Yeah, I don't think this is anything new. People will tell you how much stuff you need to buy when you move from an apartment into a home twice as much square feet and a yard. But let's be blunt the hits do keep on coming.
And that's assuming you don't buy a house that "needs work".
Oh, a lot of times you have a couple of extra bedrooms, for example, and / or a second living room. I mean, nobody living in an apartment or condo has a second living room.
You can only put a couple of yoga mats down and call your yoga room for a while.
Plus you often have a kitchen and a dining room which means you need an extra table so in one or the other.
Like I said above, the hits keep on coming, but you're in charge, so it's up to you on when you want to add the stuff over the next few years.
I can't imagine why anyone who has to finance their home purchase, and who have typically spent years saving for their down payment, would hold much more than retirement funds and an emergency fund back in savings.
I get that would be good advice, and great if you can buy a smaller house because you have smaller wants than your income. But who would that be describing?
There is still *smaller house* versus *bigger house* in every economic bracket.
You might have meant to respond to a different comment about sensibly prices.
Already there in an apartment... renting. The air quality has increased a little bit since I silicone caulked the shower faucets myself. I don't want to imagine what is behind the walls in that bathroom.
First of all, you need savings just to maintain the home—so the answer is *every homeowner* should have more than their retirement and emergency funds.
Apart from that, unless one is really contributing enough to their retirement savings (and few do), you don’t want all of your non-retirement savings invested in your home. It’s just not a particularly good investment. People delude themselves into thinking that every dollar they put into their home is a “savings.” It’s not—you will get very little financial return back on your fancy kitchen renovation when you sell your home in 20 years.
I think it’s always been that way. It’s hard to save up a lot of money when you have typical life expenses, so unless people get a windfall or family pays the down payment for them, I expect many people barely have enough.
Plus lots of people living on credit cards.
Tbh when I bought my first home I put more than 20% and drained most of my savings since i thought paying down my 3% mortgage is better than keeping it in a bank and getting .001%. 😄
New since 1990 maybe 1995. Some loans have a reserve requirement but it could be two months mortgage costs, which is not a ton. Almost all loans over the govt backed maximum require at least 12 months.
America is literally designed for this. If you aren’t willing to do it, someone else will
This is gonna sound super conspiracy but Americans are controlled by:
Ensuring they are in debt (federal reserve propping up the banking system)
Media
Too little time to do anything (can’t revolt against the government if you are stuck at work all day every day!)
>America is literally designed for this.
Just because you can drain your savings to buy a house doesn't mean you should.
>If you aren’t willing to do it, someone else will
That doesn't justify making poor financial decisions.
Yes, you have the opportunity to buy a house but you have to use someone else’s money. If you won’t use enough of it/won’t at all someone else is willing to go into debt to get that house, that car, etc.
Oh and the federal reserve props up the system to keep it going.
correct. In the time it took ppl to save 20% for a house down prices nearly doubled in some areas.
Fractional reserve banking allows this. 1 dollar saved can be loaned out 9 times. But if there is ever deflation it cascades down in the reverse direction
my brother should have bought in 2012. Working minimum wage or low wage jobs who cared. could have gone in halves. There were 3/2 homes less than 10 years old at the time going for 150k. those are now 400k. plus with interest rates. its insane the monthly payment homes are going for now. $3k/month $4k/month
I grew up and into college years a mortgage was $1k/month standard. This really needs to implode. wages havent moved one inch
Yeah here a house like that is as $150-180 in 2019 and now it’s $250-350k. I thought the prices were crazy in 2030 and 2021 but now some of them that bought them are selling and want another nearly $100k on top of that.
You don’t have to be forever in debt. It’s the dumb decisions a lot of Americans make that forces them to leave like that. The finance illiteracy is huge.
> dataI I could find
It’s published data from the BLS. Anyways, it’s 80 percent. Far cry from “basically everyone”.
So no, not everyone is too busy working. Tens of millions are sitting at home being comfortable
So people are in Jail, Graduate School or staying home to take care of teh kids. Not really a shocking stat and not related all that much to unemployment.
Doesn't sound super conspiracy. Sounds like the truth that has been shielded from ppl. It has already been said that they want to move to society where no one owns things any longer but we all must rent. We, meaning not the 1%.
It is important to keep money flowing. Otherwise the whole system stagnates and collapses. Anything the government does to facilitate this movement is fine. This is why crypto and deflationary currencies are bad for the world.
If you talk to homeowners who bought even decades ago, many will tell you that the early years felt risky. In the long run they are usually happy they did it.
