Your comment made me think, well, there are lots of good places to live that are cheaper than others, but for some people there are factors out of their control that limit their choices. Sorry to be vague 
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You’re absolutely right.
Which was why I mentioned graduates/young adults who may be looking for a first job or new job without ties to a certain area.
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In our housing journey, we have always moved and bought down, never buying beyond the ability to cover the mortgage with our lowest salary. We sold our condo in Michigan in '89 for a nice profit and moved to Boston and rented while I was in B-school. We bought our first house in N. Andover in '91 during the recession and stole the four-bedroom, 1 acre property for $275K. We sold eight years later for about $500K when we moved to AZ and bought a four-bedroom house with a large pool in Scottsdale for $300K. After 16 years raising our son in that house, we sold it for a bit over $600K and moved to our current home in the SE valley, a fully-furnished model with casita in a golf resort community for a bit above $400K. These homes have now more than doubled (tripled if you’re right on the golf course). Zillow estimates our house at $850K which seems in line with recent sales on our street. Interestingly, Zillow estimates the N. Andover house at $960K, but it’s now 36 years old and needs work. We have great memories of that house, but I wouldn’t pay that much for it today.
My brother and I went halves on a house for my mother who moved from MI to AZ in 2015 (about three miles north of our community but in a standard non-gated subdivision) for $195K. Zillow estimates that property at $425K. If my mother ever ends up in a facility, we will use the proceeds from that house toward her care.
We also bought our Maine cabin in '21 in the mid $200s, but we’ve finished out the lower level, adding a bed/bath which is reflected in Zillow’s estimate of $360K.
We don’t hold mortgages on any of the properties.
Like @silpat, we’ve never counted our home as an investment, part of our portfolio, or borrowed against it. It’s just the place we live, and we always need a roof over our head. We raised our son to look at real estate this way, too. He bought a lovely four-bedroom house outside Augusta, GA in 2020 when the Army moved him there after he commissioned and just before COVID started pushing prices up. He sold last June at a nice profit and moved to MD where he and DIL are renting while they both finish school and decide where they want to go after he satisfies his service commitment in '27-'28. Right now, they don’t want the hassle of a house, but once they are free to move, they will have a lot of flexibility as they are debt-free (she’s finishing school on his GI bill, and the Army is paying for his master’s), have significant down-payment savings and VA loan eligibility, and he has unlimited job prospects. I’ve posted before that I have many issues with the military, but our son’s employment/housing options aren’t among them. How ironic that his choice that initially caused us such anxiety has ended up being the very thing that’s removed it.
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Our older kid bought a townhouse in October 2021. Yes, his HOA fees have gone up…but only about $60 a month in total. His rent at his old place was going up $300 a month at least…year after year.
The market in his area has settled down, but he could probably sell his unit for at least $50,000 more than he paid for it. But that’s not the reason he owns it. His mortgage is stable, and his HOA fees are reasonable enough. And he has the space and location he likes.
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And there are no landlord to tell him to go packing because the landlord wants to sell the place.
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Or that they have sold the building and all the units are being remodeled…and rent increasing…oh and YOU need to move out too!
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My parents bought their first house around 1970 for $24k. Their income at the time was around $12k.
We bought our first little tiny 2br house in Nebraska in 1993 when DH was in grad school for $38k on an income around $25k. Interest rate was around 7.5%.
Our second house in AZ also cost around double our income at the time and initial interest rate was about 8.25%.
My teacher kid would be spending 7-8x annual salary just to get a basic home in a safe neighborhood in our general area. He has no hope. Can’t even afford a little condo. He has a decent apartment. My engineer kid would still be spending upwards of 3x salary, which high enough to make her think twice about tying up that much of her income on house payments at the current interest rates. She’s considering it. Kid 3 is married and lives in a bit lower cost of living area and did get a house a few years ago at 3%, but still paid at least 3x their annual income to make it happen.
Prices seem out of balance somehow. We’ve always been pretty conservative about how much house we could afford, but that’s hard to do when it means you can’t get a house at all.
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My first house I bought by myself at a higher interest rate. My annual salary was one third of the home price.
My second house, and each one after, I have bought with my wife. Being a two income family it made our incomes larger but in the end we only bought a house about twice our annual salaries.
Having a partner to purchase a home with can really make a huge difference in what is affordable. My oldest son, just starting out, would be hard pressed to buy anything but a minimal condo or minimal townhouse locally ( probably something dated that needs work) When his fiancee finishes school next year and they are both working and saving they should be able to get a smaller SFH or a very nice condo.
It’s tough to go it alone these days, in my opinion. Prices for everything else add up making it even more of a challenge.
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Home ownership is not always the best option. It really depends where one lives or one’s career. If you live in parts of country where real estate is not appreciating, buy a home is not a good investment and probably not a good thing to do until you could live in it for 5-10 years. If you live in a place, like NYC, renters are very much protected therefore there wouldn’t be issues of getting evicted. Owning a home can also be a hinder to job mobility, so I think young adults should be a bit more established in their career before putting down a huge chunk of their money.
I told my kids to do a buy/rent analysis before they jump into home ownership. D1 bought a 3 bedroom in Park Slope with 2.25 interest. They just had a second baby. I am secretly hoping they would buy a bigger place (like the brownstone down the street), but D1 is more conservative than me.
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We lived in NJ decades ago, and constantly had to explain to our parents that no, we were not looking for a house because the most disgusting, dilapidated, unfit structure would still be 5x our combined salaries at 12%. It’s always a relief when parents “get” the situation their specific kid is in. Sometimes renting just makes sense.
