Housing Market Decisions

[Acard7]

The wife and I have had to make the decision to move due to her getting a new job and our oldest of two going to kindergarten next year. That way our kid can continue from her preschool into kindergarten in the same town and then my wife will only be 20 minutes to work instead of 40 minutes. Happy wife happy, well you know.

Called the banker and asked what interest rates were, 7-7.3% in rural Iowa, wowza. The wife and I have great credit (800+) only have my truck and boat payments and then our house which would sell fairly quickly..

Sadly, we have to move by next Fall. So even if we try to wait out the recession/correction in the housing market I don’t think we will win. Since the feds will up the rates in November and December again. I’m betting we will see 8-9% interest rates by January 2023.

It’s sad we are leaving our house which is a 15 year loan at 2.5% But we have outgrown it. I can’t convince the wife to stay where we are and also look like villains if we open enroll our kid when we only live 2 blocks from the school in our small town now.

 

[HangOutdoors]

One way or the other you are going to pay for it. Cheaper home prices, possible higher rates. Lower rates with higher home prices. Do what is best for the family, find the home that is right for you and move forward. Sell your current home as soon as you can if you can get a 6 month rental availability on it that way you can stay there while you are looking for your new home, is one possible strategy. The rate the banker is quoting you seems high. You can get at least in the low 6's, or better, from a lender in other states on a 30yr fixed with no points, that can lend in your area - with a cursory glance at today's rates. I would shop the rate pretty hard, especially with your score and if your income qualifies you should be getting the best rate out there, just don't let lenders pull your credit and add inquires to your credit profile until you are ready to commit.

 

[Jim_in_Delaware]

Excellent advice above!

When you are getting ready to buy, you can also lock in the interest rate for a set number of days. The option with our bank when we financed this past March was a 30 or 45 day lock. We opted for the 30 day lock as it was 1/8th of a point cheaper for the loan. The bank was willing to extend the 30 day lock rate pass 30 days with a 1/8th of a point penalty (in our case about $500) per week for up to 21 days.

We went into a rental apartment for 9 months while our home was being built. About half of our stuff went into a temperature controlled storage locker until the house was ready.

Jim

 

[FSH 210 Sport]

The wife and I have had to make the decision to move due to her getting a new job and our oldest of two going to kindergarten next year. That way our kid can continue from her preschool into kindergarten in the same town and then my wife will only be 20 minutes to work instead of 40 minutes. Happy wife happy, well you know.

Called the banker and asked what interest rates were, 7-7.3% in rural Iowa, wowza. The wife and I have great credit (800+) only have my truck and boat payments and then our house which would sell fairly quickly..

Sadly, we have to move by next Fall. So even if we try to wait out the recession/correction in the housing market I don’t think we will win. Since the feds will up the rates in November and December again. I’m betting we will see 8-9% interest rates by January 2023.

It’s sad we are leaving our house which is a 15 year loan at 2.5% But we have outgrown it. I can’t convince the wife to stay where we are and also look like villains if we open enroll our kid when we only live 2 blocks from the school in our small town now.

My two cents,

I’d have a long hard look at those numbers… and I don’t mean just the interest numbers. The economy is on the precipice of a rather large correction that has been brewing since 2008, in my humble opinion the quantitative easing chickens are going to come home to roost, money has been way too cheap for far too long. 20 min drive vs 40 min drive cost wise, vs. the new jobs pay vs the radical increase in your housing price vs the current house’s mortgage cost…And what happens to your drive to work?

It would seem to me, sitting in the Bob Uecker seats, now would be the time to hold fast and ride this correction out, put money away, and wait for the inevitable housing correction price drop which will probably coincide with an interest rate drop then make the leap to buy a new pad. IMHO waiting would put you in the cat bird seat.

