Tighter budget worth it to own your home instead of renting?

[Lola]

owning a home is worth it, however, there are always unforseen issues that come up with owning a home... new roof, lawmower to cut the grass... there are always more expenses with owning a home, but again, it is wonderful not having to worry about being to loud so your neightbors in the next apartment won't hear you... we can watch TV as loud as we want, any time.

Once things get going with owning... you get used to it.
Hubby and i like to eat out too, although we do not go as much as we used to and if we do, our fancy night is to our local coney island for take out!

best wishes, nice house!

 

[Strk]

Originally posted by: astrocase
Wow, that house costs a downpayment in California. *sigh*

Yeah

I feel so taken advantage of living in MA!

 

[Descartes]

I would say it's absolutely the WRONG decision. A tight budget is the most stressful situation to be in. There's nothing worse than feeling financially suffocated on a daily basis.

I tend to say this in any home-related thread, and I do so because most people think that owning a house is some sort of a milestone that simply has to be done. For a lot of people it's not a solid financial decision, and this is obvious when you consider that some people are getting 45 year ARM notes on a house they can't afford. Little to no equity, little appreciation (for most people), AND your budget is tight. You have no freedom, no ability to diversify your investments, and no ability to expand because you're too busy being choked every month.

Think hard about it. Look at the tax records on that house and other houses in the neighborhood over the past few decades. See what level of appreciation you can realistically expect. Factor this into the amortization tables of the house over the same time. Look at the total return and compare it with what you would have if you took the extra money you'd save from renting and investing it in a conservative portfolio.

Good luck. Charlotte is a great city, North Carolina is a beautiful state, and the people are great. I have a few friends that live there and I've considered moving there myself on a few occasions.

 

[RagingBITCH]

Yes it is, assuming you can afford it. Mortgage, home owner's insurance, homeowners dues, higher utilities, unexpected costs for repairs, maintenance of the house, (lawn, etc) taxes depending on property value, etc. I thought I'd live with my buddy for a few months and go buy my own but after seeing what it really costs, I realize it'll be awhile before I'm in the position where I can own one. (That and my job sucks)

 

[RagingBITCH]

Originally posted by: Descartes
I would say it's absolutely the WRONG decision. A tight budget is the most stressful situation to be in. There's nothing worse than feeling financially suffocated on a daily basis.

I tend to say this in any home-related thread, and I do so because most people think that owning a house is some sort of a milestone that simply has to be done. For a lot of people it's not a solid financial decision, and this is obvious when you consider that some people are getting 45 year ARM notes on a house they can't afford. Little to no equity, little appreciation (for most people), AND your budget is tight. You have no freedom, no ability to diversify your investments, and no ability to expand because you're too busy being choked every month.

Think hard about it. Look at the tax records on that house and other houses in the neighborhood over the past few decades. See what level of appreciation you can realistically expect. Factor this into the amortization tables of the house over the same time. Look at the total return and compare it with what you would have if you took the extra money you'd save from renting and investing it in a conservative portfolio.

Good luck. Charlotte is a great city, North Carolina is a beautiful state, and the people are great. I have a few friends that live there and I've considered moving there myself on a few occasions.

You can make the argument of living with your parents and pinching pennies and investing until you're 35, but it doesn't always work that way. If he can afford it, then it'd be worthwhile. I agree that it's not necessary to have to own your own home - but you're assuming that everyone is being choked on their budget, people can only afford housing based off those ridiculous ARM's, etc. There is something to be said about building equity and your credit too though. Investments? How many people who have the extra money from renting as opposed to buying actually put it away like they're supposed to? I'd think no more than maybe 15-20% of the population.

Investing in a "conservative" portfolio is hardly the best suggestion either. What do you expect to gain % wise on your return, from a conservative portfolio?

 

[Descartes]

Originally posted by: RagingBITCH

Originally posted by: Descartes
I would say it's absolutely the WRONG decision. A tight budget is the most stressful situation to be in. There's nothing worse than feeling financially suffocated on a daily basis.

