Hi Lin,

Ya know, I will not try to pretend that I have all answers BUT I will tell you one personal success story that I believe could be anyone who does their homework. I come from a pretty savvy family (maybe I'm baised...lol) that I watched my whole life make some pretty smart moves IMHO. My parenst were always heavily invested in the stock market and at a young age started their investing in real estate as well. My parents never made a GREAT DEAL of money by any stretch of the imagination but were hard workers & saved. They bought a few properties back in the 80's during the last real estate crash in some affluent areas (1 in Bergen County which wound up being our primary residence) and one down on Long Beach Island (we had already owned a small place there & saw the market skyrocket). The one down on LBI my folks cleaned up and rented it for years until secondary housing market hit a high which is when they sold it. They owned that property for less than 10 years and sold it for a profit (excluding what they rented it for all those years) that afforded me to attend college. They sold the house in Bergen County again in a high market, after about 15 years of ownership for close to triple their purchase. OK, that is not factoring in upkeep, taxes paid etc.....BUT.....that investment allowed these 2 people to buy outright and own their own very successsful business today in NY right now (& invested the rest which he now has lost a great deal of due to current conditions)....my father will tell you hands down...real estate has out performed any other type of investment they have ever entered into and they are thinking about more purchases right now (& they are OLD....lol). Their success has been what inspired me enter into the business myself. Both parents have held a real estate license for decades. I don't have graphs & charts to refer to all I can say is I personally think anyone who can responsibly afford to enter into this market at the moment and plan on holding onto that property for awhile will do well for themselves in the end. Good luck, this can be an exciting for you.

Lin,

The answer is "it depends". I'm currently working w/ a Buyer who is only 23. However, she's
in good financial shape -- no student loans, no credit card debt which means she has
a very high FICO score. The FICO score is really important these days as this number
(the higher the better) will determine how banks view you (low score is interpreted
by banks as 'high risk' which translates to a higher interest rate).

If you have your "financial ducks lined up" (good FICO score -- over 700 is best, some "rainy day savings",
and a respectable down payment -- 20% is ideal), you may be ready to take the plunge. You need to
feel comfortable with the decision and also plan to stay in the home for a reasonable
time horizon (many now advise 5-8 years).

Lastly, I suggest that you find a good Realtor that knows your target area -- he/she can
help you to weigh the pros and cons of various properties.

Best of luck with your search.

My youngest couple were 19 and 20 and on their second home (the first was purchased with the help of family). Your not too young. Since this was last year have you looked into a mortgage? Please let me know if I can be of assistance:)

Lg,
In a hurry to strap yourself with 30 years of debt? You are young, enjoy it.

Hi Lg,

Sorry to jump in here but I want to remind everyone that Trulia Voices is not a place to trade insults or bicker. It's great that you are all so passionate about your opinions on this matter but be sure to be respectful of one another.

Please check out our Community Guidelines at the link below if you need more specifics.

Thank you,

Emily Gibson
Customer Service Representative

LG: But you're not squandering it. You're trading it for shelter!

Renting should leave you with plenty of extra cash (compared to buying, if you aren't staying there a long time), and the key is to invest that cash, instead of spending it. In that case you're right, your shelter won't have served as an investment, but you'll have an actual investment account that will have done just that.

And since the stock market has outperformed the housing market historically (true in every major country and market), you should end up with a nice big hefty pile of cashola!

So people will say "But didn't you throw your money away?" and you can look at your fat investment account and think "no. No i did not! I've got plenty of money... and unlike yours, I don't have to wait to sell a house to free mine up!"

Franklin - I'm happy for your success, but individual stories don't mean that its easy to make money in real estate. You can look at almost any market and find individual assets that have done well (ie your home, or Microsoft stock over 20 years) or things that have done very poorly (ie most houses in California over the last 3 years, or Enron stock), its the process of finding what house/stock/bond/etc to buy that's difficult. The attached article (from a few years ago) makes a very compelling case that home price appreciation in the past has been fueled by structural changes (mostly governmental) that fueled an increase in home ownership. With home ownership at an all-time high, and the last attempt to increase falling flat on its face (reverse ARMs, etc.), I don't see where the future increase will come from.

