The Siren's Call of Homeownership in America

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Is it realistic? Is this some silly unsustainable part of the American Dream? What gives?

Spun off from elsewhere to keep that thread on-topic.

Here are some quotes to start things off:

Edwin wrote:

I read this and your previous post and it just makes me realize I will probably never be able to own a home. f*cking student loans and medical bills have probably ruined me for the next few decades if not ever.

Chaz wrote:

Yeah, I was lucky enough to go to a state school before tuition costs got wacky, so I have less than $8k in loans, and I'm paying them off stupidly slowly at stupid low interest. My wife went to grad school, so she's got way more loans, but the payments are manageable, if annoying.

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

DSGamer wrote:

This is the part where a P&C thread would be interesting, probably. The insurance makes some sense, in so far as someone without 20% is theoretically a risk. But then they give out mortgages like tic-tacs, thus raising prices, thus ensuring that everyone who attempts to save 20% is priced out unless they're really wealthy or thrifty. But, once again, this is probably another thread of its own.

Yonder wrote:

I think at this point for most people you either don't buy your first house with a large down payment, or you buy your first house at a much, much later time than "ideal". I suspect that that's not actually as much of a new development as we think it is, and that looking at the numbers would show that most US couples buying a house to live in together within their 20s, and maybe even right as they got married in their early 20s, is just another myth about how awesome the US is.

Minarchist wrote:

Here are some quotes to start things off:

Chaz wrote:

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

The irony of this conversation happening on this site is that the value of most of our Steam libraries would go a significant distance towards a down-payment.

Minarchist wrote:

Is it realistic? Is this some silly unsustainable part of the American Dream? What gives?

Realistic? Sure. For everyone? Of course not. Never was, and never will be.

Home ownership was part of the American Dream sold to the middle class. It's totally achievable, but in many cases, would require sacrifices that we're simply not willing to make in order to achieve it. Like moving away to Bumblef*ck where property prices are a third of what they are in OverpopulatedCoastalAwesomeTown, USA. Or living like a pauper for several years in order to put together the down-payment.

I would be curious about some hard statistics on Yonder's point. I feel like it between the widening income disparity and the rampant abuse of mortgage incentives to drive up prices (witness the 2008 bubble) it has to be true that buying a house now is more expensive than it used to be. Also factoring in current acceptable standards of construction, regulations, etc. it has to be more expensive now than it was in the 50s, 60s, etc. I would love to see hard data on that, though.

On whether it's a good idea or not? I wouldn't do it again if I had to do it over. If I could go back in time and tell myself that I would lose my job for a period of time, want to move closer to my new job, etc. I would keep renting. Now, we've also watched rising rents radically change neighborhoods in cities across the country, so that may be a simplistic answer. But given the cost of housing, given how long it takes to pay back a mortgage and given the government programs encouraging urban infill I would have a hard time recommending that someone buy a house right now. Just my opinion.

Jonman wrote:
Minarchist wrote:

Here are some quotes to start things off:

Chaz wrote:

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

The irony of this conversation happening on this site is that the value of most of our Steam libraries would go a significant distance towards a down-payment.

This is one of the reasons I sold off all my consoles, haven't really participated in Steam sales in the past year+, and have only bought games <$20. I've basically turned into that guy in XKCD that only plays games that are 5 years old.

Jonman wrote:
Minarchist wrote:

Here are some quotes to start things off:

Chaz wrote:

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

The irony of this conversation happening on this site is that the value of most of our Steam libraries would go a significant distance towards a down-payment.

You figure? If you take the big Steam libraries - say, 500 games - and assume that somebody paid full price for each one - say, $50 each - that's still only $25k. a) that's not much for a downpayment unless you're going to Bumblef*ck, and b) I would pretty confidently say that that's not even a realistic value for most Steam libraries. Find me someone who's paid $10k realmonies for their Steam library, and I'll show you an outlier.

Interestingly, I've had the opposite experience of you, DSG.

I was seriously considering buying a modest home in my mid-20's for around $75k (in my area at the time, that would get you a 2-bedroom home in the older part of town, which is still reasonably safe and decent).

