My brother is looking at buying a house in the next month or two. He just turned 30 and has been working overseas for the past couple years. Has no debt and a large amount of savings. Going into a stable engineering job here with the same company he has been working overseas with.

His budget is 300k. The area he wants to purchase has a very overheated housing market currently. Prices rose 25% last year. And prices are OVER 2006 levels.

Would it make sense for him to wait it out until next year? Even if rates were to rise he is looking at putting 50% down and a 15 year term. He asked me for advice and this is the direction I'm leaning.

If you're gonna ask this question at least name the city.

If the options are buy now or buy next year the answer is almost definitely buy now.

If the options are buy now or buy never (or buy on a dip that may never come) then there might be a debate.

Also you might want to provide a rent vs. buy cost analysis for the particular area.

It's in Washington State. Prefer not to name the specific city. Not Seattle if that helps.

You bring up a good point in buy now vs buy never. He will probably relocate within 10 years. Would be looking at fairly new to new construction, so not as much mainteince.

Nobody can help you with the limited information you're willing to provide.

What are his other options? Is there something comparable to his home that he can rent long term?

Buying with a supposed 10y time horizon could be a bad option if rental prices for homes that are similar are available. However, if the question is should I wait a year, lol. Side with stinkypete. And even with information that could still be ?!?

How in the world could the city being secret matter? Weird.

I wouldn't put 50% down ever, unless the bank required it. Mortgage loans sooo cheap right now + potentially deductible, I personally would be in no hurry to pay down a mortgage. Invest the money towards retirement instead.

Further, if he has zero debt, having a mortgage locked in at a stupid low rate could be a good hedge against lots of other economic changes.

But yes, it's impossible to answer this question as it has too many external factors that matter which we don't know. How much would his quality of life improve in owning vs. renting? Renting may be the better economic choice, but if he wants to settle in and not worry about getting kicked our or rent hikes, it could still be a good option to buy.

It's a smaller community and I prefer to remain anonymous as I can. Anyway I did a little bit more market research last night on Zillow and Trulia. Most of the newer stuff he would be looking at would be a 3br new construction 1800-2000 sq ft. for around $290-300k depending on upgrades. Last year these same houses were running $265, so I overestimated the jump from previous year. These same sites are expecting a 6-8% increase in the area next year vs a 2.5% increase nationwide.

Rent for a similar place would be $1500-$1800. Part of the possible reasoning to wait is that the community is pretty dependent on a large amount of federal government contracts that employ the majority of people making 80k +. The local market tends to be pretty insulated, but has had times were funding got cut and housing prices took a big dip as various engineers, scientists and construction workers moved elsewhere for work.

I would be interested in the rationale for this.

If he is buying purely for financial reasons then a basic rent v buy analysis should work for him. Would recommend being v. conservative on appreciation assumptions.

If he is buying for non-financial reasons (family, enjoys ownership, etc) then he has to evaluate those and see if it's worth it and he is ok with not making money on his house.

No one knows what the market is going to do, but it's likely we are flattening out in the next few years (or slow growth/decline). The large y-o-y appreciation of 2010-2015 is gone.

I bought a house in So Cal this past year and I've been ok with the decision, as it was more non-financial (family, move closer to work) than anything else, I don't expect to make money on the house (bonus if it does). The rent v buy analysis I did came out pretty close, but the SFH rental inventory is pretty crappy for a similar place in the area.

I told him just to put 20 percent down and go 30 years. Claiming the mortgage interest and dumping money into an IRA (he maxes out his 401k now). My brother doesn't like having any kind of debt. He will most likely pay the house off within 5 years. I don't think its for rational reasons but more emotional. He's a worrier and generally has a negative outlook.

I think its possible in the market that he's looking at to buy into a dip within 5 years. Like I said a lot of the gov contracts are a yearly thing. They could be slashed for a wide variety of reasons. I don't think he's patient enough to wait that long, and wants the house as a reward to himself after working in Africa for the past 2 years. That's why I stated the 1 year timeframe. None of you think the election could impact housing negatively?

Doesn't it just come down to interest rates mostly?

Especially given his situation, he should go into a 5/1 or 7/1 ARM and not a fixed rate if he buys as it sounds super unlikely he stays past 10 years. He can get a rate at least 50 bps lower than the fixed.

are u worried were gonna buy the ****ing house he wants?

don't start a thread if you aren't going to provide relevant details, especially if you are asking for advice about a very specific question. go to reddit instead. or start a thread about a specific topic instead of a personal question that way the thread can be of more use to the forum. nobody cares who you are so you shouldn't be worried about revealing something like the city he's considering buying, the average rent for a similar condo/house, etc etc

He should be renting forever if he hates debt. He'll be paying a massive premium to "own his own home" since he's skipping all the ****ing subsidies that exist.

This. Also I despise people who ask for financial advice and disagree because of an emotional reason. Tell him he's being about $75k worth of stupid and if that doesn't bother him to have at it.

i agree with this

If he plans to own for the next 10 years as you say, I cannot imagine a scenario where he loses money when the time comes to resell vs. money he spent on rent in that same time period (unless he rents a room or a tiny, cheap **** hole). You won't tell us the exact location, but I'm willing to bet rents have shot up all the same and are "over priced" as well.

You really need to convince him to put the least down on the house. Pay down enough to avoid PMI perhaps, and that's it. Anything else is really really dumb if you are not wealthy, and is the exact opposite of the conservative approach you seem to want to take (buy now/wait etc.). He's got a fair amount of cash to earn him a nice safe return in other investments that beat the interest rates he will be paying on the house.

Trying to learn here.. even if you are wealthy, what's the advantage to putting more $ down? For anyone buying a home (whether you're worth 100k, 1mil or 10mil) shouldn't you always just put the minimum down and ride the low interest rates/tax deductions on interest?

Why pay money to borrow money that you already have? It's possible that paying the min and riding the low interest rates and tax deductions is the best option but that's not necessarily true in every situation.

If you're rich you can likely borrow money for lower rates elsewhere.

I have sort of an off thread question but seems relevant to current discussion.

I bought my house 3.5 years ago. I don't really know how long we planned to stay, but don't see us leaving in the next few years.

This was our 2nd house, and we did very well with the appreciation on our 1st house. In the 6 years we were in our first house it appreciated close to 80+%.

When I bought this house (a significant upgrade) we put 20% down not really thinking. We have a decent amount of equity in our house.

Is that a mistake? Should I have put less down and invested that money somewhere else?

Is there a good way to leverage the equity I do have in my home? Say buy purchasing a rental property? I've been looking at getting into rentals for a while, the rental market in our area is very good.

I'm in Ontario, Canada fwiw.

Also, I'm not trying to hijack the thread so if a mod thinks this is better somewhere else feel free to move it

This is pretty wrong.

P much. Loans lose some subsidy advantages when you move into jumbo territory.

Can you give some examples? Home loans are pretty cheap and highly subsidized. Or do you just mean nominal rate?

the main reason would be that the money you don't put down can have a higher return on capital than the interest rate on the loan