Warren Buffett and Charlie Munger on when it is time to buy a house

During the Q&A Sessions of the 1998 Berkshire Hathaway Annual Meeting (YT):

Question: I’m still quite young, I don’t have a house yet and I’m thinking about buying a house someday soon. And in order to do that I’m going to have to put a down payment, which means I might have to sell my [BRK] shares. And I was wondering if you can provide some insight on when is the best time to buy a house, and how much down payment you should be putting down, in relation to interest rates and also in relation to available cash and the stock market.

Buffett: Well, Charlie’s going to give you an answer to that in a second. I’ll just relay one story, which was when I got married we did have about $10,000 starting off, and I told Susie — “Now, you know, there’s two choices, it’s up to you. We can either buy a house, which will use up all my capital and clean me out, and it’ll be like a carpenter who’s had his tools taken away for him. Or you can let me work on this and someday, who knows, maybe I’ll even buy a little bit larger house than would otherwise be the case.”

So she was very understanding on that point. And we waited until 1956. We got married in 1952.

And I decided to buy a house when the down payment was about 10% or so of my net worth, because I really felt I wanted to use the capital for other purposes.

But that was a way different environment in terms of what was available to buy. In effect, if you have the house you want to buy, you know, I definitely believe in just going out and probably getting the job done. But in effect, you’re probably making something in the area of a 7 or 8% [annual return] investment, implicitly, when you do it. So you know, you’ll have to figure out your own equation from that.

Charlie probably has better advice on that. He’s a big homeowner in both senses of the word.

Munger: I think the time to buy a house is when you need one.

Buffett: And when do you need one?

Munger: Well, I have very old-fashioned ideas on that, too. The single people, I don’t care if they ever get a house.

Buffett: When do you need one if you’re married, Charlie? You need one when your wife wants one?!

Munger: Yeah, yes. I think you’ve got that exactly right.