I tend to say this in any home-related thread, and I do so because most people think that owning a house is some sort of a milestone that simply has to be done. For a lot of people it's not a solid financial decision, and this is obvious when you consider that some people are getting 45 year ARM notes on a house they can't afford. Little to no equity, little appreciation (for most people), AND your budget is tight. You have no freedom, no ability to diversify your investments, and no ability to expand because you're too busy being choked every month.

Think hard about it. Look at the tax records on that house and other houses in the neighborhood over the past few decades. See what level of appreciation you can realistically expect. Factor this into the amortization tables of the house over the same time. Look at the total return and compare it with what you would have if you took the extra money you'd save from renting and investing it in a conservative portfolio.

Good luck. Charlotte is a great city, North Carolina is a beautiful state, and the people are great. I have a few friends that live there and I've considered moving there myself on a few occasions.

You can make the argument of living with your parents and pinching pennies and investing until you're 35, but it doesn't always work that way.

Where did I say that? I wasn't making that argument. There's a difference between overextending yourself and maintaining a more conservative budget even if it means renting. You don't have to live at home until you're 35, but you don't have to buy a house you can't really afford either.

If he can afford it, then it'd be worthwhile.

Precisely, but his thread is suggestive that he can't. I don't know his numbers. My post was a suggestion for him to look at his numbers. If he can afford it, great. As an example, consider some mortgages that allow up to 50% of your income to be used for your home. To me this isn't affording it, but that's my personal preference.

I agree that it's not necessary to have to own your own home - but you're assuming that everyone is being choked on their budget, people can only afford housing based off those ridiculous ARM's, etc.

Where did I say that? How did my comment to the OP somehow get applied to everyone? You took my argument out of context. I'm offering a suggestion to the OP only.

There is something to be said about building equity and your credit too though. Investments? How many people who have the extra money from renting as opposed to buying actually put it away like they're supposed to? I'd think no more than maybe 15-20% of the population.

You're compromising my argument and again applying it to the entire house-buying population. This isn't a question of proper discipline on the part of the OP or anyone else. It's obviously implied that if you saved money from renting relative to buying a home that you should save it, but if someone is constantly spending beyond their means this entire argument is moot.

Investing in a "conservative" portfolio is hardly the best suggestion either. What do you expect to gain % wise on your return, from a conservative portfolio?

Don't take this too far. I wasn't giving investment advice. I was just suggesting that he could take a conservative portfolio and still likely come out ahead.

 

[DBL]

Originally posted by: BoomerD
Yes, your monthly payment may go up, but usually, at the end of the year, you get most of the difference back in a fat tax refund...Don't be afraid to hire a good accountant/CPA to do your taxes if you don;t already use one. A good one will save you much more than their fees.

If you have to wait to the end of the year to see the difference, you are doing something wrong. Make sure to adjust your withholdings once you get your mortgage so you can avoid making interest free loans to the government.

 

[RagingBITCH]

Originally posted by: Descartes

Originally posted by: RagingBITCH

Originally posted by: Descartes
I would say it's absolutely the WRONG decision. A tight budget is the most stressful situation to be in. There's nothing worse than feeling financially suffocated on a daily basis.

I tend to say this in any home-related thread, and I do so because most people think that owning a house is some sort of a milestone that simply has to be done. For a lot of people it's not a solid financial decision, and this is obvious when you consider that some people are getting 45 year ARM notes on a house they can't afford. Little to no equity, little appreciation (for most people), AND your budget is tight. You have no freedom, no ability to diversify your investments, and no ability to expand because you're too busy being choked every month.

Think hard about it. Look at the tax records on that house and other houses in the neighborhood over the past few decades. See what level of appreciation you can realistically expect. Factor this into the amortization tables of the house over the same time. Look at the total return and compare it with what you would have if you took the extra money you'd save from renting and investing it in a conservative portfolio.

Good luck. Charlotte is a great city, North Carolina is a beautiful state, and the people are great. I have a few friends that live there and I've considered moving there myself on a few occasions.

You can make the argument of living with your parents and pinching pennies and investing until you're 35, but it doesn't always work that way.

Where did I say that? I wasn't making that argument. There's a difference between overextending yourself and maintaining a more conservative budget even if it means renting. You don't have to live at home until you're 35, but you don't have to buy a house you can't really afford either.