Home ownership a bad investment?

Well, I guess it depends on location and your mental frame of mind.

Certain areas of the country have seen alot of appreciation in real estate while others have been less fortunate.

Western states have shown tremendous gain in value despite the current market conditions..

For example in 1994 I purchased a condo for $70,000 and $7,000 cash downpayment and a loan of $63,000.

Today I could sell that same condo sans new carpet, "formica" counter tops for $375,000 which is lower than what I could have gotten 2 years ago and that would have been $400,000.

I could now get $450,000 or more if it were remodeled.

Yes its been 10 years but what kind of return is that!

Plus I got interest and property tax writeoffs as an owner.

Now that it is an investment, I include HOA dues as a writeoff.

It is rented for $1,700 per month for a one bedroom.

Less HOA dues of $300 and property tax of $100 gives me an net of $1,300.

It might cost a bit more to maintain a single family home than a condo which goes with the territory if you want a private garage and a yard with a white picket fence.

Those who have MADE MONEY in real estate know as with any commodity BUY LOW, SELL HIGH.

Many real estate investors are now purchasing "distressed" property in good areas.

Plus interest rates have been at their lowest in many years and are starting to rise however slowly.

Real estate is local. As with EVERY business there is a CYCLE. Find a full time real estate professional from a reputable company who can guide you in your home purchase. Someone who has been around long enough and understands and can explain to you the cycles your areas has experienced. Look at home values in the form of a graft. It will show ups and downs but it will also show you the long term gain. It's like buying stocks but less volital.

Make an informed decision and include your "gut" instinct. You will always know what is right for you.

There are many people "out there" who have said and will continue to say:

SHOULD HAVE, COULD HAVE, WOULD HAVE - - they are the ones who have been left behind.

Good luck!

John,
You say you did not attack my posts. Really? You start a response to mine with "Wrong Zack.", then proceed to give erroneous information and finish the post with a snide remark about having a financial background. You refer to the_bayou as "... speaking without thinking" when his response was accurate and well thought out. Since then everyone of your posts has been little more than personal attacks. If that helps you work out some of the anger of ruining a few families to make a buck, thats fine, call me all the names you'd like. But the original poster is someone who will soon be house shopping in your town, and with you're behavior and unprofessionalism on a public forum, you've certainly cost yourself at least one client, and any others that would venture in here and read this thread. My favorite thing about this thread is your arrogant and rude tone. Its fine for someone to be arrogant and rude, as long as their right. Since you're wrong, your arrogance is comic fodder.

I'll agree with you on one point, I too am done with the thread. Your obnoxious and unprofessional behavior demonstrates and has added to the public's extremely low opinion of realtors and in this specific case, you've even managed to cost yourself a potential client.

Zack

You are smart to be thinking about a real estate investment at 24, its not too young. If your credit is good and the numbers work, it won't be a problem. Worst case, you may need a co-signer. Two families are a great way to start. Best of luck to you!

Lg - When you buy a house, you're squandering the mortgage interest rate too. If it were a matter of paying $1,000/month to rent a house vs $1,000 in mortgage + insuance + taxes to buy the same house, you'd obviously be better off buying. Unfortunately, that's not the case. In most areas, its far more expensive to buy a house - see the link below that John (a diff't John) posted on another thread. For the NY area, the closest to you, they show that owning costs, on average, double what renting does. Obviously the NY area is big, but I'd strongly advice you to look at rentals in the same area, then when you see a house you'd like to buy, think about how much you think it should rent for, and plug it into the NYtimes rent/buy calculator that Richard posted below. And keep in mind that home price apprecation in the US since 1890 is only 0.4% annually, and < 1% annually since WWII. Given that, and a rent/buy cost ratio of 1/2, it would never be worthwhile to buy a house - at least from an investment standpoint. There are obviously other intangibles that also play a role, ie stability, etc., but as an investment, it's pretty clear. Unless you have reason to think that a home will appreciate particularly well, or you have a particularly bad tax situation, etc., it's simply not worth it to buy at the prevailing prices in the NY area.

