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Ask HN: Is buying a house in 2017 a good idea?

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Re: Ask HN: Is buying a house in 2017 a good idea?

#21

Post by ChrisNorstrom »

It depends on the market in that area. Some markets are growing over the long term, others over the short term. Just talked to a lady a few months ago who bought a home in Boulder, Colorado for about $400,000 and sold it 3 years later for $900,000. She got out of there fast as property taxes were increasing constantly. In other places, you can buy a home for $250,000 with low property taxes but the neighborhood is going downhill, more crime, schools are worsening, and their home is losing value. It's going to be hard to sell in the future.

This is what you have to think about when buying a home. Is the area you are in good or bad right now, and will it be better, the same, or worse in the future. If you're not sure about a location's future. Rent.

Re: Ask HN: Is buying a house in 2017 a good idea?

#22

Post by amerkhalid »

odonnellryan wrote: post #16
amerkhalid wrote: post #10

Earlier quoted context omitted.

I put down 5% and had to get PMI. But even after that my payments were less than renting an equivalent house. So 20% is definitely not a cut n dry rule.

You sound like the exception, however. Are you taking into account maintenance, taxes, etc..?

Yes mortgage payment did include taxes, insurance, and PMI. (PMI is removed now, more on this below). But it doesn't include maintenance. I am paying almost $200 a month in HOA also which I didn't consider in my earlier comment. My guess is if HOA is considered then renting would be cheaper. (For context, I live in suburbs of Dallas).

Regarding PMI, my wife wanted to get our own house as soon as possible even if we had to pay PMI. I wanted to save 20% down first. It would have taken us more than a year to save 20% downpayment. So in end, wife won.

But that that time I didn't know that you could remove PMI as soon as you have 20% equity in the house. So we did our best, made extra payments, and built up equity to 20%, and removed PMI in about a year.

If we had tried to save for 20% downpayment like I wanted, we would have paid $12,000+ towards rent instead of about $1200 towards PMI (and a little more interests). So I tell all my friends that don't let PMI scare them, as long as they can afford to make extra payment and be able to remove it within a year or so.

Re: Ask HN: Is buying a house in 2017 a good idea?

#23

Post by snowwrestler »

If you get a fixed-rate mortgage (which I would recommend), the payment is fixed for the length of the loan. This means that long-term inflation will take 2-3% out of your real housing cost every year. It's like rent control for yourself.

If you put down 20%, you are creating 5x leverage. Even if the market value of your house only appreciates at 2.5%, your initial down payment (the cash you actually invested) will experience 12.5% return.

Of course there are the payments too, and maintenance, etc. But you have to pay to live somewhere. So make sure you're doing an apples-to-apples comparison with renting--including the mortgage interest deduction. Make sure you really know what your investment is--the amount you're paying over renting--and calculate your return on that.

Finally, the mortgage tax deduction is not the only tax advantage to a home. Another big one is that you can keep up to $250,000 of capital gains from your home, tax free--a 15% advantage against most other investments. Again, make sure you take that into account when comparing.

All of the above are only really advantages if you live in your house for a while. I agree with the other poster who said it's probably only worth it if you plan to live in that home for at least 5-7 years.

Re: Ask HN: Is buying a house in 2017 a good idea?

#24

Post by kspaans »

snowwrestler wrote: post #23

If you get a fixed-rate mortgage (which I would recommend), the payment is fixed for the length of the loan. This means that long-term inflation will take 2-3% out of your real housing cost every year. It's like rent control for yourself. If you put down 20%, you are creating 5x leverage. Even if the market value of your house only appreciates at 2.5%, your initial down payment (the cash you actually invested) will e…

The NYT has a pretty good online calculator for comparing renting vs buying. You just plug in a house price, mortgage details, and how long you're willing to stay in the house, and it will tell you what the better-deal level of rent is.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...

Re: Ask HN: Is buying a house in 2017 a good idea?

#25

Post by bogomipz »

hijinks wrote: post #19
zazpowered wrote: post #11

Earlier quoted context omitted.

What was the original price of the house?

it was on the market at 660k we bought it for 700k. This is way out in the East Bay of SF

Is it common for places to go over ask in the East Bay/SF? I'm assuming there were multiple offers at ask which is why you went over by 40K?

Re: Ask HN: Is buying a house in 2017 a good idea?

#26

Post by quesera »

bogomipz wrote: post #20
siquick wrote: post #7

Earlier quoted context omitted.