Instead, I've rented for my entire adult life. Now here I am, 37, with sh*t-all to show for my ~16 years of rental payments. My quick math puts that at just shy of $130k with no equity in anything.

If I'd bought that house, it would've been paid off well before now, so I'd be paying property taxes and insurance totalling roughly $5k/year in my area (I'm highballing that estimate). Add on around $25k in repairs/upkeep I probably would've had to spend by now, and I'd instead be in the hole at around $114k with (given the increase in home/land values since then) around $85k in equity.

That's a HUGE difference in financial standing.

You know how it ended for the sailors who listened to the sirens, right?

I've read stuff in the past about rational/irrational arguments for homeownership vs. renting. I wish I could put my hands on them.

In some cases, renting is the more rational choice. It's potentially cheaper (because you're not on the hook for maintenance or repairs), and it's more flexible (you can up and go at most any time).

Equity is somewhat of a mirage. Sure, you have the privilege of paying a bank to use what's already yours. But it's not as liquid like the money you'd potentially have in your pocket if you were renting.

ClockworkHouse wrote:

You know how it ended for the sailors who listened to the sirens, right?

Sex party?

I think it's doable if you are reasonable. Granted, the cost of homes in some parts of the country are really out of whack even with the higher income of the area. We bought ours as a foreclosure and ended up with payments that were only about 20 dollars more than what I was paying for rent.

Chumpy_McChump wrote:
Jonman wrote:
Minarchist wrote:

Here are some quotes to start things off:

Chaz wrote:

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

The irony of this conversation happening on this site is that the value of most of our Steam libraries would go a significant distance towards a down-payment.

You figure? If you take the big Steam libraries - say, 500 games - and assume that somebody paid full price for each one - say, $50 each - that's still only $25k. a) that's not much for a downpayment unless you're going to Bumblef*ck, and b) I would pretty confidently say that that's not even a realistic value for most Steam libraries. Find me someone who's paid $10k realmonies for their Steam library, and I'll show you an outlier.

I put down a $12k downpayment on a nearly $300k house in Seattle 4 years ago (which I mention only to point out that a downpayment doesn't need to be quite so huge, even in an expensive part of the world).

Enhanced Steam tells me I've payed nearly $2k to Steam alone, and I'm going to assume there's another few hundred bucks in there from Steam keys purchased elsewhere. Boom - there's a significant portion of my downpayment.

Enix wrote:

I've read stuff in the past about rational/irrational arguments for homeownership vs. renting. I wish I could put my hands on them.

In some cases, renting is the more rational choice. It's potentially cheaper (because you're not on the hook for maintenance or repairs), and it's more flexible (you can up and go at most any time).

Equity is somewhat of a mirage. Sure, you have the privilege of paying a bank to use what's already yours. But it's not as liquid like the money you'd potentially have in your pocket if you were renting.

The other concern is retirement - of course, based upon the idea that I might ever retire (that looks less and less likely as the years go by). If living on a fixed retirement income, living in a paid-for home is a much more plausible proposition than living in the potentially volatile environment of rented housing.

There's also quality-of-life concerns. I miss living in a house (used to rent one, but in this area renting a house is very difficult to do with any pets and the rent costs are overpriced) for many reasons, not the least of which is that I hate dealing with fellow tenants in apartment living. And since I don't want to be one of those assholes, I do without luxuries that I miss, like exercising in my home (I refuse to live in a downstairs apartment after too many years of noisy upstairs neighbors, so that means I'm trying not to be that noisy upstairs neighbor), or watching movies on a nice surround sound system, or really just bass frequencies in general, or doing laundry/dishes/vacuuming/etc whenever I want, and so on.

I hate -- hate -- apartment living, and that's only gotten worse since my fiancee and her child moved in with me. I'm constantly stressed out about the noise our daughter is making, which wouldn't be the case in a house.

And then there's maintenance issues. The kitchen sink's faucet is a piece of sh*t that they won't fix, and I can't fix it myself without violating my lease. It's not severe enough to warrant getting the city housing authority involved, but it really sucks when you can't get a good flow of water for any kitchen purposes. The clothes dryer won't dry anything without two full cycles. The stove's exhaust doesn't actually vent outside, just up into the kitchen ceiling. Etc. None of these problems are out of the ordinary for rental living in this area from my experience (and I've moved into enough different "high-quality" apartments to know).

