Reply to Is it dumb to put most of our savings into a house?

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[quote=Anonymous][quote=Anonymous]I appreciate all the advice!  It never occured to me that 500K (or 600 with the 401K) is not enough saved to think about buying a house.  HHI is 120K.  We had been aiming for a house in the 500-600 range but with low inventory and some pressure to move, we began considering some more expensive homes that came on the market.  Another option is to keep renting...but that's 40K a year that's not going into home ownership.  And everyone is saying interest rates and home prices are expected to rise.  I appreciate the ideas I'm getting here![/quote]

Well, yes, interest rates will rise eventually, but every economist I've read says that it will happen slowly (i.e. no one will *let* interest rates go up too much too fast b/c everyone sees the housing market as integral to the economy and interest rates as integral to the housing market).

Last year, they were saying rates bottomed out.  But guess what, they went down even more.

So waiting a year or two probably won't be too big of a deal.  Beyond that, I don't know.

I don't know what to think about house prices.  It's possible we're in another bubble, to be honest.  Some say that all of the foreclosures from the last bubble still haven't hit the market.  And frankly, there are STILL people underwater.  It's possible the prices now are a reflection of inventory and won't steadily increase at the rate we've seen in the last year, because as the prices go up, more people who were underwater but have wanted to sell will be in a position to sell, so inventory may actually increase, which will slow down the upward rise of prices.

It's all very hard to tell.  I think that's the thing about the current market -- it's strange and no one really can say with any certainty where it is going to go.

So the thing is, don't make big decisions based on what people are saying.  Make them based on your individual needs and abilities.  If you feel like your jobs are stable and you can afford a house payment and still have money to save, then that's one thing.  But if you feel like you're dumping your savings into a house you don't even like, then that just doesn't seem wise.

Whatever the case may be, given transaction costs alone, it's NOT a good idea to buy a house if you plan on moving in the next 5 years.  [/quote]

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