Is owning a home a good idea for young people?.... - Vintage Mustang Forums

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post #1 of 46 (permalink) Old 02-24-2017, 12:58 PM Thread Starter
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Is owning a home a good idea for young people?....

Long ago the American dream was have a good job, get married, build a house, have kids and live happily ever after. It was normal for the father to have a semi permanent job for at least 20 years. They built the house because they like the area and intended to stay there.

Circumstances today result in low stability for many. Seems like today most young (under 40) move every five years or less. Much of the time it's necessary for various reasons.

Seems to me the lack of stability would make buying or building a home something I would think about long and hard. Just heard the housing market is going bananas. Most markets demand is exceeding supply. Do young people just enjoy the packing, buying, selling, moving cycle?


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post #2 of 46 (permalink) Old 02-24-2017, 01:19 PM
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Short term or long it's an investment. Usually good.
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post #3 of 46 (permalink) Old 02-24-2017, 02:05 PM
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Some of the smaller homes in my area were just a little under $40k new for a 2 bdrm 1 bath home 20 years ago.
Our home was right at $78k for a 3 bdrm, 2 1/2 bath in 97.
These same homes now go for $80-140,000.
So yes home buying is a pretty good investment.
I've rehabbed homes that I wouldnt pay more than $25,000 for and seen them sell in just two days for excess of $100k after a good remodel.


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post #4 of 46 (permalink) Old 02-24-2017, 02:20 PM Thread Starter
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As I recall when I was young it being a good investment was low if even in my thinking! Wanted 8 foot basement, no septic system, near the country and affordable on my income (starting engineer). Today it wouldn't have worked.


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post #5 of 46 (permalink) Old 02-24-2017, 02:21 PM
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We built and bought our house about 7 years ago so I was about 25, wife was 26. It's in a housing development so not much yard, really close to neighbors but it's nice. We bought it for 240k it's now worth 300k and we haven't done anything to it. We are looking to sell, but we will be downsizing house size but looking for something with a little bit of land and hopefully a shop or bigger garage. I believe it was a good investment. I hate moving! But the need for more privacy is growing on us.


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post #6 of 46 (permalink) Old 02-24-2017, 02:27 PM
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The historical average ROI for real estate is around 4%, second only to the stock market which is around 8%.

I'd much rather pay money towards a house than pay almost the same for rent and have nothing to show for it after X years.

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post #7 of 46 (permalink) Old 02-24-2017, 02:28 PM
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Look for that good deal. They are out there and available if you look.


I paid $7,500 for my 5 bed room, detached garage with oversized lot just 7 years ago.


It was a HUD house. HUD has what they call a program called good neighbor program. The idea is HUD takes one of their houses that is located in an area they are looking to improve the neighborhood by improving the type of people living there. What they do is take a good house and offer it up to only a select group. In my case you had to be a Teacher, EMS, Police, Fireman to qualify. My X wife at the time was a teacher. The idea was all that were interested bid a set amount. The house was appraised at $42,000 and they put it up for bid at $15,000. But you had to be one of the above profession to offer the $15,000 bid. Then they would draw from a hat the name of the winner who got it for $15,000. Well HUD also wanted to make sure slumloards were not buying the house just to rent it out so they offered a deal where if you signed a contract saying you would live there for at least 3 years that would drop the cost in half. We were they only bidders, I think because no one else even know about the deal, and plus signed the contract that it was my main living quarters so they dropped the $15,000 I won the bid with in half. $7,500. Best deal period.

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post #8 of 46 (permalink) Old 02-24-2017, 03:22 PM
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Not trying to be harsh here Slim, but your "seems like" assumptions are based on generalities that are not necessarily true.

For instance, I'm 41 and have had two houses in the last 18 years. My parents are turning 70 this year and have moved every 3-5 years consistently. In both cases, home ownership was a good financial decision. I held onto mine enough to have them appreciate fairly significantly, my folks bought low and sold higher every time so that their current house is pretty nice and pretty large. They've been there a couple of years and it's paid for.

For younger folks, all of my employees are in their 20's-30's and most are home owners.

I'm not an expert, but I play one on the internet.
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post #9 of 46 (permalink) Old 02-24-2017, 03:24 PM
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These days, I think it only make sense if you can be close to certain that you'll be there for 10 years or longer. The housing market swings a lot and once you consider that a lot of people will upgrade a resale home, you wind up losing money if you sell it in a shorter time frame.

We live in a time when too many people want to live at or beyond their means...so they buy a home, then 5 years later when they can afford a bigger one, they want to move. After the real-estate agent costs, taxes and interest you paid...I just don't see how you can come out ahead (without being lucky and timing it right).