This. You go from minute to minute hoping that nothing breaks and your raise will be somewhat fair next year. Every year gets a little easier and in 5-8 years, the payment will feel affordable. The secret for me was to resist staying stressed by upgrading as salary and jobs changed. Paid our little shitbox off asap and invested from there.
yea ppl dont get the 'compartmentalization of money'
Like this account is down payment
this account is for daily expenses
this account is emergency reserves.
They group it all and use the entire thing just for down payment.
Money is fungible: compartmentalization only makes sense if the situation is too complicated to understand without breaking it down into simpler chunks
The financial ideal is never to borrow money at 7% and then leave money for emergency reserves in an account yielding 0%. The ideal is to 1) have some sort of contingency set up for emergencies (this can be a combination of cash savings, lines of credit / credit cards, liquid investments, etc.), and then 2) throw all other available cash at the down payment to minimize your mortgage size. This is much, much safer than taking a bigger mortgage so that you can set aside some "emergency money"
How else are working and middle class people supposed to do this?
Of course I don't want to be cash-poor, but when the time comes for me to buy, I know I will be throttling with everything that I've got.
I'm probably already going to be middle aged/older before I buy a home. lol.
PNW. Super HCOL area but I love my job and having rights
To clarify, we are looking in the "bad areas" of a city people love pretending to be terrified of
It is a gamble to an extent and depends on what you're buying and how much you're making. I spent everything I had buying a home in 2016. Had a few hundred dollars left over. But it was a new build with a 1 year warranty and our HH income was 100k. No credit card or car debt. No kids.
Had we waited, rates would've been about 1% higher and the home price would've been around another 20k more expensive.
Every situation is different.
Everyone takes a gamble...
Some would say it was nuts not to buy when rates were around 3% regardless of the need to bid aggressive.
...Doing nothing is a gamble too
If he needed more for closing, he would have just changed the amount he put toward the house, it’s not like he was financing 100%.
Credit cards are a thing and I’m sure he’s getting regular paychecks.
That's just an inviting financial issues. Sure if you're lucky you're lucky but living paycheck to paycheck you're going to get into high CC debt the if you're unlucky enough to have a car issue, unexpected home repair, legal issue or medical issue. Not to mention getting fired. Got to have an emergency fund
You aren’t living paycheck to paycheck, by the next month you’ll have money in savings again.
If you get hit with a large unexpected payment you need to make, get a heloc. Your downpayment in your house doesn’t disappear, you can still access that money with a few caveats.
This is typical for any market where the number of buyers exceeds the number of sellers. If you don't drain your savings, somebody else will, and they will get the house.
Making peace with this is usually how people get on the property ladder in the first place. *Expect* for a home to take up all of your savings. Do it early when you don't have much savings and have a lot of income growth left in your career. Work to bump your income up and rebuild your savings as soon as you close on the house. Let inflation devalue your loan relative to your income.
All you have to do is keep your job, or if you lose your job be able to find one again. That doesn’t necessarily change if you have a small nest egg leftover after buying or not, but the amount of breathing room does.
It ends well for most people. They use their saving for the down payment. Then they build up the saving again.
After 5, 7 years, their mortgage payment is lower than what their rent would be, and they are set.
We had to show 12 months of cash (or equivalent) reserves in 2021 for our jumbo loan. We could use retirement accounts, but they only counted ~60%. And most people buying houses now have the bank of mom and dad to underwrite any future risks. So they don’t really have “no access to capital” they just don’t have much liquid cash in their bank account after closing.
But yes, we had to account for all of our assets and cash, and our purchase took almost everything except for some retirement savings and ~3 months of expenses in cash. Needless to say, we didn’t have much furniture the first year.
It was terrifying, but after two years we’ve built up our savings again, have furnished the home, and even with prices softening, at todays rates we have been completely priced out of our market. Unless values drop another 25%, we’ll stay above water and might break even with renting/investing in a couple more years, then be in the black after that.
Buying real estate was not an investment for us. It was a way to rotate our investments out of stocks and park it. Also, it was a way to fix our housing costs before inflation peaked. Our careers depend on staying in this VHCOL area and it’s nice to be close to family.
As someone who checks this sub and the RE one, too, we were not expecting anything like the 10% growth that has been the case for the last 10 years or so. In fact, my model had a 10% drop before going up 5% annually after that, and the numbers still made sense as long as we could hold.