My house has increased in value by 50% in two years, 50%! But I know that is not a real number per se’. I’d love to leverage some of that equity to put up a pole barn, but not at the expense of giving up my 3% mortgage for 7% on a bigger mortgage. And there is no way I’d do a HELOC ever again…

 

[HangOutdoors]

My two cents,

I’d have a long hard look at those numbers… and I don’t mean just the interest numbers. The economy is on the precipice of a rather large correction that has been brewing since 2008, in my humble opinion the quantitative easing chickens are going to come home to roost, money has been way too cheap for far too long. 20 min drive vs 40 min drive cost wise, vs. the new jobs pay vs the radical increase in your housing price vs the current house’s mortgage cost…And what happens to your drive to work?

It would seem to me, sitting in the Bob Uecker seats, now would be the time to hold fast and ride this correction out, put money away, and wait for the inevitable housing correction price drop which will probably coincide with an interest rate drop then make the leap to buy a new pad. IMHO waiting would put you in the cat bird seat.

My house has increased in value by 50% in two years, 50%! But I know that is not a real number per se’. I’d love to leverage some of that equity to put up a pole barn, but not at the expense of giving up my 3% mortgage for 7% on a bigger mortgage. And there is no way I’d do a HELOC ever again…

Its not just a financial look it also needs to be a family look. You may be in a different place than OP is and he may not of the options of just waiting it out.

 

[FSH 210 Sport]

Its not just a financial look it also needs to be a family look. You may be in a different place than OP is and he may not of the options of just waiting it out.

As I said, sitting in the Bob Uecker seats…

I would point out the family will ultimately have to deal with the repercussions of financial decisions, good or bad. I am definitely in a different place as the OP, and have a lot of life experience with such things, aka made some really bad financial decisions in my life which was the first domino to fall in a cascading series of events that were not very fun. Every thing I said came from a place of genuine caring and concern based on experience. While I still fail at this, I learned the hard way to think it through, long term.

 

[BigN8]

My two cents,

I’d have a long hard look at those numbers… and I don’t mean just the interest numbers. The economy is on the precipice of a rather large correction that has been brewing since 2008, in my humble opinion the quantitative easing chickens are going to come home to roost, money has been way too cheap for far too long. 20 min drive vs 40 min drive cost wise, vs. the new jobs pay vs the radical increase in your housing price vs the current house’s mortgage cost…And what happens to your drive to work?

It would seem to me, sitting in the Bob Uecker seats, now would be the time to hold fast and ride this correction out, put money away, and wait for the inevitable housing correction price drop which will probably coincide with an interest rate drop then make the leap to buy a new pad. IMHO waiting would put you in the cat bird seat.

My house has increased in value by 50% in two years, 50%! But I know that is not a real number per se’. I’d love to leverage some of that equity to put up a pole barn, but not at the expense of giving up my 3% mortgage for 7% on a bigger mortgage. And there is no way I’d do a HELOC ever again…

what this guy said 100%. No way I would make that move. That being said I think you will see a sever correction in housing cost in 12-18 Months. Interest rates easing in 36+ Months. So if you held fast at least you could caoaitalize on cheaper housing cost. Of course you will get less for your current house.
Little kids are resilient. If you move and she is in 2nd grade, she’ll be fine.

 

[jdkaeser]

I don’t know what kind of price range you’re looking for, but I’d stay away from anything over $200K. Get a 5 year ARM which will have a lower rate. The housing market may cool off a bit but there is a housing shortage as well as an affordable apartment shortage. Plenty of $1600 + a month apartments which is crazy but try to find one for $800! The rates will come back down by the time your ARM gets crazy. When I bought my first house in the mid 90’s rates were 8%, an ARM was the way to go then as well. This is not like 2008, different set of circumstances. With inflation rising, I see people who have been staying home going back to work in the next 3 months. They’ll have to!

 

[Acard7]

Thanks for all the advice, and this is exactly why I posted here to get more thoughts.. Thankfully we can afford a home even with the higher interest rates right now, go with an ARM and refinance before it’s over. My wife is pretty dead set on moving before our daughter starts kindergarten, which I know our daughter would be just fine starting school where we are and then transferring.. The wife is willing to give up on a lake house plan to push that 5 years down the road, so we can get a house sooner.

