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re: Do not count on a new house holding it's value and saving you money
Posted on 4/16/14 at 1:43 pm to I B Freeman
Posted on 4/16/14 at 1:43 pm to I B Freeman
quote:
sleeps a lot better when the boss starts cutting the budget at work
I'll actually sleep better because I'll have that extra 20k (20% as opposed to 30%) you wanted me to put down on a 200k house as opposed to it all being tied into the house. I could pay my inflated mortgage for 20 months with it while I look for a new job, downsize, wait for work to pick back up...I think you're confusing having a paid off home and one with equity. The safer route is having that extra money somewhere safe if you're worried about your income stream so you can still pay the mortgage through rough times.
The bank doesn't care if you put 3% or 30% down, if something catastrophic happens in your life and you stop making payments, they want the house back. In your example, if my kid goes crazy and I can't afford a $1300 note then I probably can't swing a $1000 either.
Why not have the 20k to help me transition?
quote:
Just don't get yourself tied to a big ole mortgage and then lose your job or have twins
I guess I would be relieved that I upped my budget to get into a 4 bedroom in a better school district so I don't have to pay for private school. I'm planning to live in the house 10-15 years at least.
Your premise makes more sense if we're talking about a 300-500k house. Or people that put 3% down, have no savings, and can barely handle the note.
This post was edited on 4/16/14 at 1:53 pm
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Posted on 4/16/14 at 2:01 pm to I B Freeman
quote:
Don't work for your house---or your car either for that matter.
How am I supposed to get those things then? Do houses and cars make themselves? Does corn plant and pick itself? Does silicon just form computer chips on their own? I get that you're saying not to dedicate your life to houses and cars and I agree, but we have to work for things. Some citizens may believe stuff just comes out of thin air, but it doesn't.
Ancient people still had to work everyday to find food and clean water and make/maintain shelter.
Posted on 4/20/14 at 6:04 pm to man117
quote:
quote:
Don't work for your house---or your car either for that matter.
How am I supposed to get those things then? Do houses and cars make themselves? Does corn plant and pick itself? Does silicon just form computer chips on their own? I get that you're saying not to dedicate your life to houses and cars and I agree, but we have to work for things. Some citizens may believe stuff just comes out of thin air, but it doesn't.
Ancient people still had to work everyday to find food and clean water and make/maintain shelter.
Pay for your house and car as fast as you can. Pay cash for cars.
The quicker you don't have to go to work every day to service debt the freer you are. Work to improve your standard of living and to have more choices.
I have always said borrow for things that appreciate in value and pay cash for things that depreciation unless they are tools of income.
With that in mind I do not believe houses will continue to appreciate in real terms and they should be paid off as quickly as possible.
More evidence that demand for homes nationwide will go down.
LINK
Posted on 4/20/14 at 7:50 pm to I B Freeman
quote:So where in the hell do you think young people are going to get enough cash to put down 30% on a new mortgage as their first home? Some of you advice is decent at best and most is just so irrevelant and dumb advice. But as the average american dont have the cash flow to do what your saying unless you live in your moms basement for 20 years.
IMHO no one should even think about buying a house unless they can put down 30% and be left with a mortgage no more than 20% of their current income. Really and truly no more than 20% of the income of one of the couple.
quote:
Young people starting out that ask my advice I encourage them to build a quadruplex or a duplex or something to rent out until they start having families and have a lot of cash to put down.
So how long do you expect these people to live in the "duplex" before they start having a family? And where do you think that money is going to come from with somebody coming out of college? You would have to stay here for way more than 5 years (which I would say is a good time frame until people start having families).
Posted on 4/20/14 at 8:26 pm to blades8088
quote:
So where in the hell do you think young people are going to get enough cash to put down 30% on a new mortgage as their first home?
Saving! extra jobs, no vacations, no new cars, the same way it has always been done.
quote:
So how long do you expect these people to live in the "duplex" before they start having a family? And where do you think that money is going to come from with somebody coming out of college? You would have to stay here for way more than 5 years (which I would say is a good time frame until people start having families).