If he can afford it, then it'd be worthwhile.

Precisely, but his thread is suggestive that he can't. I don't know his numbers. My post was a suggestion for him to look at his numbers. If he can afford it, great. As an example, consider some mortgages that allow up to 50% of your income to be used for your home. To me this isn't affording it, but that's my personal preference.

I agree that it's not necessary to have to own your own home - but you're assuming that everyone is being choked on their budget, people can only afford housing based off those ridiculous ARM's, etc.

Where did I say that? How did my comment to the OP somehow get applied to everyone? You took my argument out of context. I'm offering a suggestion to the OP only.

There is something to be said about building equity and your credit too though. Investments? How many people who have the extra money from renting as opposed to buying actually put it away like they're supposed to? I'd think no more than maybe 15-20% of the population.

You're compromising my argument and again applying it to the entire house-buying population. This isn't a question of proper discipline on the part of the OP or anyone else. It's obviously implied that if you saved money from renting relative to buying a home that you should save it, but if someone is constantly spending beyond their means this entire argument is moot.

Investing in a "conservative" portfolio is hardly the best suggestion either. What do you expect to gain % wise on your return, from a conservative portfolio?

Don't take this too far. I wasn't giving investment advice. I was just suggesting that he could take a conservative portfolio and still likely come out ahead.

I think we have the same state of mind, just I think my viewpoint of what the OP greatly differs from yours.

 

[dullard]

Yes it is worth it because it is only temporarilly more expensive to have a house. Think of the typical situation: $200k house vs $800/month rent. That house will run you ~$1400/month for everything. That is $600 more per month than the apartment. That is a lot of pain in the beginning.

But what happens in 5 years? The house is $1400/month and the apartment is $1000/month.

In 10 years? They are both $1400/month.

In 20 years, the house is $1400/month and the apartment is $2000/month. In 30 years, the house is $400/month and the apartment is $3500/month. In 50 years, the house is $400/month and the apartment is $9,000/month.

 

[Kaieye]

Dude, buy the house. You will most likely thank most of us homeowners later. Now is the time to start building equity and to ensure your future financial success.

Unless the bombs start falling or the anti-christ shows up...

 

[Accipiter22]

Originally posted by: kyparrish
Making the leap from renting to buying a home. Monthly payment going up means less "fun" money. Instead of eating out 2 or 3 nights a week, it will be 1 or 0. Will be buying less crap (but we've got all of the stuff we need for new house, furniture, electronics, etc.).

Moving slightly closer to wife's work so she'll use less gas. Company pays for my gas, so I don't care about my usage.

Just trying to not feel as down about having less discretionary spending money.

It's worth it right? Especially when I'll be turning 25 in September? What wait any longer? Guess we'll know as of 7pm tomorrow night when our first offer expires.

two to three nights a week????? where the fuxor do you get money for that? If that's the style you're used to...i mean...******....1 or 0 per week is probably more real world anyway...get the house!

 

[6StringSamurai]

Originally posted by: kyparrish
obligatory link to listing so people in CA and FL can hate themselves more

edit: It's a multiple offer situation (nothing over list though), but still if anybody steals this home my wife will kill you.

HEY!!! I am bidding on that house too!!!!!! J/k I do live in Charlotte, NC tho (Dialing realtor) right near the Carolina Place Mall....( making offer over list) heheh...not to go OT...ok so I am going OT....have you been to Sir Edmund Haleys on Park rd?

 

[dullard]

Originally posted by: Accipiter22
two to three nights a week????? where the fuxor do you get money for that? If that's the style you're used to...i mean...******....1 or 0 per week is probably more real world anyway...get the house!

Eating out for 2: $5 total if you know what you are doing.

Eating at home for 2: $2-$20.

It is far more expensive for me to eat at home, since when I cook, I go elaborate. When I eat out, a $5 subway sub would last me 2 meals. Even saying that, I tend to eat out ~3 times a week.

Honestly, for most Americans, eating out 7-14 times a week is very common.

 

[puffff]

Originally posted by: Descartes

Originally posted by: RagingBITCH

Originally posted by: Descartes
I would say it's absolutely the WRONG decision. A tight budget is the most stressful situation to be in. There's nothing worse than feeling financially suffocated on a daily basis.

