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#804108 - 08/20/04 02:53 PM Re: I'm thinking of buying a house : Advice please  
Joined: Mar 2002
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BeeLady Offline
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Massachusetts
Melody you have gotten lots of great advice.

The house is charming, the price unbelievable. Do your homework, get a home inspection. Another thing I have done in buying our houses is to ring the doorbells at the neighbors and have a chat. They can tell you the history of the house, the neighborhood, schools. Perhaps there is an issue with the house or area you didn't know about. The bonus is that if you get the home, you will have already met the folks you will be living with!

Repairs are something you can do mostly yourself, get a good encyclopedia sort of home repair book. You would be amazed what a gallon of paint with do. Be creative, I hired an unemployed neighbor to help me paint my first house. He painted only the areas too high for me to reach, I painted the rest. You can work out bartering arrangements too. I have done gardening for others in exchange for help at my place.

I bought my first house as a single woman at age 24 some 20 years ago. Folks thought I was crazy.. cool They didn't think I was so crazy when I sold it 4 years later for twice the price! (Remember, this is greater Boston). In fact one of the neighbors was a buyer! laugh

Good luck and I agree with Larry, this is a monumental step in making your life better.


BeeLady

Life is like a roll of toilet paper...the closer you get to the end, the faster it goes!
Piano & Music Accessories
#804109 - 08/20/04 03:48 PM Re: I'm thinking of buying a house : Advice please  
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WAHHHH! *TEARS* The house just went under contract by another couple, while I was waiting to hear back from the realtor!!!! AHHHHHHHHHHHHHHHHHHHH

*sniffle* I'm sad....

#804110 - 08/20/04 03:50 PM Re: I'm thinking of buying a house : Advice please  
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Jeffrey Offline
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New York
Just some stats, not all of which are relevant to Melody's situation, I admit.

According to Business Week, national housing price appreciation was 1% over inflation from 1950, .5% if the costs of home remodeling are taken into account (new kitchen/bath, new roof/paint, etc.) On the coasts and big cities, the appreciation was 2-3% over inflation over the same time period, so that many people from big cities can retire to small towns on just their house appreciation.

Inflation in the post-war period from 1945 was 4.1 percent in the US (I believe the 3.1 percent number is from 1926, according to Ibbotson). I compounded 11,000 dollars from 1950 to the present at 7.1 percent (4.1 inflation, plus 3 percent) and came up with about 477,000 dollars, close to Steve's sale price. For comparison, the S+P 500 stock index was at 14 in 1950, and is now about 1100. This does not include the effects of leverage (low downpayment) or rental income (or costs of repairs) in the case of Steve's rental property, nor dividends (historically 4-5 percent or more, now under 2 percent) in the case of stocks.

In theory, ownership assets (which include both stocks and real estate) should have similar returns in the very very long run. At present, many financial institutions are wondering about a real estate "bubble" - for example, Goldman Sachs just put out a report saying that big city real estate worldwide should drop over 20%. The Economist and World Bank have similar concerns. I do not happen to agree with them, but their arguments are not crazy. For example, one can value real estate compared to the yearly rental price of a comparible home (similar to a price/earnings ratio for a stock). On that measure, real estate in NYC, SF, Boston, etc, is near an all time high (over 25-30 in some cases, vs. a long term average of 17-18, similar to stocks long term average P/E ratio). This is being kept up by ultra low interest rates, and the perceived undesirability of other financial assets (like stocks). Higher rates spell some danger here (e.g. if 30-fixed mortgages rise over 7.5 percent), though I hope we see muted increases or stagnation in home prices, and not a sharp drop.

But people can lose buying a home. Rosie O'donnell bought a townhome in my neighborhood for 6.5 mill in 2000 and sold it for about 5.5 mill a few months ago (this is from memory, it was in the papers). I know plenty of Hamptons beach houses bought for 4 mill and selling for high 2's now. We have friends in Atlanta who have to sell a few years after purchase and must take a 10% or so loss (house value maybe 140k or so). We bought a house in Iowa and had to sell it losing almost all our downpayment, about a year later, when we moved to NYC. Both houses had the same problem: oversupply in a "sprawl" city, and re-sales were lowered due to much new construction nearby, that seemed more attractive to new buyers. (Same can happen in Las Vegas, for example.) Also, many of my clients lost money in NYC real estate in the early 90's when NYC housing dropped 25 or so percent. Housing has never had a down year nationally, but people can lose as well as make money in personal real estate, depending on location and house and the local economy (try to sell a house in Flint, Michigan).

Owning a home should usually be a person's or family's first investment, given the costs of renting, and the long term benefits of ownership (financial and personal). But I sensed some degree of uncertainty in Melody's posts as to whether this is the right move for her at this point in time (if I misread your internet posts, I can't see you or your facial expressions, and I apologize for reading too much into your words). If there is any uncertainty, I only wanted to say that there is always another house out there, and no one should be rushed into a house purchase, for fear of rising prices, which may or may not happen. I know nothing about construction, or how to evaluate building condition. If this is the right time for Melody to buy, all I can say is - post pictures!

