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It's hard for me to imagine how you could just break even after 23 years. Housing prices in 1992 were very low compared to now.
The main big employer in the area had their very first and massive layoff shortly after we joined the company. This meant a huge crash in the housing market. The house we bought lost 20% of the value in a year. The peak of the housing prices was in 2007-2008 when our house was assessed at 2.2x the purchase price. The appreciation was only for a short time. The house is now assessed at 1.2x the purchase price.
Not counting the property taxes (my quick calculation shows it is at around 3% of the assessed value!), insurance and routine maintenance, my estimate of all the major repair/replace bill (including all the appliances: dishwasher, stove, oven, over the range microwave, water well pump, furnace, and the repairs/replacement mentioned in my previous post) is around 28-30% of the purchase price.
So even if we can sell the house higher than the assessed value say 1.3x, we will come out about even. So the only consolation is that we did not pay rent but if I add all the housing cost (property tax, insurance, mortgage interest for 8 years, lost interest/investment gain of the principal), it's likely that that it will not be much lower than the rental cost. I don't regret being a home owner but since our kid had flown the coop, we don't really need a big house, we may check into the option of renting a home instead of buying again.
Blue states / counties with lots of 1%ers living in them are prone to the things you mentioned here. All part of the calculus that goes into deciding what to do and where to go before getting too old.
Those places are great as part of your retirement plan.Just wonderful especially if you started working there 35 plus years ago and want to move elsewhere in retirement. There are advantages in retirement as they tend to have high level of services for the aged.
Anybody who retires having to take out a mortgage on their house has no business retiring. You earn and pack away that money first - and THEN retire.
[only exception is a fat pension you can depend on, e.g. government or military pension]
Last edited by TwinbrookNine; 06-03-2015 at 06:06 PM..
I sort of get it, because those of us in our mid sixties were living by a certain set of rules that got changed mid stream.
My husband and I are both in our 60s and we always tried to do things right, according to the way things were at the time.
We bought a little more house than we could afford, because everyone knew that wages always went up, and so did property values.
We sold the $34000. new, 4 bedroom house, for $139,000. to trade up to the house we really wanted, only to take a bath on it in 2010. The husband's business was forced to close for lack of business, and so, here we are at retirement age just treading water. We were always diligent about saving and being debt free, yet we are still struggling because the rules changed mid stream. We, along with many others, were caught with our pants down.
We have a very small mortgage now, because we thankfully were able to downsize, but still, if we had a crystal ball we could have done better.
Not quite true. Everything doesn't always go up.
History is cyclic. It repeats with boom times as well as bust.
It all depends on who you follow and read.
After the dot com crash I paid more attention to what was going on.
I became the bear in a bull market and got defensive.
I found Roubini before he became popular.
To me this mostly falls into the category of making good decisions over time. If you buy less than you can afford, pay off your house before retirement, make good decisions on location (sometimes things change over time and cannot be avoided), don't keep refinancing and blowing the money on cruises , etc. you should be fine. It's not that I don't have sympathy but to some degree, you reap what you sow.
My plan from long ago was to have a paid for house and cars with cash to live the rest of my life in savings and investments before retiring. To do that I have lived well below my means for at least a decade and now have sizable investments to assist me when I decide to retire.
Housing is becoming one of the biggest issues today for people of every age. Someone could run for president on this issue alone, but none of them want to touch it.
I have been retired for 9 months now and the place where I rent is raising rents around $600-700 a month (I'm in shock) and now we also have to pay for water, sewer and trash (which is becoming the norm), new tenants also have to have at least an income 3x the rent ...so if anyone out there is thinking about renting in one of the very popular, good weather locations, think twice my friends. There's no advantage to renting anymore.
Housing is becoming one of the biggest issues today for people of every age. Someone could run for president on this issue alone, but none of them want to touch it.
I have been retired for 9 months now and the place where I rent is raising rents around $600-700 a month (I'm in shock) and now we also have to pay for water, sewer and trash (which is becoming the norm), new tenants also have to have at least an income 3x the rent ...so if anyone out there is thinking about renting in one of the very popular, good weather locations, think twice my friends. There's no advantage to renting anymore.
While I have no doubt that you are accurately describing the rental market where you live, my comment is that all real estate is local (despite general national trends). So the analysis about renting versus owning can yield different results depending on the location analyzed.
By the way, I would be in shock too at the rental increase you cited. Do you think you were enjoying below-market rental rates up to this point? If not, it really does seem incredible. What was the rent before the increase, so we can see the percent involved? I wonder if management over-priced and will have vacancies which are hard to fill at that price? Have you looked around for comparable rental units? (Not that it's any joy to move - too damn much work in my opinion).
