patrick.net

Cash is so old fashioned. Debt for college, debt for homes, debt debt debt. Build a log cabin where? In a National Forest? The Rangers will take your ass in. In a cheap rural area? Where will you work, in a Meth Lab? Many rural areas regulate the size of houses, because they don't want to be overrun by vacation homes.

I've decided to view my mortgage/home as a "joint investment" with the bank. After all, I do have a substantial amount of capital invested in it.

jvolstad says

Buying a home? I think they are buying a mortgage.

While it may seem that way at first, you would be surprised how time flies. When the bubble peaked, I still had approx. 20+ years to go. Now, here we are in year 2015 and I am astonished to realize I only have 9 years left (I pay on a slightly accelerated pace), meaning I will be 51 years old with no more mortgage payment for the rest of my life. Compare this to the handful of regular posters who admit that they have rented the same house for 10 - 15 years or longer. If Patrick had bought when he seriously thought about it in 1999, he too would be seriously contemplating life that was largely payment free. Hopefully his savings are as large as he likely has another 30-50 more years of possibly escalating payments ahead of him.

Heraclitusstudent says

Young Adults Are Losing All Hope of Buying a Starter Home

I'm not very well traveled so I'll defer to the experts.

Is the usa the only place where certain houses are referred to as Starter homes?

komputodo says

I'm not very well traveled so I'll defer to the experts.

Is the usa the only place where certain houses are referred to as Starter homes?

Nope.
http://www.new-homes.co.uk/starter-homes/
http://www.stuff.co.nz/national/politics/2305522/Cheap-starter-homes-with-style
http://www.whichmortgage.ca/article/canadians-stuck-in-starter-homes-181904.aspx
http://www.french-property.com/vp/nv/ds/brittany-morbihan-guer-house/id/533026/

Cheap rv in a Kmart parking lot is mortgage rent free. There are always options

tatupu70 says

But rent isn't? You're going to pay to live somewhere whether you have a mortgage or not.

What are you mutts whining about. You should be thankful for California manufacturing this housing shortage and the consequent rise in the cost of housing given to you by the Fed. Otherwise Calif would be Texas.

You are ingrates.

SoftShell says

Cheap rv in a Kmart parking lot is mortgage rent free. There are always options

As long as you remember you're just renting the RV from the bank and from the state. Debt slave.

CDon says

If Patrick had bought when he seriously thought about it in 1999, he too would be seriously contemplating life that was largely payment free

Decent houses in Palo Alto/Mountain view area were 1M+ in in 1999 already which means even he paid it off he would still be paying 1K + per month in property taxes. Prices in that area are highly correlated with Nasdaq. Buying Nasdaq in 2009 would have produced much better unleveraged return than the housing there.

tr6 says

Decent houses in Palo Alto/Mountain view area were 1M+ in in 1999 already which means even he paid it off he would still be paying 1K + per month in property taxes. Prices in that area are highly correlated with Nasdaq. Buying Nasdaq in 2009 would have produced much better unleveraged return than the housing there.

But you can't live in a stock certificate. Buying a house allows you to not pay rent so you have to include that in your return calculations.

Call it Crazy says

Really? You don't think you could get a nice RV free and clear for the same 20% down payment you put on a crap shack in Illinois?

Maybe, but you're still renting from the state at that point.

Heraclitusstudent says

The problem is this: the population will grow despite the passing of boomers and we are not building enough.

Building more homes goes hand in hand with the ability to get mortgage loans. Why does my 23 year old who qualifies in every possible way, not get a loan for a silly technicality. Her company pays part of her earnings in the form of bonuses, so she won't qualify until August when she will have had 2 years of receiving bonuses. Her FICO is 800. Debt free. 20% down.
In the meantime that $400K condo will end up at $450K in 6 months. The housing market is picking up again my friends. I assure all of you, prices will be a lot higher by December.

Strategist says

he housing market is picking up again my friends. I assure all of you, prices will be a lot higher by December.

I guess it is incumbent upon me to say, think that one over before you give your daughter such bad advice.

Have her read Patrick's book on the subject.

Call it Crazy says

Strategist says

In the meantime that $400K condo will end up at $450K in 6 months.

Tell her to move to NJ, that $450K condo would be $175K here... Just think how much she'll save on the mortgage payments!!

My wife would kill me if I encouraged our baby to move out of state. Besides, she loves California and her job is in Irvine.

indigenous says

Strategist says

he housing market is picking up again my friends. I assure all of you, prices will be a lot higher by December.

I guess it is incumbent upon me to say, think that one over before you give your daughter such bad advice.

Have her read Patrick's book on the subject.

You can't go wrong buying property in Orange County. It's just not possible. She will get room mates that will cover most of the payments, resulting in her share being the same as her room mates. The difference being, she will get the tax write off.

Strategist says

Besides, she loves California and her job is in Irvine.

Irving Texas you say?

