Why you should buy a home as early as possible.

[Mr. Tycoon]

If you are not sitting on close to 300-500k cash any major investment to “fight inflation” is not a high priority.

WOW... what a number.

with this amount plenty of individuals would close on a multi million RE deal and get an awesome monthly cash flow

 

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[Mr. Tycoon]

My view is that unless you are somewhat wealthy, you should be mostly in cash.

If you are not sitting on close to 300-500k cash any major investment to “fight inflation” is not a high priority.

I just don’t see real estate as a high priority that rob away future buffer against unseen events or unseen opportunity.

Most people get into financial trouble because they underestimate the possibility of getting into a shortage of cash. They have a high paying job with high expense once they lose then job everything turns bad real quickly.

We have some many people coming with post that they have no money/time for their own business ideas.

If someone has wages not keeping up with inflation, it is not an issue if you have saved up a huge cash reserve. If someone needs their current month’s income to pay for their current month expense it is a cashflow issue that they got themselves into in the first place.

They blame wages not keeping up, they blame the unfortunate event of losing their job. They refused to have cash reserve ready.

I would rather get even more coverage for life insurance that covers all the illness possible. The more I hustle the more likely the immune system could be weakened due to stress. If you are healthy you can always make the money.

Real estate just put a lot of fear and uncertainty into me. What is the future value of the location? Can I find tenants in the future when I don’t live in it? I just don’t have the answers.

Unbelievable... you go from one extreme to another.

You're worrying so much about just owning a house ! How would you manage \run a business when you will be responsible for your employees to take care of them, and your competitions around the corner ready to kill your business 24\7, and 100 other details to keep in mind just to survive as a business owner. That's tough.

 

[Mr. Tycoon]

So here's a house I'd consider purchasing for 200,000k (it sold for 125K in 2007). Monthly repayments over a 25-year period are roughly 1K/month.

The whole 25-year debt thing scares the sh*t out of me. Like what if it all goes to pot and I lose a job etc., I'd be chained by debt repayments.

But we'll always need a roof over our heads, so that cost will exist regardless of it being a rental or purchased property.

Regarding stability, the rental we have at the moment is long-term and extremely well-furnished and a great built for the price. So it's pretty comfortable, but for sure there is little control over our future here if we get kicked out or something.

Overall, house prices and rent are appreciating in my city. As the population of Birmingham (second largest city after London) is expanding more people are living here but commuting to London. I could get cheaper housing by moving out of town, but that would mean no family or friends and inferior public facilities overall.

Hence my deadline to get a business off the ground in the next year or so. I'd be more comfortable taking on a mortgage with a higher or additional income.

Edit: I've set a reminder for next year to review this house/this post. Let's see.

Go for the house !!

I'm a lettings agent in London, and a small room in house share\HMO is going for £1,100pcm right now in Zone 2.

Your main job should be protection against this silent killer which is inflation. Forget the business, the high inflation would kill the majority of businesses anyway in the next decade.

 

[Guest-5ty5s4]

This is hard thing for younger people to swallow. When I bought my first house in 1999, I thought, man in 2029 and the house will be all paid off, that is a long long time. But reality was that in 2004 I sold it and moved.

You can always sell your place. Paid it off faster. But there's a high chance you won't be in the house for 25 years. Just take it one month at a time.

Here's another perspective. Imagine you purchased this home in 2007 for $125k. Your payment would be $594. Today in 2023, you would be paying $600 to live in this exact home. Would you be happy with that purchase?

There's probably going to be someone posting in 2030, telling you that you got lucky and bought when the prices were low.

Exactly. And I will gripe about inflation being a huge scam to the people as much or more than anyone, but we have to remember that it's not just the prices that inflate, but also all of our incomes (and the prices we can charge for our businesses' products and services).

So those monthly payments are fixed, but what you are earning stays the same. It's a great deal.

And THEN when you get into long term rental mathematics, it's even better...

And then SBA loan and biz real estate... there are just a lot of options.

 

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[biophase]

Exactly. And I will gripe about inflation being a huge scam to the people as much or more than anyone, but we have to remember that it's not just the prices that inflate, but also all of our incomes (and the prices we can charge for our businesses' products and services).

