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Fiscal Cliff and buying a house
I also put this on BAH, but figured I could post it here too.
DH and I put an offer on a house in August, and finally heard back from the seller's bank last week. We are planning to counter, and we are fairly certain they will accept. Our question now is if we should wait to see what happens with the "fiscal cliff" situation. If our take home pay is affected, we will not be able to live comfortably in the house, and we don't want to live paycheck to paycheck.
DH is worried that if we don't hurry up and make up our mind, someone else will get the house. We know there is at least one other offer on the table. He said he doesn't think our take-home pay will be that much smaller if nothing gets agreed upon in the fiscal cliff situation. But I have always been the cautious one when it comes to big decisions, so I really want to wait and see....
What do you think?
Re: Fiscal Cliff and buying a house
I don't know anything about your industry or local housing market, but if you think your take home pay is going to decrease then I would not buy a house you can't live comfortably in. I'm a big fan of buying a house on just one of your incomes - sure you could technically afford more, but why stretch yourself thin when times are good?
Also, do not get into a bidding war in this climate. There's no sense in letting someone else drive up the price you pay when there are an excess of houses on the market.
Our housing market is actually very competitive right now. Houses are quite expensive down here (we are in NEFL), and they are just getting higher and harder to find in our budget by the month. This is why DH wants to get it right this second.
I am trying to convince him that we will still be able to find a nice house at a reasonable price in 6-9 months. I would like to pay off our car a little more first, and that way we can continue to build our credit, which is pretty good already (705 for me, 720 for DH). But he really hates our tiny condo and has wanted to move for a year already! He is not budging....
I don't know what your income is like, but if you're a married couple with no children who make the median income for this country - roughly $50k - your taxes will go up about $2,000 a year (http://www.slate.com/articles/news_and_politics/map_of_the_week/2012/12/fiscal_cliff_interactive_how_it_will_increase_taxpayers_taxes.html) which is about $166 a month.
If $167 a month is the difference between being able to afford your house or not, I'd say you should not buy it.
I have to go with CoffeeBeen and recommend you purchase based on one income. As a former Realtor (I put my license in holding a few years ago), I can't understand why people buy at the top of their price point. You don't want to do that.
You stated that if your take home pay changes, you will not be able to live comfortably in the house. That means that you cannot comfortably afford it. Don't put yourself in the situation of having to worry about it. Life is a long song, and you never know what will happen from one day to the next. Don't allow yourself to be so vulnerable.
I have seen too many people live to regret a purchase. Buyer's remorse is very real. Buy a house you can comfortably afford at this stage in your life. Make a good investment, not a bad one.
I am more conservative when it comes to home prices (PITI that equals more than 27 or 28% of your monthly take-home, is a bad idea in my eyes) than most, so my advice may not work with your lifestyle.
I didn't know you practiced real estate! That's pretty cool. My high school job aptitude test said I would be a real estate agent! I didn't, but still.
I agree with Missy's conservative home price recommendation. We bought a house in '09 when the housing market crash was fresh and new in everyone's minds and I was terrified of hitting the top of our price point. I wanted to learn from other people's mistakes. We bought a house based on DH's salary alone, and even at that we went kind of low. We're not paycheck to paycheck, we have a nice savings, I could be a SAHM if I wanted, and so on. Our house isn't as amazing as it could be, but life is so much easier.
OP, I seriously think you and your DH should reconsider the purchase if your finances are that tight.
Yes! I was an English major (obvs, my grammar still sucks), and the last place I thought I would end up was in real estate. My mom owned a Prudential franchise, and I went to work for her a few years after college. Next thing I knew, I had been in real estate for a decade!
I think you are in academia, no? If yes, then I would MUCH prefer to be in that field over RE. I'm not in any field at the moment, but still.
Yeah, I do stats for a research group. I often wish that my training gave me more "real world" skills though. (Like, knowing about houses and the housing market would have been a huge boon when we were buying) Oh well, so long as the university stays in business I should be ok.