after those events.
If I were in your shoes, I would determine if the more expensive neighborhood were actually affordable for me (so, I would make sure that there is room in the budget for unexpected house expenses [which always come up, especially at the outset], but I would be prepared to tighten the belt a bit by cutting out some take-out or whatever). If it were actually affordable, I would go with the house in the better neighborhood now. Moving is stressful and expensive, selling a house is stressful and expensive, trying to time selling and buying to coordinate is stressful and expensive, and so I wouldn't be game to do it twice in five years if it could be avoided.
posted by ClaireBear at 11:51 AM on July 12, 2020
But just from a more number-oriented standpoint, if I were in your shoes, I'd think about what house prices are doing in the area where you're thinking of buying now, and in the area(s) you're thinking of moving to in five years:
- If the latter are appreciating faster than the former (and if they seem likely to continue to do so), you'll likely be priced out in five years, so you'd be wise to move to the home in the better school district now and simply suck up the extra cost.
- If they're appreciating at a similar rate, you could move to the cheaper area now, as long as you're willing and able to pay the cost to sell your house and move in five years (6% to realtors, plus associated costs of moving - staging your house potentially, repairs, and the actual cost of moving your stuff). I'd be pretty wary of this, simply because selling houses and moving are expensive, disruptive, and stressful, especially if you're trying to do it on a tight schedule of trying to do it the year before your kid enters school.
- If we're likely to enter a recession that will impact real estate prices, or if California real estate in particular appears to be overvalued and the bubble is likely to burst, I'd continue to rent and wait to buy anything until after those events.
If I were in your shoes, I would determine if the more expensive neighborhood were actually affordable for me (so, I would make sure that there is room in the budget for unexpected house expenses [which always come up, especially at the outset], but I would be prepared to tighten the belt a bit by cutting out some take-out or whatever). If it were actually affordable, I would go with the house in the better neighborhood now. Moving is stressful and expensive, selling a house is stressful and expensive, trying to time selling and buying to coordinate is stressful and expensive, and so I wouldn't be game to do it twice in five years if it could be avoided.
posted by ClaireBear at 11:51 AM on July 12, 2020
Best answer: Also, I want to say that I do applaud your instinct to be frugal. I was raised that way (my parents had a huge aversion to debt, including mortgages), and I have a lot of respect for it. That said, I want to push back a bit against one of your assumptions - the idea that buying a cheaper house is necessarily "thrifty" in a way that is ultimately more financially responsible. Buying an expensive house isn't like buying an expensive car: the car will depreciate until it's worth nothing, while the house will likely go up in value (even discounting inflation), often substantially. In my native city, for instance, prices have skyrocketed, and people's houses are worth literally 10x what they paid for them 25 years ago. Obviously YMMV, but there are very few areas of the country where house prices are actually declining. And with houses, you can leverage yourself 5x (since the standard is to put down 20%). So, I think it can be more helpful to think about houses like investment vehicles that you happen to be able to live in - more analogous to buying stocks than cars.
My personal strategy is that if an area is having skyrocketing house prices, I think it makes the most sense to buy the most expensive place you can comfortable afford with a longer-term mortgage (30 years) and the smallest down payment you're comfortable with, in order to ride the wave upwards with as much leverage as possible. In an area where house prices are flat or rising more modestly, I think it makes more sense to buy something modest, maybe with a larger down payment, and get a shorter-term mortgage (to save money on interest and build equity faster). For instance, my husband and I have a 10-year mortgage on a cheaper property (my husband was not bullish on house prices in our current city); I did a comparative amortization calculator before we decided. If we had done a 30-year mortgage, our monthly payments would have started out with about 2/3 going to paying interest; instead, with a 10-year mortgage, they started out as approximately 4/5 towards principal and only 1/5 to interest. If the prices in one's area are going up very quickly, it makes sense to pay the extra interest as a sort of fee to be able to buy in to the area and ride the wave up, but if prices are not escalating like that, I think it's more sensible to try to minimize interest and build equity, especially if you think you'll sell within 5-10 years (when the payments on a 30-year mortgage are so heavily interest). We will likely sell in five years, and should have half of the mortgage paid off by then with our 10-year mortgage.
