Building a Home Now--Smart Move?

[Fowl Play]

except you are not factoring in appreciation. Everyone said a recession was coming in 2019 and 2020. I bought my home in 2020 and it is now worth $150,000 more than when I bought it. There are very few instances in history where property values declined greatly. 2008 being the only real mentionable one.

And you are not factoring in your mortgage. In my example you are going to sell with 22 years left on your typical 30 year mortgage. That will eat any appreciation when you pay it off. Hopefully you refinanced in 21 and are at a great rate. I’m specifically speaking to 8+ percent you are seeing now. Typical home values increase at 4-5% yearly. The mortgage interest rate eats that.

I’m not saying it doesn’t work everywhere. I’m just challenging the typical thought of “your house is an asset”. Do the math for your situation including all the stuff I added. And if it makes sense, it makes sense. You’d be surprised in how many instances it is actually better off to rent even at $3000+ a month right now and put the money you would have put on a house towards something else. Hell, even money market and T-bonds are beating the yearly average property value increases right now.

 

[CorbLand]

A house is more of an asset than renting is. At least when you own, you have the potential for two things A) appreciation B) refinancing, lowering your payment.

When you rent, you can guarantee one thing. Your rent is going to go up. Rent price's skyrocketed along side home prices and will not stop as long as homeownership is strained due to costs.

There are circumstances where renting makes more sense but owning is generally better than renting, especially in the long run. I think you would be hard pressed to find anyone that hasnt broken even or come out a head on home purchases that have lived in them for 8 plus years. 07/08 was the anomaly.

 

[Fowl Play]

A house is more of an asset than renting is. At least when you own, you have the potential for two things A) appreciation B) refinancing, lowering your payment.

When you rent, you can guarantee one thing. Your rent is going to go up.

There are circumstances where renting makes more sense but owning is generally better than renting, especially in the long run.

I’m saying neither renting nor buying a primary residence is an asset. But one of them doesn’t gobble up a bunch of cash that could be put towards an actual asset.

If people like playing with numbers. I challenge you to test this in your market. Find a house you’d buy and then what an equivalent house would cost to rent right now. Add in the realtor fees, insurance rates, maintenance, property tax, mortgage interest, etc I listed. Put in historical average property value increase of 5% and then typical S&P values of 12%. Any money not spent on the down payment or fees gets put in investment (for renters).

See who actually winds up with more money after 10 years? 20 years? It takes a very low mortgage rate to make sense.

If someone can make this pencil out as buying wins, in their area, for current interest rates, I’ll buy you a beer. This is the problem our current generation is facing in the housing market.

Edit: I might be buying a bunch of people in middle of nowhere Utah a beer. Maybe let’s say keep it to population centers or suburbs.

 

[KurtR]

I’m saying neither renting nor buying a primary residence is an asset. But one of them doesn’t gobble up a bunch of cash that could be put towards an actual asset.

If people like playing with numbers. I challenge you to test this in your market. Find a house you’d buy and then what an equivalent house would cost to rent right now. Add in the realtor fees, insurance rates, maintenance, property tax, mortgage interest, etc I listed. Put in historical average property value increase of 5% and then typical S&P values of 12%. Any money not spent on the down payment or fees gets put in investment (for renters).

See who actually winds up with more money after 10 years? 20 years? It takes a very low mortgage rate to make sense.

If someone can make this pencil out as buying wins, in their area, for current interest rates, I’ll buy you a beer. This is the problem our current generation is facing in the housing market.

Edit: I might be buying a bunch of people in middle of nowhere Utah a beer. Maybe let’s say keep it to population centers or suburbs.

Haha your last sentence saved you. Middle of no where south dakota just the same

 

[CorbLand]

I’m saying neither renting nor buying a primary residence is an asset. But one of them doesn’t gobble up a bunch of cash that could be put towards an actual asset.

If people like playing with numbers. I challenge you to test this in your market. Find a house you’d buy and then what an equivalent house would cost to rent right now. Add in the realtor fees, insurance rates, maintenance, property tax, mortgage interest, etc I listed. Put in historical average property value increase of 5% and then typical S&P values of 12%. Any money not spent on the down payment or fees gets put in investment (for renters).

See who actually winds up with more money after 10 years? 20 years? It takes a very low mortgage rate to make sense.

If someone can make this pencil out as buying wins, in their area, for current interest rates, I’ll buy you a beer. This is the problem our current generation is facing in the housing market.

Edit: I might be buying a bunch of people in middle of nowhere Utah a beer. Maybe let’s say keep it to population centers or suburbs.

It will never pencil out if you use stagnate numbers like you want to. The cost of homeownership starts high and decreases over time. The cost of renting is low at the start and increases overtime.

Go back and tell anyone that bought in the 80s when interest rates were 15% that they would make more money renting.

 

[svivian]

I’m saying neither renting nor buying a primary residence is an asset. But one of them doesn’t gobble up a bunch of cash that could be put towards an actual asset.

If people like playing with numbers. I challenge you to test this in your market. Find a house you’d buy and then what an equivalent house would cost to rent right now. Add in the realtor fees, insurance rates, maintenance, property tax, mortgage interest, etc I listed. Put in historical average property value increase of 5% and then typical S&P values of 12%. Any money not spent on the down payment or fees gets put in investment (for renters).

See who actually winds up with more money after 10 years? 20 years? It takes a very low mortgage rate to make sense.

If someone can make this pencil out as buying wins, in their area, for current interest rates, I’ll buy you a beer. This is the problem our current generation is facing in the housing market.