Richard-

I understand your guidance and prudence on this issue- and agree that younger buyers/renters should proceed with caution when contemplating purchasing a house for a shorter 5-10 year period. I cannot however get over the fact that when I am renting, I am basically squandering $12000 annually on something that I cannot claim to be mine and never see a return on at the end. There are no "fruits of labor" to look forward to and basically no labor to qualify for any fruit in the first place. You can't sell an apartment you've been renting for the past 5-10 years but you can sell a house that you purchased 10 years ago- even if you *don't* make any profit off of it, or even lose a little (and yes I haven't factored in all those extra interest rates on mortgages, taxes, and maintenance fees)- at least you're not losing 10 years worth of $12000 rent money.

That being said I agree that buying is still more risky and may be a trap for people who don't fully understand those risks. I like how Suze Orman put it: " So I can imagine that those of you who are still renting might be mentally kicking yourself right about now. I am willing to bet all you can think about is how much money you would have made if you had already purchased a home. I have to tell you that sort of thinking sounds dangerously like the investors in 2000 who thought they were losers if they hadn't jumped on the technology stock craze. And we all know how that story ended. "

Well I haven't found a house yet so cheers to renting (for now)!

Zack -

Your attempt to justify your useless blatherings here this site misses the point again and again.
Although you want to be perceived as intelligent and witty, you continually fall short of the mark.

Although I did not attack your posts, I noticed that people do attack your posts because you come off in every post like one of those whiney complaing people that everyone wants just tell to shut up.
I understand that it is probably from childhood where the people around you told you how precious you were all the time, when in reality everyone else wanted to just tell you to shut up.

I'm done with you here. You can stand here and stamp your feet and cry, pull at my pants leg and beg for attention. No.

Just shut up.

The myth of the starter house.

There are basically two scenarios that will occur if you buy a starter house: The first is that you will end up living there for an extremely long time. If you do this, you're likely to do really well. This is because you will have avoided the (incredibly common) trap of buying "as much home as you can afford", and will instead have focused on buying the *least* home that will meet your needs.

The second is that you actually use it as a starter house. In this scenario, if you keep the house for 5-10 years, and you're lucky, you might end up in a financial spot similar to the one you'd be in if you had rented a comparable home, and invested the saved money. If you aren't, you'll actually be significantly worse off.

People who are young and reasonably likely to move within 5 years should *not* (in general) buy homes. You should rent the same sort of modest abode you can afford to buy, and bank the difference.

if you don't believe me, (and you shouldn't, you should always think about these things for yourself, to verify truth), plug some numbers into the rent/buy calculator at:

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAP…

then make a decision. I look forward to seeing you on a rental forum shortly thereafter!

John,
I'm also confused because on this post, you repied attacking the_bayou, and then myself because we don't believe a house is a good investment for returns and then made a snide remark saying, "I guess since I have a financial background it is just clearer to me then the average person." But I'm the one that goes around and looks for arguments?

Wow John. I feel very corrected. Thank you for picking the highlights of your career and passing it off as useful data. I understand why you're not working on wall street anymore. I realize why you have no desire to cut and paste C-S numbers, as they don't help your argument, but that's ok, analyzing statisical data is for idiots like Yale economists and the U.S. Treasury secretary.

