Tag: housing
There are 12 entries that are tagged housing. Now displaying reults 1 - 12.
Page: 1
On Renting, Part 2: Our Future
Posted on January 29, 2008 by Him
Hey, you'll need to read the previous post to figure out what's going on here!
Yes, we're strongly in favor of moving away from Chicago in 2 years. I love Chicago, but I've been here all my life. I want to experience something else to see what else is out there.
With that in mind, buying property right now doesn't seem to be in our favor. Not taking any market conditions into consideration, let's assume that we purchase a $250,000 home with a $30,000 down payment (the amount we have in cash savings now) and a 30-year fixed mortgage at 5.5%. In 2 years when we want to move we would pay down $6,094.47 in principal; therefore we would have $36,094.47 in equity. None of that includes any maintenance, closing costs, or other stuff like new furniture. Therefore, if we sold our home at the price that we paid for it, we would have some money to put down on another home and cover any costs.
But, if we take current market conditions and some pessimistic future predictions into account, the situation looks worse. Everyone and their mom is predicting that home prices will go down in the next few years; some are even predicting up to a 30% decrease in value. Assuming the above calculation, that would introduce the very real possibility that we would be upside-down on our mortgage, or we would owe more than what our house would be worth. Therefore, if we wanted to sell our place in 2 years, we could actually LOSE money just on the price of the house, not to mention have to spend more to purchase an entirely new place. That of course, assumes that we can sell our place right away; a quick look at the Chicago MLS listings (is that redundant like ATM machine?) for condos in that price range in our neighborhood reveals a glut of properties that have been on the market for more than 3 months. There's no way I would move unless the old place was sold; I wouldn't want to pay 2 mortgages for any period of time.
Now I know what people are saying: I can't time the market. I know that. But is waiting 2 more years to buy property really that bad? I believe that money that is currently going towards housing is not going to waste; after all, we do have to live somewhere. The alternative is to not spend any money on housing and live on the street, right?
As for the argument that we're making our landlord rich - even with a mortgage, aren't we going to make someone rich? The lender? The builder? The person who we bought the home from? It's not like I'm hacking away at trees, forging my own tools, and making a home from scratch. Money is changing hands - the mortgage process simply abstracts who is receiving it.
In the end, we're not against buying a home. We're just not going to purchase a home right now. We're renting now because it gives us the short-term flexibility that we need for our future plans. We also want to wait a few years so that we do it right. What's wrong with that?
On Renting, Part 1: Our History
Posted on January 28, 2008 by Him
I should have seen this coming: after Friday's post about how we got an amazing deal to rent our place for a few more years, we inevitably received the obligatory "renterz drool, homeowners rule!" comment. I apologize, personal finance blogosphere, for not letting you know the nuances of our housing decision!
Buying property isn't something that we've been ignoring. Heck, I've posted numerous times about owning property. As you can imagine, it isn't as simple as going to the fictional neighborhood condo supermarket, picking one out, and viola! - move into a new place.
When Her and I first moved to Chicago three years ago, there was no way we were in any financial shape to own property. Every month we had about 30 different bills we were paying a month with over $20,000 of credit card debt alone, coupled with a lot of student loan debt. During that first year, the only way we would be able to afford a place would be if we took out a 100% loan, probably with some "creative" financing. I'm willing to bet that we would be in deep financial trouble had we bought a place then.
Two years ago, Her and I were starting to gain momentum in terms of getting our finances together. We still had over $18,000 in credit card debt and a lot of student loans. Again, looking at our overall financial situation, we were not ready to buy property without accepting a lot of risk.
One year ago, we were well on our way to becoming somewhat financially healthy. Looking at our finances, we were in a better position to buy property. We were aware, though, that we would be buying at a time when home prices were at, or at least near, their maximum. Prices for a 2 bedroom, 1 or 2 bathroom condo near public transportation in Chicago were still out of a comfortable price range.
Today, we're in the best position to purchase property. Home prices and interest rates are dropping. Even if we weren't earmarking much of our cash for our wedding, we still wouldn't buy. The reason: In 2 years we're probably going to move away from Chicago.
Tomorrow, I have a post lined up that explains what moving in 2 years does to our purchasing property outlook.
