House Hunting, part one: Setting the Stage

16 November 2012 · 25 comments

It’s been a year since Kris and I began the divorce process. For most of that time, I’ve been living alone in a 700-square-foot apartment in northeast Portland. It’s not a bad place, but it’s never felt like home. Plus, it’s noisy. It’s noisy from the neighbors (and their dogs!), but it’s also noisy from the traffic and from the donut shop outside my window.

This summer, I finally got the itch to move someplace more permanent. Mortgage rates were at all-time lows and I began to get the sense that the real-estate market in Portland might have bottomed out.

“I think I want to buy a condo,” I told Kim before I left for Turkey. During my last few days in town, I began to do some research. I found some places I liked, but prices still seemed pretty high, especially in downtown Portland.

While I was traveling, Kim did a little research of her own. “I think you might have missed the bottom,” she told me. “The market is really picking up.”

When I returned from Turkey, I met with a real estate agent (a Get Rich Slowly reader!) who confirmed what I’d already figured out. The real estate market in Portland had indeed bottomed out, and homes in the city were selling especially quickly. (One place that I really liked sold in just 24 hours. That’s just like at the start of the housing bubble!)

My real estate agent told me that there’s very strong demand in Portland itself, which has kept the prices inflated. But that also means that areas outside of Portland are cheaper because there’s less competition. Good ol’ supply and demand!

I met with my real-estate agent a month ago. We spent two hours talking about what I need in a home, and at the end of it all she seemed to have a pretty good feel for my lifestyle. “If we could find you a small little hobbit home somewhere with low maintenance, you’d be perfectly happy with that, wouldn’t you?” she asked. Yes, I would.

As I say, I met with her a month ago. I had hoped that now, a month later, I might be deep in my house hunt. Unfortunately, it hasn’t even started yet. I hit a snag.

You see, although I have enough money in the bank (or invested, actually) to purchase a home outright, I don’t actually have much of an income. As a result, I’m unable to qualify for a mortgage. Banks don’t care if you have the money in the bank to make the house payment; they want you to have the income to make a house payment. So, after a month of jumping through hoops, the conclusion I’ve come to is that I need to pay cash for a house or not buy at all.

That’s too bad. I had really hoped to take advantage of the low mortgage rates. It’s a perfect opportunity to exercise leverage — to borrow money at a low rate (my mortgage) and make money at a higher rate somewhere else (take your pick of any number of investments that ought to return more than 3% annually, including many dividend stocks).

I haven’t given up, though. I meet with my investment advisor on Monday to see if we can create some sort of income-like money stream. And in case that doesn’t work, I’m talking with Kris about getting my half of the equity out of our house. (We maintained joint ownership even after the divorce.) It’s possible that I could find enough cash to buy a modest place outright. I’m not sure that’s something I actually want to do…but it’s a possibility.

Meanwhile, I’m about to move to a month-to-month lease on this apartment, which isn’t something I really want to do. (It costs an extra $50 a month to do so.) But I feel like my living situation is in complete flux right now, so making firm decisions is tough. It’d be so much easier if the bank would just give me a mortgage!

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17 November 2012 at 03:02

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