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Should I stay or should I go?
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cueball



Joined: 10 Sep 2007
Posts: 5

PostPosted: Mon Sep 03, 2012 10:07 pm GMT    Post subject: Should I stay or should I go? Reply with quote

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.
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Tue Sep 04, 2012 1:57 am GMT    Post subject: Reply with quote

cueball wrote:
I'm just wondering if any of you were ever in the same position as me?


I'm in somewhat of a similar position, at least in a few ways. I'm of the same mindset that I don't want to lock myself into permanently needing a "good" job. Mentally, I think that a decently paying job would be turned from what should be a positive into a major negative by committing to producing that same level of income for ~30 years. I develop software and software companies aren't stable for that type of time frame, never mind the stability of individual jobs. An industry specific downturn (like in 2001 - 2002) and lower market rates for work could easily lead to the need to work 10 - 12 hour days, just to retain past income levels for the sole purpose of servicing a mortgage. My work hours aren't as hellish as yours sound at the moment, but they have been in the past (e.g., 2001), and avoiding going back to that seems pretty straightforward and very desirable.

I'm also in a similar position in that I am entertaining the idea of moving elsewhere and could also do so from an income standpoint. I don't know where elsewhere would be, though - I've done practically no research in that regard. Do you have particular towns or cities that you're considering?

Quote:
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 would suggest that being willing to pay whatever it costs means not only working too much, as you suggest, but also borrowing as much as possible. I think that a big part of why we haven't seen bigger price declines than we have is that mortgage rates have been in perpetual decline, allowing ever increasing leverage over time. If (or when) mortgage rates start rising again, that would seem to be a single point of failure for prices in such a market. That's another reason why I would only buy conservatively now - real prices would be hurt by higher rates, and that risk is abnormally high right now because rates are at historic lows.

- admin
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CC
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PostPosted: Tue Sep 04, 2012 6:55 pm GMT    Post subject: Reply with quote

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.)
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Boston ITer



Joined: 11 Jan 2010
Posts: 269

PostPosted: Wed Sep 05, 2012 1:14 am GMT    Post subject: Re: Should I stay or should I go? Reply with quote

cueball wrote:
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.


Cueball, I know a lot of folks, who live on Rte 495 or southern NH because they have the New England/Mass family connections but can't take the risk of paying through the roof, for one of those metro Boston immune towns. And no, these aren't the tin foil hat types like myself but families with or without children. Since most of these areas are 1-2 hours from relatives, it's easy to stay in touch over weekends, since no one's got time during weekdays, anyways.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed Sep 05, 2012 2:52 pm GMT    Post subject: Reply with quote

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.
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Renter
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PostPosted: Wed Sep 05, 2012 3:12 pm GMT    Post subject: Reply with quote

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.
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CL
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PostPosted: Wed Sep 05, 2012 3:41 pm GMT    Post subject: Reply with quote

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.
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cueball



Joined: 10 Sep 2007
Posts: 5

PostPosted: Thu Sep 06, 2012 3:59 pm GMT    Post subject: Reply with quote

Great responses everyone, thanks.

CC wrote:
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.)


CC, it's not just the cost of the mortgage I'm talking about. I'm also factoring in taxes, maintenance, repairs, insurance, utilities, etc. You can't escape these costs when you're a homeowner, but in MA, things tend to cost quite a bit more.

"Cube farm" meaning people who work in cubicles all day. Office environments usually consist of cubicles and employees work inside of them. Google it or watch the movie Office Space for a good laugh.


admin wrote:
I'm in somewhat of a similar position, at least in a few ways. I'm of the same mindset that I don't want to lock myself into permanently needing a "good" job. Mentally, I think that a decently paying job would be turned from what should be a positive into a major negative by committing to producing that same level of income for ~30 years. I develop software and software companies aren't stable for that type of time frame, never mind the stability of individual jobs. An industry specific downturn (like in 2001 - 2002) and lower market rates for work could easily lead to the need to work 10 - 12 hour days, just to retain past income levels for the sole purpose of servicing a mortgage. My work hours aren't as hellish as yours sound at the moment, but they have been in the past (e.g., 2001), and avoiding going back to that seems pretty straightforward and very desirable.

I'm also in a similar position in that I am entertaining the idea of moving elsewhere and could also do so from an income standpoint. I don't know where elsewhere would be, though - I've done practically no research in that regard. Do you have particular towns or cities that you're considering?


admin, yes, I'm definitely in the same boat as you. I work in the same field, but in a different area. You described my biggest fear, which is not being able to produce the same level of income for so long. It seems like a very risky commitment given the challenges of the economy that we'll be facing over the next few years. I've seen so many things happen during my career (companies laying people off, going belly up, etc.) and all of my jobs end up being the same in terms of hours. At this point, there's no way I can keep this up until I'm 60. This is what makes me hesitate on pulling the trigger. I suppose if the price was much lower, I wouldn't be as nervous.

The problem is if you buy a house in the 200k range in MA, you will end up living in a bad area or in a home that needs a lot of work. I want to be finished with the apartment/condo lifestyle. I'm tired of hearing my neighbors every morning and night.

I'd have to move away to a different area of the country if I wanted to avoid these problems. I did a lot of research and narrowed it down to the southeast or the southwest. As crazy and this sounds, the outskirts of Las Vegas actually ended up at the top of my list. I don't drink, smoke or gamble, but the areas south and west of the city (Henderson/Summerlin) actually have great amenities, housing prices and lower crime compared to the national average. The weather is also a bonus, but I never really imagined myself living in a place like that.

It's going to be a hard decision, but I obviously plan on visiting these places before I make any moves.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Thu Sep 06, 2012 6:55 pm GMT    Post subject: Reply with quote

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.
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Renter
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PostPosted: Thu Sep 06, 2012 8:19 pm GMT    Post subject: Reply with quote

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
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admin
Site Admin


Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Thu Sep 06, 2012 8:56 pm GMT    Post subject: Reply with quote

JCK wrote:

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.


You might also want to look into renting a single family, if the towns where that would be cost effective would be a good fit for your commute.

- admin
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Sep 07, 2012 2:14 pm GMT    Post subject: Reply with quote

Renter wrote:
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


Maybe he should invest in bitcoins instead. I hear they're a hot commodity these days...
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Renter
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PostPosted: Fri Sep 07, 2012 7:50 pm GMT    Post subject: Reply with quote

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
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Sep 07, 2012 9:16 pm GMT    Post subject: Reply with quote

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.
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PostPosted: Fri Sep 07, 2012 9:51 pm GMT    Post subject: Reply with quote

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.
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