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How Long Will You Need to Save to Buy a Home In Your City?

theatlanticcities.com

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Re: How Long Will You Need to Save to Buy a Home In Your City?

#61

Post by johnpattiyson »

greghinch wrote: post #30

I really don't understand the obsession with owning a home. So many people I know expend their entire savings on buying a town home or a condo or some other place where you might as well rent an apartment. But the dream of "being a homeowner" is somehow worth it. It's always struck me as something of a con. Any tax benefits you might see are offset by the much higher monthly mortgage payment. * note my experience is…

Why do I own a home?

My girlfriend and I bought a house together a year after we finished university. We're now married. We found a beautiful 100-year old brick house in a village in the UK an hour from my work, 30 minutes from hers. It's just big enough for the family that we want in the future so we're not planning on moving.

We bought it because we wanted to have our own space to live and raise a family in. Every penny that we pay off is ours in equity. The interest base rate is so insanely low (0.5% in the UK) that we hardly pay any interest on the mortgage. We've worked hard to pay off as much of the mortgage as possible, forgoing holidays for a couple of years, so it's now more ours than the banks. In a decade or two it will be ours entirely. If we rented (and some of the houses in the village can be rented) we would pay twice as much each month and having nothing to show for it after decades.

We're close to two major UK cities, so we are not out in the sticks. We're both young academics, so we are certainly not rich.

As a couple we have a lot of fun decorating, remodelling and maintaining it. The previous owners had windows that weren't in keeping with the style so together we replaced them with hand crafted sash windows. Every summer we spend a glorious weekend having fun painting all the woodwork together.

When we die we will be able to pass on our house and its value to our children. It will be the house they grew up in, in the village they grew up in. They will either be able to sell it to get our life savings, meaning they or their children can buy their dream home, or perhaps they'll build a family in it as well.

Having your own house is about having your own space - your own castle.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#62

Post by maxerickson »

ido wrote: post #32

Interesting to see Detroit has a similar average wage as prosperous southern California cities...

From what I can tell, the wage data doesn't capture unemployment and is tied to the place of employment. It includes unemployment benefits, but it doesn't factor in people that are not working and not receiving benefits. So it doesn't really do much to capture the overall economic situation of the people living in the reporting areas.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#63

Post by ibisum »

greghinch wrote: post #30

I really don't understand the obsession with owning a home. So many people I know expend their entire savings on buying a town home or a condo or some other place where you might as well rent an apartment. But the dream of "being a homeowner" is somehow worth it. It's always struck me as something of a con. Any tax benefits you might see are offset by the much higher monthly mortgage payment. * note my experience is…

Renting an apartment means giving someone else money to let you live in their space.

Buying a home means, paying a bank to live in what will eventually, hopefully, be 'yours' to do as you wish. Such as, rent it out to someone.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#64

Post by reefoctopus »

FHA loans require 3.5%, and a typical conventional loan requires 5%. There are also housing programs in some areas that will help with a down payment. For example, the House Charlotte program recently contributed $7500 towards a home for a friend of mine.

20% is only required if you don't want to pay private mortgage insurance.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#65

Post by greghinch »

rayiner wrote: post #48
greghinch wrote: post #30

I really don't understand the obsession with owning a home. So many people I know expend their entire savings on buying a town home or a condo or some other place where you might as well rent an apartment. But the dream of "being a homeowner" is somehow worth it. It's always struck me as something of a con. Any tax benefits you might see are offset by the much higher monthly mortgage payment. * note my experience is…

Say you take out a $400,000 loan for a $500,000 place (this will buy you a 3BR high-rise condo in downtown Chicago). At today's rates, your mortgage payment will be ~$2,000/month. Your first payment on that house will be $600 principal and $1,400 interest. In a condo, your HOA fee will be maybe $800-1000/month. Depending on your tax bracket, your tax savings will be ~$400/month, which will cancel out your property ta…

I see how you're doing the math, but I think you're presenting it misleadingly to say your monthly cost is $1400+$1000. First of all you left off the $600 principal; you may recoup that in a sale but you still gotta pony it up every month. Second, your $2000 a month mortgage payment seems low on a $500k home. Talking to realtors and friends that have bought, the rule I've been told to go by is plan $700-$800 per $100k for mortgage and property taxes (not including any HOA). So that means a cost of $3500-4000 PLUS HOA dues every month. Even if you are offsetting $1000 of that with tax benefits, renting for $3k still looks attractive, especially if you factor in the cost of maintenance of a period of 10 years or more. Between two homes I've rented I've not had my rent increased once by a landlord in the past 6 years.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#66

Post by mycodebreaks »

richardjordan wrote: post #36
mycodebreaks wrote: post #21

Earlier quoted context omitted.

Or you can ride Caltrain. The downside is the accidents on Caltrain tracks. It will literally take 2 hours to get to Mountain View from SF when there is an accident.

...or when (like the weekend of the first AngelHack event) you are delayed because your train hits a pedestrian (a horrendous sound by the way - you know exactly what's just happened immediately) then the replacement train is delayed because the next train in front hit a second pedestrian. They need to sort out the grade separation, it's just ridiculous, not to mention tragic.

