Housing is too expensive.

anonymoususer · Post by **anonymoususer** » Tue Jun 06, 2017 8:38 pm

Late 30s. husband, wife, two kids

Assets: Total 365k.
175k (sometimes it is not easy to think that 100k for down payment is sitting in ibond/savings accounts/short term bonds for few years and this is going to continue for few more years) in taxable,
15k in HSA,
60k in Roth,
105k in 401k/Reg IRA.

Income: Husband ‘s 120k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.
Currently renting 2 bedroom place under 2000/month. We are not excited about schools where we live and would like to move to good school district after a year or so when first kid goes to elementary school. 3 bedroom houses start from 625k and we do not think we can afford. If we rent 3 bedroom place in good school district, rent would be similar to mortgage(mortgage = Principal and Interest + Property Taxes + Homeowners' Insurance) if we put 20% down.

Thoughts?

Job is not secure.

I logged in from different ID to be anonymous.

Side question:
I see few replies saying if your job is solid, take mortgage. If not, rent.
I work for a publicly traded company and I have seen that at least in IT, finance and administrative fields there are no job securities. How much of a cushion is ideal and practical in this situation?

bloom2708 · Post by **bloom2708** » Tue Jun 06, 2017 9:16 pm

What does the calculator tell you?

https://www.nytimes.com/interactive/201 ... .html?_r=1

This sounds like an easy "keep renting" decision. Taxes, insurance, increased utilities, maintenance, repairs, upgrades, additional furniture. That is all added on to the mortgage payment.

+1 to keep renting here.

CAsage · Post by **CAsage** » Tue Jun 06, 2017 9:21 pm

Housing in good school districts doesn't get cheaper over time. If you can afford to buy for about the same monthly payment as rent... rent goes up each year. You do need to account for property taxes, insurance, maintenance.... But with two kids, you are looking at 14 years of living there. There are no easy alternatives.

PFInterest · Post by **PFInterest** » Tue Jun 06, 2017 9:24 pm

Lol 625 for a 3 bdrm sounds cheap to me. Lucky you.

Grt2bOutdoors · Post by **Grt2bOutdoors** » Tue Jun 06, 2017 9:26 pm

No crime in renting. I would not let inability to buy dictate ability to put family first. If I wasn't able to buy, I would rent imo.

AlohaJoe · Post by **AlohaJoe** » Tue Jun 06, 2017 9:30 pm

anonymoususer wrote:If we rent, rent would be similar to mortgage if we put 20% down.

It sounds like you can afford it other than the downpayment?

In any case, consumption is always a set of tradeoffs, few people can have everything. It seems like you opted for "two kids and wife doesn't have to work" as your tradeoff for your set of circumstances. Nothing wrong with that.

KlangFool · Post by **KlangFool** » Tue Jun 06, 2017 9:47 pm

anonymoususer wrote:Late 30s. husband, wife, two kids
Assets: 175k in taxable, 15k in HSA, 60k in Roth, 105k in 401k/Reg IRA. Total 365k
Income: Husband ‘s120k-140k, not considering wife’s as wife is working part time and probably will rise kids full time for few years
Currently renting under 2000/month and would like to move to good school district after a year or so when first kid goes to elementary school. 3 bedroom houses start from 625k and we do not think we can afford. If we rent, rent would be similar to mortgage if we put 20% down. Thoughts?
I logged in from different ID to be anonymous.

anonymoususer,

Rent. There are additional costs and risks associated with buying a house. The 30 years mortgage wth 20% down need to be at least 20% to 30% lower than renting in order for this to work.

Rent with the same townhouse around here is about $2,200 to $2,300. I bought because the mortgage (PITI) payment is less than $1,800.

KlangFool

leverage · Post by **leverage** » Tue Jun 06, 2017 9:55 pm

If the mortage is the same price as the rent, why can't you afford buying the house? Sorry just a newbie here in the forums and it has always been my personal opinion that buying a house, if you can afford it, will always be better than renting one. If anybody can enlighten me on this. Thank you.

delamer · Post by **delamer** » Tue Jun 06, 2017 10:10 pm

If your job is secure and if your wife will be going back to work in a few years in a job that will increase your family income by 1/3 or more, then I would buy a house. But only under those conditions, and with the expectation that your wife's income will go only to childcare and rebuilding your savings for several years.

