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PaperclipPerfector  7mo ago (text post)   3615 thread views

Small-Scale Question Sunday for April 7, 2024

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I’m not really sure if this counts as small but it’s definitely been on my mind and id like some advice on whether or not I am thinking about this clearly. I have lived in the Las Vegas metro area for the past two years and plan to remain here for the foreseeable (at least 5 more years) future, im thinking of buying a small house in a nice part of town and can just barely afford to do it.

I find myself hesitating on actually pulling the trigger because it would result in my current housing expense increasing from the 1.9K a month I currently pay to rent to 2.8-3.3K a month depending on what I actually end up buying.

I just can’t shake the sense that I would be buying at the top. This wouldn’t necessarily be an issue (I think its unlikely I would be laid off except in a case of extreme economic hardship) except that I am concerned that if the economy does dump I will be stuck in a high interest (looking at around 6.5%) loan which I wont be able to refinance if my home value drops enough.

The thing that’s annoying though is that this really is just a feeling and I cant find any actual evidence to suggest this area is actually about to undergo any kind of correction. Prices have increased a lot in recent years (up 40-50% since 2021) but this has happened in a lot of places, the regional unemployment is low and houses that get listed are selling.

Does anyone know what kind of metrics people who follow single-family real-estate sales actually follow? I appreciate that very competent people working at large financial institutions spend a lot of time and $ trying to price real estate accurately and I don’t expect to develop an institutional level understanding of these things. Im just trying to enter this with my eyes open and want to feel slightly less clueless, before making what will be my biggest financial decision to date.

Here are some metrics I have looked at:

  1. Regional unemployment https://www.bls.gov/eag/eag.nv_lasvegas_msa.htm (which is basically flat).

  2. Permits for new construction https://fred.stlouisfed.org/series/LASV832BP1FHSA

  3. Case Schiller index calculated for Las Vegas metro area https://fred.stlouisfed.org/series/LVXRNSA

We are kinda in an anomolous time. The ratio of median home price:median income is in uncharted territory. Granted, this is a national ratio, so local market movement is a huge factor.

Without major amounts of extra supply coming on your local market or an exodus when Lake Mead runs dry, I don't see a regression to the mean happening any time soon. It's a hard choice, given your increase in housing cost.

In a similar position. Have stronger personal reasons to buy so I will buy regardless, but really difficult to shake off the feeling that it’s financially a bad decision. Prices are already ridiculous how can they go up any higher?? But then I had the exact same idea 3 years ago and here we are. I just really really hate that housing became a speculation vehicle that can go up or down in value in big unpredictable swings. It must be the most boring low return low risk investment ever

Rent vs buy math is difficult to impossible. If you can budget the house, and it'll make you happy, do it.

I got sick of landlords and wanted nice versions of things (air conditioner, kitchen appliances), so I did it. I also (correctly) assumed it'd make me finally put more effort into meeting people instead of moving cities constantly optimizing my career. Was it the right move financially? I won't know until I sell, and even then it's hard to include everything.

I just tell myself that it's at least non-disprovably a good choice and that the (uh, overly generalized) efficient market hypothesis says it should be similar to renting.

Is that housing cost after taxes? I assume you'd itemize after buying the house? If so, what's your marginal bracket?

Are you putting 20% down or something closer to 3%?

How plausible would getting a tenant be in the house if it made you more financially comfortable?

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