Is owning a home still the American Dream?

[GracieJane]

I live in Los Angeles and the cost of housing is very high. For reference: a one-bedroom rental in my neighborhood lists at $2,200/month, the average house sells between $990k - $1.5 million. 
 

I’ve only lived in coastal metropolitans here and overseas, so I don’t have much experience with housing prices in the middle of the country. Most of my friends in LA (college and post-grad, early 30s) rent. Do most people still assume they will eventually own a home? Is this still a middle class American Dream?

[ktgrok]

I think it is a dream, just not always reality. 

[Carol in Cal.]

I think it's the only way to control expenses in retirement.  Rents can move very fast.

[Mrs Tiggywinkle]

11 minutes ago, Carol in Cal. said:

I think it's the only way to control expenses in retirement.  Rents can move very fast.

This.  But it’s also location dependent.  We are not rich, though we make well above median income for our area, and can easily afford two mortgages this year.

[Carrie12345]

My kids feel like they don’t know if they’ll own homes.  2 years ago, I would have told them it’d be highly likely in our area, though maybe not others. Now? Possible. Not as certain as before.

So far, I only have 1 out of 3 looking at substantial school loans, so 2 will have more wiggle room.

 

[Farrar]

Not having real estate deeply affects intergenerational wealth, which is a big thing long term. If you don't have that, I think it's really hard to have the "American dream" whatever it means.

We own a house that we couldn't easily buy now. We did that by buying in a "bad" neighborhood which is not bad anymore and by getting really lucky on a number of fronts. It definitely has given us a huge cushion in life that I can't imagine living without. Dh lost his job recently (and then found a new one - it's been a crazy year) and at the height of that panic, I kept thinking, welp, we have over half a million dollars in equity and if things get really bad, there are ways to tap that or sell it and move somewhere much cheaper.

[Arcadia]

I live in Silicon Valley where $1mil might not even get you a condo. I have always lived in HCOL areas. We could afford a single family home if we are willing to put up with a very long commute. That is what one of my husband’s supervisor is doing and his wife is a SAHM. 

As for the American dream, I would say in my condo complex, people (singles and families) are willing to buy a condo for a starter home instead of waiting until they could afford a townhome or single family home. Some of my former neighbors have relocated to other states and to Europe because of work. I bought my first condo when I was 29 but that was with my husband. We put 40% downpayment. Both of us come from family traditions where owning a home regardless how small is seen as a relatively secured roof above your head.

[Faith-manor]

I think the younger generations have different dreams. Many value experiences, flexibility, and mobility over ownership. I have one kid who would prefer to live for five years post college in a van camper, save money, see the country. I don't know if he will ever own a home. He is not the type who needs a lot of space, nor wants a lawn.

It sounds great to people who live in areas that constantly appreciate and have hot markets. But plenty of people do not live in such areas and they have nothing but a money pit because they will never.have any decent equity. Our house which we bought for $35,000, gutted, renovated, and installed substantial upgrades is now worth a womping $50,000 IF we can find a buyer because when the housing mortgage bubble burst this area bankrupted and never recovered. It never will recover. Plenty of people ended up with such properties. On the other hand, our mountain house in Alabama will be a very good investment since it's a comfortable commuting distance to Huntsville which is growing so rapidly housing can't keep up.

So it isn't a simple yes or no, and it is no longer true that home ownership is the path to intergenerational wealth. I see other paths that are equally worthy such as simple living, minimalism, and dedicated saving. I have two nephews who make less money than DH and are only in their thirties who live in efficiency apartments by choice, and have more than a million each saved because compounding interest and smart investing is a wonderful thing.

[gardenmom5]

I'm also in a HCOL area.  two of my kids own their own homes.  (one in our HCOL area. - she bought eight years ago, and its market value has more than doubled in that time.)  the other two want to own a home, and plan on it. 

One is looking at changing careers to something he likes and pays well.  

dsil is applying for jobs in Texas (he finishes his MS in dec.) - dsil really wants him there too. - which I think is sweet. -  and  houses are much more affordable there.

 

eta: there's a reason a lot of people who were working from home during covid - like it, and don't want to go back to their commutes. dsil is having issues with one employee who is refusing to come back at all, even though the company is requiring people to be back half-time.     I think it was google that finally compromised with employees that they could continue to telecommute, but they weren't going to pay them bay area salaries.

we know one guy who when covid hit, rented out his house and took off to tour the country with his kids in an RV.  he is still working remotely.

