Why is DCUM SO conservative with housing?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It is a change of generation. The younger generations don't believe in saving as much as their parents, grandparents, etc. They also haven't lived long enough to see the bottom fall out so they have never been scared senseless. Personally, I think society has gone sideways with the constant upselling on bigger, badder, better houses. It's not sustainable. I have no idea how these 6,000 sq ft homes are going to be maintained over the next 10-20 years. What will we do with them when our young kids and their kids want to bash and build?

Personally, I think we need to stop the perpetually supersizing mentality. But, alas, that is very un-American.

Wait, you don’t think young adults the worked between 2008 and today haven’t seen the bottom fall out TWICE??

If anything, this generation understands that much better than the previous. My parent’s generation was super lucky overall, and their wealth was a lot more luck and lot less hard work than my generation or my son’s.

1. People people in their 30s/40s did not have a lot of money invested in 2008, so the drop was not as scary.
2. What happened to the stock market in March 2020 COVID was nothing as it is quickly recovered.
3. Think when the tech bubble burst, or the lost decade in investing, earning no money for a decade.

I am the OP and I am in my mid-forties. I have friends whose entire career trajectories were massively impacted by 2001 and 2008. Not just the stock market, but their entire careers.

My son and my friend’s son graduated during COVID or are graduating this year. The job market isn’t great for this bunch as a whole. Much like my friends, this will impact their career trajectories, which impacts their savings, ability to purchase housing, etc.

In comparison my parents had it pretty damn good. $145k home now worth $2M. SAHM. College was $10k/year for me and my sister. Retired in their mid-50s with $4.5M, and are worth an awful lot more than that today because they got lifetime healthcare and paid off that $145k home when I was 14. They never made a lot, we were barely UMC (not lawyer/lobbyist types). It was not hard to save a ton when things were fairly cheap.

And yes, they had hardships - my dad was kicked out of his house at 17. But he was able to go to college on his own while working part time. No student loans needed. Went to Vietnam, but was also rewarded handsomely by government programs after that fact.

LOL. My father also served during Vietnam and took advantage of the GI bill. That said, I would trade what he gained financially for the security of not having to go to Vietnam. Also, do you know that if you serve(d), you can still take advantage of the GI bill today? I'm sorry but at no time have Gen-Xers lived a tougher life than their parents. Yes, things are more expensive now but you live in a much more secure world. You didn't have to live through the Cold War. You weren't drafted for Vietnam. Your parents didn't march off to WW2 to come back with a world of crap. I am also a Gen-X and I agree that Boomers financially made out better than our generation - cheaper housing, school, lower cost of living, easier to save - but they didn't have it "easier" by any measure.

People today just like to complain. Particularly if they've never actually gone through a real life-altering hardship.

How many of your friends served in Iraq or Afghanistan? How are they doing today?

Maybe it’s because I am a young gen x-er, but financially (which is what this thread is discussing -this is a money form and thread about housing), I know a lot of kids that really struggled between 2001/2008 and/or were shoved out of the military after 3-5 years with shitty options after some recruiter lied to them about what they were signing up for.

I have quite a few friends from the military who are doing well having taken up some really great consulting jobs outside of DC. My cousins in the military are now working as police officers and are doing ok, as they live in an area that has incredibly cheap housing. How well my friends/family have done post-military service usually reflects their education level prior to joining, I've found.

but this does circle back to the money and housing costs, as PP mentioned above. My generation (I am the tail-end of GenX, as well) overspends on housing, schooling, cars, and everything under the sun by a long shot. If you live in an expensive metro area and cannot make ends meet, you should move to an area with a lower cost of living. Our parents and grandparents would have, and did, do that. Younger generations seem to hang on to living in big urban areas that they cannot afford - DC, NY, SF, LA - just to continue their struggle there. If you opt to continue to live in a HCOL area, downsize the house. Live in a townhome, apt, etc.

To the original point, I still believe in being conservative with housing because that is your biggest expense. IF you keep that low, it enables you to save more cash for other things (retirement, investing, lifestyle, etc.) It's a smart move all around. Younger generations have forgotten (or never learned) why we save.