So some of this choice is becoming familiar with the housing market in your area, and making an educated bet on what you think prices are likely to do. If you decide to go with the cheaper area, I'd encourage you to look at the cheapest houses you can stomach, with 10-year, 15-year or even 20-year mortgages. First, the rates are so much better (we have a 10-year at 2.375%, versus maybe 3% for a 30-year), and second, you save so much on interest over the life of the loan because the term is shorter. Especially if you're thinking of selling in five years, a shorter-term mortgage may mean the difference between paying mostly interest for the next five years, or being able to build substantial equity in your home that you can trade in in five years for something in a better area.
(Others on here might advise you against thinking of real estate as an investment that can make you money, but I have been happy with it over the past five years with multiple properties. There are of course costs and risks associated with owning real estate that don't present themselves with something more abstract like stocks. But I think that real estate tends to be more stable than the stock market, it obviously presents the advantage of providing you somewhere to live, and profits from a house sale are generally tax free if it's been your primary residence. Also, I find that there's something reassuringly tangible about owning real property rather than abstract stocks.)
posted by ClaireBear at 12:25 PM on July 12, 2020 [10 favorites]
My personal strategy is that if an area is having skyrocketing house prices, I think it makes the most sense to buy the most expensive place you can comfortable afford with a longer-term mortgage (30 years) and the smallest down payment you're comfortable with, in order to ride the wave upwards with as much leverage as possible. In an area where house prices are flat or rising more modestly, I think it makes more sense to buy something modest, maybe with a larger down payment, and get a shorter-term mortgage (to save money on interest and build equity faster). For instance, my husband and I have a 10-year mortgage on a cheaper property (my husband was not bullish on house prices in our current city); I did a comparative amortization calculator before we decided. If we had done a 30-year mortgage, our monthly payments would have started out with about 2/3 going to paying interest; instead, with a 10-year mortgage, they started out as approximately 4/5 towards principal and only 1/5 to interest. If the prices in one's area are going up very quickly, it makes sense to pay the extra interest as a sort of fee to be able to buy in to the area and ride the wave up, but if prices are not escalating like that, I think it's more sensible to try to minimize interest and build equity, especially if you think you'll sell within 5-10 years (when the payments on a 30-year mortgage are so heavily interest). We will likely sell in five years, and should have half of the mortgage paid off by then with our 10-year mortgage.
So some of this choice is becoming familiar with the housing market in your area, and making an educated bet on what you think prices are likely to do. If you decide to go with the cheaper area, I'd encourage you to look at the cheapest houses you can stomach, with 10-year, 15-year or even 20-year mortgages. First, the rates are so much better (we have a 10-year at 2.375%, versus maybe 3% for a 30-year), and second, you save so much on interest over the life of the loan because the term is shorter. Especially if you're thinking of selling in five years, a shorter-term mortgage may mean the difference between paying mostly interest for the next five years, or being able to build substantial equity in your home that you can trade in in five years for something in a better area.
(Others on here might advise you against thinking of real estate as an investment that can make you money, but I have been happy with it over the past five years with multiple properties. There are of course costs and risks associated with owning real estate that don't present themselves with something more abstract like stocks. But I think that real estate tends to be more stable than the stock market, it obviously presents the advantage of providing you somewhere to live, and profits from a house sale are generally tax free if it's been your primary residence. Also, I find that there's something reassuringly tangible about owning real property rather than abstract stocks.)
posted by ClaireBear at 12:25 PM on July 12, 2020 [10 favorites]
If you're buying I say buy in an area you like, with an established school system you like, in a house large enough to hold your expanding family. Also take your time and don't settle for things you don't want. I know two couples that are moving this month from homes they lived in 5 and 8 years to areas with better schools. I know 1 couple who purchased a 2 bedroom condo because they got tired of looking despite knowing they planned to have 3 kids and are now, after 4 years on a search for a larger home and a better school district. all of them were/are very concerned about selling their previous homes. it just doesn't seem worth the hassle.
posted by simplethings at 12:44 PM on July 12, 2020
posted by simplethings at 12:44 PM on July 12, 2020
As an add-on to my last comment, I have found this amortization calculator very helpful. You fill in the mortgage amount (not the house price - just the amount you'd be borrowing), the length of the mortgage (30 years, 10 years, or whatever), and the interest rate. Then you click on "show amortization schedule" at the bottom right, and it will tell you, by month, how much is going to principal vs interest, what the total interest is that you've paid to that point, and what the balance on your mortgage is at that point (i.e. what you still owe). You can see at what house price point a shorter-term mortgage is doable for you.
