Ideal ski towns for the future factoring in all issues?

[2Planker]

I cringe when wifey spends $5k on the Visa. But it gets paid in full every month.

As my old man said "If you can't pay CA$H for it, then you can't afford it"
Except for their 1st house purchase in 1966, He paid CA$H for everything. Cars, Boats, SR home
ZERO Debt - Taught me well

 

[BenedictGomez]

LOL if there are a lot of people rolling $50k in credit card debt and huge mortgages, our economy is FUCKED

My wife & I were going to put in an offer on a nice home here on the Wasatch Back that I thought was a bit overpriced due to the current market craziness, but that I thought we wouldn't get hurt on too terribly badly if things go south (great neighborhood, gorgeous views, etc..). Long story short, the home went into contract before we could make an offer. When the transaction closed I looked at the MLS sale sheet to see how much it sold for. Turns out the buyer actually used an FHA loan to buy a house for $1.15M!!!!!!! Unless one of them is a surgeon or something I expect to see that home offered for sale again in the next 36 months. LOL

 

[deadheadskier]

You can/could, but if you do that, you trip a number of incentives that disappear - like $500K per couple tax free margin on sale of owner-occupied house ( 2 + years)

If you purchased for $300K sold for $600K thats tax free $300K. Not if its a rental property tho.

Too many regs and stipulations to make an easy/straightforward comparison.

Both federal and ( in MA anyway) state.

In the early 80's Carter-appointed Volker raised rates so high it broke the two smaller recessions and with combined Reagan tax cuts moved most all sectors higher.

It wasn't popular at the time - very few pols or unelected purveyors of decisions have enough courage to make short term unpopular choices like that.


So far, Fed Chief is starting to make similar moves - although nowhere near as high as Volker. Remember when your parents did something you hated and then later on realized it was for your own long term good? It;s rare in American politics or family these days . . . . .

I don't have any intention to rent the place until we buy something else, which may be awhile because current market conditions aren't too attractive to us.

I was simply agreeing with cdskier that rents are higher than mortgages in my area. Granted my home has appreciated 50% in the 4 years since I bought it, so the math would be a lot closer for someone who bought today. That reality is the real advantage in owning vs renting. You have greater cost consistency, so as your income grows through career progression, the percentage of income used on housing goes down when you stay in the same home.

I do intend on keeping this property and renting it out vs selling when/if we eventually do move into a larger home. And the reason for that is more to have it available for our kids to use as young adults (should they want to stay here) vs using it as an income stream. The property will long since been paid off by the time the kids are adults. Figure I'd let each of them use it for cost for a few years, they could then rent out the two other bedrooms to friends and the combination of having cheap rent plus income they make off the room renters will give them a better opportunity to save for their own home.

 

[raisingarizona]

And yet 90 percent of millionaires got that way via real estate.

A 1 bedroom craphole apartment in northern NH goes for over 2 grand a month on average in 2023. Renting is a losing deal long term.

Mmm, sort of. I know a lot of people that spend probably thousands of hours doing home improvement projects and maintenance on their homes during their lives. For some people that’s a form of entertainment or a sort of pleasurable recreational activity, I think that’s great but I sure don’t want to use my free time that way. My personal time is of much more value than having a fat bank for the “golden” years.

 

[2Planker]

Snowed last night on the Rockpile.

Still say NH’s a great state to live in. MWV has it all.
Can’t wait to retire next year and make it our official home.

 

[Former Sunday Rivah Rat]

We never wanted kids and a house wasn't of great interest for us. Our financial advisors have always said "If you don't want a house, don't buy one, you'll make out better being able to invest more elsewhere." That's all worked out pretty well as we have an inexpensive living situation that we like and works for our lifestyle.

However, our advisors could not have forseen the doubling (at least) of the house prices in our area due to Covid and WFH. If we were determined to buy here, we could, but our investments haven't kept up so well that we can just buy a house without worrying about it. Feels like a wash over the last 10 years.

Additionally, I work nearby with a lot of 30-something folks who, naturally, hope to buy a home here. For those who don't have a big financial advantage (inheritance or whatever), they don't have a shot, it's a total joke, and I feel bad for them.

I bet that works great for you Financial Advisor. Fire him.

 

[Former Sunday Rivah Rat]

We'll see if the hoards who bought circa mid-2021 to mid-2022 feel that way 5 years from now.

As the warning goes, Past performance is not indicative of future results.

Commodities/real assets typically do well in an Inflationary recession. Stocks not so much.

 

[1dog]

Commodities/real assets typically do well in an Inflationary recession. Stocks not so much.

And reason RE did better than markets - free money from the feds - literally free. Take inflation. tax deduction on mortgage and 2.5-3.5% is actually them paying you. That gave people far more reason to outbid the next guy- of course, companies bought back stock and that drove markets higher too, although foreign money in both cases continues to flow in. With 250, 000 millionaires fleeing China, where do we think most of that money is going? US markets and RE.