As AlohaJoe said, consumption is always a set of tradeoffs. And many couple make tradeoffs like that in HCOL areas. We certainly did.

bligh · Post by **bligh** » Tue Jun 06, 2017 10:15 pm

How stable is your job? With the wife either working part time or not at all, the mortgage payment rests completely on your shoulders. That with the 20% down and 2 kids who depend on you, would make me nervous about buying. If your job is going to be rock solid for the next 7-10 years and you will be staying in the same spot for that long, then buying a house should be fine. My Advice would be to rent. But often, buying a house is not a financial decision but a quality of life one.

Housing is too expensive.

newbie_Mo · Post by **newbie_Mo** » Tue Jun 06, 2017 10:50 pm

How much is rent for a 2 bedrm apt in the good school district? I think there was a thread that talked about 2 sibs sharing a bedrm. Look that up.

harrychan · Post by **harrychan** » Tue Jun 06, 2017 11:07 pm

Too much risk associated with single income and too little in your retirement accounts. Can you make a compromise in an area where the school district is not the best but decent and home prices around the $550k mark? Here in SoCal, the best school districts are ultra competitive and can backfire if your kids are "just" above avg. Whereas, going to an good but not great school they will fit it better and score higher. That's my .02.

unclescrooge · Post by **unclescrooge** » Tue Jun 06, 2017 11:18 pm

Compared to the rest of the world housing in the U.S.is cheap.

Even in the HCOL areas.

As the world becomes smaller maybe U.S. prices will continue to rise until they are just as expensive as other counties.
--
If I were planning on living in an area for 15 years, I would buy.

Especially since the government is subsidizing the mortgage. Additionally, you'd be able tio itemize and claim property taxes as a deduction too.

If renting is the same as buying, what's holding you back?
--
Housing prices in good school districts is less likely to decline during a bad cycle. And if you needed to sell, you're likely to get rid of it quicker.
--

Goal33 · Post by **Goal33** » Tue Jun 06, 2017 11:20 pm

Seems to me like you can afford it.

mmmodem · Post by **mmmodem** » Wed Jun 07, 2017 1:12 am

OP, you're making $20k to $40k more than us. You have more in taxable than us. You have one less kid than us. We live in HCOLA, SF Bay Area. We own. How? We started with the two bed foreclosure in a good school district with PITI of $1500 versus the rent of around $2000. And then we moved up to a 3 bed and now to a 4 bed. DW does not have to work.

Valuethinker · Post by **Valuethinker** » Wed Jun 07, 2017 4:48 am

AlohaJoe wrote:
anonymoususer wrote:If we rent, rent would be similar to mortgage if we put 20% down.
It sounds like you can afford it other than the downpayment?

In any case, consumption is always a set of tradeoffs, few people can have everything. It seems like you opted for "two kids and wife doesn't have to work" as your tradeoff for your set of circumstances. Nothing wrong with that.

I suspect with childcare costs in the USA, it doesn't pay for a wife to work part time. Full time only if she is in a highly paid profession.

Valuethinker · Post by **Valuethinker** » Wed Jun 07, 2017 4:48 am

AlohaJoe wrote:
anonymoususer wrote:If we rent, rent would be similar to mortgage if we put 20% down.
It sounds like you can afford it other than the downpayment?

In any case, consumption is always a set of tradeoffs, few people can have everything. It seems like you opted for "two kids and wife doesn't have to work" as your tradeoff for your set of circumstances. Nothing wrong with that.

I suspect with childcare costs in the USA, it doesn't pay for a wife to work part time? Full time only if she is in a highly paid profession?

Valuethinker · Post by **Valuethinker** » Wed Jun 07, 2017 4:51 am

anonymoususer wrote:Late 30s. husband, wife, two kids
Assets: 175k in taxable, 15k in HSA, 60k in Roth, 105k in 401k/Reg IRA. Total 365k
Income: Husband ‘s 120k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years
Currently renting 2 bedroom place under 2000/month. We are not excited about schools where we live and would like to move to good school district after a year or so when first kid goes to elementary school. 3 bedroom houses start from 625k and we do not think we can afford. If we rent 3 bedroom place in good school district, rent would be similar to mortgage if we put 20% down. Thoughts?

