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Should those of us looking to buy a house hold off until layoffs happen?

13 points by dangerwill ↗ HN
With all of the layoffs happening, I'm wondering if people have thoughts on if now is not the time to buy a first house, if your company has not already done a round of layoffs? My company has said very clearly that they don't want to do layoffs but that's what all companies are saying until they do the layoffs.

Is the job market (USA, in a tech hub city) bad enough out there that an average Senior Software Engineer might need more than a 6 month emergency fund after taking out the 20% down payment?

12 comments

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breckenedge
Realistically, how far are companies going to cut their headcount? 10-15%? Do you consider yourself vulnerable? You’ve already done good by saving up an emergency fund.

Every real estate market is local. If you find the right house and it makes sense, buy it. Don’t try to time the market.

Wife and I “paused” searching for a home at the start of the pandemic. That lasted a few weeks until the right house came along at the right price. We ended up closing on our first house while many folks were still in lockdown. No competition is really nice, but only lasts a few months at best (depending on the market).

And if stuff gets really bad, who knows, maybe they will pause evictions again?

MrYellowP
If you have lots of money, you'll probably be better off turning the money into gold/silver/cryptos, or, at least, wait for the inevitable housing crash. If you can't afford a house without going into debt, then don't fucking buy a house.
teg4n_
yes, just pay off someone else’s house while you also attempt to save hundreds of thousands of dollars on top of that rent. makes perfect sense.
erehweb
You may well have some sort of expenses associated with the house after you buy it, so include that in your budget. If you're nervous, then wait and increase your emergency fund so you can be a lot more relaxed once you eventually buy.
toast0
Especially if you live in a high cost area, but also if you're worried about the near term future, don't put 20% down. That's a rule of thumb, not a rule. Yes, you'll probably need to pay PMI, but PMI isn't always very expensive.

If you had saved up a 20% downpayment, but you take my advice and only put 10% down, not only do you have a bigger emergency fund right away, but you also have a smaller sunk cost if you get laid off and you need to change your housing and the price goes down (well you're also going to lose around 4-7% on transaction costs anyway). But, if the price goes down significantly, you're also in the same boat as the lender; they'd rather you keep the loan than foreclose when the foreclosure won't pay the balance.

My credit union will do 90% loan to value up to $2M, and you can probably shop around if that's not sufficient.

adamhp
$2M has to be a jumbo mortgage, unless the FHA regulations have changed. These usually carry a decent increase in interest rate, not to mention the higher LTV will also do that. You'd probably be getting a raw deal there...
kjellsbells
The thought experiment i would suggest is that if you were unemployed for over a year, could you still afford not just the mortgage but also the upkeep, insurance, taxes, etc etc.

Houses can be illiquid money pits and will suck you down to the bottom if you are not prepared. If you are prepared, on the other hand, they provide a degree of mental and financial stability that is hard to beat.

Where people sometimes go wrong is to underestimate the cost and necessity of major repairs. One rough winter could mean a new roof, heating system, replaced flooring: all kinds of things can and commonly do go wrong. They cannot be left unattended. Now imagine that when you are unemployed.

adamhp
A fun one I had to deal with: tree fell on my power lines the day before I moved in. No big deal, the utility company will come out and repair it, right? Well, it ripped the electrical drop out of my roof, and they wouldn't reattach until a city inspector came and made sure my house was up to code. It wasn't. This was 4th of July weekend, so everyones off. Had to pay double rates for an electrician to come out and fix the drop but also make a bunch of updates to my house to bring it up to code so that utility company would reattach the lines. I learned how expensive copper is that day.

$5,000 later...

Edit: I've been very lucky since and had no major issues. Got the roof replaced by insurance in another round of storms later that year (tree branch fell). And I really really love my house. Having a place to "call your own" as they say, is really nice. And a place to spread out in (moved from 600 sqft to 2400 sqft) is just an incredible feeling. It is really a privilege that most do not get to experience and I'm grateful for it.

egberts1
Often a viable strategy during tough times of holding on to your house in case of layoff or not:

- Take in paying roommate(s) (those are good for medium periods of down years)

- Taking side jobs of disparate skill sets (woodcrafting)

- pare back non-essential utilities

p0d
I'm helping my son buy his first house in the midst of much uncertainty and British politicians shooting our economy in the foot. My advice is just do it. There is too much fear in the younger generation. Probably the result of too much information. We all need a roof over our head, this fact won't change.

When you get to my age life becomes more clear. Here's what's important; family, friends, a roof, a healthy diet, heat and the ability to go for a walk.

ragebol
If you have a roof over your head, even if it's not yours but your parents's roof, fear of bankruptcy or other financial problems from buying a house is valid IMO.

A mortgage is a bigger commitment than marriage, I've heard say. Can't divorce the bank so easily.

Awesome you are helping your son though!

Otoh: personally I would hate to have needed financial help (if that's what you are doing, ie giving money essentially) and feel insecure for needing it. That could be weird of me. Also happy it's possible and my folks did well enough to be able to offer it. But i want to be independent.

adamhp
The job market really depends on you personally, and how in demand your skills are. A house is not cheap though, as others are pointing out. It pays off in the long run, but there's risk that if you have to get out for some financial emergency, it's (a) going to be a huge headache, and (b) put you in the red. I'd only do it if you were really comfortable with your emergency fund post-purchase, and if you're not stretching on your debt-to-income ratio with the payment.