Agree though, we are f'd. Its not if its when. Got debt?

 

[kbroderick]

One other consideration for rent vs own costs is that if you're extended to make the purchase and then a major issue strikes (furnace failure, unexpected act of God that's either nor covered or not fully covered by insurance, car gets hit and you need to buy another one now, etc), you can end up in a very precarious position. If you're renting and the furnace fails or the roof lands in the yard during a wind storm, you call the landlord. If you can maintain ready access to a large enough cash and reasonable credit cushion to deal with those issues, it's a relatively minor consideration (probably just means slightly different planning and keeping a little more cash available just in case); if you can't, it makes owning a much bigger risk.

 

[cdskier]

Because you're not thinking about it from a complete economic picture. There are other real costs as well, for instance, most people dont think about annualized upkeep (about 2.5% of value per year) & other ancillary costs. But the biggest thing people leave out (and it's huge) is the variance between interest payments on debt + collecting risk-free interest returns on cash.

The mortgage rate today is over >7%, while it's simultaneously simple to get >=5% risk-free on your cash position right now. So in a very real world example where a person who puts down $150,000 on a $750,000 house (20% to avoid PIPP) is not only losing out on $7,500 in risk-free return, but they're also now paying over $40,000 in interest ($40k + $7.5k = $48k). $48k / 12 months = $4,000. And that's not even factoring in other costs like insurance, HOA, and all the small stuff typically "included" in rent (garbage, water, yada, yada), which likely take you over $5,000 in real financial cost. You can rent a $750,000k house for less than $5,000k almost everywhere. To simply look at "rent I pay" versus "what would my mortgage & taxes be" is a very badly flawed view, though somewhat surprisingly it is the view a majority of people take (thankfully for real estate agents everywhere!).

TLDR: if you do a correct apples-to-apples financial analysis, it becomes rather apparent why it's cheaper to rent today than buy today in almost all of America. As I mentioned, last time I checked it was like 396/400 places, and this is highly unusual as it should normally be cheaper to buy than to rent.

I'm definitely considering other ancillary costs in my own calculations, although maybe I didn't spell it out in my post (to me a lot of that should be understood, but maybe that's because I already own property...). Maybe you can rent a $750K house today for $5K/month. However that rental price will increase continually, whereas the mortgage cost doesn't (assuming a fixed rate mortgage). Sure other ancillary costs associated with home ownership can rise, but at least the mortgage is fixed (and again...ends). And the "risk-free" >5% return on cash you refer to is today, but not necessarily tomorrow. Considering that "risk-free" as part of your calculation when you're talking about a long term strategy is misleading. There absolutely IS risk that you won't always get that return which changes a rather significant part of your analysis and calculation. When you're talking about buying vs renting, it is silly to look at an extremely narrow window of time. If someone really only cares about today (or the next year), then buying probably isn't the right option for that person anyway.

With renting you don't even have security that you can stay there as long as you want and you could end up being forced to move at some point. That factor may not have an easily quantifiable value associated with it, but it is something that is worth something to some (or perhaps many) people.

I'm also a big proponent of buying something lower than what you can in theory afford and then just paying extra towards the principle earlier in the mortgage/loan to pay it off early. Every loan I've had I've paid off well before it matured cutting a lot of interest out of my costs. While both investing in the market and buying a house have risks, I think it is substantially less with the house AS LONG AS you buy something that you are comfortable with. I've never really viewed buying a home as an investment. My condo in VT has doubled in value, but I would also be content if it had stayed at the original value. I'm getting use and enjoyment out of it. My yearly costs are still less than most winter seasonal rentals and I have a nice asset that I could sell if I wanted/needed to.

 

[cdskier]

One other consideration for rent vs own costs is that if you're extended to make the purchase and then a major issue strikes (furnace failure, unexpected act of God that's either nor covered or not fully covered by insurance, car gets hit and you need to buy another one now, etc), you can end up in a very precarious position. If you're renting and the furnace fails or the roof lands in the yard during a wind storm, you call the landlord. If you can maintain ready access to a large enough cash and reasonable credit cushion to deal with those issues, it's a relatively minor consideration (probably just means slightly different planning and keeping a little more cash available just in case); if you can't, it makes owning a much bigger risk.

That's a valid concern, but I also think that's more of an issue with people that overextend themselves. I think there's too many people that take out larger mortgages than they should. Just because a bank tells you that they'll give you up to X doesn't mean you should really go that high. Too many people do though. I prefer a bit more conservative approach that leaves you money specifically for situations like that.

 

[thebigo]

MWV HAD it all until Massachusetts discovered it IMHO. Fixer uppers went from 150K to 400K. Can't even drive on 302 on the weekend.

and now they are developing north south road. There are three rotary in maybe a quarter mile and it terminates in the middle of town.

