mom@sfmag.UUCP (M.Modig) (03/17/86)
A question. I am a fairly young man (25). My wife and I both work.
We are in a fairly high tax bracket. We are starting to save up for
a house. By cutting out a lot of frills (not so many nights out,
brown bagging it, being careful on major purchases) we are trying to
save $1000 per month towards the house. We could probably manage a
bit more than this if we really pinched, but we need money for
regular savings as well, so this is a good compromise, certainly a
reachable goal. We estimate it will take
about two years or so to save up enough for a good-sized
downpayment.
The question comes in when we consider what to do with the money
now. I had thought about putting the money that will be held for at
least a year into a mutual fund, either a low-risk growth fund or
some sort of bond fund (tax-free?). However, several of the books I
have looked at on the subject have been at pains to emphasize that
mutual funds are strictly long-term investments, and have suggested
other things, such as money market funds or CDs. Any opinions about
what alternatives I should look at and factors to consider? At this
point I am extremely confused. I want something that will be
reasonably safe, yet will grow some to offset at least some of the
growth in housing prices I feel is inevitable as we try to
accumulate enough for a down payment.
Please respond by mail-- I will post if there is enough response.
Thank you.
Mark Modig
..{ihnp4,ulysses,allegra,bellcore,attunix}!sfmag!mommcb@styx.UUCP (Michael C. Berch) (03/24/86)
In article <882@sfmag.UUCP> mom@sfmag.UUCP writes: > A question. I am a fairly young man (25). My wife and I both work. > We are in a fairly high tax bracket. We are starting to save up for > a house. By cutting out a lot of frills (not so many nights out, > brown bagging it, being careful on major purchases) we are trying to > save $1000 per month towards the house. . . . > We estimate it will take about two years or so to save up enough for > a good-sized downpayment. . . > > The question comes in when we consider what to do with the money > now. . . . The advice I've been hearing lately is that you should try to go ahead and buy the house as soon as you can, as real estate prices tend to rise faster than your ability to purchase. Prices will not get lower, and the mortgage interest rate should be at bottom in the next month or two or three. I don't know what prices are like in your area, but assume a $90,000 house/condo with a 90% loan ($81K) and 10% down ($9K). Add $2,000 misc. costs, and you should be able to save this $11K in 10 or 11 months, if your estimates are correct. It's probably the best use of the money; you get tax benefits from interest deductions sooner. If you are looking in a higher price range than this, all the better. You'll have higher a monthly payment because of the higher loan, as well as having to pay PMI (private mortgage insurance). Some builders of new projects are providing financing in the 90 to 95% range out here in California. These suggestions may not be appropriate to your particular situation, but the general advice of trying to buy as soon as feasible should be. _____ Michael C. Berch ARPA: mcb@lll-tis-b.ARPA UUCP: {akgua,allegra,cbosgd,decwrl,dual,ihnp4,sun}!idi!styx!mcb
patcl@hammer.UUCP (Pat Clancy) (03/26/86)
> >The advice I've been hearing lately is that you should try to go ahead >and buy the house as soon as you can, as real estate prices tend to >rise faster than your ability to purchase. Prices will not get lower, >and the mortgage interest rate should be at bottom in the next month This is *not* generally true. In Oregon, prices have been dropping over the last several years, and I know several people who have lost money (in the form of equity) as a result. Also, at least recent national figures have also shown a drop. And although mortgage rates are at an N-year low, they are still "absolutely" high, eg. just below levels which used (till the late 70's) to be defined legally as "usury" in some states (eg. New York). Pat Clancy \0-a
spp@ucbvax.BERKELEY.EDU (Stephen P Pope) (03/28/86)
In article <1893@hammer.UUCP>, patcl@hammer.UUCP (Pat Clancy) writes: > > > >The advice I've been hearing lately is that you should try to go ahead > >and buy the house as soon as you can, as real estate prices tend to > >rise faster than your ability to purchase. Prices will not get lower, > >and the mortgage interest rate should be at bottom in the next month > > This is *not* generally true. In Oregon, prices have been dropping > over the last several years, and I know several people who have lost > money (in the form of equity) as a result. Some "conventional wisdom" on this subject -- which I can't confirm from personal experience -- Unimproved land, farmland, condominiums, rental units, commercial property, townhouses, will all fluctuate in value and drop in value at times. Detached single family homes very seldom drop in value -- there are exceptions: bad locations such as a declining inner city neighborhood; houses in a "company town" where the company might go into a slump -- houses in new suburbs which are constantly getting re-zoned for unlimited development -- and so on. A safe claim is "well located single-family detached houses hardly ever decline in value". I don't know about the situation in Oregon though. Prices have been firm or rising most places I'm familiar with. Many people predict that housing cost will continue to form a higher and higher portion of peoples total expenditures. If this is true housing prices can continue to rise faster than the overall inflation rate, and even rise during deflation. steve
mazlack@ernie.berkeley.edu (Lawrence J. Mazlack) (03/28/86)
>> >The advice I've been hearing lately is that you should try to go ahead >> >and buy the house as soon as you can, as real estate prices tend to >> >rise faster than your ability to purchase. Prices will not get lower, >> >and the mortgage interest rate should be at bottom in the next month >> >> This is *not* generally true. In Oregon, prices have been dropping >> over the last several years, and I know several people who have lost >> money (in the form of equity) as a result. > >Some "conventional wisdom" on this subject -- which I can't confirm >from personal experience -- > >A safe claim is "well located single-family detached houses hardly >ever decline in value". I don't know about the situation in >Oregon though. Prices have been firm or rising most places I'm >familiar with. > >Many people predict that housing cost will continue to form a >higher and higher portion of peoples total expenditures. >If this is true housing prices can continue to rise faster than >the overall inflation rate, and even rise during deflation. > This is simply not true outside of the Bay area. Nationwide, in most markets, housing has went down the last 18-24 months. This is down in absolute terms, even before considering inflation. This has been pretty well reported in the national financial press. However, you could always believe the "Milionare Maker"
scott@hou2g.UUCP (Mr. Atoz) (03/28/86)
>>>> The advice I've been hearing lately is that you should try to go ahead >>>> and buy the house as soon as you can, as real estate prices tend to >>>> rise faster than your ability to purchase. Prices will not get lower, >>>> and the mortgage interest rate should be at bottom in the next month >>> >>> This is *not* generally true. In Oregon, prices have been dropping >>> over the last several years, and I know several people who have lost >>> money (in the form of equity) as a result. >> >>A safe claim is "well located single-family detached houses hardly >>ever decline in value". I don't know about the situation in >>Oregon though. Prices have been firm or rising most places I'm >>familiar with. > >This is simply not true outside of the Bay area. Nationwide, in most markets, >housing has went down the last 18-24 months. There are many places "outside of the Bay area" that have done quite well, some much BETTER. It is true that many areas have seen either no increase or a real decrease in value. (Witness the recent popularity of 15 year mortgages--equity increase is not as complete an investment tool as it used to be, and reducing interest payments has become more important--as the rate has gone down.) However, the bottom line is that the original poster lives in Central NJ, where appreciation is QUITE high. Many areas in the state have experienced 18-20% appreciation each of the last two years--sort of like Silicon Valley years ago. The "buy now" advice is sound. ========================================= "When did you figure all THAT out?" "During the commercial..." Scott J. Berry ihnp4!hou2g!scott