Job is not secure.

I logged in from different ID to be anonymous.

If you can make a 10 year commitment to living in a place that is in a good location, ie good schools and other amenities, then it is usually better to buy.

Of course you might lose your job and be worse off, in say 5 years, if there is a housing price slump. That is the downside.

Ownership is about good location, and ability to hold on and ride the ups and downs. If you can do that, because of the leverage effect home ownership is usually a good decision. But you have to have a good location i.e. one that remains appealing to your future buyer.

rooms222 · Post by **rooms222** » Wed Jun 07, 2017 5:18 am

If your job is not stable for the long term, you may be a better candidate for FHA financing, especially in California, which is a non-recourse state. FHA only requires 3.5% down. In a non-recourse state, if you have severe financial difficulties in the future, you can walk away and not owe the deficiency balance. The FHA limit for much of California is currently $636,000.

bayview · Post by **bayview** » Wed Jun 07, 2017 5:37 am

anonymoususer wrote:Late 30s. husband, wife, two kids
Assets: 175k in taxable, 15k in HSA, 60k in Roth, 105k in 401k/Reg IRA. Total 365k
Income: Husband ‘s 120k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years
Currently renting 2 bedroom place under 2000/month. We are not excited about schools where we live and would like to move to good school district after a year or so when first kid goes to elementary school. 3 bedroom houses start from 625k and we do not think we can afford. If we rent 3 bedroom place in good school district, rent would be similar to mortgage if we put 20% down. Thoughts?

Job is not secure.

I logged in from different ID to be anonymous.

Your job is not secure = rent.

If and when 2007-08 comes around again, and you lose your job, the local housing market crashes, and you need to move to get new work, you'll be stuck with a mortgage for a house that's no longer worth anywhere near $625k.

Stay light on your feet for now and rent.

MDfive21 · Post by **MDfive21** » Wed Jun 07, 2017 10:17 am

regarding the timing of your move: whatever you decide, be sure to find out when your first kid must register and enroll in the good elementary school to be guaranteed a spot. in my area the elementary school fills up with kids zoned to it and it's first come, first enrolled. if they don't get in early, kids are being bused to other elem schools which are less desirable.

DoubleClick · Post by **DoubleClick** » Wed Jun 07, 2017 11:13 am

bayview wrote: Job is not secure.

Your job is not secure = rent.

If and when 2007-08 comes around again, and you lose your job, the local housing market crashes, and you need to move to get new work, you'll be stuck with a mortgage for a house that's no longer worth anywhere near $625k.

Stay light on your feet for now and rent.

+1. This is the main danger with stretching yourself in this situation.

KlangFool · Post by **KlangFool** » Wed Jun 07, 2017 11:24 am

leverage wrote:If the mortage is the same price as the rent, why can't you afford buying the house? Sorry just a newbie here in the forums and it has always been my personal opinion that buying a house, if you can afford it, will always be better than renting one. If anybody can enlighten me on this. Thank you.

leverage,

<<If the mortage is the same price as the rent, why can't you afford buying the house?>>

1) There are significant costs associated with owning a house. So, the mortgage payment needs to be at least 20% to 30% lower than rent in order for the person to afford the house.

2) In general, many people justify their reasoning for buying by comparing a house that they would not rent. Aka, they upsize. For example, they rent a townhouse but they would buy a single family home. Then, they use renting a single family home to justify their purchase.

KlangFool

gunn_show · Post by **gunn_show** » Wed Jun 07, 2017 11:40 am

AlohaJoe wrote:
anonymoususer wrote:If we rent, rent would be similar to mortgage if we put 20% down.
It sounds like you can afford it other than the downpayment?

In any case, consumption is always a set of tradeoffs, few people can have everything. It seems like you opted for "two kids and wife doesn't have to work" as your tradeoff for your set of circumstances. Nothing wrong with that.

Agree with Joe, life is often built on trade-offs, and you made one. No harm or crime in renting, you have to pay for housing in some fashion, which it appears is safest for you at this time being a single income household and stated uncertain job stability. Risks appear to clearly outweigh the advantages in buying here. You'd be stretching to use more than a third of your assets to cover the DP, then be stretching to make the payments and future associated maintenance and other random (and often expensive) costs that come with homeownership.

