To Buy or Not to Buy?
May 13, 2022 3:45 PM   Subscribe

My long-term partnership is ending, and I need to find a new place to live. I'm in a financial position, I think, where I could buy a nice condo, but the current state of interest rates hikes / housing market / impending recession talk has me feeling nervous. I'm an anxious, over-analyzer and potentially making this big purchase by myself is scary.

I always thought I would be buying my first house with a partner... and not for at least a few more years. My now-ex and I planned to buy together. And buying a property? In this economy?? By myself??? Scary!

My biggest motivation to buy is that I'm deeply craving stability, maybe to a degree where I might not be able to think clearly about it (hence my question). I rented for ~10 years in my 20s before moving in with my partner. My overall renting experience was great I think; I had nice and professional landlords and didn't really ever have problematic neighbours. Though, after bouncing around from apartment to apartment and not being able to really "settle down", I feel a bit nauseous at the thought of going back to renting.

I've been casually looking at condos for a couple months, but I think I've found the proverbially "one". I capital 'L' love it. I daydream about it. It's what I've been looking for, in my ideal location, within my conservative budget. The building is very well managed, and overall seems like a great find! Condos in this building don't often come on the market, so there is a sense of FOMO too.

With all the good parts there is big anxiety.

I'm worried I'm 'wasting' my money by buying a place. My down payment + closing + etc. would be all of my cash (about ~25% of my total 'savings'). Spending that much money is scary! I feel I should instead just rent a cheap place to keep saving money and invest most of that down payment. I don't really see this purchase as an investment (condos don't tend to appreciate well in my Canadian city, which is neither Toronto nor Vancouver). All in, my monthly costs of owning will be ~35% of my take-home pay. I could definitely find a cheaper place to rent. Though, if I wanted to rent an apartment equivalent to this condo, it would be maybe 40-45% of my take-home pay.

Mostly I'm looking for outside perspectives on:
-- I'm worried that, with buying a place, I'm being reckless / reactionary because my split from my partner has been incredibly destabilizing. Am I'm thinking clearly?
-- This feels like a bad idea in the current economy. All of my friends say it seems like a good opportunity. Not even one person has expressed doubts (very sus, I say!). Internet strangers, is it a bad idea? In this economy??
-- If it isn't a bad idea, how do I calm the anxiety of OMG I'M SPENDING ALL MY MONEY, especially since I'm doing this all alone?
-- I know house buying is stressful all the time, but is there a way to just make it, like, not? 

Anecdotes appreciated!
posted by Robocat to Home & Garden (14 answers total) 4 users marked this as a favorite
Some thoughts to consider.. Rent is only going to go up, probably at a faster rate than property taxes and HOA fees. So if you want to live in a place you love for 20 years with a stable monthly cost and without the hassle of moving if a landlord decides they need their apartment back, or if you want to live in a place you love vs a cheap place you don't love, then it makes sense to buy. Don't think of it as an investment, but rather a home. If you ever need to move from there, will you be able to rent it for the same amount or more as the monthly mortgage+all other costs?

I don't know how filing taxes works in Canada, and how tax returns net out with a condo vs a house, but when I bought a house my tax return was SO MUCH MORE every year in the US than when I rented. But of course, there are the usual house expenses (some on which might not apply for condos). Just something else to think about with your overall financial situation. Do you have the money for emergency repairs? Do your taxes get affected for better or for worse if you buy?

If you're worried about spending a lot of money, are 2 family houses an option in your area? Where the tenant's rent would cover a large portion of the mortgage? But of course a house comes with bigger repair expenses.
posted by at 4:02 PM on May 13, 2022

This internet stranger gives you permission to jump in and enjoy it. It sounds like you can afford it, both currently, and on an ongoing basis. No, it may not be an investment, but at the very least, your mortgage likely won't go up (by much), while rents around you will just continue to rise.

If you can see yourself in this place in 3-5 years, I don't see a reason not to.