To give more specifics: when I was deciding on our strategy, I'd have two or three different tabs open in my browser, and complete the amortization calculator with each option, and then directly compare them. For job-related reasons, we're likely to sell our house in the summer of 2025, after owning it for 5.5 years. So I would compare, say, the "July 2025" line on all three tabs. We had been deciding between a 15-year mortgage, or tightening our belts and doing a 10-year mortgage, or getting a more expensive house and doing a 30-year mortgage. Looking at the comparison of the interest we would have paid with each option and the equity we would have gotten really swayed me to the 10-year mortgage for us, especially when I saw that we would have half our mortgage paid off at that point with the 10-year mortgage. We're likely going to move for job-related reasons to a higher cost area of the country in five years, and being able to take high five figures from our house upon our move was a powerful part of the calculus in favor of a 10-year mortgage for us (versus, say, 1/5 of that with a 30-year mortgage). It also makes clear the high cost of renting money, even at good interest rates. It really persuaded me that I'd have to be really very confident of prices rising dramatically in our neighborhood to want to pick the 30-year mortgage with a more expensive house. (The latter could make sense if, say, we bought a $600,000 house with a 30-year mortgage because we felt pretty sure it was going to be worth $800,000 in five years: then, even though we wouldn't have gained much equity through our mortgage payments [since it would have been mostly interest in the first five years], we'd gain the $200,000 appreciation [minus realtor etc. fees]; however that isn't the situation in our area.)
Your choice is different since you can either move in five years or not, while we're definitely moving. It might make the most sense for you either to buy into the nicer neighborhood now and plan to stay there (and avoid moving costs), or to buy the cheapest decent house in the less good neighborhood with a shorter-term mortgage now and actively plan to move to the nicer neighborhood in five years by using your accumulated equity at that point. But run the numbers and include them in with more emotional and gut feeling factors.
posted by ClaireBear at 1:13 PM on July 12, 2020
To give more specifics: when I was deciding on our strategy, I'd have two or three different tabs open in my browser, and complete the amortization calculator with each option, and then directly compare them. For job-related reasons, we're likely to sell our house in the summer of 2025, after owning it for 5.5 years. So I would compare, say, the "July 2025" line on all three tabs. We had been deciding between a 15-year mortgage, or tightening our belts and doing a 10-year mortgage, or getting a more expensive house and doing a 30-year mortgage. Looking at the comparison of the interest we would have paid with each option and the equity we would have gotten really swayed me to the 10-year mortgage for us, especially when I saw that we would have half our mortgage paid off at that point with the 10-year mortgage. We're likely going to move for job-related reasons to a higher cost area of the country in five years, and being able to take high five figures from our house upon our move was a powerful part of the calculus in favor of a 10-year mortgage for us (versus, say, 1/5 of that with a 30-year mortgage). It also makes clear the high cost of renting money, even at good interest rates. It really persuaded me that I'd have to be really very confident of prices rising dramatically in our neighborhood to want to pick the 30-year mortgage with a more expensive house. (The latter could make sense if, say, we bought a $600,000 house with a 30-year mortgage because we felt pretty sure it was going to be worth $800,000 in five years: then, even though we wouldn't have gained much equity through our mortgage payments [since it would have been mostly interest in the first five years], we'd gain the $200,000 appreciation [minus realtor etc. fees]; however that isn't the situation in our area.)
Your choice is different since you can either move in five years or not, while we're definitely moving. It might make the most sense for you either to buy into the nicer neighborhood now and plan to stay there (and avoid moving costs), or to buy the cheapest decent house in the less good neighborhood with a shorter-term mortgage now and actively plan to move to the nicer neighborhood in five years by using your accumulated equity at that point. But run the numbers and include them in with more emotional and gut feeling factors.
posted by ClaireBear at 1:13 PM on July 12, 2020
Lots of great advice above about the finances around this ... I would only add that you should be aware that school districts can and do change. You might buy into District A today, a school feeder pattern that you love, and find out in 3 years that the district is changing all the boundaries and your child will be sent to a completely different school halfway across the city. Nothing you can *do* about that, really, but don't pay too much of a premium for something that might be taken away from you.
posted by mccxxiii at 6:30 PM on July 12, 2020 [1 favorite]
posted by mccxxiii at 6:30 PM on July 12, 2020 [1 favorite]
In my native city, for instance, prices have skyrocketed, and people's houses are worth literally 10x what they paid for them 25 years ago.
