WWYD - Housing market question

[namasteak]

Help me make a logical decision about this housing market.

Background - We bought a small house that is perfect for 2 kids in an expensive neighborhood because it was 20 minutes from my mom, 20min from my in-laws and it is where my sister lives. Well now we have 3 kids, my mom passed away and my sister is moving

DH and I had saved to do the garage conversion/extension but now do not know if that is the financially smart decision. Why put at least $60,000 into a house that will still have a living room that is a little too small and have rooms that need updating? We are priced out of moving to another house in this neighborhood.

Since my sister is now moving we could move to the suburbs where we could buy a cheaper house where we wouldn’t have to make all of the updates this house needs. A cheaper house means a lower mortgage and there would be more leftover from selling (because it would be a smaller down payment) that we could put in savings. We could also put the $ we saved for the conversion/addition into savings.

Now is not the best time for us to move but I don’t want to regret not taking advantage of this sellers market and it does seem like the most MM decision.

PDQ details
-bought almost 3 years ago for $470,000
-put $65k into updates/repairs (1940s house)
-current value is $575,000 (according to 2 realtors)
-Would make $109,000 selling this house (after realtors fees)

[mommin]

How would this impact commutes? How are the schools? Are there other amenities near you that you would miss in the suburbs?

We made the choice to move rather than add on because of the cost and my absolutely abhorrence of living through construction. However, we did this 8 years ago when things were less crazy. I think having a house you love is so important. If the schools, commute, and local amenities aren’t an issue I would at least look around the suburbs. You may find something you love or you may decide it isn’t worth it based on the houses available.

[hbomdiggity]

Is your sister headed to the burbs? Or out of the area completely?

It seems like even with the garage addition, the house won’t be perfect. And the bigger house is actually cheaper? I would strongly consider moving.

[simpsongal]

Honestly, I would let the market for the new home dictate your decision. If there are available homes for sale that you are excited to buy in the suburbs and you could do so w/o competing against like 10+ offers, I would go for it. But if selling now means you settle for whatever you can get in the suburbs, I don't think I'd make the move now.

[aspentosh]

Apr 28, 2021 12:08:15 GMT -5 simpsongal said:

Honestly, I would let the market for the new home dictate your decision. If there are available homes for sale that you are excited to buy in the suburbs and you could do so w/o competing against like 10+ offers, I would go for it. But if selling now means you settle for whatever you can get in the suburbs, I don't think I'd make the move now.

Exactly this. If you're going to be in a bidding war and settling for a house in the suburbs, this doesn't seem ideal. But if the suburbs has a more reasonable market and you can get what you want and save some money, it might make sense.

[raangoli]

I came to say what simpsongal said

[goldengirlz]

Despite the craziness in the market, I don’t think now is a terrible time to buy because interest rates are so low. But yes, it’s a seller’s market and like other PPs pointed out, you’re basically riding the overall wave (meaning that even if you wait and your market cools down, the prices in the suburbs will likely cool alongside the broader market trend — and vice versa.)

It doesn’t sound like you’re forced to move on any particular timeline, so I don’t think there’s any harm in looking if you’re serious about living in the suburbs. But I also don’t think you need to rush into anything because (usually) prices in the suburbs and the city move in tandem. (Covid was the exception because people wanted more space — however, my gut feeling is that the trend will eventually reverse and people will want to be closer to job centers once more offices reopen. So in that sense, perhaps waiting could actually be a good thing for you.)

Tl;dr: Don’t rush into something because you think it’s the MM thing to do. A house is an investment, yes, but first and foremost it’s a place to live.

[namasteak]

Apr 28, 2021 11:48:46 GMT -5 mommin said:

How would this impact commutes? How are the schools? Are there other amenities near you that you would miss in the suburbs?

We made the choice to move rather than add on because of the cost and my absolutely abhorrence of living through construction. However, we did this 8 years ago when things were less crazy. I think having a house you love is so important. If the schools, commute, and local amenities aren’t an issue I would at least look around the suburbs. You may find something you love or you may decide it isn’t worth it based on the houses available.

No commute change. DH is a consultant so he either travels or WFH.