Low costs areas had a lot more job opportunities when my parents were young. Those jobs are diminishing rapidly and many areas were decimated as a result. To the extent other metro areas with lower cost of living are an option, the costs of housing in those areas is rapidly increasing as well. Housing, especially single family housing, will be harder and harder for future generations to obtain.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don’t get why you wouldn’t *want* to be conservative about it, ideally.

Don’t you like to take vacations, have (possibly expensive) hobbies, go out to dinner, concerts, theater, bars with friends, have kids? Plus, you know, save.

All of that takes money.

OP here. I’ve always worked from home so a huge portion of my life is spent in my house. I would much rather spend discretionary income on a nice house than on nights on the town or hobbies which occupy a relatively small portion of my life.

Also, barring financial catastrophes that force you to sell at inopportune times, you get back much of your housing expense due to appreciation. A $1.6 million house that appreciates 4% per year is earning you $64,000/year at first (more later on as compounding takes over). That might roughly cover your interest, taxes and insurance (all but the “principal” in PITI). Of course, you do still have maintenance expenses. But assuming you put 20% down ($320,000), where else are you consistently earning 64K on a 320K investment?? And you get the higher quality of life thrown in there!

That's not what you're earning here, either, because you're ignoring the ~$68k you have to pay each yer for the mortgage. FFS, OP.

+1 and don’t forget the higher property taxes on the bigger home plus higher maintenance costs (those costs you can’t recoup). There’s so much more more overhead involved in investing in real estate. I’d rather own a home more comfortable within my means and use the extra income to invest elsewhere. Totally disagree with this go big or go home mentality with housing.

[Anonymous]

We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

[Anonymous]

Anonymous wrote:We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

Where did you buy a 3000 sf house for only $800K? Around here, you are luck to get a 1500 sf outdated rambler.

[Anonymous]

Anonymous wrote:We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

Thank you for your insightful analysis.

[Anonymous]

Anonymous wrote:We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

"Uppity area" ??

[Anonymous]

Anonymous wrote:

Anonymous wrote:We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

"Uppity area" ??

yeah, I am wondering if PP even knows the origination of that term. Yikes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

"Uppity area" ??

yeah, I am wondering if PP even knows the origination of that term. Yikes.

You’re confusing “connotation” with “origination.” It has a meaning independent of its racist connotation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We make 400k hhi and just bought our forever house we love in an area we love with amazing public schools for 800k. That would be pretty conservative I imagine for this OP. We live in an uppity area where you can easily spend multiple millions on gorgeous homes that are 6000 sf but we found a nice 3000 sf older but well maintained home that suits our needs and lifestyle and is in a great location. So why would I spend 2 million just because?

"Uppity area" ??

yeah, I am wondering if PP even knows the origination of that term. Yikes.

You’re confusing “connotation” with “origination.” It has a meaning independent of its racist connotation.

Duh, you are right - and that makes it SO much better.

[Anonymous]

Because they are boomers who bought when houses were cheap and interest rates were high and/or have family money. They also might pay for private school so don’t care as much about zip code.

[Anonymous]

Because we value early retirement over a big house that generates taxes and upkeep costs.

[Anonymous]

We bought a 950k house at 3x our income at the time. Maintenance is expensive. The 1.7m dollar house would be larger, more expensive to decorate, renovate, paint, maintain inside and outside, landscape/garden, and have more taxes. There would be more things breaking every year, with few economies of scale.

Also, people have other expenses. We didn’t stretch our household budget because we knew we had private school tuition and camp costs looming. For most people, maintaining a home, cars, and saving for retirement and college on a 300-400k income does not add up to holding a mortgage on and maintaining a 1.7m dollar house.

[Anonymous]

People comparing their expenses to their parents is always interesting to me. So if the mid-40’s pp whose parents bought a $145,000 house bought it around when he/she was born, that would be about 1975. (FWIW, $145,000 was an expensive house in 1975!) Accounting for inflation, that would be about $740,000 today. Also note that the average 30-year interest rate in 1975 was 9.05%. That interest rate, as compared to today, effectively doubles the payment. They were paying about $1,100 a month if they put $20,000 down. Adjusted for inflation, that would be about $5,600 today. At a 3% interest rate, that would buy about a $1.4 million house (with 20% down).