So yeah, there's a slew of reasons I want to buy a damn house already. I know I got chuckles from my "avoiding all the pitfalls I can" comment in the thread that prompted this discussion, but I'm going in eyes wide open from the many things I've learned from friends and family; it's just about impossible to buy a home that doesn't come with problems and hidden costs.

I do think that home ownership is becoming a more difficult proposition for each new generation though, and I'm not even entirely sure why.

Jonman wrote:

Realistic? Sure. For everyone? Of course not. Never was, and never will be.

Home ownership was part of the American Dream sold to the middle class. It's totally achievable, but in many cases, would require sacrifices that we're simply not willing to make in order to achieve it. Like moving away to Bumblef*ck where property prices are a third of what they are in OverpopulatedCoastalAwesomeTown, USA. Or living like a pauper for several years in order to put together the down-payment.

I largely agree with this. We both live in flyover country and spent a few years in a $450/mo apartment while we were saving up for a 20% downpayment on a decent home. We like it here, of course, but it's not like we were renting out one of those nice $2200/mo spaces downtown while we were saving up.

If you really want a house, there's almost always a way to make it happen, but it might take some motivation. Listen to the people calling in to Dave Ramsey's show every day telling how they paid off like $90k in debt (almost always student loans these days) in three years while making $50k a year. Pretty much every one of them has the same story: sell the new cars, buy junkers, shop at Aldi, stop eating out, cancel cable/nice phones, etc. etc. It's not something everyone is willing to do, or even should do, but it can be done. I think it's a judgement call each individual person has to make.

ClockworkHouse wrote:

You know how it ended for the sailors who listened to the sirens, right?

I just keep thinking of your comment to me a few weeks ago to the effect of "Min, every time I get the urge to buy a house I just ask how your week has been."

Homeownership has its perks, but also a great many drawbacks. I think it's weird that it has recently (read: last 20 years) become some great thing that everyone aspires to. Is it the right thing for some people? Absolutely. Is it the wrong thing for some people? Absolutely.

Move around a lot? Don't like fixing things? Don't like having a yard to take care of? Don't like having a money toilet? Need flexibility for any reason? Homeownership is probably not right for you.

Here's a plot of the last 50 years or so. That big spike is the housing run-up which was largely kicked off by the Community Reinvestment Act, then snowballed with things like 3% down FHA loans and monkeyed interest rates. We are roughly returning to the mean. (Which means that announcements like this should give everyone pause.)

IMAGE(http://upload.wikimedia.org/wikipedia/commons/thumb/d/de/Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg/1125px-Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg.png)

What does it mean? Hell if I know. But I do think it's not an indication of anything, one way or the other. Spain's homeownership rate is 85% and their economy is in the sh*tter. Germany's is 42% and their economy is quite robust. Do either of these numbers mean anything? Doubt it.

Homeownership can be — at times — a lot of fun, but they can be boat anchors, too. My old boss moved to Nashville right around the time the market crashed (mid-'07) and he couldn't sell his home in Chicago. He wound up taking a bath on it because it kept sitting there not getting sold while the market disintegrated around it, and probably set him back 5 years.

That being said, I enjoy homeownership and would not go back to renting unless my circumstances changed in some way, but I think, as Jonman said, this country has been sold a bill of goods as to what it really entails. Owning a home doesn't make you better than someone else; it's merely a place to put your stuff.

In my opinion there are three main reasons to own a home rather than renting.

1. Build up equity as your monthly payments reduce your debt, rather than going to another party.
2. Inflation resistance. Over the course of your mortgage your insurance and property taxes will increase, although it's hard to say how directly that increase will come with inflation. The bulk of your payments, however, will be completely immune to inflation. (It's worth noting that the other costs of home ownership, parts and labor in repairing, replacing, adding features to your property, will continue to increase with inflation, so the difference is pretty slight, however I still believe that higher rates of inflation will still favor the homeowner over the renter).
3. Stability to live in your own property for an extended amount of time, changing it and your home to make you happier.

