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0 pointsxenadu023y ago0 comments

I've made this comment before but you can correctly time a downturn and still end up worse off than people who buy at the height of the market. You lose upside, low interest rates, and continue paying rent (which has zero return). It depends on how long you can hold out during a bear market and what exactly interest rates do.

Plus there's the quality of life factor if the home you purchase is a better fit for your life... spending 10 years in a home you don't enjoy has a mental cost to it.

FWIW we borrowed $2m at 2.5% (thanks Bay Area prices!) Thanks to that low rate even if the house drops in value by 30-40% we still come out ahead on the mortgage cost assuming we stay in the house. And it is likely any money not spent on the down payment or paying it off early can be invested which thanks to the current market and interest rates can take a risk to get a good return (stocks are discounted right now) OR easily find safe investments that exceed the mortgage APR.

Plus we have a house that fits our family way better with a lot more space. We also have knock-on effects (installed Solar with a <5 year payback, something renters can't do).

It is hard to imagine a scenario where waiting out this downturn would have worked out better for us.

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ddorian433y ago· 2 in thread

> spending 10 years in a home you don't enjoy has a mental cost to it.

You buy a house at the top, find out you don't like it, and you'll stay 10 years in it just to break even.

xenadu02OP3y ago

That's why it is just one possibility. I usually only ever see people patting themselves on the back after the Nth time they're finally "proven right" about housing being over-valued. My point is just that you can be right about housing (or the stock market), make well-timed correct decisions, and still end up losing compared to the supposed "chump" who just went with the market. It all depends on your exact situation, exact market conditions, etc.

My guess is most people doing the back-patting have never run the numbers on an adverse scenario. They just see the top-line number dip and say "see, I was correct to wait!"

tl;dr: Run the numbers comprehensively for several scenarios. Include gains you missed out on, rates moving against you, your time horizon, risk appetite, etc. It isn't theoretical, real people have lost real money by being correct about a downturn.

ddorian433y ago

> My guess is most people doing the back-patting have never run the numbers on an adverse scenario.

It's a $300K+ of lumpsum in the stock market. Usually it's the correct thing to do. But sometimes you buy at the worst time and lose ~30% or more.

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