This needs to happen: https://en.wikipedia.org/wiki/Conway_Bypass_(New_Hampshire)

 

[kbroderick]

That's a valid concern, but I also think that's more of an issue with people that overextend themselves. I think there's too many people that take out larger mortgages than they should. Just because a bank tells you that they'll give you up to X doesn't mean you should really go that high. Too many people do though. I prefer a bit more conservative approach that leaves you money specifically for situations like that.

The challenge—at least the one I've felt personally—is that what I was comfortable with for housing cost was far less than the minimal cost to own your own place. As noted upthread, rental costs were lower at that point but have since escalated, whereas if I had stretched to buy a place and didn't get hit by a plausible-but-unlikely financial issue like those I mentioned, I'd be sitting on $300-400k in real-estate for a payment that matched a new higher-trim truck rather than a house. The part that annoys me is that it was obvious to me at the time that buying made more sense long-term, but I wasn't in a position to do it without being potentially over-extended.

 

[BenedictGomez]

Maybe you can rent a $750K house today for $5K/month.

Today you can rent a $750k house for much, much, much, much, less than the $5k/month that I demonstrated it would cost to buy that house in most of America, that's the point.

And this isn't an "opinion" I've come up with on the fly, it's mathematical analysis many separate outfits in the real estate world have recently made, including some of the most well known/regarded. I'd be happy to post some links to various sources who do this for a living if you like, but suffice it to say, the reason these recent analyses exist in the first place is due to the fact that it is literally unprecedented for it to be cheaper to rent a house than to buy a comparable house in virtually all of America.

Considering that "risk-free" as part of your calculation when you're talking about a long term strategy is misleading.

Considering the risk-free rate of return is what the investment world does for financial analysis. It is absolutely sacrosanct. And it's very necessary in this specific example to determine true cost at a given snapshot in time, which is what a home purchase is. The > $40,000 in interest payments the buyer in my example is getting additively socked with in 2023 would pay much of his CY23 rent. The financial opportunity cost is quite real, even if most people dont ever (sadly) consider it. I've long said economics should be taught in high school. Ditch art or music or gym to make way for it. There are so many important real world principals effecting financial well-being that people just either dont think of, forget, or never learned in the first place. If we did that my guess is the "overextended" class you mentioned would shrink significantly.

 

[deadheadskier]

BG - it's really market dependent. A $750k home in the NH Seacoast area would exceed $5k to rent. Local Condos that sell for $300k rent for $2500. Sometimes higher

 

[cdskier]

BG - it's really market dependent. A $750k home in the NH Seacoast area would exceed $5k to rent. Local Condos that sell for $300k rent for $2500. Sometimes higher

Yea...here in my area of NJ a lot of $750k homes are also over $5k to rent...so I don't know where BG's seeing them for "much, much, much, much less" than 5k.

The condo point you raise is pretty much in line with exactly what I'm seeing in NJ and the reason I had been looking into this recently here. I can buy nicer condos in the $300-350k range than what I can rent for $2.5k.

 

[Edd]

The variables here are many, and there’s an assumption in this discussion that, if renting, you’d rent a similar home to what you’d buy anyway. Renters who do it to purposely invest can live waaay below their means if they find the right situation.

 

[BenedictGomez]

BG - it's really market dependent. A $750k home in the NH Seacoast area would exceed $5k to rent. Local Condos that sell for $300k rent for $2500. Sometimes higher

Yes, of course everything is market dependent, all real estate is local, but there are few places in America right now where you can buy cheaper than rent (again this is abnormal as the situation is usually the reverse).

I imagine oceanfront or close to it in your example is one such place, but that's quite a first-world example versus the overwhelming homeowning landmass of America. What's the zip code though, I'll pull the data?

 

[BenedictGomez]

Yea...here in my area of NJ a lot of $750k homes are also over $5k to rent...so I don't know where BG's seeing them for "much, much, much, much less" than 5k.

The condo point you raise is pretty much in line with exactly what I'm seeing in NJ and the reason I had been looking into this recently here. I can buy nicer condos in the $300-350k range than what I can rent for $2.5k.

Where in New Jersey? Most of New Jersey with >$5,000/month rents houses are generally going to cost > $750,000. As you know, $750,000 (unfortunately) doesn't cut it in much of the state.

In terms of condos, it's important to understand that the price per sq/ft on condos (and townhouses) is much higher than for SFH.

 

[deadheadskier]

Yes, of course everything is market dependent, all real estate is local, but there are few places in America right now where you can buy cheaper than rent (again this is abnormal as the situation is usually the reverse).

I imagine oceanfront or close to it in your example is one such place, but that's quite a first-world example versus the overwhelming homeowning landmass of America. What's the zip code though, I'll pull the data?

Well, my town specifically is about 20 minutes from the beach. But I'd say the figures I shared are pretty common for the general area within 90 minutes of Boston. There are a few less desirable towns you may do better, but overall the rents around here are absurd. Cost to buy obviously very high too.