Should we buy a house?

[plain_simple]

We were trying to be financially responsible for the past 4 years by paying off our debt and saving (aggressively) for a 25% downpayment on a house. However in the maintime the price of houses has risen more than what we saved (it is like we did nothing). Actually we can afford less of a house that we could 4 years ago!!!

The market is going up, up, up and show no sign of decline (we are living in Montreal, Canada). We lost a lot of money in the US housing debacle. We are currently renting but this solution is no longer practical for us and we have to move (the sonner the better). We are scared to death and have no idea what to do. Price increase has been roughly 12% a year and is expected to flatten to 4% this year (estimate vary though no one seem to have a clue).

[riverwed070707]

What price range are you looking at? How much do you have saved? How much are you putting away each month?

Kudos to you for the patience you've shown already!

[plain_simple]

What price range are you looking at? How much do you have saved? How much are you putting away each month?

Kudos to you for the patience you've shown already!

the houses I like start at 550-600
the house I think we can afford less than 350 000
We managed to save 50K by being super frugal and working 2 jobs (we also paid back a lot of debt)
Now I am truly exhausted

[bjl584]

Can you move to a larger apartment while you continue to save?

Are all the houses in your market 550K and more? There has to be something in your pricerange. Here where I live there is a wide range of homes. Some as low as $40K. Some in the millions. I'm sure that you can find something that fits your needs and your budget.

[riverwed070707]

I really want to offer something super insighful and helpful but what you're dealing with is so different than the way housing is here. I tend to believe that in HCOL areas there can be exceptions to the 20% down rule if you can truly afford the payments and still afford to save each month. Some might disagree with that, but its just hard to apply a rule like that to areas of inflated costs when the income isn't necessarily inflated to match.

Our home cost $68k...saving up 20% took a few months. I really can't relate But good luck and I think you're doing great regardless of if you decide to wait a bit longer or keep socking away savings.

[plain_simple]

Can you move to a larger apartment while you continue to save?

Are all the houses in your market 550K and more? There has to be something in your pricerange. Here where I live there is a wide range of homes. Some as low as $40K. Some in the millions. I'm sure that you can find something that fits your needs and your budget.

Yes they are all the nice houses are 550K or more. I tried to include a link but was denied. And for this price you get a townhouse which is good but nothing special. For 350 you can either get a small house (1000sf), a house that needs a lot of repair (something that we neither have the skills, time or desire to do) or is very far (trafic here is crazy, this is not an option for us)

Except a doghouse I can not forseen a house that would cost only 40K! You are so lucky.

Our appartment is centrally located and very cheap however it is noisy and funny buisiness is going on in our parking lot. A nicer appartement would cost around 1800$ a month which is the mortage on a small 350K house.

I am just so sad about the whole thing. Why don't I deserve a nice house? Just because of bad timing? In US we bought at the peak of the market and had to sell at its lowest point. We though we were being smart by waiting but it just seems that it is backfiring on us. We have decent job, an emergency fund and are otherwise doing by the book in term of personnal finance. We are just incredibly unlucky and now I am unable to think straight about this.

[plain_simple]

I really want to offer something super insighful and helpful but what you're dealing with is so different than the way housing is here. I tend to believe that in HCOL areas there can be exceptions to the 20% down rule if you can truly afford the payments and still afford to save each month. Some might disagree with that, but its just hard to apply a rule like that to areas of inflated costs when the income isn't necessarily inflated to match.

Our home cost $68k...saving up 20% took a few months. I really can't relate But good luck and I think you're doing great regardless of if you decide to wait a bit longer or keep socking away savings.

We can afford the payment and will be able to save (some). Income doesn't match at all. Whish I had a 12% increase every year for the past 4 years! I feel like the joke of the party I tried to do things right and it all turned out so poorly...

[bjl584]

Housing prices can not increase every year indefinitely. (See USA in 2008.) I would be inclined to wait it out. Continue to save, continue to pay down debt, and wait until prices better reflect your financial situation.

[MonkeyMama]

I am from a high cost area so totally know what you are experiencing. (Personally, we left - wasn't worth living there).

That said, the way young people tend to cope is by buying small condos and moving up with equity. Is there any viable condos in your price range? I would consider that. (& this is only because rentals are so expensive. Frankly, if you can keep saving that kind of money, you could be better off renting, where you are).

OF course, then again you didn't say there wasn't anything in your price range - just nothing you liked. Would I buy a house that I could not afford? No. I have watched many many many people in your shoes take on $500k-ish mortgages. It NEVER ends up good.

Your choices are probably this: Buy something you don't like (er, lower your expectations significantly), wait, or move elsewhere. Anything else is probably a bad idea (like, buying way too much house). Also, just because prices are going up now, doesn't mean they will forever. I mean, they simply can't.

{Living in a high cost area, I would never recommend putting less than 20% down - that is only BAD news}.

[plain_simple]

Housing prices can not increase every year indefinitely. (See USA in 2008.) I would be inclined to wait it out. Continue to save, continue to pay down debt, and wait until prices better reflect your financial situation.

That's what I thought. However historically in Canada prices never decreased. They went flat from 89-97 but never decreased per se. It just seem that people hold on to their houses longer (it is not rare to see a house that has been on sale for more than a year).

We are currently debt free.

[plain_simple]

I am from a high cost area so totally know what you are experiencing. (Personally, we left - wasn't worth living there).