Yes I think that’s the MAIN advantage with real estate. You can lock in your “rent” payment for 30 years if you want to. Yes taxes will go up but that is minimal. HOA is a different story though.

If I stayed in my house I bought in 1999 I would be paying $1200/mo right now for a 4br/3ba house.

Literally, every other expense in the world will go up except your fixed 30 year mortgage payment!

 

[Kevin88660]

Unbelievable... you go from one extreme to another.

You're worrying so much about just owning a house ! How would you manage \run a business when you will be responsible for your employees to take care of them, and your competitions around the corner ready to kill your business 24\7, and 100 other details to keep in mind just to survive as a business owner. That's tough.

It also has to do with the options I have in my country.

When I reach 35 soon, I can get decent resale public housing in the range of 400-500k.
Alternatively, I can opt for dirt cheap newly launched public housing below 200k for unmarried singles. I can rent out after living for 5 years and get 2k monthly rental. Insane yield and impossible to lose money. The downside is that the construction waiting period takes around four years. Public housing here has decent quality and good neighborhoods.

Most of my peers opt for private apartments that cost around 1.5M these days, taking up a significant mortgage liability. The rates could not be fixed for 30 years, five years max fixed rate here, because the banks here could not hedge the risk away.

There is also no tax benefit here. Property tax is not high, but REITS that collect dividends are taxed at zero (zero dividend tax). So the only power of home ownership comes from leverage if you choose to use it. In the right direction, you make money; in the wrong direction, you are screwed.

 

[Antifragile]

I wasn’t going to post anything until this…

Alternatively, I can opt for dirt cheap newly launched public housing below 200k for unmarried singles. I can rent out after living for 5 years and get 2k monthly rental. Insane yield and impossible to lose money. The downside is that the construction waiting period takes around four years. Public housing here has decent quality and good neighborhoods.

How do you view public housing as a good idea while also being on TheFastlaneForum.com ? One of these two doesn’t fit and I don’t get it. There must be off the charts cognitive dissonance going in your head. Like a smoker who posts “smoking is bad for your health”.



Edit: I mean brother, this whole place exists to promote the abundance mindset. I personally ”fight” with politicians on a daily basis to stop meddling and let the market decide. More housing = more supply, prices will fall etc. Meddling creates slums etc. We’ve all seen how well that worked out for the communism party… history has already been there and done that.

The whole notion of subsidized public housing as part of your “life/business model” is absolutely a$$-backwards to free market enterprise. It’s scarcity mentality on steroids.

And promoting it as if it has “insane yield and impossible to lose money” is driving me up the wall here. We don‘t even know each other.

 

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[Kevin88660]

I wasn’t going to post anything until this…



How do you view public housing as a good idea while also being on TheFastlaneForum.com ? One of these two doesn’t fit and I don’t get it. There must be off the charts cognitive dissonance going in your head. Like a smoker who posts “smoking is bad for your health”.



Edit: I mean brother, this whole place exists to promote the abundance mindset. I personally ”fight” with politicians on a daily basis to stop meddling and let the market decide. More housing = more supply, prices will fall etc. Meddling creates slums etc. We’ve all seen how well that worked out for the communism party… history has already been there and done that.

The whole notion of subsidized public housing as part of your “life/business model” is absolutely a$$-backwards to free market enterprise. It’s scarcity mentality on steroids.

And promoting it as if it has “insane yield and impossible to lose money” is driving me up the wall here. We don‘t even know each other.

85 percent here in Singapore lives in public housing. The way it operates here is different.

It has also nothing to do with whether I think public housing is a good public policy or not.

 

[MitchC]

It also has to do with the options I have in my country.

When I reach 35 soon, I can get decent resale public housing in the range of 400-500k.
Alternatively, I can opt for dirt cheap newly launched public housing below 200k for unmarried singles. I can rent out after living for 5 years and get 2k monthly rental. Insane yield and impossible to lose money. The downside is that the construction waiting period takes around four years. Public housing here has decent quality and good neighborhoods.

Most of my peers opt for private apartments that cost around 1.5M these days, taking up a significant mortgage liability. The rates could not be fixed for 30 years, five years max fixed rate here, because the banks here could not hedge the risk away.

There is also no tax benefit here. Property tax is not high, but REITS that collect dividends are taxed at zero (zero dividend tax). So the only power of home ownership comes from leverage if you choose to use it. In the right direction, you make money; in the wrong direction, you are screwed.