 

Edited August 20, 2021 by gardenmom5

[HeartString]

It is where I live and nearly all of my friends own, but housing is way less expensive.  $100k-$200k can buy a very nice 3 bed 2 bath with a garage and yard in a good school district.  $200-$300k can get you something fancier or bigger.  There’s really no reason not to own with prices like that.   

Edited August 20, 2021 by HeartString

[teachermom2834]

I feel like home ownership is the only way dh and I ever would have had any security. We started with a tiny house we could barely afford and have moved up a couple times. Every time we have come out a bit ahead. I hope my dc will own homes. It’s been really important to us. I also hear about people being forced to move because their landlord wants to sell, etc. The security of home ownership has been really important in dh and I getting our feet under us. I realize everything changes but at this point I still encourage my dc to work towards that and I am even open to helping them. Rents are so high that hardly seems like a good alternative. 

[MEmama]

We’ve always encouraged DS to plan on home ownership. Helping him through university without debt is part of that plan. Wealth builds wealth, and real estate—no matter how small or frugal—typically plays a significant role in helping to provide stability. 

[elegantlion]

I live in the middle of the country in a low COL area. Around here, most people still own homes, plan to do so at some point, or live in rentals by choice. At least in my town, rent prices do not fluctuate greatly so there is some financial consistency in renting. I do not currently own a home but have in the past. We plan to buy a home within the next two years but need the rental flexibility right now. 

In the bigger city not far from here, housing prices are higher, so that probably affects home ownership. 

I see more young people (well that makes me sound old) who prefer the flexibility of renting and may only buy when they feel settled in one location. 

[Pawz4me]

We live in a reasonable COL area. I'd say that the majority of the younger people I know do eventually plan on owning a home, but I think they view it the same way they do marriage or having kids--no rush at all.

[Clarita]

1 hour ago, GracieJane said:

Do most people still assume they will eventually own a home? Is this still a middle class American Dream?

Amongst my friends they still all want to own a home. Although for a few of them I always found that notion odd because they keep switching homes every few years. It always seems stressful to me to do the buy/sell juggle that often, and I'm not sure if it would beat out renting (they've bought at peaks and valleys). Currently in my area (SF Bay Area) I think it would be extremely hard though to buy a house with the nation's median income or the average person's income in my area. 

As for my husband and me, we got pretty lucky we bought this house which was not listed with a realtor and in pretty poor shape at the end of 2012. So, the price for the house was pretty low and the price to fix it up is low compared to today. That timing also coincided with each of our companies essentially raining money on us (IPO and an acquisition). Thus a lot of luck there, sprinkle with a bit of working hard during our college years to get those jobs, instead of getting the "college experience". My house is now easily > 2x what we paid for it, but I think we must be in a bubble (not good school district, though nice house with a view of SF from the front). Our finances would be a lot tighter if we bought our house today, my husband has gotten a big promotion since we bought the house so I think I could still be a SAHM. 

[GracieJane]

These are insightful responses, thank you! 
 

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

[Arcadia]

6 minutes ago, Clarita said:

Currently in my area (SF Bay Area) I think it would be extremely hard though to buy a house with the nation's median income or the average person's income in my area. 

Property tax is another issue that we are considering if buying now. Being able to afford the mortgage is different from being able to afford the property tax when retired (or unemployed).

 

[Clarita]

8 minutes ago, Arcadia said:

Property tax is another issue that we are considering if buying now. Being able to afford the mortgage is different from being able to afford the property tax when retired (or unemployed).

I can't see affording any part of it in its current state. The market is truly ridiculous here right now.

[HS Mom in NC]

Me moved to the greater Raleigh (RDU) area from the greater Phoenix (PHX) area 3 years ago because the cost of living was significantly cheaper.  Still is.  There's been a huge increase in real estate costs in PHX due to people moving from CA in large numbers for the last decade, with a sharp increase in the last 3 years. Since the pandemic, there has been an increase in people moving to RDU from all over at higher rates than usual.  The house we bought 3 years ago and the house we bought this spring (oldest and her husband live in it) have been appreciating $20,000 per month for the last 4 months.

