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Why should they pay the price? This is not a moral issue. If someone would rather relax on the weekend than spend his time fussing with a house, so what? It's his life and his business. Moreover, legitimate experts often disagree about the wisdom of investing in houses. I made tons of money on my first house, whereas my second house in a very good neighborhood barely kept up with inflation, and more recently the value of my relatively modest house in one of the best neighborhoods in the Carolinas gyrates just like the value of everyone else's house as our economy wheezes along. Making money on real estate is often just luck and leverage. Don't confuse being lucky with being smart.
The potential to make money by owning a house needs to be weighed against the potential of being trapped in a house that you can't sell when you need to move to find a job, and against the inevitable obligation to become a weekend janitor.
To get ahead. Young people today are struggling to get ahead or even to be self-sufficient.
If you are already financially stable then relax on the weekends, but if you are struggling, sitting on your butt is not going to do a thing for your situation.
Home ownership is one of the few avenues still available for someone of moderate income to accumulate some wealth. You are right though that appreciation is not a constant, but if you are willing to commit over a long period you will usually do fine. There are no guarantees in life, you pay your money and take your chances, or you do nothing and insure your own failure.
To get ahead. Young people today are struggling to get ahead or even to be self-sufficient.
If you are already financially stable then relax on the weekends, but if you are struggling, sitting on your butt is not going to do a thing for your situation.
Home ownership is one of the few avenues still available for someone of moderate income to accumulate some wealth. You are right though that appreciation is not a constant, but if you are willing to commit over a long period you will usually do fine. There are no guarantees in life, you pay your money and take your chances, or you do nothing and insure your own failure.
Are you treating that time fussing with the house as an investment? Most of that time spent toiling away on the house on the weekends isn't part of the investment, most of it's just wasted effort. That young person would do far better using that time to earn income than to "get ahead" by messing with house chores. Home ownership is going to be a much poorer way to accumulate wealth now that the bubble burst, hopefully the younger generation takes this as a sign to diversify their assets better, rather than sinking all their money into one asset.
To get ahead. Young people today are struggling to get ahead or even to be self-sufficient.
If you are already financially stable then relax on the weekends, but if you are struggling, sitting on your butt is not going to do a thing for your situation.
Home ownership is one of the few avenues still available for someone of moderate income to accumulate some wealth. You are right though that appreciation is not a constant, but if you are willing to commit over a long period you will usually do fine. There are no guarantees in life, you pay your money and take your chances, or you do nothing and insure your own failure.
You say that, but what we witnessed in the recession was that home ownership tied individuals to cities where jobs were not. Underwater mortgages severely limited the mobility of workers who found themselves un- or under-employed. People would have been better off without such a linkage to a specific region.
So, I strongly disagree with your "to get ahead" sentiment.
Making money on real estate is often just luck and leverage. Don't confuse being lucky with being smart.
The potential to make money by owning a house needs to be weighed against the potential of being trapped in a house that you can't sell when you need to move to find a job....
I fully agree with these statements, and would extend the underlying concept in the second to any large purchase.
I fully agree with these statements, and would extend the underlying concept in the second to any large purchase.
It becomes a problem when you owe more than the item is worth... use to see it all the time in the car business... someone would buy a new high performance car and find they owed more than the car was worth when they needed to make a change to something more family oriented or less expensive on gas...
If the item is paid for or equity exists... a person is never trapped... just sell for market price, pocket the cash and move on.
There are 4 types of Real Estate that I am familiar with.
Owner/User... buys for shelter and amenities
Investor... buys for long term gains and to build equity
Speculator... buys hoping to flip and cash out
Developer... buys to build/improve by adding value.
The one of the four I have never been is a Speculator...
The other key is to buy the worst house in the best neighborhood you can find, and spend your weekends working on it instead of watching football and drinking beer.
There is money to be made in being a homeowner but it takes hard work, most people just are not willing to pay that price.
I made that sacrifice and for the most part it's working out. I bought a foreclosure at 29 and spent my time after work and the weekends fixing it up. Some work was above my skill level so I farmed it out. Still I saved a lot of money buying a distressed home and I was able to rent it out and cash flow monthly. I bought it cheap, and even with the money I put in to repair it, I have a lot of positive equity built in. Not only did I build financial equity, but I also learned some valuable experience. I learned to tile, some simple plumbing, drywall work, dealing with contractor etc.
As far as buying new cars, it's probably something I won't do again. When I was 23, I bought a brand new SUV, the first brand new vehicle I've owned. I had started making good money and I've always wanted this particular model of SUV since I was a kid. I could afford the payments, insurance, upkeep etc. It's a great vehicle, I still own it today and it's been paid off for a number of years. I was making payments of $575 a month and I have to wonder what the lost opportunity cost was if instead I just bought a cheaper car with a lower monthly payment.
As far as buying new cars, it's probably something I won't do again. When I was 23, I bought a brand new SUV, the first brand new vehicle I've owned. I had started making good money and I've always wanted this particular model of SUV since I was a kid. I could afford the payments, insurance, upkeep etc. It's a great vehicle, I still own it today and it's been paid off for a number of years. I was making payments of $575 a month and I have to wonder what the lost opportunity cost was if instead I just bought a cheaper car with a lower monthly payment.
I did the same, I still have the car I bought and I love the car. Even though I bought it slightly used for a good price, I still think of the opportunity cost of those monthly payments vs the investments I could have done.
I think it depends much on where in the country these "twentysomethings" are. In some regions - the NY/NJ/CT area, Bay Area, etc. - the price of even a modest house on a postage-stamp sized piece of land excludes almost all young adults from the market. In others, such as much of the Midwest, a 25-year-old beginning their career can afford to buy a house, perhaps not in the best part of town, perhaps 1920's vintage, but a house nonetheless. (The problem comes with entering the job market in some careers). Two working adults, recently married - as much of my high school graduating class (2005) now is - can often easily afford to buy a newer house on a large plot of land right outside the city, at least here. I have no specific data, but housing prices have seemed to diverge vastly between different regions of the country in the past three decades or so, and most media outlets are based on the coasts where the former phenomenon takes hold, so there is bound to be a regional bias.
As for cars - the budgets of young adults, in general, are strained more now than in years' past. Not very many people my age locally or with whom I have graduated high school do not have a car, however. They are driving less and holding on to their college and even high school vehicles, which is part of why used vehicle prices have escalated so much in recent years (even since I started driving). Elevated insurance rates and higher gas prices also surely turn people off to buying new cars. It could also be that other priorities take precedence in their budget - travel (which is far more expensive than it was in the early-mid 2000s or late 1990s), technology (it is not just rich people who "need" the latest iPhone and iPad, and data plans for those things run expensive), etc.
I've been increasing noticing a lack of being crazy about cars by us young people. Instead of wanting some awesome car, I notice more and more saying its just a tool to get from point a to b, and nothing more.
23 now and still driving my car from highschool, though it was new at the time. Finally down to $150 for registration, compared to 350+ in the past. Insurance is finally down to 500 from 2500 (flawless record) though I did buy a house and roll it with that. Probably be atleast 2 more years before I start looking for a replacement, it'll be 8 years old then (I'll keep it, being an suv it's useful, but will want a commuting car).
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