I am going to sit down tonight and really look at our numbers and budget. I was also pretty sure that what the bank quoted me was far higher than others. The good thing is we will likely make 30-40k on our home sale so rolling that into our next house would bring our final refi to a lower number. Either way, told the wife we can’t do anything for a couple weeks so she will have to wait, haha.

I’m a rock in a hard place I will keep you all updated for sure.

 

[HangOutdoors]

@Acard7 I know where you are coming from..... When the Admiral decides what course she wants to take and digs in, I just try and figure out how to make it happen The nice thing is I get to save up the I told you so's....... for when I need them!

 

[Jim_in_Delaware]

If I was in the OP shoes, I would seriously consider the move as he has already said the wife wants to move, she will have a shorter commute, they have outgrown the current house, and they kids would go to school in their new neighborhood. Pretty much a no brainer to me. Yea, it costs more money, but it likely would lead to a less stressful family life.

Not sure I understand the train of thought to get an ARM and refinance it later? I don't see interest rates falling much in the short term. Refinancing into a fixed rate loan in a couple of years would likely have a higher interest rate. Depending on the length of the note, could cost more than simply starting with a fixed rate.

Jim

 

[BlkGS]

If I was in your shoes, I'd expand thr house and not move. That 5% in APR and whatever extra cost the new house will be just would not be worth it to me to save 20 minutes. But I'm lucky, my wife is a very fiscally conservstive person, so she would never let us do it.

I did recently tell her we were never selling this house, and if we ever moved we were renting it out. The mortgage is just too cheap to ever let it go.

 

[BigN8]

I had to go back a reread the original post. For some reason I thought you were polling the community advice, but I see now you were making a statement. Nevertheless I think you’re messing up. Happy wife happy life should not trump your fiduciary responsibilities for the families finances. Good luck.

 

[NewGuy]

Interesting debate. Greetings from Brentwood, TN (formerly grew up in NW Iowa) also formerly a pension manager and stock analyst (way back) before doing what I really wanted to do today. First know that mortgage rates are market driven and price in anticipation of future Fed action, i.e., there is no way to know what rates are going to be months from now; although you can get an idea what the collective market thinks from yield curves.

I would buy no more house than what you could afford with 20 pct. down on a 15-yr mortgage. The pain of sweating bullets over the next payment or worrying what ARMs may do is just not worth it. Rolling ARMs has worked for a long time, but there’s no telling if worse days are ahead. Everybody has a “genius” uncle/brother/friend who has “outsmarted” the market. Truth is I’ve seen tons of brilliant money managers with “magic” models fail from commodities to stocks, bonds, mortgages - you name it. NOBODY knows what anything looks like going forward, so reduce your risk and keep life simple.

 

[adrianp89]

I wouldn't sell the home. I would save up 5% to close on the next home and as the time gets closer, lock in a 1 year rental agreement on your current home. If you need to, take a HELOC on current for down payment on next.

 

[Acard7]

Forgot to update everyone on this.. The bank got us a 5% 5 year ARM for the new home and we took out a HELOC on our old home to put down money on the new home as well. Our old home is under contract with an all cash offer, crazy I know. So after we pay off the old house and HELOC we will still clear around 20k. Closing next week, so that’s a good Christmas present.

Planning to pay off most of our debt in the next two years, including making extra principle payments on the new home so when we refinance it won’t matter what the rate will be by then. If all goes as planned, which it hardly ever does lol, maybe the lake house isn’t too far away in our near future.

 

[Babin Farms]

Forgot to update everyone on this.. The bank got us a 5% 5 year ARM for the new home and we took out a HELOC on our old home to put down money on the new home as well. Our old home is under contract with an all cash offer, crazy I know. So after we pay off the old house and HELOC we will still clear around 20k. Closing next week, so that’s a good Christmas present.

Planning to pay off most of our debt in the next two years, including making extra principle payments on the new home so when we refinance it won’t matter what the rate will be by then. If all goes as planned, which it hardly ever does lol, maybe the lake house isn’t too far away in our near future.

Congratulations!!!