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Who expects an 8% return on housing? Not in a million years. Historically, housing appreciates about 3-4% at best over time. You can't assume that a house will provide the same returns as the stock market because after 30 years or less, you own it free and clear.
Isn't it ironic that the two people that supposedly know the most about homeowners in Westchester are not themselves homeowners (and potentially not even living here based on screen name?). I'm an owner and I'm telling you that today I could rent my house out for more than my monthly outlay. Throw every calculation you want to at me, that fact remains. If prices drop and people do want to rent longer, it actually pushes rents up, too.
Do any of you own cars? Those are the worst assets to have since they depreciate wildly the moment you drive off the lot, yet I bet you all do. Housing is not a purely financial decision, as much as all of those clowns chasing the market in the early 2000s would have us believe otherwise.
And as I said, renting offers a completely different lifestlye than owning. If someone makes enough money to afford something, by all means do it. FWIW, you would be astounded at the number of people making well north of $200K in my 'hood. And you'd never even guess it by looking at them.
Who expects an 8% return on housing? Not in a million years. Historically, housing appreciates about 3-4% at best over time. You can't assume that a house will provide the same returns as the stock market because after 30 years or less, you own it free and clear.
Isn't it ironic that the two people that supposedly know the most about homeowners in Westchester are not themselves homeowners (and potentially not even living here based on screen name?). I'm an owner and I'm telling you that today I could rent my house out for more than my monthly outlay. Throw every calculation you want to at me, that fact remains. If prices drop and people do want to rent longer, it actually pushes rents up, too.
Do any of you own cars? Those are the worst assets to have since they depreciate wildly the moment you drive off the lot, yet I bet you all do. Housing is not a purely financial decision, as much as all of those clowns chasing the market in the early 2000s would have us believe otherwise.
And as I said, renting offers a completely different lifestlye than owning. If someone makes enough money to afford something, by all means do it. FWIW, you would be astounded at the number of people making well north of $200K in my 'hood. And you'd never even guess it by looking at them.
My whole point is that if you own a house worth 600k and you only make 100k in income it's a terrible asset allocation decision. Way too much money is tied up in housing. If you still have a mortgage on it it's even worse.
If 200K is so easy to make then why there is no town with population of at least 10,000 in the whole US (incl NYC,NJ,CT) with median over 200K? Only the top 3.65% of US and 6.3% of New York City make 200K. If you make 200K a year you are rich according to some
Why will a 200k household buy an average house in Dobbs Ferry, or Mamaroneck in a 2nd tier school district of 100K median, instead of Scarsdale or Chappaqua in a first tier school district where the median household income is 180K, is beyond me.
I think that owners and realtors have lost all sense of measure and believe rich people are falling from the sky all over westchester. The reason this country is in this state is due to many people buying more house than they could afford or should spend on, because they thought prices go only up. This is over. Many owners can hold on to their overpriced houses for hundreds of years, however prices are determined from those who sell not those who hold. And believe me there are many owners willing to sell as they can still take advantage of the bubble pricing. In fact, there are more sellers than buyers witness the price decreases.
So, even by your figures, 1 in 16 NYC households make over 200K.
And second tier school district compared to what? Compared to the highest scoring schools in the country like Chappaqua? Or compared to NYC public schools, in which case they come out first tier. Thats the choice people living in the city have.
I think you 1) haven't got kids going through the NYC public school system 2) think that 200K makes you rich. Thats why it is "beyond" you at the moment - its just all specious theorizing to you.
I just looked up the average combined (plus math) 2010 SAT scores of the 350 plus NYC high schools. My local, Rye Neck High (in Mamaroneck), comes in with a average combined SAT higher than the no. 10 HS in the NYC rankings of the 350 schools. I'm sure the Mamaroneck High (which is also in Mamaroneck...) comes in not much below. Dobbs Ferry comes in at about no. 16/17. Chappaqua would be no. 3. Scarsdale would be no. 5.