Have these factors changed over the last 60 years? How much? How so?

Lets start out with the third one. Popular knowledge would probably lead us to immediately saying "people move around way more in modern times, with so much hustle and bustle it's less likely to live in a home as long, meaning that the benefit of being able to change a home to better suit you, and then enjoy the fruit of your labors, is less.

Once again I wonder, is that popular knowledge correct? Sure, people move around a lot now... but they always have, right? Right now people are moving back to cities, but before that they left them for the suburbs, and before that they moved to the cities in the first place. Our nation is that of immigrants, people and descendants of people that traveled thousands of miles just to get here. I mean, this country had the Oregon Trail, is our level of moving around now really more than it was 40-50 years ago? Maybe.

If we do move around more than before, that would also weaken the first point a bit, as people would stick around less, thus accruing less equity before moving on to the next house. Theoretically only a bit of that would be lost with the move though, because the idea would be to use what equity you got in the first house to make a larger down payment on the next home, carrying your equity with you.

Another thing that may weaken the equity point is the general lower level of income among the middle and lower classes right now. Finally paying off the home, attaining the full amount of equity and drastically lowering your monthly payments, is a long, long concern. A 20-30 year concern. It's entirely possible (and IMO fairly likely) that our lower median income, especially coupled with drastically higher health and education costs, means that many are no longer able to afford to invest in a 20-30 year payout that may very well have increased costs over the alternative in the next 5-10 years.

As for the second point, inflation protection, that's a really hard one to judge. It's really hard to tell with certainty what the rate of inflation will be over the next 10-15 years. Certainly inflation does seem to be quite a bit lower now than in many times from the 50s to 80s, which could help make owning a home a better decision in those times (although we've also changed how inflation is calculated a couple times). Since you can't really plan for that that much it seems like inflation protection is an unhelpful factor in trying to decide whether you should purchase a home rather than renting, unless you live in Venezuela or Russia or somewhere else with much higher inflation rates.

Dr.Ghastly wrote:
ClockworkHouse wrote:

You know how it ended for the sailors who listened to the sirens, right?

Sex party?

That is what she said!

On topic:

I can give a new home buyer's perspective. My wife and I bought a house in June of 2014. While there is a lot of small stuff (the previous owners were the King and Queen of 90% complete is 100% complete), the major things (foundation, walls, appliances, garage door) are all solid. I'm really happy I bought a house.

Farscry wrote:

I do think that home ownership is becoming a more difficult proposition for each new generation though, and I'm not even entirely sure why.

Well, for one thing, the average size of a house in 1950 was about 900 square feet and the average house today is about 2,200 square feet. That and the 1950s house didn't come with air conditioning, stainless steel kitchen appliances, and numerous other amenities that are viewed as "must haves" today.

What we really don't have anymore are starter homes: small, affordable homes that younger folks can buy and then trade up to a larger place when they get married and have kids. I remember seeing a new development in Orange County when I lived in California that had a sign for "starter homes beginning at $800,000."

First thought: nothing will protect you against gentrification better than homeownership. In fact homeownership in a gentrifying neighborhood gives you so many powerful bargaining chips over renting that it's almost a no brainer. I'm watching it unfold right here in my neighborhod, as tenants are forced out because property owners are requiring higher rents or selling to developers who want to build condos (which results in eviction of existing tenants).

Who's winning? The new, affluent neighbors, of course, but also the property owners selling/renting at 4x more than they were in 2008.

Second thought: homeownership can be an albatross around your neck. A few very close friends of mine chose to strategically default in 2012. They drastically downsized their clutter footprint, and have never been happier. Everything they own fits in a U-Haul, and they've lived in three different cities and three different apartments since defaulting (the personal credit score hit they took was nowhere near as disastrous as bankers would lead you to believe). This has allowed them to follow the jobs market and increase their personal income by over 50% in two years. He now makes a comfortable income in the greater Detroit area in IT while she works for a major Detroit wine distributor. These are options they would never had been able to pursue had they been forced to deal with selling a property at a loss, and they maintain the (sizeable) psychological freedom of being able to switch cities for the cost of one month's rent and a U-Haul.

Farscry wrote:

Interestingly, I've had the opposite experience of you, DSG.