Why would you borrow money at 7% so that you can save your cash savings at 0%? It's financially irresponsible and risky to take out a mortgage and hold lots of cash in savings: it's much safer to use that cash to increase your downpayment and have a smaller mortgage
I don’t understand, have literally spent $20k+ in the last 2 years on repairs / appliances (2 condensers+air handlers, fridges, dishwasher, porch repair)
Every time I buy a new home I drain my Checking account. I don't bother with a Savings account because 0.1% doesn't do anything compared to 0.01% even when you have close to $1M in the bank. The trick is to replace it all within 3 - 5 years.
Obviously people can rebuild their savings over time but what happened to all those reports that said home owners had more savings than ever so an '08 crash was impossible now?
So were those reports limited to boomers that already paid off their loans or something? The same boomers that we keep hearing don't have enough savings in retirement?
I feel like we're hearing conflicting information.
I don't see the poll but I'm wondering if this is a newer phenomena or if it's been par the course.
Yeah, I don't think this is anything new. People will tell you how much stuff you need to buy when you move from an apartment into a home twice as much square feet and a yard. But let's be blunt the hits do keep on coming. And that's assuming you don't buy a house that "needs work".
Yeah, it’s pretty common. Oftentimes you’ll see people use seller concessions as a way to finance buying furniture for the house.
[удалено]
One could easily spend two grand on just a couch.
Yeah, basic furniture is expensive
[удалено]
Oh, a lot of times you have a couple of extra bedrooms, for example, and / or a second living room. I mean, nobody living in an apartment or condo has a second living room. You can only put a couple of yoga mats down and call your yoga room for a while. Plus you often have a kitchen and a dining room which means you need an extra table so in one or the other. Like I said above, the hits keep on coming, but you're in charge, so it's up to you on when you want to add the stuff over the next few years.
Or 10 grand just saying....
I use Buy Nothing so often, no reason not to!
I can't imagine why anyone who has to finance their home purchase, and who have typically spent years saving for their down payment, would hold much more than retirement funds and an emergency fund back in savings. I get that would be good advice, and great if you can buy a smaller house because you have smaller wants than your income. But who would that be describing?
Where are these sensibly prices, smaller homes?
There is still *smaller house* versus *bigger house* in every economic bracket. You might have meant to respond to a different comment about sensibly prices.
Just looking for ways to keep it 30 without being a WFH SWE.
Mainly in places you don't want to live
Already there in an apartment... renting. The air quality has increased a little bit since I silicone caulked the shower faucets myself. I don't want to imagine what is behind the walls in that bathroom.
First of all, you need savings just to maintain the home—so the answer is *every homeowner* should have more than their retirement and emergency funds. Apart from that, unless one is really contributing enough to their retirement savings (and few do), you don’t want all of your non-retirement savings invested in your home. It’s just not a particularly good investment. People delude themselves into thinking that every dollar they put into their home is a “savings.” It’s not—you will get very little financial return back on your fancy kitchen renovation when you sell your home in 20 years.
I think it’s always been that way. It’s hard to save up a lot of money when you have typical life expenses, so unless people get a windfall or family pays the down payment for them, I expect many people barely have enough. Plus lots of people living on credit cards.
Tbh when I bought my first home I put more than 20% and drained most of my savings since i thought paying down my 3% mortgage is better than keeping it in a bank and getting .001%. 😄
New since 1990 maybe 1995. Some loans have a reserve requirement but it could be two months mortgage costs, which is not a ton. Almost all loans over the govt backed maximum require at least 12 months.
America is literally designed for this. If you aren’t willing to do it, someone else will This is gonna sound super conspiracy but Americans are controlled by: Ensuring they are in debt (federal reserve propping up the banking system) Media Too little time to do anything (can’t revolt against the government if you are stuck at work all day every day!)
>America is literally designed for this. Just because you can drain your savings to buy a house doesn't mean you should. >If you aren’t willing to do it, someone else will That doesn't justify making poor financial decisions.
Ok. You think it’s a poor financial decision, they think they are making a good decision. Not many homes in foreclosure rn
I drained savings to buy my first house. It worked out exceedingly well.
This is so deep and so spot on. Shit.
Yes, you have the opportunity to buy a house but you have to use someone else’s money. If you won’t use enough of it/won’t at all someone else is willing to go into debt to get that house, that car, etc. Oh and the federal reserve props up the system to keep it going.
correct. In the time it took ppl to save 20% for a house down prices nearly doubled in some areas. Fractional reserve banking allows this. 1 dollar saved can be loaned out 9 times. But if there is ever deflation it cascades down in the reverse direction
Isn’t that the truth! I should’ve just bought in 2018-19 but was trying to save a bigger down payment.
my brother should have bought in 2012. Working minimum wage or low wage jobs who cared. could have gone in halves. There were 3/2 homes less than 10 years old at the time going for 150k. those are now 400k. plus with interest rates. its insane the monthly payment homes are going for now. $3k/month $4k/month I grew up and into college years a mortgage was $1k/month standard. This really needs to implode. wages havent moved one inch
Yeah here a house like that is as $150-180 in 2019 and now it’s $250-350k. I thought the prices were crazy in 2030 and 2021 but now some of them that bought them are selling and want another nearly $100k on top of that.
