Apartments bear no equity. It's money spent on rent with no return .
Whereas owning a home and or land will always bear equity and a monetary return.
Whereas owning a home and or land will always bear equity and a monetary return.
Are Boomers and Retirees Having Problems Selling Their Homes? (How Is Depending on a Home as Personal Wealth Turning Out?)
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That sounds like a good idea. My daughter is 30, and has her own life, but when my days are numbered, she will inherit a decent amount of money. Like I did from my dad (a person I didn’t get to know before I was in my late teens).
I am not in the market to buy/sell my home. I'm also retired so I cannot speak for the security to be found when it comes to remaining employed.
But you are correct when you speak of older people being faced with decisions about what they should do.
I have lived in my current home for about 20-25 yrs. It sits on approx 2 acres of land. The land is partially treed which is a battle that I once looked forward to, but must admit it gets more difficult with each year that goes by.
This year we had some very high winds which broke many limbs. No damage to the house, but it cost me several thousand dollars just to get the mess cleaned up.
On the other hand, if I look back on time, I can see that investing in land would have been a very wise thing to do. I cannot think of many things that have increased in value more than land. It's not like most things, there is only so much of it, and it continues to be snatched up at an alarming rate!
So maybe its a decision that changes based on where you are in life. . . . . .
But you are correct when you speak of older people being faced with decisions about what they should do.
I have lived in my current home for about 20-25 yrs. It sits on approx 2 acres of land. The land is partially treed which is a battle that I once looked forward to, but must admit it gets more difficult with each year that goes by.
This year we had some very high winds which broke many limbs. No damage to the house, but it cost me several thousand dollars just to get the mess cleaned up.
On the other hand, if I look back on time, I can see that investing in land would have been a very wise thing to do. I cannot think of many things that have increased in value more than land. It's not like most things, there is only so much of it, and it continues to be snatched up at an alarming rate!
So maybe its a decision that changes based on where you are in life. . . . . .
I understand, because this is what I've heard society say my whole life. But I think things are changing. With 50-year mortgages, which most of the younger generation will have to take out, they will never get it paid off and will never own their homes anyway.
Even if you do get it paid off, you don't really own it. I've listened to several stories of people with "paid-off" places who are losing them because they can't keep up with the rising taxes and insurance. You can buy the house, and you can buy the land, but it might very well still be taken from you if you can't pay the property taxes.
Everyone says renting is throwing away money, but I don't think so if it's presented in another way.
Realtors I've listened to say that what gets people into trouble is that they see the mortgage payment and figure if they can pay that, they can afford a home. But many don't consider utilities, taxes, HOA fees, insurance, and maintenance -- which will rise in cost uncontrollably every year -- just like rent. I have friends who don't live anywhere near hurricanes but their insurance still went up 30% in a year because the insurance company also covers states like FL, which seems to have disasters every other day.
I've also heard these realtors say that homeowners need to budget $2000 to $5000 a month IN ADDITION to the mortgage payment for these costs. So although you have a mortgage payment that might build equity, you're also spending an additional amount every month that you will also never get back -- just as if you were renting.
These are not my own personal numbers but I live in an expensive state, so let's say I bought a house with $2000 being my monthly mortgage payment and another $2000 a month for taxes, miscellaneous fees, and maintenance (including having to replace HVAC, roof, and appliances over the coming years.) So only "half" of that $4000 is "building equity," and even then, for a good number of years, a large part of the mortgage payment is going to interest alone -- which is even more money you'll never get back.
Even if the full $2000 went to the actual price of the house and not interest, you're still paying another $2000 a month for non-equitable necessities that's being "thrown away." If I have to budget $4000 a month for a house and $2000 is being "thrown away" anyway, I could rent a great place with everything I need for $2000, including a 24-hour maintenance line, and save the other $2000 a month myself.
No one talks about this, and I know our system never teaches anything about money -- except to take on as much debt as possible.
Saving $2000 a month = $24,000 a year, and if we go back to the time of 30-year mortgages, $24,000 a year saved over 30 years = $720,000.
That's a nice little chunk of change, and that's not even considering what it would be if it had been invested regularly into the S&P 500, which has average annual turns of about 9% (I know investing is scary to a lot of people, but I'm just using this as an example.)
But yet, no one talks about or is taught this.
Better yet, if I have an emergency (like a family member did with a surgery that cost $10,000 after insurance,) I don't have to worry about trying to borrow against a house or property -- I can just access my own money on my own terms. I've always wondered about this -- if a homeowner has an emergency and all their equity is tied to their house -- what happens when emergencies come up? It's not like you can sell your house a few bricks at a time to cover those expenses. Is the only choice then to take on more debt? Saving money on your own gives you a lot more flexibility.