Families can't be raised in duplexes, quadplexes, and condos? In many major cities single family houses are the exception with most people living in multifamily buildings.
Posted on 4/20/14 at 8:40 pm to EA6B
quote:
Saving! extra jobs, no vacations, no new cars, the same way it has always been done.
Say its a 150k house. Which is low in my area. That would be a 45k down payment. Would you like to tell me how long you think that would take you to save having a normal 40k a year job in your 20s? While on top of renting since we cant buy until we have a huge down payment. (And no were not gonna leach off of mom and dad, we are in our 20s and being a adult.) Plus having an emergency fund being you wouldnt want to leave yourself broke. The way its always been done? Yes since so many people have the ability to do this?
Posted on 4/20/14 at 9:33 pm to blades8088
Living in a duplex or quadruplex are simply examples of real estate investments that I think young people should consider instead of a house. Four of five years in such an investment would give the couple income to help with a mortgage for a home and equity their tenants helped build.
All across American today there are hundreds of thousands of people upside down on mortgages because real estate values have fallen.
If Fannie and Freddie suddenly decided to sell all their inventory of housing there is no way house values would go up in the next decade. LINK
All across American today there are hundreds of thousands of people upside down on mortgages because real estate values have fallen.
If Fannie and Freddie suddenly decided to sell all their inventory of housing there is no way house values would go up in the next decade. LINK
Posted on 4/20/14 at 9:39 pm to I B Freeman
Instead of building 3 other units, a soundstage using film tax credits would be a better investment, IMO.
Posted on 4/20/14 at 11:00 pm to Golfer
So, the young people should build the duplex/quad. Only after saving the 30% to build it. Also have to be in a place desirable to this type of housing. Also realize you are committing yourself to another part time job of landlord.
Until then put your life on hold to save up the money.
There is a lot of life to live before retirement, it's a shame so many people miss out because they think their life will start at 59.
Until then put your life on hold to save up the money.
There is a lot of life to live before retirement, it's a shame so many people miss out because they think their life will start at 59.
This post was edited on 4/20/14 at 11:08 pm
Posted on 4/21/14 at 1:05 am to blades8088
quote:
Say its a 150k house. Which is low in my area. That would be a 45k down payment. Would you like to tell me how long you think that would take you to save having a normal 40k a year job in your 20s? While on top of renting since we cant buy until we have a huge down payment. (And no were not gonna leach off of mom and dad, we are in our 20s and being a adult.) Plus having an emergency fund being you wouldnt want to leave yourself broke. The way its always been done? Yes since so many people have the ability to do this?
A 150K house with zero down at only 3.5% for 30 years will have a note around $850.00 including PMI and some taxes, so it doesn't really matter how long it would take them to save the money, they cannot afford to buy it without a significant down payment. They could probably save $500.00 a month for 6 years and get in a house, if they can't save $500.00 a month, they really have no business buying a house. The financial obligation required to purchase a house is determined by the market, not the ability of the buyer to do it.
Posted on 4/21/14 at 5:30 am to I B Freeman
I think the better argument is not expecting your home to hold its value against the rate of inflation. But anytime purchasing gets out of whack vs renting the market corrects itself for the most part. Landlords price in those same cost to rent as a homeowner should to owning. Appliances, windows, roofing, and HVAC generally have a 14-25 year shelf life on new construction. Everything else is an oil change per comparison.
The next big hurdle for housing will be what happens when rates get back in the 6-7% range. The theory is the economy will be there to support the hike, but the psychology of that may cause a downturn in some markets. Or housing sq. footage may decrease, affecting the median price of a market.
IMHO, I expect housing to rise accordingly with the rate of inflation as it has for decades. If prices were to decrease past the point of builders making profit, they would have to stop building, thus creating a demand and an increase in value for desirable markets.
I'll save the shifting population of the US for the PT board, but the "go west young man and prosper" mentality is very alive and well, at least in my market and other markets like mine.