Like @Antifragile I've been trying to refrain from replying to your posts even though they are the stupidest posts I've ever read but you got me here I can't help it anymore.

Have a think how much money you've lost by waiting.

You wouldn't even be thinking about buying public housing if you'd just bought a house at 25 instead of 35.

The problem with your posts is you think you have some special insight that everyone here doesn't. All these smart people are saying something and you are arguing the exact opposite.

I was the same.

I literally wrote a post about it above and said how stupid I was.

I literally saved the 300k you said would be needed in case of emergency.

What the F*ck was I thinking? What emergency?

And more importantly what opportunity?

What opportunity could someone possibly present me that involves me needing 300k, that doesn't end in me losing that 300k?

Having money in the bank like that is just sitting there asking to be played with lost and spent.

Also, mortgage or rent, it's the same thing. Mortgage payments are often less.

Anyone here saying they don't want 30 years in mortgage payments, have a think of the alternative, you wanna rent for 30 years instead?

What if I move? You won't. And if you do, so what? sell the house, rent it out, it's easier than breaking a lease.

 

[Antifragile]

85 percent here in Singapore lives in public housing. The way it operates here is different.

99% here in Canada don’t live like the remaining 1% do.

Just saying…

 

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[Kevin88660]

99% here in Canada don’t live like the remaining 1% do.

Just saying…

Public housing price range here : 1M and below
Private housing here 1.2M and above typically.

So 1M is dividing line.

 

[biophase]

It also has to do with the options I have in my country.

When I reach 35 soon, I can get decent resale public housing in the range of 400-500k.
Alternatively, I can opt for dirt cheap newly launched public housing below 200k for unmarried singles. I can rent out after living for 5 years and get 2k monthly rental. Insane yield and impossible to lose money. The downside is that the construction waiting period takes around four years. Public housing here has decent quality and good neighborhoods.

Most of my peers opt for private apartments that cost around 1.5M these days, taking up a significant mortgage liability. The rates could not be fixed for 30 years, five years max fixed rate here, because the banks here could not hedge the risk away.

There is also no tax benefit here. Property tax is not high, but REITS that collect dividends are taxed at zero (zero dividend tax). So the only power of home ownership comes from leverage if you choose to use it. In the right direction, you make money; in the wrong direction, you are screwed.

First, thanks for answering and trying to help us understand.

So if I understand this correctly, you cannot purchase public housing until you reach 35 years old? Does the public housing ever appreciate? This doesn't make sense to me, if you can buy it at $400k, then someone who is 25 years old can buy it at $400k in 10 years? The price must increase each year right? What's the point of purchasing it if there is no appreciation. It's not hedging inflation at all.

A single person at any age can buy a place for $200k, and after 5 years can rent it out for $2k a month? 12% return? The downside is waiting 4 years after you pay $200k? Or just waiting 4 years with a deposit? Do these $200k places ever go up in price? Why wouldn't you have chosen this option? You said and I quote. "Insane yield and impossible to lose money." THIS WAS YOUR UNSEEN OPPORTUNITY that you were saving your money for. You just turned your $200k into a $24k salary.

So due to this, you have been trying to save up all your money so that when you reach 35 you can purchase a home without a loan? Was this your strategy all along?

 

[MitchC]

Public housing price range here : 1M and below
Private housing here 1.2M and above typically.

So 1M is dividing line.

You are the person who is also saying to have 300k saved up.

300k is a 25% deposit on a 1.2m house.

How much was a public house when you were 25? How much is it now?

 

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[Kevin88660]

First, thanks for answering and trying to help us understand.

So if I understand this correctly, you cannot purchase public housing until you reach 35 years old? Does the public housing ever appreciate? This doesn't make sense to me, if you can buy it at $400k, then someone who is 25 years old can buy it at $400k in 10 years? The price must increase each year right? What's the point of purchasing it if there is no appreciation. It's not hedging inflation at all.

A single person at any age can buy a place for $200k, and after 5 years can rent it out for $2k a month? 12% return? The downside is waiting 4 years after you pay $200k? Or just waiting 4 years with a deposit? Do these $200k places ever go up in price? Why wouldn't you have chosen this option? You said and I quote. "Insane yield and impossible to lose money." THIS WAS YOUR UNSEEN OPPORTUNITY that you were saving your money for. You just turned your $200k into a $24k salary.