If you can increase your income a bit and feel more stable about it, then I think the tide turns.

leverage wrote:If the mortage is the same price as the rent, why can't you afford buying the house? Sorry just a newbie here in the forums and it has always been my personal opinion that buying a house, if you can afford it, will always be better than renting one. If anybody can enlighten me on this. Thank you.

Do some research in the forums, books, wiki. There are 100 reasons in each direction to answer your question as to this statement "buying a house, if you can afford it, will always be better than renting one" is most certainly not always true. (edit to add KlangFool as always hit the mark on this as well)

One simple scenario:
Next year all the appliances break in your house, random for sure, but sometimes sh*t happens. Let's say $3000 to replace it all.
A renter calls his landlord, gets it all replaced at no cost. (perhaps rent goes up, but prob not, it is a cost of doing business for landlord).
A homeowner instead has to drop everything, go shopping, and pull $3000 out of his savings account so he can continue functioning and providing food from his kitchen for his family. Most recent statistics state some 30-40% of Americans could not afford a $400 accident tomorrow if it happened.
Buying a house is not always a great idea for everyone, and not always for the simple thought "that because you can afford it (on the surface) that you should"

KATNYC · Post by **KATNYC** » Wed Jun 07, 2017 11:54 am

PFInterest wrote:Lol 625 for a 3 bdrm sounds cheap to me. Lucky you.

I had the same thought. $625K for a 3 bedroom is a steal in NYC.
A 2 bedroom in my building is in contract for almost $800K.

If the job is not secure, rent.

SkierMom · Post by **SkierMom** » Wed Jun 07, 2017 12:15 pm

If I was in my early 30's again in California (assumption) with young kids.......(queue harp music)

I would buy the least expensive (crappy?) house or town home in the very best possible school district I could afford, and put sweat-equity to work.

For me, I don't like the unknown variables of housing that come with renting, particularly with school-aged children in the picture. It puts your family in too vulnerable of a position.

My husband and I like to look at things with a 5-year perspective. Could you commit to this area for a minimum of five years?

Nowizard · Post by **Nowizard** » Wed Jun 07, 2017 12:27 pm

Move to a LCOL area. We live in a beautiful suburb in West Tennessee and have our house on the market. It is 5,000 sf, on a one acre lot, and is eight years old with many upscale features. Listing price $639,900. Our total incomes were just above the $140,000 top you mention, we invested well, and are secure in retirement. There are many areas where you hear negative comments of the "I would never live there" type, but those areas, if metropolitan, have nice suburbs in many cases. Our combined city and county taxes are approximately $2,700, and there is no income tax in Tennessee. Might not be your choice but there are many other LCOL places as well.
Tim

anonymoususer · Post by **anonymoususer** » Wed Jun 07, 2017 12:46 pm

newbie_Mo wrote:How much is rent for a 2 bedrm apt in the good school district? I think there was a thread that talked about 2 sibs sharing a bedrm. Look that up.

I will look that thread up.

About rent for 2 bedroom apartment, I have not looked in detail, but there are 3-4 neighborhoods; all neighborhoods serve same high school. But serve different elementary schools. We probably will be happy with any of these elementary schools. I just browsed for 2 bedroom apartments in high school district and there are a couple of apartments listed for ~2300/month. Seems like this is the only neighborhood( serving a particular elementary school) that have apartments for rents. I think apartments are not common in other neighborhoods.

anonymoususer · Post by **anonymoususer** » Wed Jun 07, 2017 12:51 pm

mmmodem wrote:OP, you're making $20k to $40k more than us. You have more in taxable than us. You have one less kid than us. We live in HCOLA, SF Bay Area. We own. How? We started with the two bed foreclosure in a good school district with PITI of $1500 versus the rent of around $2000. And then we moved up to a 3 bed and now to a 4 bed. DW does not have to work.

