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Ask HN: Is buying a house in 2017 a good idea?

• codegeek 10y ago
  In my opinion, buying a house is never a good idea unless you intend to live in it yourself for at least 5-7 years (usual real estate cycle) AND you have put down at least 20%. Anything less and you are exposing yourself to higher risks. I am not saying that you should not consider investment capacity etc at all but those should always be secondary motive, not primary unless you are an expert real estate investor (even they struggle in bad markets)
  • flukus 10y ago
    > AND you have put down at least 20%. I'm not sure how universal this is, but in my area this is also about the point where you're loan repayments will become cheaper than renting the equivalent. And your loan repayments will only go down over time, rent will only go up.
    • amerkhalid 10y ago
      I put down 5% and had to get PMI. But even after that my payments were less than renting an equivalent house. So 20% is definitely not a cut n dry rule.
      • odonnellryan 10y ago
        You sound like the exception, however. Are you taking into account maintenance, taxes, etc..?
        • amerkhalid 10y ago
          Yes mortgage payment did include taxes, insurance, and PMI. (PMI is removed now, more on this below). But it doesn't include maintenance. I am paying almost $200 a month in HOA also which I didn't consider in my earlier comment. My guess is if HOA is considered then renting would be cheaper. (For context, I live in suburbs of Dallas). Regarding PMI, my wife wanted to get our own house as soon as possible even if we had to pay PMI. I wanted to save 20% down first. It would have taken us more than a year to save 20% downpayment. So in end, wife won. But that that time I didn't know that you could remove PMI as soon as you have 20% equity in the house. So we did our best, made extra payments, and built up equity to 20%, and removed PMI in about a year. If we had tried to save for 20% downpayment like I wanted, we would have paid $12,000+ towards rent instead of about $1200 towards PMI (and a little more interests). So I tell all my friends that don't let PMI scare them, as long as they can afford to make extra payment and be able to remove it within a year or so.
          • jdash 10y ago
            For FHA backed mortgages the FHA changed the rules on PMI in 2013 where you are no longer able to remove the PMI after the loan reaches 78% loan-to-value and annual MIP has been paid for at least 60 months. For FHA mortgages finalized after June 3, 2013 the payments are there for the life of the loan. So can be worth considering refinancing once you are in the position to qualify for conventional financing and pay 20% down.
    • joeclark77 10y ago
      In general if you put down less than 20%, you have to pay for mortgage insurance, which pays neither principal nor interest. That may vary by region and by other things like first-time homebuyer or veteran status, so YMMV. But from first-hand experience I can say that paying 20% makes life a lot happier.
• gigatexal 10y ago
  Buy one cheap and rent it. That's my plan anyway. Already have one. Our current one will be our second. And I've already begun eyeing the third. But do your homework and never pay more than it's worth. So yes. Buy one but only as an investment because it's a huge money pit regardless but at least when renting it you can write off a lot of it on your taxes and others are building the equity in the home for you.
  • siquick 10y ago
    >>you can write off a lot of it on your taxes Can you explain this please? Excuse my ignorance of the US tax system. This sounds like a pretty shitty thing for the government to allow, giving existing home-owners a huge advantage to build up property portfolios over people not yet orable to get on the ladder. (similar to negative gearing in Australia where I live)
    • caleblloyd 10y ago
      Interest on a mortgage is tax deductible in the USA. According to Wikipedia, in 1913 "the reason for the deduction was that in a nation of small proprietors, it was more difficult to separate business and personal expenses, and so it was simpler to just allow deduction of all interest" https://en.wikipedia.org/wiki/Home_mortgage_interest_deduction https://en.wikipedia.org/wiki/Home_mortgage_interest_deducti...
    • nibs 10y ago
      It is insane, and yes you can "expense" mortgage interest against your taxes, and in the case of a rental, a portion of everything else too. Incentivizes owning houses.
      • siquick 10y ago
        (Again excuse any ignorance of the tax laws in the US) In a fair world, this would only be allowed on the first buy-to-let property. Anything above that is just not in the interest of society in general, especially in cities like SF and Sydney that are running out of space to and/or NIMBY behaviour.
• hijinks 10y ago
  I'm a Bay area home owner. We bought 4 years ago. For us it was a great choice. Our our first child was 2 years old and were looking to find a place to settle down and live. We didn't want to worry about rent going up 30% to re-sign a lease. We wanted a place where she could go to school and not have to move around each time a lease is up. In the end it turned into a great decision for us. The house went up 350k in 4 years and we are looking to cash out and move to a cheaper area where I can take my remote job and pretty much buy a house in all cash and not worry about a mortgage anymore. So it really depends on your situation. Are you willing to stay in a house for 5+ years. If you want to sell.. can you ride out a dip in the market?
  • gigatexal 10y ago
    That's such an awesome position to be in.
    • hijinks 10y ago
      We got super lucky. Bought a house at the lowest rates possible and pretty much have been living house poor for 4 years now.
  • zazpowered 10y ago
    What was the original price of the house?
    • hijinks 10y ago
      it was on the market at 660k we bought it for 700k. This is way out in the East Bay of SF
      • bogomipz 10y ago
        Is it common for places to go over ask in the East Bay/SF? I'm assuming there were multiple offers at ask which is why you went over by 40K?
