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Old 05-04-2015, 11:22 AM
 
304 posts, read 285,178 times
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Quote:
Originally Posted by CHTransplant View Post
And, on average over time, a bad investment at that.

Why your home is not a good investment
Writers benefit by creating alarming headlines for articles, but to be more accurate, a home can be a decent investment under certain circumstances:

1. You plan to stay in the home for an indefinite period of time.
This is one reason homes got a reputation as a good investment in days gone by -- families were less transient then. If you buy a home thinking "we'll try this city out for a while, then move if we don't like it" then you should rent first, and then decide if you want to say. The beauty is that it forces the buyer to think about not only what they might need/want today, but also what they are going to need/want in 20 years. This leads to a better overall buying decision, because if they find themselves locked into the house longer than expected, they don't find themselves resorting to "desperation" moves like selling the house in the wrong market, or worse short selling or foreclosing.

2. You buy only what you need (short and long term). If people would spend less time worrying about the beauty of the landscaping, the shiny factor of the countertops, and whether or not the exact shade of the wood in the cabinets is trendy enough for them, and ask themselves: "if one of us gets terminally ill, or there is a divorce situation, can the remaining one sustain the mortgage?".

If not, it's probably way out of the range of "need" and into "want" territory. "Want" homes are dangerous investments!

But I should qualify all this. A lot of people think "Homes are bad investments" is the same as saying "You shouldn't buy a home". It's not the same thing. Yes most people should buy a home, they just should not put more money into it than necessary expecting a return. An investment is a place to put your money expecting a return when you liquidate the asset. Homes are terrible for that, however they are a great financial strategy for avoiding cost of housing increases.

Last edited by pdocstr; 05-04-2015 at 12:08 PM..
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Old 05-04-2015, 12:04 PM
 
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You could do a 10 year loan on a $250K house and your payment would be about the same as your 30 year loan on the 420K house.
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Old 05-04-2015, 12:58 PM
 
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Been in my home (now 25 yr old house) for 9 years. The house is worth maybe $5 - $10K more than I paid for it back in 2006. Houses in my area have been selling lower, due to some short sales. Over the 9 years I've owned the house I put in about $30K (new roof, new siding, new HVAC, updated/repaired deck). I still need to upgrade the master bath and get a new vanity for another bathroom. I figure if I ever get back my investment in the house it won't be for another decade or more, given that prices haven't really risen much.

BTW, this is in Cary, older section.

I knew going in that I would need to put $$$ into the home to maintain it so I was prepared. But yeah, I have dreams of selling the house and finding something new(er) since I don't really need a single family home.

OP: you should expect to need to put in $10K into this house for WhoKnowsWhat. Something will need fixing. Something will go wrong. It just does. That's on top of needing to have a full year of mortgage payments, including taxes, insurance in your emergency fund. It's never just the cost of the house; there are all kinds of things that cost money in home ownership.
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Old 05-04-2015, 01:03 PM
 
Location: Cary, NC
31,613 posts, read 55,335,524 times
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Quote:
Originally Posted by lottamoxie View Post
Been in my home (now 25 yr old house) for 9 years. The house is worth maybe $5 - $10K more than I paid for it back in 2006. Houses in my area have been selling lower, due to some short sales. Over the 9 years I've owned the house I put in about $30K (new roof, new siding, new HVAC, updated/repaired deck). I still need to upgrade the master bath and get a new vanity for another bathroom. I figure if I ever get back my investment in the house it won't be for another decade or more, given that prices haven't really risen much.

BTW, this is in Cary, older section.

I knew going in that I would need to put $$$ into the home to maintain it so I was prepared. But yeah, I have dreams of selling the house and finding something new(er) since I don't really need a single family home.

OP: you should expect to need to put in $10K into this house for WhoKnowsWhat. Something will need fixing. Something will go wrong. It just does. That's on top of needing to have a full year of mortgage payments, including taxes, insurance in your emergency fund. It's never just the cost of the house; there are all kinds of things that cost money in home ownership.
I would love to do a CMA on your house, because there isn't much in Cary that is that close to 2006 pricing.
And, the photos you have posted in the past show great appeal from the curb.
Additionally, I would completely overlook short sales when arriving at a likely sales price. There are not many current or recent short sales comps in most areas right now.
Short sales? That is so-o-o 2012.