It is just that the timing is off. And the whole anchor thing which will keep her from moving if a better opportunity comes up or marriage.

indigenous says

It is just that the timing is off. And the whole anchor thing which will keep her from moving if a better opportunity comes up or marriage.

hmmmm. good point. She could rent it if she moves, as she will be breakeven. I don't mind managing it for her.

Yup cept the prices ARE going to come down. Don't be a: those who don't know history are doomed to repeat it type dude.

indigenous says

Yup cept the prices ARE going to come down. Don't be a: those who don't know history are doomed to repeat it type dude.

That's where we disagree. Prices have already started to jump, with the lower priced condos in Ladera Ranch where she wants to buy, getting snapped up.
We went to check out new homes they are building next to Ladera Ranch, which gave us sticker shock. $800K for a new 2500 sq ft home, on a 3500 to 4000 sq ft lot. Add to that $100K in upgrades, and Mello Roos to your payments. All those homes are getting snapped up.
It felt like the Bay Area. :(

Strategist says

That's where we disagree. Prices have already started to jump, with the lower priced condos in Ladera Ranch where she wants to buy, getting snapped up.

We went to check out new homes they are building next to Ladera Ranch, which gave us sticker shock. $800K for a new 2500 sq ft home, on a 3500 to 4000 sq ft lot. Add to that $100K in upgrades, and Mello Roos to your payments. All those homes are getting snapped up.

It felt like the Bay Area. :(

Ok but don't say I didn't warn you, you are being taken in by Group Think, Mass Hysteria type deal. You WILL regret it.

BTW giving financial advise is not something I do lightly but in this case your thinking is so egregiously bad I have to say something.

I wonder how much of the economy suffers in Calif because of the increased cost of housing that takes away from discretionary spending?

I mean if there were no regulations the volume of housing would be much higher and the cost much lower. Sort of like how NYC limits the number of taxi licenses that it puts out. To where I have heard Rothbard say the going rate is 100k for a license or Sowell say the price is 500k

bob2356 says

komputodo says

I'm not very well traveled so I'll defer to the experts.

Is the usa the only place where certain houses are referred to as Starter homes?

Nope.

http://www.new-homes.co.uk/starter-homes/

http://www.stuff.co.nz/national/politics/2305522/Cheap-starter-homes-with-style

http://www.whichmortgage.ca/article/canadians-stuck-in-starter-homes-181904.aspx

http://www.french-property.com/vp/nv/ds/brittany-morbihan-guer-house/id/533026/

LOL...I wasn't asking if americans call small homes in other countries "starter homes". I was asking if the people in other countries referred to small homes as STARTER HOMES.

Please correct me if I'm wrong. Is it true that most people in other nations, spent most of the pay in houses and as such don't have much discretionary spending? In USA, post-war policy turns almost every American households into a middle income household, Americans become the biggest consumers. If my thinking is correct, we are now "reverting to the mean"... just like any nations.

komputodo says

LOL...I wasn't asking if americans call small homes in other countries "starter homes". I was asking if the people in other countries referred to small homes as STARTER HOMES.

Try reading the link names. .co.uk is uk .co.nz is nz .ca is canada. french-property.com is also uk which is why all the phone numbers are international code 44. Those pages ARE people in other countries.

Wait until 2022... then the demand curve will change because once you have dual income factor then the housing numbers will change

To rehash this old story – for those who somehow missed it, the reasons for this weakness revolve around a mixture of inter-related economic, social and political forces some of which include:

1. Delay in marriage (Dual incomes missing)
2. A lack of a strong paying full-time job with security.
3. Older Americans are unable to retire due to lack of savings – they replace younger workers, who have trouble finding jobs.
4. Having enough for a down payment plus closing cost with taxes impounded is a lot for young aspiring home buyers.
5. Renting isn’t considered a bad option anymore from young Americans.
6. Exotic loans that allow would be homeowners to obtain credit without collateral or income verification are removed from the market.
7. Financially strapped parents are unable to “gift” down payments for first home purchases by their children.
8. Student loan debt impacted household formation from rising and making it more expensive for first time home buyers to buy.
9. Despite the weak first time buyer market, home prices go up in many markets due to the lack of inventory, keeping home ownership even further out of reach.

With all these factors in play, we simply don’t have enough qualified home buyers once you removed the cash buyers, to generate a housing recovery.

http://loganmohtashami.com/2014/11/03/demand-from-first-time-home-buyers-hits-21st-century-low/

Key number is to get first time home buyers back to 40% of mortgage buyers as an average of monthly buyers 2013, 2014 both have been 29% on the monthly numbers the chart above is the yearly survey average

Call it Crazy says

Strategist says

In the meantime that $400K condo will end up at $450K in 6 months.

Tell her to move to NJ, that $450K condo would be $175K here... Just think how much she'll save on the mortgage payments!!

Heck, tell her to move to Houston, that $450K condo would be between $100K and $150K.

bob2356 says

LOL...I wasn't asking if americans call small homes in other countries "starter homes". I was asking if the people in other countries referred to small homes as STARTER HOMES.