So due to this, you have been trying to save up all your money so that when you reach 35 you can purchase a home without a loan? Was this your strategy all along?

Public housing is only available to married couple or single people aged 35 and above. You can either buy resale or new flat. New flat has higher appreciation potential since you will be the first owner, buying from the government (housing development board). But the downside is that you have to be on a waiting list that will take 3-4 years.

But TBH saving for housing hasn’t been high on my priority either.

I have a friend who went through the ballot process (single after 35 scheme) and got a new flat in a mediocre location rather quickly. He has to pay around 150k, and after living for five years (a rule on renting out), he could rent it out for 2k a month. Downside is that he has to wait for four years. It is not even constructed yet and he will pay for it after it is done. So it will take nine years before he can rent out or sell it.

He got it within a few weeks because he wasn’t greedy and balloting for prime location (higher appreciation potential), where a few hundred applicant was fighting for one unit. I didn’t save money for this specifically. The way it works you can keep trying to ballot but you can just get one unit. I just heard about him getting it 2-3 months ago. Getting such a good deal definitely is something I am open to, provided the supply and demand didn’t change when I am eligible to ballot.

The public housing is being bought and sold in the market as well. You just need to be a local (citizen or permanent resident).

A common strategy used by local is to queue for new public housing unit in good location (paying more for that as well). The bet is as more immigrants come to Singapore and get converted into citizens they get to sold it at higher price in the future.

So basically there are two housing markets in Singapore. One is public housing that only locals (with criteria on age or marriage) could participate. The other is private property market that everyone could participate.

 

[Feuertaufe]

Exactly. And I will gripe about inflation being a huge scam to the people as much or more than anyone, but we have to remember that it's not just the prices that inflate, but also all of our incomes (and the prices we can charge for our businesses' products and services).

So those monthly payments are fixed, but what you are earning stays the same. It's a great deal.

And THEN when you get into long term rental mathematics, it's even better...

And then SBA loan and biz real estate... there are just a lot of options.

100% agreed. And for the doom and gloom fraction. At least you can grow your own food.

 

[circleme]

Hi @biophase,

thank you very much for your post, it really made me think a lot. I think I do not fall exactly into the target group you described, but I have some similarites (except the part regarding the successful running copany... ouch). I am currently in my late 20's and (still) living for rent. I've been thinking about home ownership for a while now, but primarily from a pure slowlaner point of view. Here I have to say right up front that it would be 100% fixed for me as a Slowlaner to buy a house or an apartment. BUT...

After all, this is the Fastlane forum and I don't follow the Slowlane, I follow the Fastlane. For a few weeks already full time. Of course, with rent prices going up, the topic still catches up with me from time to time and that begs the question for me:

Should I buy a home despite the Fastlane or "hope" to succeed with my FL business in the foreseeable future (next 5-7 years)?

From a purely statistical point of view, the path as a slowlaner is probably more promising if it is purely a matter of purchasing and "safely" paying off the real estate loan. But if I want to buy a property as a Fastlaner anyway AND would need a loan for it, I think several problems arise at once:

1. The bank does not give a loan to a self-employed person or a young entrepreneur, because the creditworthiness is not guaranteed. It is also not with a job, but from the bank's point of view a job stands for more security. (I speak here for the situation in Europe).
2. I could switch to the Slowlane with one foot (part-time), strengthen my credit rating and thus get the loan for my house, and continue to pursue my Fastlane business with the other foot.

Should I pursue point 2, this has potentially serious effects on my Fastlane Journey, as:

1. I am already limited in time, as I have to spend XY hours per week NOT on my Fastlane business, but on my job.
2. I am mentally not fully with my cause (my Fastlane venture).
3. I am now a CREDIT PAYER. I will reluctantly take what may be essential risks for the Fastlane Business and jeopardize my ability to pay for the loan. I will probably fall into the "I'd rather play it safe until my property is paid off" mindset.
4. The time until I get results with my fastlane business (no matter if positive or negative) is significantly higher, since I still have to work a job on the side. If I would pursue the Fastlane Full-Time, I would have more time to fail or a possible success would occur earlier.

