Inflation has outpaced the rise in salaries for the first time in 14 years.

[jbooma]

Originally posted by du7st

Will the roomates not be put off by paying me rent knowing that I am ending up with the ownership? Maybe I just need to find dumb roomates?

My buddy did this, he bought a house a couple of years ago, and the roomies paid the mortgage, he doesn't even live there anymore and has his own condo.

Now, just buying a house isn't as easy as many think. You will need money up front to close etc... You will need to be preapproved for a loan, and depending on the area you might have to be competive with your contract.

Owning a home is a lot of work, if you rent it out to roomies if anything goes wrong it is your responsibility to fix, unless of course they break something. It is smart to get some books on home improvement and basic repairs, like plumbing, electrical, etc... you can save yourself a lot of money.

Depending on the house you buy you might want to look at a home warranty untill you have money to cover big expenses like your furnace going down, or your ac etc... You can get them for about $315 a year and the great thing about it is depending on teh appliances they will replace them for free.

My mother in law had such a warranty and the water header died in her new place, they couldn't fix it but had to replace and she got a water heater that would have cost a couple of hundred dollars for $75.

If you are interested in buying, go to the library and read a lot of books, the dummie guide to mortges, homes, etc... is a great place to start.

The one great thing about owning is your money isn't being thrown away, like it does when you rent, you are building equity and credit and your future all at the same time, however there are risks you have to be prepared for.

[jbooma]

Originally posted by du7st

I think my biggest concern is that this is the peak of housing prices. If I buy say at 300g, it drops to 200g and I put 50g into it, wouldn't I be at a net loss?

As an alternative, what if I rent for a year or two and wait for prices to go down?

Those are the risks you have to be aware of. Depending on the area you live in the value of the home won't drop. It may not appraise in double digets every year, but still should continue to rise. The one thing you are doing if you are waiting is hoping the interest rate doesn't rise to fast, that is one thing you have to think about, you can still get a 5 year arm at a very good rate.

For example my wife and I bought our TH for $223K 2 years ago, one down the street is now selling for close to $400k, I don't think in two years we will be able to sell it for say $600K but even if we can sell it for $450K we still make a ton off of it.

Then again we are going to hold on it for as long as we can and rent it out, so it keep going up. The new home we are buying might be near the top of the market, however it is bigger then our current one, close to a lake, and as long as our old home keeps going up we are fine. Worse case situation is we sell our first home in 5 years.

[jenmdixon]

Originally posted by du7st

I think my biggest concern is that this is the peak of housing prices. If I buy say at 300g, it drops to 200g and I put 50g into it, wouldn't I be at a net loss?

As an alternative, what if I rent for a year or two and wait for prices to go down?

For the most part, real estate values over time (and I mean years here) go up not down, unless you are in a bad area or some other natural disaster or chemical spill happens.

Waiting for prices to go down is not necessarily the best bet, since there is never a guarantee that prices will go down, no matter what the "experts" say now. Look at trends in the area you want to buy a place in, see how the market prices have gone up or down over the last 5 years or so.

Depends on the area too - if you are in NoVA, the housing market is still going strong, and prices are still being driven up due to demand. If you are in Outer Armpit, OutInTheBoonies, then that's another situation entirely...

[jbooma]

Originally posted by jenmdixon

Depends on the area too - if you are in NoVA, the housing market is still going strong, and prices are still being driven up due to demand. If you are in Outer Armpit, OutInTheBoonies, then that's another situation entirely...

Bingo, more minority familes are now buying for the first time in this area and the demand for homes is huge!! This is why the condo market is going through the roof, we have such a high demand right now.

They say in about 10 years Reston will be the center of NOVA, and I can't wait

[Darth Tater]

jenmdixon,

It is one thing to be taught good money management, its another thing to practice it. What is the value of putting in the time and discipline required to practice it? Most of us do not see the value in the thing until we either deal with it directly (for example, get into credit problems). Anyway, most of the value you get from good money habits is negative (for instance, not having to pay for things already consumed), intangible (the peace of mind thing) or long-term (something most of us seem to discount too strongly).

[Kilmer17]

As the saying goes, dont buy land in a steel town.

You should be fine in NJ. The bubble may burst, but that wont mean the prices will drop by a third. More likely they just wont appreciate for a few years.

But even in that event, you're still better off because in essences, you are paying the rent to yourself. You'll still build equity even without appreciation. Just not as much.