[Arcadia]

7 minutes ago, Clarita said:

I can't see affording any part of it in its current state. The market is truly ridiculous here right now.

A neighbor recently sold her single family home for $2.5mil and that is already on the low side for my region. I do know many cash in their stock options to buy new homes from developers because they don’t want to engage in bidding wars for resale homes. Even then, there are multiple buyers interested in the same units and developers are doing lottery system. 

[HeartString]

56 minutes ago, GracieJane said:

These are insightful responses, thank you! 
 

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

If you’re willing to drive a bit.  Even in backwoods Arkansas we have art museums, concerts, comedy clubs, nightclubs, a symphony, a ballet, a few different theater options, science and children’s museums, a zoo.  No botanical garden that I know of though.   Most things are smaller, but the trade off is that they are affordable enough to go very regularly.  I can buy a year long pass to the Little Rock zoo for less than the cost of 1 visit to the zoo in Richmond.   Same with the museums, 1 visit in VA equals a bit more than the cost of a years pass in AR. That’s why we’re moving back to AR.

Edited August 21, 2021 by HeartString

[HeartString]

51 minutes ago, Arcadia said:

Property tax is another issue that we are considering if buying now. Being able to afford the mortgage is different from being able to afford the property tax when retired (or unemployed).

 

Do you live in one of the crazy high property tax states?  My property taxes are only a couple of thousand, so hardly anything to think about in retirement.  Although renting means you are usually covering the mortgage plus property tax and insurance for the landlord, usually with some profit built in too.  

[RootAnn]

56 minutes ago, GracieJane said:

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

Over an hour away in multiple directions but you could live closer if your job allowed.

One of my sister's college professors asserted in the mid-90s that it would be virtually impossible for those college students to own their own houses. She disagreed with him. Like many of us, she owns her own house now (or at least has equity in it). 

It won't be NYC, but there is culture in flyover states. Maybe not political agreement with your values though...

[HeartString]

3 minutes ago, RootAnn said:

 

It won't be NYC, but there is culture in flyover states. Maybe not political agreement with your values though...

There are pockets of blue in every red state.  We can be found!   It takes more effort, but we exist.  

[Arcadia]

41 minutes ago, HeartString said:

Do you live in one of the crazy high property tax states?  My property taxes are only a couple of thousand, so hardly anything to think about in retirement.  

My county property tax rate is 1%. The problem is that even a condo can cost over $1mil. So buying a single family home for $2.5mil would mean paying a property tax bill of more than $25k annually. 

[Faith-manor]

6 minutes ago, Arcadia said:

My county property tax rate is 1%. The problem is that even a condo can cost over $1mil. So buying a single family home for $2.5mil would mean paying a property tax bill of more than $25k annually. 

And the other thing people do not take into account is how much money must be saved fro maintenance of the home during retirement. My mother really has okay monthly income. In this low COL, she can afford to be in her home. But she can't afford the maintenance, the roof that is going to have to be replaced in five years, the septic field that is going to give up and cost $10,000 to redo, the furnace when it goes out, you name it. She has no way, in her health condition, to increase income and no bank is lining that money to a 78 year old in poor health. Reverse mortgages are terrible, and of course, her house isn't worth enough to begin with which many elders find out the hard way when they age in place and the local economy tanks.

The other thing is that my parent's generation and a lot of Gen X had fairly stable employment. Even though we have moved several times, we've always been in one place long enough not to take a bath on home purchases. But, our kids' generation is predicted to spend most of their careers moving around a lot. Except for super, hot markets, that makes it difficult to recoup loan origination fees, closing costs, selling costs, repairs, etc. One of our boys is embarking on a career that will have him living out of a suitcase for twenty years. He is probably best off with minimal possessions, no house, nothing to maintain. He can build wealth by paying off his federal student loans quickly and then saving, saving, saving and safe investing from a young age.

[MercyA]

2 hours ago, GracieJane said:

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

LCOL area in the Midwest. Excellent museums and celebrity-type concerts are about two and a half hour drive away in various directions. We have a very nice zoo about a half hour away. There are small museums within a half hour drive as well but we'd rather drive further for larger and nicer ones. 🙂 

[Carrie12345]

8 hours ago, GracieJane said:

These are insightful responses, thank you! 
 

