how can a young couple afford to buy a home these days....

[Kamuelamom]

I heard that Donald Trump had recently stated that the best place to buy real estate now is on the Big Island of hawaii.

Why would he do that to us???????

He should''ve kept his mouth shut, as things are bad enough here, over inflated and waaaay beyond the reach of many local first time buyers. Now I''m sure the likes of D.T. will be lurking to develop more of the precious land we have here. There isn''t much left, all things considered, and the developers have sealed the fate for many who cannot afford to dream of owning a home in this market.

I just sold my home for an unheard price, all things considered, but believe me, it was what the market is bearing. But I rode out 2 cycles. Time was our friend. My neighbors would have killed me had I undercut that for any reason. We would have held on to it but we didn''t want to maintain both homes, and also we decided to use part of the money as a "down payment" towards the upgrade we spent on our newly built home. My kids'' generation will NEVER be able to afford to buy property if things continue along as they have been. 2004 was a record year for rising real estate prices here. From what is being said on this thread, it seems as though it''s happening everywhere. Alot of folks are selling their homes for what they can make on it, without thinking, where will they go once they get their cash? It''s not like you can turn the money around to work for you in the same way in this type of market. Rentals are impossible to find, too.

Dancing fire, I agree with you. What goes up must come down. I bought my first home 15 years ago at the peak of the Japanese market inflation here. (Thanks Genshiro-San) My home then was the lowest priced home in the area that we could afford, it was a simple starter home in so-so shape. We bought into the frenzy then. 8 months later it was worth about $40k less when the market took a nose dive.

The bubble will burst.

I''d hate to see what happens when folks scrambling to buy homes here now (for fear of not being able to afford it if they wait~aka The Frenzy) lose there homes to the banks in foreclosure. I''ve seen it happen. It''ll happen again as most folks buying "affordable" homes here (upwards of $300K for a major fixer upper) have to work 2 and 3 jobs to afford those payments. It''s not a good situation by any means.

 

[Dancing Fire]

my greatest accomplishment(so far) is i paid off my mortgage last yr at the age of 46,because i know i can''t afford to buy my house today....come to think about it $147k was a lot money(for us) in 1986 and still is today.

 

[Kamuelamom]

Date: 1/25/2005 9:20:27 PM
Author: Dancing Fire
my greatest accomplishment(so far) is i paid off my mortgage last yr at the age of 46,because i know i can''t afford to buy my house today....come to think about it $147k was a lot money(for us) in 1986 and still is today.

Whoa, congratulations! THAT is a *MAJOR* accomplishment.

Meanwhile I''m 42 and just started my brand new 30 yr mortgage.

We hope to pay it down slowly so as not to drag it on for the next 30 yrs. I might be dead by then.

 

[ursulawrite]

Wow. This post is a total shocker to me. I was under the impression that most people on here were absolutely minted, given the baubles I see posted every day. And the prices people pay for them.

My husband and I have just bought our first home, in NYC. We saved long and hard -- no monster rock here -- and it''s paid off. We move into a lovely Soho loft in a month''s time.

 

[Dancing Fire]

Date: 1/25/2005 7:42:17 PM
Author: strmrdr
Personaly I think a house is one of the worst investments anyone can make.
They may rise for a while but they will crash eventualy and the interest kills ya.

in a way i agree with you, but timing is everything if you bought a house 7 or 8 yrs ago when housing was low along with low interest rate you would be in great shape , now interest is still low but housing has sky rocket.in the long run just don't expect to get a big return (just free rent)the monthly mortgage payment is a savings account.

 

[perry]

Dancing Fire:

I stick to my statement that the principal winniers on homes is the finance companies.

Yes, there could be a big loss at some point; but that does not erase all the profits they make up to that time. Unlike Japan, any bank that gets into real trouble in the US is closed by the Federal government (different agencies depending on bank,S&L,Credit Union, etc). If that happens the investors behind the bank loose once that year- and it might whipe out a few of them. The bank is usually taken over by another - with the Goverment absobing a good chunk of the loss. Actually, this happens all the time - several banks a year in each state are closed by the FDIC (and the other agencies). Almost always it is realestate loan problems (once in a while it is commercial loans, or fraud).