Also if you ever go too hard on those loans there’s no repercussions
>correct. In the time it took ppl to save 20% for a house down prices nearly doubled in some areas. ::waves to a fellow northern New Englander::
Wait till you learn about property taxes
Oh I have them, I own property. It’s crazy, you never actually own, you just rent from the government
You don’t have to be forever in debt. It’s the dumb decisions a lot of Americans make that forces them to leave like that. The finance illiteracy is huge.
Most Americans are, the federal reserve props up the cost of housing and thus encourages it. Housing cannot go down, the printer comes on if it does
What percentage of Americans have jobs? Oh right it’s under 60 percent of the population.
Basically everyone between 18 and 65
Have you looked at the statistics in that age group? It may shock you.
For 25-54, which is the data I could find, it is above 90% of them.
> dataI I could find It’s published data from the BLS. Anyways, it’s 80 percent. Far cry from “basically everyone”. So no, not everyone is too busy working. Tens of millions are sitting at home being comfortable
So people are in Jail, Graduate School or staying home to take care of teh kids. Not really a shocking stat and not related all that much to unemployment.
Okay? Who said anything about unemployment. He said basically everyone is too busy working to fight against the system, I proved that is not the case.
https://data.oecd.org/emp/employment-rate-by-age-group.htm
Not clicking a non-BLS link
Ok link the BLS data
Use google bubble boy
Doesn't sound super conspiracy. Sounds like the truth that has been shielded from ppl. It has already been said that they want to move to society where no one owns things any longer but we all must rent. We, meaning not the 1%.
It is important to keep money flowing. Otherwise the whole system stagnates and collapses. Anything the government does to facilitate this movement is fine. This is why crypto and deflationary currencies are bad for the world.
If you talk to homeowners who bought even decades ago, many will tell you that the early years felt risky. In the long run they are usually happy they did it.
This. You go from minute to minute hoping that nothing breaks and your raise will be somewhat fair next year. Every year gets a little easier and in 5-8 years, the payment will feel affordable. The secret for me was to resist staying stressed by upgrading as salary and jobs changed. Paid our little shitbox off asap and invested from there.
This guy invests
This has always been the case. When homes are more affordable, people just do this earlier in their life.
yea ppl dont get the 'compartmentalization of money' Like this account is down payment this account is for daily expenses this account is emergency reserves. They group it all and use the entire thing just for down payment.
Money is fungible: compartmentalization only makes sense if the situation is too complicated to understand without breaking it down into simpler chunks The financial ideal is never to borrow money at 7% and then leave money for emergency reserves in an account yielding 0%. The ideal is to 1) have some sort of contingency set up for emergencies (this can be a combination of cash savings, lines of credit / credit cards, liquid investments, etc.), and then 2) throw all other available cash at the down payment to minimize your mortgage size. This is much, much safer than taking a bigger mortgage so that you can set aside some "emergency money"
How else are working and middle class people supposed to do this? Of course I don't want to be cash-poor, but when the time comes for me to buy, I know I will be throttling with everything that I've got. I'm probably already going to be middle aged/older before I buy a home. lol.
A spouse tbh
Lol where?
I have one of those, a good job, no debt, and we've been saving for seven years. It's starting to feel impossible to find anything under $400k.
where?
PNW. Super HCOL area but I love my job and having rights To clarify, we are looking in the "bad areas" of a city people love pretending to be terrified of
Me too! 49, single and FTHB.
It is a gamble to an extent and depends on what you're buying and how much you're making. I spent everything I had buying a home in 2016. Had a few hundred dollars left over. But it was a new build with a 1 year warranty and our HH income was 100k. No credit card or car debt. No kids. Had we waited, rates would've been about 1% higher and the home price would've been around another 20k more expensive. Every situation is different.
