Buying a home? Plan to live there at least five years

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I’m noticing an alarming trend in my neighborhood, an abundance of newly built homes for sale after only a few years of occupancy.  I get that sometimes people have to move due to life circumstances like job relocation, financial hardship, bad neighbors (anyone have the neighbor that decorates their lawn for every occasion-Christmas, Halloween-okay Houston Texans games…? Really?!).

I live in a new master planned community near Houston, TX (thankfully we weren’t victims of Hurricane Harvey).  My home was completed in 2014 and many of the homes being put up for sale were built around the same time plus or minus a few years.  My builder hasn’t even completed selling all of the lots in my subdivision yet there are at least 8-9 houses for sale.  My husband thinks that maybe people are leaving due to the high property taxes (Texas has no income tax so homeowners largely fund the government and services).

As a former apartment dweller, I definitely recommend buying versus renting-no thin walls, attached parking garage, no annual rent increases, no annual moving because you refuse to pay the rent increases, and you can decorate to your heart’s desire.  And you’re building equity-hopefully.  But you’re also locking up a significant portion of your wealth in a single investment for a long time.  Don’t you want to maximize your return?
  1. The Five Year Rule: Homes in our area have appreciated since we bought but likely only enough to get to $10-20k above break even.  Did you know closing costs are typically 3-6% of the home price not to mention the realtor’s commission?  Homes appreciate 2-3% annually though this varies by geographical area. There is no way these homeowners are making much return on their investment. 
  2. The first few years of mortgage payments are largely interest so my neighbors haven’t had time to build up equity.  Until you hit the 5 year point you were probably better off renting than buying.
  3. Also, did you know that if you sell your house within 2 years you could have to pay capital gains taxes on the appreciation?
  4. And finally who wants a “used” home when you can wait a few months and buy a brand new one from the builder built exactly your taste? (If you are building a home-Houzz is amazing for decorating ideas)

I don’t know what’s going on with my neighbors…hopefully they don’t know something I don’t about the future of my neighborhood-will keep you posted.  Meanwhile, I love my house and plan to stay put for several more years and let equity build.


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