30-year home appreciation by city

Investing Strategies Retirement Investing
41

FCorelli writes,

<<I like being a homeowner because I like my home and yard (though not right now after the recent ice storm and a million downed limbs :slightly_frowning_face:), but I really don’t consider it an investment. It’s where I live.>>>

And this is the whole point. It’s hard to make sense when half the people in the room are talking about investments and the other half are talking about what to buy with their investments. You gotta live somewhere. What floats your boat? It has a price.

Exactly! Real estate is an emotional business for many people – just look at how much I’ve got inparadise wound up.

Again, I’m not saying that anyone should live in a less luxurious property than they’d like. Just that it makes sense to investigate whether the real estate amenities you desire are cheaper to acquire by purchase or rent. Identifying this wide gap in asset pricing that defies explanation with arithmetic and a rational investment return is what earned Robert Shiller a Nobel Prize.

Why buy the cow if in many instances the milk is close to free? Let someone else pay for the care and feeding of the cow (i.e, the landlord) if he or she finds that to be a fashionable, status enhancing activity.

For example, in the 80’s and 90’s many homeowners got the idea that living on a golf course enhanced the value of their property and paid premium prices to do so. Most of these folks didn’t even play golf. They just thought it was status enhancing to live on a golf course.

After a year or two they start to realize that it’s very expensive to keep an 18-hole golf course in the kind of luxury condition that enhances property values. And every once and a while a golf ball comes through the picture window in the living room and the culprit is long gone. Then they look at the $500 or $600/month homeowners’ association fee and ask “Why are we paying for this, we don’t even play golf?”

Then the HOA decides to open up play to the public in an attempt to capture additional revenue to reduce the homeowners association fees. And that’s when you see intercst and his retired friends playing on your luxury, status enhancing golf course for $20 mid-week, cart and box lunch included. It was amazing.

Similarly, IP made the point that intercst doesn’t need to think about the quality of local schools since he doesn’t have kids. That’s very true. However, I pointed out that there are 2 and 3 bedroom apartments in the highly-rated Memorial School District just North of where I lived in Houston that rented for similar prices. You didn’t need to buy a $1 million home to send your kid to a good school. Actually, the funniest thing about Memorial was that it wasn’t uncommon for parents to pay up for a home in the Memorial School District and then decide it was even more status enhancing to send their kids to one of the expensive private schools in the area that cost as much as college. They were paying for the kid’s education twice – in both increased property taxes and private school tuition. Real estate is an emotional business.

But by far my favorite real estate pricing disparity is in Beverly Hills CA. There are apparently a few apartment complexes just inside the border of the Beverly Hills School District. I’m sure they cost thousands of dollars a month to rent, but it’s still a lot cheaper than buying a $5 or $10 million home in Beverly Hills, and your kids have access to excellent schools where they can rub shoulders with the kids of the rich and famous. Quite a deal for the savvy and well-informed parent.

https://www.trulia.com/for_rent/0604830_sd/

intercst

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“I’m sure they cost thousands of dollars a month to rent, but it’s still a lot cheaper than buying a $5 or $10 million home in Beverly Hills, and your kids have access to excellent schools where they can rub shoulders with the kids of the rich and famous. Quite a deal for the savvy and well-informed parent.”

Most of the 3 bedroom apartments are way,way up there. If you got kids, you need more thana 1 bedroom place

I wouldn’t want my kids rubbing shoulders with the kids of the rich and famous who likely drive $150,000 sports cars, blow hundreds of dollars, set the fashions at school with $15,000 wardrobes, etc. Most of the kids of ‘the rich and famous’ have a lot of emotional problems, too, in my opinion… and I suspect most of the kids of the rich and famous go to private schools. Maybe in Switzerland…

t.

43

Exactly! Real estate is an emotional business for many people – just look at how much I’ve got inparadise wound up.

Nah, it’s your pompous attitude that there’s only one way to do things that gets me riled up, whether it’s how to invest, marriage and kids, hyper focused on making more and more money to retire earlier. You would be worth listening to sometimes, if you just weren’t so pompous and off putting. Your goals are not everyone’s goals, and people are not stupid for following their own vision of life rather than yours.

