How are people affording these crazy home prices?

D S 319

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Lets say you buy a home at 20, 30 year mortgage at $2000/month, and you plan to live in it until 75. That $2000/month mortgage goes away at the age of 50 and you paid $720000 total to live there and are sitting on a pile of equity from 50-75 without making any payments for 25 years.

Rent a similar home from 20 to 75 for $2000/month it would cost you $1,320,000 and your payment never goes away.

Very basic example of course but the point is youre ever ahead renting.

An extra 500k over a lifetime to never have to do maintenance or upkeep doesn’t sound too bad if you put it that way. That 720k isn’t painting the whole picture.
 

z987k

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An extra 500k over a lifetime to never have to do maintenance or upkeep doesn’t sound too bad if you put it that way. That 720k isn’t painting the whole picture.
Honestly, when I look at the real cost of repairs, maintenance and upgrade/remodel on my rentals expanded forward 55 years and then adjusted for inflation, it'll be pretty close to 500k per property, not per unit though although the budget for the 4 plex and the duplex aren't very far from each other.
 

5MilesBack

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Next problem: all the boomers and their money is going to fuel REAL inflation, further whittling away their savings, further making it harder for your kids (mine too).
How are they and their money going to fuel real inflation? What's going to fuel inflation is our government's constant over-spending. Our dollar will continue to weaken, and eventually will collapse from all our debt piling up. You'll want to own real tangible assets when the dollar crashes.
 

5MilesBack

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An extra 500k over a lifetime to never have to do maintenance or upkeep doesn’t sound too bad if you put it that way.
Ya, except I don't know anybody that would lock in fixed rental prices for the next 50 years. In 20 years average rent might be $5k/month or even more. In 40 years.......who knows. When I started college 40 years ago, rent averaged about $400 for a two bedroom apartment. Now, two bedroom apartments that are much smaller than they used to be start at $2k and go way up from there. My daughter and SIL had a very small one BR apartment in Denver and it was $1800.
 
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D S 319

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Ya, except I don't know anybody that would lock in fixed rental prices for the next 50 years. In 20 years average rent might be $5k/month or even more. In 40 years.......who knows.
Sure, you’re right, but that’s not the way he put it either.
 
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An extra 500k over a lifetime to never have to do maintenance or upkeep doesn’t sound too bad if you put it that way. That 720k isn’t painting the whole picture.
It’s very simplified yea. But it was to simply point out you’re always ahead owning vs renting on the long run, even with adding in home maintenance and such.

Plus, it’s just so much better owning your own hone and piece of dirt to do what you want to with so there is that too.
 
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Plus, it’s just so much better owning your own hone and piece of dirt to do what you want to with so there is that too.
For people like us, who value "dirt," that may be true. But don't forget there is 1/2 of society that doesn't share that desire for ownership of dirt. They have no use for it. And for them, dirt just represents work they don't have time for.
 
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For people like us, who value "dirt," that may be true. But don't forget there is 1/2 of society that doesn't share that desire for ownership of dirt. They have no use for it. And for them, dirt just represents work they don't have time for.
That’s really sad when you think about it, really is.
 
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That’s really sad when you think about it, really is.
I guess. But people not encumbered by dirt have a lot of time to devote to researching various fields. I say this because my daughter and son in law are two perfect examples. They choose to rent even though they hold four college degrees between them and could easily afford to buy. Paying their apartment manager to deal with the dirt allows them time to read, research and explore their interests. Who am I to say that's a bad thing? There is time in their future for dirt, after they have had their day in the sun. Hell, at some point they will probably own a lot more dirt than I ever will.
 

Rich M

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For people like us, who value "dirt," that may be true. But don't forget there is 1/2 of society that doesn't share that desire for ownership of dirt. They have no use for it. And for them, dirt just represents work they don't have time for.
Its not about work, its about not worrying about stuff ir not being able to afford home or condo.

We bought 20 yrs back. Value of house has quardrupled. The equity will buy our retirement place once we get there.