None of that changes how much the industry, and the invesotors behind those banks, makes each year from it. Very lucritive. There is a reason that many many mortage companies want your business. Lots of money to be made.

Look at the numbers that strmrdr posted to give you an idea.

The other thing that is a general myth: the concept that people make money on home appreciation. In general that is not true as homes in general (on average in the US) only appreciate at about the cost of inflation (long term averages). There are isolated cases where this is not true (realestate hot markets- typically in some metropolitan areas), but remember that there are areas in the US where prices go down (and don't much get reported because they are not in a major population center where the news media reports on them).

Perry

 

[Superidealist]

My wife and I recently decided to finally look into buying. We looked at the market locally (Los Angeles) and decided that it makes no sense to buy here. With the money we have in the bank we could afford a nice house in a nice neighborhood, but we just aren't comfortable taking on so much debt. With the money we have saved, we could outright buy a brand new three or four bedroom house in Portland or the Raleigh-Durham area. I love the weather in Los Angeles but not so much that I am willing enslave myself to a house for thirty years to stay here!

By the way, can anyone recommend a nice neighborhood in Raleigh, Portland, or Seattle?

 

[Dancing Fire]

Date: 1/25/2005 9:25:34 PM
Author: Kamuelamom

Date: 1/25/2005 9:20:27 PM
Author: Dancing Fire
my greatest accomplishment(so far) is i paid off my mortgage last yr at the age of 46,because i know i can''t afford to buy my house today....come to think about it $147k was a lot money(for us) in 1986 and still is today.

Whoa, congratulations! THAT is a *MAJOR* accomplishment.

Meanwhile I''m 42 and just started my brand new 30 yr mortgage.

We hope to pay it down slowly so as not to drag it on for the next 30 yrs. I might be dead by then.

K-MOM
we have no choice my daughter started college last yr her tuition cost more than our monthly mortgage

can''t afford both payment at the same time.

 

[MichelleCarmen]

Date: 1/25/2005 9:32:52 PM
Author: ursulawrite
Wow. This post is a total shocker to me. I was under the impression that most people on here were absolutely minted, given the baubles I see posted every day. And the prices people pay for them.

My husband and I have just bought our first home, in NYC. We saved long and hard -- no monster rock here -- and it''s paid off. We move into a lovely Soho loft in a month''s time.

When reading here, I think the impression comes across that everyone is loaded, but in reality there are tons of one-time purchases (for the big rock) and the few here and there lucky individuals who purchase lots of baubles once or twice, or more, per year. My husband and I are in the same boat as you. Smaller rock in order to live in a house we own, plus afford other luxuries such as nice cars and nice clothes too Plus I eat only organic, which means our grocery bill is WAY up there

I could buy a two-carat diamond with how much money I spend a year on food and herbal supplements

 

[orbaya]

Hubby and I are building a townhouse right now. It''s a brand new neighborhood and we''ve been able to design our floorplan, cabinets, flooring, etc. This will be a 2000 Sq ft unit (3000 if we finish the basement) with an attached two car garage. Base price was 200K, but when it''s all said and done, the total price will be about 210K or so. If we were to buy or build a house right now instead, we couldn''t afford anything nearly as nice as our townhouse. Plus, we don''t have to do yardwork!

 

[aljdewey]

Well, a few comments.

For those waiting to save the elusive 20%......don''t wait. The only benefit to having 20% down is to avoid paying an extra $125-150/mo in PMI. However, with today''s programs, this can be avoided in other ways. Rich and I took out an 80/10/10 loan.....principal mortgage for 80%, 2nd (heloc) for 10%, and put down 10%. you can also do an 85/10/5, but you get a slight bump in the rate for being less than 10% down.

Every 10K you come up with only reduces your mortgage payment by about $100/mo.

As for whether or not a house is a good investment, I have to say I think it is over the LONG run especially if you are smart about your mortgage. Most folks find it a bit of a stretch when they first begin paying the mortgage, but as the cost of living, etc. increases, their mortgage becomes a bit more comfortable. paying 1-2 extra payments a year can pay off your loan nearly 8 years early and save a bundle in interest charges.

