Housing: To Buy or Not to Buy, That is the Question

I can’t afford a house. The cheapest houses here cost $700k and those have 2 bedrooms and 1 bathroom and are major fixer uppers in not-so-nice areas. (Remind me again why I love the Bay Area?) But there are a few condos which fall into a price point that could make sense. $500k wouldn’t be that crazy (maybe?), if I were to liquidate all my stocks for $97k (well, it will be less than that due to taxes, but most of my stocks have been in there for a year so will qualify for 15% tax rate on profits.) Figure $80k from that, and I’d have to find $20k for a downpayment to have 20% down on a $500k property.

My credit score is a 724 (not perfect but still considered excellent to most lenders, I hear) so I should be able to get a pretty good rate. I don’t understand all the fees involved in buying, but I assume there will be quite a few added on to the total price of the condo, so that would mean I probably could only afford a $400k place. That would be basically enough for a decent 1br 1ba condo.

Going through those numbers, owning just doesn’t seem to make sense. HOA fees would be $500+ per month and more later down the line. I can’t imagine it will make sense to own until I have $1M liquid (like maybe by the time I’m 70.) So I guess I should keep renting, right? Well, renting isn’t perfect either.

At the moment, my rental costs are really cheap. $650 per month. But my boyfriend and I are planning on moving in together this year. I’m expecting we’ll rent for $1800 per month, 3x what I’m paying now, for a 1 bedroom. When I work out the mortgage on a $500k house on lender calculators online, the cost to own isn’t that much higher:

30 year fixed
APR 3.534%
Lender fees: $2100
Monthly Payment: $2091

So instead of paying $1800 per month, I’d pay $2091 plus HOA (maybe $2500 total) and own a place. I go back and forth on if owning is the dream of America’s past and something I should want for my future. I don’t long for a white picket fence, but I do want my own space and I’m tired of moving. I’ve actually lived in my current place for four years now, and I’m growing out of it. Living with a couple, even though they are nice, gets old after a while. I don’t like feeling like the third wheel in my own house. And I fantasize about having counter space to keep my grill and slow cookers out for ongoing use. (God, when did I become so domestic?)

I don’t understand enough about home buying and need to do a lot more research before moving forward with a purchase. The only thing I could see making sense is buying a 2br 2ba condo so I could rent out the second bedroom if needed. But most 2br 2ba condos are going to be more like $600k – $800k, and out of my price range.

Renting isn’t bad – but I also know to get a 1br that meets the quality of my current 3br, it’s going to cost a small fortune. So I’m not sure what to do. My boyfriend and I will probably move in together by September, assuming he gets a job, so I need to figure it out fairly soon. Waiting to buy isn’t the worst thing, but if rates are really low right now maybe I should at least consider it?

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3 thoughts on “Housing: To Buy or Not to Buy, That is the Question”

  1. Make sure you account for property tax and insurance when making your monthly payment calcuations. Some lenders make you pay those through them via an escrow account and that can increase the monthly payment quite a bit.

  2. I'm in a similar situation, with a high net worth and income. A condo across the street had an open house, and I thought about making on offer.

    New York Times has a tool for determining if its better to rent or buy. I entered my uber cheap rent, estimated home price, and down payment, and it says I should keep renting :/

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