I don't mean to belittle your post by any stretch of the imagination. Even now in the course of writing my response, it still makes me think, because somewhere inside me (Slowlaner upbringing probably) I still feel that with every year that goes by I pay one more year into the void, being a tenant. On the other hand, the points I listed and my intention complicate the process of buying a property immensely for me.

Why I am interested in this topic has very little to do with asset accumulation, but rather with the fact that a paid-off apartment is a kind of backup plan. You can F*ck up as hard as you want, at least you have a roof over your head and the running costs are many times lower than with a similar sized rental apartment or house. I also think that the topic of owning a home is part of the process of achieving financial independence for many.

At the end of the day, it represents a sort of "mini-gamble" for me. It can turn out insanely well for me, but it can also turn out insanely bad. The worst-case would be that in 10 years I'm still standing there as a tenant with countless failed fastlane businesses and huge opportunity costs. The best case: Well, I think we all know the best case. =)

 

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[Jrjohnny]

I know that this may be a controversial topic, but I want to give you a few examples of people that I know that are slowlaners but are actually doing very well vs. some aspiring "fastlaners" that aren't anywhere in the same position. This topic came to mind when another friend was shocked when he learned that one of our mutual friends had a decent net worth despite having a low paying job.

Example 1: I had a friend who we will call Amy who made $7/hr back in 2008. Back then a city in the Phoenix area had a first time homebuyers program. The city would pay up to $50,000 down payment for a home, but the catch was that when she sells the home, the first $50,000 is returned to the city. She qualified for the program due to her low salary.

So she bought a home for $100,000. With a $50k down payment from the city, she got a loan of $50,000 at something like 4.5%. She was able to qualify for a house on a salary of under $15,000 a year!

Today her home is worth $375,000. Her house equity is probably $170kish and she is lucky to have a nice fixed $500 mortgage payment on her current home until its paid off. If she had continued renting, she wouldn't be able to afford anything today!

Example 2: I have another friend who we will call Julie. I have known her since 2008. She has never made more than $35k per year. She bought a house for $88k in 2000. Today her house is almost paid off (she's been making an extra $100 payment per month). Today her house is worth $340k. Her equity is $330k. There is no way she could have saved that amount in 20 years on $35k a year.

These are two examples of people who would have huge issues in surviving today if they had not purchased a home years ago. Rents in their areas are $2500 a month for a home in their area. They would have been priced out a long time ago. But because of their purchase, they are paying $500 and $450 a month in mortgage payments.

I contrast this to others I have known who consistently make $75k-$150k per year but never buy a home. They lived the digital nomad life or the lifestyle business life of renting a nice loft in the city. 5-10 years later, their net worth is close to zero and they cannot afford a home any more due to the prices and interest rates.

I can already hear the naysayers saying, but if you reinvest everything back into your business, that's a much higher ROI. I agree. But this is assuming your business is successful. What I would tell any 20 year old aspiring entrepreneur is that if your business is doing well, invest into a home first, then the rest into your business.

See, I noticed this, but I cant do anything. I’m 13… for example, I know someone who built their house in 2011 for like 1 million, now its worth 3-3.5 million, now each 1k sq ft is 1m$, which is weird. Like what am I supposed to do? What about my sister? By the time im 20, a 3 thousand sqft house is going to be like 9 million!

 

[Tiago]

Yes I think that’s the MAIN advantage with real estate. You can lock in your “rent” payment for 30 years if you want to. Yes taxes will go up but that is minimal. HOA is a different story though.

If I stayed in my house I bought in 1999 I would be paying $1200/mo right now for a 4br/3ba house.

Literally, every other expense in the world will go up except your fixed 30 year mortgage payment!

I've been looking at buy my house too.

It's literally the same argument for solar, the industry I'm in. You can lock in your payments, protect yourself against inflation, and funnel that money into an asset instead of a liability.

 

[biophase]

See, I noticed this, but I cant do anything. I’m 13… for example, I know someone who built their house in 2011 for like 1 million, now its worth 3-3.5 million, now each 1k sq ft is 1m$, which is weird. Like what am I supposed to do? What about my sister? By the time im 20, a 3 thousand sqft house is going to be like 9 million!

