How are people affording these crazy home prices?

[Rich M]

I don't know, maybe it's always tough to avoid myopia. I think we live modestly compared to others around us. We have 3 vehicles, the newest a 2008 with 180k on it, and we save $70k a year into various retirement accounts. We live where we live for the kids and the social opportunities it provides. If it were just me and my wife we could get rid of most of this stuff. I envision our retirement to be in a small place on a small piece of land, and we are working hard to get there by age 55 (and I think we will).

I'll say again, I don't think middle class America wants 1200, 1400, or even 1800 sf. Middle class America would rather mortgage up to their eyeballs on 3000+ sf and work till they die, and there is plenty of evidence to prove that.

We’re on similar paths. we lost a business in 2009 and abruptly hit negative. Took til 2014/2015 to get feet back under us. Leased house so we didnt lose it. Investing about the same in 401k and stock options. Wife drives a 2013 and i drive a company vehicle. We live here for work. Our kids are long out and have grandkids.

Not gonna make it in time for 55, hoping for less than 10 yrs tho. Hope you get it all down tight and make it work. 55 is a great time to retire.

Yes, many folks desire big. Some can afford it.

I’m genuinely curious what everyone’s property taxes look like. I chose where I live currently based in part on the property taxes. 1 mile down the road (next county over they are almost quadruple). I have a 3800sf house on 7-ish acres and pay somewhere in the neighborhood of $2000. Although that will go up next year to pay for bigger schools and road improvements- etc.

You can go online to many tax assessor websites and pull the data for houses, taxes, what they paid, etc.

My dad always talked about turning down this certain lot on a river. It was maybe $60k when they were looking. It now has a $2.3 mil house on it and pays $38k/yr in taxes. I looked it up kadt time hecwas telling the story.

Gotta factor in risk. You lose your job what happens? You work for Yellow Freight and wake up tomorrow without a job, how does that math work out for you? I will take my way every day you can do yours. Great thing about America

Wife and i bought our house with this mindset. I had already been laid off a few times and wanted to be sure we could afford it one 1 salary. Could have gotten more but went with affordable.

Right now we have 3.75% mortgage. They are basically paying us to have it. Some Banks are paying close to 5%. I think that’s what he meant. No need to pay it off early, put that money into interest earning account…

 

[z987k]

Gotta factor in risk. You lose your job what happens? You work for Yellow Freight and wake up tomorrow without a job, how does that math work out for you? I will take my way every day you can do yours. Great thing about America

Well, I'd have about 12 years to find a new job before I couldn't make the payment. BIG risk. With the bank giving me the first 1k of the payment, I could work at the local grocery store stocking shelves and make the payment every month.

 

[NRA4LIFE]

I’m genuinely curious what everyone’s property taxes look like. I chose where I live currently based in part on the property taxes. 1 mile down the road (next county over they are almost quadruple). I have a 3800sf house on 7-ish acres and pay somewhere in the neighborhood of $2000. Although that will go up next year to pay for bigger schools and road improvements- etc.

I live on 5 acres, 2400 SF house, 1300 SF pole barn and pay over $10K in property taxes. And yes, that's per year.

 

[Rich M]

If you think you can do what you want with you're property, try moving to King County in WA. I would need a permit to mow some of my yard if I wanted.

I live in FL for a reason. You choose to live in a deep blue state. Have some friends who moved to oregon for some reason, they’re happy.

I know folks in CT and they pay $4000/yr for taxes on a small house w less than 1/8 acre. Also know someone w similar property in FL that pays $850/yr.

Know someone else in FL w 25 acres and cattle. Very nice house. Pond. $250/yr taxes due to ag designation.

 

[NRA4LIFE]

Of course, on the flip side, I own 48 acres in MO (no house, just a camper) where I pay $32 a year in taxes.

 

[Rich M]

Of course, on the flip side, I own 48 acres in MO (no house, just a camper) where I pay $32 a year in taxes.

Crazy aint it?

 

[browning2480]

Well, I'd have about 12 years to find a new job before I couldn't make the payment. BIG risk. With the bank giving me the first 1k of the payment, I could work at the local grocery store stocking shelves and make the payment every month.

I guess this thread isn’t for you then lol. You can make a mortgage payment bagging groceries for 12 years so cost can’t be that high then.

 

[z987k]

nope.

