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Tying up 230 at say 6% is what over 1300 dollars a month, am I right on my calculations? So if its paid for you do not have to make that Prin and Interest payment.
Can you make 6% on that money today? Close to it but then you still need a place to live.
Rentals are in the 800 to 1200 range for soso 2 bedroom places. Home rentals are near 1200 a month and up. kinda a wash? but a paid for home is well a great place to SLEEP IN!
I suppose it would be mortgaging a house, rather than renting, that would qualify for the adage "throwing your money away" (in this particular case).
I find the NY Times calculator to be the best index in deciding whether or not it's cost effective. It factors in upkeep, interest deduction and interest.
I think the rent:mortgage ratio (aka fundamentals) is important factor to consider in the area. If you're comfortable with how that lines up between how much it would cost you to rent vs. buy the same house...I think things are going to be ok for you.
In many many areas of the country fundamentals are completely out of whack. See patrick.net (Prices still disconnected from fundamentals. House prices are still far beyond any historically known relationship to rents or salaries. Yearly rents are 3% of purchase price. Mortgage rates are 6.5%, so it costs more than twice as much to borrow money to buy a house than it does to rent an equivalent house.). I don't see that being the case in much of the Triangle so I feel more optimistic about the Triangle's future.
Have sale prices been on a decline here at all prior to this report? I don't want to be seen as the "Debbie downer" of the thread (no disrespect to any members named Debbie here), but do slight rises in sale prices really mean the market has turned around while the quantity of sales steadily decreases?
Exactly what I was thinking MorrisBoy. And, even if there wasn't a mortgage, there is still the opportunity cost of tying up $230k. So living in that house for 1 year has already costed you something NC-newcomer, in the form of interest paid or interest not received.
Two points...
1) That interest paid is tax deductible.
2) Putting your money into stocks isn't a guarantee of better returns. And in fact, if you happen to make some poor stock choices, you could easily find your stock portfolio wiped out.
Exactly what I was thinking MorrisBoy. And, even if there wasn't a mortgage, there is still the opportunity cost of tying up $230k. So living in that house for 1 year has already costed you something NC-newcomer, in the form of interest paid or interest not received.
No mortgage. And, yes, of course there is opportunity cost of lost interest, realistically at 3-4% in a money market account (and there is income tax to be paid on that interest, reducing the effective interest rate by a chunk).
Frankly, no one should go into the purchase of a house without considering several different complete financial scenarios (spreadsheets are a must) for up and down markets. KNOW what you may be getting into!
Is it costing me something to live in a house I own for 1-2 years? Yes. Is it likely to cost me a lot, compared to the improvement in the quality of my life over living in a rental? No.
Not every real estate decision is purely an investment decision.
Last edited by NC_newcomer; 12-02-2007 at 08:20 AM..
I have heard of so much talk about this area and how wonderfull this area is. I got to wonder why the scare and now the panic to sell. no disrespect.
No scare....it's just that there were so many doom and gloom reports about the housing markedt being efected by the rest of the country's woes that I posted this as a "turning point". I actually posted it sarcastically but the Triangle has been effected by the rest of the country:
1) Builders expected a huge migrations of northerners and west coasters so they overbuilt.
2) Those markets tanked so the perspective buyers cannot afford to carry two mortgages hence homes staying on the market longer (inventory) causing huge markdowns and such.
3) Locals needing to move for work, family etc....cannot sell because they are competing against newer homes that are cheaper or the same price but....newer.
4) People read forums, take everything to heart and instead of researching things themselves they panic and start freaking out (kinda like during a prediction of snow )....I use forums for electronics advice.
The area is great, the housing market is being effected by the rest of the country and will be one of the first to "turn around". Still a great place to come just do A LOT more research before moving to make sure if you buy that you make a smart investmen.
No scare....it's just that there were so many doom and gloom reports about the housing markedt being efected by the rest of the country's woes that I posted this as a "turning point". I actually posted it sarcastically but the Triangle has been effected by the rest of the country:
1) Builders expected a huge migrations of northerners and west coasters so they overbuilt.
2) Those markets tanked so the perspective buyers cannot afford to carry two mortgages hence homes staying on the market longer (inventory) causing huge markdowns and such.
3) Locals needing to move for work, family etc....cannot sell because they are competing against newer homes that are cheaper or the same price but....newer.
4) People read forums, take everything to heart and instead of researching things themselves they panic and start freaking out (kinda like during a prediction of snow )....I use forums for electronics advice.
The area is great, the housing market is being effected by the rest of the country and will be one of the first to "turn around". Still a great place to come just do A LOT more research before moving to make sure if you buy that you make a smart investmen.
Is this an intellectual cry for people to research, evaluate a variety of expert opinions. Do you want them to examine data and trends. You probably watch squawk box instead of just going into the investment forum. What for, all so they can extrapolate the salient information for THEMSELVES to decide on? Sorry bud for me I read the forum and count the posts. The side that has the most posts is who I follow.
No scare....it's just that there were so many doom and gloom reports about the housing markedt being efected by the rest of the country's woes that I posted this as a "turning point". I actually posted it sarcastically but the Triangle has been effected by the rest of the country:
1) Builders expected a huge migrations of northerners and west coasters so they overbuilt.
2) Those markets tanked so the perspective buyers cannot afford to carry two mortgages hence homes staying on the market longer (inventory) causing huge markdowns and such.
3) Locals needing to move for work, family etc....cannot sell because they are competing against newer homes that are cheaper or the same price but....newer.
4) People read forums, take everything to heart and instead of researching things themselves they panic and start freaking out (kinda like during a prediction of snow )....I use forums for electronics advice.
The area is great, the housing market is being effected by the rest of the country and will be one of the first to "turn around". Still a great place to come just do A LOT more research before moving to make sure if you buy that you make a smart investmen.
I agree with #2.
I don't think I agree with #1. In Phoenix, you have new developments that are over 50% vacant. I don't see anything like that around here. In my development, homes are still selling briskly (judging by the "x home left" sign out front).
I don't quite understand #3. If the newer homes are reducing the overall price of homes, then these families shouldn't have a problem purchasing these new homes. They may have to sell their old house for less, but the money they do get goes farther, right? And the lower prices benefit first-time home owners.
I don't think I agree with #1. In Phoenix, you have new developments that are over 50% vacant. I don't see anything like that around here. In my development, homes are still selling briskly (judging by the "x home left" sign out front).
I don't quite understand #3. If the newer homes are reducing the overall price of homes, then these families shouldn't have a problem purchasing these new homes. They may have to sell their old house for less, but the money they do get goes farther, right? And the lower prices benefit first-time home owners.
#3 depends on the situation you are in. If you are struggling with a large mortgage and have to take on a second mortgage then who cares how cheap a home is........if you are selling a "used" home and the neighborhood down the street is selling their homes at a 20% discount off of surrounding comps then you selling the "used" home have to drop your price as well. If you bought recently (5 years) then you have to reduce your price at least that much PLUS the Triangle has not had the ridiculous growth in house cost hence you are lowering the value of your home MORE than you have appreciated in the past 1, 2, 3, 4, 5 years. My point was that someone trying to sell their "used" home against a neighborhood of used homes, and they are out therer otherwise I would not be getting multiple emails about 4% financing, up to 100k off of "INVENTORY HOMES" and the other spam mail I get. There are A LOT of inventory homes competing against existing homes. I just sold......i know.
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tluv
)....I use forums for electronics advice.
Hmmmmm
