Will 2020 be the time to buy in Philadelphia? (Sandy: renters, mortgage)

[Berteau]

Originally Posted by KansastoSouthphilly

If you buy a $300k house and make the payments for 30 years you will then have an asset worth $300k + plus any appreciation.

Conversely if you rent for 30 years you then have no asset and have to deal with the inevitable rising rents most years whereas with your mortgage you will likely be paying roughly the same amount in year 28 as your are in year 1 (taxes will probably go up). My mortgage payment (including taxes and insurance) is less than what I could rent a house for on my block and is nicer than the rentals on my street.

I would agree that buying a house and selling it a few years later is a bad financial decision (one I have, unfortunately, made) but it is generally a good decision if you intend to hang on to the house for a while. You have to live somewhere. If you intend to stay put it is better to build equity (even if you are building it slowly) than it is to not.

If you had the option of living rent free and investing $1,400/month or paying $1,400/mo on a mortgage I agree the first option is better. Most people, however, have to pay to live somewhere. If you intend to stay put it is better to build equity (even if you are building it slowly) than it is to not.

People rarely stay anywhere for 30 years. You could also take the additional costs of owning a home and invest that money in stocks and get a better return.

[kyb01]

Originally Posted by Muinteoir

It is pretty depressing to think close to 90% of my payment would go toward interest. So for a 250K house with 4.375% interest, you're looking at paying $10,937 a year towards interest. Divide that by 12, rent becomes less money "thrown away" at $900 or less. Those same caliber houses are almost definitely well over 1K to rent. With upkeep, repairs, taxes, insurance etc. yeah it probably comes close to evening out. Like you said, the big difference is appreciation. However, that affects you once you sell *plus* if you were to continue to rent, as renting costs can continue to inflate whereas your mortgage is fixed (albeit any taxes and insurance fluctuation).

So buying is a good way to not only build equity, but also dig your feet in and avoid any major spike in the rental market, especially in a generally appreciating market. It's kind of hard to tell where Philly is going in this regard.

Before the Great Recession interest was about 6-7%. Interest may not stay what it is now.

[kyb01]

Originally Posted by Berteau

People rarely stay anywhere for 30 years. You could also take the additional costs of owning a home and invest that money in stocks and get a better return.

No, he/she should put it in a 401k if they aren't doing that already. Stocks are for people who are financially secure enough to take the risks involved.

[Pennsport]

Originally Posted by kyb01

Before the Great Recession interest was about 6-7%. Interest may not stay what it is now.

It almost certainly won’t. The DOW is so high now, to get an average 6% return over the next three decades is going to be exceptionally difficult.

[MarketStEl]

Originally Posted by kyb01

No, he/she should put it in a 401k if they aren't doing that already. Stocks are for people who are financially secure enough to take the risks involved.

Investing in individual stocks, yes, but what do you think most of those 401(k) plans pour the money into?

They just do it via mutual funds, which dilute the risk by investing in many stocks. People can choose funds based on their risk tolerance: if they want rapid growth, they can invest in a fund that shoots for that and whose value will likely fluctuate more. Or they could invest in an index fund like Vanguard's flagship fund, which simply puts investors' money into the stocks in a broad-based stock index like the S&P 500. Vanguard's insight was that most actively managed funds did not beat the returns of just investing in the index, and the management fees ate into investors' principal. Those funds' values will also rise and fall, but if you're looking for long-term performance, nothing does better than the stock market.

[TownDweller]

Originally Posted by kyb01

No, he/she should put it in a 401k if they aren't doing that already. Stocks are for people who are financially secure enough to take the risks involved.

And for those who have a long term outlook. They have always bounced back after markers crash. Since the bottom in March 2009, the S&P is up over 300%. But after crashes, it usually takes a few years, sometimes longer, to reach their previous highs.

[Muinteoir]

I just discovered a 10K down payment assistance program in the city for which I will be eligible. The fifteen year minimum will be difficult to meet, who knows where I will be in even 10. However, I think it just needs to be repaid in full (no interest) if you leave. Overall, a great incentive for "medium" income folks like me:
https://www.phillyvoice.com/philadel...m-downpayment/

[TownDweller]

Thats great, here's lots of stuff out there to help first time buyers.

[kyb01]

Originally Posted by MarketStEl

Investing in individual stocks, yes, but what do you think most of those 401(k) plans pour the money into?

They just do it via mutual funds, which dilute the risk by investing in many stocks. People can choose funds based on their risk tolerance: if they want rapid growth, they can invest in a fund that shoots for that and whose value will likely fluctuate more. Or they could invest in an index fund like Vanguard's flagship fund, which simply puts investors' money into the stocks in a broad-based stock index like the S&P 500. Vanguard's insight was that most actively managed funds did not beat the returns of just investing in the index, and the management fees ate into investors' principal. Those funds' values will also rise and fall, but if you're looking for long-term performance, nothing does better than the stock market.

Sandy, I don't always appreciate "lectures" from you. I know what 401ks are. I do not need "teachable moments" from you.

[Redddog]

Uh oh.