Building equity in a home or land also doesn't help when the only option is to sell what you have, then depend on that sale to determine if you even have another place to live. The example in the original post was of a couple relying on their home to sell for $800,000 but it's on the market for $560,000 -- it's still not selling -- and they're already locked in to paying $800,000 for a new place, which they thought the sale of their home would cover.
I know saving on one's own isn't a good option for many -- even realtors, at least the ones I've listened to, say buying a home is the only way some people will save, because even if they rented and had extra money, it would just get spent. But for myself and my own habits, it seems like the best option.
This is what frustrates me -- that people aren't presented with other options.
For some, it might seem foolish and not even worth considering, but for others like me, it might just be a much better fit.
Tall_Timbers
Well-known member
Sometimes when a person sells they experience a loss. Sometimes it's a large loss. If they've got a mortgage, sometimes you find yourself in a pickle because the value of the property is less than what's outstanding on the mortgage.
Additionally, if you take out a 30 year mortgage on a home, the amount of your monthly payment that goes towards equity is almost nothing for years. If you factor in the interest on the loan the likelihood of coming out ahead diminishes considerably.
The bank wins, the slave remains a slave.
OK,
Buy low, sell high....
Location, location, location!
Meaning that most people don't do this. Over 80% of people pay way too much for homes. Patience and home purchases are usually not done together because of the many factors involved.....and they are ALL very frustrating for most people.
By the time most people find a home they believe they can afford and live in they are frustrated beyond rational thinking.
Pre approved mortgages and etc....not for the faint of heart or conviction.
A home is a home....but it also is often an anchor. It's going to tie you down to a place for an unseeable future. Neighborhoods go bad, bad neighbors move in, the economy of your town/state goes bad, a petroleum refinery, power plant, strip club, amusement park, meat processing facility, or rock quarry is built two blocks away, all sorts of things can and will happen.
It's all risks you assume with purchasing a home. It's a LONG TERM investment you live in and with.
Paying full retail for a home....NEVER is a good idea. Buying when the number of purchasers is greater than available homes is bad.
You want to buy when the number of available homes is the highest its been....and the number of people buying is low.
HOAs can be nazis or helpful or worthless. Again its dependent on your neighborhood and neighbors. Personally witnessed all three.
Buying distressed property sounds good until you crunch numbers. Are the repairs something that you can do cheaply with sweat equity? If not....dont! Then when doing them do NOT gold plate the repairs. Dont skimp either...but dont buy a GMC when you need a Chevy.
Most people are out at this point. It can take well over a YEAR to find a good buy for a home. Sometimes more.
A home can be a blessing or mostly a curse if it's truly beyond your means.
However, if you do things right....(most don't) its awesome, a hedge against inflation and every mortgage payment made will return to your pocket when you sell it.
Selling can be a nightmare....
Most buy at the wrong time and then sell again at the wrong time. (80% of buyers and sellers do this)
6 years is the average for living in the same place according to Realators.
Job changes or transfers or job loss can cause nightmares from housing being an anchor around your neck.
Nothing feels like "whole life failure" than having your house repossessed by the bank. (Forclosure)
All that being said....5.5%-6.5% mortgages are normal. But we just had huge inflation and skyrocketing home prices....wages always lag inflation by a decade. So homes are going to remain unaffordable for first time buyers. But currently in many markets sellers are overloading the market and losing price by the day....
Detroit used to be the hottest house market out there. Today it's a cesspool with crumbling houses in complete disrepair.
I seen a neighborhood in TN go from super desired to junk because of the sewage plant being overloaded and the neighborhood smells like sewer constantly. (Too many subdivisions built too fast in the area)
Buy low, sell high....
Location, location, location!
Meaning that most people don't do this. Over 80% of people pay way too much for homes. Patience and home purchases are usually not done together because of the many factors involved.....and they are ALL very frustrating for most people.
By the time most people find a home they believe they can afford and live in they are frustrated beyond rational thinking.
Pre approved mortgages and etc....not for the faint of heart or conviction.
A home is a home....but it also is often an anchor. It's going to tie you down to a place for an unseeable future. Neighborhoods go bad, bad neighbors move in, the economy of your town/state goes bad, a petroleum refinery, power plant, strip club, amusement park, meat processing facility, or rock quarry is built two blocks away, all sorts of things can and will happen.
It's all risks you assume with purchasing a home. It's a LONG TERM investment you live in and with.
