mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Sunday, March 13, 2005

Should mad anthony buy a house?

mad anthony has been thinking a lot lately, and now his head hurts. I've been debating if I should buy a house. For the last two years, I've been a renter, and my current lease ends in 4 months. My original plan was to buy this year, but now I'm starting to think I should wait another year.

I've been working a ton of overtime, plus I'm cheap and don't spend much money, so I have a decent amount saved up for a down payment. But the bigger the down payment the better.

But the major thing that's keeping me waiting is the housing market. Prices in the Baltimore area have been freakin' crazy. For example, there's a house right across the street from where I work. It's on the edge of a good neighborhood, but it's on a busy street, is smaller than most of the houses, and is basic 4-bedroom cape cod. I drove past it and noticed it was for sale, so I was curious how much it was listed for. To me, it looked like a $200,000 house. Nope - it's actually a four hundred thousand dollar house.

So the question is, is there a housing bubble? King at SCSU Scholars does (and he's an econ professor, so he knows stuff), and says that Allen Greenspan has said the same (and he predicted the dot.com bust with his irrational exuberance comments).

On the other hand, there is only a limited amount of space in an urban area like Baltimore to build houses, and there isn't much left. Many people don't want an hour or two commute. To me, it seems that unless there is a massive recession where people can't afford to buy houses, or a massive move by employers out of that area, that people will still have to live somewhere. So I don't really see them coming down sharply or bursting.

Still, it does also seem that, unless demand continues to increase, or massive amounts of people and employers move in, that prices will eventually stop climbing. I would be happy if prices at least stabilized, where houses remained on the market for longer than a day or two, and only good houses in good neighborhoods commanded premium prices, rather than piles of junk in good neighborhoods or nice houses in bad neighborhoods.

So I think I'm probably going to wait a year. If mad anthony's past decisions are an indicator of markets, that probably means it's a good time to buy, because I make horrible decisions. Of course, it's a hard place to be in- if I buy and the bubble bursts, I'll lose a bunch of money, but if prices keep climbing I'll never be able to afford to buy a house. And this is basically my life savings we're talking about, so it behooves me to be prudent. But when even economists and real estate pros disagree, it's hard for a helpdesk tech to beat the market.

1 Comments:

At 8:54 PM, Anonymous Rick said...

Mad,

The cost of interest is greater than the cost of any likely bubble burst. If you buy a house and pay down the principle as fast as you can, you should do alright. In a worst case scenario, any deflation in housing prices will be temporary.

Also, you are still young, so it's better to be aggressive financially. The life savings you have now is insignificant compared to the money you will eventually have as a frugal computer/MBA guy. Put your money to work now!

Good Luck,

Rick

 

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