Let's just see what the housing market is like when you are 20 and figure it out then. No need to worry about this at your age.

 

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[Guest-5ty5s4]

See, I noticed this, but I cant do anything. I’m 13… for example, I know someone who built their house in 2011 for like 1 million, now its worth 3-3.5 million, now each 1k sq ft is 1m$, which is weird. Like what am I supposed to do? What about my sister? By the time im 20, a 3 thousand sqft house is going to be like 9 million!

I would look at other areas (in most places on the planet, houses do NOT cost $1,000 per square foot), but like @biophase said, you should worry about other stuff at 13. You can't even legally own a house for 5 more years. Have you done any work? What skills are you cultivating? Have you sold anything? Focus on that.

 

[JUAREZ]

@biophase ,just wanted to tell you that I really appreciate you sharing your wisdom with us. I always enjoy reading your posts. Can't wait to get to your level. I am currently using that flexibility trick and also your posts on ecom. Currently in a bad spot, but working to improve. Thank you for writing here.

 

[21elnegocio]

You can still find a way. Everyone always thinks that they are too late. If you are making six figures, you should be able to get something.

I bought my first home for $230k on a $65k salary at 8.25% interest. It was a 1.5 hour commute from my work.

It wasn't a great home. It had shag carpet in all the rooms.

I agree with you @biophase 1000% I am a real estate agent in Phoenix, 80% of my clients are milenials and I see this over and over again my millenial clients think their first home will be a huge house with the white picket fence. Let me tell you the harsh truth, in many cases IT WILL NOT BE THAT HOME you saw on IG BUT I guarantee you it will be the best investment you will ever make.

I always let me clients know about this, I also tell them that the first home will get you closer to that dream home why? Because as your house appreciates, you can later on sell that first home or refinance and use the profit to buy that dream you home want.

Step 1 Buy a house with down payment assistance
Step 2 Wait a couple of years 24-32 months
Step 3 Sell first home take (Lets say $175K profit, keep in mind you dont pay taxes on your primary residance capital gains if you owned it for 24 months or more)
Step 4 Use that $175k plus your own downpayment to buy your dream home.

 

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[SpinnerRedPenny]

you have to live somewhere you can buy your own house. if you still want to travel a lot you can rent it out.

Buying a home is a good way for many people to save money that they would otherwise spend on other junk

@jclean and @biophase I agree in principle with most of your contention(s). @jclean had the "Money quote" (): You have to live somewhere [emphasis added].

Peter Lynch (in either Beating the Street or One Up on Wall Street, I can't recall which) mentioned that buying a home essentially leads one through a due-diligence process that can become a transferable skill when analyzing companies in which one is considering investing. If true, that represents a complementary advantage to owning a home.

My family and I are currently renting in Munich because it was the most reasonable accommodation in a neighborhood with a minimally-acceptable school and a commuting time that wasn't obnoxiously lengthy. We probably could have afforded the (at the time) €1.3m price of a house in this neighborhood, or moved farther out of the city. But renting seemed to us to be the better value.

We rented when we moved to Tucson in 2008 because (mercifully) my father-in-law pointed out that the market wasn't done plunging yet and we'd've taken a bath if we'd purchased there.

We bought our first house in 2011 in Illinois, paid it off by late 2013, and were living large in the slow lane from then until we moved over here. It made complete sense to purchase there, the mortgage payments plus insurance were at right about $1k/month and rent would have been anywhere from $1.8-2.4k/month with no title to show for it at the end of the rental term. Owning the home cost us around $36k for the five years we lived there (maintenance, realtor fees at purchase/sale, miscellaneous). Renting something similar would have cost us $132k.

Any individual's decision to purchase will perforce be based on circumstances unique to the individual.

One of the commenters (I forgot whom, and I apologize) indicated values have been inflated recently and factoring in high interest rates ought to give purchasers pause if they are paying attention to economic headwinds/tailwinds.

Sometimes renting is the right answer, but I agree that owning is (in general) preferable.

 

[BizyDad]

This is one of "those threads".

Housing doesn't only go up $100k/yr for 20 years. Sell your house every 2 years? In what universe is that "the right move" for a slowlaner who lacks expertise in real estate?

If you live in a crappy area, I'd argue it is better to move to an area with more opportunity and rent there than it is to buy a house right now in your crappy area. There's a reason your real estate is more affordable. Move.

