Should I/am I ready to buy a place?
December 6, 2013 11:19 PM   Subscribe

I thought I wasn't ready to buy a place, but with all the advice I've been getting from everyone, I wonder if I should.

This is pretty much what I've observed:

a) The fact that absolutely everyone around me is buying, which is not advice in itself but indicates a good buyers' market, which was confirmed by a lady I had a random conversation with on the train, who indicated that the housing cycle spans roughly 7 years, and that the low prices have been there for about 3-4 years, and I probably have another year to go before they start rising again.
b) People from the areas I've lived in and liked have advised that land is an absolute bargain, some houses can be had for good prices.
c) I have sufficient deposit for any of these places.

However, the reason why I'm reluctant to buy is because a friend said it's better to travel and do all that life stuff for yourself, before settling down to buy a house, and another agreed, saying you might travel overseas and then realise you want to live there instead, and not have a house tie you down.

But I dunno. I just need to talk this out with people. I feel like it would be a smart decision to, but then again, I dunno. How do you know if you're ready to buy a house, is my question. And if I'm ready, should I buy a house so I can rent it out, or should I just buy a bit of land and let it appreciate? (I'm quite scared of the idea of a mortgage, and land in my preferred areas, I can buy outright, whereas with a house it wouldn't be possible).

posted by glache to Home & Garden (16 answers total) 4 users marked this as a favorite
Land has holding costs. Buy income property.
posted by MeanwhileBackAtTheRanch at 11:52 PM on December 6, 2013

I think your reasons for and against are all silly. Do you understand what owning a home entails, do you want to be a homeowner, does it make financial sense for you to be a homeowner?

You also haven't given us any information to work with, aside from what your friends are telling you. What's your financial situation and what's your life/career/family situation?
posted by acidic at 11:58 PM on December 6, 2013 [10 favorites]

Buying a house really isn't about market timing as much as people think it is. Just ignore all that talk.

If you're planning on traveling around and not settling down, you're not ready to buy a house. Land is not a bargain if you're not going to use it for anything. You have to pay taxes on that land.

If you want to settle down and stay in one place for a MINIMUM of 5 years (5 to 10 years would be better), and you have the money for the down payment and mortgage and other associated costs (read about closing costs and what they are), and you are ready to take responsibility for home maintenance/decorating/yard work, you are ready to own a house.

Check out this calculator from the New York Times for more information: Is It Better To Rent Or Buy?
posted by treehorn+bunny at 12:41 AM on December 7, 2013 [4 favorites]

If you are looking for a good investment place where you can put all that money you have saved up, you should look at something like an index fund that has a very low expense ratio/no fees, rather than buying a piece of land that will end up costing you whatever you'll owe in taxes (and closing costs will eat a whole lot of any potential profit).

If you are going to travel, don't buy an income property - it's hard enough to be a landlord when you live locally. If you have no experience doing this, and don't want to hire a management company to manage your property (which would eat most if not all of any potential profit) then trust me, you don't want to be an absentee landlord.
posted by treehorn+bunny at 12:45 AM on December 7, 2013

"Absolutely everyone is buying" aka increased demand is not necessarily how i would describe a buyer's market.

Also, let's take a minute to consider how stupid this random train lady is. Let's assume that housing indeed runs in 7 year cycles, and that prices slowly increase through years 1-5 then go up sharply in years 6 & 7. Wouldn't any rational person, observing this phenomenon, buy right at the beginning of year one? By the same token, you'd have to be an idiot to buy in year six. Well if no one is buying in year six, prices will go down. This is why this idea is not possible in a free market, it would immediately be exploited and fall apart.
posted by hamsterdam at 1:09 AM on December 7, 2013

You need to figure out how you yourself feel, and not just weigh the opinion of a random person on the train vs the opinion of friend A vs opinion of friend B. Do this to figure out your own opinion:

1. Try doing some home repair right now. Install a lawn sprinkler or new shower head. Did you enjoy working with your hands, and being competent? Or did you hate it?