Thats just SAT. Forget the rest - the huge sports fields, the saftey issues, that fact that NYC HS graduation rate is diabolical so you've already selected out a huge population of students who didn't even take the tests. The attractiveness of Westchester schools to middle-income familes in the city are very real. You buy in the right Westchester district - your kid goes to a great school. But if you live in NYC - you're competing with ultra-competitive studying-machines, and you have to win, to get in to a top 20 school.
There are advantages to living in the city for sure, and some people would rather be boiled alive in EVOO and sprinkled with locally-sourced chevre than move to the suburbs. But you citing "schools" and "low crime" as attractions of the city is completely upside down, casting doubt on the rest of your theorizing.
Last edited by bg7; 01-25-2012 at 02:18 PM..
Reason: typo
Who expects an 8% return on housing? Not in a million years. Historically, housing appreciates about 3-4% at best over time. You can't assume that a house will provide the same returns as the stock market because after 30 years or less, you own it free and clear.
Not in a million years?
I recently bought home in Westchester and the sellers were the original owners. I have both there initial purchase price and there selling price. Using a return on investment calculator online, I calculated there simple annualized ROI to be 15.2%.
Mind you, I bought at a very significant discount. Had I bought b4 the bubble burst, it could of been >20%.
And to the argument that there a lot of costs with owning a house.. yes there are. There are also costs associated with renting. Plus there are many benefits to owning a house. Owning a house is a no brainer.
Also, I don't agree that the stock market is a better investment. Which of you got a bank to loan them money to invest on the stock market? Sure if I had 600k to invest in the stock market, I'd do it over buying a house. But I don't have nowhere near 600k. Yet I can still buy a $600k house. Actually, I would not invest 600k in stocks right now
Historically, not counting bubble years. What happened in the early 2000s cannot be counted in the annual returns, as that was an anomoly of cheap money to anyone with a pulse. Don't get me wrong, I own myself, but if you think for one second that you'll get double-digit returns over a period of a decade or more, you're bound to be disappointed.
And don't get me started on the stock market! I'm truly perplexed at anyone buying into this so-called 'bull' market right now.
I think you're all missing the point when i talk about a 8% return. A house is an asset which essentially pays a monthly divided which is the fact that your housing needs are satisfied. A 600k house essentially provides a 3-4k month subsidy for housing needs (whether you have a mtge on this or not is irrelvent). My entire point is that if you're earning 100k per year, 4k per month may be too much on housing.
Now to circle that square either home prices can go down or salaries of the residents can go up.
Nobody would disagree that $4K a month on housing on $100K is too high. The biggest point to be made is that the median income of a city has very little to do with home prices. Some cities with more uniformly middle class people have higher medians that in NY, yet much lower home prices. NY is the land of the haves and the have nots. Our have nots pull the median way, way down.
There is no problem with the math. Your numbers might be correct although a 300K/4% mortgage with a 20K taxes and utilities/repair etc is cutting it close for a sub 100K income.
The problem is what happens in the future. What happens when the sub100K crowd decides to sell? to whom? you need 200K people--that's the definition of the pyramid scheme/bubble. Bubble pricing cannot be sustained.
There will always be a sub $100,000 crowd. If you buy a house when you are 30 and you age and pay it off when you are 60, all you would have to pay is taxes and expenses. That person will retire, make less than $100,000 and pay for their taxes and expenses from pensions, 401Ks and SS. That is my plan. I bought my house, I will pay it off in 24 years when I am in my 60's. I have a pension and a 401K and I will be able to live off that income that I have planned for when I am old.
Many of my Westchester neighbors are older retired people. My taxes are 12,000 (after Star) but the elderly lady I bought from was paying less than 9,000. She owned the house outright because she bought in the 60's. She lived there well into her 80s and now moved to be closer to her children in another state. There are so many older residents in these towns that make very little money and there will always be older residents who planned wisely that will do the same.
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