Not sure why you think just Boomers think this is great? Anyone who owns or invests in Real Estate thinks it's great as they just see their asset appreciating. Has zero to do with their age.
There is a demand for ageism that exceeds the supply.
Ironically, a primary residence is only an investment (in the strict financial sense) if you plan to downsize out of it. For example, someone buys a house in San Francisco and later sells it and buys another in Boise.
House owners mistakenly think that "My house went up in value." What really happened is every house in your area became more expensive. In theory, this is because your area became somehow more desirable. Given that you got a residence in a desirable area at a discounted price, there is no logical reason why you would sell it.
It's very silly to think of a house like some financial vehicle. As others have alluded to, Zillow/Redfin have stimulated this mentality that a house is like a bank account on public display, which has in turn stimulated demand for home ownership and driven up prices.
No
A primary residence can be an investment if you upsize to a new house, but keep that first, smaller house and rent it out.
You keep paying that same fixed mortgage for 10 years or so (paid by your renter) and then sell. The price increase over that 10 years plus the principle you’ve paid down turns into a boatload of equity.
Ironically, a primary residence is only an investment (in the strict financial sense) if you plan to downsize out of it. For example, someone buys a house in San Francisco and later sells it and buys another in Boise.
House owners mistakenly think that "My house went up in value." What really happened is every house in your area became more expensive. In theory, this is because your area became somehow more desirable. Given that you got a residence in a desirable area at a discounted price, there is no logical reason why you would sell it.
It's very silly to think of a house like some financial vehicle. As others have alluded to, Zillow/Redfin have stimulated this mentality that a house is like a bank account on public display, which has in turn stimulated demand for home ownership and driven up prices.
No
A primary residence can be an investment if you upsize to a new house, but keep that first, smaller house and rent it out.
You keep paying that same fixed mortgage for 10 years or so (paid by your renter) and then sell. The price increase over that 10 years plus the principle you’ve paid down turns into a boatload of equity.
Sounds like voodoo economics you heard from Suze Orman.
I had a townhouse that I bought in 2002. I moved to a new area in 2008. Housing prices crashed, so I couldn’t sell it even for what I owed.
I initially rented where I moved to and at the same time I rented out my townhouse that I owned. The rent I received covered the mortgage and management fees. I had no positive cash flow.
Then I bought a single family home to live in. I upsized.
In 2019 I moved again to a nicer house. I sold both houses.
The net proceeds from the sale of the first townhouse I bought was $100,000 after paying off the remaining mortgage. That was a combination of the mortgage being paid down over that period and the rising value.
Ironically, a primary residence is only an investment (in the strict financial sense) if you plan to downsize out of it. For example, someone buys a house in San Francisco and later sells it and buys another in Boise.
House owners mistakenly think that "My house went up in value." What really happened is every house in your area became more expensive. In theory, this is because your area became somehow more desirable. Given that you got a residence in a desirable area at a discounted price, there is no logical reason why you would sell it.
It's very silly to think of a house like some financial vehicle. As others have alluded to, Zillow/Redfin have stimulated this mentality that a house is like a bank account on public display, which has in turn stimulated demand for home ownership and driven up prices.
This is not true. The equity in your home can be used while you are still living in it. It can be used simply to borrow against at low rates or as collateral for other things like opening a business or college costs.
People that think the value of a home is simply what you can sell it for at the time you move don't understand real estate.
So you can borrow against your home equity. Who cares? If borrowing money to start a business is your end goal, you're better off not buying a house.
I think people are forgetting that to buy a house you need to
* Liquidate assets (possibly income-generating assets like dividend-paying stocks) equal to 20% of the house's value.
* Pay thousands more per month compared to renting.
Let's say you have the option of buying a $1M house.
Buy:
* $0 cash
* $5k/month expense
Don't Buy:
* $200k cash
* $2k/month expense (rent)
Without buying, you have an extra $3k/month and extra $200k cash. You won't need to borrow as much from a bank to fund your business idea.
Your net worth is the "same" by most definitions (I would argue against the standard definition. Having $X assets and $0 debt is superior to having $5X assets and $4X debt.), but your expenses are different. Banks who would need to approve the business loan will look at your monthly expenses.
If you want to keep paying rent all your life and never build equity 8n a home have at it. I really don't care what you do. The fact of the matter remains having equity in a home is useful even while living in it. This is an undeniable fact
If you want to keep paying rent all your life and never build equity 8n a home have at it. I really don't care what you do. The fact of the matter remains having equity in a home is useful even while living in it. This is an undeniable fact
The usefulness isn't free; you pay a huge premium for it upfront and then every month for years and years.