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

We drive to them. Or, when organized, charter a bus!
At home, we have access to nature centers, sanctuaries, hiking, riding (equine or engine), swimming, boating, farm visits (fun or education), mines, caves, and many more organizations catering to the outdoors and local history. Plus events like concerts and whatnot, just on a smaller scale.

[TexasProud]

9 hours ago, HeartString said:

It is where I live and nearly all of my friends own, but housing is way less expensive.  $100k-$200k can buy a very nice 3 bed 2 bath with a garage and yard in a good school district.  $200-$300k can get you something fancier or bigger.  There’s really no reason not to own with prices like that.   

Yeah, I do not know anyone that doesn't own a house. But we live in an area like that. In fact I know two 2019 graduates that have bought and are living in a house. One is a  single firefighter, the other  is married and  has a warehouse job.  Now, their houses cost under 100,000.  They live across from one another. Again, though, this is rural Texas.  Like I  have probably mentioned before, I went to a cousin's wedding in 2005. I stayed in my Uncle's house in San Jose. It was just a normal starter home like in Texas. I cannot remember now if it had 2 or 3 bedrooms as they only had one kid. They bought in the 70's. In my town, that house would have been worth under 100,000.  There is was worth 1.5 million. They were trying to figure out whether or not their daughter was going to want it.  The problem was that even if they sold it to her for a dollar, she would never be able to afford to pay the taxes on it. 

So yeah, this is very location specific.

[DawnM]

Although I miss living in Los Angeles a lot, I was worried that my kids would have a very hard time affording to stay there when they eventually wanted to be on their own.

We owned 3 houses in LA (not at the same time) and when prices shot up in the early 2000s, we opted to move out of the area.
 

A house can be a good investment, but I do worry that there will be another housing market dive.   For those who don't have to move, it is not as bad to be underwater, but for those who have to move for jobs, etc....it is a nightmare.

[Soror]

I live in a lcol area and home ownership is still quite common. I am greatly concerned with the rising of housing prices and taxes. It is not good for our future and that of our children that so many places are becoming impossible to afford to live. Even in my area with much cheaper real estate I don't know how people afford what they are buying on the money they are making. There will be an awful reckoning when it comes time for retirement.

 

[HeartString]

9 hours ago, Arcadia said:

My county property tax rate is 1%. The problem is that even a condo can cost over $1mil. So buying a single family home for $2.5mil would mean paying a property tax bill of more than $25k annually. 

Oh my.  I just don’t understand how anyone buys a $2 million home!  Even my friends who make low 6 figures couldn’t afford that.  

Edited August 21, 2021 by HeartString

[Faith-manor]

10 hours ago, GracieJane said:

These are insightful responses, thank you! 
 

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

No. We travel to Detroit, Ann Arbor, etc. It is 1.5-2 hrs for everything. People who live along 127 in central lower peninsula do have the Performing Arts center at Alma, College which has a way better theatre department than CMU plus the Bagpipe band, and prior to covid, low tickets prices, and I think students were free or nearly free. my kids grew up on Alma College performances though we have to travel 1.5 hrs each way to get there. It is also 1.5 hrs to the Dow in Midland for us, but many a performance there for us plus the nature center and gardens, and for those who like baseball, there is a triple A ball team and their stadium and ticket prices are very family friendly. Our eldest ds also sang with the Flint Festival Chorus at the Flint Cultural Center for one season, an 80 minutes drives each way. Most of the locals though are averse to commutes like that so cultural events are not common for kids raised here and the schools eliminated field trips. We had kids on our rocket team whose first experience at a museum was when we took them to D.C. for competition and went to the Smithsonian Air and Space. This is very typical here. Our kids were the"weirdos" who had traveled a lot, taken in Young People's Concerts at the DSO, seen the Nutcracker live, attended several Shakespeare plays, heard Neil de Grasse Tyson speak at Alma, been to numerous museums and historical places like Greenfield Village, Fort Michilimakinac, etc. We have traveled a lot so they had been many, many places. But they grew up around kids who by the time they graduated from high school, had not been more than 30 minutes from home unless they played a high school sport because away games are spread over other class D schools in the trip county area.

For many Michigandars, in order to live at low COL it comes with the price of not many amenities, and long distance from any kind of decent healthcare.

