[mulmen]

Well the most obvious approach would be to pay cash.

The more fiscally conservative option is to only borrow money if you have capital which is earning income at a higher rate than the mortgage. This probably necessitates having more capital than the house costs.

[xeromal]

The problem with that is that unless you have an extremely well paying job or rich parents, you have to outsave inflation and rising house prices. You may never own. Getting a loan just locks you into an inflation proof price as a "forced" savings. I don't think it's realistic at all for 85% of Americans to save for a new house.

[itake]

If you save $2.5k/mo for 15 years, after 14 years (mid-30s), you’d have $800k at 8% interest.

Even in Seattle, $800k would get you a decent starter home.

(I chose $2.5k, bc 15 years ago out of college, that’s how much I saved living in GA on a $70k salary). I saved even more when I move to California in my mid 20s.

[xeromal]

That' assuming houses don't go up in price though right?

Also I think it's pretty rare for people to have the mental fortitude to save 2.5k a month for a house on top of living expenses, rent, and trying to build your retirement / savings / emergency fund.

It's definitely possible but I think it's out of reach for the average person.

[mulmen]

> That' assuming houses don't go up in price though right?

No, it isn’t. You can invest your savings. If you had put $2,500.00 a month into SPY500 since October 2009 (15 years ago) you’d have $1,388,302.13 today.

https://dqydj.com/sp-500-periodic-reinvestment-calculator-di...

> Also I think it's pretty rare for people to have the mental fortitude to save 2.5k a month for a house on top of living expenses, rent, and trying to build your retirement / savings / emergency fund.

How is saving for a house “on top of” literally “saving”? If you can save for retirement, savings, and emergencies then you have the mental fortitude to save for a house. People are bad with money, we know that. One of the best examples is buying a house they can’t afford.

> It's definitely possible but I think it's out of reach for the average person.

Yes, agree.

[xeromal]

Yeah, I just think examples like this need to work for the masses in order to be useful otherwise they're just pie in the sky advice like abstinence to prevent childbirth. It does work and it's 100% effective but humans are horny. Same with saving this amount of money, there's a select few that can pull it off but most are incapable. Those are the people advice is for

[mulmen]

I don’t disagree with you. But I was replying to this question:

> So how does one buy a house without being dependent on cash flow?

The answer to which is “you don’t”.

Most people can’t afford to buy a house and never will. Even many homeowners.

I will spell it out if it isn’t already clear.

Live within your means and save as much as you can, investing that savings in a diversified portfolio. Buy a home only when your savings allow for it.

[lancesells]

Glad you made that work but that's counting steady job, steady health, no kids, cost of living staying the same the entire time.

[itake]

No, those are considered. That $2,500/mo is at the bottom of your career. You will be saving more as you age, even accounting for employment gaps.

If we are considering kids, presumably there is another partner (and income) to be added to the equation. While you may have half the amount saved due to the cost of raising children, your partner would have the other half.

8% was chosen to discount 3% inflation (cost of living) from SnP 500’s average 11% growth.

[xeromal]

Plus the cost of houses which will definitely go up

[mulmen]

2008 would like a word. House prices absolutely do go down. They rose for a long time but recently they are again beginning to fall.

Median home price in the US peaked at $479,500.00 in 2022. By Q3 2023 it was down to $431,000.00. In Q3 2024 we reached $420,000.00.

[sgerenser]

Case-Shiller seems to disagree that home prices are still below 2022 levels: https://fred.stlouisfed.org/series/CSUSHPINSA

[csomar]

They are not going down because of lack of inventory. Look at commercial, some properties had an 80% discount. But that requires that supply overwhelms demand. It’s not happening with regular housing.

[itake]

Estimation considers that as my career started 13 years ago and we can see how home prices are today

[srockets]

Which real world financial instrument would give you that 8% interest?

[mulmen]

Basically any S&P 500 index fund [1] averages over 8% return over the trailing 15 years, even inflation adjusted [2].

Using [3] October 2009 to present gives an annualized return of 13.763% and going back 20 years to include the great recession returns 12.06%.

Post-tax current-day value scenarios:

Starting in 2004 (20Y):

    $500.00/mo:   $418,349.29
  $2,500.00/mo: $2,091,746.42

Starting in 2009 (15Y):

    $500.00/mo:   $252,413.58
  $2,500.00/mo: $1,262,067.88

[1]: https://www.financecharts.com/etfs/SPY/performance/total-ret...

[2]: https://dqydj.com/sp-500-return-calculator/

[3]: https://dqydj.com/sp-500-periodic-reinvestment-calculator-di...

[srockets]

That's not guaranteed, and not how you save for a fixed goal.

I don't know of any lower-risk and higher-interest alternative to the 30-years-fixed that is currently offered to US consumers, and based of the above answer, neither do you.

[johnnyanmac]

>at 8% interest.

What savings account do you have? Even the best HYSA's I've seen in the '10's is 4%

I suppose if you're really confident in your monopoly money you can do it.

[pjc50]

> $800k at 8% interest.

OK, and how does that work when houses appreciate at 9%?

[csomar]

Bonds didn’t pay 8% during the bull run.

[mulmen]

Yes, it’s a tragedy of the commons. That doesn’t make taking on a loan you can’t afford less of a bad idea.

House prices are unaffordable because people take on loans they can’t afford. This reinforces the unaffordable prices. If milk was $40.00 a gallon you’d just stop putting it on cereal and eventually farmers get the message. Houses are the same thing.

If you can’t comfortably afford a house then don’t buy it. You’re stuck renting or buying something more modest. This isn’t complicated.

The idea that house prices can only go up is delusional. Nothing about a house is uniquely inflation proof or even inflation resistant. This isn’t the only investment vehicle available to you.

This idea that houses are an important part of financial security is putting the cart in front of the horse. It leads to the NIMBYism that prevents additional supply from being built because prices must always go up.

We all exist in the same economy and no action happens in a vacuum. When you buy something you have reduced supply and applied upward pressure on price. Individually this effect is so small it is immeasurable. In aggregate it isn’t.

[Cthulhu_]

This was a failure of regulation, not just in the US but elsewhere too; banks and mortgage brokers weren't doing their due diligence and were giving out loans and mortgages that people couldn't afford based on their income and other outstanding debts, eventually leading to the 2007/8 financial crisis.

Which should have been a lesson, but five years later, housing prices recovered and ballooned. I don't know why besides increased demand and reduced availability, clearly people can still get mortgages despite the lessons learned from the crisis.

[mulmen]

In my immediate social circle it’s people paying over half their income toward a mortgage, often also lighting money on fire for PMI.