bostonbubble.com

cueball · Joined: 10 Sep 2007 Posts: 5

I've been a longtime lurker on this forum. It has been several years since I've posted, but I've always kept myself up to date on recent housing market data thanks to the contributors on this forum.

Several years ago I promised myself that I would wait until housing prices came down significantly before buying. I've always wanted to own a house in the greater Boston area, but in some ways I'm thankful that I decided to sit on the sidelines all these years. I'm still renting a moderately sized apartment and saving each month. Looking back now, prices have come down, but not by much when compared with the rest of the country. I was definitely living in a pipe dream a few years back.

I've come to the conclusion that Massachusetts has a strong and diverse economy. Many people are willing to pay whatever it costs to live here and send their children to our schools, even if it means working in a cube farm well past their retirement age. I don't understand this mentality, but I fully recognize that I am not one of those people. When I try and explain this to my friends and siblings, they don't seem to understand. Living anywhere else sounds crazy to them. Everyone seems to be blindly loyal to Massachusetts, no matter what the cost.

I read this post last year by John P. and it really hit home with me:

http://www.bostonbubble.com/forums/viewtopic.php?t=3453

It felt like someone finally agreed with my thoughts and could see the mentality of the typical Massachusetts family from a higher perspective.

I'm 30 with no children. I have a stressful, but stable higher paying job. I have about 200k in savings along with some conservative investments. Most people think it would be a no brainer for me to buy a 400k house in Reading and take out a 30 year mortgage @ 5.5%, but I'm not sure if this is the right move.

When I sit down and do all the math, is it really worth it in the end? Am I getting what I'm paying for? It doesn't seem like it. All I can see is several more years of unhealthy 10-12h work days (including weekends), working in some crappy cube farm while being told how great my life is because I make a decent salary and have a "good" job. All of this so I can pay off some overpriced mortgage until I'm close to the grave.

The only benefit to staying here is that I get to see my family and friends. You can't place value on this, but it's almost hard not to, considering what I could get elsewhere for so much less. It's such a personal struggle for me. I am very close to my family, so it would be very difficult for me to leave. At the same time, I have done quite a bit of research and found that I could have so much more in other areas of the country. I have a hobby that brings in more than enough to live in most areas, so I wouldn't need to keep my stressful job.

Anyways, that's enough of my ranting. It's a tough decision. I'm just wondering if any of you were ever in the same position as me? I'm sure there's many things I would miss in Massachusetts, but the cost of living and rat race lifestyle isn't one of them.

admin · Posted: Tue Sep 04, 2012 1:57 am GMT Post subject:

CC · Guest

If you have 200k in savings, why don't you take 15 years mortgage which has lowest rate now (probably 3%?). Actually since you are single, you may consider a condo or townhouse. The cost is much lower than SFH.

BTW, what do you mean "cube farm"? (PS: English is not my first language.)

Boston ITer · Joined: 11 Jan 2010 Posts: 269

JCK · Joined: 15 Feb 2007 Posts: 559

cueball, mortgage rates right now are WAY less than 5.5%, probably closer to 3.5%.

So I'd recalibrate your thinking on that one.

I guess the questions I'd ask are (1) do you like where you live now?; (2) how much do you pay in rent?; and (3) is your commute acceptable?

If you've got $200k in savings, I don't think paying $400k for a house is unreasonable, depending of course on your income.

I agree with admin that you don't want the house to become a boat anchor, sucking away your income, but you need to make sure you're happy, one way or another.

Renter · Guest

A couple of thoughts on your question.

1. The cost of owning a home is NOT just the Mortgage. Sounds like you are a pretty bright person and may have already anticipated this. Consider all the added costs of owing appliances, roof repair, Home Owner Association fee increases. When you rent your rent incorporates all these costs in your monthly rent.

2. If you were to buy a condo or home (and never refinance- when you refinance your Mortgage becomes a Money purchase) you can walk away from a Mortgage if you were under water. I'm not a CPA or expert - so please check this.

3. There all all sorts of crazy Mortgages around that you may qualify - check out MassHousing - its a non-profit with ridiculuously low downpayment and low rate mortgages - the income limits are based on where you buy - so even with your excellent income you may be surprised with what you qualify for.