>>you can write off a lot of it on your taxes Can you explain this please? Excuse my ignorance of the US tax system. This sounds like a pretty shitty thing for the government to allow, giving existing home-owners a huge advantage to build up property portfolios over people not yet orable to get on the ladder. (similar to negative gearing in Australia where I live)

You can write 100% of the interest on your primary or secondary residence in the US. You can not write off the interest on a house that is strictly an income property. http://homeguides.sfgate.com/irs-rules-mortgage-interest-ded... The intention is the incentivize people to own their own home, it is not to incentivize them to build up property portfolios. Indeed that would be perverse. I'm sure you can show a loss on…

> You can not write off the interest on a house that is strictly an income property.

That is not correct. The article you posted seems to imply it, but it is absolutely not true.

Pure rental property is treated as a business property, and mortgage interest on business properties is an expense that is deducted from rental income before determining tax liability. You can even carry a net loss over to your personal return (subject to some limits).

Details in IRS pub527: https://www.irs.gov/publications/p527/ch01.html

Re: Ask HN: Is buying a house in 2017 a good idea?

#27

Post by seanp2k2 »

bogomipz wrote: post #25
hijinks wrote: post #19

Earlier quoted context omitted.

it was on the market at 660k we bought it for 700k. This is way out in the East Bay of SF

Is it common for places to go over ask in the East Bay/SF? I'm assuming there were multiple offers at ask which is why you went over by 40K?

Almost all property in the Bay Area for the past few years has multiple bids over asking price. Many of them are also all cash from foreign investors. Rich Chinese are trying to move money out of their country. Many are also investors looking to rent it out or flippers. Many times, flippers sell to other flippers, so a property will have gone through multiple bad "lipstick remodels" in a few years, and each flipper will want to make a profit. You'll get a $1m 1800sqft single family house on a block next to a bunch of rundown POS properties that's been sold once a year. It's crazy and idiotic.

Re: Ask HN: Is buying a house in 2017 a good idea?

#28

Post by jdash »

amerkhalid wrote: post #22
odonnellryan wrote: post #16

Earlier quoted context omitted.

You sound like the exception, however. Are you taking into account maintenance, taxes, etc..?

Yes mortgage payment did include taxes, insurance, and PMI. (PMI is removed now, more on this below). But it doesn't include maintenance. I am paying almost $200 a month in HOA also which I didn't consider in my earlier comment. My guess is if HOA is considered then renting would be cheaper. (For context, I live in suburbs of Dallas). Regarding PMI, my wife wanted to get our own house as soon as possible even if we h…

For FHA backed mortgages the FHA changed the rules on PMI in 2013 where you are no longer able to remove the PMI after the loan reaches 78% loan-to-value and annual MIP has been paid for at least 60 months. For FHA mortgages finalized after June 3, 2013 the payments are there for the life of the loan. So can be worth considering refinancing once you are in the position to qualify for conventional financing and pay 20% down.

Re: Ask HN: Is buying a house in 2017 a good idea?

#29

Post by hijinks »

bogomipz wrote: post #25
hijinks wrote: post #19

Earlier quoted context omitted.

it was on the market at 660k we bought it for 700k. This is way out in the East Bay of SF

Is it common for places to go over ask in the East Bay/SF? I'm assuming there were multiple offers at ask which is why you went over by 40K?

When we bought it was the peak time for oversea investors coming in with all cash.

When I was at the open house there were a few Chinese people that were alone that you could tell were buying houses for people in China.

We looked for 18 months before that and were outbid 12 other times. So we overbid on this one. If I remember there were 18 other offers on the house with at least 20% down.

The market has cooled down in the Bay area a bit where you aren't seeing 30-40 bids on a house but they still move fast if priced right.

Re: Ask HN: Is buying a house in 2017 a good idea?

#30

Post by jasonkester »

Houses don't make particularly good investments.

While it's true that you can sometimes come out ahead compared to, say, investing the same amount in the S&P 500, it's very rare that the S&P will need you to put a new roof on it or spend the better part of every weekend pulling weeds and doing DIY. The S&P will just wait until you ask for your money back, then give you lots more money back than you gave it. Houses make you work for that money.

Now, lots of people enjoy DIY as a hobby, so if you're looking to include "maintaining a house" as a new hobby then by all means buy a house. They're also quite pleasant to live in when compared with crappy apartments that are the usual alternative.

But only buy a house if you want to own a house. Buying one just because it's a good investment or what you're "supposed to do" will only leave you unhappy and wondering what happened to all your free time. If you don't believe this, pick any one of your homeowner friends and ask them what they did this weekend.

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