 

[browning2480]

It's not terribly low. The difference is that I'm having my money pay me more than the bank charges me.
This is why the Dave Ramsey approach to debt is for idiots. It's not that it's bad, because if you're an idiot with your money, you really should follow his advice. But there's a much better way.
Rich dad poor dad comes to mind here.

Everyone has to make their own way in life. Good luck to you!

 

[HvyBeams]

It's not terribly low. The difference is that I'm having my money pay me more than the bank charges me.
This is why the Dave Ramsey approach to debt is for idiots. It's not that it's bad, because if you're an idiot with your money, you really should follow his advice. But there's a much better way.
Rich dad poor dad comes to mind here.

Calling people idiots and simpletons for a personal finance choice is the best way to get people to change their minds on their personal finance decisions. Post up your portfolio, 36-year-old decamillionaire.

 

[z987k]

Calling people idiots and simpletons for a personal finance choice is the best way to get people to change their minds on their personal finance decisions. Post up your portfolio, 36-year-old decamillionaire.

I agree, I'm sorry for that. I edited that not quick enough and shouldn't have wrote it that way in the first place.
You don't need 10 mil in assets to bring in 1k a month passive.

 

[fngTony]

That's way too simplistic way to look at it.

Are you really a slave to the lender if the lender gives you $1k a month in interest on the money you have, but only charges you $500 a month in interest on what you owe him? Seems like he's a slave to me.

I could pay off my house right now, but my lender is paying me not to. If everything remained constant(My MM interest rate didn't change for the next 20 years), I will be 120k ahead by NOT paying off the loan early.
If that swaps, and the interest paid to me becomes less than the interest I owe, I can take not only the money I have but all the extra money they've given me up to that point and pay off whatever amount I want.

I’m not swimming in debt but I’m also not knowledgeable beyond basic finance so what does all this mean?

Well, I'd have about 12 years to find a new job before I couldn't make the payment. BIG risk. With the bank giving me the first 1k of the payment, I could work at the local grocery store stocking shelves and make the payment every month.

Probably ties into the above but how is the bank giving you 1k?

I agree, I'm sorry for that. I edited that not quick enough and shouldn't have wrote it that way in the first place.
You don't need 10 mil in assets to bring in 1k a month passive.

I also read that before your edit but I don’t think you’re raising kids in that space? And this is probably a whole nother thread but interested in how you’re doing the passive income thing? I think you mean interest from investments and not the modern borderline sketchy affiliate link or amazon store?

 

[big44a4]

I live in FL for a reason. You choose to live in a deep blue state. Have some friends who moved to oregon for some reason, they’re happy.

I know folks in CT and they pay $4000/yr for taxes on a small house w less than 1/8 acre. Also know someone w similar property in FL that pays $850/yr.

Know someone else in FL w 25 acres and cattle. Very nice house. Pond. $250/yr taxes due to ag designation.

In texas I live on .47 acres with a 2,062 SQFT (3 bed/2 bath) house and my property taxes are $9600 a year. I like my house but it’s not as nice as that would make you think.

 

[z987k]

I’m not swimming in debt but I’m also not knowledgeable beyond basic finance so what does all this mean?

Probably ties into the above but how is the bank giving you 1k?

I also read that before your edit but I don’t think you’re raising kids in that space? And this is probably a whole nother thread but interested in how you’re doing the passive income thing? I think you mean interest from investments and not the modern borderline sketchy affiliate link or amazon store?

If the interest rate on your mortgage is 2.5% and the interest rate on your saving account is 5%, you net 2.5% every month by not paying extra on your mortgage, assuming you have the extra money to net the 2.5% on.

Money markets are paying 4.5-5.2% right now. If that yield drops below your mortgage rate, then at that point you should start paying the extra money on the mortgage rather than sit on it, assuming you can't make it go to work for you elsewhere at greater than 2.5%. The difference there is money market accounts carry no risk so long as you keep each account at an institution under 250k. 5% is a hell of a return on a no risk whatsoever investment and rates haven't been this high since the early 90s. Who knows how long it will last.
I guess we could also discuss the real rate of inflation and the effect that has on sitting on money like that below the rate of inflation while also considering the effect of inflation on mortgage interest/principal.

 

[fngTony]

If the interest rate on your mortgage is 2.5% and the interest rate on your saving account is 5%, you net 2.5% every month by not paying extra on your mortgage, assuming you have the extra money to net the 2.5% on.