Edit: I might be buying a bunch of people in middle of nowhere Utah a beer. Maybe let’s say keep it to population centers or suburbs.

I completely disagree but you are entitled to your opinion. I’m not trying to change your mind either as the world needs renters and I profit off of them.

With your thought process on interest rates, Folks in the 80’s were crazy to be buying houses at 15%…. Those poor bastards must have gone broke and homeless

 

[Fowl Play]

I completely disagree but you are entitled to your opinion. I’m not trying to change your mind either as the world needs renters and I profit off of them.

With your thought process on interest rates, Folks in the 80’s were crazy to be buying houses at 15%…. Those poor bastards must have gone broke and homeless

A rental property is definitely an asset.

Just for funzies, does anyone want to pencil out what a buyer vs renter would have made in 1980. If they invested like I’m talking about.

S&P total return since then was 12,000%, housing price return 575%

Edit: increased my housing price return. That’s the highest I can find.

 

[Danny Hoey]

I am looking into having my home built on my property.

I have heard two different views on this.

A. Do not build now with the current rates. Wait until rates drop and then build.

B. Build now while rates are high. No one is building and material costs are low. Once/If the market fixes itself, then refinance at a lower rate.

Any experts on here? What are your thoughts?

If I was borrowing the majority of the build, I would wait.

If I had the cash to build, I would.

 

[prm]

Regardless of markets, your life is moving forward. If you can afford it, build now and live the life you want. All the talk of markets, costs, etc. are just guesses. It may not be the best time, but nor is it the worst.

 

[Beendare]

Get your plans and engineering done. Once those are approved, you can take a look and see if it is go time or to wait.

Thats what I was going to say.

If you are going to finance….ouch…but paying cash…materials should come down a little more over the next year.

 

[thinhorn_AK]

except you are not factoring in appreciation. Everyone said a recession was coming in 2019 and 2020. I bought my home in 2020 and it is now worth $150,000 more than when I bought it. There are very few instances in history where property values declined greatly. 2008 being the only real mentionable one.

Same here, got our home in September of 2020, paid around 300k for it, the appraisal guy was in town a few weeks back so we had him look over ours again and he figured with our land, house and shop, we could fairly easily get well over 400k for it due to supply and demand where I live. Hard pass though since I have a 2.1% interest rate for the 25 year term, we're also putting down over a thousand dollars extra towards the principal each month.

 

[mt terry d]

Two points to consider:

Appreciation and inflation aren’t the same thing

And you never own your home even if it’s paid off; you’re still renting from the government

That said, it’s better to own.

 

[Reburn]

I completely disagree but you are entitled to your opinion. I’m not trying to change your mind either as the world needs renters and I profit off of them.

With your thought process on interest rates, Folks in the 80’s were crazy to be buying houses at 15%…. Those poor bastards must have gone broke and homeless

Hahahahahahaha.
I use the positive cash flow from older rentals to cash flow the new ones that are still negative.
I try to explain to people 7% interest vs 6% appreciation and 4% inflation.
but whatever.

 

[Reburn]

Two points to consider:

Appreciation and inflation aren’t the same thing

And you never own your home even if it’s paid off; you’re still renting from the government

That said, it’s better to own.

While this is a valid point it is not a factor.
You pay the taxes as an owner or you pay the taxes as a renter.
Either way someone is paying them.
You can either be the one that owns it or the one that pays for it.

 

[thinhorn_AK]

While this is a valid point it is not a factor.
You pay the taxes as an owner or you pay the taxes as a renter.
Either way someone is paying them.
You can either be the one that owns it or the one that pays for it.

Exactly.

 

[Fowl Play]

Same here, got our home in September of 2020, paid around 300k for it, the appraisal guy was in town a few weeks back so we had him look over ours again and he figured with our land, house and shop, we could fairly easily get well over 400k for it due to supply and demand where I live. Hard pass though since I have a 2.1% interest rate for the 25 year term, we're also putting down over a thousand dollars extra towards the principal each month.

I would ride out that 2.1% forever. The extra money you are putting down towards principle would be better put literally anywhere right now. A decent money market is over 4.5%. Thats net 2.4% more money in your pocket.

 

[cornfedkiller]

I would ride out that 2.1% forever. The extra money you are putting down towards principle would be better put literally anywhere right now. A decent money market is over 4.5%. Thats net 2.4% more money in your pocket.

Was going to say the same thing

 

[thinhorn_AK]

I would ride out that 2.1% forever. The extra money you are putting down towards principle would be better put literally anywhere right now. A decent money market is over 4.5%. Thats net 2.4% more money in your pocket.

Yeah true, it is cheap money. The idea was to get the house paid off as fast as possible since we can currently easily afford the mortgage and the extra towards the principal while still saving, making other investments/retirement stuff and maintaining our quality of life.

 

[cnelk]

I bought my place in 1989 at 11% interest rate for $54,000.

Refinanced several times thru the years, upgraded almost everything myself.

It’s now valued at $700,000+

Can’t beat sweat equity and time appreciation.

 

[PlumberED]

We are currently building our new retirement home. We are able to do all of the work ourselves. Takes time and saves money. I've more time than money. Material costs are what they are. My beautiful wife has saved us a lot of money buying supplies.
It will be nice to have a new home paid for. For us, if you wait until you have the time and money at the same time you may be waiting a while.

Congrats on building your own home. Glad to see you are installing radiant heat. OP, I am sorry for derailing the thread