I was seriously considering buying a modest home in my mid-20's for around $75k (in my area at the time, that would get you a 2-bedroom home in the older part of town, which is still reasonably safe and decent).

Instead, I've rented for my entire adult life. Now here I am, 37, with sh*t-all to show for my ~16 years of rental payments. My quick math puts that at just shy of $130k with no equity in anything.

If I'd bought that house, it would've been paid off well before now, so I'd be paying property taxes and insurance totalling roughly $5k/year in my area (I'm highballing that estimate). Add on around $25k in repairs/upkeep I probably would've had to spend by now, and I'd instead be in the hole at around $114k with (given the increase in home/land values since then) around $85k in equity.

That's a HUGE difference in financial standing.

We just went through a huge bubble, though, and timing matters. You would have been absolutely in great shape if you'd bought that house in your mid-20s. Assuming you didn't need to move for jobs, etc. Heck, my first stop if I had that time machine I mentioned earlier would be to go back and tell my 23 year old self to buy a house immediately as close in as possible and wait for it to appreciate by 1000%. Unfortunately timing is really really hard in any market. My opinion on buying a house is purely based on the current job market and my opinion that the timing isn't great right now. I might be wrong and there might be a similar $200,000 house in your market that will be $1,000,000 in 10 years. But I doubt it.

Seth wrote:

Second thought: homeownership can be an albatross around your neck. A few very close friends of mine chose to strategically default in 2012. They drastically downsized their clutter footprint, and have never been happier. Everything they own fits in a U-Haul, and they've lived in three different cities and three different apartments since defaulting (the personal credit score hit they took was nowhere near as disastrous as bankers would lead you to believe). This has allowed them to follow the jobs market and increase their personal income by over 50% in two years. He now makes a comfortable income in the greater Detroit area in IT while she works for a major Detroit wine distributor. These are options they would never had been able to pursue had they been forced to deal with selling a property at a loss, and they maintain the (sizeable) psychological freedom of being able to switch cities for the cost of one month's rent and a U-Haul.

This is basically my frame of mind right now. I'm not living it, but that's the advice I'm giving. I don't think there are many affordable homes in gentrifying neighborhoods in most popular cities unless you have some sense of what part of the city will be gentrifying next. And that requires some kind of faith that the economy will keep getting better and gentrification will continue. I don't know how much faith I have in the economy in the next 10 years so I'd much rather have flexibility, personally.

Seth wrote:

First thought: nothing will protect you against gentrification better than homeownership. In fact homeownership in a gentrifying neighborhood gives you so many powerful bargaining chips over renting that it's almost a no brainer. I'm watching it unfold right here in my neighborhod, as tenants are forced out because property owners are requiring higher rents or selling to developers who want to build condos (which results in eviction of existing tenants).

Gentrification isn't necessarily a one-way street though; there's no way to guarantee that today's trendy neighborhood won't become tomorrow's blighted wasteland. To experience those benefits you have to be willing to shoulder the risk.

I'd postulate that young people today may be more keenly aware of the risks of ownership than many older people due to the prominence of the housing market collapse. Taking on a lot of extra debt at a time when student debt is already high is a difficult proposition, and they may be much more cognizant of the potential downsides than prior generations.

As Jonman said, whether or not a house may be affordable is largely dependent on where it is. That, plus a bunch of other factors. The first house my wife and I bought was a complete sh*thole. It'd been rental property for years and had been badly neglected and had 70s carpet, multiple layers of wallpaper, and you could literally peel the roof tiles off with your hands. I spent four years working on that stupid house teaching myself home repair, and, as we were lucky enough buy before the market inflated, we were able to make a killing when we moved and buy a much nicer house.

I live in the suburbs of the Twin Cities. My house would probably cost half as much in the small Iowa town my wife is from, and would cost twice as much (if not more) in the D.C. suburbs where we used to live. There's no way I could have afforded my current house when I was 30 but I could afford the dump I bought back then.

Move 30-45 minutes further away. Buy a fixer-upper. The financial benefits of home ownership are pretty huge.