My dad bought a condo in a decent area of eastern PA in 1990 for $120k. It's worth $180k now. Maybe $200. Nice quiet neighborhood. His place is very well maintained. That's 33 years appreciation. He loves it, but I outpaced that appreciation on my home in 2021 alone. My house is only 350 sq ft bigger. And my neighborhood is noticeably worse than his. That's the difference between eastern PA and Phoenix AZ. When I first moved to Phoenix I was priced out of the market. I bought at the bottom of the last crash. Today my house is worth more than twice what my Dad's is.

Interest rates, at least in the US, are going to go up. Looking at the falling home sales figures, it is just a matter of time before prices start to come down. Telling people to buy a house now feels a bit like saying that in '07. The writing is on the wall and those who bought in '07 didn't recover from their decision for 10ish years.

Kinda like how people are already giving their overpriced cars back to the dealers (or getting repoed) rather than pay their inflated loan/lease amounts.

Even if I'm wrong, even if a crash isn't coming, it doesn't look like any surge in pricing is coming anytime soon. So it doesn't actually hurt you to wait another year or two and see which way the wind is blowing. And a lot of places it is cheaper to rent than own right now. There's nothing wrong with keeping your powder dry.

My point is this...

There is good advice here that is generally true. Generally.

But like anything, or everything in life, you have to be smart enough to take a look at the specific factors of your life and decide if this advice is truly good advice for you specifically.

 

[MJ DeMarco]

Interesting article that relates to this discussion...

The End of Homeownership - Macleans.ca

For generations, middle-class Canadians have been sold on the promise of homeownership. The promise was always flawed. Today it’s simply broken.

macleans.ca

Curious what any Canadians think...

excerpt...



excerpt...

 

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[biophase]

Scenarios like these are exactly why I made this post…

From the article MJ linked:

Excerpt…



They had years and years to purchase something.

Excerpt…

I mean 40 years old? Come on. Who’s to blame?



Btw, I’m not immune to this either. There’s a neighborhood in Phoenix that I wanted to live in and since home prices were stagnant from 2013 to 2020, I was just waiting and monitoring the area for the perfect home. I wanted a 2 acre property and I could and should have bought a tear down for $500k and built the perfect home. Unfortunately I waited too long and a 2 acre tear down would go for $1.5M today.

 

[Guest-5ty5s4]

Scenarios like these are exactly why I made this post…

From the article MJ linked:

Excerpt…

View attachment 49516

They had years and years to purchase something.

Excerpt…

I mean 40 years old? Come on. Who’s to blame?

View attachment 49517

Btw, I’m not immune to this either. There’s a neighborhood in Phoenix that I wanted to live in and since home prices were stagnant from 2013 to 2020, I was just waiting and monitoring the area for the perfect home. I wanted a 2 acre property and I could and should have bought a tear down for $500k and built the perfect home. Unfortunately I waited too long and a 2 acre tear down would go for $1.5M today.

Who’s to blame? Governments and central banks. The govs for their low down payment house programs driving up the prices fast and central banks driving them up long term by creating money out of thin air. We know this already but I’m just reiterating.

 

[Andy Black]

Interesting article that relates to this discussion...

The End of Homeownership - Macleans.ca

For generations, middle-class Canadians have been sold on the promise of homeownership. The promise was always flawed. Today it’s simply broken.

macleans.ca

Curious what any Canadians think...

excerpt...

View attachment 49514

excerpt...

View attachment 49515

I haven't read the article, just your comments.

I fear this is how it is in Ireland too. My stepson, nieces, and nephews may never get to own a home. Saving for a deposit is like trying to catch a target accelerating away from them.

House prices are still going up even when the European Central Bank has hiked interest rates. Apparently the mortgage interest for many has gone from 1% last year to 5% this year, yet house prices still go up because of lack of supply.

Rents are also high due to lack of supply, and are marching upwards too as mortgage interest payments for the landlords go up.

I lived in London about 25 years ago.
Over a short period of 5 years I was priced out of the market in London because I wanted the "freedom of being a renter" and I wanted to continue to live in the trendier areas. A friend who'd already bought practically pleaded with me to buy, saying that every year I waited I was losing out on thousands and how I was going to get priced out.

