[quote=applejack]Update: We decided to move forward with the house, despite the low appraisal. Our mortgage broker helped us appeal the original appraisal, and the new appraisal was was only 30k below our agreed upon price. These are the reasons:

1. The PITI is equivalent to the rent we are paying, but the house is nicer than our rental. Monthly expenses will actually go down due to solar panels on new house.

2. We think the stock market and housing market are BOTH over valued right now. If we keep renting, we do not want to put the down payment money into the stock market. Bonds are also a bad option right now, and I don’t want to hold that amount of money as cash. The downpayment is 20% of our net worth. It makes sense to diversify where we are holding our money.

3. We like the house and think we will stay there at least 5 years.

4. If they had multiple offers at list price, it seems like the price we are paying is actually the true market value. (or the market is too heated, not sure about this one.)

5. My husband wouldn’t let me not buy it. He really likes it. I actually wanted to walk away from the deal and wait until the market cools, but he was pretty upset about that idea. All of the upgrades and style choices are exactly what we would have chosen.

So there you have it — a case study on the fools that pay inflated prices for their house! Haha!! I hope it works out![/quote]

Great news, applejack! These are all excellent reasons for making the move to buy. As you’ve noted, even if the housing market is overvalued (and I think it is), there’s still a risk holding any other assets, including cash. At least with a house, you’re getting a roof over your head. Having lower payments than then rental, along with a superior property, makes it an excellent choice.

Hope you have a smooth escrow and transition to your new home! 🙂