House affordability

[LivingAlmostLarge]

Ours is a townhouse in an excellent school district. So the resale is easy and high. But I don't think affordability is in the cards for us in this district reality. That was our trade off. Size and wall sharing.

[snafu]

Selling your current home, packing up and moving is in the top 5 stressful life challenges. It seems you have several different decisions to work out. 1st location, will you move to family, different employments opportunities at the WC or stay in your general locale? 2nd Will you return to the workforce for the long term? 3rd, current allocation of income and should that change to facilitate DH's desires? Allocation with a 2nd income?

Your SFH outline is modest, what does DH desire that boosts price significantly? What do you both need in a SFH? Can you find compromise on location, square footage, property size, school district, commute, access to services, percentage of income for costs of mortgage, taxes, landscaping, maintenance, daily care etc. Price can be what ever you want to offer, inclusions are what you ask.

Our careers have required we move more than most and selling and buying homes. When you start the process of visiting homes electronically and in person, I suggest you evaluate each home by cost per square foot, adding and subtracting value of features present or absent. As you visit each site picture yourself moving through your daily routine. Imagine leaving your car with two or three very heavy grocery bags and how easy/difficult it would be through the process entry to every last items put away for example. Imagine cutting grass and watering landscaping weekly. Kitchen triangle? Age of appliances, water heater, furnace, AC. windows? Value level of insulation? Fitted closets, putting away a two weeks of laundry [just to be difficult]. Water pressure [turn on bath & flush toilet to see variances. I can go on but you see what I mean...

[sandrark]

LAL, I commend you for thinking these things through, but I must admit I'm a bit on your DH's side. If a larger home would use only 15% of your income, I think that's sufficiently prudent and careful.

As I posted in another thread, we recently sold our smaller, older, more urban home to buy one further out, necessitating a longer commute and a bit more money. WE ARE THRILLED with the new place, even almost 3 years later.

It's larger, more gracious, has 2 bathrooms (instead of one), has a living area that leads onto a deck for BBQing (our last backyard required 3 flights of stairs and two doors). And the new neighborhood is charming, with little crime. We have a community now, instead of an urban encampment, and we will never move back.

Some people think we're crazy - the old place was closer, cheaper, and "made more sense" on paper. But our hearts aren't made from data calculations.

What would your child LOVE? What would make your family THRIVE? a SFH where you have some space? A garden? A park nearby? Riding paths for family bike rides?

In the end, we went from a house that cost 15% or our combined gross income to one that costs 21% of our combined gross income. I'm also commuting 3 hours per day, 4x per week, so my gas cost is 2.5X what it used to be. And none of that MATTERS - what matters is how happy and at home we feel in the new place.

Our new house cost $550K; we sold the old one for $400K, but we had a lot of equity in it, so we were able to put down nearly 30% on the new place. If you can do the same for the new place, you'll find it more affordable, and infinitely more pleasing. And you will be able to save for retirement, kid's college, vacations, home renovations, etc.

I encourage you to be open-hearted with your husband's desires, instead of tight fisted and concerned only with price. It sounds to me like there is room for compromise...if you find out what qualities in a $750K house he wants, perhaps you can find that in a $650K house, and meet in the middle.

Our house has a horrific kitchen and a damaged master bath; also, a 1980's "rock wall" fireplace that makes me want to take a jackhammer to it TODAY! The deck needs to be replaced. And if all of things had been done, the house would be out of our league. So I'm confident you'll be able to find something that allows you to meet in the middle - so make sure that you visit house on both sides of your price line.

[scfr]

While I currently own my home outright, in the past when we had a mortgage we never bought a house that was more than what I (the lower earner of the 2 of us) could afford to keep on my own, through a combination of income and savings. (We also looked in to whether we needed life insurance but decided we were OK self-insuring.) If, God forbid, my husband were no longer in the picture I would probably choose to sell my house and move to something smaller. But I would never want to be in a situation where I HAD to sell quickly at a fire sale price.

In your situation, it sounds like you need to figure out what you as a couple want to do in terms of relocating to the other side of the country and/or going back to work before moving ahead on house-hunting. You don't even need to decide what you are going to do for sure, just what the 2 of you HOPE to do. If you and your husband agree that the goal is to try to relocate in a few years, then the best thing to do may be to find a way to stay in your town home by making the space more liveable. Spending a few hundred on furniture or supplies to increase storage, and putting some energy in to eliminating things that you don't need or use, would make more sense than buying a SFH only to sell it again in a few years.

Would it be worth it to spend for a babysitter so the 2 of you can go out someplace quiet for some really serious couples time to sit down and have an open & honest discussion about what you want to do over the next 5-10 years: Relocate or stay where you are? You go back to work or continue to stay at home with the kids? Personally I wouldn't really even think about houses in anything other than general terms until after those decisions had been made.

[JoeP]

OP:I hate to sound negative, but is it possible that the housing prices in your area are over-valued, and may be due for a "market correction?" I'd hate to be holding on to property originally valued at $700k only to find it corrected down to $500k.

[LivingAlmostLarge]

Nope no market correction. It's been depressed since we bought and hasn't really moved since 2005. But it's going up now and getting hotter than ever. Things are flying off the market and there literally is very little inventory.

We are still arguing over moving leaving area versus staying. A lot of friends not from the area recommend moving somewhere cheaper and making the leap. That staying where we are even for the salary is tough since everything is expensive.

Housing, daycare runs around $2k-2500/month, heating electric, gas, oil - super expensive. Most people I know pay $500/month during winter if not $1k+ depending on size, age, type of house. And gas is not available for many. Many use oil or radiator heat. Not efficient. No insulation. It's awful. Trust me the inner bathroom of our neighbors condo (our bathrooms are side by side) had no insulation when they had to tear out the wall, ceiling, etc this past january because of a frozen pipe on their second floor bathroom. NO insulation period. And not surprising. We couldn't put it in unlike our exterior which we did prior.

[LivingAlmostLarge]

Has anyone considered the affect that rising interest rates will have on affordability? I ask because the rates are up around 4.5% for 30 year fixed and assuming we don't move for another year if it goes up to 5% it increases our payments quite a bit.

Something I've pointed out to my DH and currently we've got an artificially low rate and so assuming we can afford the $750k home compared to $600k even with me working seems crazy. Since the rates will affect the payment by as much as $1k right now, since we've at 2.625% versus 4.5% now and that's assuming it stays there or goes lower.

So affordability is also based on interest rate prevailing at the time. But I don't want to rush any decisions based on interest rates.