You can make the argument of living with your parents and pinching pennies and investing until you're 35, but it doesn't always work that way.

If he can afford it, then it'd be worthwhile.

Precisely, but his thread is suggestive that he can't. I don't know his numbers. My post was a suggestion for him to look at his numbers. If he can afford it, great. As an example, consider some mortgages that allow up to 50% of your income to be used for your home. To me this isn't affording it, but that's my personal preference.

Descartes, you're one of the few members on this board who actually has worthwhile things to say, but I think you've just contradicted yourself in this thread. You say you don't know his numbers, but also say it's absolutely the wrong decision....

From the OP's original post, I don't gather anything that suggests overstretching. All he said is he'll have higher monthly payments. If he's got some 45 yr ARM, then I agree he's buying something out of his league, but if he's got the typical 30 yr fixed, I think he's making the right decision buying.

Personally, I think one should buy a home that will require stretching. One needs to take into account where they expect to be 5 years down the line too.. I know a couple people who bought places they comfortably afforded, only to find 2-3 years their salary rose and they had now outgrown their home.

 

[Descartes]

Originally posted by: dullard
Yes it is worth it because it is only temporarilly more expensive to have a house. Think of the typical situation: $200k house vs $800/month rent. That house will run you ~$1400/month for everything. That is $600 more per month than the apartment. That is a lot of pain in the beginning.

But what happens in 5 years? The house is $1400/month and the apartment is $1000/month.

In 10 years? They are both $1400/month.

In 20 years, the house is $1400/month and the apartment is $2000/month. In 30 years, the house is $400/month and the apartment is $3500/month. In 50 years, the house is $400/month and the apartment is $9,000/month.

I agree with you in principle, but I think that your rental costs are inflated over the specified timeframes.

In addition, if your house remains your primary investment (which is implied if your budget is overextended to the point of having little remaining income) you are, as I said in my first post, limited in your ability to diversify. You can't take your gains without selling the home, and when you do you can't take those gains without purchasing a lesser home than you previously owned (assuming appreciation is relatively consistent in your area).

A minor example from my own experience. My business partner has a substantial amount of equity in a large home, and there have been two investment opportunities presented to us this year that were highly desirable. In both cases my partner wasn't in a position to make the investment as he couldn't realize the gains in his home. In contrast, I have access to most of my money (I do own a home) and am in a position to enter other substantial investments.

It's not black and white. That's all I'm trying to say. I try to balance out the almost reflexive "you must buy a house" rule.

:thumbsup:

 

[Descartes]

Originally posted by: puffff

Originally posted by: Descartes

Originally posted by: RagingBITCH

Originally posted by: Descartes
I would say it's absolutely the WRONG decision. A tight budget is the most stressful situation to be in. There's nothing worse than feeling financially suffocated on a daily basis.

You can make the argument of living with your parents and pinching pennies and investing until you're 35, but it doesn't always work that way.

If he can afford it, then it'd be worthwhile.

Precisely, but his thread is suggestive that he can't. I don't know his numbers. My post was a suggestion for him to look at his numbers. If he can afford it, great. As an example, consider some mortgages that allow up to 50% of your income to be used for your home. To me this isn't affording it, but that's my personal preference.

Descartes, you're one of the few members on this board who actually has worthwhile things to say, but I think you've just contradicted yourself in this thread. You say you don't know his numbers, but also say it's absolutely the wrong decision....

I appreciate the comment, and you're right. That was my initial reaction to the thread, so I stated it somewhat enthusiastically. I think the rest of my post provided the reasoning for my reaction though. The OP might find that everything I said doesn't apply to him, and that's ok, but all options should be considered.

From the OP's original post, I don't gather anything that suggests overstretching. All he said is he'll have higher monthly payments. If he's got some 45 yr ARM, then I agree he's buying something out of his league, but if he's got the typical 30 yr fixed, I think he's making the right decision buying.

Personally, I think one should buy a home that will require stretching. One needs to take into account where they expect to be 5 years down the line too.. I know a couple people who bought places they comfortably afforded, only to find 2-3 years their salary rose and they had now outgrown their home.