It is great that it worked out for you. But it is risky for my taste to take the path where I plan to buy 3 houses in few years. Housing market has to appreciate at good rate for that to work out and I do not think most of us know how housing market will behave in next decade or so.

anonymoususer · Post by **anonymoususer** » Wed Jun 07, 2017 12:52 pm

MDfive21 wrote:regarding the timing of your move: whatever you decide, be sure to find out when your first kid must register and enroll in the good elementary school to be guaranteed a spot. in my area the elementary school fills up with kids zoned to it and it's first come, first enrolled. if they don't get in early, kids are being bused to other elem schools which are less desirable.

I did not know this. Thanks!

Frisco Kid · Post by **Frisco Kid** » Wed Jun 07, 2017 12:57 pm

Keep in mind too that the costs of selling 3 houses in a HCOL area would be HUGE.....

sport · Post by **sport** » Wed Jun 07, 2017 1:01 pm

Nowizard wrote:Move to a LCOL area. We live in a beautiful suburb in West Tennessee and have our house on the market. It is 5,000 sf, on a one acre lot, and is eight years old with many upscale features. Listing price $639,900. Our total incomes were just above the $140,000 top you mention, we invested well, and are secure in retirement. There are many areas where you hear negative comments of the "I would never live there" type, but those areas, if metropolitan, have nice suburbs in many cases. Our combined city and county taxes are approximately $2,700, and there is no income tax in Tennessee. Might not be your choice but there are many other LCOL places as well.
Tim

This was my thought as well. In my area you can get a nice house for 250K in a good school district. For 400K, you can get a large upscale house in a fancy suburb.

jharkin · Post by **jharkin** » Wed Jun 07, 2017 1:12 pm

KlangFool wrote:
leverage wrote:If the mortage is the same price as the rent, why can't you afford buying the house? Sorry just a newbie here in the forums and it has always been my personal opinion that buying a house, if you can afford it, will always be better than renting one. If anybody can enlighten me on this. Thank you.
leverage,

<<If the mortage is the same price as the rent, why can't you afford buying the house?>>

1) There are significant costs associated with owning a house. So, the mortgage payment needs to be at least 20% to 30% lower than rent in order for the person to afford the house.

2) In general, many people justify their reasoning for buying by comparing a house that they would not rent. Aka, they upsize. For example, they rent a townhouse but they would buy a single family home. Then, they use renting a single family home to justify their purchase.

KlangFool

+1 When you own there are LOTS of additional expenses beyond the basic housing payment. To start you have to add in insurance and property taxes that can add thousands per year. Then you add in all the unexpected surprises.

Case in point just yesterday I get a frantic call at work from the Mrs... Septic overflow alarm went off. Rush home and I'm handy so I diagnosed it to a loose pump float switch that I was able to fix, but a non-DIYer might have had a 4 figure service bill and a couple days spent at a hotel since you could not use the facilities. And this happens with zero advance warning.

Or you start noticing a water spot on the ceiling in heavy rain. Guess what, that will be $10,000 for a new roof.

Town wants to build a new high school? Property tax override and your bill goes up a grand per year.

These kinds of things happen ALL THE TIME to homeowners and you have to be ready for them. Just because the mortgage PI = a rent payment doesn't mean you can afford the house.

------
I also agree that the numbers for a 600k+ house just plain dont work on an unstable 140k income. OP would need to liquidate taxable to get into a house like that - and that's still a stretch - leaving no emergency cushion just when its most needed.

HomerJ · Post by **HomerJ** » Wed Jun 07, 2017 1:21 pm

unclescrooge wrote:Compared to the rest of the world housing in the U.S.is cheap.

Even in the HCOL areas.

As the world becomes smaller maybe U.S. prices will continue to rise until they are just as expensive as other counties.

What are you talking about? What exactly is your definition of "the rest of the world"?

forevernaive · Post by **forevernaive** » Wed Jun 07, 2017 1:22 pm

I think the most important factor is to consider not just your job security, but whether you could (relatively) easily find another job in the area without moving.

If the answer to the latter is yes, then you would just need to make sure you have an adequate emergency fund in addition to your down payment before purchasing. From your description, that doesn't sound like where you are today (ie the stretch to buy a 3BR).

In your situation you should probably continue to to rent until you are financially comfortable buying. If you are/would be in a market with rapidly increasing rents, that might motivate you to a different decision.