Here''s how I see it: Rich and I were paying outrageous money every month renting.....money that we got NOTHING back for. If we pay rent for 30 years, at the end of it, we have nothing to show for it. At the end of 30 years paying for a house, we can sell it and add that money to what we have saved. At worst, it''s like a savings plan. It entitles us to tax relief that we cannot otherwise get.

In the meantime, it changes our entire way of life.......the freedom to live as we wish and to make changes that make us happy. It also gives us something to hopefully fall back on if something catastrophic happened.....we could always sell the house. In our area, it''s unlikely that home prices will tail off much because there is so little buildable land left.

Our city has many homes that are 2x the cost of ours.....which help to maintain our property value.

My parents bought their home in 1978 for $36900. With a 30-yr fixed, perhaps they paid close to $120K with interest by the time is was all said and done. Today, the house would sell for $225000 easily. It''s hard to imagine how that''s NOT an investment. Sure, a market has ebbs and flows at any given point, but most folks who are in for the long run don''t lose.

 

[Dancing Fire]

Date: 1/26/2005 12:23

4 AM
Author: aljdewey
Well, a few comments.

For those waiting to save the elusive 20%......don''t wait. The only benefit to having 20% down is to avoid paying an extra $125-150/mo in PMI. However, with today''s programs, this can be avoided in other ways. Rich and I took out an 80/10/10 loan.....principal mortgage for 80%, 2nd (heloc) for 10%, and put down 10%. you can also do an 85/10/5, but you get a slight bump in the rate for being less than 10% down.

Every 10K you come up with only reduces your mortgage payment by about $100/mo.

As for whether or not a house is a good investment, I have to say I think it is over the LONG run especially if you are smart about your mortgage. Most folks find it a bit of a stretch when they first begin paying the mortgage, but as the cost of living, etc. increases, their mortgage becomes a bit more comfortable. paying 1-2 extra payments a year can pay off your loan nearly 8 years early and save a bundle in interest charges.

Here''s how I see it: Rich and I were paying outrageous money every month renting.....money that we got NOTHING back for. If we pay rent for 30 years, at the end of it, we have nothing to show for it. At the end of 30 years paying for a house, we can sell it and add that money to what we have saved. At worst, it''s like a savings plan. It entitles us to tax relief that we cannot otherwise get.

In the meantime, it changes our entire way of life.......the freedom to live as we wish and to make changes that make us happy. It also gives us something to hopefully fall back on if something catastrophic happened.....we could always sell the house. In our area, it''s unlikely that home prices will tail off much because there is so little buildable land left.

Our city has many homes that are 2x the cost of ours.....which help to maintain our property value.

My parents bought their home in 1978 for $36900. With a 30-yr fixed, perhaps they paid close to $120K with interest by the time is was all said and done. Today, the house would sell for $225000 easily. It''s hard to imagine how that''s NOT an investment. Sure, a market has ebbs and flows at any given point, but most folks who are in for the long run don''t lose.

AL
i always look at the mortgage payment as a savings account nothing more of corse is better than renting but,people also forget about paying property tax and insurance for all those yrs.what about landscaping + all kinds of maintenance (inside & outside),i just had a new roof put on my house cost us $24k

there was a servey awhile back saying that if you put the same amount of $$$''s into the S&P 500 index for the pass 30 yrs you would come out ahead of property investment.

 

[lostdog]

"there was a servey awhile back saying that if you put the same amount of $$$''s into the S&P 500 index for the pass 30 yrs you would come out ahead of property investment. "

Factor in mortgage interest income tax deduction and the fact that you would have to pay for shelter in some form, it''s hard to argue against it. (And pick a different 30 year period and the resluts could be very unfavorable. Housing has sustained solid gains with only a few localized off years. Recent giant rises in value, though, won''t be able to remain the norm.)

Now if you owned your house free and clear, and were deciding what to do with the share of your income that would normally go toward the mortgage, there''s a good argument to put it to some sort of investment other than another house.

