[xvolter]

The data was very interesting, but there wasn't anything meaningful mentioned that came out of the data, other than possibly where you should look to move to if you have flexibility.

I personally bought a house in my early twenties. At the time it was roughly 2.5x my income. I've been there a few years and went through some changes to my employment, I now earn more making it easier. Over the course of ownership, in the ~20 years, I'll have paid close to $400k between the principal and interest.

If I made more, it wouldn't change the amount I pay toward my house so it wouldn't make me own the house faster. While I could send additional payments, the amount of interest I'd avoid would not be worth it.

If I had $20k available to me right now and sent it entirely to my house it'd save around $12k in interest over 15 years. Had I invested that $20k now and received only a 5% growth, over 15 years that would have earned $22k in compound earnings leaving me with $42k of potentially easily liquidatable assets.

Buying a house that is close to your annual income doesn't make you own the house faster, it just makes it easier for you to afford.

I think the guidance most people should take away is to avoid buying a house that you cannot pay off in 10-15 years. A house at $250k at a 3.5% interest rate would cost you $72k in interest on a 15-year mortgage or $154k in interest on a 30-year mortgage. At that point, it is worth sending additional payments (especially early on in the mortgage) to save on interest. This is pretty popular advice, to not overshoot for a house you cannot afford. The best reason is that you can still move later on. Buying a house you'll live in the rest of your life might be a good goal (@Clubber) but it doesn't happen for most of us. Instead, buy a house you can actually make a dent toward ownership in, so if you want to sell it in 10-15 years you'll do so with potential profit.

You don't need to sell your house for a profit (although we all would love to). Had you rented like @magic_beans wants you to, you might have lost 100% of that money and every year your rental price may go up, you might not be allowed to have pets, you can't make improvements you want; you can lose a lot of control with renting. If you buy an affordable house though, in 10 years you might sell it and if you get back even 50% of the total cost of ownership you still walk away better than someone who rented. If you got a house you could pay off in 10 years, you might walk away with a lot of cash and some profit (especially if the house's value went up).

You then have the choice to use the cash from your home sale as a down payment for your next house, which would allow you to afford a slightly more expensive house while still paying it off in 10 years. Imagine you buy a house now for $250k, pay it off 15 years (that might cost you around $2.5k/month). You sell it in 10 years, you could then buy a house for $500k and only mortgage another $250k. Or you could buy a reasonably priced home in the middle, allowing you to start investing your money elsewhere, pay off the house sooner, etc.

My plan, my suggestion: Buy a house when you're in your 20s that is affordable. By the time you're married, have kids that need their own rooms, and are looking to settle down a bit more you'll be able to sell that first house and afford that house you need. It's worked out so far.

[BoorishBears]

>You don't need to sell your house for a profit (although we all would love to). Had you rented like @magic_beans wants you to, you might have lost 100% of that money and every year your rental price may go up, you might not be allowed to have pets, you can't make improvements you want; you can lose a lot of control with renting.

For the record, my apartment is pet friendly, you're allowed to paint the apartment, I've been allowed to change fixtures I don't like (such as replace their smart thermostat with a Nest), and there are amenities I could never afford myself (a proper private theater complete with movie theatre seats, a top quality gym, yoga studio, apartment owned cafe, etc.).

And this year want the chance to work in a new market so I'm just not renewing my lease. It took 5 minutes of filling out a form to decide I'm allowed to leave in 30 days with 0 financial burden.

As a 20-something year old I think buying a house in your 20s is a terrible idea unless you're talking very late 20s (practically 30s).

A huge investment feels like it'd be adding almost as much inertia to your life as a wife, kids, and settling down (from a financial standpoint it certainly is). It's an age at which even some people who think they have it all figured out enough to settle down don't (not that it's not an issue at other ages, but the early and mid 20s are a ripe time to do something about it when it happens), and the last thing you want to to do after you decide to make a change is to deal with a mortgage hanging over your head.

[switch007]

> ...a top quality gym, yoga studio, apartment owned cafe, etc.).

It's funny how different things are in different countries. I've read a few US rent-vs-buy articles and they often mention these uber cool apartment blocks. I think they're extremely rare and/or so expensive nobody's heard of them in the UK (outside of small, prestigious areas of London). Here, a majority of the flats are in blocks with just the accommodation or are converted houses in residential areas.

