adameepoo

Anybody have a buyer's agent inside the loop offering 1-2% rebate that they would like to recommend? I do most of my own research and only need somebody to let me into places and do the contract work.

Thanks

Hi adameepoo (and others)

I've really enjoying reading this post...very interesting, enough to get me to signup for this forum.

I just wanted to add my two cents to the question of the house values.

Having moved into a new community on the South side of Houston in 2005 the value of my house has pretty much depericated.

To make it even worst is the HCAD "market" value of my home is COMPLETELY out of sync with actual selling trends in my neighborhood.

I'm too am a single person with no person to support outside of myself and my dog. If I had 50k right now to invest in something, the last thing I would consider would be a house. That is from an investment, trying to get the highest roi, standpoint.

However, if you need a place to stay and see renting as a waste of money, getting a house would be your best solution to that problem. Builders are reducing homes and many homes are for sale. It's a complete buyers market and yours for the taking. In looking at new home pricing list I got 6 months to 1 year ago to current rates, I'm seeing price reductions from 10k - 20k.

Another thing I was thinking, and please correct me if I'm totally off base here (legally and/or finanically). You mentioned using your IRA if things get really bad financially. However, wouldn't you have to pay crazy taxes on that come years end? Would it (and I'm truely asking a question here), be better to use the IRA as the downpayment for your first house tax free and keep your already taxed 50k for that rainy day?

NONA

Thanks for the input. I'm glad others are finding this thread as useful as I have.

I think I've pretty much decided not to buy a house... not for any fincanical reasons, but because I've seen literally every single new construction in my price range in the areas that I want to live in, and cant find a single one I can see myself living in, let alone buy.

As far as the IRA goes, I would't dare touch that except in case of an emergency. I'd keep a few months living expenses in savings just in case, and 3 months is the longest it has taken me to find a job - I switch quite often. So I had used that as a maximum. Others have suggested a longer time frame, and that would probably be the safer bet.

I know you can take a penalty-free loan from an IRA "towards the cost of a first-time house purchase", so I'm assuming it counts for a mortgage payment (I'm just guessing, but somebody feel free to correct me).

Anways, I'm a little bummed about not finding anything I liked. But builders, if you're reading this, next year, please for the love of God, no more Pine wood flooring!

So, you're going to invest your $600 savings by renting into a taxable "investment fund", but ignore the tax deduction on the interest and taxes paid on a mortgage? Even at 25-28% tax rates, the numbers are substantial. To begin with, that $600 you are investing is not $600. It is $432 (28% tax) to $450 (25%). The math may still work in your favor, but you have to be honest about it. How likely are you to invest the $600 every month? How much will rent increase over the 30 years? Where would you be buying (or renting)?

Thanks for the suggestion. Believe me, I didn't add the deduction to the interest to skew my result, but because I was too lazy to figure out how to combine apr mortgage amortization vs apy interest payments in excel. I didn't factor in the rent increase, which I think I should. So with some new factors, I get the follow numbers

Including 25% opportunity cost vs interest tax deduction with buying

Including 6% annual increase in rent - a fairly high assumption I feel

Using apr instead of apy for interest payments

Including 25% capital gains tax for investment gains

year.....@3%.apr........@4%.apr........@6%.apr........@12%.apr

30.......$335,283.05....$389,575.16....$534,063.66 ....$1,524,845.25

.........0.98%..........1.49%..........2.56% ..........6.21%

I get these numbers which seems a lot more inline with some of the rent vs buy calculators I see online. It does once again seem prudent to buy instead of rent, but its still hard to compare without knowing historical appreication from different houston areas

Anybody know where I could find historical home appreciation values in houston? I'd like to see what would happen if i invested my downpayment instead vs appreciation in a home after 30 years.

Assuming a 250k home with 50k down and 6% apr, I'd have about $1200 p&i and $1800 piti

Assuming my rent is equal to my p&i at $1200/mo and the difference of $600/mo goes towards my "investment fund"

I came up with these numbers at different rates of return (sorry about the dots, couldn't figure out tables or spaces)

