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My son is 30 something working in Silicon Valley paying outlandish rents and looking at expensive housing. Is it still a good option to purchase in this market? I was burned on real estate as a young adult and don’t want to advise him If it is not a good idea.
As many have already pointed out it depends on many factors. Does your son command an extremely high income as some Silicon Valley folks do or is he earning an average salary? If it’s the former I would lean on purchasing. Is he planning to stay in that local for 10 plus years then perhaps purchasing is a good option. If the house in question (or even the rent he’s currently paying) is north of 30% of his monthly income I would highly recommend he move and purchase elsewhere. Life is more than the house or neighborhood we live in.
OK, 3 houses over 55 years, House 1 gain of 7.4% per year for 8 years, House 2 4% per year for 37 years, House 3 6.6% per year for 6 years. But the biggest reason to own a home, is it is a GREAT way to raise a family, and not have to answer to a Landlord, or neighbors banging on the wall, when baby needs to sleep. The Autonomy is worth a small loss, but in my situation we gained on every home and bought a bigger one each time. Neighborhood and a little luck have a lot to do with it. I would not give up ownership for renting, I did that as a child until 21 years old, and living in your own home is an American Dream, and thankfully we did that. That said at 74 we moved into Independent Living, have a great apartment and are surviving quite well, however the average age here is 83 years old!! No noise after 9 PM.
William,
We have never rented and always owned.
And based on sales prices on both ends of the transaction we have made money.
Yet there are costs to ownership. Upkeep and property taxes and insurance.
Your analysis that “ … the biggest reason to own a home, is it is a GREAT way to raise a family … “ is 100% correct!!!
Rather than frequently moving our kids could have the same set of friends at both school and Church. We have great memories of our forever home and our neighbors and our children’s friends. Whatever it may have cost it was definitely worth it.
I was lucky to have been able to buy my first home at age 25 and have only owned a total of three homes in the intervening 50 years.
The value of my current home is beyond anything that I could have imagined at age 25. That said, the cost of a mortgage, taxes, insurance, repairs and improvements over the years has been considerable. In addition, I have lived through several major real estate resets and have seen the value of my homes swing wildly.
So, is owning a home a good thing? Yes, but it depends. Over time owning a home makes sense, but the timing of a move can have a huge impact on the amount of equity you can move to a new home. Buying a fixer can also make sense, but only if you: a) can afford to pay for the repairs and improvements, or b) have the skills, tools, time and willingness to take on significant home repairs and improvements. My wife and I also were very conscious of never having a mortgage payment that we couldn’t manage on one income, which has become more difficult to achieve with today’s housing costs.
All I can say is that owning a home has worked for me, but I am less certain of what my son’s experience as a home owner will be over time. He rightly states that the relative cost of my first home was much lower than what he has had to face, which could only be accomplished with the help of the Bank of Mom and Dad. And, if he were to suddenly lose his job, the family bank might have to extend further aid in order to keep a roof over his head.