So?
Yeah the average price of a house here in my area (La Jolla) is 1.3 million. But I can walk to the beach/ocean and the weather is nice although I think June gloom is here too. Although the housing market here is slowing down in terms of houses staying on the market longer but remains strong.
Are you just being a prick or do you have something to add to the discussion (even though we are in the Pit)? Zsofia said that buying a SoCal house is crazy since she got one that was much cheaper elsewhere. The counter to that is that you will generally get much more appreciation here as I have. I’m will most likely retire comfortably largely because of my investment in So Cal real estate. How about you?
Just to expand upon what that which my “So” is referring, making a HUGE assumption that housing costs are going to increase for 13 more years, and that the buyer can afford a 1.1 million dollar house, lets see what you actually made off it.
How much money did you really make investment-wise?
265k today is about 381k accounting for inflation, which means if you sold your house for 1.1 million dollars today, you would only make about 720k. Not quite 3/4 of a million. That is 55k a year or about 15% interest. Take into the account cost of home improvements, time spent fixing and updating the house, cost of maintaining such as time spent mowing, cost of property taxes and interest paid on mortgage, I would imagine, from an investment purpose, it would be around what you could get in a good savings account.
Buying a house as a long term investment probably isn’t the best thing.
Yeah, and if you don’t sell soon, you may also see the value decrease. Then you have to actually sell it (and incur closing costs, etc). Then unless you move to a lower cost of living area, the BIG TIME money you think you made pretty much evened itself out since you will be paying out the wazoo for another house, apartment or retirement community.
All that BIG TIME money you have made… You haven’t really made.
I second it, GO. Just wait it out. Back in 1997, I waited out the previous owner of my current house for one year and saved 25% ($68K) when the sellers far outnumbered the buyers. Picking up a nice looking foreclosure would be a plus; mine wasn’t. Good Luck.
You forgot to add in the cost of renting a home as big as the one he’s got. I have a five bedroom house in the Bay Area, and if I could get something similar for less than $1500 a month, I’d be shocked. That’s more than I pay for my mortgage, and that isn’t tax deductible. All the maintenance items would go into the rent - it’s not like a landlord maintains an apartment out of love. Plus. you get to do it when and how you want.
If you’ve owned long enough, any crash causing you a serious issue is going to be such a disaster that resale will be the least of your problems.
And indeed, it is comforting to see prices in other parts of the country and know that I can sell here, move someplace else, and have a bunch to add to my retirement nest egg.
Oh, and property taxes in California go up much more slowly than the value of your house. My house value has more than doubled, my taxes have gone up 10% at most.
I’m not against buying a house. I was initially commenting on the idea that somebody should chose to live in SoCal just because one person had a house that increased in value.
Yeah, if you plan on buying a house in an area with a lower cost of living, such as the Midwest, that 700k in profit (if there is that much after taxes, etc), will make a nice nest egg. Most people don’t move to the midwest for that reason though, and all their talk about how much their house went up is kind of pointless cause most or all of the houses in that area went up.
Yes, but I didn’t really pay 265k, I put down $6k and financed the rest. My mortgage interest is tax deductible (so is property tax) so my effective payment is less than it seems. Part of the mortgage payment goes straight to equity. Rent money is lost forever, no equity and no tax deduction. In the end, there is no way it would match any savings account.
Houses are staying on the market longer in my local area but prices haven’t dipped yet. They may take a two year hit but I think that it’s a safe bet that it’ll be worth much more than it is now in twenty plus years when I will be thinking of selling.
You can get 800-sq-ft for $250? And it’s a house? And it is somewhere in the general vicinity of a beach?
I need to move to Annapolis.
I’m not talking about rent. I am talking about buying a house somewhere else. Obviously nobody is going to try and argue that renting is smarter.
Actually, renting is smarter in the Bay Area right now. Not indefinitely of course, but until there’s price appreciation on the horizon again, you’ll end up with more equity by renting and saving the difference than buying.
D’oh, I stand corrected. 
I didn’t notice anyone saying you should move somewhere to get an increase in house value. That would be pretty stupid. Being from New York, and now living in NoCal, I think SoCal sucks also. But making money on your house is some solace.
Hajaro commented on this by flaunting his house value, suggesting that this person should reconsider their opinion that they would never move to SoCal because his house increased in value. Thats what I was commenting on. The So? was in regards to why him making a lot of money on his house should convince somebody else to move to SoCal.
But the quote he responded to specifically said staying in L.A., not moving to L.A. Once you have a house, there’s no reason not to stay (apart from the smog, the traffic, and all the dumb people), and in fact he has benefited financially quite a bit from staying in a place that lots of other people want to live.
I think your basic point is correct – inflated housing markets like L.A. and the Bay Area are not great long-term investments right now. You’re just doing a really bad job of making it by arguing against hajario’s specific situation.
Watch it! :mad:
But I’ll forgive you if you give me 300,000 so I can trade in my townhouse for a bigger house with a yard and keep the same morgage payment.
I live in Santa Barbara. We hate L.A. too. We have very little smog and few traffic problems here. As for dumb people, they’re everywhere.
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Don’t discount the capital gains you’ve got to take out for that $750k.
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Renting can be smarter in a volatile market. Here’s the numbers we ran;
IHV (what we paid): $88,000
Worth in today’s dollars: $145,000
Worth at peak: $157,000 (peak was 2 years ago)
What we’ve put into the home in 10 years: $31,000 (cash)
What we’ve put into the home in 10 years: $67,000 (time/labor, which is mucho conservative)
That’s what everybody forgets. Your time has value. We’ve put a 2nd bathroom on, remodeled the kitchen, replaced 2 of the three decks, painted a number of times, made various and sundry repairs, replaced the pool, maintained both the pool and hot tub, replaced a garage door and opener, among other things. If I had paid someone to do those things, the cost of ownership would be astronomical.
If I carried this home the whole entire length of the mortgage, I would have spent, not counting the upgrades and repairs, $172,000 with interest payments.
Frankly, for the short term, renting is the only thing that makes sense for us, being dinks (dbl income no kids), we’d have money to spend on the stuff we want, but all of that is paying on the debt we’re into because of the house.
People always say ‘you’re making the rental companies rich’ and that’s true, but the mortgage lenders aren’t hurting either. It’s true, rent money builds no equity, but I would rather spend my time going for a walk in the neighborhood than cutting my grass.
Most importantly though, if the neighborhood goes kerflooey like mine is, I don’t have to wait long to get out, and I have nothing to sell. I simply pick up my stuff and hit the bricks. Careful investment diversification will make you as much if not more money than home purchase, and this market, I think, will behave much like the dot com market did, and when it busts, it won’t be as severe, but when people begin to default enmasse on their flexible ARM’s (when they come due) and the interest only loans come due and folks can’t pay, I’ll be right there to scoop up that $400k house for the $225k it’s worth, because I’ll have the money I didn’t put into my rental.
I’m always conflicted reading these threads. It’s true that if you’re in already staying in a runaway appreciation area can be a good idea. But moving to one, or even selling and buying in one is trouble.
I left a high-value area with one hell of a long commute (some of the Dopers will confirm this…they’ve been there) to move to a rural area a few states over. I ended up with:
~4000 square feet on four levels
2 blocks to work
four bedrooms (five when I get the upstairs one renovated)
in the heart of a historic downtown area of a town of 14K two hours from any major city
$80K
Will it appreciate as much as DC? No, I admit. But my stress level is down, my blood pressure is better, and I have time for the kids these days. I’ll make that trade, and encourage others to do so, every day of the year.