When I finally took property seriously I bought back home in the North of England. I rented out to my brother, then bought a few more little properties.

Those purchases were some of the best decisions I made as they went up in value and allowed me to cash out and get into the Irish market 10 years ago - just after the crash after the "Celtic Tiger" increase, and before the current increases. Our family home has increased in value and our mortgage payments on a 4 bed home are less than the current rent for a one bed studio. We're also fortunate enough to nearly own another property outright.

Yes, you have to do your due diligence and buy the right house in the right place for your own circumstances, but get on the ladder as soon as you can.

You want time and inflation working with you to eat into your debt (mortgage), and to increase the value of your property. You also want the security of not getting evicted by landlords who have to sell and/or raise rents.

And as others have said, living in a *home* you own is completely different than renting a property. We're thinking of paying €10k to get a little back garden done up to look nicer. We'd never do that in a rental, but it's practically a no brainer as a home owner since it will increase the value of the house by more than €10k when done.

It may feel like you're "settling down" and no longer free to move around. I get that for youngsters it feels too complicated and too grown up. It's not.

 

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[Andy Black]

Who’s to blame? Governments and central banks. The govs for their low down payment house programs driving up the prices fast and central banks driving them up long term by creating money out of thin air. We know this already but I’m just reiterating.

It's like a law of nature - over time prices go up / fiat currency devalues.

So take out a mortgage on a property that will go up in value and where the debt will go down in value? Purely by the passage of time.

We pay heavily for our ignorance and for trying to swim against the tide.

I'm reminded again of MJ's post about Maths being so important. This stuff isn't complicated calculus or trigonometry. It's just understanding simple percentage increases/ decreases, compounding, and the power of the passage of time.

Get time and the laws of nature working for you, not against you.

Who's to blame? At some point we have to take responsibility and accept there are some things we can't change but we can change what we do about it.

 

[biophase]

This is one of "those threads".

Housing doesn't only go up $100k/yr for 20 years. Sell your house every 2 years? In what universe is that "the right move" for a slowlaner who lacks expertise in real estate?

If you live in a crappy area, I'd argue it is better to move to an area with more opportunity and rent there than it is to buy a house right now in your crappy area. There's a reason your real estate is more affordable. Move.

My dad bought a condo in a decent area of eastern PA in 1990 for $120k. It's worth $180k now. Maybe $200. Nice quiet neighborhood. His place is very well maintained. That's 33 years appreciation. He loves it, but I outpaced that appreciation on my home in 2021 alone. My house is only 350 sq ft bigger. And my neighborhood is noticeably worse than his. That's the difference between eastern PA and Phoenix AZ. When I first moved to Phoenix I was priced out of the market. I bought at the bottom of the last crash. Today my house is worth more than twice what my Dad's is.

Interest rates, at least in the US, are going to go up. Looking at the falling home sales figures, it is just a matter of time before prices start to come down. Telling people to buy a house now feels a bit like saying that in '07. The writing is on the wall and those who bought in '07 didn't recover from their decision for 10ish years.

Kinda like how people are already giving their overpriced cars back to the dealers (or getting repoed) rather than pay their inflated loan/lease amounts.

Even if I'm wrong, even if a crash isn't coming, it doesn't look like any surge in pricing is coming anytime soon. So it doesn't actually hurt you to wait another year or two and see which way the wind is blowing. And a lot of places it is cheaper to rent than own right now. There's nothing wrong with keeping your powder dry.

My point is this...

There is good advice here that is generally true. Generally.

But like anything, or everything in life, you have to be smart enough to take a look at the specific factors of your life and decide if this advice is truly good advice for you specifically.

Yes I agree with you that this isn’t, go run out and buy anything right away.

This is more for the people who are relatively stable and choose to rent instead of buy for lifestyle choices.

And yes location matters immensely. In 2000 Chicago was more expensive than Phoenix. Chicago and Cali were kind of close. Cali had a huge run up. Phoenix didn’t do anything until 2005 to 2008. Today Phoenix is getting close to Cali prices. Chicago didn’t go anywhere from 2000 to 2023. It’s hard to predict real estate.

I always thought Phoenix was underpriced the whole time I lived there until 2023. Now it feels overpriced. Vegas feels underpriced to me now still.