Buying In Your 20's
From the Wall Street Journal:
Are Twentysomethings Ready for Commitment To Owning Real Estate?
Are Twentysomethings Ready for Commitment To Owning Real Estate?
Wish you were more grounded? Here's a solution: Buy a house.
For people in their 20s, owning real estate is a way to take on more responsibility, get a sense of stability in at least one area of life and maybe even build up some equity, too. But it involves a heavy commitment -- to a mortgage, to a place, to holding a steady job -- all of which can limit lifestyle and career choices. What about that six-month trip around the world, going back to school or joining the Peace Corps? Once a deed is signed, it may not be that easy to skip town on a month's notice.
...
People in their 20s are more inclined to buy real estate now than they were 20 years ago, according to annual statistics from the U.S. Census bureau. In 2005, almost 26% of household heads under 25 years old owned their home, up from 17% in 1985. Homeownership rates for 25 to 29 year olds also increased over the past two decades, though not as sharply.
But don't we have a propensity to change jobs and cities in our twenties? How about college and graduate school? Military deployments? In this phase, it may be hard to count on an income beyond the most immediate job, which could change. Is it worth taking the risk of committing to a mortgage payment budgeted around unpredictable conditions?
...
Phyllis Attebury, a real estate broker who lives in Carmel Valley, Calif., and works with clients on the San Francisco peninsula, says the market is slowing down a little and that buyers should be prepared to keep a house for at least five years to weather market downturns. "In the long haul, real estate has been a saving grace for many. But for a single person who's here, there, and everywhere they should probably just think about renting for a couple of years," she says.
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Michael Esquivel, 23, a budget analyst who lives in New City, N.Y., is considering buying a house with two of his oldest friends. "But we're young, and any of us could change jobs easily or move out and the other two would be stuck paying the mortgage, which would be horrible," he says. On his own, Mr. Esquivel says he could only afford a shack and would prefer to live at his parent's house and save money to buy a nice house later on.
I'm a renter myself, and I often wonder if owning a home that I could paint orange and cerulean and landscape with agave cacti and olive trees would instill such a serene sense of propriety that I'd be willing to give up being footloose and cosmopolitan. Or maybe I'd be better off renting indefinitely, and spending any extra money on dinners out and trips to Oaxaca and Paris.
It's a tough call between empire and freedom.
20 Comments:
I bought my first house (2 family)when I was barely 21. That was 20 years ago, I guess I was an anommaly back then.
The main difference I think is I was married already and I had not gone to school like the ones ooutlined in this story. I lived in the house while going to school and rented out the other apartment to pay most of my mortgage.
An article I saw in the Usatoday about a half a year ago showed these young buyers living on the fringes of the suburban areas and not in cities. This was according to census data. It also showed they were buying alone.
In Manhattan & in the other boros, many people in their 20's are already buying. I never can understand how the average person can pull together the down payment and meet the monthly mortgage payment.
Does everyone in NYC work on Wall Street or make in the six figures. Reading the NY Times, NY Magazine and speaking to realtors you would think so.
What kind of work do they do that they can buy a condo downtown or on the JC or Hoboken waterfront?? Or do the parents or trust fund make the mortgage payment??
They are not the ones to save money to buy a home either. Most waste money on designer clothes, clubs, & restaurants not to mention rent. They want it now and feel that they are entitled and that someone 'else' should pay.
Many are using risky loans. This will not work for many over time.A tough lesson will be learned.
I maintain my position that easy lending and the general housing mania has caused future buyers to jump into the market early. Thus, a portion of the demand seen over the past three years was in essence borrowed from the future.
This not only applies to younger buyers, but also marginal buyers who purchased earlier than they would have due to low rates and lax financing.
Many of these future borrowers will be facing a tough financial situation as ARMs readjust, property taxes increase utilities increase and everyday cost of living they did not factor in.
Many of these want-a-bees are in for tough lesson.
When the party ends this is one example of the fallout.
lean times are a coming in real estate land.
Homes Go ‘Unfinished’ In Arizona
A pair of reports from the Arizona Republic. “State and local officials are investigating a months-long work stoppage that has left about 200 unfinished houses in Casa Grande and Maricopa withering in Arizona’s summer as home buyers wonder whether they’ll ever be able to move in.”
“As the Valley’s housing market ebbs, smaller builders like Turner-Dunn, which may have arrived late to capitalize on Pinal County’s gangbusters housing market, are more prone to failures, said Jay Butler, at Arizona State University. Unlike big builders, they can’t absorb rising labor and materials costs, struggle with credit and sometimes lack experienced management that can deal with a cooling market, Butler said.”
“‘If you look at the numbers nationally, the market is slowing tremendously,’ Butler said. ‘With small builders, the problems just cascade.’”
“It’s unclear with Turner-Dunn whether there was fiscal malfeasance or the company was knocked down by the market. But one thing is fairly certain: Turner-Dunn is unlikely to step in and help buyers and owners solve their problems, consumer real estate attorney Chris Combs said.”