A bigger dillemma is whether you leave your equity tied up in a paid off house, or take some equity out at mortgage rates and invest it chasing higher rates of return.

Most people don''t get the luxury of these sort of problems, unfortunately.

But while housing is an expense, at least if you are building equity and the asset is appreciating, it is also an investment.

A new luxury car is not an investment, that language is a joke played on buyers. Nor are a few other expensive things that can be named and are often billed as such.

A house is often the best investment people do make, though not necessarily the best one they could make.

 

[Dancing Fire]

Date: 1/25/2005 10:22

8 PM
Author: perry
Dancing Fire:

I stick to my statement that the principal winniers on homes is the finance companies.

Yes, there could be a big loss at some point; but that does not erase all the profits they make up to that time. Unlike Japan, any bank that gets into real trouble in the US is closed by the Federal government (different agencies depending on bank,S&L,Credit Union, etc). If that happens the investors behind the bank loose once that year- and it might whipe out a few of them. The bank is usually taken over by another - with the Goverment absobing a good chunk of the loss. Actually, this happens all the time - several banks a year in each state are closed by the FDIC (and the other agencies). Almost always it is realestate loan problems (once in a while it is commercial loans, or fraud).

None of that changes how much the industry, and the invesotors behind those banks, makes each year from it. Very lucritive. There is a reason that many many mortage companies want your business. Lots of money to be made.

Look at the numbers that strmrdr posted to give you an idea.

The other thing that is a general myth: the concept that people make money on home appreciation. In general that is not true as homes in general (on average in the US) only appreciate at about the cost of inflation (long term averages). There are isolated cases where this is not true (realestate hot markets- typically in some metropolitan areas), but remember that there are areas in the US where prices go down (and don''t much get reported because they are not in a major population center where the news media reports on them).

Perry

Perry
i agree 101% with the last paragraph above.

 

[cflutist]

Date: 1/25/2005 9:20:27 PM
Author: Dancing Fire
my greatest accomplishment(so far) is i paid off my mortgage last yr at the age of 46,because i know i can''t afford to buy my house today....come to think about it $147k was a lot money(for us) in 1986 and still is today.

Congrats

, that is my goal right now too. Last year I made $5500 per month payments (more than the minimum) and I still have about 5 years to go.

 

[hoorray]

it''s true, in the right time and place, you can make a lot of money off real estate. IMO, the problem is that that same investment is typically your home. You can''t cash out easily or take advantage of market peaks, because then where do you live? Even if you home doubles from where you bought (which can happen in hot markets) if you are not ready to leave the area, all you can do is roll it into your next property, which will have apreciated proportionatly. Maybe eventually, you can cash out, but before then, it''s not ready money to use for other purposes. I''ve been through a couple of periods in CA where the market has slowed to a screeching halt. Property may only be down 5 - 10%, but nothing moves. It was VERY difficult to sell anything, especialy things on the market edges -- condos or luxury homes, in that market. People don''t see this now, but for those who look at the historical market trneds, I think it''s a typical CA housing market.

 

[lostdog]

"The other thing that is a general myth: the concept that people make money on home appreciation. In general that is not true as homes in general (on average in the US) only appreciate at about the cost of inflation (long term averages). There are isolated cases where this is not true (realestate hot markets- typically in some metropolitan areas), but remember that there are areas in the US where prices go down (and don''t much get reported because they are not in a major population center where the news media reports on them)."

I was trying not to complicate it, but it''s really about the spread between mortgage interest rate and inflation if you look long term.

Real estate where the structure is obsolete, where the jobs are fleeing the area, where where they just put you under the flight path of the new airport, etc., will vary. But those are specifics and the discussion is by nature generalities.

Demographics (boomers into prime earning years) and poor performance of the stock market and low interest rates converged to produce an almost perfect storm, so in a period of little to no inflation, housing prices went up 10-20% annually.

The principal winners are probably the investment bank dealing in the secondary market mortgage bonds, the real state agent (how much per hour does that come out to?), maybe the developer, and possibly most of all the land seller the developer bought from.

