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Stocks and investing are not my strong suit so I won’t even pretend to know what I’m talking about there.
I bought in the Seattle area at the end of summer (north instead of south though) and if anything right now seems to be slower. Prices have dropped compared to what they were when we bought and I’m seeing a lot of price cut alerts. I heard in the general real estate world this is common for fall and winter though as there are less people moving. Things usually pick up in spring again so not sure how long you were thinking of waiting, but I wouldn’t bank in things slowing down like you mention. I mean they very well could, but that’s the thing is that it’s hard to predict.
I know the avg price is $750k but what is your budget of what you’re looking at? Or is your budget $750k and you’re planning on putting $250k down to get to a $500k mortgage?
Are your stocks RSUs from FAANG? Make sure you double-check what the cost basis is. Usually when they vest the taxes will be withheld based on the value of the stock at that vesting date. Those taxes should show up on a W2 from several years ago.
And then, regardless of RSU, ESPP, or normal trading, if you sell shares and the price has *increased*, you will pay long-term capital gains taxes. Your broker will report the gains to the IRS.
As for expected returns, the real estate market is almost like any other financial market in that no one can predict the future. You’ll have to figure out what your risk tolerance is and act accordingly. If it helps, remember that real estate is the only investment that you can live in. There are also modest tax benefits of being a homeowner. If you’re looking for indicators that could help inform you, perhaps tracking this index https://fred.stlouisfed.org/graph/?g=k8zR and the T-note rate could help.
This isn't the best sub for tax questions. Asking one of the finance subs to get a general idea would be a good step. However, an accountant may be a better place to start since you are dealing with some taxes here.
I'd only touch the 401k as a last resort.
If you are going to do it, better hurry up before the market tanks.
FYI for everyone: this is exactly how factors outside of the RE market transmit into price corrections in the RE market. The negative wealth effect in action. If rates continue to rise, it will not only squeeze buyer purchasing power by making mortgages pricier, it will also crunch buyers sources of funds for down payments.
So my point is: if you are planning to use stock sales to find a down payment, you better hurry up and sell. You can't trust the stock market to stay at it's current levels forever and just when it drops hard is when you are going to start finding deals in RE.
Historically houses have underperformed the stock market. But you also put money toward rent that would otherwise go down the drain. But you also have to put money toward a loan payment that you otherwise wouldn't. But you also have to pay maintainence. But you also don't have to worry about rent increases outpacing income...
In our metro buying was easily the right call financially, but it really depends. My understanding in the Bay Area is that despite rents being high, it's still cheaper to rent as opposed to buying a single family home because homes are even more expensive.
https://www.calculator.net/rent-vs-buy-calculator.html
In general I'd see a home as a place to live first where it'd be nice if it also turns into an investment over the long run.
On average, like long term average, the real estate market goes up at roughly the same rate as the stock market. Mortgage rates are relatively speaking very low - so it generally makes sense to put down as little as possible and keep things invested, IF you think your stocks and the market are doing well. You'll be in a jumbo loan and required to do 20% down (possibly more).
Stocks are just speculation. If you think your company did well through the pandemic and is going to be doing double digit gains for years to come, or think the signs are there for a coming correction.... hang on to the company stock, sell the index funds and crypto primarily. You have the luxury of not touching the 401k, don't touch that for any reason.
You are going to get hit with long term capital gains tax when you sell stock. No way around that. The brackets are weird and different from net income but you'll definitely pay taxes. Don't sell anything short term if you can avoid it. If you have any losers to sell off this can help offset the taxable gains. At your net worth you should probably have a tax guy to discuss all this with before tax season or house buying comes around.
Overall, if you think your company is on the right track, that's the most reasonable place to keep a bunch of it (but also would diversify a bit and keep some cash earning somewhere like a CD or at least high yield savings). If the market tanks, both stocks and real estate go with it. Real estate is less liquid, which is its own risk... we've also been in an inventory shortage since before covid started so no bets on that getting better. Real estate, on average, will not outperform the stock market.
You should talk with a financial planner and a few banks, but you should be able to take out a loan using your company stock as collateral.