We are a family of campers, kayakers, hikers, cross country as well as alpine skiiers, swimmers, beach bums, etc. We can kayak rivers just ten minutes from the house, hang out on the shores of Lake Huron in 20 minutes, same for camping and good fishing, cross country ski locally, but we do travel 3 hrs for alpine with chair lifts, and we can live on one income. But, the COL is rising, and the one income family is going the way of the dodo of necessity. Soon that will not be a draw though property values aren't really going up much. Auto insurance is just getting insane, property taxes are going up a lot for only minimal improvements and no real property appreciation, utilities went up, and without natural gas, heating is getting out of sight.

[Farrar]

32 minutes ago, HeartString said:

Oh my.  I just don’t understand how anyone buys a $2 million home!  Even my friends who make low 6 figures couldn’t afford that.  

So, we couldn’t buy a 2 million dollar home but we could buy a million dollar home or even a 1.5 million dollar home and we don’t make that much. The reason is that we bought a “starter home” young and the value appreciated in a HCOL area.  So you just trade up and take on more mortgage as your income rises - but as you go, if you do it well, with some luck, the equity also rises so you can potentially do it again. Over and over. We haven’t… but lots of people do. That’s part of why it’s so important to own property if you’re ever going to get ahead. I don’t think it’s right, but I do think it’s true.

[Farrar]

As for retirement, this is part of why a lot of people sell their expensive homes and downsize to other communities when they retire. 
 

And as for bubbles, I also think a bubble is coming. But our home could lose a significant chunk and we’d still be fine because overall the prices rise so much. This is why people really need the ability to buy and ride out the costs long term. Again - I see a lot of issues with it because a lot of people can’t buy in the first place. The barrier is too high.

[Carrie12345]

2 minutes ago, Farrar said:

So, we couldn’t buy a 2 million dollar home but we could buy a million dollar home or even a 1.5 million dollar home and we don’t make that much. The reason is that we bought a “starter home” young and the value appreciated in a HCOL area.  So you just trade up and take on more mortgage as your income rises - but as you go, if you do it well, with some luck, the equity also rises so you can potentially do it again. Over and over. We haven’t… but lots of people do. That’s part of why it’s so important to own property if you’re ever going to get ahead. I don’t think it’s right, but I do think it’s true.

That’s the kind of thing I expected to do. Not to the 7 figures, but same concept.  Except my starter home tanked just a few years in, and stayed down for more than a decade. We’re very fortunate that employment didn’t require any kind of relocation, or we probably would have needed to explore bankruptcy and own nothing.

[Lecka]

I have never expected to do that just because of not living places with that level of home appreciation.

We have moved because of job changes, but always in places that are not HCOL.

There just is not the level of appreciation for us.  That is not our reality.

My ILs live in a semi-HCOL and they think our choices are so stupid, because we do not do things the way things work when there is major appreciation.  
 

For us — the end game is to pay off our mortgage and not have to make that payment anymore.  It’s a totally realistic goal and it’s not uncommon to be able to do it in less than 30 years.  It’s not uncommon to know people who aren’t making a mortgage payment anymore. 
 

That is our chief consideration.

 

We have traded up with moves over the years, with 3 moves, and we have gone from $190,000 to $244,000.  My ILs thought we were dumb as rocks to not get a better first house, and we were there 7 years.  They thought we would have 10% appreciation per year.  No!  It barely changed.  The housing prices in the whole town barely changed.  It’s just not a place where house prices change very much.  
 

We are much better off to have a mortgage amount that we can pay, pretty easily, and then invest in the stock market.  The stock market is where we pin our hopes of appreciation.  We don’t pin them on house prices.

 

Plus for us — we want to stay in our house.  
 

I do not totally understand the house end-game for HCOL, because do they end up that you have to sell the family home to realize the profits?  
 

And do you ever stop paying a mortgage?

 

Another thing, for us, you really do have to be careful because without appreciation like in HCOL, you really do have to look at how long it takes to break even with closing costs.  The principal payment early in a loan is so low, it can take time for the principal to get to where it is more than the closing costs were.

This is the kind of thing I don’t think happens in HCOL areas.  It is a real thing with starter homes with people we know.  
 

The real benefit is that it is often going to be cheaper to buy than to rent, and your house will be much nicer than if you were renting.  (Edit — so you live somewhere nicer for maybe a few hundred bucks more or less than if you were renting — that is the main pay-off.  The main pay-off isn’t you move and have made a lot of money.)

