When it comes to the housing market, prices most often go up. Even if they go down for a while, such as they did during the Great Recession, they always come back up higher than they were before. It’s not just the houses themselves, it’s also the building materials and the labor. That’s why I firmly believe in the carpe diem approach to real estate.
In my opinion, seizing the day does not mean ignoring the future. Seizing the day becomes a building block for your financial future, as long as you can afford what you are buying. Otherwise, a house becomes a millstone destine to sink whomever is on title. I almost bought a house in 2007 before the crash, and even though a mortgage broker was telling me I could afford it, I knew I couldn’t. That mortgage broker worked for Washington Mutual, which went out of business from all the bad paper they wrote.
It was years before I was finally about to afford a single family home, and when the time came, I didn’t hesitate. I bought a house that needed a lot of work, but I was confident I would finally be able to financially handle it. Every year I’ve put more money into the house when I could. I haven’t hesitated. The main reason comes back to the costs. The things I put off today won’t be any cheaper tomorrow.
Let me give you an example. Let’s say your driveway is a mess, you are considering redoing it, and you have the necessary funds. To do it today will cost you X. To do it next year will cost you X + Y (inflation, which becomes compounded over time). Inflation in February 2024 was 3.2% from a year earlier. Inflation varies between financial sectors. The California Construction Cost Index was up 9.4% in 2023, 9.3% in 2022, and 13.4% in 2021. Even as overall inflation hopefully approaches 2%, you can rest assured that construction inflation, not to mention the price of housing, will pull the overall inflation number higher, not lower.
The thing about some of the bigger projects, like the driveway example, is that they will last a very long time. How many driveways do you expect to put in during your lifetime? I wouldn’t expect to have to do a driveway more than once. So, if you are going to do the driveway, and it is at the top of your priority list and you have the money, get it done now or pay more later.
The strategy is pretty simple. Buy a house. Make a plan. Write down what you are going to do, when you are going to do it, and factoring in inflation estimate your costs. Do what you can, when you can. Or wait and pay more.