I have no doubt that with a personality like yours, not getting married or having kids was an excellent choice for you and probably for us as well. An Intercst Jr is just too awful to think about.

Just that it makes sense to investigate whether the real estate amenities you desire are cheaper to acquire by purchase or rent.

Finally. Something reasonable. Run your numbers. Remember, I run a 10 year profit projection spreadsheet for every house I buy, so you are telling me absolutely nothing new. The 3 years we lived in NJ I refused to buy there and we rented. In all honesty that was in part an emotional choice, as NJ was supposed to be a short term gig and I feared getting stuck there long term if we bought, but the numbers backed me up. Prices and taxes were insane. As it was we were there twice as long as we were supposed to be. I doubt I would have been OK long term with the rent hikes every year, particularly when as a local rule landlords passed the cost of HOAs and the 1 month rent Realtor listing fee on to the tenant…up front, making it very hard financially for most to leave a bad rental.

Owning a property gives you more control both on expenses and on the way you live, without having to be a child and ask for permission to change something. That’s an intangible that’s hard to put a price on.

As to your other points, there are indeed a lot of people out there with poor judgement. Just think about all those people paying money to chase a small white ball around a lawn with a metal stick. Weird.

IP

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44

Just that it makes sense to investigate whether the real estate amenities you desire are cheaper to acquire by purchase or rent.

Most people desire amenities like:
Being able to play your stereo as loud as you want.
Not having to listen to your neighbor’s stereo as loud as he wants to play it.
A place for your children to know as “home” and to grow up in the same place instead of being uprooted every couple of years.
Being able to plant whatever shrubs, bushes, and flowers you want to. (Limited, perhaps, to ones that the frigging DEER don’t eat.)
Paint the rooms whatever colors you want.
Redecorate curtains, etc. at the wife’s whim.
Relax in the yard, sit on the patio without having to step around other people who also want to run around in the yard and have already occupied all the best seats on the patio.
A fixed monthly payment that doesn’t go up 5%-10% every damn year.

A lot of these are particularly desired by married people with children.

Most of these cannot be acquired by renting, unless perhaps you are quite rich.

Singles, I think especially rich single men, have a different set of desired amenities.

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45

“Most people desire amenities like:
Being able to play your stereo as loud as you want.
Not having to listen to your neighbor’s stereo as loud as he wants to play it.
A place for your children to know as “home” and to grow up in the same place instead of being uprooted every couple of years.
Being able to plant whatever shrubs, bushes, and flowers you want to. (Limited, perhaps, to ones that the frigging DEER don’t eat.)
Paint the rooms whatever colors you want.
Redecorate curtains, etc. at the wife’s whim.
Relax in the yard, sit on the patio without having to step around other people who also want to run around in the yard and have already occupied all the best seats on the patio.
A fixed monthly payment that doesn’t go up 5%-10% every damn year.”

Add to that having to listen to neighbors have parties until 4am Saturday night, week after week.

And hearing footsteps on your ceiling that sound like elephants stomping at all hours of the night.

and being able to comfortably go to bed without listening to neighbors having loud sex next door , above or below you…

And being able to invite friends over for BBQ or shrimp on the barbie…on your BBQ grill.

And having to move every couple years as the rent in your current place goes up 30% while rest of apartments only 15%…

Plus being able to have family stop by for multiple days and stay with you. Important for some.

Note: My grandparents (M side) lived in apartments their entire life… raised 2 kids.

My parents lived in apt for a few years, then when had me, 2 years later bought house - and second kit came along. Always had a house. 2 kids.

My grandparents (F side) had a house as long as I can remember. Five kids…lived in it 55+ years…

Most ‘middle class’ folks want to have a house when they have kids.

As intercst would note, having kids reduces your ‘wealth’. Same for buying a house most likely. For many, kids are ‘priceless’.

He’ll die with 100 million in his portfolio and make some charity very happy. Maybe they’ll even name a scholarship at WPI after him…or a building.

t.

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46

A lot of these are particularly desired by married people with children.

Most of these cannot be acquired by renting, unless perhaps you are quite rich.

Singles, I think especially rich single men, have a different set of desired amenities

I agree with all of this. Most people would.

The thing is, though, that a lot of people—well, I know a lot of these people—who think they are “rich” because they own a house that’s worth a lot in today’s market.