Good point, and that should be considered as well. If your earnings outlook over the next 10 year greatly exceeds your current income then a little overextension might not be a detrimental step.

 

[dullard]

Originally posted by: Descartes
I agree with you in principle, but I think that your rental costs are inflated over the specified timeframes.

Those prices are a 5% yearly increase in apartment rents. If your area is less than 5% a year, then you can use lower numbers. In my area, apartments tend to go up 8% a year. And news reports indicate that aparment rents are going to soar over the next few years. I figured 5% is a fairly conservative number.

In addition, if your house remains your primary investment (which is implied if your budget is overextended to the point of having little remaining income) you are, as I said in my first post, limited in your ability to diversify.

That is true, and right now housing is probably not the best possible investment. I repeatedly state in this forum to buy less of a house than you can so that you do have money available for other things. But I chose to make a point here. If his only sacrifice is eating out a bit less, he really isn't stretched too much yet. Housing isn't for everyone. But someone always comes in here and posts that housing is far too expensive for everyone. I like to counter that argument with long-term thinking.

 

[LegendKiller]

Originally posted by: dullard
Yes it is worth it because it is only temporarilly more expensive to have a house. Think of the typical situation: $200k house vs $800/month rent. That house will run you ~$1400/month for everything. That is $600 more per month than the apartment. That is a lot of pain in the beginning.

But what happens in 5 years? The house is $1400/month and the apartment is $1000/month.

In 10 years? They are both $1400/month.

In 20 years, the house is $1400/month and the apartment is $2000/month. In 30 years, the house is $400/month and the apartment is $3500/month. In 50 years, the house is $400/month and the apartment is $9,000/month.

Here is where you go wrong. In 30 years, he will *just* paid off the house. In that time, somebody will have saved over 210,000, not including an 8% return.

people will first say "Well, you are not taking account tax write off of interest". To that I say, you aren't taking into account maintenance, insurance, and property taxes, which easily make up the difference, and then some.

People then will say "Well, you are not taking into account appreciation". To that I say, if the house is already grossly appreciated and inflated, then it will either go down in price during that timeframe, or stay level. Most houses these days are inflated.

So, then we include inflation, which I assume is your primary means of increasing apartment costs. Well, if you put your "saved" money into a 30-year bond, you would get an inflation protection!

If you assume an 8% return, 4% inflation of rent, then your money, after 30 years, is now worth 586,127.

So in 30 years, I could take all of the money I saved, and probably buy the same house you own and still have money left over.

Of coruse, people will say "But you are assuming the house will not inflate too much". Keeping the 4% inflation constant, the house will be worth 405,424, assuming no down-turn. Adding in the long-run .03% housing increase over the past 110 years, you get 408,829. Not to mention your taxes go up every time you re-asses (some cities are requiring yearly now), whereas mine won't.

That isn't to say that I don't think he should buy, if it isn't over-inflated he should, but automatically dismissing rent is stupid, especially in an inflated market.

 

[dullard]

Originally posted by: LegendKiller
Here is where you go wrong. In 30 years, he will *just* paid off the house. In that time, somebody will have saved over 210,000, not including an 8% return.

people will first say "Well, you are not taking account tax write off of interest". To that I say, you aren't taking into account maintenance, insurance, and property taxes, which easily make up the difference, and then some.

People then will say "Well, you are not taking into account appreciation". To that I say, if the house is already grossly appreciated and inflated, then it will either go down in price during that timeframe, or stay level. Most houses these days are inflated.

So, then we include inflation, which I assume is your primary means of increasing apartment costs. Well, if you put your "saved" money into a 30-year bond, you would get an inflation protection!

If you assume an 8% return, 4% inflation of rent, then your money, after 30 years, is now worth 586,127.

So in 30 years, I could take all of the money I saved, and probably buy the same house you own and still have money left over.

Of coruse, people will say "But you are assuming the house will not inflate too much". Keeping the 4% inflation constant, the house will be worth 405,424, assuming no down-turn. Adding in the long-run .03% housing increase over the past 110 years, you get 408,829. Not to mention your taxes go up every time you re-asses (some cities are requiring yearly now), whereas mine won't.

