Why is DCUM SO conservative with housing?

[Anonymous]

Our house was $1.25 a few years ago and our HHI is currently around $1.1 and rising. However, we wanted a house we could afford on either one of our salaries because life is uncertain.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm a millennial. I watched the housing crisis in 2008 eat up my parents' neighborhood (my parents were fine). The crash also resulted in me losing my post graduation job when I was a senior (I had done co op with them) and they also laid off a huge number of engineers, so the market was flooded with more experienced workers. I ended up doing a masters to delay entry into the job market which worked out for me, but it was a gamble.

So I guess experience taught me to be cautious.

Very smart move.

It's smart to act like a once in a 100 year crash is always around the corner? No, it's not. It's foolish paranoia. Meanwhile the peers the young PP graduated college with who bought expensive houses they "couldn't afford" ( ) in 2009 to 2019 are laughing to the bank. Making big bucks and living large while the PP lives in fear in some modest home.

What's wrong with a modest home though, as long as the neighborhood is decent? My time is precious and I don't want to have a big house to clean/upkeep or to have to manage house cleaners.

Scared money doesn't make money. The peers of PP's who swung for the fences on a bigger home in a premier/hot zip code saw far more appreciation than PP who lives in some "conservative/modest" s***shack or condo. So not only did they make more money, they got to live lavishly. How is that difficult to comprehend? Being "conservative" on a home is ignorant. Actually, it more often than not is just a cope for being too poor and not having the income, credit score, or down payment to go bigger.

Ok so let’s say you spend 5-7x your income to get into the bigger home you want. Let’s also say you have 2 kids.

Do you have 50k leftover for travel? 50k for college savings? 25k for kid activities? This is not even getting into food, clothes, restaurants, gifts, private school if you want that, tutors, entertainment, etc. etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It’s not just DCUM, it’s the people in this area! I know people whose HHIs are likely double ours but they live in old, crappy homes. We are very comfortably able to afford our home, and I’m sure they could too! Perhaps they value passing that money on, or putting it into luxury items

We fall in this category. We plan to retire early so it’s well worth it to us to live in an older, smaller home. I know you disagree right now, but talk to me again when you’re 52 and still looking at another decade plus of working. We’ll be retired and comfortable by then.

You will not be. Retiring at 52 is simply not doable unless you have the health care solved. Also where you are building equity in your small house, I am building equity in my large house.

[Anonymous]

We make around 750k. We still live in the house we bought for 500k in 2004. Idk what it is worth now. However, because we stayed in the house and invested our extra money, Ernie have over 5 million while having also spent lavishly in cars, travel, renovations, furniture, art, etc.

It’s smart to live below your means.

[Anonymous]

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!

[Anonymous]

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!

Bingo. All the nonsense on here or where ever where people spin how smart it is to buy a "conservative" or "modest" home is a cope. I know a lot of rich people, none of them live in a modest house. That's not to say they live in tacky homes, but you know what I mean. Always go big and always go for the most premier hot zip code you can. Life is short and those who swing for the fences get rewarded the most in America.

[Anonymous]

So we bought at 3x of income, being conservative. In retrospect that was stupid, we should have just bought at 4x the first time around, instead of blowing transaction and/or renovation costs away.

I mean interest rates were and still are rock bottom. The home cost isn't really that bad.

[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!

Bingo. All the nonsense on here or where ever where people spin how smart it is to buy a "conservative" or "modest" home is a cope. I know a lot of rich people, none of them live in a modest house. That's not to say they live in tacky homes, but you know what I mean. Always go big and always go for the most premier hot zip code you can. Life is short and those who swing for the fences get rewarded the most in America.

OMG except for all of the people that had to foreclose on their homes after 2008.

[Anonymous]

Our household income is low 300s. We’ve lived both ways and our personal preference is a smaller mortgage. I like the freedom to book vacations, expensive extracurriculars or tutoring etc without worrying and calculating. And the unexpected. My husband was very ill last year and I needed to hire more help around the house and with the kids. That wasn’t a problem because our mortgage is maybe a sixth of our take home income.

[Anonymous]

Do you work in real estate, OP?

[Anonymous]

Anonymous wrote:

Anonymous wrote:It’s not just DCUM, it’s the people in this area! I know people whose HHIs are likely double ours but they live in old, crappy homes. We are very comfortably able to afford our home, and I’m sure they could too! Perhaps they value passing that money on, or putting it into luxury items

We fall in this category. We plan to retire early so it’s well worth it to us to live in an older, smaller home. I know you disagree right now, but talk to me again when you’re 52 and still looking at another decade plus of working. We’ll be retired and comfortable by then.