#804111 - 08/20/04 03:54 PM Re: I'm thinking of buying a house : Advice please  
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ChickGrand Offline
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Midwest U.S.
Psssttt....

No more than about 80 characters per line or we all end up scrolling, not just for your post but for every one that precedes and everyone that follows.

And another pointer--that little icon above your post that looks like a sheet of paper--it lets you edit your previous post at any time. Takes you right to the composition window, where you can change it. Then you just click the little "Edit" button on the left below the box and you are done.

As to the house--just keep looking. Another will come up in your range. Meantime, you have time to save and to look into various financing and rehabilitation options. Since I stay fairly well-informed around Norman about what's available, I'll let you know if I see anything that looks promising. Meantime, get hubby working!

[I see you figured out that characters/scrolling thing, even before seeing my post. thumb ]

#804112 - 08/20/04 03:57 PM Re: I'm thinking of buying a house : Advice please  
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MizMelody2001 Offline
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Thank you!

I fixed the AHHH's right after I posted. I didn't realize it would mess it up so much.

Hubby picked up a job application yesterday.

#804113 - 08/20/04 04:15 PM Re: I'm thinking of buying a house : Advice please  
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Tom--K Offline
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Quote
Posted by Melody: I have alredy told him btw that if h lives in this house with us (If I buyit) he MUST work.
My wife tells me the SAME THING!!! All you women are the SAME! You got some kind of girl plot going?

#804114 - 08/20/04 04:15 PM Re: I'm thinking of buying a house : Advice please  
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MizMelody2001 Offline
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I am so disapppointed.

#804115 - 08/20/04 04:17 PM Re: I'm thinking of buying a house : Advice please  
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Tom--K Offline
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Quote
Originally posted by MizMelody2001:
I am so disapppointed.
Good. Now it's time to go out and find the truly RIGHT house for you.

#804116 - 08/20/04 04:23 PM Re: I'm thinking of buying a house : Advice please  
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BeeLady Offline
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Massachusetts
Never fear, another house is out there.

Chalk it up as a learning experience. You'll know that much more the next time and now you have a new knowledge you can use to continue looking.

Best of luck in your house hunt.


BeeLady

Life is like a roll of toilet paper...the closer you get to the end, the faster it goes!
#804117 - 08/20/04 04:35 PM Re: I'm thinking of buying a house : Advice please  
Joined: Apr 2004
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Jeffrey Offline
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New York
Just to add to the good advice above: not once have I seen a friend or client miss a house, no matter how much they wanted it at the time, not come up very soon (weeks or months at most) with a house they liked better in almost every respect. Happy house hunting (and get a buyer's broker, if available)!

#804118 - 08/20/04 05:02 PM Re: I'm thinking of buying a house : Advice please  
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MizMelody2001 Offline
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Here's a listing for another house..... Or is it a condo or town home?

http://realtor.com/FindHome/HomeLis...amp;snumxlid=1039929033&lnksrc=00002

I called about it and am waiting to hear back....

#804119 - 08/20/04 05:07 PM Re: I'm thinking of buying a house : Advice please  
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MizMelody2001 Offline
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USA
Thank you everyone!

#804120 - 08/20/04 05:09 PM Re: I'm thinking of buying a house : Advice please  
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MizMelody2001 Offline
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I just sort of prematurely fell in love with the porch and lovely back yard.... IT was right down the block from my sons school and all.... well located.

#804121 - 08/20/04 05:47 PM Re: I'm thinking of buying a house : Advice please  
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JoeB Offline
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Northern California
Quote
IT was right down the block from my sons school and all.... well located.
That sounds like an important criteria. Even if there isn't another house located so well now, there will be sooner or later. As you spend time house hunting you are also spending time getting house smarter - both in the local real estate market and your own preferences and priorities. Good luck.


"How, Monsieur, you care not for music? You do not play the clavecin? I am sorry for you! You are indeed condemming yourself to a dull old age!" - Fouquet
#804122 - 08/20/04 06:24 PM Re: I'm thinking of buying a house : Advice please  
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MizMelody2001 Offline
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Thank you Joe!

#804123 - 08/20/04 06:46 PM Re: I'm thinking of buying a house : Advice please  
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Steve Miller Offline
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Sorry that this one got away, but there are lots of houses, all the time. That one was nice, there are others out there nicer.

Look at all you have learned so far. When the next one comes along you can react that much more quickly. Now that you know the City of Norman has programs for first time buyers, you have some time to pay them a visit and see what they offer. You might even be able to pre-qualify with them so you know what you can afford and can move quickly to lock up a house when you find the right one.

I think the "Buyer's Broker" idea is a good one. You have some time now to shop around for one you like working with. Meantime, save what you can toward a down payment - looks like $2- $3K is what you'll need in your market.