Minarchist wrote:

Here are some quotes to start things off:

Chaz wrote:

Yeah, I was lucky enough to go to a state school before tuition costs got wacky, so I have less than $8k in loans, and I'm paying them off stupidly slowly at stupid low interest. My wife went to grad school, so she's got way more loans, but the payments are manageable, if annoying.

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

Depends entirely on your lifestyle and personal situation. My wife is a nurse (underpaid for the bullsh*t she has to put up with, but still makes a decent living) and I'm a software developer. It didn't take us too long to save up for a down payment on a new house in the Seattle suburbs. But then we've never spent much money in general and my wife also had a full ride through college for swimming, which undoubtably helped. Point being, it's entirely possible for a middle-class couple to save for a down payment. Live a normal middle-class lifestyle where you're putting a way $5k-$10k per year? You'll get there, but it's gonna take some time (and luck, any major expense will kill you). Living paycheck-to-paycheck because you go out to eat every night and live in a nice apartment in some city? Never gonna get there, but it doesn't sound like that person wants to own a house anyways. 'Thrifty' and middle-to-upper-middle class? You can do it in a few years.

DSGamer wrote:

This is the part where a P&C thread would be interesting, probably. The insurance makes some sense, in so far as someone without 20% is theoretically a risk. But then they give out mortgages like tic-tacs, thus raising prices, thus ensuring that everyone who attempts to save 20% is priced out unless they're really wealthy or thrifty. But, once again, this is probably another thread of its own.

This was definitely the case leading up to the market crash, but it's not anymore. My mother actually worked for a mortgage place for a few weeks before quitting due to feeling that they were doing some shady stuff ('applicant doesn't have a job? make one up!'). Anyway, at the very least, things had tightened up by the time we moved to Hawaii in 2010. I still owned the house in WA, and it was about ~200k underwater. I could have gone through foreclosure, which may have actually been the smarter play financially, but I could get a rental payment on it that was a bit more than my monthly mortgage payment, so I figured I'd hold on to it and try to sell once the market recovered. Since that house existed, I couldn't be involved in buying the house over here, so my income and stable job was completely ignored. So for my wife, who started a new job when we moved here, they wanted something like 4 paychecks before they'd give her the loan. I was annoyed at the time, but I understand why they were so particular.

MilkmanDanimal wrote:

Move 30-45 minutes further away. Buy a fixer-upper. The financial benefits of home ownership are pretty huge.

I would say that "buy a fixer-upper and fix it up" isn't a super fair comparison with "live in a rental" it's a better comparison with "live in a rental and get a second job".

Sure, it's a second job that will teach you skills that will be valuable for you and your loved ones for your entire life, the hours are pretty flexible, the pay can be quite good, and the commute is fantastic. Not only that but it's very rewarding. It's a great second job to get if you're so inclined, but it's still asking for a lot of effort over and beyond just living in a rental.

OG_slinger wrote:
Farscry wrote:

I do think that home ownership is becoming a more difficult proposition for each new generation though, and I'm not even entirely sure why.

Well, for one thing, the average size of a house in 1950 was about 900 square feet and the average house today is about 2,200 square feet. That and the 1950s house didn't come with air conditioning, stainless steel kitchen appliances, and numerous other amenities that are viewed as "must haves" today.

What we really don't have anymore are starter homes: small, affordable homes that younger folks can buy and then trade up to a larger place when they get married and have kids. I remember seeing a new development in Orange County when I lived in California that had a sign for "starter homes beginning at $800,000."

I think this why you are seeing container homes and "tiny houses." The cost to build is insane. I am working on a housing indicator report for Duluth, MN and the average cost to build new is about 275k.

I think my house (split level, 1900 sq ft made in '59) would cost about that new. EDIT: I paid 163k after closing.

I have a bunch of work to get done. Wiring is a nightmare, decor sucks, garage is.... present but I love it. Better than any rental home or apartment I have stayed in. The foundation and frame are amazing.

That said I have some pretty competitive loan programs I am eligible for and will probably put another 30k into it before too long.

Yonder wrote:
MilkmanDanimal wrote:

Move 30-45 minutes further away. Buy a fixer-upper. The financial benefits of home ownership are pretty huge.

