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> Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only

> Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. Are you sure your friends aren't just being rational? I thought about the rent vs buy thing pretty constantly in my 20s and always came down on the rent side. Not because renting Dwelling A would be cheaper than buying Dwelling A, but because I was happy living in Dwelling A (a nice-ish 1-bedroom apartment) but if I were to commit to ownership I'd want Dwelling B (at least 3 bedrooms). Life can change fast - you're not sure which fling will turn into a spouse or when a little one will come along or when you'll really need a home office. Selling a one-bedroom condo is obviously doable, but transaction costs are fairly insane on real estate, and it seems like low-end places (like 1-bed condos) haven't historically experienced the same appreciation as standard houses. It sounds like your friends could get by with a Smart car but bought a Toyota RAV4 instead. And when they decide to trade up to a Tesla in a few years, they might find that the RAV4 retained value better than the Smart car, because that's what "everyone" wants!

tidepod12 6y ago
Sure. If you're being rational, it would possibly make sense to buy a 2 bedroom house or even a 3 bedroom if you think you might need an extra room for a kid plus a home office. But it's not as rational to insist that you need 4 bedroom house with a three car garage inside a top school district when you aren't even married/pregnant yet. Yes, life can change fast, but paying a premium mortgage for a top school district that you won't even use for 6 years minimum (if you suddenly got pregnant today) and an extra bedroom that is going to go unused for at least several years (second pregnancy, perhaps)? I can't see how that's rational.
- nrmitchi 6y ago
  With real estate prices in some of those areas going up %10+ per year, and the 6-8% transaction cost of selling a property, buying something that you may not need for 10 years starts seeming more rational. It's a risk, because things change, but if you know you're going to be somewhere long-term, it's a rational decision in a irrational game.
- watwut 6y ago
  It might end up cheaper overall then buying twice or renting and moving. Especially with prices rising every year. If you know you want kids one day and want to live in that area and paying that mortage still leaves you enough money to live, it easily ends up better deal.

tidepod12 6y ago

Sure. If you're being rational, it would possibly make sense to buy a 2 bedroom house or even a 3 bedroom if you think you might need an extra room for a kid plus a home office. But it's not as rational to insist that you need 4 bedroom house with a three car garage inside a top school district when you aren't even married/pregnant yet. Yes, life can change fast, but paying a premium mortgage for a top school district that you won't even use for 6 years minimum (if you suddenly got pregnant today) and an extra bedroom that is going to go unused for at least several years (second pregnancy, perhaps)? I can't see how that's rational.

nrmitchi 6y ago
With real estate prices in some of those areas going up %10+ per year, and the 6-8% transaction cost of selling a property, buying something that you may not need for 10 years starts seeming more rational. It's a risk, because things change, but if you know you're going to be somewhere long-term, it's a rational decision in a irrational game.
watwut 6y ago
It might end up cheaper overall then buying twice or renting and moving. Especially with prices rising every year. If you know you want kids one day and want to live in that area and paying that mortage still leaves you enough money to live, it easily ends up better deal.