Housing pain
This past weekend was, hopefully, the culmination of several weeks of housing research and efforts to relocate to Boston. With Dori’s first day at Harvard looming several months ahead, we were eager to secure our new abode, but in reality we reached the end of our collective wits.
On this past Saturday, we looked at several of our top choices (to buy) for a second run to make sure we liked the direction we were going in. We left NYC at 8am, and drove up to meet our realtor at noon, and started our review.
By the end of the day, we were pretty happy to be still leaning strongly towards our first choice. We even put in an offer that night, about 34k lower than the asking price. They counter-offered a whole 2k less than their original. They didn’t seem too serious about making any concessions, so we were a little worried that our expectations and theirs wouldn’t line up.
I also spoke to my mom that night, for some advice, which generally boiled down to the ever-solid “don’t rush, take your time.” Good advice, in nearly all decisions. The next morning, after she and my dad had discussed, they pointed out a flaw in our financial model that seriously impacted our estimates. Somehow we forgot to include the cost of the interest paid on the loan into the computation - this obviously is not money you get back when you resell - it is lost. Since you pay almost entirely interest over the first few years of your loan, this was a sizable amount of money.
Upon redoing our analysis, if we bought a place and it appreciated about 2-3% a year, we’d do equally as well as if we had just stuck the down payment in a CD earning 5% (which you can get, these days) and rented. 2-3% is not a large increase for a real estate market, but many of the houses in this particular neighborhood are not gaining a wide margin anymore - Jamaica Plain is almost entirely a nice place to live, and housing prices are up. The real money is to be made further south and further east, along the gentrification frontier, but these places have safety and convenience factors against them.
As a result, we’re more-or-less back to square one. We do have a better financial model to make decisions with, and our understanding of the market and neighborhoods are much mature, but we’ve got a lot more driving to do and flowing through Craig’s List postings wears one down quite rapidly.