Please be careful about what you write. I have well above median income in one of the highest income areas in the country (Metro DC). I will retire with the maximum possible SS income at FRA. The housing here is insanely overpriced and I never bought anything for that reason once I moved here.
Once I retire, I'd be delighted to have an inexpensive house on a small plot of land. In an area where the fraudulent builders and used house salesmen do not have everybody by the short hairs, I will be able to do it. What the real estate syndicate does amounts to racketeering, and the name brand firms qualify for RICO sanctions. The town fathers are in on it - building inspectors in cahoots with the real estate mafia accept the builders' word as a bona fide building inspector's attest, warranting that the $600K POS cr*pshack which starts melting the minute the warranty is up, is fit to live in.
I am mortified that you lump all of us minimalists into one bucket! Personally, I refuse to feed the beast. I do not buy into funding the builders' 50% margins, and the real estate mafia's $1000/hour "commissions".
Nevertheless, there are many posting on this forum who - for whatever reason - think it's a mark of distinction to fund the slush funds of the racketeers who hold them in contempt.
Perhaps this is just a quibble, since I understand what you are explaining about your home and your situation, but there is really no such thing as "a free place to live" unless someone else (rich uncle?) is paying for it. Your own conclusion to the final sentence acknowledges as much ("which leaves enough money for maintenance").
However much it makes sense to have a paid-off mortgage (mine is), it costs money to provide a home for oneself:
1. Property taxes
2. Maintenance costs (somewhat unpredictable depending on age of the property, but can be huge)
3. Insurance
4. Foregone investment returns on the amount of equity in the house
Again, I am not arguing against having a mortgage-free home in retirement (it is my own choice for myself), but no one should delude himself about having a free place to live!
1. Property taxes can be deferred for the rest of my life, and this was available to anyone over 65. Since my property taxes are only $1500/year, I'm not that broke.
2. House maintenance is something you know is going to happen years in advance. Nobody springs a new roof or a paint job on you. I need a new roof, and the money is in the bank for a 30 year roof. I'll be dead long before I need another one. I did the last paint job myself, and will do the next one too. When you're retired, waving a paint roller around a few hours a day is not a big thing.
3. Insurance is trivial if you have a savings account. Almost all claims on homeowner insurance are small, so just have a $5000 deductible and the insurance company won't bother you for much money.
4. Between house appreciation and stock appreciation it's pretty much a push. Your home equity keeps right on growing even after it is paid off. If you have more than just a house, the profit balance shifts to the land. My parents' farm beat the S&P 500 by 5.5% over the last 50 years, provided a place to live, and after they retired, rental on the land returned $250/acre every year. My own home put $49k net in my pocket in 2013 on a 20 acre logging project.
Meanwhile, monthly costs are much lower than they would be in a rental. Thanks to my planning, my only utility bill is electricity, which only costs me $125/month. By coincidence, that's the same amount I pay for property taxes. The new roof, pro-rated, is going to cost me $233/year, about $24/month. Insurance runs a whopping $70/month, though that includes the $1 million liability rider that covers the whole 93 acres and my vehicles too. So far that's $344/month, including utilities and insurance that you would pay no matter where you live. If that's not free, it may as well be.
I understand that some people have much higher housing costs even without a mortgage, but if they planned to retire their mortgage and replace 50% of their working income in retirement, they should be doing just fine.
Please be careful about what you write. I have well above median income in one of the highest income areas in the country (Metro DC). I will retire with the maximum possible SS income at FRA. The housing here is insanely overpriced and I never bought anything for that reason once I moved here.
Once I retire, I'd be delighted to have an inexpensive house on a small plot of land. In an area where the fraudulent builders and used house salesmen do not have everybody by the short hairs, I will be able to do it. What the real estate syndicate does amounts to racketeering, and the name brand firms qualify for RICO sanctions. The town fathers are in on it - building inspectors in cahoots with the real estate mafia accept the builders' word as a bona fide building inspector's attest, warranting that the $600K POS cr*pshack which starts melting the minute the warranty is up, is fit to live in.
I am mortified that you lump all of us minimalists into one bucket! Personally, I refuse to feed the beast. I do not buy into funding the builders' 50% margins, and the real estate mafia's $1000/hour "commissions".
Nevertheless, there are many posting on this forum who - for whatever reason - think it's a mark of distinction to fund the slush funds of the racketeers who hold them in contempt.
There's nothing keeping you from doing it right now except your own choices. You complain about not being able to afford something that doesn't even exist where you live. You may as well complain about no ocean front property in Kansas. Don't forget that DC was a malarial swamp before the developers moved in. The only reason to live there is to suck up to the money and the power. Don't pretend that's not your choice.
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All real estate is local
