NYT Magazine: 'What is it about 20-somethings?'

Over time there almost always is . . . unless you buy at the absolute top of a ridiculous bubble.

My house has gone down in value by about $180,000 since 2005.

So what? Still worth $200,000. And I paid only $130,000 for it and owe only $22,000.

No housing payment and $200,000 of equity are only 20 months away.

 

Yep.

 

I agree with this.

I did not really settle into a career until my mid thirties, granted the work I was doing in my early 30's set me up for it but I would not change a thing.

I spent my twenties floating in and out of school, travelling including overseas, living pay cheque to paycheque, getting drunk, watching Kung Fu movies, etc. I was also mostly free of serious relationships and took advantage of the freedom that it afforded.

I watched my parents struggle with money and the stress it caused and decided that I would not get married or have kids until I was on a career path that I enjoyed and paid enough that I was at least somewhat comfortable and could afford a few things.

I got married when I was 38 and my first child was born when I was 40. Sometimes I regret that I probably won't be around to be a grandparent which sucks but I am having a tremendous time as a first time parent and have the security that I simply did not have 10 years ago.

 

I would discourage anybody from buying a house, ever.
It sucks.
I hate most everything about home ownership. It eats up so much of your money. And a good bit of your time.
I've sold 3 houses; did well on 2, lost shirt on 1 (because of a "forced" job change, the kind of thing that happens to people in tough times). Pretty much evened out, so the idea that it's a "good investment" is lost on me.

Only thing I would say in regards to home ownership: If you're going to do it, get a 15-year mortgage and not a 30. And if you can't afford the 15 on the house you're buying, buy a less expensive one. If I'd gone 15 on my current house, I'd be about 18 months from paying it off. I kick most self once a month for not going in that direction originally.

 

DING! DING! DING!


Time had one a month or so ago about single-kid families. God I hate those stories. It reminded me of a marketing focus group at a paper I worked at more than a decade ago. It said if the paper was a person it would be a guy who drives a Buick, has a couple of kids in high school/junior high and thinks he is a hell of a lot cooler than he actually is.
The marketing people suggested we cover more drag racing. I shit you not.

And Faith Popcorn? Fake name.

 

I've seen pretty good numbers run that say that renting vs. owning is pretty much a wash in terms of investment. As long as you have the discipline to invest your rental savings.

 

So you feel it's a better investment to pay off somebody Else's mortgage then your own?

I don't agree with the first part, but I definitely agree with your last paragraph. You need to be able to pay off your house in a reasonable period of time. If you're are in it for the long haul you will make money.

 

Right, but my point is that a lot of people in their 20s aren't in it for the long haul yet. They might think they are, but most aren't. It can be an albatross if you want any flexibility in your life.

 

1) Rick -- that rent vs. own equation, does that take the numbers out for a long span or just at the moment of decision? Not doubting the premise, but if rents go up 5 percent a year you are going to be paying double in 10 years, whereas the home purchase is locked in.

2) Many of those projections and models discount a very important factor, the capital-gains exemption on selling primary residences ($250,000 for single, $500,000 per couple).

The capital gains rate for stocks/investments is currently 15 percent but will rise again to 20 percent (long term) and 28 percent (short term) if Congress doesn't extend the lower rates. Say you're disciplined and use that savings from renting, and over 25 years you make a profit of $200,000. That's going to be a net of between $144,000 and $160,000 after taxes.

Sell your house and make $200,000 after 25 years? Your net is going to be $200,000.

 

Of course, that fails to factor in all the money you've spent on the home over those 25 years in insurance, maintenance and improvements.

 

Not really; most people use PITI (principal, interest, taxes and INSURANCE) as the cost basis to compare to renting, so it's included in the comparison. I suppose maintenance is something of a hidden cost; improvements, when done right, usually add to the value of the home at the end of the run.

Just saying you don't get many chances in this life to get a six-figure payment that the gubmint can't touch.

 

It also allows you to have more control of where you live and what you would like done to the place. You are also not at the mercy of your landlord.

One other big thing that hasn't been mentioned, it allows you to stop paying rent or a mortgage when you are retired or close to retirement. You can also sell and downsize leaving yourself a considerable chunk of change in the bank when you retire.