So, somewhat cheaper than today, but not the OMG, a house for $145k(!) cheap. People also forget how expensive things were in the 70’s. Gasoline prices were about the same as today, adjusted for inflation. Clothing prices were much higher. An “inexpensive” t-shirt at the Mall was around $10, which would be about $50 in today’s dollars. We just didn’t have the kind of inexpensive consumer goods that we have today.

Note that if the $145,000 had been invested in the stock market in investments that tracked the DJIA, the stocks would be worth over $5 million today.

[Anonymous]

Anonymous wrote:People comparing their expenses to their parents is always interesting to me. So if the mid-40’s pp whose parents bought a $145,000 house bought it around when he/she was born, that would be about 1975. (FWIW, $145,000 was an expensive house in 1975!) Accounting for inflation, that would be about $740,000 today. Also note that the average 30-year interest rate in 1975 was 9.05%. That interest rate, as compared to today, effectively doubles the payment. They were paying about $1,100 a month if they put $20,000 down. Adjusted for inflation, that would be about $5,600 today. At a 3% interest rate, that would buy about a $1.4 million house (with 20% down).

So, somewhat cheaper than today, but not the OMG, a house for $145k(!) cheap. People also forget how expensive things were in the 70’s. Gasoline prices were about the same as today, adjusted for inflation. Clothing prices were much higher. An “inexpensive” t-shirt at the Mall was around $10, which would be about $50 in today’s dollars. We just didn’t have the kind of inexpensive consumer goods that we have today.

Note that if the $145,000 had been invested in the stock market in investments that tracked the DJIA, the stocks would be worth over $5 million today.

I am that PP. they bought it in 1989.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It is a change of generation. The younger generations don't believe in saving as much as their parents, grandparents, etc. They also haven't lived long enough to see the bottom fall out so they have never been scared senseless. Personally, I think society has gone sideways with the constant upselling on bigger, badder, better houses. It's not sustainable. I have no idea how these 6,000 sq ft homes are going to be maintained over the next 10-20 years. What will we do with them when our young kids and their kids want to bash and build?

Personally, I think we need to stop the perpetually supersizing mentality. But, alas, that is very un-American.

Wait, you don’t think young adults the worked between 2008 and today haven’t seen the bottom fall out TWICE??

If anything, this generation understands that much better than the previous. My parent’s generation was super lucky overall, and their wealth was a lot more luck and lot less hard work than my generation or my son’s.

1. People people in their 30s/40s did not have a lot of money invested in 2008, so the drop was not as scary.
2. What happened to the stock market in March 2020 COVID was nothing as it is quickly recovered.
3. Think when the tech bubble burst, or the lost decade in investing, earning no money for a decade.

I am the OP and I am in my mid-forties. I have friends whose entire career trajectories were massively impacted by 2001 and 2008. Not just the stock market, but their entire careers.

My son and my friend’s son graduated during COVID or are graduating this year. The job market isn’t great for this bunch as a whole. Much like my friends, this will impact their career trajectories, which impacts their savings, ability to purchase housing, etc.

In comparison my parents had it pretty damn good. $145k home now worth $2M. SAHM. College was $10k/year for me and my sister. Retired in their mid-50s with $4.5M, and are worth an awful lot more than that today because they got lifetime healthcare and paid off that $145k home when I was 14. They never made a lot, we were barely UMC (not lawyer/lobbyist types). It was not hard to save a ton when things were fairly cheap.

And yes, they had hardships - my dad was kicked out of his house at 17. But he was able to go to college on his own while working part time. No student loans needed. Went to Vietnam, but was also rewarded handsomely by government programs after that fact.

My experience is different. All of the recent college grads I know had good jobs lined up or found something very shortly after graduating. The only ones who seemed to struggle a bit were those who had non-marketable majors and/or lacked internship/volunteer experience.