Your vitriolic post is kinda funny in a sad way. First, you compare getting a real estate license to getting a masters degree. That's seriously funny. That would be funny if it was a correspondence masters from grenada let alone a real degree. I guess I should expect it, you're probably the type that tells people that ask about selling their home themselves "You wouldn't perform surgery on yourself" because we all know its very realistic to compare real estate to surgical medicine. Then you check out my profile and make another broad and baseless generalization. If you actually looked at my profile, you'd realize that what I do is answer people's questions about a home as an investment and point out how expensive it is over many years to overpay for shelter. Since nearly everyone on this site, including you, are either ignorant, lying, or in denial about a house as an investment, or have been so force-fed the NAR company line so many times that you now can't help but believe it, my posts tend to get attacked a lot. Your response is not unique in the fact that it again considers only data from the recent bubble market and assumes that this bubble is still continuing, when in fact, the party is well over. The only single house you posted in your vitriolic rant that didn't have more half its owners duration during the bubble was the 1972 house, and their return was less than 5% per year. The funny thing, is if you assume that from 2002 until present, increases were 17.5% per year, which is lower than any of your other short term examples, from 1972-2002 they would've made less the 2.5% per year, which is less than inflation. So in true purchasing power, they're home cost more in 1972 than it did in 2002. Thank god for this recent bubble that surely will repeat again starting in 2009.

John, thank you for the data, you've shown that your area was highly affect by the credit bubble and that prior to this bubble, housing was, as I said, a poor investment. I'm sorry you think my attempts to correct the BS spewed on this site means I have no life. That may or may not be true, but at least I'm not giving false information to potential buyers about investment. Next time one of your clients goes into foreclosure, just remember, your lies helped to create that. Sleep well at night.

Zack

These stats have been provided time and time again. I have no desire to cut and paste Case Schiller numbers and others, any idiot can do that (as you well know). You have no real knowledge other then what you are cutting and pasting. I recently sold a home that was purchased for $140,000 seven years ago, sold for 430,000, a town house that was purchased for $180,000 three years ago sold for $335,000 last week, I also sold a home last week that the home owner bought in 1972 for $98,000 sold for $530,000, a home that was purchased for $985,000 6 years ago I sold for $1,680,000.00 .
These people used these homes, paid for/towards them and still walked away with a nice profit. I have dozens of others.

Lets keep it simple. What else would you like to know?

Most people that enter into real estate do not make it. Just like you said you have your masters degree
(as you say) anyone can get a piece of paper on anything, It is what you do with it that makes a difference.

I looked at your profile and I notice that you never really do anything except look for argiuuments with people. Get a life already.

One is never too young to start an investment portfolio as long as you meet the legal requirements of your state regarding the right to enter into binding contracts.

Your qualifing for a loan is the next essential step.

That plus your down payment will give you an idea of your upper limit for a price range.

Next find that property you like in a good neighborhood.

Work with a full time real estate professional who knows the area you are considering.

I congratulate you on your desire to purchase a home.

As others have said, why help a landlord build equity when you can do that for yourself..

All the best,

The 24 year old person, to have the head to buy a home rather then pay someone $2,000 per month to live and own instead is the point. The second part of the point is that this person at young age instead of throwing his money aat a landlod, will be making an INVESTMENT in a property that he / she will utilize daily and pay for. If this person makes qa smart descision , with a little homework he/she can walk away with a nice profit when all is said and done.


"According to an April 2007 NYTimes business article: "House prices have to fall more before housing becomes a clear buy again,” says Mark Zandi, chief economist of Moody’s Economy.com, a research company that helped conduct the analysis. “These markets aren’t as overvalued as they were a year ago or two years ago, but they’re still unfriendly. And that’s one of the reasons the market is still soft — people realize it’s not a bargain.”

This clip is not for our area. The market 35 miles into NJ from NYC is NOT dead... we are down a little but houses are selling and people are buying. Take this clip top the people in Florida, West Virginia, Ohio and so on. NJ is lower thena few years ago... and there are some good buys out there. INVEST in something.

John,
Are you planning on actually providing any data or anything intelligent to this discussion? I realize your current career requires a full 75 hours of training, or less than 2 weeks of work for most people, and getting past this immense hurdle proves that you are obviously one of the country's greatest minds so could you please grace us with some of this superior intellect? Being in the sales business, you must have plenty of practice dumbing down your highly advanced thought process for us common plebes so I'm asking if you could please do that here and provide some data as to the return on housing as an investment. Thanks!

Zack

" I guess since I have a masters degree in computational finance it just isn't clearer to me then the average person. "

Yes, I guess so. Athletic scholarship perhaps?