IOW, I think it is very possible that you may be undervaluing the property.
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Old 05-04-2015, 01:07 PM
 
6,323 posts, read 7,997,981 times
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Quote:
Originally Posted by MikeJaquish View Post
I would love to do a CMA on your house, because there isn't much in Cary that is that close to 2006 pricing.
And, the photos you have posted in the past show great appeal from the curb.
Additionally, I would completely overlook short sales when arriving at a likely sales price. There are not many current or recent short sales comps in most areas right now.
Short sales? That is so-o-o 2012.

IOW, I think it is very possible that you may be undervaluing the property.
Well good! Houses in my subdivision have been selling pretty low. There's a realtor who 'specializes' in my subdivision and he sends out newsletters every time he lists and sells a property. IMO the houses he sells are priced low to move quickly (not short sales). I've been surprised at how low some of them go for.
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Old 05-04-2015, 09:18 PM
 
2,241 posts, read 2,190,981 times
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Quote:
Originally Posted by lancers View Post
What happens if you get stuck and end up in the home in perpetuity? Best to lock in near historic lows and pay the loan down. Having no debt makes everything easier.
Actually, having a pile of cash makes everything easier. How would anyone be stuck in the home in perpetuity? If you need to move and you cant get what you want for the house, you either sell it for less than you paid it or walk away from the home. NC is a non-recourse state, so if the housing market implodes and the value drops by 50%, you can still hand the keys over, walk away and not be sued for any deficiency.

In the OP's case, he has substantial reserves even after putting 20% down (2 years of mortgage payments). This is not a case of person not being in a financial position to purchase/own a home. If he is only planning on staying in the home for 5-10 years, then he is overpaying by selecting the 30 year fixed mortgage. The breakeven is 11 years, assuming the full 2% rate adjustment after month 60.

Nobody knows which way interest rates are headed. We have been fed the "rates are going up" story for the last 5 years, but here they still are hovering near record lows. Are we stuck in a 1990s era Japan situation where rates stay low for 20 years? No one really knows. Sure, if he stays for 15 or 20 years (and does not refinance) he may have been financially better off with a 30 yr mortgage, but no plan is 100% foolproof.

A couple of questions for the OP that would be more important than what type of mortgage to take out:
  • Where are you in your career/life? Is there room for growth in your industry or are you holding on to an industry which is dieing?
  • Do you have children? If not, are you planning on having them and in what timeframe? In that case, the more important guideance is to NOT buy too small a house or one where you will need/want to move when children arrive (schools, layout, etc.). The frictional costs of selling property would dwarf any mortgage savings.
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Old 05-04-2015, 09:26 PM
 
2,241 posts, read 2,190,981 times
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Quote:
Originally Posted by RedZin View Post
In your example with the 600k home around here my guess is that there are still too many places to buy a new/practically new one, so people do expect perfection from a resale.

You can also buy a new home in a lower price bracket, but those aren't quite so easy to score in desirable areas and the trim levels aren't so high as to make reselling a lower-priced home harder. It's much easier as long as it's clean and reasonably maintained.

Once the area is fully built out, those higher-priced homes will rise at a more predictable rate.

Again, just a guess.
This seems to be what is happening in my neighborhood as the $500-800K market (houses 7-15 yrs old) is red hot. Most of the comparable new construction is $600-1M with the lower end being the last few lots in a neighborhood, smaller lots or in neighborhoods that are further away from shopping, etc.
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Old 05-04-2015, 09:53 PM
 
304 posts, read 285,178 times
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Quote:
Originally Posted by cheapdad00 View Post
NC is a non-recourse state, so if the housing market implodes and the value drops by 50%, you can still hand the keys over, walk away and not be sued for any deficiency.
Not really. NC allows non-recourse mortgages but does not require them. Check your specific mortgage document fine print to see if your lender gave you the option to walk away.

Besides anyone that considers foreclosure to be a "fall back" strategy of any sort is a moron. That should be the last possible thought that enters a homeowners mind, not something to provide a feel-good cushion for buying a home that's more than they need.
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Old 05-05-2015, 07:36 AM
 
304 posts, read 285,178 times
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Interesting that the thread was moved to a geographically neutral area right around the time the discussion became more NC focused.
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Old 05-05-2015, 11:36 AM
Status: "US Dream Tracker : 67%" (set 7 hours ago)
 
3,269 posts, read 1,722,068 times
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Based on your data, I would get a $380K instead of a $450K. It still gives a mansion feeling but less hit on your budget. I live in such neighborhood and the reactions from people when they see the subdivision makes me feel a million bucks!
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