Twice in my lifetime I have sauntered up to a Vegas craps table with a crisp new $100 bill, taken the dice in my hands, and rolled my way to big money – free flight and hotel nights thanks to Lady Luck. (*)
On both occasions, once well ahead, I very carefully tucked a $100 chip into my wallet. Going forward, win or lose, I was playing with house money.
Now… thanks to a robust stock market I’m once again playing with house money. Literally.
And when I joked about buying a house, I got some nasty emails (read to the end.)
So this time around, I am making advance notice – we will probably buy a house. Renters for a half life.
Making an offer
2 weeks ago we actually made an offer on a house – all cash, no contingencies, as-is, close in a week.
After a couple months of looking I found what seemed an ideal candidate, a nice ~60 year old home with a sizable yard in a walkable/bikeable neighborhood near the California coast. It will need a new roof in a year or three, but is otherwise in respectable condition.
Family helped with a tour and inspection – I was able to “walk” through the house via video chat. To pull everything together I was up making phone calls at all hours of the night… With offers due at 5, I was able to get a carpenter friend-of-a-friend to climb into the attic and crawlspace just after lunch. A roofing contractor provided a quote shortly thereafter (~$14k.)
Ours was the lowest of 5 offers and the sellers declined to make a counteroffer.
We offered the asking price. According to Zillow the home has already appreciated 10%.
This all happened by accident… we have been on covid lockdown for a couple months now and I was just doing some spreadsheets and analyzing some data, and one thing led to another… I may have gone a little stir crazy.
Does this make any sense? No, no it doesn’t. But here is the rationalization…
We’ve long been planning a return to the United States – we would like our children to spend time immersed in both of their cultures. We didn’t know where exactly, but we knew what we were looking for – a mid-sized city with good weather and schools.
Now post-covid a few things have changed:
– our interest in travel is not what it once was – I just want to bike and swim and Winnie wants to paint and bake. Combine this with the limitations of traveling around a school schedule and we are becoming No Go Curry Cracker. Life is good.
– the housing market is different – housing prices have jumped significantly. A lot of high income people with location flexibility also seem to like mid-sized cities with good weather, so the ratio between High Cost of Living areas and Mid-range areas is not as severe as it once was. This statement is time sensitive and will not age well.
– our portfolio is up even more than the housing market – it’s crazy. Near the bottom of the covid market decline we were down over $1 million. Now we have all of that back and then some. Pushing a bunch of our bond money into stocks during the downturn helped.
So we figured… why not let Mr. Market buy us a house? And maybe in areas we previously discounted because of higher housing prices.
The numbers don’t really add up, but it’s just a big luxury purchase so they don’t have to.
I explored how much we could pay without needing more income, whether to pay cash or get a mortgage, sequence of return risk with a mortgage, the tax implications of paying cash, how the SALT deduction limitation would impact our taxes as a homeowner, and more.
All of my extensive (over)analysis says it works – we still have a 100% retirement success rate with our projected California budget. There is some really interesting stuff in the details – I’ll share some of that in future posts.
But that is all putting the cart before the horse.
We are currently in a bit of a sweet spot – we can afford the houses we are looking at as long as the stock market doesn’t drop or home prices rise significantly higher. 10% either way and we miss the window and would then go back to looking at more medium cost of living places.
It actually may already be too late… the offer I made was already going to strain things a bit and prices are still climbing.
Maybe the stock market will jump 20% this week..
The housing market is crazy so I decided to buy a house. It didn’t work.
We are still looking though and maybe that house money will still find a home.
(*) also in my lifetime, I’ve certain I’ve lost more than I’ve won. The house always wins in the end.