That isn't to say that I don't think he should buy, if it isn't over-inflated he should, but automatically dismissing rent is stupid, especially in an inflated market.

We could play the extreme example game forever. And both prove our points. I would like to say I have issues with the following portions of your post:
1) 8% return on investments is possibly a stretch, and it certainly isn't guaranteed.
2) It assumes the person renting will have money to invest by scrimping. In reality, they will do what the OP does and blow it eating out.
3) My numbers included insurance and property taxes. But no, I didn't include maintenance since that will vary so drastically from house to house.
4) Over no 30+ year period in history have houses in any city gone down or stayed level. True, if you move into a ghost town, that general rule is wrong.
5) 4% inflation of rent is about half of what I typically see. Inflation of rent is not just inflation. It is also population growth vs raw material shortages that adds onto inflation.
6) I never said to automatically dismiss rent. I said rent is cheaper in the short run. But I said you also have to look at the long run where rent is higher. The combination of those two opposing forces can have any result - where renting is better, buying is better, or they offset - depending on the exact circumstances.
7) Neither of us mention the intangibles. For some the freedom you usually get with a house is priceless. For others the freedom from mowing the lawn you get with an apartment is priceless.

 

[LegendKiller]

Originally posted by: dullard
We could play the extreme example game forever. And both prove our points. I would like to point out that.
1) 8% return on investments is possibly a stretch, and it certainly isn't guaranteed.
2) It assumes the person renting will have money to invest by scrimping. In reality, they will do with the OP does and blow it eating out.
3) My numbers included insurance and property taxes. But no, I didn't include maintenance since that will vary so drastically from house to house.
4) Over no 30+ year period in history have houses in any city gone down or stayed level. True, if you move into a ghost town, that general rule is wrong.
5) 4% inflation of rent is about half of what I typically see. Inflation of rent is not just inflation. It is also population growth vs raw material shortages that adds onto inflation.
6) I never said to automatically dismiss rent. I said rent is cheaper in the short run. But I said you also have to look at the long run where rent is higher. The combination of those two opposing forces can have any result - where renting is better, buying is better, or they offset - depending on the exact circumstances.

There actually have been large parts of history where housing, once you remove inflationary tendancies, has stayed almost even for long stretches of time. According to several financial experts who have built housing indexes, housing only increased 20% in 105 years, from 1890 to 1995 and 50% in the following 10 years. That is a 2.5x growth in 1/10th the time.

Of course, this mean diversion could continue on forever, but that isn't going to happen. We *WILL* regress to the mean, one way or another.

Furthermore, your assumption that 8% is hard to believe, but that is also based upon long-run analysis of historical returns. Some may say that the equity risk premium has diminished, which may be true for developed countries, but the world isn't entirely developed and the equity risk premium is alive and well in other segments of the world. It isn't hard to imagine an 8% return over the next 30 years, and is actually probably a little conservative.

If rent will skyrocket in the future, it will be to the detriment of housing. The population of this country is not growing fast enough that the demand of apartments and houses are increasing at rates greater than inflation + growth. Temporary market disturbances aside, housing is in for a nasty one in the next 5 years.

Those who squeeze into houses using exotic mortgages or high debt/income ratios are going to get burned.

 

[dullard]

Originally posted by: LegendKiller
There actually have been large parts of history where housing, once you remove inflationary tendancies, has stayed almost even for long stretches of time.

I like how you now say "inflation adjusted". In my housing thread in P&N, I haven't yet found any evidence of a 25+ year dry spell in housing in any area. Yes, 20 year dry spells have happened. But I did clearly word it for a 30 year mortgage (kind of sneaky I guess).

Of course, this mean diversion could continue on forever, but that isn't going to happen. We *WILL* regress to the mean, one way or another.

Buying a house now for an investment is not a good idea. My post is basically a general and timeless post. Anyone can point out a specific period in time when one investment is a bad choice. But that doesn't mean that investment is bad forever.

Some may say that the equity risk premium has diminished, which may be true for developed countries, but the world isn't entirely developed and the equity risk premium is alive and well in other segments of the world.