2. Go to a couple of open houses. It's always free to attend. Do you get really excited and fantasize about yourself living there? Or did you feel bored and like it was a lot of pressure?

3. Research firsthand what drives up home prices in your specific area. Are some neighborhoods becoming more valuable? What's the range of house that you can get for your price range? Is this "7 year cycle" (which I've never heard of) actually accurate when you look at the historical prices of houses in the neighborhood you're examining?

If you want to buy after all of these actions, then go look at open houses until you find a specific house you want to buy. Then you will either be enamored with the house and determined to make an offer on it, or you will keep waffling and being unable to settle on any particular house (which means you don't really want to buy).
posted by cheesecake at 1:20 AM on December 7, 2013

This is why this idea is not possible in a free market, it would immediately be exploited and fall apart.

No, it would not be possible in a rational market.
posted by [insert clever name here] at 1:31 AM on December 7, 2013 [3 favorites]

I do not think you are ready to buy a house. Buying a house is a serious pain in the butt and it requires a lot of work to pull it off and then it requires work and money to keep it up. If you don't have real reasons to want a house (i.e. you want to live in one or you have a sensible business plan to be a landlord/flipper/etc), then I don't think it makes any sense to try and buy one, any more than it would make sense to try and get married or have a baby for abstract reasons.
posted by feets at 1:54 AM on December 7, 2013 [6 favorites]

"The fact that absolutely everyone around me is buying, which is not advice in itself but indicates a good buyers' market"

Wrong. A Buyer's Market is a situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. The term "Buyer's Market" is commonly used to describe real estate markets, but it applies to any type of market where there is more product available than there are people who want to buy it.

There is something else "absolutely everyone around" you has in common, and that is, they are ready, willing, and able to be homeowners at this time, for whatever individually self-evident reason(s) they may or may not share with you.

When I bought my first home back in the day, The So-Called Reason Absolutely Everyone Around Me Was Buying was that we were all 27-30 years old, had finished our post-college schooling, had job offers with large signing bonuses to put towards a downpayment, had recently gotten married, and were 2-5 years away from having our first babies. This was 3 years before the US housing bubble burst. Good times.

No, you're not ready to become a homeowner. OP, if all your friends jumped off a cliff….
posted by hush at 5:40 AM on December 7, 2013 [1 favorite]

An anecdote:

I bought a house in summer of 2008 (you know, right at the very *peak* of the housing bubble), for what sound like many of the same "reasons":
- It's what I thought "I should do", or what "people did"
- People kept telling me it was a great time to buy (mostly realtors)
- I had some extra money, so why not?
- I didn't have a lot of direction in life and it felt like the next logical step

These "reasons" (spoiler alert, those are all bullshit reasons to buy a house) ended up convincing me that I really wanted a house, and I latched onto that feeling as though it was my new purpose in life. I put a lot of work into finding and buying a house because that's what I thought I wanted.

The end result of this is that I made a huge financial mistake, and bought a house that was absolutely wrong for me. I bought it at absolutely the wrong time, in what turned out to be not the right place.

However, I am very, very lucky. I bought at a time when mortgage rates are insanely low (drastically reducing the financial impact). I found good people to share the house with me to reduce my financial burden. My finances are stable enough to absorb the hit. And finally, I live in an area whose rental market is very good, and I found an excellent property management agency to handle renting the house once I moved out.

Having a house, as others have said, is a sinkhole of time, money, and energy. If you have an excess of any of those, you'll have an easier time of it, but it's still a serious proposition. However, for me, because I was lucky as I describe above, it was not the end of the world. I still own the house, my property management people take care of it and find renters, and I break even on my mortgage every month. Having the house doesn't stop me from living where I want, traveling when I want, or doing what I want. Again, I am extremely lucky in this regard and most people will not 'get off so easy' after making a house-purchase mistake.

My advice is this: Take a very, very hard look at what you actually want, and at why you're considering this. Taking that look is introspective and scary; I shied away from taking that look and ended up saddled with a huge (but not world-ending) financial burden.