I have a very good friend—good enough that we talk financial stuff—who bought their house in 1996. It’s appreciated A LOT since they bought it. My friend and her husband have very little saved for retirement, no real outside investments, etc. She tells me all the time: “but we’ll be okay because we have the house.” Uh, no, probably not. Not really. It’s not the kind of place to easily “age in place” in, and if you move, you’ll have to buy or rent someplace to live. The value might get you a buy-in at a retire community, but not a lot else after that.

That’s my interpretation of the point Intercst is trying to make: no one rents thinking it’s an investment that will make them rich. A lot of people buy houses because “the appreciation will make them rich.” Because they only consider the ultimate number, and never consider costs of repairs, maintenance, upgrades, inflation, etc. Or the opportunity cost of the money you used for/in your house that might have been invested elsewhere.

Buy a house. Enjoy every minute you’re in it. But it’s not an investment for a lot of people, and if they treat it like one, they may be sorry.

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47

We just sold our house in greater LA. At the time I said if we didn’t already own our house we couldn’t afford it.

CNC
… but the sale financed our move to an expensive retirement home.

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IP: An Intercst Jr is just too awful to think about.

LOL! :grin: :laughing: :sweat_smile: :joy: :rofl:

CNC

49

The thing is, though, that a lot of people—well, I know a lot of these people—who think they are “rich” because they own a house that’s worth a lot in today’s market.

I had a house own me once, when I got stuck with a property in an unmarketable mid-rehab state after a divorce. Didn’t matter, as it was worth the price of getting ExH to sign the papers, and the education I received from that property was priceless. It’s one reason why I am so conservative on contingency plans if things don’t go as expected, like a down market when you need to sell.

I also have a friend with 13 rentals. Happily they were bought some time ago and they are doing very well with income from rents and paper profits on appreciation. What they don’t have is an exit plan now that they are facing retirement. I helped her sell a property last year without a Realtor, but rather than diversifying into something else, heck, anything else, they did a 1031 exchange and at least bought a property that requires less hands on management. Frankly they could easily take on a manager and do very well, so perhaps it is not that big an issue, but they are simply not thinking about retirement or developing a plan.

Flexibility to me is the big issue with real estate. Yes, you may be able to do a reverse mortgage if you need to pull cash out, though the wisdom of those is debatable no matter what Tom Selleck claims. Unlike stocks or funds, you cannot sell off a few shares when you need a specific amount of money, instead having to liquidate the whole property and potentially making yourself subject to a higher rate of income taxes than you actually needed. Like any investment there are pros and cons. Run your own numbers.

IP

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We have been casually looking over the last year. We visited maybe four homes over that time. Our ideal home would have a first floor master due to my wife’s arthritis. A second bedroom on the first floor would be nice for my in-laws when they visit or if we need to move my MIL in some day. Pool in the back or yard large enough to put in a pool. Three car garage so I can store my bass boat I’m going to buy in retirement.

A house came up for sale this week. It has everything on our wish list. Being on the same road (opposite end) as our daughters was a bonus. We would never even known about the house if my daughter didn’t text us about it. The house search our agent set up in her system didn’t show it since it was above our top end price in the search. We looked online Saturday night, toured it Sunday morning and put in an offer on Sunday afternoon.

Interesting how my wife and I went through the decision process. I was more enthused at the beginning. During the last year, my wife complained about the stairs on our house. We went through different options such as motorized chair on stairs, installing elevator and major renovation of the house to add a first floor master to the current house. The new house meant that she would be happy and I wouldn’t hear her complain about the current home. My wife was not initially behind the house basically on price. It going to cost significantly about our current home.

Then as the hours go by, my cheapness gene started kicking in. I am just not good at spending money. I agonize over purchases at the dollar store. I was leaning towards not moving. She started to want the house more and more. She loves the thought being near her daughters. She is really close to the younger one. So in the end she got her way. On Monday, our offer was still not accepted. There were a few details to be ironed out. That morning, my wife’s friend died of cancer. She was our age. That was the tipping point. She wanted the house. Life is too short to be all about the money. intecst will never learn that.

