Should I Buy a House?
Thanks in advance for any advice. Been struggling with this decision for awhile. Before dismissing the idea outright, please allow me to lay out a few factors.
1) I live in Los Angeles (an obvious mistake, but my job is here and my wife teaches at UCLA). As such, I am paying $2400 a month for a pretty basic 2 1/2 BR, 1 BA house with a small yard. I could pay slightly less, but I travel a lot for work and wouldn't want to leave my wife at home by herself in a sketchier neighborhood (the neighborhood we're in now is OK, but not upscale... it's basically the bottom-end of what I'm comfortable with).
2) Our combined income is around $150k, and we have no debt.
3) I served 10 years in the military, finished two years ago. So I have access to the VA Home Loan. This guarantees the lowest interest rate, requires no down payment, and eliminates the need for mortgage insurance.
Now, I'm very wary of the possibility that investor demand may evaporate, that banks are holding shadow inventory, and that we may simply see another worldwide credit crunch that can depress prices. It's why I haven't bought up to this point.
However, considering that I do not have to use any of my own capital to buy, thanks to the 0% down payment required by the VA guarantee, could it still make economic sense? I am already paying $2400 a month in rent, so when you factor in mortgage interest tax benefits, I could essentially buy the house I'm currently renting for the same monthly payment. Additionally, a locked in low interest rate on a piece of real estate would seem to be a good thing to have in the event of future inflation.
I think of those factors, and feel like I should definitely buy. But then I consider the fact that I'm talking about spending a half a million dollars on single-family starter home in a town where the median income does not come close to supporting those price levels, and I can't justify it. So I'm stuck. That's why I came here. Been reading the blog and message board for awhile with only a little participation, but there are a lot of smart people here whose opinions I've come to respect. So maybe you can help point me in the right direction.
Thanks.
-JN
