Nothing Inbetween (Grove City: home, college, income)

[janiesgirl]

Captain - I just took a quick look at the HHanna website for houses in Mt. Lebanon listed at $100-150. There are more than you think. Some I recognize and know to be decently kept in lovely neighborhoods with friendly people who mow their lawns and would mow yours too when you're sick.

They're not new, but very little in this suburb is. What you might get for your money is plaster walls, slate roofs, charm, community infrastructure. We live in an old, smallish house. Three kids in 1800 square feet, which feels just fine to us, but stuns the folks who live in McMansions. People ask how I can cook for my family in our small kitchen. I cook holiday meals for 20+ people in my kitchen! I didn't expect new or large - just enough.

You'll find it - spend a couple of Sundays and target looking at 10 properties. It's out there.

[Tallysmom]

Originally Posted by Hopes

Of course, why not at least ask!

This is what happens when I try to do more than one thing at a time.... I don't finish something! Okay -- the study said there was a 50,000 difference between the asking figure and the selling figure. Usually, the figures are more in line together -- not exact mind you, but not 50K apart...

This means that sellers still have a very inflated idea of their home's worth (or that they used the home as an ATM, and are in debt that much!). And they aren't willing to dicker much because of that, and that's one of the reasons the real estate market has slowed down.

The guy also said when the figures come more into line together, that's when the housing slowdown will be done.

[CaptainObvious]

Originally Posted by hnsq

Zip, I agree with what you are trying to say, however I don't quite think this is the case with regard to a 401K. Lets say I make $100,000/yr (for a nice, round number). Lets also say my employer will match 100% of my investment into a 401K up to 6%. If i opt to invest nothing, my paycheck (and total income) for the year is $100,000. Now lets say I choose to invest the maximum of 6% into the 401K. My paycheck for the year drops to $94,000, but I have also invested $12,000 (6% of my pay plus the amount my employer matched). This brings my gross income for the year to $106,000. This is money I make TODAY, not tomorrow. Going with this choice allows me to make $6,000/yr more than investing nothing at all. Yes, you might not be able to access this money today, but it still has present value. The future value of the present assets is positive. In your example (as quoted above), you are advising against comparing present value of present assets to future value of future assets. There is a huge difference.

Yeah, I am not touching the 401(k). I make 100% on the money the moment I put it in there...and that's a deal too good to pass up.

Captain

[Tallysmom]

Originally Posted by CaptainObvious

Yeah, I am not touching the 401(k). I make 100% on the money the moment I put it in there...and that's a deal too good to pass up.

Captain

There was a radio money guy out here that was talking about whether you can earn real money in the stock market VS real money in real estate. He said -- the stock market gains beats home ownership gains all the time.

But I think it's hard to quantify. I know people that have purchased homes that are money pits. And I know us. We've hardly put any money into this house that was "needed". It was a solidly built little house, firmly anchored to the foundation. Every thing but repointing the fireplace and chimney has been cosmetic updates. (I consider fancy granite kitchens cosmetic) And maybe that's the wrong to look at it...

Now -- that being said -- I can say that when real estate has been bad, the stock market has been great. And when the stock market has been bad, real estate has gone gangbusters. At least here. So I feel like I've had the best of both worlds...

[Hopes]

I find it amazing that citydata members have spent 7 pages on trying to convince CO to take the plunge.

[CaptainObvious]

Originally Posted by Tallysmom

There was a radio money guy out here that was talking about whether you can earn real money in the stock market VS real money in real estate. He said -- the stock market gains beats home ownership gains all the time.

The DOW has averaged a 7% gain annually over the past 50 years. Housing prices have averaged a 4% gain annually over the past 50 years nationwide. Over the long run, he's right.

Cap

[CaptainObvious]

Originally Posted by Hopes

I find it amazing that citydata members have spent 7 pages on trying to convince CO to take the plunge.

Well, at least 3 of that was me b itching about housing prices.

Cap

[Hopes]

Originally Posted by CaptainObvious

Well, at least 3 of that was me b itching about housing prices.

Property will only get more expensive, CO.

Pittsburgh real estate in solid neighborhoods don't depreciate like real estate in cities with huge boom and bust economies.

[zip95]

Originally Posted by hnsq

Zip, I agree with what you are trying to say, however I don't quite think this is the case with regard to a 401K. Lets say I make $100,000/yr (for a nice, round number). Lets also say my employer will match 100% of my investment into a 401K up to 6%. If i opt to invest nothing, my paycheck (and total income) for the year is $100,000. Now lets say I choose to invest the maximum of 6% into the 401K. My paycheck for the year drops to $94,000, but I have also invested $12,000 (6% of my pay plus the amount my employer matched). This brings my gross income for the year to $106,000. This is money I make TODAY, not tomorrow. Going with this choice allows me to make $6,000/yr more than investing nothing at all. Yes, you might not be able to access this money today, but it still has present value. The future value of the present assets is positive. In your example (as quoted above), you are advising against comparing present value of present assets to future value of future assets. There is a huge difference.

That only makes sense if a 401k is the best possible investment...which it isn't. Many investments show exponential return rates. That means that "If I'm smart with my investments" my $1 will easily beat your $2 over time. Understand that a 1-time doubling right-now is worse than good exponential return over time.......that's just the math.

Remember, my original comment was:
...."If you know how to invest (in your house or whatever else) $1 today is more valuable than $3 tomorrow.".....

Now, If a 401k is all that's available to you, it could be a good idea...but "If you know how to invest " It's not going to make sense. One investment that could show you a higher return would be your house.

But you say, wait a minute Zip95, I just heard....

Originally Posted by CaptainObvious

The DOW has averaged a 7% gain annually over the past 50 years. Housing prices have averaged a 4% gain annually over the past 50 years nationwide.

To which I would reply...

That's an irrelevent statistic...unless of course you plan on buying every house in the nation....Real estate is always local!

Tell the people who brought houses in Cranberry or Robinson 10 years ago that they would only see a 4% gain...they'll laugh at you all the way to the bank.

Tell the people who brought houses in Wilkensburg or Western Penn Hills 10 years ago that they could see up to a 4% gain...they'll laugh at you all the way to the poor house.

Even a real estate statistic for only the Pittsburgh Metro would be irrelevent. You have to look at your own situation, determine your appetite for risk, and see what's available to you. Whatever you decide, you should understand that a 401k is far from the ultimate investment.

[hnsq]

Originally Posted by zip95

That only makes sense if a 401k is the best possible investment...which it isn't. Many investments show exponential return rates. That means that "If I'm smart with my investments" my $1 will easily beat your $2 over time. Understand that a 1-time doubling right-now is worse than good exponential return over time.......that's just the math.

Remember, my original comment was:
...."If you know how to invest (in your house or whatever else) $1 today is more valuable than $3 tomorrow.".....

Now, If a 401k is all that's available to you, it could be a good idea...but "If you know how to invest " It's not going to make sense. One investment that could show you a higher return would be your house.

zip - if you want to believe that, go right ahead. If you are ever in Grove City, PA and have a minute to spare, I can give you the name of a few grad-school professors who would love to go over it with you, but it seems your personal experience is a higher source than the people I have learned from who have spent their lives studying such material.

I am done arguing - not going to post again about this. Its your money, if you don't want a 401K, that is absolutely your choice.