That said, the way young people tend to cope is by buying small condos and moving up with equity. Is there any viable condos in your price range? I would consider that. (& this is only because rentals are so expensive. Frankly, if you can keep saving that kind of money, you could be better off renting, where you are).

OF course, then again you didn't say there wasn't anything in your price range - just nothing you liked. Would I buy a house that I could not afford? No. I have watched many many many people in your shoes take on $500k-ish mortgages. It NEVER ends up good.

Your choices are probably this: Buy something you don't like (er, lower your expectations significantly), wait, or move elsewhere. Anything else is probably a bad idea (like, buying way too much house). Also, just because prices are going up now, doesn't mean they will forever. I mean, they simply can't.

{Living in a high cost area, I would never recommend putting less than 20% down - that is only BAD news}.

Thank you so much for your advice. Surprinsingly condo are not that much cheaper. Horrible condos are 190 we found a ok one for 300. for 50K more you get a yard and no one walking over your head. We visited a great condo but that one was 499K!

[MonkeyMama]

Yes they are all the nice houses are 550K or more. I tried to include a link but was denied. And for this price you get a townhouse which is good but nothing special. For 350 you can either get a small house (1000sf), a house that needs a lot of repair (something that we neither have the skills, time or desire to do) or is very far (trafic here is crazy, this is not an option for us)

Well, compared to the city I grew up in, these home prices sound like a dream!

It's just all relative. Trust me, I know people paying $700k for really crappy old homes that need a lot of work (2-bedroom/1 bath type homes - 100 years old).

& I don't want to be too harsh - because when I was 22 or so I probably could have written the same post you did. But, unlike most of our friends and relatives, we did decide to move. & it is easy to look at the situation VERY differently from the outside looking in. Everyone thinks we are crazy, they could never move, and they live in the best place ever. We were bitter when we moved out of the area, but that lasted all of about 5 seconds. Within the first year we would visit our relatives and I would say, "I never want to live here again." So over-crowded, and everyone is working way too hard just to live there - no one is enjoying it. I have often marveled how we could probably pay for a hotel weekend to enjoy all the area has to offer, and be far ahead financially. (We moved and bought a VERY nice home - the type I never thought we would ever buy otherwise. That's not the part of why we are so happy - we just don't have to work near as hard for the roof over our head - that part is what is so freeing. Or mortgage payment on our dream home is on par on the worst studio apartment we could rent back home - cockroaches and drug dealers - know what I mean?).

Anyway, for you, the best choice may be to stay put. But you just have to deal with the situation you are dealt. This is one of those "life isn't fair" lessons, I guess. But I also think it's important to realize that most people have more choices than they really realize, in these type situations. For all the reasons our friends and relatives give for never being able to move? - that's what I say. Not to all of their excuses - but definitely to most of them.

[plain_simple]

& I don't want to be too harsh - because when I was 22 or so I probably could have written the same post you did. But, unlike most of our friends and relatives, we did decide to move. & it is easy to look at the situation VERY differently from the outside looking in. Everyone thinks we are crazy, they could never move, and they live in the best place ever. We were bitter when we moved out of the area, but that lasted all of about 5 seconds. Within the first year we would visit our relatives and I would say, "I never want to live here again." So over-crowded, and everyone is working way too hard just to live there - no one is enjoying it. I have often marveled how we could probably pay for a hotel weekend to enjoy all the area has to offer, and be far ahead financially. (We moved and bought a VERY nice home - the type I never thought we would ever buy otherwise. That's not the part of why we are so happy - we just don't have to work near as hard for the roof over our head - that part is what is so freeing. Or mortgage payment on our dream home is on par on the worst studio apartment we could rent back home - cockroaches and drug dealers - know what I mean?).

Wish I was still 22 Would make things easier.
We can not really move we are uber specialized and finding 2 jobs in the same city was already a challenge. Housing situation (except in rural area) is roughly the same all over Canada. Prices are actually way cheaper here than in Toronto or other major cities (but high everywhere regardless). Moving to the US is not an option, it just isn't home.

I am suffering from a brain freeze about the whole situation so any comments are appreciated

[snafu]

Montreal is an expensive housing city Plain_Simple, worse is Toronto and costs are stratospheric in Vancouver. It was unfortunate your USA home ownership ended badly but you don't want to make another problem for yourself. While I understand your desire to buy a house, it may not be a smart financial decision. There is no tax deduction for mortgage interest or taxes and unplanned, unexpected costs can cause a money pit. The one thing you can count on is extra costs.

Home ownership might mean commuting or moving to a less expensive region in Que. home ownership in Manitoba for example, is far more affordable.

[plain_simple]

Basically the choices are
1) staying put: which means keeping our options open and saving a lot of money but also risking that the market keeps going up and losing sleep over an unsafe living situation (literraly we can not sleep)

2) Buying a small house 1000sf that is in ok condition and would satisfy our needs for the next 3 years (more than that I am not sure). The house is nothing special but the location is amazing price 350K

3) Buying a house that we love but is further away and will require the purchase of a 2nd car. Location ok, house great would satisfy our need for several years. No need (expectation) to move. Price 500K

4) renting elsewhere a nice appartment 1500-1800$ a month (does it make financial sense?)

We can not move, that's off the table
We have been waiting for more than 3 years. So I am wondering if waiting longer is also off the table.

Not sure if that is relevant but we are 32 and 38.