I see nothing in your question that indicates that you want a house; I see only that you feel like you "should" buy a house.
posted by Dilligas at 7:47 AM on December 7, 2013 [3 favorites]

What cheesecake said, especially the part about home repairs. Unless you buy a house in tip-top shape, home ownership can be a constant headache of fences that need fixing, things that need patching, etc. If your interest is primarily in investing, find other ways to do it that leave you free to travel and without the headaches of owning a home. If you are interested in a home base that you can decorate, paint, etc., consider a condo.
posted by eleslie at 7:47 AM on December 7, 2013

A bargain - in terms of land, or a home - is only a bargain if you're happy with it. If you're ambivalent (at best) about buying a house, you'll quickly start to resent the time and effort and cost involved in upkeep - even the basic stuff. Rental properties require upkeep and it falls onto you, somehow, to make it happen.

I love my house, as far as places to live go, but a lot of weekend and evening time (and money) goes into cleaning and repairing and fixing and updating. Spare time is often spent talking about "what should we do about the [random thing] that we need to fix" and "how much do you think it will cost to have the [other random thing] done".

If the idea of owning a home doesn't fill you with excitement and glee, don't do it. Much like everything else in life, it's much easier to overcome the challenges that come along with something if you're really thrilled about it in the first place.
posted by VioletU at 9:48 AM on December 7, 2013

FWIW, I go through a similar line of thinking once in a while. I've concluded that it needs to be the right time *for me.* External factors (interest rates, what other people are doing, etc.) are not as important to me as whether I feel comfortable making the biggest purchase I expect to make in my lifetime. YMMV.
posted by kat518 at 10:47 AM on December 7, 2013

Buying a house is really expensive in terms of both time and money. Just getting into the home, you have to pay the time to find one that you like, the time to negotiate with the current owner, the time of dealing with paperwork and home inspections, the money for the closing costs, the loan, the insurance, and so on.

Then once you own it, it takes more of your time and money. You have to maintain it, fix things when they break, deal with property taxes and the bank. You immobilize yourself and put yourself at financial risk--if you need to move, you have to sell the house or else pay two loan payments until you find a buyer, assuming that you can sell it for the same or more than you owe. If your house's value goes down, you're out potentially thousands of dollars.

These are just the things that are likely to happen. Disasters also happen. Even if you get a great insurance policy, if a tornado eats half of your house, you have to deal with it.

My point isn't that home ownership is necessarily a bad idea. But you should go into it with your eyes open, knowing the responsibility you're taking on.
posted by JDHarper at 11:41 AM on December 7, 2013

Response by poster: Thanks for the thoughtful input. Yes I thought I wasn't ready for it, even though I have enough money. I like the idea of shares. No, anything I own would simply be an investment initially--I would not stay in the town I'm in long term, and the areas I would love to buy in (and not say know about, but can get info from friends who both have bought there recently) are almost 2000km away, and I will not move to them for at least another 18 months until I've seen what the career progression opportunities are like with my current job (I'm just doing the time to get it onto my resume, and it's a good job, just not sure how much I can progress in that organisation). That's a good point about it's hard enough to be a local landlord, let alone one from a distance.

Thanks for your story Dilligas,and I'm glad it wasn't world-ending. The places I would love to buy in have high rental returns, so that's fine, but maybe down the track. After all my 36 year old housemate is currently in the process of buying a house for the first time, so I guess I shouldn't feel pressured to buy even if the market is truly a bargain at this time (I'm 24).
posted by glache at 4:13 PM on December 7, 2013

After seeing your update:

If you plan to move to a place that you don't have much knowledge about, I strongly recommend renting there for at least 6 months to a year before buying. Even though you have friends with information about those locations, it is extremely helpful to live in a place and get a sense of where everything is (highways, grocery stores, public transit, etc) before you buy. It is definitely worth it in the end not to make an impulse purchase with such a large amount of money, and to be sure you get what you're looking for.
posted by treehorn+bunny at 11:32 PM on December 7, 2013

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