+1

I’m free.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm a millennial. I watched the housing crisis in 2008 eat up my parents' neighborhood (my parents were fine). The crash also resulted in me losing my post graduation job when I was a senior (I had done co op with them) and they also laid off a huge number of engineers, so the market was flooded with more experienced workers. I ended up doing a masters to delay entry into the job market which worked out for me, but it was a gamble.

So I guess experience taught me to be cautious.

Very smart move.

It's smart to act like a once in a 100 year crash is always around the corner? No, it's not. It's foolish paranoia. Meanwhile the peers the young PP graduated college with who bought expensive houses they "couldn't afford" ( ) in 2009 to 2019 are laughing to the bank. Making big bucks and living large while the PP lives in fear in some modest home.

What's wrong with a modest home though, as long as the neighborhood is decent? My time is precious and I don't want to have a big house to clean/upkeep or to have to manage house cleaners.

Scared money doesn't make money. The peers of PP's who swung for the fences on a bigger home in a premier/hot zip code saw far more appreciation than PP who lives in some "conservative/modest" s***shack or condo. So not only did they make more money, they got to live lavishly. How is that difficult to comprehend? Being "conservative" on a home is ignorant. Actually, it more often than not is just a cope for being too poor and not having the income, credit score, or down payment to go bigger.

I’m the one who asked if you work in real estate.

I think OP is a mortgage broker or real estate agent wanting to get the word out that everyone should spend more.

You do what you want, OP. Stop lecturing.

[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!

Bingo. All the nonsense on here or where ever where people spin how smart it is to buy a "conservative" or "modest" home is a cope. I know a lot of rich people, none of them live in a modest house. That's not to say they live in tacky homes, but you know what I mean. Always go big and always go for the most premier hot zip code you can. Life is short and those who swing for the fences get rewarded the most in America.

“Go big”? “Swing for the fences”? “Premier” zip code?

So you are saying you can only go big by spending a lot on a house? Weird.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm a millennial. I watched the housing crisis in 2008 eat up my parents' neighborhood (my parents were fine). The crash also resulted in me losing my post graduation job when I was a senior (I had done co op with them) and they also laid off a huge number of engineers, so the market was flooded with more experienced workers. I ended up doing a masters to delay entry into the job market which worked out for me, but it was a gamble.

So I guess experience taught me to be cautious.

Very smart move.

It's smart to act like a once in a 100 year crash is always around the corner? No, it's not. It's foolish paranoia. Meanwhile the peers the young PP graduated college with who bought expensive houses they "couldn't afford" ( ) in 2009 to 2019 are laughing to the bank. Making big bucks and living large while the PP lives in fear in some modest home.

What's wrong with a modest home though, as long as the neighborhood is decent? My time is precious and I don't want to have a big house to clean/upkeep or to have to manage house cleaners.

Scared money doesn't make money. The peers of PP's who swung for the fences on a bigger home in a premier/hot zip code saw far more appreciation than PP who lives in some "conservative/modest" s***shack or condo. So not only did they make more money, they got to live lavishly. How is that difficult to comprehend? Being "conservative" on a home is ignorant. Actually, it more often than not is just a cope for being too poor and not having the income, credit score, or down payment to go bigger.

I’m the one who asked if you work in real estate.

I think OP is a mortgage broker or real estate agent wanting to get the word out that everyone should spend more.

You do what you want, OP. Stop lecturing.

Goodness no, I don’t work in real estate. And even if I *did* and were trying to drum up business, I wouldn’t do it on an anonymous form. Also, the quote you cited above was not from me - it looks like other people agree with me.

But I’m not lecturing. I just laid out the math explaining why I don’t think that the oft-cited DCUM advice to buy the cheapest house you can stand is intelligent from an investment standpoint or from the point of view of maximizing the quality of life we experience in our short lives.

[Anonymous]

I just get confused by the pearl clutching at buying a 1m house on 300k income say, while at the same time everyone seems to have 2 to 3M in retirement accounts by 40 on even more modest income. Something doesn't add up. How can it be super scary to buy a 1M house at 3 to 4 times income and also a given we all need to save way more than that for retirement or starve. Honestly asking