10X what they paid 25 years ago. I'm sure there are a few, but the 3-2 home in a BFE college town in 1995 was $100k, and hadn't been updated since it was built in 1982. So 10X is $1m. My sister's condo at the same time in San Diego cost $300k. It is not worth $3 million now.
So even in hot real-estate CA, stories like this are mostly exaggerations. It's easy to see:
Huntington Beach CA - $1m Check the price & tax history in Zillow. It was sold for $300k in 1998, $400k in 2001. So it's roughly doubled in the last 20 years.
Sonoma is no different.
Sonoma CA $1.2m Sold for $225 in 2000. Now $1.2m, so 4X.
Sonoma $995 3X since 1998.
So over 5 years, you can expect your house to approximately appreciate at 5% a year in Sonoma.
posted by The_Vegetables at 8:41 AM on July 15, 2020
10X what they paid 25 years ago. I'm sure there are a few, but the 3-2 home in a BFE college town in 1995 was $100k, and hadn't been updated since it was built in 1982. So 10X is $1m. My sister's condo at the same time in San Diego cost $300k. It is not worth $3 million now.
So even in hot real-estate CA, stories like this are mostly exaggerations. It's easy to see:
Huntington Beach CA - $1m Check the price & tax history in Zillow. It was sold for $300k in 1998, $400k in 2001. So it's roughly doubled in the last 20 years.
Sonoma is no different.
Sonoma CA $1.2m Sold for $225 in 2000. Now $1.2m, so 4X.
Sonoma $995 3X since 1998.
So over 5 years, you can expect your house to approximately appreciate at 5% a year in Sonoma.
posted by The_Vegetables at 8:41 AM on July 15, 2020
The_Vegetables, I'm sure it's regional, and maybe Philly is unusual (there's a huge resurgence in Philly over the last 10 years in particular), but there are plenty of places in Philly that are worth 10x what they were worth 25 years ago. If you go to Zillow and look at the property history, you can see when it was sold and for what. I'm super fascinated by this kind of thing and am also personally invested in it, so I poked around for a while just now and found a number of current examples:
(1) 1015 Clinton Street: currently listed for $2,050,000, last sold in 2005 for $169,309, and sold in 1997 for $58,845.
(2) 2036 Cherry St: currently listed at $1,200,000, last sold in 1996 for $90,000.
(3) 621 Lombard St: currently listed for $795,000, sold for $89,000 in 1995.
(4) 2039 Pine St: currently listed for $3,450,000, sold for $290,000 in 1996 (looks like it may have had an extension renovation in the meantime)
(5) 1725 Rodman St: currently listed for $520,000, sold in 1997 for $90,000.
(6) 2134 Carpenter St: currently listed for $625,000, looks like it was built in 2007 and first sold in 2008 for $127,500.
(7) 1325 Christian St: currently listed for $485,000, sold for $25,000 in 2004.
(8) 1429 Christian St: currently listed for $895,000, sold for $177,500 in 2004.
(9) 1829 Montrose St: currently listed for $850,000, sold for $175,668 in 2009.
(10) 5 Alder Ct: currently listed for $715,000, sold in 1999 for $174,500.
(11) 330 S Quince St: currently listed for $1,250,000, sold in 1997 for $275,000.
(12) 1208 Rodman St: currently listed for $899,000, sold in 1999 for $156,000
(13) 311 Pemberton St: currently listed for $749,000, sold in 1997 for $130,000
(14) 227 S Delhi St: currently listed for $694,900, sold for $130,000 in 1996.
(15) 706 N 5th St: currently listed for $1,250,000 (it's a 4-unit), sold for $75,000 in 1996.
(16) 421 N 20th St: currently listed for $725,000, sold for $115,000 in 1997.
(17) 128 Pemberton St: currently listed for $945,000 (it's a triplex), sold for $150,000 in 1995.