Just do some due dilligence on the condo association. Ensure that it's well run and they have a good reserve of funds built up. If they need a new roof, for example, they can have a special assessment to all owners that can be HUGE if they don't have a good reserve built up.
posted by hydra77 at 4:04 PM on May 13, 2022 [8 favorites]

You asked for anecdotes: I jumped in at the age of 26 or so. I knew I wanted to own a condo. I had saved some money. On paper, I could afford the place, but the leap into ownership made my monthly mortgage payment much more than monthly rent. That down payment pretty much emptied my bank account. It was scary, but I never regretted it. I ended up selling it just three years later (things changed in life), and still made money on the sale.

The best way to alleviate anxiety (to me) is education. Let your rational brain evaluate the pros and cons and convince yourself that you're making the right decision.
posted by hydra77 at 4:07 PM on May 13, 2022 [1 favorite]

Gosh, I might plan to rent for a little while. I hear you are craving stability. It also sounds like you are living with your partner currently. I would go ahead and rent asap, even if you did a six-month lease, if that's an option. Give yourself a tiny bit of breathing room and time living on your own. Yes, moving is an absolute pain.

I also think you are right that there's reason to believe that real estate prices might be going down sooner rather than later, and waiting out this current weirdness, at least for a few months, might offer a bit of clarity? Or maybe interest rates will rise and there will be more on the market.

I think buying is great, and it does sound like a good idea, but I also think being on your own a bit might give you some mental space and clarity, to make sure that single you has the same dream as partner-but-splitting you.
posted by bluedaisy at 4:13 PM on May 13, 2022

I have been trying to buy a house for a while now and I've felt heartbroken to the point of tears a few times now. It's really stressful in the current market. (Maybe it's better where you are!) Since you're already dealing with stress, and since it would be a little bit of a financial stretch, I think it might be nice to rent temporarily, and then begin the housing search a little later.
posted by pinochiette at 4:55 PM on May 13, 2022 [1 favorite]

Look into what recourse terms the loan has. Can you hand the condo keys back to the bank and have no remaining loans? Or are you still liable for the balance?

I know many people who bought homes at the peak of the last housing bubble, in 2008. Once the whole thing popped, they were stuck with a mortgage for more than the current home value (called being "underwater") since the property had dropped by half.

Smarter folks, with a no-recourse loan, bailed on the property and down payment. They could find places to rent or even buy (at foreclosure sales) for less than their mortgage. Less smart folks fed money into the property even though they could live cheaper elseware.
posted by meowzilla at 6:06 PM on May 13, 2022 [1 favorite]

The thing that concerns me is that it sounds like you won't have a reserve after the purchase? There's always something wrong with a house within a year after you buy it. You need to have several thousand dollars left over. But if I'm misunderstanding you, never mind.
posted by praemunire at 6:17 PM on May 13, 2022 [2 favorites]

Real estate, especially in Canada, has gone up massively in the last while. Meanwhile, interest rates have recently increased, are likely to increase further, and we may be in the middle of a significant fall in the stock market. In other words, prices are quite high and demand is likely to fall somewhat.

I would not want to buy real estate right now. I think there's a reasonable chance that prices will decline over the next year or few years, especially after the huge increases we've seen over the pandemic. Things might not change that much, but I think there is a significant risk of a downturn in the market. I wouldn't want to take that risk, myself. I would be much more comfortable renting for a few years and looking to buy a little later.

Regarding no-recourse mortgages, these are only possible in Alberta and Sask.
posted by ssg at 7:31 PM on May 13, 2022 [1 favorite]

No one can predict the housing market. The last five years have amply demonstrated that. So I think the best way to mitigate that uncertainty is to only buy a place if you’re going to be there for at least 5 years, or if the costs to live there compare reasonably to renting a similar place, and not try to make bets about what will happen to prices.

It sounds like you have identified a condo that you love, that is affordable to you. and you are really craving stability. Stepping back, is it realistic to expect you’ll be there for 5 years or more? Are you considering a career change? A move to a different area? Is it too small for 2 people, in case you meet someone new and want to live with them?