I only made money on one house in the last 30 years...and that was one we bought before the housing boom in Dec99 and sold it just after the peak in 2006. That house was in South Florida (Weston) and the home value increased by 300% in that time frame.
We've taken a beating on the two homes we've owned & sold since then and each were homes we were in for shorter time frames (3 years and 6 years). I'm not leaving the home I'm in now ever if I can help it.

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post #10 of 46 (permalink) Old 02-24-2017, 03:53 PM
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I bought my first house when I was 27. I sold and moved a couple times to bigger and better areas. I just kept rolling the equity into the new houses. When I first bought my payments were right where the rent was at the time for that area, about $600 with tax and insurance. Today I'm 49 and my monthly payment is still $600 and that's about half to a third of what renters around me are paying ($1200 to $1800). When I retire in about 15 years years the house will have been long paid for and should be worth a few hundred thousand. The rentals won't have any equity and you'll still be paying the current market value for them. Just make sure you buy in a solid neighborhood with jobs in the area. Also, buy the worst house on the block and make it the nicest provided you can do the updates yourself.
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post #11 of 46 (permalink) Old 02-24-2017, 04:26 PM
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Long ago the American dream was have a good job, get married, build a house, have kids and live happily ever after. It was normal for the father to have a semi permanent job for at least 20 years. They built the house because they like the area and intended to stay there.
I believe the American Dream to be much more abstract than that. The American Dream, to me, has always been "Independence to Pursue whatever makes you Happy." I think the version you outlined was the post-War version of that dream. The generation already "saw the world" under a hail of gunfire and were almost certainly in situations where the simplest of luxuries were unavailable for long stretches of time.

The people that came back were thankful to be alive and psychologically restricted themselves from excessive things in order to not disrepect those who never returned.

In my opinion, that's why the 50s version of the American Dream came to fruition.

Quote:
Is owning a home a good idea for young people?
The answer to this question is that it really depends and it is much more nuanced than generic guidance would suggest.

There are some real things to be mindful of when considering the purchase of a house.

You usually hear things like:
"its stupid to throw your money away in rent."
"start building equity."
"etc,etc,etc."

Renting is not throwing money away. Renting just treats habitation as a service, free of variable costs.

"Equity" is not a real thing in this sense; it is only a market expectation of clearing prices. In order to realize your "equity" you have to be able to liquidate your house and houses are not commodities. It's also perilous to bundle your "home" with your "house. " By this distinction, I intend "home" to be a consumable and your "house" to be the residual asset portion of your dwelling. Your"house" has a concept of market value. Your "home" is simply valued at replacement cost.

There's also a dangerous conflation between "owning your own home" and "being contractually obligated to pay a bank for 30 years." These are nowhere *close* to being the same thing, so they should never be treated the same. Houses are money and time sinks, and emotions cause people to chase good money after bad.

Renting provides better short term financial stability, transiency, and a better cash position.

Owning provides a stake in the ground that "this is mine."

You have to decide for yourself which of those you value most, and younger generations have been made wise to the options.
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post #12 of 46 (permalink) Old 02-24-2017, 04:39 PM Thread Starter
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Originally Posted by BlakeTX View Post
Not trying to be harsh here Slim, but your "seems like" assumptions are based on generalities that are not necessarily true.

For instance, I'm 41 and have had two houses in the last 18 years. My parents are turning 70 this year and have moved every 3-5 years consistently. In both cases, home ownership was a good financial decision. I held onto mine enough to have them appreciate fairly significantly, my folks bought low and sold higher every time so that their current house is pretty nice and pretty large. They've been there a couple of years and it's paid for.

For younger folks, all of my employees are in their 20's-30's and most are home owners.

In most cases (not a seems like, but observation) buying low and selling high is a good idea.

The act of buying low and selling high in general requires low seller the high buyer.


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post #13 of 46 (permalink) Old 02-24-2017, 05:18 PM
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A 1200-1600 sq ft fixer upper can range from about 40-60k.
I usually charge about $8,000-10,000 for a patch, tape & float, texture, re-spray on the interior including new interior doors, bi-fold closet doors, and trim.
Also new commodes, vanities, tile shower etc.
I'll sometimes include kitchen cabinets, counter, and linoleum in that if not too elaborate.
What's left is carpet which most subs will do for about $1800 for 3 bedrooms and living.
Assuming it doesn't need a new a/c or water heater (about $3000) what's left is the ext.
New shingle roof about $3000, rehab on ext minor trim, siding, new window screens, maybe swap out ext doors, about $3500.
So almost like a brand new home for about $60-80k easily flipped in excess of $100,000 which is the norm now of homes with equivalent square footage.
A rehab like that usually only takes about 3-4 weeks.
A lot of smart young people are buying homes in need of rehabbing from what I've seen.
They can always be turned for a profit as long as repairs and upgrades are properly executed.


