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Buying a More Expensive House: Update January 24, 2008

Posted by pf in Expenses and Savings, Home Purchase.
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Some months ago, I had written some thoughts about our potential purchase of a new home (Buying A More Expensive House: Good Investment?). Since then, the real-estate market has tanked. This was an easy reason to postpone any purchase while we watched how things shake out. More specifically, we are hopeful that the downturn will work to our advantage and create an opportunity to buy our house at a reduced cost. Also, we have discovered that our family still “fits” into our house and although not our ideal, we are clearly not suffocating. Finally, we also really like watching that mortgage balance go down each month…almost $1000 in principal…significant money.

Recently, we had another discussion where we talked about the recent decline in interest rates and whether or not it would be enough of a catalyst to push us to make a purchase. Honestly, I’ve felt very warm and fuzzy about our decision to delay and decision and the thought of actually doing something made me very uncomfortable…mostly from a financial perspective. Admittedly, if we staying in our budget range, the anticipated payments plus the inevitable increase in property taxes are manageable. Unfortunately, in order to do so, we will have to get ourselves back into a 30 year mortgage, which makes me feel a bit ill.

My financial brain says we should not do it…at least not now. After all, we have already purchased the land…so it will always be there and there is no time limit on when we can build. The more emotional side of me says that we will surely enjoy a larger house, better neighborhood, and nicer lot that should meet our needs for the next 20 years. For me, the decision is agonizing as I am unable to predict our future finances. Will I make significantly more than I do today? Less? What about future expenses like the funding of our children’s education or just the costs of their activities, etc. that will be needed during their teen years? Also, ultimately, when do I think I can retire and will I have enough to fund it?

I re-read my earlier post which helped me focus my thoughts. Unfortunately, I still end up in a similar place, but not totally convinced of it, either. I think that is partly because of the influence of my significant other. She knows that if it were completely up to me, we would probably do nothing…just like the purchase of our first house. If she had not pushed me a bit (in a good way), we might not have bought what we have now, which, in hindsight was a good move for us and has served our family well. We tend to balance each other out a bit in that sense…she, a bit more risk taker and not forgetting to live in the now, while me, minimizing risk and not forgetting to plan for the future. Is she right, again?

For now, I will continue to watch the real-estate market which looks to remain depressed for the rest of 2008 and perhaps talk to a few builders again to see if the strain is finally being realized in terms of lower prices. I would really appreciate any suggestions, advice, or words of wisdom from any of you out there.

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