Also you might ask a prospective (private) landlord if they'd consider a private party sale in a year or two. Not paying the RE commission can make houses a lot more affordable. And as a landlord I always take this as a positive sign from tenants even if I am not interested in selling, as long as their time frame is over one year away (I don't want to deal with broken leases).

BW1985 · Post by **BW1985** » Wed Jun 07, 2017 2:00 pm

sport wrote:
Nowizard wrote:Move to a LCOL area. We live in a beautiful suburb in West Tennessee and have our house on the market. It is 5,000 sf, on a one acre lot, and is eight years old with many upscale features. Listing price $639,900. Our total incomes were just above the $140,000 top you mention, we invested well, and are secure in retirement. There are many areas where you hear negative comments of the "I would never live there" type, but those areas, if metropolitan, have nice suburbs in many cases. Our combined city and county taxes are approximately $2,700, and there is no income tax in Tennessee. Might not be your choice but there are many other LCOL places as well.
Tim
This was my thought as well. In my area you can get a nice house for 250K in a good school district. For 400K, you can get a large upscale house in a fancy suburb.

Same here. I"m glad we left the HCOL area.

mmmodem · Post by **mmmodem** » Wed Jun 07, 2017 3:20 pm

anonymoususer wrote:
mmmodem wrote:OP, you're making $20k to $40k more than us. You have more in taxable than us. You have one less kid than us. We live in HCOLA, SF Bay Area. We own. How? We started with the two bed foreclosure in a good school district with PITI of $1500 versus the rent of around $2000. And then we moved up to a 3 bed and now to a 4 bed. DW does not have to work.
It is great that it worked out for you. But it is risky for my taste to take the path where I plan to buy 3 houses in few years. Housing market has to appreciate at good rate for that to work out and I do not think most of us know how housing market will behave in next decade or so.

You missed the point. You don't buy three houses in a few years. You buy a cheap house. Move up when ready.

For example, you get a used car when you're 16. You move up to a new car when you get your first job. You finally get your dream car later in life.

You don't buy a 3 bed house now. You buy a fixer upper 2 bed townhome now. The equity from the first home goes into the second and so on.

BolderBoy · Post by **BolderBoy** » Thu Jun 08, 2017 8:31 am

DoubleClick wrote:
bayview wrote: Job is not secure.

Your job is not secure = rent.

If and when 2007-08 comes around again, and you lose your job, the local housing market crashes, and you need to move to get new work, you'll be stuck with a mortgage for a house that's no longer worth anywhere near $625k.

Stay light on your feet for now and rent.
+1. This is the main danger with stretching yourself in this situation.

Agree with this.

mak1277 · Post by **mak1277** » Thu Jun 08, 2017 8:40 am

When I read "job is not secure", the first thought that comes to mind is that this is the perfect opportunity to at least investigation relocating to a lower COL area.

jlcnuke · Post by **jlcnuke** » Thu Jun 08, 2017 1:49 pm

HomerJ wrote:
unclescrooge wrote:Compared to the rest of the world housing in the U.S.is cheap.

Even in the HCOL areas.

As the world becomes smaller maybe U.S. prices will continue to rise until they are just as expensive as other counties.
What are you talking about? What exactly is your definition of "the rest of the world"?

Probably talking about Europe etc. Converting square meters to square feet is about a 1:11 ratio, so $11/square meter = $1/square foot. In France, the average price per square meter is over $10k/square meter, or about $909/sq ft. At that rate, a 2,000 square foot home would cost ~$1.8M. While the most outrageous housing cost areas in the US are in that range, average home prices in the US are about 1/10th of that.

AmericaFirst · Post by **AmericaFirst** » Thu Jun 08, 2017 2:30 pm

Consider moving to a low cost of living, high quality of life area. There are plenty of them in the Midwest and south.

goodenyou · Post by **goodenyou** » Thu Jun 08, 2017 2:45 pm

Buying a house that is going to stretch yourself thin is not a good idea. Just because you can cash flow a house doesn't mean you should purchase. As others have said, the linchpin in the decision is the security of the job. The risk of not being able to unload a house, if you have to in the event that you cannot continue to cash flow it, can cause a serious financial setback. It is painful to be stuck in a house that racks up repair costs and property taxes while staring at a 6% immediate cost of commission just to sell. I have seen many make this mistake. Buy a house when you have a financial cushion and job security in a highly desirable area. Rent in the mean time and save. My $.02

HomerJ · Post by **HomerJ** » Thu Jun 08, 2017 3:11 pm

jlcnuke wrote:
HomerJ wrote:
unclescrooge wrote:Compared to the rest of the world housing in the U.S.is cheap.