If all the answers tilt towards stability, go ahead and buy, with the caveat that even when we try our hardest we cannot predict things. Maybe your town will be the New Hotness for zoomers and your condo will be worth a lot. Maybe a motorcycle gang will decide to use your street for wheelie practice at midnight every night and it will lose value.
posted by The Elusive Architeuthis at 9:13 PM on May 13, 2022 [2 favorites]

I would pose this question to people at r/personalfinancecanada, with more (potentially identifiable) details for them to rake you over the coals with (of course you can easily delete the question). Eg location (Winnipeg, Whitby, and North Bay have totally different dynamics), building age/type + maintenance fees, your job situation (self-employed? Contractor? What field), full financial picture (debts, assets, are you pre-approved, how long would you want your mortgage to be, how old are you, what % is your down payment going to be). Also is this a glass building where 90% of the exterior has a 15-year life span or is it a concrete beast, how healthy is the reserve fund, how sensible vs corrupt vs competent is the board as far as you can discern, what % of residents are owner-residents vs renters vs investors/AirBnB profiteers, etc.

I agree with ssg, the market is in so much flux/such a mess right now that the devil is really in the details when it comes to taking this kind of risk.

On the face of it though, it *sounds* like it could be doable?

I don’t know that buying would necessarily be the worst thing as long as you can carry the cost (counting the stress test). It’s weird right now in some areas of Ontario, where detached values are dropping fast (month over month anyway) yet condos are holding steady (for now). So it’s conceivable that a two-bedroom condo could end up not far off a detached (depending on location).

Idk. Some people think with interest rates rising, we’ll soon see a stalemate between sellers and buyers (with sellers holding out for their number & relisting until they think they can get it, or just not listing at all for now, and buyers holding out for better prices, or not being able to buy period given the price of gas and chicken). So there might not even be anything else out there to buy in eg 6 months.
posted by cotton dress sock at 1:08 AM on May 14, 2022

When I bought my house, I'd been saving for 6 years (4 in a vague "one day I'll buy a house" way, 2 in a dedicated House Fund). It was SO terrifying when I had to write for the down payment. It was like 20x what I'd ever spent at one time. Scary!

Just to reiterate that what you are feeling is 100% normal. If you didn't feel terrified about spending that much money, you'd have to be either reckless or flush with cash.

It sounds like you would have a bigger reserve than I did after the closing. I agree with others that you want to do your due diligence but financially this seems like the right move for you.
posted by basalganglia at 1:54 AM on May 14, 2022 [2 favorites]

It feels daunting to commit to a purchase and that’s ok. That doesn’t mean it’s a bad idea. In terms of stability and long-term commitment, the question I would ask is how easily it’d be to sell the condo again. And how easy it would be to find a tenant and let it and generate rental income that at least covers your costs. And if you were to let the condo, would your lender force you to switch to a different mortgage/rate that changes the maths?

Even if the market drops you only ‘make a loss’ if you have to sell at the lower prevailing prices. If you live in the place or can let it covering your costs and wait out the recovery a temporary reduction in value is just a theoretical loss, not one you actually realise.
posted by koahiatamadl at 4:16 AM on May 14, 2022

You could talk to a financial planner to assess if you're "wasting your money," but honestly, the kind of piece of mind you mention is a good reason to buy somewhere, not "irrational," and something worth paying for even if the numbers aren't perfectly in favor of buying. Remember to look at how much the condo association has saved up vs how much deferred maintenance there might be to avoid financial surprises later, but your real estate agent probably already mentioned that.
posted by slidell at 9:25 AM on May 14, 2022

since you are a human being, not an investor, the only questions you need to answer for yourself about buying property -- about buying anything -- are a. do you want it and b. can you afford it.

it's only a bad time to buy if you can't afford anything on the market that appeals to you, or if you have no plan for how to keep paying the mortgage if you lose your job for a while, or if you might want to live somewhere else in the next few years, or if you don't know enough about home ownership to be able to predict the money it'll cost over and above the monthly payment + condo fees.

lots of people say it's a bad time to buy because homes are so expensive. this is only relevant to all of us who can't afford one; if you can, this need not concern you. but they also say that because you can't count on selling it for more than you paid for it. this is an absolutely bizarre way to think about a home you are going to live in, and I assume people who think this way also never put money towards food, cats, spouses, mattresses, or the arts. to name a few more fundamentals of life that are not best understood or approached as assets that need to appreciate.
posted by queenofbithynia at 8:10 PM on May 14, 2022

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