I would say that "buy a fixer-upper and fix it up" isn't a super fair comparison with "live in a rental" it's a better comparison with "live in a rental and get a second job".

Sure, it's a second job that will teach you skills that will be valuable for you and your loved ones for your entire life, the hours are pretty flexible, the pay can be quite good, and the commute is fantastic. Not only that but it's very rewarding. It's a great second job to get if you're so inclined, but it's still asking for a lot of effort over and beyond just living in a rental.

Oh, it's clearly a load of work and characterizing it as a second job is pretty accurate, but, from a long-term perspective, it's by far the wiser financial move. Yes, there are other concerns than just finance, but having the equity in your house is something that can make a huge difference in the long run. Add in the tax breaks from your mortgage payments, and there's short-term benefits as well.

No, the fixer-upper isn't for everyone, but it is a way to make home ownership more affordable. The average young person clearly can't afford a cool house in Portland or SF or other desirable areas. They can probably afford a crappy house somewhere else, and use it as leverage to get somewhere else at some point in the future.

MilkmanDanimal wrote:

Move 30-45 minutes further away.

A bit off-topic but worth noting that most people vastly underestimate the cost of doing that. Here's some fun with numbers.

OG_slinger wrote:

What we really don't have anymore are starter homes: small, affordable homes that younger folks can buy and then trade up to a larger place when they get married and have kids. I remember seeing a new development in Orange County when I lived in California that had a sign for "starter homes beginning at $800,000."

That might be a starter home for Orange County :). But they do exist. Before my dad moved out on his own he ran building sites for a builder who only built 'starter homes' in the Seattle-Tacoma area. They generally started around $120k (in the early 2000s when I worked for him for a summer -- no idea how much those prices inflated with the rest of the bubble). That seems reasonable to me for a starter home.

Fascinating debate, because my wife and I are beginning to save a nest egg for downpayment now. The greater sense of control a house provides is, more than any other factor, beginning to outweigh the benefits of apartment living, now that we've lived in a few different places and experienced many different positive and negative factors re: apartment life. That said, the city is right out, and much of the surrounding areas are too expensive for us as well. Luckily, as a DINK couple, we'd be ok with a relatively small house, so that opens up some more options.

Minarchist wrote:
MilkmanDanimal wrote:

Move 30-45 minutes further away.

A bit off-topic but worth noting that most people vastly underestimate the cost of doing that. Here's some fun with numbers.

That article is a favorite of mine, but I'm not sure how relevant it is on the West Coast or other areas where housing is going through the roof. My wife and I would literally have to sell our house at a loss and then spend 2 to 3 times what we pay now to move into central Portland. By my math we're better off toughing out the commute until the market recovers in our part of town. Even then I'm not sure that we would move closer in versus possibly moving elsewhere in the country or out of the country, if the opportunity presented itself.

Jonman wrote:
Chumpy_McChump wrote:
Jonman wrote:
Minarchist wrote:

Here are some quotes to start things off:

Chaz wrote:

I'm honestly not sure how anyone's expected to save up a down payment outside of having some kind of low-rent or rent-free living arrangement though. That part is seriously wacky.

The irony of this conversation happening on this site is that the value of most of our Steam libraries would go a significant distance towards a down-payment.

You figure? If you take the big Steam libraries - say, 500 games - and assume that somebody paid full price for each one - say, $50 each - that's still only $25k. a) that's not much for a downpayment unless you're going to Bumblef*ck, and b) I would pretty confidently say that that's not even a realistic value for most Steam libraries. Find me someone who's paid $10k realmonies for their Steam library, and I'll show you an outlier.

I put down a $12k downpayment on a nearly $300k house in Seattle 4 years ago (which I mention only to point out that a downpayment doesn't need to be quite so huge, even in an expensive part of the world).

Enhanced Steam tells me I've payed nearly $2k to Steam alone, and I'm going to assume there's another few hundred bucks in there from Steam keys purchased elsewhere. Boom - there's a significant portion of my downpayment.

That's a bit misleading though. When did you sign up to Steam? 2004 like most of us? Are you saying that you would have done nothing that cost money in all that time and years that you were playing games in order to save that money?

I seriously doubt it.

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