Lg,
you said, "but the "home" factor does add priceless value to buying a house instead of renting. You can paint your walls any color, at any time, patch up the roof on your own schedule, and just simply enjoy the basic responsibilities of home ownership. "

This is absolutely true and completely agree. You mentioned "invest" in your original post so I answered in that way but you are right about intangible benefits. You definitely seem to be going about this in a very intelligent way and I wish you luck. If you think taxes are exorbitant in NJ, you should see them in NY tristate area. Westchester County is obscene. When we were looking at houses up to about 900k, we were trying to keep our taxes under 20k/yr which was a challenge. Anyway, good luck with your decision either way.

Zack

According to an April 2007 NYTimes business article: "House prices have to fall more before housing becomes a clear buy again,” says Mark Zandi, chief economist of Moody’s Economy.com, a research company that helped conduct the analysis. “These markets aren’t as overvalued as they were a year ago or two years ago, but they’re still unfriendly. And that’s one of the reasons the market is still soft — people realize it’s not a bargain.”

I'm sure there are much better investment strategies that owning a house but the "home" factor does add priceless value to buying a house instead of renting. You can paint your walls any color, at any time, patch up the roof on your own schedule, and just simply enjoy the basic responsibilities of home ownership. But after reading a myriad of articles about the finances to purchasing a home: property taxes (exorbitant in New Jersey), maintenance fees, repairs, interest on your mortgage payments - it does seem rather daunting. And with some mortgages you can't even tap into the equity until you've gotten the mortgage down to an manageable number (and/or after 5+ years).

Thanks for all your advice! I can't wait to sum up everyone's opinions on this matter.

Hi Lg
I bought my first house at 25 and wish I could have done it sooner. Paying rent is fine for some people, however for me home ownership has always been important. If this is your ultimate goal and you are financially able to purchase a home at this stage in your lives, then I would put aside the debate about whether or not a home is a good investment and just go for it!
I've been in the Hackettstown area since 1994 and would be happy to answer any questions you have about real estate in this part of Warren County.

Absolutely not! It's not about your age but about how responsible you are. Do you have stable employment? Do you have your debts in check? What about your short-term savings? You should have at least 3 months living expenses saved prior to buying a house. Additionally, you need to have money saved for the down payment. There are many financing opportunities. Meet with a loan officer who can advise you on what you need to do to prepare to buy a house. May you find your home, your castle!

And, just for comparison, the DJIA was about 2000 points in 1997. Currently it is closer to 12,000. So, $70 in 1987 is worth $420k today if the money had been put in the stock market.

John, since you have a financial background, can you provide some data to support your opinion? Please post expected yearly returns and include maintenance costs, including insurance, friction costs, and taxes. You can invest in other products on margin also which appears to be the crux of your argument for housing. I'm also not sure, from an investment standpoint, what use has to do with anything. I'd actually think it would be better if you didn't use your investment daily, since that use causes wear and tear which will need to be repaired.

I guess since I have a masters degree in computational finance it just isn't clearer to me then the average person.

It is easy to clip a piece of a statement. you chose to leave out the "choose wisely" portion of the statement.
---
It is also easy to use terms like "as always" and "proven" without actually proving anything. I can very easily say that as always buying a Hummer when gas prices are high has always proven to be a good investment, but that won't make it so.

Using the Case-Schiller numbers, the median price of a single family home in the Boston area in 1987 was about $70k, and currently it is $158k. So, if you look at the 1987 home as an investment you would have made $88k. Assuming interest of 6.0%, you would have paid about $70k in interest on the $70k, and you would likely have paid at least $21k in taxes, assuming a very low $1k per year. Now you have a house that you paid $70k for, plus $70k in interest and $21k in taxes, and now you are at $161. So, not including any upkeep on the home, you have a negative return on investment.

Of course you didn't really lose money because you had a place to live and raise your family all those years, so you feel good about the purchase. And that is my point, think about your new house as a home, and not as an investment.

Wrong Zack. For the amount of money a typical buyer will put down on a house, again, given the person is smart and buys a house in this market expecially since prices have come down a bit.. the return will surely over perform compared to a typical "investment planner" investment. Especially for an investment that you utilize everyday. Hands down the best investment.