[jbooma]

Originally posted by Darth Tater

jenmdixon,

It is one thing to be taught good money management, its another thing to practice it. What is the value of putting in the time and discipline required to practice it? Most of us do not see the value in the thing until we either deal with it directly (for example, get into credit problems). Anyway, most of the value you get from good money habits is negative (for instance, not having to pay for things already consumed), intangible (the peace of mind thing) or long-term (something most of us seem to discount too strongly).

I do think there should be classes in school to teach kids this, and still wish Congress would have forced the credit card companies to put how many years it would take to pay off the debt by paying the minimum.

You are right the one way to learn is experience.

[jbooma]

I love talking about Money

Actually the best thing I ever bought was Quicken, when you see what you spend your money on every month you might be amazed. I created a budget and now buy EVERYTHING with my check cards, no cash and was shocked how much I spent at starbucs :laugh: :doh:

Star you might want to do that to see what you can curb, or just see what you do spend on, especially before buying a house.

[jenmdixon]

Originally posted by Darth Tater

It is one thing to be taught good money management, its another thing to practice it. What is the value of putting in the time and discipline required to practice it? Most of us do not see the value in the thing until we either deal with it directly (for example, get into credit problems). Anyway, most of the value you get from good money habits is negative (for instance, not having to pay for things already consumed), intangible (the peace of mind thing) or long-term (something most of us seem to discount too strongly).

I agree - the best way to learn is through experience.

However, if you do not even have the basic knowledge to understand the experience the first (second, third...) time you go through it...and it's an easy enough thing to put into people's heads, why not?

In terms of college students, who have credit card applications thrown at them from the first second they set foot on campus - which would you rather them take - the required "get acquainted with your library!" course or "how not to screw up your financial future while you are in college" course?

You also get value from seeing your money grow over time (yeah, I know, savings accounts only pay around 1.5% or so now - but invested elsewhere it earns more than putting more charges on that credit card gets you, right?)

[Kilmer17]

Originally posted by jbooma

I love talking about Money

Actually the best thing I ever bought was Quicken, when you see what you spend your money on every month you might be amazed. I created a budget and now buy EVERYTHING with my check cards, no cash and was shocked how much I spent at starbucs :laugh: :doh:

Star you might want to do that to see what you can curb, or just see what you do spend on, especially before buying a house.

CHECK CARDS???????!!!!!

Bad bad bad bad.

If you want the convenience of a CC and the tracking ability. Go ahead and use a card that gives you something (miles, cashback etc) and pay it off every month.

You're wasting money using a check card. And you dont have the same protections you do with a real CC.

[jbooma]

Originally posted by Kilmer17

CHECK CARDS???????!!!!!

Bad bad bad bad.

If you want the convenience of a CC and the tracking ability. Go ahead and use a card that gives you something (miles, cashback etc) and pay it off every month.

You're wasting money using a check card. And you dont have the same protections you do with a real CC.

We use our Citi card for big purchases, and then pay it off every month.

Wachovia actually provides stuff now using their checkcards, gas, food, movie tickets, etc....

The banks are getting smarter now.

[jbooma]

Originally posted by jenmdixon

You also get value from seeing your money grow over time (yeah, I know, savings accounts only pay around 1.5% or so now - but invested elsewhere it earns more than putting more charges on that credit card gets you, right?)

ING direct is up to 3% now

[jenmdixon]

Hm. Just had an idea enter my head. Look out

Universities are now equipping their students with iPods and other technical/electronic things/doohickies to get connected with their students, right?

Here's the deal. University can make a deal with E*Trade or some other cheapie brokerage house. University charges an extra fee for the course, let's say $100.00. That $100.00 gets deposited into an account for said student at E*Trade. It's theirs. They own it. They manage it, using the knowledge and tools they learn in class.

What do you think?

[Kilmer17]

Really? Wasnt aware of that. Have they closed the loophole re: responsibility if stolen or fraud?

Even still. IF your check card is stolen or simply pilfered from somewhere, you're checking account will be out of money. It's a hassle. I'd rather simply see my Regular Credit Card maxed out (it happened to me in October to the tune of 3 grand) and simply make 1 phone call. The thought of having to deal with a zeroed out checking account scares me.

Good to know that the banks are giving credits for using the check cards now though.

[Ignatius J.]