So you can borrow against your home equity. Who cares? If borrowing money to start a business is your end goal, you're better off not buying a house.
I think people are forgetting that to buy a house you need to
* Liquidate assets (possibly income-generating assets like dividend-paying stocks) equal to 20% of the house's value.
* Pay thousands more per month compared to renting.
Let's say you have the option of buying a $1M house.
Buy:
* $0 cash
* $5k/month expense
Don't Buy:
* $200k cash
* $2k/month expense (rent)
Without buying, you have an extra $3k/month and extra $200k cash. You won't need to borrow as much from a bank to fund your business idea.
Your net worth is the "same" by most definitions (I would argue against the standard definition. Having $X assets and $0 debt is superior to having $5X assets and $4X debt.), but your expenses are different. Banks who would need to approve the business loan will look at your monthly expenses.
Where can you rent the equivalent property of a $1M house for $2K? To rent a million $ home you will need to pay roughly the equivalent of the mortgage, depending on the market.
If you want to keep paying rent all your life and never build equity 8n a home have at it.
* I don't want to rent any longer.
* I also don't want to build home equity. Why would anyone want money tied up in a primary residence instead of stocks and bonds? It's just a fact of life that if you want a house then you divert significant resources to this expense.
If you want to keep paying rent all your life and never build equity 8n a home have at it. I really don't care what you do. The fact of the matter remains having equity in a home is useful even while living in it. This is an undeniable fact
The usefulness isn't free; you pay a huge premium for it upfront and then every month for years and years.
The payoff for owning comes at the back end. Think of the cost of buying vs. a lifetime of paying rent. If I buy when I'm 30 and the home is paid off in 30 years I probably have at least 20 more years of living there rent free when the cost of rent will be much higher. And if I live in CA my property taxes won't even go up. Plus you need to factor in the cost of moving multiple times into the rental costs.
When you calculate in the increase in rent over time for life there is no comparison that owning will be cheaper.
If I buy when I'm 30 and the home is paid off in 30 years I probably have at least 20 more years of living there rent free
If you invested the significant sums of money that you would be saving by renting, this money alone over 30 years would be enough that the income from Treasury Bills could cover your rent for the remainder of your life.
The benefits of owning a house are social and lifestyle benefits.
Probably the dumbest statistic I always hear quoted is that homeowners have a greater net worth than renters. Breaking news: people with more money can pay for more expensive things. 🙄
If I buy when I'm 30 and the home is paid off in 30 years I probably have at least 20 more years of %living there rent free
If you invested the significant sums of money that you would be saving by renting, this money alone over 30 years would be enough that the income from Treasury Bills could cover your rent for the remainder of your life.
The benefits of owning a house are social and lifestyle benefits.
Probably the dumbest statistic I always hear quoted is that homeowners have a greater net worth than renters. Breaking news: people with more money can pay for more expensive things. 🙄
You are presuming that home owners will not be investing as well. Rent has increased at an annual rate of 8.86% per year since 1980. Homeowners will have more to invest over time relative to renters as rent goes up. In fact, at that rate it will not be many years before owners can invest more annually than renters.
Now, if owners sell and move multiple times that changes the numbers completely. I'm only comparing a scenario where an owner lives in the same home the rest of their life vs. renting the rest of their life. Obviously, the longer someone lives the more the balance tips in favor of owners.
If you want to keep paying rent all your life and never build equity 8n a home have at it.
* I don't want to rent any longer.
* I also don't want to build home equity. Why would anyone want money tied up in a primary residence instead of stocks and bonds? It's just a fact of life that if you want a house then you divert significant resources to this expense.
If you don't want to rent or buy, go live with your parents or invest in a tent.
If I buy when I'm 30 and the home is paid off in 30 years I probably have at least 20 more years of living there rent free
If you invested the significant sums of money that you would be saving by renting, this money alone over 30 years would be enough that the income from Treasury Bills could cover your rent for the remainder of your life.
The benefits of owning a house are social and lifestyle benefits.
Probably the dumbest statistic I always hear quoted is that homeowners have a greater net worth than renters. Breaking news: people with more money can pay for more expensive things. 🙄
My story which was rocky at times but at the end of the day worked out for me but not entirely for my children,
I bought my home 22 years ago back when I had very little money and our combined family (family of 4) income was around 50k. It was very much a fixer upper house that had many issues but in a desirable area we purchased for 120k.