My county had 100k residents in 2003. By 2020 we project to have 1M. Simple supply and demand counter your initial assertion for my market. Land is finite, when it's gone where it's desired, it appreciates.
I do agree that the potential for less desirable areas to become even more so less desirable is very possible. The new speculation will be on the outskirts of these now newer more desirable markets. But that is par for the course in the US throughout our history.
The next big hurdle for housing will be what happens when rates get back in the 6-7% range. The theory is the economy will be there to support the hike, but the psychology of that may cause a downturn in some markets. Or housing sq. footage may decrease, affecting the median price of a market.
IMHO, I expect housing to rise accordingly with the rate of inflation as it has for decades. If prices were to decrease past the point of builders making profit, they would have to stop building, thus creating a demand and an increase in value for desirable markets.
I'll save the shifting population of the US for the PT board, but the "go west young man and prosper" mentality is very alive and well, at least in my market and other markets like mine.
My county had 100k residents in 2003. By 2020 we project to have 1M. Simple supply and demand counter your initial assertion for my market. Land is finite, when it's gone where it's desired, it appreciates.
I do agree that the potential for less desirable areas to become even more so less desirable is very possible. The new speculation will be on the outskirts of these now newer more desirable markets. But that is par for the course in the US throughout our history.
Posted on 4/21/14 at 6:36 am to EA6B
quote:
They could probably save $500.00 a month for 6 years and get in a house, if they can't save $500.00 a month, they really have no business buying a house.
This works fine. If you have a free place to live. If they are paying 600 in rent and saving 300 that allows them to easily make the house note.
To be clear, I'm not advocating everyone should be buying houses with nothing down. Just that the "have everything up front" approach might not be the most logical.
This post was edited on 4/21/14 at 6:38 am
Posted on 4/21/14 at 7:20 am to blades8088
quote:
Say its a 150k house. Which is low in my area. That would be a 45k down payment. Would you like to tell me how long you think that would take you to save having a normal 40k a year job
someone making only 40k shouldnt be buying a 150k house.
Posted on 4/21/14 at 7:41 am to fightin tigers
quote:
To be clear, I'm not advocating everyone should be buying houses with nothing down. Just that the "have everything up front" approach might not be the most logical.
This.
Some people want to apply all of these one size fits all rules to housing, "always put 20% down", "don't have your DTI above x%", "NEVER pay PMI" etc etc.
Everyone's situation is different. Sometimes it makes sense for a person to put as little as possible down or even (gasp!) pay PMI.
Posted on 4/21/14 at 8:27 am to diat150
quote:
someone making only 40k shouldnt be buying a 150k house
Why?
Paying PMI upfront and borrowing 150k with mortgage, taxes, insurance is about $860/mo here in TN. 40k/yr with no state income tax and clears about 2400/mo in my estimate. With another $840/mo in bills and expenses, one could still save on average $700/mo.
Posted on 4/21/14 at 8:29 pm to ItNeverRains
Short memories here.
Nobody remembers the late eighties and $15 oil?
Nothing is worse than a big ole mortgage when you are forced to take a big income cut just to work AND the house you are in is not worth the mortgage.
Nobody remembers the late eighties and $15 oil?
Nothing is worse than a big ole mortgage when you are forced to take a big income cut just to work AND the house you are in is not worth the mortgage.
This post was edited on 4/21/14 at 8:30 pm
Posted on 4/21/14 at 10:34 pm to I B Freeman
Was alerted tonight to the ability to take loans against my 401k.
Take a 25k loan and pay back at 2-4%. The 25k continues to earn at 401k rates as if it was never removed.
Gotta say that is a neat perk for putting a down payment on a house.
Take a 25k loan and pay back at 2-4%. The 25k continues to earn at 401k rates as if it was never removed.
Gotta say that is a neat perk for putting a down payment on a house.
Posted on 4/21/14 at 10:40 pm to diat150
quote:
someone making only 40k shouldnt be buying a 150k house.
I did something very close to this.
Posted on 4/22/14 at 9:59 pm to I B Freeman
I mean I don't look at my home as an investment vehicle.
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