House is a good investment and will save money over the long run. Just get a reasonably priced home.
 

z987k

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I guess. But people not encumbered by dirt have a lot of time to devote to researching various fields. I say this because my daughter and son in law are two perfect examples. They choose to rent even though they hold four college degrees between them and could easily afford to buy. Paying their apartment manager to deal with the dirt allows them time to read, research and explore their interests. Who am I to say that's a bad thing? There is time in their future for dirt, after they have had their day in the sun. Hell, at some point they will probably own a lot more dirt than I ever will.
It's entirely possible, if not likely, that someone with high income potential can make a crap ton more money than a house will inflate in price with their time.

People don't only rent because they can't afford a down payment. If that was the case there wouldn't be half the need for rentals and housing prices would fall.
 
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Its not about work, its about not worrying about stuff ir not being able to afford home or condo.

We bought 20 yrs back. Value of house has quardrupled. The equity will buy our retirement place once we get there.

House is a good investment and will save money over the long run. Just get a reasonably priced home.
That depends on where and what you buy
 
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It's entirely possible, if not likely, that someone with high income potential can make a crap ton more money than a house will inflate in price with their time.

People don't only rent because they can't afford a down payment. If that was the case there wouldn't be half the need for rentals and housing prices would fall.
There are a lot of people with high income or the potential for high income, who choose not to buy. Washington DC area is a great example. Since most of them are smarter than I am, I'm not going to say they're wrong.
 
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Yoder

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Lets say you buy a home at 20, 30 year mortgage at $2000/month, and you plan to live in it until 75. That $2000/month mortgage goes away at the age of 50 and you paid $720000 total to live there and are sitting on a pile of equity from 50-75 without making any payments for 25 years.

Rent a similar home from 20 to 75 for $2000/month it would cost you $1,320,000 and your payment never goes away.

Very basic example of course but the point is youre ever ahead renting.
What is your time worth? Also it depends on the house and the market. Not all markets are going through the roof. You also still have payments. Property tax, insurance and utilities. Then when you go to the nursing home, they take everything you ever earned anyway.
 

Rich M

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If the property values are falling - use that as a clue and get or stay out.

Hard to change how those numbers work.

A renter will not experience the monthly payment gap between renting and buying (mortgage/tax/insurance is less than rent) or the return on equity when selling.

Everyone I know who has money, owns real estate and rentals (residential and commercial). It is a form of wealth. It is a way to increase wealth. It fluctuates with the markets and is often seen as a hedge against inflation - if the dollar loses value, the house is worth more dollars. By owning rental real estate or even a house, the money is actively working for you. In my case I pay a lot less in mortgage/tax/insurance than my kid does renting.

Some folks can't afford homes and some don't want em, preferring to travel or move around a lot. It is okay to not want to own, just can't make the numbers work to prove that it is a bad idea financially for most folks.
 
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For people like us, who value "dirt," that may be true. But don't forget there is 1/2 of society that doesn't share that desire for ownership of dirt. They have no use for it. And for them, dirt just represents work they don't have time for.
We are seeing a lot of that in the new developments going in. Wall to sidewalk building with a small landscape area of rock and native bushes. Most of them folks seem to be younger, educated but probably wouldn't know how to start a mower or change a light switch.
 
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What is your time worth? Also it depends on the house and the market. Not all markets are going through the roof. You also still have payments. Property tax, insurance and utilities. Then when you go to the nursing home, they take everything you ever earned anyway.
So youre arguing that it would be better financially to pay $2000/month rent for an additional 25 years than to pay my $3000/year property taxes, $500/year home insurance, and utilities which I paid for anyways when i rented 25 years ago? Keep in mind, if your house is worth say $500,000 and you had no payment from 50-75 whereas a renter pays that $2000 rent from 50-75 (an additional $600,000) the homeowner has $500,000 in equity in their hose whereas the renter has ZERO money in the bank to show for their efforts. Renting is just pissing money into the wind you get absolutely nothing back from the landlord when you go.

So youre saying that is a sound financial strategy, renting forever.....really????? Paying $2000 (or whatever as it can go up) in retirement seems like as much fun as poking my eyes out with a butter knife but to each their own i guess. Me, ill be mortgage free and using that money on what i want knowing i can liquidate the house any time i want and put the cash in the bank while living off my retirement.

Pro tip, there are ways to protect your assets so the nursing home gets zero.
 
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