Just in time for the new building code rules that make it so that you can't (legally) even finish a basement, let alone use it as a bedroom, without provisions for emergency escape in case of fire.
Keeping us tied down
- Thread starter goodoleboy
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JHZR2
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Gary,
Unfortunately what you say is all too true.
Unless we see a shift in home valuations where some of the newer 'high end' stuff drops rapidly in value, to prices that others can afford, or home builders see slowing sales in large homes, and go back to the 3br, 2ba homes that the average American family needs and can afford. Otherwise, people like me (24 y.o.) don't have much hope.
Even if I manage to end up with a 20income household, doing better than 120k/yr, the need for excess frugality, long-term debt instruments, and watching it every step of the way will be the norm.
Correct me if Im wrong, but 5 years ago, people werent making that much less than they are now, yet homes were probably only 0.5-0.75 the price that they are now.
Ugh... It depresses me too much, must go.
JMH
Unfortunately what you say is all too true.
Unless we see a shift in home valuations where some of the newer 'high end' stuff drops rapidly in value, to prices that others can afford, or home builders see slowing sales in large homes, and go back to the 3br, 2ba homes that the average American family needs and can afford. Otherwise, people like me (24 y.o.) don't have much hope.
Even if I manage to end up with a 20income household, doing better than 120k/yr, the need for excess frugality, long-term debt instruments, and watching it every step of the way will be the norm.
Correct me if Im wrong, but 5 years ago, people werent making that much less than they are now, yet homes were probably only 0.5-0.75 the price that they are now.
Ugh... It depresses me too much, must go.
JMH
There is an interesting phenomena as loans terms get longer, particularly above 30 years.
The payment doesn't go down much with increased loan length.
Monthly payment rounded to nearest dollar on a $100k loan at 6%
Going to 30 years gets you most of the benefit of lower payments, another 10 years only drops the payment 8.3%
.
Longer loans also usually have higher interest rates, although it might only be by half a percent.
Are houses really 'appreciating' assets though? I personally see characteristics of houses being similar to that of cars, assets that almost all of us consider 'depreciating':
1) They cost a lot to build and the cost to build is entirely dependant on labour and material costs.
2) They are consumers of energy. Over time, all other things being equal, newer ones are more energy efficient than older ones.
3) They both require costly upkeep and repairs.
4) They both have significant taxes and insurance premiums levied against them.
5) They both are generally non-unique. There's a gazillion Honda Civics out there, and there are a gazillion 2-storey bungalows out there.
6) People generally desire to own newer models of them.
7) Large amount of debt and leverage is generally used to purchase both of them.
8) Use is generally considered essential for survival.
See? Not much different than a car, eh?
So why do people believe houses will continue to appreciate in value? Do you guys honestly believe cash-strapped, overindebted, overleveraged, underearning baby boomers will hang onto their white elephants when they need cash flow for their retirement? Or will they all end up hitting the market and cause margin calls for those who bought housing they really couldn't afford?
pitzel,
it's easier to not have a car than to not live in a house (some economists down here have demonstrated that a taxi, while expensive is cheaper than owning/financing/maintaining a car).
Anyway, you have some good points, and basically showed that it makes more sense to take a "bite sized" house, rather than take the biggest that your wages will allow (Oz banks will always remind people just how much they could really borrow).
Smaller houses lose less energy, consume less labour and materials, and encourage you not to accumulate junk (not enough in my case, appraently), have biiger outside leaisure areas for a given block.
We bought and paid off a small house relatively quickly, and are consolidating for the small house on a rural block (ultimately).
Same for cars, buy second hand, and not go for the bells and whistles.
it's easier to not have a car than to not live in a house (some economists down here have demonstrated that a taxi, while expensive is cheaper than owning/financing/maintaining a car).
Anyway, you have some good points, and basically showed that it makes more sense to take a "bite sized" house, rather than take the biggest that your wages will allow (Oz banks will always remind people just how much they could really borrow).
Smaller houses lose less energy, consume less labour and materials, and encourage you not to accumulate junk (not enough in my case, appraently), have biiger outside leaisure areas for a given block.
We bought and paid off a small house relatively quickly, and are consolidating for the small house on a rural block (ultimately).
Same for cars, buy second hand, and not go for the bells and whistles.
JHZR2
Staff member
pitzel,
thats an excellent point actually. My father has been saying this for some time now.
When you look at house prices, consider taxes (high in NJ), interest, upkeep, etc., you need that home to appreciate a LOT over that which is just due to inflation, merely to break even.
Sure, youre throwing money away living in an apartment, but as of now, I have to wonder how much less overall Ill likely lay out living in a reasonable apartment over a reasonable house. I have no upkeep, no taxes, no mortgage, etc.
Of course I will be buying a house, hopoefully over the next 2 years, but Im not counting on ever making any money off of it.
In some ways a car is a better "investment" than a house. THe car is an investment in a tool, and overall, considering that it enables you to go have a job where you want and earn lots of money, takes you from A to B, and provides you with a lot more utility and value than it costs overall to purchase and run, the dollar and non-dollar value gains come to a lot more than the costs. With a house, it enables you to live where you want, safely and cleanly, protecting you from the elements, which is no small thing, but you can extract that same utility just as easily from other things (apartments, condos, etc) that may cost less, at the end of the day. The tax break does not seal it for me, because Im lonly getting 30c on the dollar I spend in taxes and interest... not that great, and still leaves me pretty far behind.
OK, just babbling now, but thats how I see it. THe whole house buying thing scares me, because I need to do it soon, but it is just so darn expensive.
JMH
thats an excellent point actually. My father has been saying this for some time now.
When you look at house prices, consider taxes (high in NJ), interest, upkeep, etc., you need that home to appreciate a LOT over that which is just due to inflation, merely to break even.
Sure, youre throwing money away living in an apartment, but as of now, I have to wonder how much less overall Ill likely lay out living in a reasonable apartment over a reasonable house. I have no upkeep, no taxes, no mortgage, etc.
Of course I will be buying a house, hopoefully over the next 2 years, but Im not counting on ever making any money off of it.
In some ways a car is a better "investment" than a house. THe car is an investment in a tool, and overall, considering that it enables you to go have a job where you want and earn lots of money, takes you from A to B, and provides you with a lot more utility and value than it costs overall to purchase and run, the dollar and non-dollar value gains come to a lot more than the costs. With a house, it enables you to live where you want, safely and cleanly, protecting you from the elements, which is no small thing, but you can extract that same utility just as easily from other things (apartments, condos, etc) that may cost less, at the end of the day. The tax break does not seal it for me, because Im lonly getting 30c on the dollar I spend in taxes and interest... not that great, and still leaves me pretty far behind.
OK, just babbling now, but thats how I see it. THe whole house buying thing scares me, because I need to do it soon, but it is just so darn expensive.
JMH
Certainly something to think about.
The house is not. The land it sits on is.
JHZR2
Staff member
yeah, dont businessed consider depreciation in their taxes, as all the while us consumers think that house value will appreciate up to richness and financial security?
JMH
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