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How Many Years of Life Does That House Cost?

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Re: How Many Years of Life Does That House Cost?

#41
post #10

Earlier quoted context omitted.

> bought a house big enough for a family to live comfortably that I could reasonably afford in my late 20s. Well, we'd all love to do that, but where? (That was a rhetorical question, I personally moved to Edinburgh and bought an affordable family house in my late 30s) I remember a website tracking London affordability that pointed out that in some years price appreciation made it literally impossible to save for a h…

Nowhere! If you're in SF, move out to the east bay Besides that, hope residents use legislation to balance out the market... progressive taxes in aesthetically pleasing areas, education/public transportation in economically competitive areas, condos/up-zoning in popular urban areas.

[deleted]

Re: How Many Years of Life Does That House Cost?

#42
post #27

Earlier quoted context omitted.

That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing. But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

Ha, well in non-major cities you're right, but all the major cities cost an arm and a leg for the most part!

Well the only way to drive down price is to either increase supply or decrease demand. So make cities shitier and denser.

Is this a case where a small increase in supply would decrease the price significantly? I doubt it.

So, is there some reason we (as a nation) need to double population density of our largest cities? With the huge advances we are likely to see in autonomous zero-emission delivery infrastructure and remote communication over the next 20 years, not to mention the increasing likelihood of natural disasters and WMDs hitting these cities, I really don't see the point of pushing for so much urban growth.

Re: How Many Years of Life Does That House Cost?

#43

I liked the visualization and data, but I don't think it makes sense to compare home prices to wages w/o considering alternatives to home ownership. Home prices don't exit in a vacuum. That is, if a home is 10x the median salary, you can't really say "well, if I didn't buy a home I could work 10 years less." That's because the alternative to buying is renting, which is also expensive. So sure, a mortgage in SF is $6k…

I think he was pointing out how out of reach buying is. I'm sure a lot of people would like to own that are renting in SF right now but that's just not possible. "Having a roof of your head" and home ownership is very different, offering different benefits. For someone with kids, who probably does not want to be moving, renting is a bad option but the only one in a lot of markets.

Re: How Many Years of Life Does That House Cost?

#44

Earlier quoted context omitted.

> also, obviously, after 20 years you have no more payments. You have maintenance. And if something bad happens with the foundation, that's very expensive to fix. Unless you just plan to die and have the house demolished and the property sold (which is honestly preferable in some cases of inheritance). I had to pay $25k to have supports installed in the crawlspace and other mitigation to avoid foundation work. I migh…

Don't forget the roof that needs replacing every 15 or 20 years. Appliances. Furnace. Plumbing. Septic tank. Water lines on your property. Tree removal. Re-decorating and re-modeling. Replacing windows.

It's not like you avoid these expenses by renting. They're just rolled into your rent. You get to avoid thinking about them, of course.

Although there is an economies-of-scale advantage to maintenance on multi-family dwellings.

Re: How Many Years of Life Does That House Cost?

#45
The data was very interesting, but there wasn't anything meaningful mentioned that came out of the data, other than possibly where you should look to move to if you have flexibility.

I personally bought a house in my early twenties. At the time it was roughly 2.5x my income. I've been there a few years and went through some changes to my employment, I now earn more making it easier. Over the course of ownership, in the ~20 years, I'll have paid close to $400k between the principal and interest.

If I made more, it wouldn't change the amount I pay toward my house so it wouldn't make me own the house faster. While I could send additional payments, the amount of interest I'd avoid would not be worth it.

If I had $20k available to me right now and sent it entirely to my house it'd save around $12k in interest over 15 years. Had I invested that $20k now and received only a 5% growth, over 15 years that would have earned $22k in compound earnings leaving me with $42k of potentially easily liquidatable assets.

Buying a house that is close to your annual income doesn't make you own the house faster, it just makes it easier for you to afford.

I think the guidance most people should take away is to avoid buying a house that you cannot pay off in 10-15 years. A house at $250k at a 3.5% interest rate would cost you $72k in interest on a 15-year mortgage or $154k in interest on a 30-year mortgage. At that point, it is worth sending additional payments (especially early on in the mortgage) to save on interest. This is pretty popular advice, to not overshoot for a house you cannot afford. The best reason is that you can still move later on. Buying a house you'll live in the rest of your life might be a good goal (@Clubber) but it doesn't happen for most of us. Instead, buy a house you can actually make a dent toward ownership in, so if you want to sell it in 10-15 years you'll do so with potential profit.

