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Soaring lumber prices add to the cost of a new home

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Re: Soaring lumber prices add to the cost of a new home

#141

Post by busterarm »

forrestthewoods wrote: post #139
busterarm wrote: post #136

Earlier quoted context omitted.

Hey, what do I know? I'm just debt-free millennial with a fully paid off house and car looking to purchase investment property #2 on another 15-year mortgage while renting an apartment in Manhattan.

This is just math. You don’t have to earn $200,000/year to afford a $400,000 property. Borrowing $400k costs about $2000/mo. Call it $2500 with taxes and maybe an HOA. That’s about $30,000/year, or 15% of $200,000. Take home on 200 will be north of $150. Mortgage rates are sub 3% today. That rule of thumb that’s “been around forever” existed when rates were 10%. Such a rule can not possibly be the same when the rate…

There's also a risk management calculation here. Sure the easy money and high leverage works if your life circumstances only change for the positive.

I've also seen lots of people in the last two years who had made similar sound decisions who were then furloughed, or lost their jobs, or got sick, or got REALLY sick and ended up losing everything.

If you want to make higher risk bets, there are better avenues for it and certainly ones that you don't live in and risk losing.

Re: Soaring lumber prices add to the cost of a new home

#142

Post by ineedasername »

busterarm wrote: post #141
forrestthewoods wrote: post #139

Earlier quoted context omitted.

This is just math. You don’t have to earn $200,000/year to afford a $400,000 property. Borrowing $400k costs about $2000/mo. Call it $2500 with taxes and maybe an HOA. That’s about $30,000/year, or 15% of $200,000. Take home on 200 will be north of $150. Mortgage rates are sub 3% today. That rule of thumb that’s “been around forever” existed when rates were 10%. Such a rule can not possibly be the same when the rate…

There's also a risk management calculation here. Sure the easy money and high leverage works if your life circumstances only change for the positive. I've also seen lots of people in the last two years who had made similar sound decisions who were then furloughed, or lost their jobs, or got sick, or got REALLY sick and ended up losing everything. If you want to make higher risk bets, there are better avenues for it a…

If you're losing everything, it really doesn't matter if your home was 2x or 20x. It's all gone. But for those situations short of losing everything, (lost job, furloughed, sick) then the scenario I outlined that allowed for saving 20% of income would be just of useful if housing was 60% of living expenses or 20% of living expenses.

But you also haven't commented on the aspect of the scenario I presented where a 4x home was still under Rule 28.

No single rule can encompass complex multivariate systems. That is all I am saying here. Otherwise, how about we end it here: It's clear we both agree that financial stability is good and should be a part of any long-term plan, we may simply disagree on the specific parameters that allow for it, which is fine. I appreciate the thoughtful conversation-- HN is one of the few places on the internet where I find that possible.

Re: Soaring lumber prices add to the cost of a new home

#143

Post by dragonwriter »

busterarm wrote: post #141
forrestthewoods wrote: post #139

Earlier quoted context omitted.

This is just math. You don’t have to earn $200,000/year to afford a $400,000 property. Borrowing $400k costs about $2000/mo. Call it $2500 with taxes and maybe an HOA. That’s about $30,000/year, or 15% of $200,000. Take home on 200 will be north of $150. Mortgage rates are sub 3% today. That rule of thumb that’s “been around forever” existed when rates were 10%. Such a rule can not possibly be the same when the rate…

There's also a risk management calculation here. Sure the easy money and high leverage works if your life circumstances only change for the positive. I've also seen lots of people in the last two years who had made similar sound decisions who were then furloughed, or lost their jobs, or got sick, or got REALLY sick and ended up losing everything. If you want to make higher risk bets, there are better avenues for it a…

> I've also seen lots of people in the last two years who had made similar sound decisions who were then furloughed, or lost their jobs, or got sick, or got REALLY sick and ended up losing everything.

In a non-recourse state, you don’t really “lose everything”. You lose the house, when the bank gets around to foreclosing. If you recognize the problem before you have adverse marks on your credit history, it's pretty trivial to secure an apartment before you do, otherwise the challenge is finding a landlord willing to consider details of your circumstances in renting rather than just saying no because of the adverse credit.

> If you want to make higher risk bets, there are better avenues for it and certainly ones that you don't live in and risk losing.

What specifically is a better avenue, allowing both the use of leverage and the downside risk protection of buying a house in a non-recourse state?

Because, having been through pretty much exactly the negative scenario you describe—losing the house and, the cleanliness of my credit history—I don't regret it at all.

Re: Soaring lumber prices add to the cost of a new home

#144

Post by ineedasername »

ryanianian wrote: post #107
ineedasername wrote: post #106

Earlier quoted context omitted.