Unbelievable Rent Increase
Posted on January 25, 2008 by Him
When Her and I first most to Chicago, it took us a little while to find an apartment that would accommodate us and not have any weird holes in strange locations. We didn't enlist the services of any of the apartment finding services here, but instead we took a multi-pronged approach of checking out Craigslist and the Chicago Reader.
After seeing many apartments that were too small for the rent asked, had too many holes in weird places (seriously, this was a weird theme in our hunt), or were not in a location near to public transportation, we finally saw one we liked. Thus, a little over three years ago, we signed a 3-year lease for a 3 bedroom apartment in a great Chicago neighborhood a few miles north of downtown. Not only that, but we somehow found a place for only $900/month, with a 5% increase each year thereafter. Sure there was no dishwasher; we're fully capable of doing dishes ourselves. It didn't have a washer/dryer in the unit, or even in the building, but that wasn't a problem since there is a laundromat a steps away from our apartment.
In the time in which we've been in our apartment, we've seen many buildings get torn down, and others rise up to take their place. To our delight a brunch place and a coffee shop opened up two years ago, just steps away from our apartment. A CVS opened up shortly after we moved just a block and a half away. All of this has resulted in more foot traffic on our block, meaning safer commutes and more of a community feel.
Alas, this March our lease to rent our current apartment was set to expire. Because of the 5% rent increases over the last few years, our rent has increases but has managed to stay a hair under $1,000.
As Her and I have a wedding this year and much uncertainly of where we even want to be in a few years, we mulled over the decision to ask our landlord to extend our lease. We didn't have much time to mull it over when we came up to speak with us about that very topic.
He offered us this proposal: An even $1,000 per month, for the next two years. No increase...and if we wanted to stay longer, he wouldn't increase the rent.
Our landlord was proposing to raise our rent by less than $8 per month for the next two years. With an option to renew at that rate.
Unbelievable. The fact that he was going to offer it to us for so cheap was unbelievable.
Needless to say, we have a place to live for the next two years.
"On Paper" Divorce for Financial Reasons
Posted on November 12, 2007 by Her
photo: How I Met Your Mother website
Last week on How I Met Your Mother, Lily and Marshall considered getting a divorce "on paper" for financial reasons. Lily had bad credit, so she proposed that Marshall divorce her so he could apply for a mortgage without her. The odd thing about this scenario is that I know a couple who actually did this - and it ended in a real, bitter (and permanent) divorce.
This couple, who were close friends of my parents, started several hotel businesses. Over time one business after another collapsed, leaving them personally in financial ruin. They were facing bankruptcy, a difficult time for any married couple with two small children. They were going to lose their home and have to uproot their children. Wanting to protect his wife and children, the husband proposed that they get a divorce before he filed for bankruptcy, allowing his wife and children to retain their home. It was supposed to be "on paper" and he would still live with them. After the dust settled, he planned to remarry his wife. But his wife was so hurt by the idea that they started fighting over it - in addition to their fights about finances. Within a year, they were divorced for real. They ended up losing it all: the businesses, the house, and the marriage.
Aside from the obvious legal and ethical issues (what the husband wanted to do was obviously fraud), this was a terrible idea for their relationship. It may be tempting to try using divorce to cure your financial issues, but chances are you will only add pain to the disaster. It's better to take advantage of credit counseling and other debt services than to try to defraud your creditors and spouse.
Good Weather For Renting
Posted on August 27, 2007 by Her
Lately lots of our friends have been buying houses, and we've been feeling left out. But this week Chicago has been deluged with severe weather, and suddenly the only thing we're missing out on is damaged property. The friends with the brand new garden level condo are furious that it has flooded - again - and the contractor won't return their phone calls. The co-worker with the new house in the suburbs now has two enormous trees decorating their living room. The friends with a new condo on the north side were out in the storm shoveling leaves out of the storm sewer. As for our own leaky windows, the landlord was here last night to take measurements for replacement windows while we lounged around.
A major reason we haven't purchased real estate is that we don't have an emergency fund large enough to cover major home repairs. For once the soggy grass seems greener on the renting side.
"How Much Home Can You Afford?" Calculators Scare the Bejeezus Outta Me
Posted on June 22, 2007 by Him
Between friends and coworkers, I'd say that 80% of the people I know are now homeowners, with many of them buying their first home in the last year or so. Admittedly, I've felt out of the loop.