You don't need to sell your house for a profit (although we all would love to). Had you rented like @magic_beans wants you to, you might have lost 100% of that money and every year your rental price may go up, you might not be allowed to have pets, you can't make improvements you want; you can lose a lot of control with renting. If you buy an affordable house though, in 10 years you might sell it and if you get back even 50% of the total cost of ownership you still walk away better than someone who rented. If you got a house you could pay off in 10 years, you might walk away with a lot of cash and some profit (especially if the house's value went up).

You then have the choice to use the cash from your home sale as a down payment for your next house, which would allow you to afford a slightly more expensive house while still paying it off in 10 years. Imagine you buy a house now for $250k, pay it off 15 years (that might cost you around $2.5k/month). You sell it in 10 years, you could then buy a house for $500k and only mortgage another $250k. Or you could buy a reasonably priced home in the middle, allowing you to start investing your money elsewhere, pay off the house sooner, etc.

My plan, my suggestion: Buy a house when you're in your 20s that is affordable. By the time you're married, have kids that need their own rooms, and are looking to settle down a bit more you'll be able to sell that first house and afford that house you need. It's worked out so far.

Re: How Many Years of Life Does That House Cost?

#46
post #10

Earlier quoted context omitted.

> bought a house big enough for a family to live comfortably that I could reasonably afford in my late 20s. Well, we'd all love to do that, but where? (That was a rhetorical question, I personally moved to Edinburgh and bought an affordable family house in my late 30s) I remember a website tracking London affordability that pointed out that in some years price appreciation made it literally impossible to save for a h…

Even if house values (or even 20% deposits) are going up faster than incomes, you can still save towards a house. Imagine a $1MM house, with a $200K minimum deposit, $135K of household income. If that house goes up by 5% per year ($50K, $10K deposit), your income never goes up , and you save 8% or more of your income towards a down payment, you are still making headway towards the down payment. If you save 15-20% of…

I think what you've said is only true asssuming that you can always afford to increase the portion of your income that you spend on housing.

If housing prices increase faster than your income does, there will come a time when you must spend 100% of your income on housing. If prices increase further, you will be unable to pay. In practice, you will be unable to pay long before then.

Re: How Many Years of Life Does That House Cost?

#47

I liked the visualization and data, but I don't think it makes sense to compare home prices to wages w/o considering alternatives to home ownership. Home prices don't exit in a vacuum. That is, if a home is 10x the median salary, you can't really say "well, if I didn't buy a home I could work 10 years less." That's because the alternative to buying is renting, which is also expensive. So sure, a mortgage in SF is $6k…

You also have to factor in the opportunity cost of what you could've done with that down payment (e.g. What would a $100k downpayment invested for 30 years in the stock market be worth vs how much is that worth in your home in 30 years?) The NYT has a buy vs rent calculator that helps make some of these decisions: https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

And of course the NYTimes calculator also factors in home prices appreciation. This is not really academic; it's fairly important. In cheaper housing markets with limited growth, it might be cheaper to rent because the expected cost of a major repair (and return on that investment) are both so low.

Of course, you can't ever recognize the value of your house unless you sell it and move somewhere cheaper (or buy a 2nd house and rent out the first one, but that's just another side of the same coin).

Re: How Many Years of Life Does That House Cost?

#48
post #27

Earlier quoted context omitted.

That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing. But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

Ha, well in non-major cities you're right, but all the major cities cost an arm and a leg for the most part!

Leave the coasts and you can find all sorts of multiple-million-people cities with far cheaper housing.

Re: How Many Years of Life Does That House Cost?

#49
post #27

Earlier quoted context omitted.

That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing. But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

You clearly don't know what it's like to live on minimum wage right now. It's extremely difficult to live anywhere even close to the Bay area on minimum wage, which let's be real, a call center employee would be on. Public transportation options get figured in there too. I'm very fortunate to have a good job now, but it wasn't all that long ago I was scraping by on near minimum wage.

This is one of the reasons companies have a strategic advantage when they let their CS folks work remotely.

Re: How Many Years of Life Does That House Cost?

#50
post #11

Is it really necessary to own a home if your mortgage is going to be 20 years long? I get that renting is like throwing money in a hole, but people are so much more nomadic these days. What's the big deal in moving once every 10 years once rent gets unbearable?

The ability to repaint and punch holes in your walls. Having a lawn and some privacy from the neighbors. Not everyone is nomadic.

There are plenty of houses for rent. Rent doesn't imply apartment.
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