We previously lived in a master planned community and I like those amenities (trails, pools, etc)

[namasteak]

Apr 28, 2021 12:05:10 GMT -5 hbomdiggity said:

Is your sister headed to the burbs? Or out of the area completely?

It seems like even with the garage addition, the house won’t be perfect. And the bigger house is actually cheaper? I would strongly consider moving.

She is moving 5 hours away.

Even with the garage conversion the bathrooms & kitchen need updating. The living will always be small because there is no way to expand it.

[Poppy]

You say you could buy a cheaper house, but it would help me if you could put numbers on it.

Also, it sounds like you will be resetting your mortgage term (#years) and have lower equity. So I am not quite sure whether it's an overall win based on your post.

[namasteak]

Apr 28, 2021 12:08:15 GMT -5 simpsongal said:

Honestly, I would let the market for the new home dictate your decision. If there are available homes for sale that you are excited to buy in the suburbs and you could do so w/o competing against like 10+ offers, I would go for it. But if selling now means you settle for whatever you can get in the suburbs, I don't think I'd make the move now.

This is basically what my realtor said.

We would have zero problems selling our house. It will likely sell off market and if it goes on market it will only last a few days with multiple offers based on comps.

[namasteak]

Apr 28, 2021 12:46:14 GMT -5 Poppy said:

You say you could buy a cheaper house, but it would help me if you could put numbers on it.

Also, it sounds like you will be resetting your mortgage term (#years) and have lower equity. So I am not quite sure whether it's an overall win based on your post.

A house in the burbs would be around $400k, more or less depending on how much work it needs.

We would only be resetting our mortgage by 2 years (we refinanced last summer) so I don’t think that’s a big deal.

A lower mortgage payment means we could potentially afford a 15 year mortgage OR get a 30year and make extra payments.

[ohgillian]

It sounds like you don't want to stay there. So, I think I would sell.

[icedcoffee]

Agree with others that I'd do this only if you found something you love. Basically, don't do it for financial reasons. Do it because you fall in love with something that will be a great fit.

Is there any possibility of a move to CO? I don't know if that idea was mostly just a joke or has any potential.

Your reasons for moving seem to make sense though.

[TR]

I think you should definitely move to my neighborhood

[namasteak]

Apr 28, 2021 12:51:09 GMT -5 ohgillian said:

It sounds like you don't want to stay there. So, I think I would sell.

I don’t but DH does.

My mom also passed 5 months ago so I’m trying to make sure this is logical vs emotional.

[namasteak]

Apr 28, 2021 13:29:47 GMT -5 TR said:

I think you should definitely move to my neighborhood

I found THE PERFECT house and by the time my realtor called that realtor it was under contract

[Poppy]

Well, it does seem like it works out money-wise. So I agree with PPs that the question is more about what suits your family's desires more.

[namasteak]

Apr 28, 2021 13:24:01 GMT -5 icedcoffee said:

Agree with others that I'd do this only if you found something you love. Basically, don't do it for financial reasons. Do it because you fall in love with something that will be a great fit.

Is there any possibility of a move to CO? I don't know if that idea was mostly just a joke or has any potential.

Your reasons for moving seem to make sense though.

It was a mostly joke on ML because DH and I both love Colorado. Idk if DH would want to move that far from his parents.

[namasteak]

Apr 28, 2021 13:24:01 GMT -5 icedcoffee said:

Agree with others that I'd do this only if you found something you love. Basically, don't do it for financial reasons. Do it because you fall in love with something that will be a great fit.

Is there any possibility of a move to CO? I don't know if that idea was mostly just a joke or has any potential.

Your reasons for moving seem to make sense though.

It was a mostly joke on ML because DH and I both love Colorado. Idk if DH would want to move that far from his parents.

[Susie]

I'm not really convinced the housing market is a major factor in this sort of decision, unless you're moving from one market to another and significantly different market conditions exist between them.  

We were also weighing renovation vs. moving, and we were pretty heavy in the renovation camp until we realized that even if we added a master suite as planned, the house would never be what we wanted it to be.  It was too big when it was just us, just right for the 2.5 years we had only one child, and then suddenly too small as soon as we had #2.  The kitchen, backyard, only-partial basement, and 1 car garage, were all too small, there was no place to put 1st floor laundry, etc.  Even if we fixed our bedroom/bathroom size issue via the addition, we'd have spent $80-100k or so and the house still wouldn't be exactly right.