Paying full retail for a home....NEVER is a good idea. Buying when the number of purchasers is greater than available homes is bad.
You want to buy when the number of available homes is the highest its been....and the number of people buying is low.
HOAs can be nazis or helpful or worthless. Again its dependent on your neighborhood and neighbors. Personally witnessed all three.
Buying distressed property sounds good until you crunch numbers. Are the repairs something that you can do cheaply with sweat equity? If not....dont! Then when doing them do NOT gold plate the repairs. Dont skimp either...but dont buy a GMC when you need a Chevy.
Most people are out at this point. It can take well over a YEAR to find a good buy for a home. Sometimes more.
A home can be a blessing or mostly a curse if it's truly beyond your means.
However, if you do things right....(most don't) its awesome, a hedge against inflation and every mortgage payment made will return to your pocket when you sell it.
Selling can be a nightmare....
Most buy at the wrong time and then sell again at the wrong time. (80% of buyers and sellers do this)
6 years is the average for living in the same place according to Realators.
Job changes or transfers or job loss can cause nightmares from housing being an anchor around your neck.
Nothing feels like "whole life failure" than having your house repossessed by the bank. (Forclosure)
All that being said....5.5%-6.5% mortgages are normal. But we just had huge inflation and skyrocketing home prices....wages always lag inflation by a decade. So homes are going to remain unaffordable for first time buyers. But currently in many markets sellers are overloading the market and losing price by the day....
Detroit used to be the hottest house market out there. Today it's a cesspool with crumbling houses in complete disrepair.
I seen a neighborhood in TN go from super desired to junk because of the sewage plant being overloaded and the neighborhood smells like sewer constantly. (Too many subdivisions built too fast in the area)
Honestly it would be hard for me to know what i would do either but donating it to the church would be my first guess.
Or maybe a worthy cause.
All good points!
There will always be a risk, but I believe it is a risk worth taking, especially while younger.
I would add a couple of thoughts. 1) If you live in a large town or city, consider buying property in a smaller town perhaps 15-20 miles away in the direction of growth. You would be surprised at the price difference. Plus, as growth continues, the value will appreciate.
2) Get a thirty year loan, and always try to add the next month's principle amount to each payment. This will result in a fifteen year loan – but give you the option of reducing your payment, should the need arise.
But take your time, as you mentioned location is everything.
Good idea....
Also unfinished new large subdivisions are a good idea too. (I made bank on one I bought and sold) the first few 20-40 houses (built spec) will be sold cheaper than the last ones....but you will be living with construction crews and roads until the subdivision is finished.
However, one needs to be extra careful as the outskirts of town is often where industrial enterprises will go.
AND
Watch the quality of construction. I seen one on the outskirts of town using cheap and dirty construction. (Not enough roof joists) and other corners cut. The houses sold cheap....and people bought. (Everything passed inspection) But....then it became a nightmare subdivision. And during an economic downturn many houses bank owned were not worth the mortgages still owed on them. And all needing massive repairs.
However, in Downtown Nashville, the city gave away abandoned and run down neighborhoods so long as you improved the homes or rebuilt them. These places were crack houses and homeless squatters were living and dying in them.
So Habitat for Humanity came in and built new subdivisions in many of them. HOAs covered the neighborhoods too. (Nazis) but many poor people got their own homes. But then Nashville grew exponentially....the Downtown got revitalized. High rises and condominiums everywhere except for the subdivision that Habitat built. This little picturesque subdivision in the middle of highly expensive Downtown Nashville.
What people don't understand is that the tenure of these homes and specialized mortgages is almost over. These section-8 homes are now million dollar plus homes each.
I don't see these houses staying for the next ten years. Someone is going to turn these into offices and condos soon.
so much depends on a person's income, if its a steady income & your manner of saving & investing. putting aside all variables, this, i'll tell you. since i was 20, i've had a salary that is comfortable. in my life, i purchased 2 homes & eventually sold them both. the 1st home, in which my friend sold for me who is the top realtor around, told me that in all his years, i earned the 2nd highest profit he ever heard of. the 2nd home i sold, i did not earn a profit but equalled the loss on a $15,000 clear profit antique deal that occurred during the time of the sale. the 3 homes we have now will not be a problem to sell as the value keeps rising. we are in the Adirondack-Saratoga area. i used a loan for 1 house i bought & paid cash for the other. we never spend money in a profligate manner, don't accumulate extras nor do we waste anything. being a proper steward of God's money is of the utmost importance.Hello Everyone,
I listen to a lot of debates on whether it's better to rent or buy a place to live, especially as the economic landscape (in the USA) is always shifting. Conventional wisdom that I grew up with always said that buying is better because it's basically a forced savings account, with houses usually appreciating in value, and not being subjected to the whims of a landlord.