PSU

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…and never consider costs of repairs, maintenance, upgrades, inflation, etc. Or the opportunity cost of the money you used for/in your house that might have been invested elsewhere.

Buy a house. Enjoy every minute you’re in it. But it’s not an investment for a lot of people, and if they treat it like one, they may be sorry.

The cost of repairs! And trees that cost thousands to take down! I’ve seen it all. My house has more than doubled in price in the last 25 years if I were to sell today. I’ve put almost that much into so many things, some cosmetic, some essential, like giant trees falling, roof and gutters damaged, due to straight-line winds last year. (If you aren’t calculating extreme weather, you are making a mistake!) Owning a house is not for the faint of heart or more importantly, without $$$ for all the things needed.

I could sell right now while real estate is high, but then where would I go? How much would it cost? Rent is sky high here and elsewhere. I have family in this area AND I like it here, especially the weather [notwithstanding the extreme weather last year:)]
–Linda

p.s. I think of this house as an asset which my daughters can sell when I am no longer able to be in it (dead or nursing home?) and split the profits.

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Life is too short to be all about the money.

Yes, indeed.

So, did you get the house? I know where I live (in central NC) the bids have to be anywhere from 15-30% above asking…but that is for a “mid-price” home ($300-500K). One of my employees has been trying to get in the game for the better part of a year and keeps getting outbid. I understand, though, that the pricier the house, the less you have to overbid.

Pete

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That was the tipping point. She wanted the house. Life is too short to be all about the money.

Amen. Although we still often buy store-brand food instead of name brand.

Most of the houses in our community are single story. Not a retirement community, but most of the people are retired.

I kinda wanted a two story so we could have an elevator. Or even a 3 story. Only $20,000 (installed), size of a standard closet. Not a huge additional cost on building a new house.
Wife put the kibosh on that with no hesitation.

… will never learn that.

Always single has a different viewpoint on life than a person with family, spouse & kids.
The future belongs to those who show up. That creates a different mindset.

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So, did you get the house? I know where I live (in central NC) the bids have to be anywhere from 15-30% above asking…but that is for a “mid-price” home ($300-500K). One of my employees has been trying to get in the game for the better part of a year and keeps getting outbid. I understand, though, that the pricier the house, the less you have to overbid.

Our written offer was accepted in writing. Yes, we got the house. Tomorrow is an inspection. Then off to the regular closing process. Next we have to prepare our current house to sell.

PSU

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  1. I believe the concept of “average increase” is desperately flawed. I owned a condo in Boston. It was in Back Bay. My outcome wold have been quite different had it been in Jamaica Plains or Mattapan or Roxbury lots of other areas of the city.

  2. Because we were both in broadcasting, we expected to move fairly frequently. Even though Westinghouse would buy the property if they transferred us, what if we left on our own? Therefore, like IP we always bought with an eye toward easy resell. That meant “good school district” (even though we have no children), convenient to shopping (yes, please), and other amenities that might or might not have been on our list if we were just looking for “a place to live.”

  3. I absolutely look at my house as an investment. Someday I expect I will be moved into an assisted living facility, and I want to have enough equity (somewhere) to make sure it’s a nice one. My brother-in-law works in one for medicaid patients only, and you do not want to end up there. My sister-in-law lives in a double-wide, and while it’s comfortable for her now, when she goes to sell it (it sits on someone else’s land) she will get very little to show. With ease she could have bought something that would appreciate, but she took the cheap & easy way instead.

  4. I do not advocate landlordism as an avocation; punching the buy or sell button on a stock portfolio is much easier, but property isn’t such a terrible idea that you should be holding your nose about it. A choice property or two, as one part of a personal portfolio isn’t a bad thing, given the advantages I’ve already detailed earlier. Typically the leverage you get will only affect that particular asset; leverage up a stock or bond purchase and watch it go south ad expect your entire portfolio to be liquidated at an inconvenient time not of your own choosing. Having the bank foreclose would not be a pretty prospect, but unless you are wildly overpaying for speculative property, it will likely end there.

  5. Diversify means more than “buy two different stocks”, and real estate is (historically) a decent investment over time. It comes with limitations like lack of liquidity, but advantages as I’ve already detailed upthread.

