housing market in 2014 and beyond...

[rachmoninov3]

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So like so many class of 2011's I just matched and have secured a pre-approval for purchasing a house. However, as it stands right now my husband and I do not think we would want to live in this location long term. While all the signs and misc. websites (bloomberg's businessweek) I can find show a housing upswing in 2014 (when residency will be over for me), how easy will it be to sell in 2014?

I know that compared to renting, we could easilly make $20K + if projections are correct and the market rebounds, but we could also be stuck in this location or at least have a rental property that we can't unload.

I would love everyone's thoughts on this, especially the pessimists.

 

[Bobblehead]

Sorry there's not enough information in my magic 8 ball to give you an accurate prediction but it sounds like you're still living in 2005 where real estate can only go up.

Remember leverage when prices go up = good, leverage when prices go down = disasterous. If you don't understand this concept on a 3 year horizon please rent.

It's easy to sell any house. Assuming it's habitable and in a neighborhood someone is willing to live in all you have to do is find a price that's low enough for someone to meet. To them, what you paid for the house is irrelevant so basing your sales price off your purchase price, which is what it sounds like you plan on doing, may result in more days on the market than you're willing to tolerate. Or you can "at least have a rental property that [you] can't unload".

I assume this "$20K +" that you projected includes closing/start-up costs for the purchase, unexpected maintenance (please tell me you've got additional funds saved up for this), and sales costs including agent commission and closing costs. What is the standard commission rate in your part of the country?

Are you willing to be an accidental landlord when you're done with residency? Can you do basic house repairs, plumbing, fix a light switch/fixture that's acting up? What are the rental prices in the area currently? After you've covered PITI for your rental property how much do you have left to cover routine/deferred maintenance, vacancies and tenant screening costs? Who will handle the maintenance if you're not in the area? How much are you willing to pay them?

 

[Gute]

As the previous guy said, there is no guarantee that residential real estate values in your neighborhood will go up in the next 3 years. Whether or not you buy is a personal decision, but I would base it off of livability issues (owning you can have a pet, do home improvements, more control, more privacy, no worries that you can't renew the lease if you want to stay after your lease is done, etc) rather than financial issues.

 

[peppy]

As the previous guy said, there is no guarantee that residential real estate values in your neighborhood will go up in the next 3 years. Whether or not you buy is a personal decision, but I would base it off of livability issues (owning you can have a pet, do home improvements, more control, more privacy, no worries that you can't renew the lease if you want to stay after your lease is done, etc) rather than financial issues.

I think that is a good way to look at it. I bought a house last year when I matched. For me, the benefits of home ownership (like being able to own a dog and never again having to worry about sharing a wall with a crazy neighbor) were important and we found a home that was reasonably priced in a neighborhood that seems likely to hold its value. I am not confident that we will make a profit off its sale but I am not terribly worried about ending up underwater.

 

[rachmoninov3]

I think that is a good way to look at it. I bought a house last year when I matched. For me, the benefits of home ownership (like being able to own a dog and never again having to worry about sharing a wall with a crazy neighbor) were important and we found a home that was reasonably priced in a neighborhood that seems likely to hold its value. I am not confident that we will make a profit off its sale but I am not terribly worried about ending up underwater.

I'm pretty convinced that we shouldn't be too worried about losing $ either, as humble as it may be compared to other specialties, my income should at least tripple after residency, so having an extra house payment for a while shouldn't be too difficult.

And to bobblehead: Yeah, I tried the magic eight ball too and got the same response. 🙄

 

[Bobblehead]

I'm pretty convinced that we shouldn't be too worried about losing $ either, as humble as it may be compared to other specialties, my income should at least tripple after residency, so having an extra house payment for a while shouldn't be too difficult.

And to bobblehead: Yeah, I tried the magic eight ball too and got the same response. 🙄

You'll be just fine. Go ahead and buy.

 

[ShyRem]

Just be prepared if the forecasts are wrong. There was supposed to be an upswing for 2010. Didn't happen. Fortunately, we found someone to rent the house we own 800 miles away from where we now live which does help pay the mortgage. But that also means we have to rent where we are now for residency.

We're hoping the market turns around at some point in the next three years so we can unload the house we own in a state we have no intention of ever moving back to.

 

[Gute]

Just be prepared if the forecasts are wrong. There was supposed to be an upswing for 2010. Didn't happen. Fortunately, we found someone to rent the house we own 800 miles away from where we now live which does help pay the mortgage. But that also means we have to rent where we are now for residency.

We're hoping the market turns around at some point in the next three years so we can unload the house we own in a state we have no intention of ever moving back to.

For you, I hope that market is favorable. Certain locations are probably going to be tough markets for the near future.

Of course, selling a home is never terribly difficult if you are willing to put it up for a marketable price, but it is super tough psychologically to lose money from it. Unfortunately, buyers do not care how much you bought the home for.

 

[goodoldalky]

Some market analysts are saying there will be an upswing soon. Many others say that the economic indicators suggest things have not gotten better and will not get better for 10+ years.

I would say, if you have a long residency program, and you're willing to accept that there is a strong possibility you will lose money on this short-term investment, then go for it. But houses are not good short-term investments in this situation and they can just as easily be a liability as an asset. Remember, when the furnace goes out (and it will), you'll be paying for it.

For some residents, I think it is a good idea to buy. If you: have a family, have a long residency program, can put 20% down, and are willing to stay in the house past your residency requirements, it may very well be a good idea.

JMO, as someone who just matched, has thought about this, and will rent. Good luck!

 

[dynx]

Just as backgound I own rental properties (not stuck with but bought for that purpose) and I rent the place I live.

I would never, never buy a house hoping/expecting to make money on such a short timeline (<5 years). There is too much that people don't think about when buying a house. As mentioned: closing costs/comission when you buy AND sell, Property tax, insurance, repairs. Some of these things can be planned for but what happens when the basement floods, the water heater gives out etc? I just got done with a new roof for about 10k...thats a hefty hit on the profit you're hoping to make. And being a landlord when you're not expecting to be one is NOT fun, so don't plan on renting it out in the future for a profit. Landlords search a long time looking for properties that turn a positive cash flow these days and chances are the house you buy for yourself is not going to just by luck be that kind of property if you get stuck with it (in fact especially if you get stuck with it).

20k is not a lot of money for the risk you're taking. In fact its almost nothing compared to what it could cost you.

 

[alreadylernd]

1. Be weary of "predictions" from "experts". Predictions sound good, and can "make sense" but there's a degree of randomness that I like to call "the future."

2. Be mindful that with any mortgage often with the first few years, the majority of your mortgage payments are paying mainly interest and therefore you're not paying down much principle. This matters particularly if you go to sell in a short period of time.

3. You will need to balance the tax benefits of the mortgage deduction (though your tax burden as a resident is far less than as an attended) weighed against the added costs of ownership (upkeep, property taxes etc.) in light of point #2.

4. Remember also the value of your own time. You don't have a lot of money as a resident, but you also don't have a lot of time. Do you really want to spend your one day off each week at Home Depot, or mowing the lawn, or calling a contractor. There are some benefits of renting - mainly, maintenance is someone else's problem. On the other hand, if you're a fixer-upper, then that's great.