If you said 6-7% I wouldn't have said a word. 8% is certainly possible. But I think the stock market is exactly like the housing market. It is at highs, and likely will be flat or down over several years. However, even if you average 8%, if the first few years are 0% in that average then the net gain is much less than 8%. The first few years are critical. In Jan, I moved my US stocks to international stocks (to suppliment the international ones I already had). I'm up a nice 17% on that move alone. So, there is truth to what you said there. But while you could hedge your investments internationally just a few years ago, it looks like in 2006, that does nothing. Will the correlation of US stocks to international stocks end? Hopefully. But the more international the world economy gets, the less chance that international stocks will be any better.

Temporary market disturbances aside, housing is in for a nasty one in the next 5 years. Those who squeeze into houses using exotic mortgages or high debt/income ratios are going to get burned.

I agree there on both those points.

 

[kyparrish]

Checking back in, didn't realize this thread would take off.

- 30 year fixed mortgage, not some stupid 50-year note or 5/1 ARM.
- Still will be contributing 6% to 401(k) to catch my company's 3% match.
- Housing prices in Charlotte haven't spiraled up like the rest of the country, meaning, there isn't a real bubble here. Rather, they've appreciated at a very normal rate.
- I feel that my wife and I have been very liberal with discretionary income in the past. The fact that we are now forced to really examine every dollar that comes and goes is a good thing to me.
- You've gotta go ahead and just do this sometime. If I do it next year, I'm 25 going on 26; the year after, I'm 26 going on 27, etc. Want to have a few years of home ownership under our belt before kyparrish jr. comes along.

 

[LegendKiller]

Originally posted by: dullard

I agree there on both those points.

1. Again, inflation adjusted, there have been more than 30 year periods of dry spells in housing. I have posted the image done by Shiller in "Irrational Exuberance" 2nd ed, where he shows an extensively compiled housing index, which clearly shows that housing, when adjusted for inflation, is a crappy investment that has actually *LOST* money in the past. Furthermore, during that period of time, the *REAL* rate of appreciation in the housing market was only 20%.

2. Long-run stock appreciation over the *SAME* time period, approximately 100 years, has been 8%, non inflation adjusted. This means that you get a sure bet of approximately 8% over the long run. I am not talking 5-10 year cycles, I am talking long-term investing. Sure, issues become overpriced, but the diversified market over long investing periods has yielded 8%+ for over 100 years, significantly higher than even nominal housing prices.

You can dispute statistical and historical *FACT* all day long, but that doesn't disprove it is fact. Furthermore, you can dispute single-issue over-inflation all day long, but if you knew what I was talking about, then you would know that I am not talking about single-issue or even sector investing, I am talking about market based, efficient frontier, global market investing.

One big discussion among the financial researchers is the question of the equity risk premium. Many believe that the US market is mature enough that the risk premium is dead, these are the "risk is dead" people. THen there are the "get what you pay for" who believe that risk premiums over the long-run treasury bond, are 2-3%, as opposed to 5-6% (results in 7-10% nominal equity yield).

However, that is for *US* stocks and even then is a hotly debated field. Once you throw international diversification, where the equity risk premium is very much alive, you get 10%+ nominal yield over sustained periods of time.


COnsidering those points, it is not impossible for a diversified portfolio, with at least a 50% allocation to international markets, to achieve 8% or greater returns, over the next 50+ years.

I am not sure what your finance background is, but you haven't produced any evidence or logic to refute my claims. If you have evidence that the long-run returns for the US are 6-7%, then please present it. If you have something to add regarding the equity risk premium debate, or soemthing to counter my international diversification/equity premium point, then please present it.




Back to OP....

If you can purchase in a non-inflated market that is within your means and you are not using hybrid mortgages, then by all means go for it. I am somewhat envious, as I live in a hyper-inflated market right now and am forced (by my own intellect) to rent, at least for the time being.

It looks like a very nice house, enjoy!!

 

[1sikbITCH]

Sure, it'll be an adjustment, and you will have a few roadbumps as you learn the ropes and get hit with unexpected expenses, but 5 years from now you won't be able to imagine NOT owning your home.
However, if there's an HOA, I would shop elsewhere or at least have your lawyer examine the covenant before signing and make sure the association isn't run by Nazis.