Good luck!


Defender of the Landfill Piano
#804124 - 08/20/04 10:32 PM Re: I'm thinking of buying a house : Advice please  
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Steve Miller Offline
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Steve Miller  Offline
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Yorba Linda, CA
Jeffrey-

Great analysis.

I'll agree that as an investment, there are other ways to go besides houses and in many cases these ways may be preferable. They're not for me; I like investments I can see, touch and hammer nails in to. Everything else seems to me too great a gamble. Not so for others however, and that's fine by me. A couple of them are paying down my mortgages every month.

I am going to consider what you say very carefully, because I work with houses as investments. But we're not necessarily talking about investments for Melody, we're talking about one house - a house to live in. The investment question is rather a side issue in this case, except as it relates to rising prices/inflation and the advisability of waiting.

So here's the question: Assuming an intention to stay in one location for at least several years, would you advise someone to pay rent on a place to live in and invest in stocks or to buy a house for themselves? Fund the IRA or buy the condo?

It would seem to me that although there may be higher profit potential in stocks (relative risk nonwithstanding, and assuming an investment equal to a down payment), any profit you might make on stocks would be quickly consumed by whatever you were paying in rent. Pay tax on the stock profits, pay tax on the dividends, pay brokerage commissions, management fees, etc. and you won't have much left. In the meantime, you write a check for the rent every single month; each of which represents a dead loss. A dead loss on after-tax money.

Even if the house drops in value (not likely over the long term), you will own it when you are done paying for it, and you will pay for it with increasingly inflated dollars over time. Every payment you make brings you one step closer to owning it outright - an desirable position in any market. In the meantime, no one can change the payment, no one can sell the house out from under you, and no one can tell you what color to paint the kitchen.

You're not the first investment pro to tell me that a house is not a great investment, but despite your most thorough analysis I still can't understand how this could be so. Indeed, there is a quote in "Rich Dad, Poor Dad" that states that the poor and middle class consder their house an asset, but the wealthy consider their house a liability. He must have a point - he's sold an awful lot of books - but I still don't get it. It sure looks like an asset to me.

Jeffrey, do you rent or own?


Defender of the Landfill Piano
#804125 - 08/21/04 12:22 AM Re: I'm thinking of buying a house : Advice please  
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Jeffrey Offline
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New York
Steve - I believe what I said in my long post: "Owning a home should usually be a person's or family's first investment, given the costs of renting, and the long term benefits of ownership (financial and personal)." I never meant to imply that "a house is not a great investment." The return on a personal house investment should be calculated as the increase in the house's value (which could be quite high as a percentage, given a low down payment), PLUS any "implied rent" that would have been paid for a similar quality rental unit, minus any expenses for mortgage, taxes and upkeep. On that basis, housing is hard to beat as a first investment outside a company 401(k) plan with a free match, for most people, in most circumstances, provided they plan to live in the area for at least 3-5 years.

I personally own. I owned in the midwest, and lost some money when I had to sell quickly in an overbuilt market against newer units when I moved to NYC. I made a mistake buying in an area I didn't really want to live in long term. I should have rented, in retrospect. I rented in a cheap walk-up for 4 years as I established my self in my new career in NYC, and saved for a downpayment. I bought a 1928 Emory Roth designed pre-war co-op in October of 2001 in Manhattan during a 15% dip in NYC real estate prices, and have a very large increase on that purchase. When I purchased both I and all my friends thought I would lose money given the outlook at the time for the local economy, but I purchased because I loved the building and the apt., and as a statement of long-term faith in NYC. It was the right lifestyle choice for me at the time given my time horizon, and also happened to work out financially.

As to what people "should" invest in outside a 401(k) and a personal home, stocks or real estate, there is no one answer. Each person is different. If you are knowlegeable about how to fix houses, and the responsibilities of being a landlord, rental real estate could be a good investment for you. Your comfort level with that type of investment is a big plus in it being the right choice for you. In general, I find that people who underspend their income, and invest regularly in any decent investment(s) over time, become wealthy, and those that overspend their income and don't invest (I don't care - stocks, real estate, fine art, hedge funds, whatever) tend to be less wealthy. Beyond that, I would never generalize and say that everyone "should" invest one way or another, without knowing the person and their circumstances in much more detail.

I have not read the Rich Dad series. I don't see how a house can be a liability. My main point in challenging the idea that housing always goes up (in addition to my finding the general topic interesting) is to encourage Melody to take the first home buying process a bit more slowly. [Edit: and congrats on your construction business which you posted about elsewhere!]

#804126 - 08/21/04 08:37 PM Re: I'm thinking of buying a house : Advice please  
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Jack Frost Offline
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Maine
Mel,

I have been away for three days and much has happened since.

I yield any rights of being first responder and encourage you to listen to the lots of good advice you have recieved.

In the meantime, I add only this advice:

Stay on the piano forum. You will find many good people to help you with any task....

jf


"Make the pie higher." GWB
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