Once it had enough equity around 2006-07 I took out a loan against it and replaced just about everything and doubled the size of the house with an addition. I added 1500 square feet and fixed up the existing portion for 100k. The only parts I had done by others was the foundation, the external framing, and roof for the new addition so I could get it weather tight and do the rest of the work myself which took me around six years to do. I learned how to do the plumbing and electrical from a Good Housekeeping handyman book. I could not afford to have done it otherwise.
Recently I took a line of credit against the house to help fund our kid's education. They are through college and we owe 80K on that.
So, right now as I stand I owe around 300k against a house that is now valued at 900k. I pay $2200 per month for the mortgage, taxes, and insurance combined. Rents in my area are higher than that.
A power move I could make right now is to sell out and rent until the housing market drops and then buy back in with no mortgage, but I like my house too much so I don't want to do that.
It was not always easy. When I lost my job in 2008 and my wife was not working it was difficult to see the light at the end of the tunnel with two aging kids that wanted to go to college in a few years.
My kids are not in a position to buy right now and it is not looking great as interest rates will continue to rise even if house prices go down.
Houses are becoming more unaffordable and there's a certain segment of the population, usually home-owners of a certain generation born circa 1946-64, who think it's great. Uhmmmmm no. Houses should be as CHEAP as possible. Stop celebrating others' inability to buy homes.
Also, I want to say that the perception from younger generations is that we never put our time in. We were handed everything, took advantage of a climate perfect for making us rich...
When I lost my job in 2008, for whatever reason I could not get hired anywhere. My wife at the time was caring for our children.
I started a company with transfer offer from my credit card. I was taking unemployment at the time which the state ordered me to give back simply because I started a company even know it and had not made a single sale at that time. I paid that back with my other credit card.
We came very close to losing the house and there were many times we had trouble finding ways to find food for dinner. I started moonlighting at night working for a painting company on the side for $10 per hour until I could start paying myself. My wife did a great job with the kids bringing them to the library all the time and finding whatever town activities were free to the public.
I know some had it more difficult than us, but we were a step away from losing our home and maybe even having to give up custody of our children. This went on for a couple of years.
Now we are doing well and have not forgotten what it was like to scrape by. I basically rebuilt my house on my own. We did it for many years with no help from anyone.
It seems like you would have liked it if people like us failed? That's fine. We are used to it. There were many people around to step on us when we were down.
Houses are becoming more unaffordable and there's a certain segment of the population, usually home-owners of a certain generation born circa 1946-64, who think it's great. Uhmmmmm no. Houses should be as CHEAP as possible. Stop celebrating others' inability to buy homes.
Also, I want to say that the perception from younger generations is that we never put our time in. We were handed everything, took advantage of a climate perfect for making us rich...
When I lost my job in 2008, for whatever reason I could not get hired anywhere. My wife at the time was caring for our children.
I started a company with transfer offer from my credit card. I was taking unemployment at the time which the state ordered me to give back simply because I started a company even know it and had not made a single sale at that time. I paid that back with my other credit card.
We came very close to losing the house and there were many times we had trouble finding ways to find food for dinner. I started moonlighting at night working for a painting company on the side for $10 per hour until I could start paying myself. My wife did a great job with the kids bringing them to the library all the time and finding whatever town activities were free to the public.
I know some had it more difficult than us, but we were a step away from losing our home and maybe even having to give up custody of our children. This went on for a couple of years.
Now we are doing well and have not forgotten what it was like to scrape by. I basically rebuilt my house on my own. We did it for many years with no help from anyone.
It seems like you would have liked it if people like us failed? That's fine. We are used to it. There were many people around to step on us when we were down.
There are 60-80K houses all over the country. Many of them are far, far nicer than the first home I bought for 70K nearly 30 years ago. I couldn't work remote 30 years ago, nor work at gigantic shipping warehouses that are all over the country now.
In other words, if an entire generation did not scream that they want a house within 5 miles of an ocean, that's 2500 sq ft with granite countertops, they'd find themselves better off than I was in the mid-90s. And maybe they'd find themselves in a million dollar house, with granite countertops, and an ocean view after about 30 years.
One of the main reasons people buy a home is to build wealth. The common line is: “Why pay someone else’s mortgage and contribute to their equity (via rent) when you can spend the same amount of money or less and reap the rew...
Pricing young people out of homeownership is one of the dumbest things a society can do. People are celebrating the death of the American dream. It's really sad.
You make more money than I did when I bought my first house. There are houses that cost less, in the three areas where I first bought houses, today and they're nicer than what I bought.
An entire generation is bitching because they want it all now. I never would have guessed that the "everyone wins" generation would turn out this way.
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