Precisely... my loan was actually too small to qualify for the lowest rates, according to research & some friends in the business, rates like 1.75% were mostly for $250k+ loans, but I was still able to refinance a line of credit we'd used to expand out house years earlier to such a lower interest rate that we're saving more than 20% off our previous monthly payment & about $50k off the total life of the loan (assumin…

> assuming we do an extra payment toward the principal every once & a while At the risk of veering into financial advice, paying extra principle early is almost never a good idea. Instead, put that money aside into an investment account and use it to pay off the mortgage once the sum is greater than the balance. Assuming markets beat your interest rate, you'll have a higher return and you have the emergency fund in c…

At the risk of veering into financial advice...

Fine, but if my investments tank I'll be getting a subpoena for your IP from HN, and then from your ISP for you, so I can sue you for issuing financial advice without a license, thus causing me significant material harm. /s

Actually you're right, that's a very good idea.

Re: Soaring lumber prices add to the cost of a new home

#145

Post by busterarm »

ineedasername wrote: post #142
busterarm wrote: post #141

Earlier quoted context omitted.

There's also a risk management calculation here. Sure the easy money and high leverage works if your life circumstances only change for the positive. I've also seen lots of people in the last two years who had made similar sound decisions who were then furloughed, or lost their jobs, or got sick, or got REALLY sick and ended up losing everything. If you want to make higher risk bets, there are better avenues for it a…

If you're losing everything, it really doesn't matter if your home was 2x or 20x. It's all gone. But for those situations short of losing everything, (lost job, furloughed, sick) then the scenario I outlined that allowed for saving 20% of income would be just of useful if housing was 60% of living expenses or 20% of living expenses. But you also haven't commented on the aspect of the scenario I presented where a 4x h…

The point is that you're significantly less likely to lose your home at 2x.

Re: Soaring lumber prices add to the cost of a new home

#146

Post by xnx »

croutonwagon wrote: post #131
andrewmcwatters wrote: post #112

Earlier quoted context omitted.

Total building costs are more expensive than ever. Regulations, IBC, and consumer feature demand dictate it to be so. I don't know what you're talking about. Quality also hasn't improved, only marginal cost of production of materials has dropped. The actually structural integrity of those materials has worsened over time.

I’m sorry I’m gonna disagree. Structure designs have improved allowing cheaper/more sustainable framing to be used that are stronger. Allowing a range of materials from simple pine framing, to block etc. modern wood framing designs can withstand a lot better storm ratings than even 20 years ago. Especially when you add things like hurricane straps in the south etc. Roofing materials last longer and are cheaper and mo…

This is a great summary of material and construction improvements over the past decades. I get frustrated that housing is not the same engineered quality and does not improve as quickly as consumer electronics, but it is improving.

Re: Soaring lumber prices add to the cost of a new home

#147

Post by ixacto »

almost_usual wrote: post #134
epicureanideal wrote: post #94

Earlier quoted context omitted.

But are still EXTREMELY expensive relative to most of the US, not because of materials costs.

If you had the money and power to solve this problem how much housing would you build in the Bay Area?

I'd make SF and all the large costal cities look like this https://upload.wikimedia.org/wikipedia/commons/a/a4/Hong_Kon.... That is enough density to have a condo cost 100k instead of 500k. Sure there will be a decent amount of taxes and HOA fees, but that would turn housing into a utility rather than a government subsidy for the middle class. Also you could wire fibre to each unit and solve the internet speed problem for these NIMBYified cities.

Re: Soaring lumber prices add to the cost of a new home

#148

Post by [deleted] »

ixacto wrote: post #147
almost_usual wrote: post #134

Earlier quoted context omitted.

If you had the money and power to solve this problem how much housing would you build in the Bay Area?

I'd make SF and all the large costal cities look like this https://upload.wikimedia.org/wikipedia/commons/a/a4/Hong_Kon... . That is enough density to have a condo cost 100k instead of 500k. Sure there will be a decent amount of taxes and HOA fees, but that would turn housing into a utility rather than a government subsidy for the middle class. Also you could wire fibre to each unit and solve the internet speed probl…

[deleted]

Re: Soaring lumber prices add to the cost of a new home

#150

Post by souprock »

ixacto wrote: post #39
epicureanideal wrote: post #2

So about 0.3% of the price of an SF Bay Area home? At least in this area, the price has a lot more to do with NIMBYism than the cost of materials.

This is the real problem IMO. We need more dense condos like Chicago, where the median condo price is 268k versus other large cities where it is almost double that. This is just people being taking advantage of their housing...investment/tax shelter/savings plan that is bidding the price up. Look at something like this zero red flags that I can see for $219k that is much cheaper than in most other large cities, housi…

Why must it be "need more dense condos like Chicago" when you can just move to Chicago?

If other large cities change to be more like Chicago, then you might change your opinion of them.

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