Instead, we made what felt like a hard decision to put our equity + cash into a new house.  We are in contract to buy one that fixes all of those size issues (at least we think/hope it will!), and we're selling ours.  Right now the market is up, so we are overpaying for our purchase, but we're also getting a higher than anticipated price on our sale.

If we did the move in 2019, our house would have sold for around $280k, and the house we're buying DID sell for $375k.  (Our sellers were only there 2 years.)  Instead, we're doing it in 2021, our house has multiple offers for $350k, and we paid $450k for the house we're buying.  Either way, it's about $100k to jump from one house to the other.  The market affects the actual numbers, but not really the delta.  As far as the process, too... when you have to both buy and sell, I'm not sure it matters that much because one end or the other will suck.  Inventory right now is crazy low, prices are crazy high, bidding wars happen on every house, etc.  So it being a seller's market isn't great all around.  (Also, see my thread on H&G for how frustrating selling is going even in a strong seller's market!)

All that said... it sounds like your house isn't working for you.  Would the suburbs work better?  Would you be happier?  Would you like the location?  What would it mean for commutes, schools, kid activities, all that?  Those are the key questions that would drive what I wanted to do.

[namasteak]

Apr 28, 2021 14:22:56 GMT -5 Susie said:

I'm not really convinced the housing market is a major factor in this sort of decision, unless you're moving from one market to another and significantly different market conditions exist between them.  

We were also weighing renovation vs. moving, and we were pretty heavy in the renovation camp until we realized that even if we added a master suite as planned, the house would never be what we wanted it to be.  It was too big when it was just us, just right for the 2.5 years we had only one child, and then suddenly too small as soon as we had #2.  The kitchen, backyard, only-partial basement, and 1 car garage, were all too small, there was no place to put 1st floor laundry, etc.  Even if we fixed our bedroom/bathroom size issue via the addition, we'd have spent $80-100k or so and the house still wouldn't be exactly right.

Instead, we made what felt like a hard decision to put our equity + cash into a new house.  We are in contract to buy one that fixes all of those size issues (at least we think/hope it will!), and we're selling ours.  Right now the market is up, so we are overpaying for our purchase, but we're also getting a higher than anticipated price on our sale.

If we did the move in 2019, our house would have sold for around $280k, and the house we're buying DID sell for $375k.  (Our sellers were only there 2 years.)  Instead, we're doing it in 2021, our house has multiple offers for $350k, and we paid $450k for the house we're buying.  Either way, it's about $100k to jump from one house to the other.  The market affects the actual numbers, but not really the delta.  As far as the process, too... when you have to both buy and sell, I'm not sure it matters that much because one end or the other will suck.  Inventory right now is crazy low, prices are crazy high, bidding wars happen on every house, etc.  So it being a seller's market isn't great all around.  (Also, see my thread on H&G for how frustrating selling is going even in a strong seller's market!)

All that said... it sounds like your house isn't working for you.  Would the suburbs work better?  Would you be happier?  Would you like the location?  What would it mean for commutes, schools, kid activities, all that?  Those are the key questions that would drive what I wanted to do.

I think we are in the same position as you re: house renovations and it still not quite working. It was something we were willing to live with when family was a factor but it is unfortunately not now.

I would be happier in a bigger house. DH doesn’t want to move but he gets so annoyed by typical kid noise and now he needs a proper home office * so I think he would be happier once we moved too.

I’m familiar with the possible locations and like them. The kids just started karate (their only activity) & there are plenty of dojo’s in the suburbs.

Although I don’t totally agree I see your point about the market so we need to really weigh our choices here.

*His company has changed their policy and consultants now work remotely & only travel under rare circumstances.

[ellipses84]

Unless you love your neighborhood and think you wouldn’t like the suburbs, I’d start looking for a new house and be picky. See if there’s something you fall in love with. You can sell high and interest rates are low even if you have to buy high. I don’t think you are going to love your current house at any point. Can you imagine a time when it would be ideal? If not after renovating, then when kids go to college? That’s a lot of years of compromise when you don’t have to and there’s nothing keeping you in that particular neighborhood.