Totally agree.I wonder why Caltrain is inefficient at times.

What prevents Caltrain to do better in terms of keeping up with schedule? Also, there must be a way to keep fare reasonably cheaper than cost of driving a car to work.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#67

Post by heretohelp »

troels wrote: post #60
heretohelp wrote: post #58

Earlier quoted context omitted.

Most of the developing world, when it has a motor vehicle at all, it's a scooter or motorcycle. So no, it's not a first-world problem to ride a two-wheeled vehicle in bad weather because you can't afford a car. Try visiting Southeast Asia or India sometime.

Yes, but I bet that you choose to drive a bike for all sorts of non-practical reasons, which makes it a luxury issue. Anecdotally, my impression is that lots of people wear suits in both India and Southeast Asia. Maybe even more so than we tend to do in "the West". For lots of people it's not a choice, but a requirement to keep a job.

At the time I rode my motorcycle through a midwestern winter, it was because I was living off $5-6k a year and living on my own. I was profoundly impoverished.

But your assumptions about my status in being a yuppie like you are noted.

>Anecdotally, my impression is that lots of people wear suits in both India and Southeast Asia.

That wasn't my impression at all. Most people wore nice, cool button-down shirts with slacks.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#68

Post by rayiner »

greghinch wrote: post #65
rayiner wrote: post #48

Earlier quoted context omitted.

Say you take out a $400,000 loan for a $500,000 place (this will buy you a 3BR high-rise condo in downtown Chicago). At today's rates, your mortgage payment will be ~$2,000/month. Your first payment on that house will be $600 principal and $1,400 interest. In a condo, your HOA fee will be maybe $800-1000/month. Depending on your tax bracket, your tax savings will be ~$400/month, which will cancel out your property ta…

I see how you're doing the math, but I think you're presenting it misleadingly to say your monthly cost is $1400+$1000. First of all you left off the $600 principal; you may recoup that in a sale but you still gotta pony it up every month. Second, your $2000 a month mortgage payment seems low on a $500k home. Talking to realtors and friends that have bought, the rule I've been told to go by is plan $700-$800 per $100…

It's not misleading, it's accurate. Your principal payment is money you'll get back on sale (or can borrow from if you need liquidity). It's qualitatively different than interest or a rent payment that you'll never get back.

My number is roughly in line with the $700/100k figure. I'm assuming 20% down, so the loan is for $400k. If your credit is excellent, and you don't live in one of the high-tax areas, $2000 loan payment + $500 taxes is doable.

As for rent increases, I've never not had a rent increase in 8 years of renting in Chicago and Atlanta. It's standard practice in the city.

Re: How Long Will You Need to Save to Buy a Home In Your City?

#69

Post by greghinch »

rayiner wrote: post #68
greghinch wrote: post #65

Earlier quoted context omitted.

I see how you're doing the math, but I think you're presenting it misleadingly to say your monthly cost is $1400+$1000. First of all you left off the $600 principal; you may recoup that in a sale but you still gotta pony it up every month. Second, your $2000 a month mortgage payment seems low on a $500k home. Talking to realtors and friends that have bought, the rule I've been told to go by is plan $700-$800 per $100…

It's not misleading, it's accurate. Your principal payment is money you'll get back on sale (or can borrow from if you need liquidity). It's qualitatively different than interest or a rent payment that you'll never get back. My number is roughly in line with the $700/100k figure. I'm assuming 20% down, so the loan is for $400k. If your credit is excellent, and you don't live in one of the high-tax areas, $2000 loan p…

Well it does matter from a practical sense in that you'll need to write checks for $2500 a month (plus HOA). You may recoup $5000 or so in tax relief at the end of the year, but you still had to come up with that money in the first place (let alone save up $100,000 which is no mean feat, even if you're making a low six figure salary like a lot of professionals in their late 20s/early-mid 30s).

I guess my bottom line with my original comment was, I can think of a lot better uses for the money, time, and effort it takes to buy a $500,000 condo, and to me the returns in my quality of life vastly outweigh any sort of long-term security you might feel from owning a home

Re: How Long Will You Need to Save to Buy a Home In Your City?

#70

Post by salsashark »

greghinch wrote: post #69
rayiner wrote: post #68

Earlier quoted context omitted.

It's not misleading, it's accurate. Your principal payment is money you'll get back on sale (or can borrow from if you need liquidity). It's qualitatively different than interest or a rent payment that you'll never get back. My number is roughly in line with the $700/100k figure. I'm assuming 20% down, so the loan is for $400k. If your credit is excellent, and you don't live in one of the high-tax areas, $2000 loan p…

Well it does matter from a practical sense in that you'll need to write checks for $2500 a month (plus HOA). You may recoup $5000 or so in tax relief at the end of the year, but you still had to come up with that money in the first place (let alone save up $100,000 which is no mean feat, even if you're making a low six figure salary like a lot of professionals in their late 20s/early-mid 30s). I guess my bottom line…

Don't forget the cost of improvements and remodeling for a home you own? Home owners will probably need to update at least the bathrooms and kitchens before they sell, which can be an investment of >$20k. Not to mention the costs of repair, which you don't take on in a rental...
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