I guess since I have a financial background it is just clearer to me then the average person.

The_bayou is the only one who provided a reasonable answer. If you're looking to "invest" in a home, what are you hoping to do? Have a place to live? Fine. Get a good return on your investment? not likely. You need to look at why you're looking to buy, if its as an investment, take your downpayment, savings for closing costs, etc and talk to a financial planner as nearly every other investment has a better long term return than housing.

It is easy to clip a piece of a statement. you chose to leave out the "choose wisely" portion of the statement.

Real Estate is an investment. It is your home and an investment. If you choose to buy a house because it is cheap.. next to train tracks, on a busy street, whatever... yeah it may not be a good investment and will always be cheap.

The problem with some people is just like this person that recently answered is they speak without thinking.

Do your reseach and as I stated previously, get a competent Realtor to discuss the area you want to live in, with comps and market high prices and market low prices. Be smart, make a good choice and your "home" will be a great benefit to you when you choose to sell.

As always Real Estate has proven to be the best investment.
---

Lg, be smart and do not believe comments like this. I believe that it is a good idea for you to buy, but going into the transaction believing that your home is an investment will only lead to disappointment later on. But, if you do want to think of it as an investment, be sure to include costs of taxes, insurance, maintenance, upgrades, etc... into your formula. Also include the tax benefits, but be aware that there is a good chance that the mortgage interest deduction may be eliminated by the next administration (See link below).

Good luck with the purchase, just be sure to remember that the most important thing for a new house to become is a home, not an investment.

It is a good move. I wish a lot of other "younger people" would realize that this purchase is also an investment. This is a great time to buy a house. As always Real Estate has proven to be the best investment. Choose wisely and you will be in a better position in a few years.

Contact a competant Realtor that can help you find a place that will be in your best interest.

Hi Lg,

What a terrific time to be contemplating your first home purchase. You want to tap two resources right away - a reputable mortgage lender and a good responsive Realtor. The mortgage lender will help you get your arms around what you can afford as well as describe mortgage programs that you can consider. As far as finding a good agent, take the time to speak to several to be sure that you are comfortable with the agent you select and the way they do business. If you like to search online, select an agent who embraces and understands the internet as you do.

The home buying process is complicated and a good agent can help you navigate from search to successful negotiation and close. I stay involved every step of the way. Unfortunately, you are out of the range of my area of expertise, but I do referral agents that can help. Email or call if you'd like my assistance.

Good luck to you!
Best,
Jeanne Feenick
Weichert Realtors http://www.feenick.com

I agree with the other comments. You should probably consider a 3 bedroom house with 2 bathrooms. It is never too young to start investing in your future. Real Estate is still a great investment. Before I became a real estate agent I bought my first house at age of 20. Granted I rented some rooms out when I lived there for $400 a piece with all utilities included, so the bills paid themselves. Now it is one of my rental units. Talk to a lender and then contact a local Realtor.

You have attained the age of majority, and demonstrate good sense by having an interest in buying instead of renting. I suggest though that you consider a 3 BR 2 BA for the sake of resale. They are in higher demand than 2 BR homes, and generally sell more quickly.

The following is the same advice I gave to both of my daughters, whom I love more than life itself.

For a definitive answer to your financial question, meet with your bank's mortgage loan officer, and talk with a mortgage broker/banker--to compare loans. This important first step is necessary to see not only whether you can get a loan, but to determine what your loan limit may be.

Your next step should be to make a buyer representation agreement with a good REALTOR member of the MLS. It will likely cost you nothing, and make the process so much less stressful than trying to go it on your own.

For validation of this advice, and answers to many another question you may have, see the following Web page on the HUD Web site:

http://www.hud.gov/buying/comq.cfm

Lg,

As long as you have the credit score, income and down payment, banks will lend to you. As young as 24 sounds to you, it was very common for people your age to own homes only a generation ago.

Good luck on the home purchase (and feel free to use UTerms.com to help you find your dream home)