City centres with purpose-built modern apartments at the upper end of the market might have a gym, maybe a concierge and occasionally parking. :)

[BoorishBears]

It's definitely a trend forming in the part of my city and it feels centered around gentrification.

The part of the city outside downtown is generally poor and has serious crime problems. But downtown, older properties are being converted into nearly unrecognizable modern high-end apartments priced out of the range of (most) locals and have reached a pricing ceiling so high they can get away with 50% occupancy and simply compete on amenities for the people who don't care about how much they cost. To top it off the city is practically giving away the properties to the developers to try drive growth.

I care about the price but there's a state fund I jokingly refer to as the "Gentrifcation Fund" (I forget the real name) that will pay a part of your rent in certain properties if your income is under a certain amount.

The problem is unlike most assisted housing the limit is based on making more than most people, not less. It's defined as 150% of the local median income. Combine the income limit based on people making 2.5x the median income with the high rent, and you essentially have a fund that's paying well off people (poorer people can't afford the apartments even with the subsidy) to live in expensive apartments, feeding the gentrification of the area. I'm conflicted because it allows me to live in a very nice apartment, but I know that money could be better spent elsewhere.

It's funny because I see it as "trickle down economics" in action. For example, while I might be able to afford the apartment otherwise, the fund frees up would could be disposable income for me. The hope is probably I'd spend that money in the local economy.

Except instead what it does is give me more money to save, I sure don't feel any urge to go and waste it on expensive overpriced Downtown restaurants every night.

[user5994461]

I think people just don't care about where they live and how much they pay. I am constantly amazed at how many people pay a fortune for tiny rooms and 3-6 flatmates.

There are lots of places with concierge in London and a few with parking or gym. If you really want one, you'll get one. There is no notable price difference.

[TomMarius]

It's getting increasingly common in Prague upper-class apartment buildings.

[fnovd]

>A house at $250k at a 3.5% interest rate would cost you $72k in interest on a 15-year mortgage or $154k in interest on a 30-year mortgage. At that point, it is worth sending additional payments (especially early on in the mortgage) to save on interest.

I would argue that it's not necessarily a smart idea to pay extra just to avoid interest. $154k looks like a lot, and it is, but it's still just paying interest at 3.5%. On average, you'll do better to put that money into investments. Additionally, the ~$1k you're paying every month is a lot less in year 20 than it was in year 1 due to inflation. Your mortgage payments, inflation adjusted, are actually going down every year.

[dlubarov]

And depending on your tax situation, the effective loan rate might be 3.5% * (100% - marginal tax bracket) after deducting interest payments.

[readhn]

"my suggestion: Buy a house when you're in your 20s that is affordable."

now folks just need a time machine. simple.

[icedchai]

Folks just need to try and live below their means. This may not be practical for everyone, obviously.

I bought a town house condo right before I turned 25, worth roughly 2x my salary at the time. By age 31, I had paid it off entirely: a 15 year mortgage, done 8 years ahead of schedule.

Could I have done better if I invested that money? Probably. But I like being debt free. I also invested a ton anyway.

[user5994461]

Of course it's easy to buy when properties are only twice your salary and can be fully paid off in a couple of years.

You were just lucky to leave when properties were cheap and interest were high.

[icedchai]

Luck is part of it, but not all.

I know people who bought homes at similar times who have refinanced every 3 years and now owe way more than they started with. They don't care about debt. They continue to spend more than they make, year after year, live pay check to pay check despite their high salaries...

[deathanatos]

My friend bought a townhouse; ~10x my salary.

This is part of what the graphic is trying to demonstrate: there is a significant and material difference in trying to purchase a home between your market, and the one I'm in.

[icedchai]

Have you considered moving somewhere more affordable?

[readhn]

if you can find a well paying / interesting job in your field in the area where real estate is "cheap" - go for it!

in my field most interesting (!) and well paying jobs are concentrated in major metropolis areas around major university hubs ... where real estate costs are some of the highest in the country.

[pjc50]

> At the time it was roughly 2.5x my income.

The median of the map in this article. A nice sensible multiple. However there are plenty of areas where the multiple is more like 10x.