DC Buyer: The Downtown Working Couple Expecting Their First Child

• January 27, 2010

by Martin Smith

DC Buyer is a series on UrbanTurf where we look at buyers from various demographics and provide available housing options for them in the current DC market. After presenting some choices, we will ask readers to help them make their choice.

This week, we look at Bill, 37, and Michelle, 35, a couple who just found out they are expecting their first child. Bill is an attorney in Farragut North who earns about $95,000 per year. His FICO score isn’t great (695), and his monthly debt comes to about $1,500 a month.

43 Seaton Place NW

Michelle is a budget analyst at the Navy Yard, earning $72,000. She is no longer saddled with student loan debt, but has about $1,000 in monthly credit card and car debt. She’s been much better in managing her finances than Bill, which is illustrated by her 764 FICO score.

From savings of $35,000 and the $115,000 that they will make off the sale of their condo, Bill and Michelle can contribute about $150,000 toward a down payment, although they may instead choose to put some of that money toward renovations before they move in. Since they are planning to have a second child, Bill and Michelle want a three-bedroom property with at least two bathrooms. They aren’t opposed to doing some renovations to get the right space, as long as the price reflects what needs to be done. They are also hopeful to get at least one off-street parking space. The properties that they are going to be looking at are in the $525,000 to $575,000 range, with the upper price point being a stretch for them.

The first property that we found that fits Bill and Michelle’s criteria is a four-bedroom, two-and-a-half bath townhouse at 43 Seaton Place NW in Eckington. While it isn’t in their first-choice neighborhood, at $550,000 the price is almost perfect, and the home hits a number of items on their checklist. The interior has been renovated, it has parking in the back, and there is an extra bedroom even after their second child is born. An added bonus: no condo fees. The only downside from their standpoint is that the washer/dryer is in the kitchen.

Living Room at 3219 11th Street

The second possible property is a two-level, three-bedroom condo in Columbia Heights at 3219 11th Street NW for $579,000. It is a little more than what they want to spend, but it is a beautiful, new rehab project in a good area. There is only one other unit in the building, and the condo features a roof deck with views of the city. The downside is that it does not come with parking. Given the proximity to the Metro, however, they could sell one of their cars.

The final property they are considering is 525 U Street NW in LeDroit Park. This three-bedroom, two-and-a-half bath property was built eight years ago, and is now on the market for $549,000. The property offers large rooms and off-street parking, but the kitchen is not the upscale look Michelle was hoping for, so she would likely use some of her savings to upgrade the appliances. In addition, this home offers easy Metro access and a backyard, which Bill would like so the children will have a safe place to play.

Given these three choices, where should they put in their offer?

28 Comments

1. rdhd said at 9:16 am on Wednesday January 27, 2010:

   Coop at 4101 Cathedral NW.  549,000.  3bd 2bath.  Garage parking.  Near excellent elementary schools.  Looks good except for one atrocious bathroom.

   http://www.redfin.com/DC/Washington/4101-Cathedral-Ave-NW-20016/unit-205/home/21653676

1. SimonF said at 9:25 am on Wednesday January 27, 2010:

   The home on Seaton Place. Can’t say that you will want to raise kids there, but the home has a great interior.

1. dcrez said at 9:53 am on Wednesday January 27, 2010:

   none of the 3 listing are ideal for raising kids.  Father of twins [2 yrs old], just moved from downtown [Mt Vernon Sq]. Me and my spouse have lived and worked in downtown DC for a decade.  Loved living there without kids, walking to work, walking to Chinatown, access to everything, but once you have kids the convenience of being so close to the “action” is muted by your desire for parks, outdoor space and to be near other families raising kids. When the time came to move we stayed in DC, higher up in NW, because we could not give city life entirely.  We still have the conveniences on Conn. Ave and Wisc Ave and the boys have space, parks, access to better schools, programs, activities and other young families raising kids in DC.  It’s only been a few weeks but we love it.

   Where this couple will struggle is price point, we made out investment eight years ago allowing us time to build equity before starting a family.

1. B said at 10:05 am on Wednesday January 27, 2010:

   The home at Seaton because it has been on and off the market with no takers for a while, and they should be able to get it for <$515k

1. B again said at 10:06 am on Wednesday January 27, 2010:

   And, although people will say the one on Seaton is in a less desirable neighborhood, anyone who has been to Big Bear on a warm Sunday can tell you the neighborhood is chock full of kiddies and hippie-ish young fun parents.