It is often better to buy than to rent, but the saying is not as obvious as it once was.

In places like britain and Los Angeles, where there is a definate housing bubble, there are definate financial reasons to rent. If there is a slowdown in the rate of housing appreciation, renters are going to be much better off than buyers.

More importantly, you should do the math. Figure out the rate at which you will be buying equity in your home, and compare it to your predictions for the interest rates in other investment opportunities. The economist did an interesting stufy a few months ago and came to the conclusion that in many cases, renters were better off than buyers, especially in urban environments, where renters save more than the typical buyer due to enoromous economies of scale.

All I'm saying is that sayings are rarely true, though they are always based in some amount of truth. If you live in a place where single family homes are cheap and you can get a mortgage for about what you're paying in rent for an interest rate lower than your expected earnings potential in another investment, do it. But if you have a nice apartment close to your work and you're going to have to move out to suburbia to get that dream home in a city that's on a bit of a bubble, then think twice.

[jbooma]

Originally posted by jenmdixon

Hm. Just had an idea enter my head. Look out

Universities are now equipping their students with iPods and other technical/electronic things/doohickies to get connected with their students, right?

Here's the deal. University can make a deal with E*Trade or some other cheapie brokerage house. University charges an extra fee for the course, let's say $100.00. That $100.00 gets deposited into an account for said student at E*Trade. It's theirs. They own it. They manage it, using the knowledge and tools they learn in class.

What do you think?

Universities are not that smart

Plus that might create more people to change their funds everyday because they are not happy with the performance, hence the stock boom all over again :doh:

[Monte51Coleman]

Originally posted by jenmdixon

You also get value from seeing your money grow over time (yeah, I know, savings accounts only pay around 1.5% or so now - but invested elsewhere it earns more than putting more charges on that credit card gets you, right?)

emigrantdirect.com is currently paying 3.25%, and ingdirect.com is paying 3.00%. Pretty good rates with no minimum and no time restrictions. Those rates beat almost every short term CD available.

[jbooma]

Originally posted by Kilmer17

Really? Wasnt aware of that. Have they closed the loophole re: responsibility if stolen or fraud?

Even still. IF your check card is stolen or simply pilfered from somewhere, you're checking account will be out of money. It's a hassle. I'd rather simply see my Regular Credit Card maxed out (it happened to me in October to the tune of 3 grand) and simply make 1 phone call. The thought of having to deal with a zeroed out checking account scares me.

Good to know that the banks are giving credits for using the check cards now though.

Most banks have protection now on checkcards. I love the new virtual numbers though citi provides, you can create a generic CC # for any purchase and set the amount as well as time you want it opened.

If you are worried about that then just have a savings with enough in overdraft to protect your checking.

Did someone get your info through identity theft??

Which reminds me of another thing, BUY A PAPER SHREDDER, shred anything you don't want people getting there hands on, don't just throw it in the trash. My friend had someone go in their garbage and got all of her info, what was funny the idiot who stole her trash called Dominos to much with the card # and they busted them.

[du7st]

Jen,

I like the idea of some sort of money management class sponsored by E-Trade. Perhaps it would be a one credit pass/fail class?

I kind of wish my school would have a "getting acquainted with your library" course. There are upperclassman here that have never checked out a book from the library. Last year some sort of book-mobile showed up near the student center - it reminded me of a similar thing that ELEMENTARY and MIDDLE SCHOOLS have. [insert college students are idiots joke here]

[Kilmer17]

Originally posted by jbooma

Most banks have protection now on checkcards. I love the new virtual numbers though citi provides, you can create a generic CC # for any purchase and set the amount as well as time you want it opened.

If you are worried about that then just have a savings with enough in overdraft to protect your checking.

Did someone get your info through identity theft??

Which reminds me of another thing, BUY A PAPER SHREDDER, shred anything you don't want people getting there hands on, don't just throw it in the trash. My friend had someone go in their garbage and got all of her info, what was funny the idiot who stole her trash called Dominos to much with the card # and they busted them.

I have an industrial strength shredder. Crosscut. Icant believe some people throw away info like that all the time.

I have no idea how my cc number was taken. But it was just 1 card and they called me the next day and issued a new card.

[chomerics]

Originally posted by Ignatius J.

It is often better to buy than to rent, but the saying is not as obvious as it once was.