Money markets are paying 4.5-5.2% right now. If that yield drops below your mortgage rate, then at that point you should start paying the extra money on the mortgage rather than sit on it, assuming you can't make it go to work for you elsewhere at greater than 2.5%. The difference there is money market accounts carry no risk so long as you keep each account at an institution under 250k. 5% is a hell of a return on a no risk whatsoever investment and rates haven't been this high since the early 90s. Who knows how long it will last.
I guess we could also discuss the real rate of inflation and the effect that has on sitting on money like that below the rate of inflation while also considering the effect of inflation on mortgage interest/principal.

I appreciate the response but after the first paragraph…..

 

[NRA4LIFE]

If the interest rate on your mortgage is 2.5% and the interest rate on your saving account is 5%, you net 2.5% every month by not paying extra on your mortgage, assuming you have the extra money to net the 2.5% on.

Money markets are paying 4.5-5.2% right now. If that yield drops below your mortgage rate, then at that point you should start paying the extra money on the mortgage rather than sit on it, assuming you can't make it go to work for you elsewhere at greater than 2.5%. The difference there is money market accounts carry no risk so long as you keep each account at an institution under 250k. 5% is a hell of a return on a no risk whatsoever investment and rates haven't been this high since the early 90s. Who knows how long it will last.
I guess we could also discuss the real rate of inflation and the effect that has on sitting on money like that below the rate of inflation while also considering the effect of inflation on mortgage interest/principal.

It will last until November 2024. Then we're back in the market, strong.

 

[PNW bow hunter]

He means he has about $240k sitting in a money market account that pays 5 percent. ($12k per year, $1000 per month in interest payments )

His mortgage is with the same bank for the same amount ($240k) and he pays the bank 2.5 percent interest on that mortgage.
(He pays the bank about $6k per year/ $500 per month)

By not just paying off the loan he is ahead 2.5 percent by loaning the same bank money (money market account) he borrows money from for his mortgage.

He’s up $6k if all that is actually true

Meanwhile my money in the Vanguard total stock market index fund is up 17.56 % since the beginning of 2023.
$240k in that index fund would give you a profit of $42k so far this year!

So far from this thread I have learned what ever each of us has personally done financially is the smartest idea, which makes sense.

Because we all try to make the best decisions with our money.

Also there are also several people that made way smarter decisions

I appreciate the response but after the first paragraph…..View attachment 584232

 

[z987k]

He means he has about $240k sitting in a money market account that pays 5 percent. ($12k per year, $1000 per month in interest payments )

His mortgage is with the same bank for the same amount ($240k) and he pays the bank 2.5 percent interest on that mortgage.
(He pays the bank about $6k per year/ $500 per month)

By not just paying off the loan he is ahead 2.5 percent by loaning the same bank money (money market account) he borrows money from for his mortgage.

He’s up $6k if all that is actually true

Meanwhile my money in the Vanguard total stock market index fund is up 17.56 % since the beginning of 2023.
$240k in that index fund would give you a profit of $42k so far this year!

So far from this thread I have learned what ever each of us has personally done financially is the smartest idea, which makes sense.

Because we all try to make the best decisions with our money.

Also there are also several people that made way smarter decisions

Oh absolutely. I am not saying that a MM is the smartest way to handle your money, it very likely is not. All I'm claiming is that paying off a under 5% mortgage is currently very much not the smartest way to do it and using the MM at 5% and an example of why with literally 0 risk. The market returns 7ish% long term right? So anything under that would qualify.
The issue was paying off a crazy low interest mortgage just to "not have a payment".
The 0 risk is relevant here because of the perceived issue of not being able to pay it if you lost your job, or the return dropped below the interest rate. At which point no matter what the market did, you still have all the money to pay it off, you're just richer in having waited.

 

[Rich M]

In texas I live on .47 acres with a 2,062 SQFT (3 bed/2 bath) house and my property taxes are $9600 a year. I like my house but it’s not as nice as that would make you think.

The whole tax thing confuses me, but it seems to be based on location and area around here. Some cities/counties charge more.

It might be different if the taxing authority provides more services. Better roads, water, snow plowing (where applicable), storm response, etc.

Personally, have see no significant diff between local services in 3 states I have experience and the tax rates were diff - income, state, sales, gas, etc. If I move, this will be a significant factor in choosing.

 

[loganwayne]

I just turned 32 and paid off all our debit. my wife is 29. Id love to go out and buy some land but its to expensive now to even consider it. we are stocking all our cash away incase we get a chance at some property but realy dont see it happening a few years ago ok land was 4500.00 an acre. now even the land that's impossible to build on is 12-15000.00 an acre.