1. Lauren said at 10:41 am on Wednesday January 27, 2010:

   None of the above. Sorry to go all Suze Orman on these people, but they need to pay down their debt first. $1000/month in CC/car payments is not managing your finances well. Sell the condo if they need a bigger place and move into a rental.

1. wdc said at 11:09 am on Wednesday January 27, 2010:

   I agree with the issue of whether you want to raise your kids at these spots.  Seems to me that the edges of Capitol Hill near H Street or Potomac metro might be better areas around that price point.  Lots of young families with young kids on the Hill and increasingly many of them who are sending their kids to public schools there.

1. annon said at 11:18 am on Wednesday January 27, 2010:

   col heights is the way to go in my opinion.

1. C said at 11:23 am on Wednesday January 27, 2010:

   Ledroit is probably the most family friendly neighborhood of these choices and the back yard would be great for kids.  The new Ledroit Park Park (hope they come up with a better name than that) at the former Gage-Eckington elementary school site (torn down for the park) is scheduled to be finished by the Fall which would also be great for kids and would only be two blocks away.  That being said the area around Seaton is also improving very quickly though safety may be a concern for a little while longer.

1. Anon said at 12:01 pm on Wednesday January 27, 2010:

   How are the schools in Capitol Hill?  I have a family, and have been looking in the area.

   Is Glover Park a good area for families?

1. Bill said at 3:34 pm on Wednesday January 27, 2010:

   Whoa RDHD.  Nice $2400/month Coop fee.  Are you trying to bankrupt the poor family??

1. Sandra said at 3:44 pm on Wednesday January 27, 2010:

   Anon,

   Capitol Hill has some great public schools, specifically the Capitol Hill cluster schools.

   My choice for the family would be Columbia Heights.

1. LM said at 5:11 pm on Wednesday January 27, 2010:

   I say buy the Seaton Place house - a whole house, beautiful inside and a good deal. Sure, they will be needing to think about schools in a few years but you could say that for almost any neighborhood in the city (my neighborhood Petworth is also full of 30-something couples with young children). I think they will be near a lot of other young families in a great up-and-coming neighborhood.

1. anon said at 6:03 pm on Wednesday January 27, 2010:

   I suggest buying in Petworth.  You will get a lot more for your $$$.  Lots of young families moving in and the area keeps getting better and better, the quality of the schools, especially if we all do our part, will follow.

1. roots said at 1:04 am on Thursday January 28, 2010:

   The Ledroit Park location, easy! You can upgrade your kitchen and basically get your money back in equity for the renovations. Off street parking and close to metro.

   The kicker is that area continues to see more development and the value of the property will increase over time.

1. rdhd said at 9:26 am on Thursday January 28, 2010:

   @Bill, didn’t see that coop fee.  Yikes!  Our condo fee (just down the road) is one fourth that.

1. DC Realtor said at 12:08 pm on Thursday January 28, 2010:

   Coop fee includes underlying mortgage, taxes, and utilities…quite different from a condo fee

1. RBDD said at 12:08 pm on Thursday January 28, 2010:

   How about a house in Kensington?

   This 5BR/3BA new construction looks like a great deal at $579K:

   http://www.redfin.com/MD/Kensington/3316-Ferndale-St-20895/home/11013671

1. CBMendez said at 12:32 pm on Thursday January 28, 2010:

   Lauren, Suze Orman & Dave Ramsey are right. Sell the condo, pay off as much debt as possible, rent a cheap 2bd in your dream neighborhood, get to know the parks, schools, families and pets. Pay off the rest of the debt and save a 3-6 mo emergency fund. You are having a baby in 6 or 7 months (not a 9th grader). It is possible for the yet to be born kids to share a room for 24 months while mom and dad take care of business. If you find you don’t love your dream neighborhood afterall, may I suggest the neighborhoods between Takoma and 16th St Heights - families, long standing communities, GREAT parks and recreation facilities.

1. Morgan said at 2:12 pm on Thursday January 28, 2010:

   Although I favor the Seaton Pl location and the Columbia Height’s house, I don’t really think that these locations are really family friendly.  Although you might see families in these areas, Columbia Hiehgt is dangerous at night (esspecially when you talk about selling one of their cars)and the schools in these districts are not fabulous.  I would keep looking.