[cherry1111]

I think you’re in DFW...knowing what I do about the market you’ll have 0 problem selling but buying may be rough. As someone already in the DFW burbs I would probably make the move but you’ll have to be ready to look at houses the day they go on the market and be prepared to offer above asking. A family friend just offered 20% over asking on a $300k house. They did win it but that is a crazy amount over asking.

[mlkgls]

Also in the suburbs and the home buying chatter I see on my local FB pages is mind-blowing. Multiple offers above asking seem to be the norm, but it doesn’t sound like you would have any problem selling. I would seriously consider moving given all the change in circumstances; it will be easier to move when they’re younger and the space constraints won’t lessen as they get older.

It doesn’t hurt to explore your options, even if you ultimately decide to stay put.

[namasteak]

Apr 29, 2021 16:22:36 GMT -5 cherry1111 said:

I think you’re in DFW...knowing what I do about the market you’ll have 0 problem selling but buying may be rough. As someone already in the DFW burbs I would probably make the move but you’ll have to be ready to look at houses the day they go on the market and be prepared to offer above asking. A family friend just offered 20% over asking on a $300k house. They did win it but that is a crazy amount over asking.

I am in DFW and have had family here for YEARS (DH & I both grew up here) so we are pretty familiar with the general vibe of them. 

A big factor in us staying (at least for awhile) is the stress of the current buying market. And the fact that DH REALLY doesn't want to move. Like so much so he is willing to put $ into making this house work even if its not the most MM decision. 

[egishere]

I'm not totally familiar with how appraisal gaps work but if you were to get a new house and have to bid over to win it wouldn't it probably take a large chunk of your profit from selling your current home? So 20% over on a 400k house would be 80k-yikes! The horror stories I keep reading about the multiple bids on houses etc all over the country would dissuade me from moving right now! My friend recently bid 122k over asking on a million $ house in the Denver burbs and they were third place. It's all ridiculous!

[namasteak]

Apr 30, 2021 14:23:11 GMT -5 egishere said:

I'm not totally familiar with how appraisal gaps work but if you were to get a new house and have to bid over to win it wouldn't it probably take a large chunk of your profit from selling your current home? So 20% over on a 400k house would be 80k-yikes! The horror stories I keep reading about the multiple bids on houses etc all over the country would dissuade me from moving right now! My friend recently bid 122k over asking on a million $ house in the Denver burbs and they were third place. It's all ridiculous!

The market on buying has me seriously reconsidering things. It’s way worse than I thought!

[mccallister84]

May 2, 2021 11:16:39 GMT -5 namasteak said:

Apr 30, 2021 14:23:11 GMT -5 egishere said:

I'm not totally familiar with how appraisal gaps work but if you were to get a new house and have to bid over to win it wouldn't it probably take a large chunk of your profit from selling your current home? So 20% over on a 400k house would be 80k-yikes! The horror stories I keep reading about the multiple bids on houses etc all over the country would dissuade me from moving right now! My friend recently bid 122k over asking on a million $ house in the Denver burbs and they were third place. It's all ridiculous!

The market on buying has me seriously reconsidering things. It’s way worse than I thought!

This is where we are. We have considered moving for a while now but didn’t plan on doing for at least a year or so. With the market taking off we have considered moving that timeline up, but I 100% refuse to settle for anything in our next house. This house is fine - and we could live here for the rest of our lives, but there are things we don’t love about it that we can’t change. In the market we would be buying and selling in houses are going as is, over asking with waived appraisals in bidding wars within 48 hours of hitting the market. I have zero desire to be a part of that as a buyer. Honestly, we have decided that if the market doesn’t calm down a bit in the next few years we will just stay put.

[dochas]

The numbers you posted don't add up to me. Do you mean the equity you would walk away with? That would be different than what you would "make". Have you looked at selling prices in "the burbs"? I live in suburbs near a major city and people always think they're coming here and getting houses for nothing. While it's less than what you pay there, it's nowhere near as low as they imagine. Right now it's also very difficult to even get one. If you've thpught about all of that, then I'd move on to an area that would make you happier!