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We’ve done similarly. We rented initially, when we were engaged, and then bought a house in Greenwich CT (both worked in NYC) for $575k. Sold 2 years later when my husband wanted out of NY for $840k. Bought our place in MA for $580k (and invested our profits) and have raised our family here. Our house is now worth something north of $1m but we have put quite a bit into it over the years (new kitchen, bathrooms, heating system etc) - although we will realize a profit on it at some point (or our children will) I don’t view it as an “investment” since money in the stock market would have handily outperformed the growth in value of our home. I do feel for kids today since the barriers to home ownership are high - often tough to put together a down payment given the prices and interest rates are high compare to a few years back. Above all, inventory is low in many places - some folks aren’t moving because they are locked in at really low rates (choosing to renovate or add on instead) and investors are also snapping up houses and turning them into rentals. It has really created a perfect storm.
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Don’t buy a home for the investment value, buy it as a place to live in. We sold last year the house we had owned for 35 years and raised our daughter in. When we did the math, despite getting an excellent price for the house (much more than double what we paid for it), we probably didn’t actually make any money. When you subtract the large real estate taxes we paid over those years, the tons of maintenance costs, and the actual home improvements (multiple roofs, HVAC systems, new kitchen, new baths, etc.) we probably ended up in the hole.
BUT, we had a lovely place to live in. Today most new construction also have HOA fees. When you add up maintenance, HOA, and real estate taxes, in many markets rent (although high) comes out cheaper.
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There’s a financial guy named Ramit Sethi who makes a good argument against home ownership. He’s quite wealthy and still doesn’t own, although he admits that eventually he probably will. Here’s one video where he argues the value of home ownership.
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Welcome to southern CA housing market.
Bought first home in 1982-new build 4+2. 30 yr fixed 13% mortgage/5% down payment ($109000). Sold it for just under a double in 1990. Economy was down until 1994, guessing we lost approx. 25% of what we paid for in 1990. By 1998 economy had recovered and guessing home was back up to what we paid in 1990. Economy went up again, by 2006, we sold for a near double of what we paid in 1990. We moved, bought another home in 2006, paid cash with equity from house sale, walked away with 50K. Economy then tanked. By 2010 guessing house value down by around 30%. Since then housing market slowly recovered then has gone vertical. Similar houses in area are around 725000.
Comparing salaries to home costs does show the rising costs, but it does not tell the whole story.
Our first house price of $63k was less than 1.5x our combined salary. BUT in those days our interest rate was 12% variable (would have been 15% fixed; we refinanced for 9% fixed the next year). AND the NY the property taxes were quite high. So the monthy payment felt cumbersome, especially since we had school loans and wanted the house to be affordable if I took a leave from work
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The market here in AZ has been boom-bust. How you did with home ownership really depended on when you bought and sold. We’ve been fortunate. We bought our house in 2001. It quickly doubled in value by 2006, then plummeted to about what we paid for it by 2008, and has steadily increased since then for the most part to nearly 3x what we paid, although prices are lower now than they were two years ago in our area. The house next door was bought near the height of the market in 2006, foreclosed and flipped and sold in 2010 for 35% less than in 2006, and then those folks sold in 2021 for twice what they paid, which was close to what we paid back in 2001. It’s all good at a great price/great interest rate, but when the market doesn’t look like that it feels a lot riskier to jump in, and potentially get trapped needing to sell at a bad time. Our kids feel less like they can be sure of staying in one place long-term than we have been able to do.
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We had an interest rate of 3.75% in our last house, which gave us lots of disposable income. Unfortunately, a poor high school and deteriorating neighborhood forced us to move “post inflation.” That with the upgraded suburban neighborhood came at a big premium. We definitely don’t have the kind of disposable income we had before. But we also have less worry about being broken into.
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I think it’s area specific. We have done really well with home ownership. My spouse bought his first house before we were married. Sold it 4 years later for double what he paid. Our present home had gone up an astonishing amount. I admit in the time we have owned prices at times took a drop but have now all come back up and skyrocketed. Rents in the area have also skyrocketed and one is at the mercy of the landlord. If they want to sell you’re going to have a hard time finding a replacement. It does make it hard for young people who are starting out.
One of mine is a home owner. They bought well with their first house and made 100,000 profit in three years. Zillow has that house valued at 100000 over what they sold it for. Their present house they were able to get a 2% VA loan.
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We were very fortunate to be able to leverage very generous exec relocation packages in all but our last move (retirement). We started outside of Dallas where we built a custom home on a lake for $175k. My W was recruited by a California based tech company so our first move took us to a Roseville CA house at $250k then 2 years later to Portland OR home at $375. With each move we bought down principal and qualified for the remainder based on one income. We then moved to Scottsdale AZ to a $520k home where we remained for 17 years. We timed the sale of our Scottsdale house to our daughter moving to college. Sold the Scottsdale house for about double. We’re now in a gated, acreage lot community for retirement.
The main thing that allowed us to do this was - we had no student loans to pay off, we both had multiple engineering degrees (an wife had MBA on top of BS/MS EE) and stable paying engineering jobs. Could this be replicated now? Maybe. Time will tell.
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Did anyone post this already?
The median first-time homebuyer has reached an all-time high age of 38 years old, three years older than in July 2023.
The typical repeat homebuyer is now 61 years old, and sellers are typically 63
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