1. SimonF said at 4:49 pm on Thursday January 28, 2010:

   @lauren and CBMendez

   While in a perfect world we would all be buying homes without having to worry about debt, we don’t live in a perfect world. Most everyone I know has some debt hanging over them and a couple making $160k a year that has $2,500 a month in debt should not prevent themselves from buying a home as a result. They should just be conservative about the home they purchase.

1. Lauren said at 5:43 pm on Thursday January 28, 2010:

   @ SimonF; I agree, most people have some kind of debt, but it’s a matter of degree and what the interest rate is. $1000/month of high-interest car and credit card payments is, IMO, insane. This couple should get that under control before undertaking the huge financial responsibilities of a house and a child. Just my opinion.

1. Joe Esq 74 said at 9:07 pm on Thursday January 28, 2010:

   “Capitol Hill has some great public schools, specifically the Capitol Hill cluster schools”

   SOME??? The Cluster and maybe a one good Charter…not some.

   Col Heights has Capital City charter entry by lottery slim odds, long wait list. You can apply Out of Boundary which would mean taking your child across town before heading downtown to work. Go with a small condo 20015 / 20016 zip if you want to stay in city and be guranteed spot in best schools .

1. NN said at 12:09 am on Friday January 29, 2010:

   I have a 3 year old and a 1 year old within 2 blocks of the Seaton Pl property (which is actually in Bloomingdale rather than Eckington).  There are ALOT of strollers in this neighborhood!  There is a very large Bloomingdale discussion board for parents with small children.  The city is completely renovating one playground a few blocks away from the unit block of Seaton and building a brand new one a few blocks in the other direction.  There is a group of parents that meets at two area playgrounds on Saturday and Sunday mornings all summer.  Some parents of smaller children are meeting every week at the Yoga District for a playtime with their children.  Unlike places further into the heart of NW where I’ve seen signs on the sidewalk saying “breeders go home,” Bloomingdale is VERY friendly to parents with children.

1. CBMendez said at 12:39 pm on Friday January 29, 2010:

   @SimonF and all… The fact of the matter is consumer debt greatly reduces your purchasing power (and personal choices). Renting for 24-months changes this family’s financial position dramatically. $160k increases by at least 5% to $168,000. Not so great credit scores improve due to 24 months of no late payments. Using $150,000 to pay down debt, means any remaining debt will go away quickly (12 mos?) and saving another $35,000 will not take long (12 mos?) and they may be able to consider a home with no repairs needed. A reduction in monthly expenses by $2500 means the difference in qualifying for a $550,000 mortgage versus a $650,000 home. An improvement in credit scores means an improvement in mortgage interest rates.

   The reality is, very few of us are conservative in our home purchase. The bank tells us $525 - 575k and the first place the realtor shows us is $585k. Everything after that looks like a tin-roof mud house.

   My hope was to remind this happy family that there is time. Babies have been known to sleep in cribs in mom and dad’s room. Siblings have been known to share a room (without a TV or telephone). Moreover, the city of DC has some amazing communities that open up to you if you are willing to make a few short-term sacrifices.

1. dcite said at 1:48 pm on Friday January 29, 2010:

   i’d entirely skip the condo that costs more money than the houses.

   the bloomingdale house offers more space and is the same price.

   go with that.

   basement for the kids
   foyered entranceway
   there’s more potential upside to bloomingdale.
   more families.
   fewer nightclubs
   less dense.
   less crime.

   
   but i would get out of debt first.

1. LM said at 2:08 pm on Friday January 29, 2010:

   Hmm, looking again at this posting, I wonder why they wouldn’t use their $35,000 in savings to pay off the car and credit card debt, then buy a place they can afford with a $115K down payment. As another poster commented, an equivalent house to the Seaton Place house might cost 100K less in Petworth where you can get a nicely renovated 3BR rowhouse close to the metro for about $450K. It wouldn’t be as close to downtown, but it’s pretty much an equivalent neighborhood to Bloomingdale, with a lot of development on the way, lots of young couples with kids, etc.

1. Lauren said at 3:49 pm on Friday January 29, 2010:

   @LM, I wondered the same thing. If you have debt AND savings you should use the savings to pay off the debt (leaving some aside for an emergency) when the interest rate on the debt is higher than any potential return on your cash, which it would be in this case.  I don’t know if these are real people or just an illustration, but my guess is that the debt could be substantially more than $35,000 (which is probably the case if the monthly payment is $1,000), so paying it completely off isn’t an option.

   @ CBMendez, well said.