Dear MarketWatch,
I’m 54, single, and I have saved $100,000. The good news: I also have no debt. I work as a server at a steakhouse, and make between $55,000 and $60,000 a year. I live and rent a condo for $1,500 a month in Southern California.
I’m not sure if I should buy something in California, or just save it for a rainy day and invest in something else. Another option I’m weighing is moving to another state, buying property there and starting a new life.
What should I do? I have always rented, and I’m wondering if it’s too late for me to buy a home?
Ready for a Change
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage. Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Ready,
Your next move depends on a couple of things.
You have a decent amount of rainy-day savings. But as you hint, yes, using that as your down payment in California may leave you without much, should an emergency arise.
But investing it in real estate, or any other asset like stocks and bonds, may grow your wealth and benefit you more. Given your current salary, it may make sense if you move to a cheaper housing market.
If you want to dabble in real estate, first ask yourself these questions: Are you prepared to uproot your life and try something new? Can your salary support a mortgage over the next few years? And would you be able to find work easily with a salary that will be enough to make your mortgage payments every month?
The bottom line: If homeownership has been a lifelong dream, the amount you have saved can absolutely go towards a down payment on a home.
If you plan to work for the next 11 years or more, and are employed full-time and can count on a stable paycheck, you can use MarketWatch’s mortgage calculator, or ask for quotes from different mortgage companies, and see what your finances allow you to buy. Consult a mortgage broker, and establish your price range. It’s a big plus that you have no debt.
You can look for a home within your price range in California. But as you may already know, it’s an expensive proposition. The median price of a single-family home in California was $791,490, according to the California Association of Realtors. Condos and townhomes were around $640,000. There are counties further up north where the median prices drop down to the $400,000 range and, in some cases, below $300,000.
If you’re moving to a different state, perhaps one that has a cheaper cost of living — California is the fourth-most expensive states to live in the U.S. — factor in moving expenses, and other miscellaneous expenses. Can you easily find another job in the new state?
“‘A down payment of $100,000 can go very far in some parts of the country.’”
Consider the beneficial change in taxes when you move out of California. You’re moving out of a state that levies the highest income taxes on its residents. If you have a specific state in mind, approach a lender or a real-estate agent to see what you can afford and what’s on the market. Believe me, a down payment of $100,000 can go very far in some parts of the country.
Ultimately, if you really want to try something new and have some cash to spare, and can easily find a new job in a new state, take a short-term rental in the new city first and start your home-buying search aggressively.
Real-estate agents will tell you it’s never too late to buy a home. And there’s some truth to that, given how home values have appreciated over the long term. Between February 2003 and February 2023, home prices have grown by nearly 130%, according to the Case-Shiller index, and prices rose 43% in the last five years alone.
If your goal is to become a homeowner, pursue it if you have the financial means to do so. But a warning about entering the housing market right now: It’s going to be tough. There may be competition, depending on where you’re looking.
As real-estate technology company Redfin
RDFN,
put it, the market is hot and it’s also cold. Home buyers are saying, “Yes,” while sellers are saying, “No.” Few homes are on the market, with new listings falling 19% as compared to last year, the company said.
If you feel very overwhelmed by this process of home buying, then consider renting. That way, you can always go back.
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