Still, I can think of a lot of people whose houses increased their net worth faster than if they could have banked their entirely salary tax free. Historically it''s an aberration, but it still happened.

 

[Dancing Fire]

Date: 1/26/2005 2:32

9 AM
Author: cflutist

Date: 1/25/2005 9:20:27 PM
Author: Dancing Fire
my greatest accomplishment(so far) is i paid off my mortgage last yr at the age of 46,because i know i can''t afford to buy my house today....come to think about it $147k was a lot money(for us) in 1986 and still is today.

Congrats

, that is my goal right now too. Last year I made $5500 per month payments (more than the minimum) and I still have about 5 years to go.

cflutist
WOW!!! $5500 per month ,i wouldn''t be able to sleep at nite if i had your payment, but of corse anybody who could afford to live in the S.F. bay area is super RICH.

 

[perry]

Here are some other truisms on houses.

"Houses are an Asset" Everyone knows that. and the Real Estate agnents and mortagage companies pitch it endlessly...

What most people don''t understand... is that they are the asset of the financing company.

Assets are the way a business make money. Many bussness models look at the customer base of a store as an asset (regular customers make the stores the most money - they are, each and everyone of them, an asset).

Look at your cash flow to see who is making money. To whom is the "house" providing a stready stream of income.

The other reason real estate and financing companies pitch refinancing and move-ups is because off all the money they make on "closing" the sale.

If I had a half million dollars (free cash) and wanted to build a business that produced a reasonable return on my investment money... I''d not build a jewelry store, I would really consider starting a financing company for home loans.

Perry

 

[Momoftwo]

You have to look at is as more than just an investment. Besides being your home, your interest is a tax write off. That little fact means you will pay less in taxes even if your mortgage is more than the rent you are currently paying. Our mortgage is double what our previous one was and we have two kids in college. We are making our equity work and using it for part of our kids college costs. We put 20% down just over a year ago and we have something like 35-40% equity now due to price increases. I live in the fastest growing county in the country (Loudoun County, VA) and while housing prices are going up everywhere, ours have increased by double digits the last couple of years due to demand. Also, wherever home ownership is high, the quality of life is better. Crime rates tend to be lower and schools better. The housing market over the long run has trended upward. The fact we are in our mid to late 40's and have been married for 24 years means we have more disposable income than we did 10 and 20 years ago and we can buy more home now. While, we are not rich, my husband is so glad I talked him into moving into our new home last year, because of what the market has done plus we love our home. The plan is to stay here for 20 years, retire, and take our profit and buy a smaller home. So, in some ways it is an investment, but not the center of our financial planning. When we were young and having our children, we had less home and lower payments, but we always, even now have bought what we can afford on 1 income and that meant two townhomes before our first single family which was due to the fact we wanted me to raise our children. We also didn't go out to eat a lot and only bought new cars when the old ones died in order to save what we needed. There is sacrifice involved.

Perry, why are you so bitter? Sounds like you personally have had a bad experience.

 

[Lord Summerisle]

Same over this side of the pond.

We where lucky - we bought our first place this summer... if we had waited, now interest rates are up 3/4% and the deals on mortages arnt as good, plus homes have risen by £5-7K in the area we are...

Our home was £64000 when we bought... which was the top of our budget (combined earnings of £27K p.a.)

and that bought us a 3 floor (and cellar - not very common any more here) back to back terrace house,

when i say back-to-back terrace i mean that we are joined to another house on 3 sides, our side walls and back wall are that of another house. We can trace the history back to it having been built around 1855-1860 - deeds say ownership was taken in 1860, and it came with the expansion of the railway through our valley in 1850 (leading to an increase of the cotton mills)

Our place is the cream (sand blasted local stone) with the ''moving works'' sign on the wall

 

[cflutist]

Date: 1/26/2005 3

5:52 AM
Author: Dancing Fire

Date: 1/26/2005 2:32

9 AM
Author: cflutist

Date: 1/25/2005 9:20:27 PM
Author: Dancing Fire
my greatest accomplishment(so far) is i paid off my mortgage last yr at the age of 46,because i know i can''t afford to buy my house today....come to think about it $147k was a lot money(for us) in 1986 and still is today.