Even in the HCOL areas.

As the world becomes smaller maybe U.S. prices will continue to rise until they are just as expensive as other counties.
What are you talking about? What exactly is your definition of "the rest of the world"?
Probably talking about Europe etc. Converting square meters to square feet is about a 1:11 ratio, so $11/square meter = $1/square foot. In France, the average price per square meter is over $10k/square meter, or about $909/sq ft. At that rate, a 2,000 square foot home would cost ~$1.8M. While the most outrageous housing cost areas in the US are in that range, average home prices in the US are about 1/10th of that.

In France? Or in certain parts of Paris? Big difference.

jlcnuke · Post by **jlcnuke** » Thu Jun 08, 2017 4:11 pm

Those numbers were apparently for the "biggest" city (didn't say which).

Either way, overall housing costs for many countries in Europe is much higher on average than overall housing costs for the US. IF you look at "price in real terms" here you'll see that while our prices had only recovered about 50% of their relative cost since the housing bubble, England/France/Australia etc have just continued to get more expensive and are closing in on double the cost we pay.

unclescrooge · Post by **unclescrooge** » Fri Jun 09, 2017 8:31 am

HomerJ wrote:
jlcnuke wrote:
HomerJ wrote:
unclescrooge wrote:Compared to the rest of the world housing in the U.S.is cheap.

Even in the HCOL areas.

As the world becomes smaller maybe U.S. prices will continue to rise until they are just as expensive as other counties.
What are you talking about? What exactly is your definition of "the rest of the world"?
Probably talking about Europe etc. Converting square meters to square feet is about a 1:11 ratio, so $11/square meter = $1/square foot. In France, the average price per square meter is over $10k/square meter, or about $909/sq ft. At that rate, a 2,000 square foot home would cost ~$1.8M. While the most outrageous housing cost areas in the US are in that range, average home prices in the US are about 1/10th of that.
In France? Or in certain parts of Paris? Big difference.

Yes, I was talking about Europe, India, China and Hong Kong. Basically where ever most of the human population lives.

A HCOL city like SF is only 70% the cost of Hong Kong or Beijing. Los Angeles is much cheaper than Mumbai.

Similarly, a LCOL city is cheaper than some rural place in Europe.

Housing in India/China is ridiculously expensive, both in terms of local wages and from a relative stand point.

We have it good here.

Grogs · Post by **Grogs** » Fri Jun 09, 2017 10:22 am

unclescrooge wrote:
HomerJ wrote:
jlcnuke wrote:
HomerJ wrote:
unclescrooge wrote:Compared to the rest of the world housing in the U.S.is cheap.

Even in the HCOL areas.

As the world becomes smaller maybe U.S. prices will continue to rise until they are just as expensive as other counties.
What are you talking about? What exactly is your definition of "the rest of the world"?
Probably talking about Europe etc. Converting square meters to square feet is about a 1:11 ratio, so $11/square meter = $1/square foot. In France, the average price per square meter is over $10k/square meter, or about $909/sq ft. At that rate, a 2,000 square foot home would cost ~$1.8M. While the most outrageous housing cost areas in the US are in that range, average home prices in the US are about 1/10th of that.
In France? Or in certain parts of Paris? Big difference.
Yes, I was talking about Europe, India, China and Hong Kong. Basically where ever most of the human population lives.

A HCOL city like SF is only 70% the cost of Hong Kong or Beijing. Los Angeles is much cheaper than Mumbai.

Similarly, a LCOL city is cheaper than some rural place in Europe.

Housing in India/China is ridiculously expensive, both in terms of local wages and from a relative stand point.

We have it good here.