“‘If a builder doesn’t even have the money to build a house, I’m pretty sure the buyer isn’t going to see their earnest money,’ Combs said. ‘And if they paid for home upgrades, those are probably long gone too.’”
“In the meantime, insulation yellows in the sun, motorists slalom through streets with 4-foot piles of decorative gravel, wood frames warp and twist like rubbery candy, sun-bleached work orders stapled to walls show work last performed in March. Frustration builds with buyers whose contracts have no timelines for completion while nearby, half-finished homes are cannibalized by new residents for doorknobs and other fixtures.”
“At least eight subcontractors have filed about 100 liens for more than $1 million on finished or unfinished homes in Turner-Dunn Construction Inc. developments in the Pinal County cities of Casa Grande and Maricopa.”
“With liens, the homeowners’ credit can be ruined, and they can’t sell their houses, Richard Marsh, former president of the Land Title Association of Arizona said. ‘This happens a lot when the residential real estate market slows down and smaller builders become overextended,’ Marsh said. ‘It penalizes the homeowner, but the idea is to protect the (subcontractors).’”
{{I have friends in their 20s who work in NYC. None of them make over 70k a year.}}
I couldn't imagine living on less than $70,000 a year. Not with todays rents & inflation at a 16 year high.
Even Northern Queens & Nassau has gotten prohibitively expensive, but many of the 20 year olds you see in Queens or on Long Island still live at home with parents but drive BMW's, Mercedes or Porches. They probably spend a few thousand on designer clothes at Roosevelt Field every week as well.
Actually working to get ahead is passe. Now it is based on what you have and can show others especially on Long Island probably the consumerist capital of the country
Look bubbleheads. We are in deep doodoo.
http://photos1.blogger.com/hello/243/2888/640/MIq206.jpg
Keep in mind that interest rates from 1990-1993 dropped from 9% to 6%. we are record levels now, but rates are going UP!!!
Really Really Bad news Bubbleheads.
BAAAAAAAWAAAAAHAHAHAHA
Lean times are a coming in Real estate land.
Be prepared.
Babababa BUST!
Bob
Just think ~Bubbleheads.
I know that's hard for you folks, but your dream world is crashing all around you.
http://photos1.blogger.com/hello/243/2888/640/MIq206.jpg
Look at the chart again. Remember interest rates in 1977 went from 6-7% to 18% in 1981. In 1990-1993 rates went from 9% to 6%. Now we have rates going up while we are at record highs. This was caused by insane real estate prices NOTHING else.
BAAAAAAAWAAAAAAAAAHAHAHA
http://photos1.blogger.com/
hello/243/2888/640/
MIq206.jpg
Its not like they are saving anything either. Most walk around with designer clothes, drive expensive cars around the city, eat out every night etc...
It must be nice to have a trust fund or parents to bail you out when you overspend.
{{An article I saw in the Usatoday about a half a year ago showed these young buyers living on the fringes of the suburban areas and not in cities. This was according to census data. It also showed they were buying alone. }}
Jersey City & Hoboken is where most are buying. Those condos start at around $600,000 on the waterfront + HOA fees & RE Taxes which aren't cheap.
Even a $200,000 a year salary isn't enough for these recent grads given their mortgage & spending patterns.
Worry about yourself and stop stalking other with such an envious eye.
Spend the energy doing for yourself.
The roaring 20's all over again?
grim
Bergen,
Would you have been able to do what you did if prices were at today's levels?
The housing market in 2001 might as well be another time and place, because it bears no resemblance to today.
This blog wouldn't exist if the situation had not changed so dramatically since that point.
grim
How can a first time home buyer afford $400K -$500K or $600k Crapbox depending on the area.
20% down is about $100k.
How many have $40k to put down?
it's a disaster in the making. Especially ofr those that pruchased in last 1-3 years.
BAAAAAAAAWAAAAAAHAHAHAHA
Bob
Bob, is that really you?
Your rant included one meaningful sentence in english.
I do. I have 40K to put down.
Also...
1) For the person who said none of his friends in NYC make over 70k... I made 55k base salary last year with an 80k bonus, in my first year out of college. I went to a public university (though a top one at that). Total in first year out of school: 135k.
2) The "future" buyers who bought in will only be hurt if they have ARMs. No person in his right mind would EVER get an ARM under any condition, offer, or rate. At least not anyone who has taken the time to consider personal finance and that you want it to be "predictable". The 20-somethings who got fixed rates, at 5% mind you... are sitting damn pretty now compared to you or anyone else. Whether the real estate goes up or down from here.
I posted the last comment and do want to mention that, even with a salary in the top 1% of my graduating class, I feel priced out of today's NYC/NJ/LI real estate market.
Where is my mega-bonus going? $20,000 towards student loans. That leaves only another $20,000 after taxes (I'll get some more when I do my taxes though). As for that $20k, it won't go into a down payment because prices today just aren't sustainable. So I do agree with some if not most of what conventional wisdom is here on these threads.
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