The Modern Homebuyer Story

Why does it look like they’re unlocking their house with a car key?

I was inspired to write today by some conversations I saw from my colleagues – people who couldn’t imagine buying a home at an 8% interest rate today. The typically back-and-forth begins with something like:

“I just helped a client buy a $500,000 home at 8%. Wild!”
“Back in my day, 8% was normal! It may never get down to 2% again!”
“That’s true, it just feels so abnormal.”
“It’s not!”

Rinse. Repeat.

Both sides of this conversation are right. 8% mortgage rates have historically been pretty normal. That said, 8% rates have never been seen with home prices as high as they are (relative to income, even adjusted for inflation.) So we’re both living in precedented and UNprecedented times. Schrödinger’s housing market. Let me tell you how it feels to be a buyer right now, as well as financial planner.

“This is the last year…”

Like every story, ours begins with two lovebirds and a dream. My fiancé and I have been together for about three years. We’re very practical people, from slightly different backgrounds. Both of us were lucky enough to get bachelor’s degrees and worm our way into great careers that have nothing to do with those degrees. The last two years have seen us living in a not-so-great apartment that we are fortunate to be able to easily afford, especially given we moved in together during the crazy surge in rents during the pandemic.

That not-so-great apartment started really wearing us down at lease renewal time. We decided it would be the last time we renewed. That meant knowing we were going to be buying a home in Winter 2023-2024. We had been very aggressively saving our funds since moving in together, knowing that a down payment would need to be on hand sometime soon anyhow.

Both of us earn incomes that are above-average for our metropolitan area. We contribute a reasonable sum to our retirement accounts, but we aren’t FIRE people, so it’s a steady amount. We both put a LOT into saving, to the tune of well over $3,000 a month for this goal, between the two of us.

Over the two years we lived together we were able to save up a down payment that amounted to 10% of an average home price in our area ($489,000 is average now, folks.) I’m a financial planner, so I know it doesn’t stop there. Then you have to factor in closing costs, some basic pre-move maintenance, moving costs, furniture, and an emergency fund. That number adds up quickly and I just can’t see paying a larger down payment and then having nothing in the bank as a “good move.”

Catfishing and Costs

The process of looking for a home these days feels like being catfished. Out of our first nearly-dozen houses toured, almost all of them were way worse than they appeared online. The penultimate house we visited we didn’t even enter. We showed up and realized the house’s driveway was a semicircle that connected two major roads (not pictured, of course.) So we moved on.

Generally the houses we toured in that first month or so all seemed fine, decent…but they all carried huge repair bills. They all needed new HVAC units soon, had to be relandscaped, or had to be redone in some other major way. The process was exhausting and revealed to us why so many people were staying out of the market when we were looking to enter it. Why would be buy a house that needs $80,000 of work upfront?

Finally, after all of the disappointment, we found a home in late October. It had its issues, but it was a spacious home with modern features. We made our buying decision that night and we negotiated a few thousand off the price (and we got a mini-fridge included!) Then came the inspections, work quotes, and lots of small surprises. After negotiating for a credit based on some of those fun findings, we ended up paying $482,400. Here’s where the crazy math in the home buying process shows up.

Those inspections, moving costs, and other closing costs came to about $8,500. As far as non-optional maintenance, appliances, and other surprises (yay, gas leak!) we spent an additional $6,000. As far as optional maintenance goes, we spent about $8,000 on the house. These are things that were not necessarily required, but would contribute to our quality of life hugely. Finally, because we had the funds available, we spent about $4,800 on furniture.

So all in all, we bought a great home at a near-average price. We paid near-as-makes-no-difference $28,000 of additional costs getting into it.

Conclusion…Or Is It?

I’m finishing up this post in early February. I began writing it back in October. While I’d like to say the costs associated with our move are fully realized now, I’m not sure that they are. That said, hopefully this is a transparent post that communicates what the modern homebuyer’s story looks like. If you want to know why “kids these days” aren’t buying houses anymore, it’s because even with two great incomes my fiancé and I felt immensely underfunded for a ton of the houses we looked at. Wages have not kept up with these costs.

We ended up with a property we were happy with, but not without accepting we’ll have a huge mortgage payment for a while…at least until rates drop. We can make that choice because we have two paychecks above the local average and no kids. Also of note, if rates do drop, who’s to say the average price for homes wouldn’t be 10% higher?

I am extremely grateful for our home. I am glad to be here. However, I wish it were easier for all of my family, friends, and clients to realize the same dream. If you’re reading this as a future homeowner, good luck and godspeed.

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