In the past, we've wondered if it were feasible to put down 20% on a home. The more I look at our future, it looks like that could be possible. As we've just paid off all of our revolving credit card debt, I've wondered (just for fun) how it would affect how much home we'd be able to afford. So in order to get a better idea of a number, I decided to run the numbers using four different online calculators.
Before I get into the details of each calculator, there were some ground rules in the numbers to make everything even. I assumed:
- $50,000 for a down payment, the approximate amount I'd like to save up before buying a home
- Fixed 30-year mortgage at 6.25%, a reasonable guesstimate of what our interest rate would be considering our FICO scores
- Annual property taxes of $2,300, an eyeballed average of property tax listings of condos in my part of town
- Annual homeowner's insurance of $659, the 2004 Illinois state average.
- Monthly debt of $1,000, the minimum payment for the student loans
The first calculator is the one (warning, this calculator is a java applet that will slow down your computer for a few seconds) from dinkytown.com. I'm pretty sure that it is the same calculator found on (also java) interest.com (disclosure: they may have ads on this site, on every page, or something). I like their calculator because it shows how much mortgage you can afford over a range of interest rates. But since we're only looking at interest rates at 6.25%, I've gratuitously outlined the value in the chart: $318,883. Add to that a $50,000 down payment, and we have a value of $368,883. Not bad.
The second calculator was the venerable bankrate.com's housing affordability calculator, which said we could afford a $368,902.36 home:
I next went to smartmoney.com to use their calculator. The mortgage amount was pretty much the same as was dinkytown.com stated, $318,835, making the final value $368,835.
The last calculator I tried was CNN Money's offering. This calculator gave me a range from $368,882.87-$397,846.38.
This was a fun exercise considering that a year and a half ago a calculator (erroneously) told us that we could only afford a $10,000 home!
Why do these calculators scare the bejeezus out of me? Because I know for a fact that I'm not in the state of mind for home ownership. I'm still in young and carefree mode, and with a house comes a lot of responsibility that I don't think I'm ready for. I think Mapgirl would agree with me on this one.
The real scare is knowing how much more debt would be added to our tally. That is only slightly tempered by the fact that we'd have to be paying for housing whether we're renting or buying...so why not build equity? I also have to keep in mind that these numbers represent the MAXIMUM amount of mortgage that we'd be able to handle. Her and I have had some pillowtalk discussions about how stretched thin we'd be if we bought the maximum amount of house we could "afford," and how we'd rather not have to stress about the money.
In the end, I know that none of this is serious. We're not looking to buy until at least a few more years, both for maturity and saving's sake. It does feel good though, to know that we're making some financial progress.
Building Your Own Home? A Financial Overview
Posted on January 15, 2007 by Her
Somehow, I ended up with a copy of Timber Home Living Magazine on the train ride home from work. They had a well-written overview of financial considerations for people planning on building a custom home of any kind (not just a log home). If you're considering building a custom home, check it out. They talk about construction financing, how to choose a lender, and the structure of payments.
I Don't Look Like A Million Bucks
Posted on October 07, 2006 by Her
A few days ago I went for a walk. I saw a beautiful home that was hosting an open house. The price tag was right around $1 million, so I was curious to see the inside. I went in. The realtor was showing another guest around. She gave me a long, scathing once over, frowned, and announced that she was going to be showing the home to the other guest, and I could show myself around.
Apparently, I don't look like a million bucks. Oh, well.
The house had a closet that was over 200 square feet. It was worth being insulted just to see it :)
Where To Live? Urban vs. Sub(urban)
Posted on September 22, 2006 by Him
On my last post, both Gigi and Chitowngirl both suggested that we look for housing in the suburbs of Chicago. Their prevailing reason is, of course, the lower cost of housing. But the square footage of housing isn't the be-all-end-all for reasons to live somewhere. Personally though, as long as we don't have kids, I don't want to move to the suburbs.
On the contrary to Chitowngirl's comment that we're not south siders, I grew up in the near southwest suburbs of Chicago. Heck I'm even a White Sox fan. I've seen what there is in the burbs. And I don't particularly like it.
Here's a few reasons why I love living in the city so much:
- On the first day we moved into our apartment, our upstairs neighbor welcomed us with Ann Sather cinnamon rolls. We've been good friends ever since.