These are all great benefits, but I'm wondering how it's working out in a practical sense for people. Wherever there's a lot of talk, I always need to see the proof from those who are in the walk.
I'm sure there are plenty of people who made out well from buying and selling a home, but I just listened to a video a few days ago from a real estate agent giving an example of one pair of boomer clients who were retiring and building a new house for close to $800,000. They were expecting their house to sell for around $800,000 because (quoting the realtor) "they thought it was still 2022 when you could sell a home in a day, but that's been over for a while."
The harsh reality is that their former house was only appraised at $560,000, and even at that price, it's not selling, so they're in quite a situation -- especially since they are older and trying to retire.
I know these numbers are ridiculous, but I live in an area where Google says the average home price in my area is $500,000 - $570,000. If you want lower prices, be prepared to have a village of homeless people sleeping on your lawn (that's not an exaggeration -- I've driven past neighborhoods with tents flooding over across open patches of grass between the houses.) The "less expensive" houses are also old, and will likely need a bit of work, which racks up the cost.
Substances that were illegal when I was a kid are legal here, and there have been various "experiments" with defunding the police and decriminalizing hard drugs in bigger cities, with the consequences spilling over to all the surrounding areas. It's sad fact that safety has a very high price tag here.
I had relatives who looked into downsizing to a smaller house with older people in mind, but builders told them they don't build anything less than 2,200 feet, because everything here is designed for families. No one wants to waste their time building smaller, more affordable housing.
In the video I listened to, the realtor asked, "Who, exactly, are boomers expecting to sell their houses to?" Who can be counted on to pay these kind of prices? I hear story after story of tech workers making 6 figures getting laid off, and are lucky to find a job that pays half of their former income.
I know some people have houses that have appreciated greatly in value, but I'm always wondering: 1. Who will buy them at that price, especially since they will need work done? With so many new builds here, people will often choose new. 2. Is the price they're selling their house for enough to cost the expenses of finding another place to live?
I have relatives who had to move cross-country and the moving costs alone for all their things was $30,000. Not to mention closing costs and all the fees, taxes, and additional expenses when finding a new home.
I would like to ask (whether for yourself or those you know
* Are older and retired people finding success in selling their houses for great profits, paying all the taxes, and then being able to afford to move to another place?
* Are they finding smaller, cheaper places to live -- because if not, why move if you don't have to?
* If people are using their houses as their main source of wealth, how does it work if you aren't able to sell you house? (Do you just survive by taking loans against the value of your home?)
I have owned a home in the past but feel that renting is better for my current situation. Never in my life would I be able to or willingly take on a $500,000 home. Yet, I'm often told that I should (buy a home.) But I've also been hearing many stories of older people who are losing their homes anyway because they can't keep up with the rising taxes, insurance, and HOA fees.
I'd really like to hear how things have worked out for other people in the ongoing renting vs. owning debate, especially for people who are depending on their home's value to support them for the rest of their lives.
Is what I listened to just an exaggeration?
Yes agree, I think the whole "equity" argument needs to be broken down and the numbers need to crunched, there is no one size fits all and if it works for you than that is what matters.
There are so many factors which need to be taken into consideration especially in times of an overvalued market.
I've done a lot of research on owning vs. renting, and these days especially, I think people need to know that in some cases, renting and saving independently could be a valid choice.
But it's very rarely talked about.
Thank you so much for your post!
I've done a lot of research on owning vs. renting, and these days especially, I think people need to know that in some cases, renting and saving independently could be a valid choice.
But it's very rarely talked about.
Thank you so much for your post!
Well my son and I have had this discussion for a few years now, renting versing owning a home/condo.
He had the data and I had to concede. lol
My aunt had a nice 3BR 2BT brick home on 10 acres. She had 2 children and 3 grandchildren. One of her children and two grandchildren lived in Alaska. The other lived and worked a few miles away. When her husband passed, she was left with a big beautiful house and no one to share it with. To make a long story short, her daughter and son-in-law sold their home across the county, built her a small house next door. They moved into the big home. When my aunt passed away, her daughter and son-in-law moved into the small house and their daughter and family moved into the big house. Her daughter passed away a couple of years ago. Her son-in-law told me that the small house was the smartest thing that my aunt ever did. He is partially disabled and has no problem keeping up the house.