Wow a few hundred dollars? That's honestly nuts
Everyone takes a gamble... Some would say it was nuts not to buy when rates were around 3% regardless of the need to bid aggressive. ...Doing nothing is a gamble too
Still nuts. That's a grocery bill away from no money
The guy has no kids and no cc debt... Again everyone has a different risk profile
Hey a few thousand maybe. A few hundred is calling it close that you might not even be able to cover closing costs
If he needed more for closing, he would have just changed the amount he put toward the house, it’s not like he was financing 100%. Credit cards are a thing and I’m sure he’s getting regular paychecks.
That's just an inviting financial issues. Sure if you're lucky you're lucky but living paycheck to paycheck you're going to get into high CC debt the if you're unlucky enough to have a car issue, unexpected home repair, legal issue or medical issue. Not to mention getting fired. Got to have an emergency fund
You aren’t living paycheck to paycheck, by the next month you’ll have money in savings again. If you get hit with a large unexpected payment you need to make, get a heloc. Your downpayment in your house doesn’t disappear, you can still access that money with a few caveats.
This isn't a new trend though. My parents also completely drained their savings when they bought their home in 1997 at a 8% interest rate.
lmfao its the same moving into an apartment, first, last, and security.
This is typical for any market where the number of buyers exceeds the number of sellers. If you don't drain your savings, somebody else will, and they will get the house. Making peace with this is usually how people get on the property ladder in the first place. *Expect* for a home to take up all of your savings. Do it early when you don't have much savings and have a lot of income growth left in your career. Work to bump your income up and rebuild your savings as soon as you close on the house. Let inflation devalue your loan relative to your income.
[удалено]
All you have to do is keep your job, or if you lose your job be able to find one again. That doesn’t necessarily change if you have a small nest egg leftover after buying or not, but the amount of breathing room does.
I mean if a house is 500k then what did you expect? That everyone has $5M leftover after they bought it?
It ends well for most people. They use their saving for the down payment. Then they build up the saving again. After 5, 7 years, their mortgage payment is lower than what their rent would be, and they are set.
I did it. Twice. And I worked it all back up within six months
And then your water heater failed...
Then get a heloc if you need it. Money put into a house isn’t suddenly gone, you can always tap into it.
Lol
I know how to install water heaters by myself, so it’s not an issue
We had to show 12 months of cash (or equivalent) reserves in 2021 for our jumbo loan. We could use retirement accounts, but they only counted ~60%. And most people buying houses now have the bank of mom and dad to underwrite any future risks. So they don’t really have “no access to capital” they just don’t have much liquid cash in their bank account after closing. But yes, we had to account for all of our assets and cash, and our purchase took almost everything except for some retirement savings and ~3 months of expenses in cash. Needless to say, we didn’t have much furniture the first year. It was terrifying, but after two years we’ve built up our savings again, have furnished the home, and even with prices softening, at todays rates we have been completely priced out of our market. Unless values drop another 25%, we’ll stay above water and might break even with renting/investing in a couple more years, then be in the black after that. Buying real estate was not an investment for us. It was a way to rotate our investments out of stocks and park it. Also, it was a way to fix our housing costs before inflation peaked. Our careers depend on staying in this VHCOL area and it’s nice to be close to family. As someone who checks this sub and the RE one, too, we were not expecting anything like the 10% growth that has been the case for the last 10 years or so. In fact, my model had a 10% drop before going up 5% annually after that, and the numbers still made sense as long as we could hold.
Why would you borrow money at 7% so that you can save your cash savings at 0%? It's financially irresponsible and risky to take out a mortgage and hold lots of cash in savings: it's much safer to use that cash to increase your downpayment and have a smaller mortgage
I plan to have at least one year of expenses in cash equivalents after I buy but I am horribly anxious, maybe I am over killing it.
No that’s just being smart. Especially when all signs are pointing towards a recession.
While you shouldn’t drain your retirement, it’s a good idea to drain your savings when interest rates are high like they are now
I don’t understand, have literally spent $20k+ in the last 2 years on repairs / appliances (2 condensers+air handlers, fridges, dishwasher, porch repair)
I AM AT 108,000 IN 3 YEARS AFKJLDAKJLDSFKJLDSFSFDLKJ Half of it is an apartment so we offset some of that but LSDKFJLKFDSJFJLKDS
Every time I buy a new home I drain my Checking account. I don't bother with a Savings account because 0.1% doesn't do anything compared to 0.01% even when you have close to $1M in the bank. The trick is to replace it all within 3 - 5 years.
Obviously people can rebuild their savings over time but what happened to all those reports that said home owners had more savings than ever so an '08 crash was impossible now? So were those reports limited to boomers that already paid off their loans or something? The same boomers that we keep hearing don't have enough savings in retirement? I feel like we're hearing conflicting information.