year.....@3%.apy........@4%.apy........@6%.apy........@12%.apy

0........50,000.00......50,000.00......50,000.00......50,000.00

1........58,700.00......59,200.00......60,200.00......63,200.00

2........67,661.00......68,768.00......71,012.00......77,984.00

3........76,890.83......78,718.72......82,472.72......94,542.08

4........86,397.55......89,067.47......94,621.08......113,087.13

5........96,189.48......99,830.17......107,498.35.....133,857.59

6........106,275.17.....111,023.37.....121,148.25.....157,120.50

7........116,663.42.....122,664.31.....135,617.14.....183,174.95

8........127,363.32.....134,770.88.....150,954.17.....212,355.95

9........138,384.22.....147,361.72.....167,211.42.....245,038.66

10.......149,735.75.....160,456.19.....184,444.11.....281,643.30

20.......283,772.26.....323,958.32.....425,213.03.....1,001,092.24

30.......463,906.12.....565,981.43.....856,393.50.....3,235,591.43

.........2.08%..........2.76%..........4.19%..........8.91%

So my home would have to appreciate ~2% a year to break even with my investment at 3% apy, 2.76% @ 4% apy, 4.19% @ 6% apy and 8.91% @ 12% apy, the historical average stock market return rate. This is also ignoring closing costs and maintenence fees as well as the tax deduction incurred for buying a home. Can anybody shed some light on the likelihood of any of these appreciation rates and anything I should add to my model when doing my calculations?

I'm beginning to question the financial responsiblility for me buying espeically since its very unlikely I'll be staying in it for over 10 years as somebody pointed out earlier. Thanks again for all the input

Come to think of it, that's only how my home mortgage is set up. The terms on my commercial mortgage as well as for my car note each get treated slightly differently as well. So perhaps the devil is in the details.

In any event, MidtownCoog's advice is still sound, probably compounded by income tax deductions on the interest. There are definitely better places to put that money.

Well I woke up this morning thinking that there was no way my calculations were right. I re-did everything to the detail, and included future value calculations for the amortization payments. And though its been a few years since my last finance class, it seems paying it off early definitely enjoys the full 6% savings on interest (assuming a 6% apr mortgage). I dont know why or how I could have found otherwise, but I'll chalk it up to 1am drowsiness.

That being said, there aren't may investment intstruments out there that offer better returns than that at the moment, and paying it off early would definitely be worth it in my opinion. Hell, inflation alone was over 6% last year not including the increase in money supply. So any kind of bond is already starting at a huge negative. Still, if interest rates start to rise dramatically (as i think they'd have to eventually) or the stock markets start doing better, I'd probably reassess the situation.

I absolutely concur. Just stay out of newer subdividions built to be crappy upon completion, and give it at least 4 years, and you'll have done far better than renting.

YES, YES, YES! Paying extra on a mortgage payment doesn't reduce the amount of interest that you'll pay in suceeding months and only affects the back end of amortization, after you've paid off almost all of the interest.

Invest in short-term treasuries before paying extra on your mortgage. Mutual funds and ETFs are better, though.

Thanks for the advice on location. I was leaning towards something in midtown, preferably north of 59, but maybe some of those new constructions a few streets south. Otherwise probably near Houston @ Washington. How do you think those areas will fare in the near future (5-10 years)?

After your comment about the amortization, I did some calculations and no matter how I looked at it, to my surprise, paying off the premium would only have saved me about 4.3-4.5% on the extra payments with a 6% apr loan. So you're absolutely right, and although I dont think a short term treasury is paying quite that much, maybe a short term CD or high yield savings account. So again, great advice! I'm glad I joined this forum.

Thanks for the responses. I also believe there will be a sigh of relief no matter what happens in November, but without going too deep into politics, I cant imagine any real benefits coming from any candidate's economic proposals. I would like to wait, but my lease is up in about 3 months time and I'd rather not commit to another year while my savings are sitting on cash.

I cant foresee any safe place to park my money at even 6% for the next year or two so I'm thinking a mortgage would be the best bet at this point in time. I'd try to pay off as much of the prinicple as possible within these first few years, by paying up 50-80% of my income into it. And hopefully by then the economy would have turned around enough to make other investments lucrative again.

I didn't know that the recommended percentages were so low. I imagine thats the average for a typical nuclear family though, where as I'm single with little financial responsibility. I dont know if that justiifies the added risk or not, but I'd still plan to keep about 3 months of expenses on hand just in case and have enough in my IRAs to borrow against up to a year for that worst case scenario.

I'd really like to put as much money as possible into this and really looking at it as a "savings account" and not just a mortgage payment. I have a bit of a gambling problem when it comes to investing, so anything that keeps me illiquid will probably do me good in the long run.

With inflation and commodities at all time highs, interest rates and the USD at rock bottom lows, and the stock market stagnant, there there are very few places I feel comfortable putting my savings in. Correct me if I'm wrong, but Houston's real estate market seems pretty stable.

I am finally in a position in my life to afford a house and have enough of a downpayment saved up since I started working about 3 years ago. Would it be wise to use my savings towards a downpayment and use the equity as a bank for my savings? The homes I've been looking at probably take about 50% of my take home income for the piti and I could probably pay up to 80%% of my take home towards it without effecting my life style. I would also plan to use my ira's as my rainy day fund.

Anyways, just wondering if anybody had thoughts or experience with using your home equity as your savings account. Thanks!