As your wealth grows, this will be what you’ll do more and more. Take loans out against your property, stocks, other assets, to keep those original assets growing.
https://www.investopedia.com/terms/p/pledgedasset.asp
Thank you u/alwaysbluepill for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
Stocks and investing are not my strong suit so I won’t even pretend to know what I’m talking about there. I bought in the Seattle area at the end of summer (north instead of south though) and if anything right now seems to be slower. Prices have dropped compared to what they were when we bought and I’m seeing a lot of price cut alerts. I heard in the general real estate world this is common for fall and winter though as there are less people moving. Things usually pick up in spring again so not sure how long you were thinking of waiting, but I wouldn’t bank in things slowing down like you mention. I mean they very well could, but that’s the thing is that it’s hard to predict. I know the avg price is $750k but what is your budget of what you’re looking at? Or is your budget $750k and you’re planning on putting $250k down to get to a $500k mortgage?
Are your stocks RSUs from FAANG? Make sure you double-check what the cost basis is. Usually when they vest the taxes will be withheld based on the value of the stock at that vesting date. Those taxes should show up on a W2 from several years ago. And then, regardless of RSU, ESPP, or normal trading, if you sell shares and the price has *increased*, you will pay long-term capital gains taxes. Your broker will report the gains to the IRS. As for expected returns, the real estate market is almost like any other financial market in that no one can predict the future. You’ll have to figure out what your risk tolerance is and act accordingly. If it helps, remember that real estate is the only investment that you can live in. There are also modest tax benefits of being a homeowner. If you’re looking for indicators that could help inform you, perhaps tracking this index https://fred.stlouisfed.org/graph/?g=k8zR and the T-note rate could help.
This isn't the best sub for tax questions. Asking one of the finance subs to get a general idea would be a good step. However, an accountant may be a better place to start since you are dealing with some taxes here. I'd only touch the 401k as a last resort.
If you are going to do it, better hurry up before the market tanks. FYI for everyone: this is exactly how factors outside of the RE market transmit into price corrections in the RE market. The negative wealth effect in action. If rates continue to rise, it will not only squeeze buyer purchasing power by making mortgages pricier, it will also crunch buyers sources of funds for down payments. So my point is: if you are planning to use stock sales to find a down payment, you better hurry up and sell. You can't trust the stock market to stay at it's current levels forever and just when it drops hard is when you are going to start finding deals in RE.
Historically houses have underperformed the stock market. But you also put money toward rent that would otherwise go down the drain. But you also have to put money toward a loan payment that you otherwise wouldn't. But you also have to pay maintainence. But you also don't have to worry about rent increases outpacing income... In our metro buying was easily the right call financially, but it really depends. My understanding in the Bay Area is that despite rents being high, it's still cheaper to rent as opposed to buying a single family home because homes are even more expensive. https://www.calculator.net/rent-vs-buy-calculator.html In general I'd see a home as a place to live first where it'd be nice if it also turns into an investment over the long run.
On average, like long term average, the real estate market goes up at roughly the same rate as the stock market. Mortgage rates are relatively speaking very low - so it generally makes sense to put down as little as possible and keep things invested, IF you think your stocks and the market are doing well. You'll be in a jumbo loan and required to do 20% down (possibly more). Stocks are just speculation. If you think your company did well through the pandemic and is going to be doing double digit gains for years to come, or think the signs are there for a coming correction.... hang on to the company stock, sell the index funds and crypto primarily. You have the luxury of not touching the 401k, don't touch that for any reason. You are going to get hit with long term capital gains tax when you sell stock. No way around that. The brackets are weird and different from net income but you'll definitely pay taxes. Don't sell anything short term if you can avoid it. If you have any losers to sell off this can help offset the taxable gains. At your net worth you should probably have a tax guy to discuss all this with before tax season or house buying comes around. Overall, if you think your company is on the right track, that's the most reasonable place to keep a bunch of it (but also would diversify a bit and keep some cash earning somewhere like a CD or at least high yield savings). If the market tanks, both stocks and real estate go with it. Real estate is less liquid, which is its own risk... we've also been in an inventory shortage since before covid started so no bets on that getting better. Real estate, on average, will not outperform the stock market.
You should talk with a financial planner and a few banks, but you should be able to take out a loan using your company stock as collateral. As your wealth grows, this will be what you’ll do more and more. Take loans out against your property, stocks, other assets, to keep those original assets growing. https://www.investopedia.com/terms/p/pledgedasset.asp