Thoughts on buying a personal residence right now?

Question

My wife and I are in the process of buying a condo as our first personal residence in Fullerton, CA. We have opened escrow and are just about to wrap up our inspections. We have a lot of family members semi-freaking out saying real estate is going to tank and that we're making a big mistake (aka starting to freak us out a little).

We spent a lot of time analyzing the numbers and it's something we can afford, and continue to save for future real estate investing. I work for a tax accounting firm as a CPA and I would say my job is very secure.

Wondering what you all think of buying a personal residence at this time?

Hal Thompson · Answer

The answer is "it depends". What is your personal financial situation? Will you end up paying more or less for housing if you buy the condo? Could you rent the condo to cover your costs if you get tired of living there or have to move jobs or even cities?

There is never an inherently good or bad time to buy real estate. Right now, you may be able to get some of the lowest interest rates on a mortgage in all of recorded history. However, we have also had 10 years of low rates and rising real estate prices, and now 30M people are out of a job. The market for real estate might get very soft over the next few years. Will you be able to ride it out to the other side, if you lost your job, or if rents dropped by 25%?

Sorry to make it complicated....but it is complicated. Being good at real estate investing is about weighing your upside and downside risk, in the context of your portfolio and personal appetite for risk, and then coming to a strategic decision. There are unfortunately no easy yes/no answers in most cases.

Mike Dymski · Answer

Unemployment has skyrocketed, GDP has plummeted, little traction has been made on the virus in six months, asset prices remain elevated, and we are in a recession.  People are having trouble coming to grips with reality.  Your concerns are valid.

Marc Winter · Answer

It's easy to be scared and concerned these days.  The first time is usually the most difficult (I'm talking about buying a home.)

That being said, if you can afford it and you love it, go for it!  It will be your home.  If you plan on being there for 5 to 7 years, do you think it will not be worth then what it costs you today?

Good luck.

Eli Geneus · Answer

It matters on YOUR financial position. Regardless of all the noise out there you have to do what's right for you. Run the numbers and if they make sense dont sweat the small stuff. Also would you be able to move out of the property and turn it into a cash flow positive. Right now it's all about having multiple exit strategies. Dont let this purchase stretch you financially.

Andrew Goodwin · Answer

@Stephen Tanquary I don't time the market when I make a purchase. I don't have a crystal ball, I analyze the deal as is. If you're renting now, as long as the mortgage payment is less than you're paying in rent, it's a good personal decision.

Having seconds thoughts is natural. Having concerns is natural. You went under contract for a reason.

I purchased a live in flip last month. Of course I'm concerned about the market, but I know the decision I made was and is a good decision.

Basit Siddiqi · Answer

@Stephen TanquaryNo one can say for certain if real estate prices will drop, stay flat, or increase.Are there some signs that real estate prices will drop a little - yes, by how much, no one can tell you for sure.I personally would wait it a year to see if prices drop.

Ben Baye · Answer

@Stephen Tanquary

Looks like a lot of good advice for analyzing the value in the purchase. It does appear you have done your homework and have a solid purchase for the time we are in.

I personally think if it is going to be your personal home and you are currently renting the necessity to make every penny possible diminishes. Obviously you don’t want to intentionally make a poor decision but If you’ve analyzed the deal and it makes sense, just go for it. Home ownership is rewarding in itself and worst case scenario you may need to live there longer or hold it longer for the market to recover “IF” it does collapse.

Don’t get hung up worrying about what might happen. Evaluate, which you’ve done, make a decision and move forward. There’s never a perfect time for action and rarely a perfect option.

Good luck!

Stephen Tanquary · Answer

Thanks everyone for your responses! We are living in strange times, but I appreciate the BP community and all of you who took the time to share your thoughts!

Daniel B. · Answer

@Stephen Tanquary

Before this started, was there a supply/demand problem across the country and specifically in your area?  Covid doesn’t change the number of existing homes or the number of adults who need homes.  In recessions, people can bunker up, move back in with family etc, but eventually we will return to the reality that there is a housing shortage, never really recovered from the Great Recession where enough homes weren’t built to keep up with new adults.

That’s not to say your specific area couldn’t be overpriced...I don’t know a thing about it.  Interest rates are are historic lows, so that affects price as well.  I would buy if you feel secure with your income, are sure you aren’t overpaying, etc.

Thoughts on buying a personal residence right now?

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