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post #14 of 46 (permalink) Old 02-24-2017, 05:28 PM Thread Starter
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I believe the American Dream to be much more abstract than that. The American Dream, to me, has always been "Independence to Pursue whatever makes you Happy." I think the version you outlined was the post-War version of that dream. The generation already "saw the world" under a hail of gunfire and were almost certainly in situations where the simplest of luxuries were unavailable for long stretches of time.

The people that came back were thankful to be alive and psychologically restricted themselves from excessive things in order to not disrepect those who never returned.

In my opinion, that's why the 50s version of the American Dream came to fruition.


The answer to this question is that it really depends and it is much more complicated than generic guidance would suggest.

There are some real things to be mindful of when considering the purchase of a house.

You usually hear things like:
"its stupid to throw your money away in rent."
"start building equity."
"etc,etc,etc."

Renting is not throwing money away. Renting just treats habitation as a service, free of variable costs.

"Equity" is not a real thing in this sense; it is only a market expectation of clearing prices. In order to realize your "equity" you have to be able to liquidate your house and houses are not commodities. It's also perilous to bundle your "home" with your "house. " By this distinction, I intend "home" to be a consumable and your "house" to be the residual asset portion of your dwelling. Your"house" has a concept of market value. Your "home" is simply valued at replacement cost.

There's also a dangerous conflation between "owning tour own home" and "being contractually obligated to pay a bank for 30 years." These are nowhere *close* to being the same thing, so they should never be treated the same. Houses are money and time sinks, and emotions cause people to chase good money after bad.

Renting provides better short term financial stability, transiency, and a better cash position.

Owning provides a stake in the ground that "this is mine."

You have to decide for yourself which of those you value most, and younger generations have been made wise to the options.

You said a mouthful! An old saying for a lot of wisdom.

Let's start with marriage or a close relationship. It's a commitment for many that results in less flexibility. Not for some.
Buying a new car or leasing. Not the same answer for everyone.
Home owning or renting. Only the individual of individuals can know or speculate on what's for them. Like Aleric said home owning is a time and money sink and an anchor. If you get laid off or transferred you may not be in a position to sell high, even sell soon.

Maybe you have no desire to cut the lawn and having a huge area with no pesky neighbors means a lot more work at the homestead.

Let's say you have an occupation and overall life where your home is mainly a place to sleep and store clothes, take a shower etc. Some millionairs fall into that sorta situation.


Investment: Hey in the late 70s you could go to the bank and get 10 year CDs that earned 10% a year! Meanwhile home mortgages were going at 12%/yr. Good time to buy?

Only 10 years ago the "bubble" burst. Many 2 income families had one lose their job as the economy plunged. Many nice homes were forclosed. Sell high? Hell no one to buy at over 1/2 price! I drove around an was shocked
to see beautiful that were way out of our reach in classy neighborhood....forclosed!


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Last edited by slim; 02-24-2017 at 05:38 PM.
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post #15 of 46 (permalink) Old 02-24-2017, 06:30 PM
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Quote:
Originally Posted by Alaric View Post
I believe the American Dream to be much more abstract than that. The American Dream, to me, has always been "Independence to Pursue whatever makes you Happy." I think the version you outlined was the post-War version of that dream. The generation already "saw the world" under a hail of gunfire and were almost certainly in situations where the simplest of luxuries were unavailable for long stretches of time.

The people that came back were thankful to be alive and psychologically restricted themselves from excessive things in order to not disrepect those who never returned.

In my opinion, that's why the 50s version of the American Dream came to fruition.
I don't want to start a fight about politics but that 1950s/1960s Norman Rockwell American Dream is reflective of the opportunities granted to white men after the war. From New Deal/socialist programs to strong unions, there was a foundation for the deserving poor to utilize these opportunities.

You have the independence to engage in the pursuit whatever makes you happy, but those who could actually succeed is not reflective of the entire population.

And now, there's not an entire generation going to college because of the GI bill and a large percentage of people with a degree is struggle to get a job reflective of their skills. College tuition is insane and due to this mix of substantial debt and overqualified for menial jobs, people struggle to pay off their debt and are stuck with renting a house. And because such a large quantity of money goes into paying rent, that money can't be saved and used for a down payment on a house.

Is it a good idea for my generation to own a house? I don't know. I would like to. But this situation with rent and income is definitely representative of people's decisions to live with their parents until they're 30. That way they have enough for a down payment on a house and can be separate from their parents with (hopefully) minimal college debt.

In regard to what @slim said about the commitment level of marriage... I don't know if it's entirely commitment that's the problem. Socially, this generation has different priorities anyway but many (with adequate foresight) don't want to be married until they are stable. Which means paying off debt, establishing a career, living with your parents longer.

Granted these are generalizations but as someone who grew up in Los Angeles, these are some of the observations I've made.

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