I suspect the correlation with population density is pretty high. Where I live, there is a lot of open land. If the demand for housing gets too high, some developers will eventually knock down some trees and build a thousand new houses. As long as that's the case, home prices will probably remain pretty reasonable. In a place like SFO or Singapore, there's no more available land, so no easy relief valve. In that case, prices will continue to rise until enough people are priced out of the market. The other big driver is probably government policy - taxes, ease to get new building permits, etc. We're probably better on those in the US than most other developed nations.

dspencer · Post by **dspencer** » Fri Jun 09, 2017 10:28 am

mak1277 wrote:When I read "job is not secure", the first thought that comes to mind is that this is the perfect opportunity to at least investigation relocating to a lower COL area.

Same here. It's a pretty radical suggestion and hard to say whether OP would even remotely consider it. As someone who has only lived in low/average COL areas it is hard to fathom how someone making $130k would consider a house over $600k. Of course where I live you would be buying so much house at that cost that utilities and maintenance would be a large burden as well. It seems like living in a HCOL area basically forces you to include a large real estate gamble as part of your asset allocation.

My brother in law works in finance and recently moved from NYC to Colorado and has been very happy about it. Easy commute, better work/life balance, lower stress environment. Maybe OP has great reasons for staying, but in my mind that salary is not sufficient to justify the trade offs of living in such a high cost area.

Basically if your job is not secure, I would not buy a very expensive house you aren't sure you can afford. It might work out fine, but the potential worst case scenario is pretty disastrous.

unclescrooge · Post by **unclescrooge** » Fri Jun 09, 2017 12:42 pm

Grogs wrote:
unclescrooge wrote:
HomerJ wrote:
jlcnuke wrote:
HomerJ wrote:
What are you talking about? What exactly is your definition of "the rest of the world"?
Probably talking about Europe etc. Converting square meters to square feet is about a 1:11 ratio, so $11/square meter = $1/square foot. In France, the average price per square meter is over $10k/square meter, or about $909/sq ft. At that rate, a 2,000 square foot home would cost ~$1.8M. While the most outrageous housing cost areas in the US are in that range, average home prices in the US are about 1/10th of that.
In France? Or in certain parts of Paris? Big difference.
Yes, I was talking about Europe, India, China and Hong Kong. Basically where ever most of the human population lives.

A HCOL city like SF is only 70% the cost of Hong Kong or Beijing. Los Angeles is much cheaper than Mumbai.

Similarly, a LCOL city is cheaper than some rural place in Europe.

Housing in India/China is ridiculously expensive, both in terms of local wages and from a relative stand point.

We have it good here.
I suspect the correlation with population density is pretty high. Where I live, there is a lot of open land. If the demand for housing gets too high, some developers will eventually knock down some trees and build a thousand new houses. As long as that's the case, home prices will probably remain pretty reasonable. In a place like SFO or Singapore, there's no more available land, so no easy relief valve. In that case, prices will continue to rise until enough people are priced out of the market. The other big driver is probably government policy - taxes, ease to get new building permits, etc. We're probably better on those in the US than most other developed nations.

I agree with that.

As population (and density) in US rises, is it just a matter of time before housing here becomes equally expensive?

Pajamas · Post by **Pajamas** » Fri Jun 09, 2017 12:52 pm

If you don't feel comfortable buying, can you rent in a good school district?

It's hard to balance the goals of good schools for your kids and financial security, but you can't improve the schooling your children receive after the fact, whereas you could improve your financial situation later.

Maybe shift from saving to buy a house to investing to increase wealth. Then you can buy a house when you feel comfortably able to do so or at least are not so concerned about it from a financial and job security perspective when the housing market is not so hot. You can't really predict the housing market, but it has definitely been cyclical in the past.

Valuethinker wrote:
I suspect with childcare costs in the USA, it doesn't pay for a wife to work part time? Full time only if she is in a highly paid profession?

Wouldn't the same apply to a husband?

delamer · Post by **delamer** » Fri Jun 09, 2017 12:57 pm

Pajamas wrote:
Valuethinker wrote:
I suspect with childcare costs in the USA, it doesn't pay for a wife to work part time? Full time only if she is in a highly paid profession?
Wouldn't the same apply to a husband?

This

Also, it isn't just about current income minus expenses. The need to stay current in your field and to maintain your career path and network are long-term goals that can be seriously short-circuited if someone steps out of the workforce for an extended period.