Congrats

, that is my goal right now too. Last year I made $5500 per month payments (more than the minimum) and I still have about 5 years to go.

cflutist
WOW!!! $5500 per month ,i wouldn''t be able to sleep at nite if i had your payment, but of corse anybody who could afford to live in the S.F. bay area is super RICH.

Dancing Fire, You think we''re Rich? LOL, No, house POOR instead. Any more diamonds will have to wait

 

[bar01]

I will say that a home is like any other investment. Like stocks, there are good ones and bad ones. I my case it is the biggest and best investment I have made yet.


Here are some more interesting links to check out.


Home Prices in Major Areas

Richest Towns

 

[Lord Summerisle]

Date: 1/26/2005 8:43:11 AM
Author: Feydakin
I would love to live in town like that.. No yard, etc., but then I woulddn''t have room for all my cars

Aye, tis beautiful country up here. Thing was, houses of the same size but with a yard or garden, at the same price where in such poor nick... or where £10-20K more. It was something we had to compromise on.

Mortgage wise we took the risk on a fixed term interest rate for 5 years... as, i dont know about the US, but they have been at their lowest for decades, and when they are low theres only one way they can go from there! plus on such a tight budget as ours, makes life easier to know that each month is the same repayment. and we got a first time buyer deal, meaning we only needed a 3% deposit, rather then the usual 5%.

 

[strmrdr]

Also its impossible to cash out on a home without either buying another more expensive one or paying a ton of taxes if the value went up untill you reach 55.
Yea you get tax breaks but your also tied down and are limited in what you can do.
The tax code is written to insure that you will buy another house should you make money on the one you sell.
That savings account is worthless if the goverment snags 35% of the money.
Lets make it simple and a cash sale no loan you buy a house for $100k sell it for $200k You have allready paid income taxes on the orginal $100k now you have another 100K to pay taxes on or you buy a $200k house or better.
Depending on the tax braket you have paid $35000 in income taxes to have a $100k gain in your "savings account" if you cash out.
Add in interest and your upside down in a hurry.

 

[fire&ice]

Date: 1/26/2005 9:46:50 AM
Author: strmrdr
Also its impossible to cash out on a home without either buying another more expensive one or paying a ton of taxes if the value went up untill you reach 55.
Yea you get tax breaks but your also tied down and are limited in what you can do.
The tax code is written to insure that you will buy another house should you make money on the one you sell.

Actually , that is not true. You have to live in the house for two years. There does exist caps; but, it''s fairly high amount. And, you only have to pay the cap gain on the overage. No age restriction. You can own two homes as long as they are considered your residence. You have to physcially live there.

Without a doubt, homeowership has proven to be excellent investment in the LONG term. As Al noted, it''s kinda like forced savings because you do pay down the principal - you get NOTHING in return for rent - it''s like throwing the money out the window. Also, the interest deduction is HUGE and off sets the overage on inflation. Nice round #''s - 10K in interest deduction will save well over 4k on taxes in the higher bracket. It also can knock you down to a lower bracket.

One key - when you start to make some more money (which is the case for most people as you age), put more towards principal. We have paid off our house once already. We have a mortgage because it just makes sense. Most people don''t have enough to itemize deductions without it. We choose a 15 year mortgage. For younger couples, a 30 year may be more prudent with paying it like a 15 year when you can. Also, the twice a month payment is a good deal.

One of the few times homeownership doesn''t make sense is if you relocate every two years.

We rented before we bought for a couple of reasons - we needed to save for the downpayment (we banked everything I made & tried to live off his salary) & you get to know the areas much better.

Thinking off the top of my head - in the long run you usually can''t go wrong buying in a college town.

 

[fire&ice]

Date: 1/25/2005 10:29

7 PM
Author: Superidealist
My wife and I recently decided to finally look into buying. We looked at the market locally (Los Angeles) and decided that it makes no sense to buy here. With the money we have in the bank we could afford a nice house in a nice neighborhood, but we just aren''t comfortable taking on so much debt. With the money we have saved, we could outright buy a brand new three or four bedroom house in Portland or the Raleigh-Durham area. I love the weather in Los Angeles but not so much that I am willing enslave myself to a house for thirty years to stay here!