All that said - I'd recommend parking your savings in an investment that does well with inflation - and rent.

CL · Guest

I think in general it's actually a good time to buy in some areas of greater Boston, given the price has somewhat corrected from the peak, interest rate is low and the economy is doing okay here in Boston so the demand (in some areas) are actually well supported.

But, for you, I think you should rent. Since you are single, have a well paying job/hobby, no children, and in your 30s, I won't give up the mobility that you can have in order to trade for a house, whether it makes financial sense or not. When you have kids, you can settle down.

If I were you, I will use your position and mobility to explore the world before settling down. I was born in Asia, studied in US, lived in Europe before settling down here and I think that mobility is too precious to be traded away.

cueball · Joined: 10 Sep 2007 Posts: 5

Great responses everyone, thanks.

JCK · Joined: 15 Feb 2007 Posts: 559

You have plenty of money. If you really want out of the condo building, buy yourself a house. Or don't. I think this is a lifestyle issue as much or more than a financial one.

If your salary is decent and you certainly can swing a $250k mortgage on a $400k house.

If you do a 30 year at 3.75%, your mortgage is under $1200/mo. Taxes will be a few hundred, utilities/insurance a few hundred, and upkeep probably a few hundred each month. You should be at or under $2k/mo, all together. Then your interest is tax deductible and about $400 is going to paying down loan balance. So figure that saves you another $500-600/mo on the net. Now you're only paying out about $1500/mo.

I don't know your salary or your current rent, but that doesn't seem unreasonable to me.

Your risk is now that prices drop and you want to sell. If your place drops in price to, say $350k, would that be devastating?

Just something to think about. Don't make this harder than it really is.

Or just rent a place in a building with better soundproofing. It sounds to me like the real issue that you don't like your current apartment.

Renter · Guest

Cueball,

Keep renting and buy invest that savings in something like Gold - and you'll b very happy with your decision to wait.

See Bill Gross - of PIMCO the Bond King recommending Gold over Bonds or Stocks.

http://www.bloomberg.com/video/gross-gold-a-better-investment-than-bonds-stocks-67gICY2RTwy3MytiYpX8jg.html

Regards

admin · Posted: Thu Sep 06, 2012 8:56 pm GMT Post subject:

JCK · Joined: 15 Feb 2007 Posts: 559

Renter · Guest

JCK,

I'll bite.....because you have to be a realtor.

Is that your attempt to compare Gold to Bitcoins???

Wink

Cueball - listen to people like James Grant - Intereast Rate Advisor, or George Soros who is back buying Gold for his Investment portfolio, Don't place short term money because there is sure to be volatility. But, Money stored in Gold, select Equities, and commodities will be more valuable in 24 Months while homes will be flat to down.

Best part of Gold no Realtor required to buy and sell and bought as an etf through your boker can be liquidated with the click of a mouse.

Can't do that with an over priced Condo that you may buy at the wrong time and then find your self needing to move...

Best Regards

JCK · Joined: 15 Feb 2007 Posts: 559

Gold? Really???

Please. You don't need a Realtor to buy or sell property either, despite their brainwashing to the contrary.

If you buy a condo whose monthly carrying costs are less than it would rent for (which you should pretty much no matter what), you can always rent it out for positive cash flow, should you need to move. Give me that any day of the week over a pot of gold.

Renter · Guest

JCK,

"You can always rent it out?"

I will agree there are probably some places where you can get a decent rent roll on a Condo, but that is high dependent on location, purchase price, a well managed HOA, reasonable property taxes, and you have to account for depreciation of the property (things wear out).

Then you have to find a good renter - they do exist.

Then you will owe taxes on any extra income (regular income tax rate - I believe - what ever your highest bracket is) that you make on the property.

Meanwhile, I can own something like the PHYS - gold etf, pay Longterm taxable gain rate (lower than income tax bracket - often), and I pay no taxes until I sell. No home owners insurance required , no maintenance, no surprise expenses.

I think we'll agree to disagree - we all take a different path and no path is the same for anyone person - each must choose their own route through life.

Best Regards.