Wednesday, January 24, 2007


How do I decide: buy a house or save for retirement

Having started rather late in life with worrying about saving for retirement, saving for a house or just saving in general I'm finding myself becoming obsessed. How am I going to be able to do both when I have less than $3k saved up? Should I even attempt to do both or should I just concentrate on one? If I concentrate on one, which one should it be? Last week I had no clue, yesterday I decided I could do both. I was all set to start maxing out my IRA once I am debt free in April and then really start socking away money for a house downpayment. Well now I read this in today's Seattle PI and I'm undecided again:

The median Seattle home sold last year cost $449,950 -- 6 percent higher than homes in King County as a whole and nearly 40 percent higher than the median for the 19 counties in the Northwest MLS. The median new house cost 13 percent more than the median existing house.

Condominiums continue to become a larger part of Seattle's home market, accounting for 28.5 percent of homes sold last year, up from 28.3 percent in 2005 and 26.6 percent in 2004. The typical condominium sold for $292,950.

The housing market here is sooo expensive, the article says that a downturn is coming at the end of the year but I don't believe a downturn will make housing that much more affordable. My salary is only around $48k, I think a median home price of $449k is to much for me to take on. And I don't really want to move out of the city because I work in the city and I want to keep my commute time as little as possible. Oh what to do???


Anonymous Boston Gal said...

Hi Kassy,

Focusing on paying off your debt first is 100% correct. Then contributing the max that you can to your IRA is great!

If you want to own your own home someday you have to start savings - period. Don't focus too much on what is happening in the housing market today. It took me four years to save for a down payment. It could take you that long or longer - who knows? Just realize that a lot can happen during that time which you have no control over - however you can control your savings.

Once you do have a healthy down payment fund you can start looking at the housing market seriously. But just remember - buying a home is a LONG TERM INVESTMENT - don't try to time the market. That works as well as timing the stock market.

Good Luck!

1:48 PM  
Anonymous Jennifer Lynn said...


What % interest are you paying on your debts right now, if I may ask?

3:50 PM  
Blogger mapgirl said...

Hey Kassy!

Conventional wisdom says don't spend more than 10x your income on a home. Overbuying is only good if you plan to rent some rooms till you can cover the whole mortgage yourself.

I agree with Boston Gal, trying to time the real estate market is probably a bad idea. Buy a home because you are ready for the responsibility that comes with owning property.

7:16 PM  
Blogger kassy said...

Thanks for the comments and wisdom Boston Gal and Mapgirl. I am going to do just as you say, save up for a down payment and buy when I am ready not when the market is ready. Whew! I will now relax.

Jennifer, I'm paying two interest rates right now on my debt, they are both promo balance transfer rates are are good until I get the debt paid off. One is 6.99% and the other is 4.99%. I haven't looked at the breakdown lately to see how much of my debt is allocated to each interest rate.

8:19 AM  

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