Obviously the level of rise depends on various factors. The properties that were in good neighborhoods to start with obviously experienced less increase (it looks like often about 5x or a bit more). The properties that were in neighborhoods that significantly improved over the last decade or two increased more (5x-10x). Some of these properties look to have have had substantial renovations that also increased their value. Still, I think the gain is striking. For instance, 2036 Cherry Street sold for $90,000 in 1996. The owners perhaps put down 20%, which is $18,000. The current asking price now is $1,200,000. That's an incredible gain in 24 years - more than some people make in a whole lifetime of working at a job. Even the ones that rose more modestly still made a whole bunch of money - e.g. 1725 Rodman St, which sold in 1997 for $90k (so the buyers may again have put down $18k), and is now worth $520k. Several other cities (NYC, Boston, probably others) have had similar rises, at least in certain neighborhoods. Obviously past performance is no guarantee of future results, but the returns I think are pretty competitive with the stock market, and seem less risky to me. Of course, YMMV.
posted by ClaireBear at 12:12 PM on July 15, 2020
(1) 1015 Clinton Street: currently listed for $2,050,000, last sold in 2005 for $169,309, and sold in 1997 for $58,845.
(2) 2036 Cherry St: currently listed at $1,200,000, last sold in 1996 for $90,000.
(3) 621 Lombard St: currently listed for $795,000, sold for $89,000 in 1995.
(4) 2039 Pine St: currently listed for $3,450,000, sold for $290,000 in 1996 (looks like it may have had an extension renovation in the meantime)
(5) 1725 Rodman St: currently listed for $520,000, sold in 1997 for $90,000.
(6) 2134 Carpenter St: currently listed for $625,000, looks like it was built in 2007 and first sold in 2008 for $127,500.
(7) 1325 Christian St: currently listed for $485,000, sold for $25,000 in 2004.
(8) 1429 Christian St: currently listed for $895,000, sold for $177,500 in 2004.
(9) 1829 Montrose St: currently listed for $850,000, sold for $175,668 in 2009.
(10) 5 Alder Ct: currently listed for $715,000, sold in 1999 for $174,500.
(11) 330 S Quince St: currently listed for $1,250,000, sold in 1997 for $275,000.
(12) 1208 Rodman St: currently listed for $899,000, sold in 1999 for $156,000
(13) 311 Pemberton St: currently listed for $749,000, sold in 1997 for $130,000
(14) 227 S Delhi St: currently listed for $694,900, sold for $130,000 in 1996.
(15) 706 N 5th St: currently listed for $1,250,000 (it's a 4-unit), sold for $75,000 in 1996.
(16) 421 N 20th St: currently listed for $725,000, sold for $115,000 in 1997.
(17) 128 Pemberton St: currently listed for $945,000 (it's a triplex), sold for $150,000 in 1995.
Obviously the level of rise depends on various factors. The properties that were in good neighborhoods to start with obviously experienced less increase (it looks like often about 5x or a bit more). The properties that were in neighborhoods that significantly improved over the last decade or two increased more (5x-10x). Some of these properties look to have have had substantial renovations that also increased their value. Still, I think the gain is striking. For instance, 2036 Cherry Street sold for $90,000 in 1996. The owners perhaps put down 20%, which is $18,000. The current asking price now is $1,200,000. That's an incredible gain in 24 years - more than some people make in a whole lifetime of working at a job. Even the ones that rose more modestly still made a whole bunch of money - e.g. 1725 Rodman St, which sold in 1997 for $90k (so the buyers may again have put down $18k), and is now worth $520k. Several other cities (NYC, Boston, probably others) have had similar rises, at least in certain neighborhoods. Obviously past performance is no guarantee of future results, but the returns I think are pretty competitive with the stock market, and seem less risky to me. Of course, YMMV.
posted by ClaireBear at 12:12 PM on July 15, 2020
Late to the thread, but please keep in mind the very real possibility that your 5-year starter house may turn into your longer term house. That's what happened to our family. At the very least, it might be extremely helpful to have that option in 5 years and not be forced to move because the schools are bad.
Other people are right that scores are not necessarily the same as good schools. If you can, I'd try to find parents in the district whose judgement you trust and get their impressions of the school. Think about middle school and high school too, just in case.
posted by callmejay at 7:18 AM on July 24, 2020
Other people are right that scores are not necessarily the same as good schools. If you can, I'd try to find parents in the district whose judgement you trust and get their impressions of the school. Think about middle school and high school too, just in case.
posted by callmejay at 7:18 AM on July 24, 2020
This thread is closed to new comments.
posted by Flannery Culp at 9:26 AM on July 12, 2020 [13 favorites]