  6. There is no feeling better than owning your home free and clear. I know some will argue that you should mortgage to the hilt and put the rest in the market, but there are times and places when that hasn’t worked so well, and you still have a mortgage payment.

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56

PSU surmises,

Life is too short to be all about the money. intecst will never learn that.

I’m touched at the concern for my welfare, but cry not for me.

I’ve always believed that life is all about “having nothing you have to do, and nobody you have to report to.” For the past 28 years, I’ve been fortunate enough to get up every morning and do whatever 100% interests me at the time, and ignore the rest. Money will buy that freedom for you.

But my finances have been on autopilot for more than two decades. It just grows and compounds over time without much thought or attention from me. I just spend a few hours with Turbo Tax at year end, do some light rebalancing, and I’m done.

My big advantage was early knowledge of “the skim” and the fantastic financial opportunities in minimizing or eliminating it. That 3-day financial planning course I took as an 18-year-old Freshman got me an extra decade or two of compounding since I was able to avoid most of the mistakes people make early in their financial lives.

But of course, most people will never learn that.

intercst

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57

"But of course, most people will never learn that.

intercst "

And most of those will live their lives happily and somewhat content with their lot.
Folks are happy you enjoy posting and your contribution to the boards are welcome. They
add a bunch to think about and evaluate.
Some folks take different views of investing and they also add a bunch to think on and evaluate.

Howie52
People tend to see the paths they take very well and describe the ways forward based on their
experience and views. Other paths are frequently described with terms like “Here be dragons!”.
Sometimes there are people who sail past the dragon’s abode safely.
Sometimes there are people who sail past the dragon’s abode and still die of scurvy.
And sometimes there are people who sell seats on their boats to people who really really want
to see a dragon - or just a dragon’s abode.

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"Our written offer was accepted in writing. Yes, we got the house. Tomorrow is an inspection. Then off to the regular closing process. Next we have to prepare our current house to sell.

PSU "

Congrats!!!

Howie52
I don’t think selling will be as much fun - but finishing the whole enchilada will be a
treat.

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GH: 3. I absolutely look at my house as an investment. Someday I expect I will be moved into an assisted living facility, and I want to have enough equity (somewhere) to make sure it’s a nice one. My brother-in-law works in one for medicaid patients only, and you do not want to end up there. My sister-in-law lives in a double-wide, and while it’s comfortable for her now, when she goes to sell it (it sits on someone else’s land) she will get very little to show. With ease she could have bought something that would appreciate, but she took the cheap & easy way instead.

Who do you expect will move you into an assisted living facility? Your children? Spouse? Yourself? It is true that there are still pure assisted living facilities, but the recent trend is to Continuing Care Residential Communities - CCRC’s. A CCRC provides four levels of living. Independent living (the first level) is the goal for us all, but if the day comes when we need assistance, a CCRC will provide that. Can be as little as needing help bathing or dressing. Sadly, some of us will become senile (Lose our marbles - ever know anyone like that?) At this time we need more care, and typically we need to be kept from wandering off and getting lost, or worse, getting in our car and killing someone. At that time we need what is euphemistically called “memory care” - kept in a closed community. Lastly, we may become so ill or bed-ridden that we need someone to physically take care of us. Skilled nursing care is provided at a CCRC.

Last October we moved to a CCRC in Southern California. We sold our house for enough to pay for the move (plus a little left over). The monthly rent is staggering, but it covers maintenance, meals, and potential future needs for assistance or care. We have a two bedroom apartment, but we are “merely rich”. The truly rich can afford a larger apartment, or even an apartment in a four-plex, or a duplex. There are even a few free-standing houses in our complex. Interesting to me is that three years in, there are still unoccupied apartments, but the larger units are all fully subscribed, with a waiting list.

The community is active and there are social opportunities in the form of clubs, organized games (bridge, anyone?) and outings. There is a nice movie theater. The food is good and plenteous, served in a restaurant setting. (I wonder why everyone here isn’t fat!)

Come on in! The water’s fine!

I am sure the Goofyhoofys would be comfortable here without feeling they were in a slum.

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I don’t think selling will be as much fun - but finishing the whole enchilada will be a
treat.

We thought it was fun to get multiple offers for well over our (absurdly high) asking price.

CNC

1 Like