How much can we afford to spend on home?

[Anonymous]

Anonymous wrote:For those arguing about whether a home is an investment or not, I recommend checking out this calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

It compares renting to buying, and has a number of factors you can change.

At a home price of $800k, renting is better (after 9 years) if you can rent at $2,686 a month or less (to begin with, it factors in inflation). That's with default values, so you may find the answer change significantly with specific inputs that fit your case.

Problem is that rent has always gone up for us at a rate much higher than inflation. Now we own a three bedroom plus basement for a 3500 mortgage. Our home was in the 700s. Our one bedroom with garage parking was the same amount and we couldn't write off mortgage deduction. In nine years, the rent will be way way more. Our rent would have increased probably 300-400 in just one year.

I don't know where you can find a rental for a family in DC for 2686 a month! And a rental that only increases 3-4 percent a year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:PP's point was that homes generally just keep pace with inflation. you can find plenty of anecdotal evidence to the contrary (as you did with your own situation), but this doesn't refute all the data out there to support the conclusion that real estate generally isn't a great investment. the last 15 or so years have been an anomaly.

again, ignoring leverage.

When the home keeps pace with inflation, that is still a great investment when you are only using 20% cash down and the interest and taxes are tax-deductible. why is this hard to understand?

It's good to hear from people with some financial literacy on DCUM. There are too many dummies on DCUM who think that stridently asserting insanely over-conservative viewpoints somehow makes them sound wise. Oh and these are also the same folks who constantly quote Dave Ramsay, suze orman and mr money mustache. Right - real brilliant. I take my finance and investing advice from actual pros.

[Anonymous]

Anonymous wrote:

Anonymous wrote:For those arguing about whether a home is an investment or not, I recommend checking out this calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

It compares renting to buying, and has a number of factors you can change.

At a home price of $800k, renting is better (after 9 years) if you can rent at $2,686 a month or less (to begin with, it factors in inflation). That's with default values, so you may find the answer change significantly with specific inputs that fit your case.

Problem is that rent has always gone up for us at a rate much higher than inflation. Now we own a three bedroom plus basement for a 3500 mortgage. Our home was in the 700s. Our one bedroom with garage parking was the same amount and we couldn't write off mortgage deduction. In nine years, the rent will be way way more. Our rent would have increased probably 300-400 in just one year.

I don't know where you can find a rental for a family in DC for 2686 a month! And a rental that only increases 3-4 percent a year.

All the assumptions can be changed by the user - one reason I like that calculator so much.

I definitely didn't share it with the intention of saying "you should never buy" or the like, just that it takes many factors into consideration that people were arguing about, including several factors no one mentioned.

3-4 percent a year rent increase may be accurate in the long term, though, if not the next few years. An increase of >=5% each year is not sustainable in the long run (over ten years).