By the way, can anyone recommend a nice neighborhood in Raleigh, Portland, or Seattle?

I''m unsure if this is like it is in every city - but in the cities in the South - Raleigh being one of them - the old established neighborhoods command the most amount of money. New construction will be cheaper per square foot. In the Raleigh area, inside the beltline holds the most cache and serves as the best investment. Since quite a bit of new construction is going on, "used" homes in the burbs are much harder to sell.

Yes, you can''t beat the weather in LA (though this seems to be a rough year). But, the sunny southeast like the Raleigh area is quite moderate. We have the change of seasons; but, about 8 months out of the year, it''s quite nice. Personally, if you were looking at the Raleigh Durham area - I would consider the Piedmont Triad instead. Temp is better, housing is cheaper & traffic is better. Plus, one of the best farmer''s market in the country and a strong Arts community.

 

[fire&ice]

Date: 1/25/2005 10:22

8 PM
Author: perry
Dancing Fire:


The other thing that is a general myth: the concept that people make money on home appreciation. In general that is not true as homes in general (on average in the US) only appreciate at about the cost of inflation (long term averages). There are isolated cases where this is not true (realestate hot markets- typically in some metropolitan areas), but remember that there are areas in the US where prices go down (and don''t much get reported because they are not in a major population center where the news media reports on them).

Perry

Even if I entertained your myth, which I don''t, homes are an asset. And, one you can *add* value to. Renting does nothing.

 

[Libster]

When we rented and also when we owned a less expensive home we were paying huge income taxes at tax filing time. This with having the maximum withheld, i.e. 0 deductions/single, and maxing out our 401k contributions. For us it is just a win/win all around. Renting for us was just throwing money away. Just my scenario.

 

[Diamonds4Me]

Date: 1/26/2005 10:33:15 AM
Author: fire&ice

Date: 1/26/2005 9:46:50 AM
Author: strmrdr
Also its impossible to cash out on a home without either buying another more expensive one or paying a ton of taxes if the value went up untill you reach 55.
Yea you get tax breaks but your also tied down and are limited in what you can do.
The tax code is written to insure that you will buy another house should you make money on the one you sell.

Actually , that is not true. You have to live in the house for two years.  There does exist caps; but, it's fairly high amount. And, you only have to pay the cap gain on the overage. No age restriction. You can own two homes as long as they are considered your residence. You have to physcially live there.

Without a doubt, homeowership has proven to be excellent investment in the LONG term. As Al noted, it's kinda like forced savings because you do pay down the principal - you get NOTHING in return for rent - it's like throwing the money out the window. Also, the interest deduction is HUGE and off sets the overage on inflation. Nice round #'s - 10K in interest deduction will save well over 4k on taxes in the higher bracket. It also can knock you down to a lower bracket.

One key - when you start to make some more money (which is the case for most people as you age), put more towards principal. We have paid off our house once already. We have a mortgage because it just makes sense. Most people don't have enough to itemize deductions without it. We choose a 15 year mortgage. For younger couples, a 30 year may be more prudent with paying it like a 15 year when you can. Also, the twice a month payment is a good deal.

One of the few times homeownership doesn't make sense is if you relocate every two years.

We rented before we bought for a couple of reasons - we needed to save for the downpayment (we banked everything I made & tried to live off his salary) & you get to know the areas much better.

Thinking off the top of my head - in the long run you usually can't go wrong buying in a college town.

Here in NC, under current tax law, capital gains..up to $500,000 for a married couple filing jointly and up to $250,000 for a single person or a married person filing singly from the sale of a principal residence are excluded from taxation. The seller must have occupied the residence for two out of five years of ownership and it's available only once every two years. Anything above and beyond the $500K or $250K would be taxed at the 20% capital gains rate.

I don't know about other states though.


Edited: Cool beans F&I. I just noticed you're in NC too