In places like britain and Los Angeles, where there is a definate housing bubble, there are definate financial reasons to rent. If there is a slowdown in the rate of housing appreciation, renters are going to be much better off than buyers.

More importantly, you should do the math. Figure out the rate at which you will be buying equity in your home, and compare it to your predictions for the interest rates in other investment opportunities. The economist did an interesting stufy a few months ago and came to the conclusion that in many cases, renters were better off than buyers, especially in urban environments, where renters save more than the typical buyer due to enoromous economies of scale.

All I'm saying is that sayings are rarely true, though they are always based in some amount of truth. If you live in a place where single family homes are cheap and you can get a mortgage for about what you're paying in rent for an interest rate lower than your expected earnings potential in another investment, do it. But if you have a nice apartment close to your work and you're going to have to move out to suburbia to get that dream home in a city that's on a bit of a bubble, then think twice.

Great point IJ. If I did not own my house, there is no way I would purchase one right now, at least in Boston. As of right now, the average price on a 3 bedroom house in greater Boston is around 550K. With intrest rates at around 6%, you will be shelling out at least $3K/month and adding nothing to the principal. Now, if intrest rates go up (and rising inflation WILL bring intrest rates up) the price of houses will drop. It is simple economics.

Now, people will have a $3K/month loan they are paying on a house that is worth $400,000. In one year year, due solely to the rise in intrest rates, they would have lost $100K, and they would have no way out. They will own a mortgage worth $500K on a house worth $400K ant they are in a position of negative equity. Not a very good position to be in, and god forbid if something happens.

Now, if they can hold on for about 12 years or so, they will see their investment return, just hopefully they never have to move out of the area.

I would rent out a cheap ass house for as little as I could. I would take the extra money, and invest it. This will keep me out of a negative equity situation, at least for the time being until things stabalize. Then in about 5 years, you'll be able to purchase some property for real cheap.

I always go back to the old stock market addage. . . Buy low and sell high. Now is a time to sell, not buy. But I guess all those people who purchased Amazon at $200+/share will never learn.

[Ignatius J.]

cho, the danger isn't just in the house losing value. If the house even remains even, you're not getting a good investment. That 8% interest on your loan is tough to beat right now, just look at all the people on this thread happy to get 3%.

God forbid it goes down, but you need prices to go up to make the investment wise.

[Kilmer17]

Of course the other aspect to consider is the real value of shelter.

It's not just an investment, so if you werent paying for the house, you'd still be spending some of that on shelter.

[Guest Gichin13]

Originally posted by jbooma

No it doesn't, that is this area, when ever there is issue everywhere else we are not as impacted.

Like I said the market won't tumble if rates start going up, then yes it will slow down, but you will still be able to sell homes for at least assesment or 50K over.

There are so many more options now regarding mortgages that let people afford these homes.

The other key is location, the DC area is one of the best locations in the nation, because of the job market, government and area.

Look back in history even in 91 homes were still selling here and people were still making money in the middle of a long recession.

In 1991, residential real estate prices flattened out and, if I remember correctly, actually dipped up and down during the early 90's for a while.

The bottom really fell out of the commerical market and a bunch of builders and developers went into bankruptcy. I remember representing some land surveyors and them telling me that their four to six person shops used to have 70, 80 and 90 employees a couple years earlier (land surveyors are on the front edge of development being hit by the economy).

Despite some history of the DC market facing some of the same pressures as other markets, the federal government, defense contracting and other housing demands in this area greatly insulate this market from the pressures of other areas.

[Guest Gichin13]

Originally posted by NoCalMike

Getting a house is not the problem, it is what to do once you are locked up in a sh!tty mortgage, interest rate, etc......a lot of the suburbia folks are driving themselves into debt just to become a member of a brand new suburban patch, with the 2 shiny cars in the driveway, the plasma tv, all the new gadgets, and besides running up credit card debt beyond belief....no way in hell of every paying for any of it.

Now that is a different wrinkle. I think there is a lot of truth to people living way beyond their means.

I bought in 1996. I make a good living and own my own business. I also do not live high on the hog and save and invest a lot of my earnings.

I look around and see people blowing incredible amounts of cash in addition to huge mortgages. It should be interesting to watch when all these people have saved nothing and face any type of bump in the road.

Just looking at the average credit card debt per person is a telling factor. Add in that college kids are whacking the plastic at unprecedented rates on top of college loans and there may be hell to pay at some point.