[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.

[johnnyanmac]

>Live within your means and save as much as you can

It's expensive being poor and the job market isn't getting better to compensate this economy. If you rent forever you spend more than someone paying off a mortgage (only amortized by needing to upkeep the house youself). If you're wokrking your back out everyday you're more likely to pay more insurance and medical bills than the cushy white collar job with proggresion options.

Most people don't even have the $1000 rainy day fund. They are 3 steps removed from the thought of a "diversified portfolio".

[mulmen]

They can’t afford a rainy day fund so they should buy a house?

I have a “cushy white collar job” and I can’t afford a house. Prices are absurd. I can make mortgage payments but it would destroy any other savings. Buying a house when poor isn’t a smart financial move.

I wish everyone could afford a house but that’s not the world we live in. Nothing will change until people wake up and stop killing themselves to inflate home prices.

[JumpCrisscross]

> Most people can’t afford to buy a house and never will

Most homes in America are owned by the person who lives there.

[mulmen]

Just because you buy something doesn’t mean you can afford it.

If you can’t retire or pay medical expenses or maintain your physical and emotional wellbeing because you spent money on a house then you couldn’t afford it. Owning a house doesn’t mean you can pay the property taxes or maintenance costs.

My point is that people are making financially unsound home buying purchases.

Another way to say this is that Bugatti doesn’t sell Veyrons to people with $1,000,000.00. Bugatti sells Veyrons to people with an extra $1,000,000.00.

[kasey_junk]

And it’s not particularly close. ~65% of households own their home.

That rate is higher now than in the 50s, 60s, 70s, 80s or 90s. It rofl stomps the pre-war era.

[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

[mulmen]

Ah yeah fair. The numbers I quoted are median and I don’t have the source. They are from a quick search of financial news. Your index numbers are probably a more sound comparison of overall house prices.

But even using the index numbers it isn’t hard to see that housing prices do in fact go both up and down.

[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.