Buying a house when the market is overpriced
Hello everyone! This is my first post on BiggerPockets and hope I can get a burning question answered. This developed from a difference in opinion I had with a friend about purchasing a home in a very hot market. At the time I had little to no experience with real estate and since then I have come upon BiggerPockets and started to read as much as I can. I still haven't found the answer to this question and decided I should ask the forums!
I am from the Portland, Oregon area which is 'on fire' in some areas. My friend was hoping to buy a house close in to the downtown area where she worked. This area was very active with houses selling in one or two days, sometimes 30-40,000$ over asking price. She had a few houses where she put $30,000 over asking and still didn't get the house and some of these houses needed a ton of work. She has since given up searching because there are so few houses available.
I thought it was a bad time to be buying a house as a first time homebuyer because the prices are the highest they have ever been (houses sold for 60k a decade or less ago were not selling for 300k).
My argument was that it would be a bad idea to buy a house in a hot market and obtain such a high mortgage as a first time home buyer. Would the house not eventually drop in value in the inevitable market fluctuation and she would be paying a mortgage that is more than the value of the house?
Her argument was that buying a house at any time is a good investment, even if the mortgage is almost beyond her capacity. It didn't matter if the price was high or low, it was about location and owning her own home.
I am looking forward to some discussion on the topic. Thanks!