• kspaans 10y ago
  If you are thinking strictly of investments, using a house as your first may not be the wisest. Portfolio theory suggests that it's not ideal to have lots of your net worth tied up in any single asset or asset class. "Real Estate" is one such class (specifically the combo of a permanent structure with land underneath, buying a mobile home doesn't count because they are usually on rented land).
• cylinder 10y ago
  Find the shittiest house you can on the best piece of land and hold it for 30+ years and you should be fine.
• ChrisNorstrom 10y ago
  It depends on the market in that area. Some markets are growing over the long term, others over the short term. Just talked to a lady a few months ago who bought a home in Boulder, Colorado for about $400,000 and sold it 3 years later for $900,000. She got out of there fast as property taxes were increasing constantly. In other places, you can buy a home for $250,000 with low property taxes but the neighborhood is going downhill, more crime, schools are worsening, and their home is losing value. It's going to be hard to sell in the future. This is what you have to think about when buying a home. Is the area you are in good or bad right now, and will it be better, the same, or worse in the future. If you're not sure about a location's future. Rent.
• snowwrestler 10y ago
  If you get a fixed-rate mortgage (which I would recommend), the payment is fixed for the length of the loan. This means that long-term inflation will take 2-3% out of your real housing cost every year. It's like rent control for yourself. If you put down 20%, you are creating 5x leverage. Even if the market value of your house only appreciates at 2.5%, your initial down payment (the cash you actually invested) will experience 12.5% return. Of course there are the payments too, and maintenance, etc. But you have to pay to live somewhere. So make sure you're doing an apples-to-apples comparison with renting--including the mortgage interest deduction. Make sure you really know what your investment is--the amount you're paying over renting--and calculate your return on that. Finally, the mortgage tax deduction is not the only tax advantage to a home. Another big one is that you can keep up to $250,000 of capital gains from your home, tax free--a 15% advantage against most other investments. Again, make sure you take that into account when comparing. All of the above are only really advantages if you live in your house for a while. I agree with the other poster who said it's probably only worth it if you plan to live in that home for at least 5-7 years.
  • kspaans 10y ago
    The NYT has a pretty good online calculator for comparing renting vs buying. You just plug in a house price, mortgage details, and how long you're willing to stay in the house, and it will tell you what the better-deal level of rent is. http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...
    • secabeen 10y ago
      The NYT one is good. If you need more features, like adjusting for renting a room, the Michel Blue Jay one is great too: http://michaelbluejay.com/house/rentvsbuy.html http://michaelbluejay.com/house/rentvsbuy.html
  • baccredited 10y ago
    >you can keep up to $250,000 of capital gains from your home, tax free And I'm pretty sure it is $500,000 for married couples: http://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html http://www.nolo.com/legal-encyclopedia/the-250000500000-home...
• jasonkester 10y ago
  Houses don't make particularly good investments. While it's true that you can sometimes come out ahead compared to, say, investing the same amount in the S&P 500, it's very rare that the S&P will need you to put a new roof on it or spend the better part of every weekend pulling weeds and doing DIY. The S&P will just wait until you ask for your money back, then give you lots more money back than you gave it. Houses make you work for that money. Now, lots of people enjoy DIY as a hobby, so if you're looking to include "maintaining a house" as a new hobby then by all means buy a house. They're also quite pleasant to live in when compared with crappy apartments that are the usual alternative. But only buy a house if you want to own a house. Buying one just because it's a good investment or what you're "supposed to do" will only leave you unhappy and wondering what happened to all your free time. If you don't believe this, pick any one of your homeowner friends and ask them what they did this weekend.
• bsvalley 10y ago
  Buying a house since 2008 has always been a great idea. So To answer your question - yes. If you're coming with only %20 down in the Bay Area, you will turn cash poor, unless you're a millionaire. So think about that first, buying a house is the best mid-long term investment in life. But property tax here on a $1 million house is $10-12k per year. Home owner insurance is about $2-3k per year. So you're at about $12-15k extra per year (+$1000/month) just for the fact that you own a property. Now, the property itself will cost you about $4500/month at %3.8 APR for a $1 million house with %20 down. Total of about $5500 net per month. Basically a bit below the average salary of an experienced software engineer in the bay area. And for $1 million, you don't get much here...
• JSeymourATL 10y ago
  Crystal Ball on Bay Area Real Estate says... - Bay Area Projected to Lead U.S. for Home Price Gains in 2017 > http://blog.pacificunion.com/bay-area-projected-to-lead-u-s-for-home-price-gains-in-2017/ http://blog.pacificunion.com/bay-area-projected-to-lead-u-s-... - Bay Area Home Sales Projected to Decline Again in 2017 > http://blog.pacificunion.com/bay-area-home-sales-projected-to-decline-in-2017/ http://blog.pacificunion.com/bay-area-home-sales-projected-t... What to do? Find the ugliest place that needs tons of work in a solid neighborhood, that most retail buyers won't touch. That gives you a good margin of error. You can make $30-50K worth of fix-up fluff & buff go a long way.