Why does the value of things in dollars not make sense?
Why does the value of things in dollars not make sense?
This is difficult to explain. I can't figure out a rule of thumb for spending, the prices of things fluctuate so quickly it's confusing. Here are some examples
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A house, prices are out of control, inventory is low, sellers are greedy. I'm feeling not only unable to afford it but finding lack of value in inflated prices
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Computer parts. Relatively cheap compared to pandemic but more expensive than before but also much cheaper than 90s/00s, but still could be cheaper
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TWS earbuds, completely different ball game from regular earbuds, disposable electronics.
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Food. Nights out with drinks now sometimes cost me more than 2 & 3, but seem like just keeping up with inflation
The prices range from 100,000s to 100s, but some are fleeting, some semi permanent, some last a long time. I also spend hours researching prices of parts and waiting for sales, but spending the same amount on social events in an instant
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No doubt there is no value to buying a home in a lot of areas rn.
I rent a 2 br townhouse for 1800/mo. I have a detached garage. I have a basement with washer and dryer. I have about about 1200 sqft plus the basement which is unfinished. Utilities combined is 200/mo. Heat is included.
A similar unit would be about $300k. I'd get probably 8% interest with a 750 credit score. I'd have basically the same mortgage as I have for rent. Plus I'd be responsible for stuff I'm not right now, like heat, water, sewer, trash, recycling, lawn care, and literally any maintenance.
It's a way, way better deal to be renting right now I many areas.
That's what a lot of people fail to understand. It isn't just the price of the house. It's everything else included (maintenance, replacement,taxes ). If over the very long term it's cheaper to rent then probably just rent.
If over the very long term it's cheaper to rent then probably just rent.
A major thing to consider is that you're building equity in the house. If you've paid a year of rent, you don't have anything to show for it at the end. You've just helped the landlord pay off their loan. On the other hand, if you've paid a year of your own house payments, that money has gone towards your loan and you'd get more money back when you sell the house.
If you're comparing renting vs buying, you need to consider growth in value of the house and increase in property tax (for buying), and average yearly rent increases (for renting).
Owning a house can be stressful with all the things you need to do, but it's also really nice being able to do anything you want with it, and not have to deal with landlord-quality "fixes" when things break.
Absolutely all true. Although I did say Everything else included. While yes you are building equity... If at the end of your ability to live alone, you have spent more by owning then renting (read this as significantly more) then it might have been wiser to have rented and invested the difference. Again people have to look at ALL the options.
I implore anyone to look into this historical fact:
The Bush's sold GW's childhood home a few months ahead of an economic recession. They rented across town for a few years while they assembled a 'historical society' to rebuy the home after the housing crisis. It is now a museum in Milton, MA.
This happened in the mid-late 80s.
Even the ultra wealthy rent, when it makes sense economically to do so.
Owning is great and equity is important. But you don't need to set owning a home in a pedestal.
Can you say where you're located because that sounds like a screaming deal. I'm in NYC though, so everything sounds affordable to me.
from those numbers sound like midwest away from a city
Incorrect.
I am in new England, and close to a metropolitan area.
oh wow. nice.
To clarify, neither Boston nor New York city. But still! It's pretty great, and a $2000 mortgage for a 300k property makes no sense while I've got this.
With rent you're just paying to live there. With a mortgage every payment means you own more of the place (equity). If you have payed off the mortgage or didn't need one then you have equity that you can use for last-ditch funding.
Yes, but managing that equity comes at a cost itself.
If a hurricane comes and floods my basement, it is 100% $0 to me, not my problem.
And, more importantly, I will have more capital available to me to be a first time home buyers by being patient, which will allow me to build equity faster in the long run.
Good point on the basement but the overall concern seems to be that the cost of real estate (including renting) is getting so it's not feasible for most people to move along from just renting (if they choose to).
Yeah, but that will create a supply issue
Either prices or interest rates will fall. Or the oublics buying power will Increase.
wHaT's EqUiTy?!
If you're looking at 300k @ 8%, youre not going to be paying anything similar to your current rent. I got a place for 190k @ 6%, and I'm paying about 200/mo less for my mortgage than you do for rent. At that rate, I'd be surprised if you got out under 2500/mo.
did that include taxes being paid from escrow? He might be doing a simplified thing and did not include taxes and such. Something I think to that people don't realize with mortgages is the excrow part can go up so the monthly is not completely locked in.
Yes, as stated below that includes property taxes and insurance, things that this person likely isn't thinking about and isn't figuring into their monthly payment. I hope I'm wrong, but I've watched friends crash and burn doing something similar.
8% of 300,000 is 24,000.
That is $2000/month.
It is basic arithmetic.
Sure, if you ignore all kinds of other factors like additional closing costs added to your mortgage, as well as stuff like insurance and property taxes and the interest on the loan itself. But yeah, simple arithmetic....
I wish it was as easy as just a percentage of the mortgage every month
The offset to the basic arithmetic is negligible.
In my case, a $300k home would yield a $2k/mo mortgage
Source: I'm fucking buying a house.
Jfc y'all
It is basic arithmetic.
The offset to the basic arithmetic is negligible.
L.O. L. Man, I really hope your monthly budget is looser than your math is, because your payment is going to be at least 300-500 more than what you think it will be based on your sloppy math, ignoring all the shit I called out.
Source: I just bought a house in the last year
That’s not at all how interest is calculated on amortized loans
Yes it is.
There are a few factors that modulate this, very slightly
0 down on 300k at 8% yields a 2025/mo mortgage.
It is basic arithmetic.
No, it’s not.
You’re rationale that 8% of 300,000 = 24,000 therefore $2,000/mo., by dumb luck, comes close at 8%.
- 12% of 300,00 = 36,000/12 = 3,000; actual is $3085/mo
- 8% of 300,000 = 24,000/12 = 2,000; actual is $2200/mo (not $2025)
- 4% of 300,000 = 12,000/12= 1,000; actual is $1432/mo
- 2% of 300,000 = 6,000/12 = 500; actual is $1108/mo
- 0% of 300,000 = 0/12 = 0; actual is $833/mo
It’s algebra, not arithmetic.
P = (r * A) / (1 - (1 + r)^(-n))
where:
- P is the monthly payment
- A is the loan amount
- r is the monthly interest rate (APR/12)
- n is the total number of payments
Do you live in some world where PEMDAS/order of operations isn't basic arithmetic?!
Jfc..
Even we Americans are taught this shit by age 12.
Seriously.
PS., it is $2025. Source: qualified. Decided to wait until $2025/Mo gets me something worthwhile. Your basic arithmetic failed to include the handful of factors that mitigate these numbers slightly zip code/taxes, hoa fees, etc. still, basic fucking arithmetic.
Stay in school.
Not sure how zip code factors into “simple arithmetic” but you do you.