Try reading the link names. .co.uk is uk .co.nz is nz .ca is canada. french-property.com is also uk which is why all the phone numbers are international code 44. Those pages ARE people in other countries.

I'm not quite convinced. Those articles seems to be written by/for and american audience. For example, from my experience in latin america, I've never heard the term starter home. It's just a house. You buy it and you add on to it when you need more room. Then you pass it along to your kids when you die. The term "starter home" implies that it's your first home and you aren't supposed to stay there. You aren't supposed to put down roots. You are supposed to flip it and move into a bigger pressboard and vinyl structure.
When you see a family that has lived in a house for several generations, does that mean that they failed in the pursuit of the DREAM of "moving on up"?
What was the need to use STARTER in the title?
"Young Adults Are Losing All Hope of Buying a Home" would work just fine.

IOW Calif has a case of sticky prices, that are kept up by investors, government manufactured shortage through regulations (think Santa Barbara), and the Fed.

But at some point reality is going to trump all of the above and prices are going to unstick, right quick. But at the very least they are not going to continue up for long or much.

komputodo says

Those articles seems to be written by/for and american audience. For example, from my experience in latin america, I've never heard the term starter home. It's just a house. You buy it and you add on to it when you need more room.

Well yes that is a key difference.

In the US it is often discouraged to add rooms, and particularly to delete them.

Part and parcel of our developer-driven throway economy also.

No kids? Buy a townhome.
Having kids? Time to kick that one to the curb and buy a McMansion.
Kids gone? Time to move to a planned retirement community.

Starter home: Dads and Mums give you the down payment and co-sign for the mortgage.

mmmarvel says

Heck, tell her to move to Houston, that $450K condo would be between $100K and $150K.

Move to detroit and they'll give you a house.

bob2356 says

Move to detroit and they'll give you a house.

I hear investment in Detroit is very strong.

Call it Crazy says

that $450K condo would be $175K here.

Unlike Ocean County, Orange County, and specifically Irvine actually has jobs....condos/townhomes in NJ closer to job centers/better school districts than 'Heroin High' cost more than 175K.

My mortgage in Decatur GA close to Emory is 1300/month.....my brother's rent in a new townhome in Highland Park, NJ(near Rutgers) is 2700/mo and a good bit smaller, to boot.

I will say though, even Atlanta is getting expensive....starting townhomes inside I-285 are around 400K

I didn't see anything on zillow in Highland Park, NJ for 175K

http://www.zillow.com/highland-park-nj/

virtually no homes in Edison for 175 K....anything decent will be bare minimum 320K

http://www.zillow.com/edison-nj/

You can find a 1b/1ba for 158K in Plainsboro....
http://www.trulia.com/for_sale/Plainsboro,NJ/TOWNHOUSE_type

Nothing below 350K in south brunswick
http://www.zillow.com/south-brunswick-nj/

Ahead of time, I ask you to forgive me for cherry-picking.....It's just that I think comparing similar places in terms of #of professionals, education levels of neighbors and quality of school districts matters.

Where are the 175K homes in NJ in a decent school district close to jobs? Please post links though, as opposed to claims of cherry-picking without any supporting evidence to the contrary.

Just for context
Heroin High is the nickname of Toms River High School North....the only semi-respectable high school in Ocean County, NJ
http://www.urbandictionary.com/define.php?term=heroin+high

If anyone can show me that it is so much cheaper to live in a professional-predominant communities with good schools in New Jersey vs California....I am open to the evidence....but please post links to support your opinions.

Call it Crazy says

You're REALLY good at that

get to the point ......sometime this year would be great.....still waiting for the links.....

Call it Crazy says

Apples and Oranges seems to be a strong suit of yours, not to mention going off on tangents...

But hey, cherry pick and spin all you want...

Where are the 175 K houses....I'm still waiting for proof.....anytime this year would be great....

Where in New Jersey are there 175K condos....this year

Jackson, Point Pleasant Boro, Bayville, Manchester, all Ocean County, no less...... wow, loads of professionals there and good school districts to match.....but thanks for proving my point with your links. Even San Joaquin County, Riverside county and San Bernardino county are comparably priced on a per sq ft basis, if you want to live in a neighborhood of uneducated, non-professionals with mediocre schools. Once you figure in taxes, it's nearly equal.

I stand by my original comment that it (Ocean County)is not the best place to live for professionals with school age children. Nor does it represent New Jersey as a whole, which, like California, is unaffordable. House prices are cheaper slightly in NJ and slightly less per sq ft, but NJ makes up for it with the taxes.

Given the choice, if money was that much of an issue, the Texas idea, (Not including Austin) makes more sense.

Call it Crazy says

How many $45K jobs are available for graduates vs. how may $100K jobs are available?

Well, it depends if you're looking in Ocean County, NJ or Bay Area, CA.