- On Sunday mornings we go to the corner liquor store to buy a newspaper. The Mediterranean owner calls Her "sweetheart" which we both find endearing. He even offered save a newspaper for us if we come in late. We have yet to take up that offer.
- I don't need to own a car. I sold may car a few months ago and now rely on public transportation. When we need to go on grocery trips or out of town, we use Her car, which we only put >10,000 miles a year on. Everything in the burbs is too scattered to not own a car.
- I don't have to drive home from the bars. Whenever I drive by a bar in the burbs I see parking lots. That is seriously not a good combination.
- My friends live all around me. Not only that, there are thousands of social events in the city that would put me in touch with people my age, with my interests. The burbs are less friendly socially.
- Running outside is safer, or at least, more scenic. And no one walks in the suburbs! And if they do, it's dangerous.
- There seems to be more volunteer opportunities that put me in direct contact with the less fortunate. That's my favorite way to volunteer.
- The cuisine offers more that Red Lobster, Applebee’s, and Outback Steakhouse. I can eat Japanese, Indian, Chinese, Mediterranean. French, Spanish, or American food without having to travel more than a mile.
Yes, a 1,000 square foot condo in Chicago may cost $300,000. What price would you put on culture, convenience, and community?
Is It Feasible For Us To Put Down 20% For A Home?
Posted on September 19, 2006 by Him
The home ownership bug has hit me as of late. This is a dangerous thing, apparently, as many hours of my day are spent looking at housing calculators, reading up about different types of mortgages, and most procastinating-ly, looking at various properties in Chicago (those virtual tours devour my lunch hour).
I know I know - we are SO not in a position to buy a home. But hear me out.
We'll be credit card debt free in less than two years, freeing up about $1,000 a month for us. By that time we'll be married, and we will have a nice chunk of wedding money and other money saved up - by my estimates around $20,000. (EDIT: Please note that the $20,000 is coming from wedding gifts and OTHER SAVINGS. My parents have comitted to giving us a $10,000 gift for our wedding, so there's where half of it comes from.) Because we're faithfully paying off the credit card debt, we'll have excellent credit scores by then as well.
A decent 2 bedroom condo in Chicago runs about $300,000, so a 20% down payment on that home would be $60,000. That is a considerable chunk of change, especially when we already have a mortgage worth of student debt to pay off.
Is it feasible to drop 20% down considering our financial situation? What alternatives would you recommend?
Granite Countertops Are the New Avocado
Posted on July 17, 2006 by Her
As part of the recent real estate boom, people have been pouring money into kitchen renovations, often upgrading with expensive finishes and appliances. Some of these trendy purchases are bound to end up just like the avocado stove – a dated eyesore. This article, On the Way Out?, attempts to predict which are the likely candidates and why. Topping out their list…
The Above-Counter Sink
This style lost its expensive cache when inexpensive knock-offs flooded the market. They require frequent cleaning and aren’t that functional.
Matte Stone Countertops
These require so much care that many are sure to be discolored and chipped within a few years.
Glass Cabinet Doors
They look great…until you put things inside the cabinet.
Built-In Flat Panel TV’s
When technology changes, replacing these built-ins could require costly repair to walls and ceilings.
Tumbled Stone Flooring
The texture of these floors attract dirt, and cheap knock-offs are readily available.
Your best bet for timeless appeal? Choose a clean, classic style that compliments the design of the home and maximizes light and functionality.
How much home we can't afford
Posted on January 25, 2006 by Him
One of my guilty pleasures is watching the Fine Living Network. I dunno, something about seeing the light at the end of the tunnel or something like that. Anyway, an interesting show on that channel is What You Get for the Money; each episode showcases houses across the nation of a certain price point. It is interesting to see how much house $300,000 can buy in the midwest, versus the tiny space in downtown Manhattan.
A few days ago, I decided to see how much home we would be able to afford. I used the handy-dandy How Much House Can You Afford? calculator over at Bankrate.
With our current monthly expenses and a down payment of $10,000, we would be able to afford...
...wait for it...
...a $10,000 house. What's that? The amount of the monthly mortgage we can afford? $0.00.
Anyone got a single wide they want to sell us?
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