 

Edit: to answer the question — I think it is to our benefit to be homeowners.  I don’t think it is the American Dream to me.  

Edited August 21, 2021 by Lecka

[J-rap]

I don't know, I see this changing a bit.  I know for my parents' generation (they're in their 90's) a dream home was a big goal, and there was no doubt that they would have a home.  Having your own home really was the American dream.  (My dad was a WWII vet -- just to give an idea of the era they've lived through.)   My dh and I weren't as eager... having our own home wasn't necessarily our dream, although we assumed we would have one someday.   Many of my friends seemed to have that same attitude.  We didn't buy a home until after our 3rd child turned one, and we were just fine with that one home.   (We actually sold it two years ago after your youngest graduated from college and have moved to an apartment while we decide what's next.)

My own children are in their 20's through early 30's, and only one of them has bought their first home (abroad).  I agree that many in that generation seem to be in no hurry to marry, have children, or buy a home.  I think most if not all of my children will have a home eventually?, but it is not at all a driving urge for them.  They're all minimalists and would prefer to put their money into growing their own vegetables and traveling.  

It will be interesting to see how this changes over time.  I'm really glad to not have to deal with a house anymore, and enjoy being in a community (an active, fun apartment building).  I've talked to more and more people of different ages who say they're interested in an intentional living community -- sharing land and a community area with other families who have common interests and values, etc.   So I don't know if this is possibly a slow trend, or just a phase.  

I do agree that for many people, being able to own a home can make a huge difference in their lives financially, over the years.  

[HeartString]

46 minutes ago, Lecka said:

 

I do not totally understand the house end-game for HCOL, because do they end up that you have to sell the family home to realize the profits?  

I think this might be part of the shift now.  Most people don’t want to inherit the family home anyway.  So many adult children live far away and aren’t interested in moving back to live in the family home. Aging in place is also difficult with kids far away from home, most elders won’t make it through retirement without needing to sell the home anyway to move in with a child, or move to a retirement community or nursing home.  I think all of that has kind of killed the concept of the family home being passed down.  I would guess that more often if the elder has lived in the family home the whole time that the kids will sell it and split the money after they pass anyway. 
 

I know for me, my family moved a lot so I have no “family home”, my parents live in a house that I’ve never lived in.   My husband’s parents still live in his childhood home but it’s falling apart Tom deferred maintenance and has so much junk from border line hoarding that we have no interest in inheriting it and have it set up to go entirely to the sibling who has been living there doing care giving.  We wouldn’t want to live in that area anyway.  

[Lecka]

What I mean is — what do people do who want to retire but are young retirees, who don’t want to move into a retirement community, but don’t have cash?

I agree it’s very rare to be able to leave a family home, I agree most people need to sell at some point to raise funds.

What I am saying is more ——- my ILs have a nice house but not so much cash, and want to stay in this house but also retire.

My parents don’t have nearly as much home value (it’s a fraction) but they have cash.  
 

(I say cash — I mean retirement account or whatever.) 
 

Maybe this is just something with my ILs?  Right now they are looking at retiring, but they don’t want to move.  They have a lot of money in their house, but how does that turn into money for them to live off in retirement, unless they downsize drastically or move out of the area?  
 

 

 

[HeartString]

I know my oldest (19) has no interest in owning a home, but he wants to own land. The dwelling isn’t important to him.  A trailer in the middle of 5 or 10 acres would be fine by him.  

[Lecka]

But he will save for the future in some other way, at some point, I assume.

His domicile won’t be his retirement fund.  
 

My ILs have a lot of value in their home, but how do they retire, and get to live in their house while also having money?

 

They don’t want to sell their house.  They don’t want to move out of the area.

 

What I am saying is more — we have less house value, but we have other assets.  We can have a paid-off house.  We foresee being able to stay in our house until we want to move or have to move.  
 

My ILs  want to stay in their house, too, but I don’t know if they will be able to.  Because all their money is in their house, basically.  
 

Do other people in HCOL just do better planning?  
 

Edit:  my understanding is that it’s always a rational choice to invest in more property value because it will appreciate so much and you are using leverage. 
 

But then how do you pay off your house, and how do you eventually realize that money without also not having a house?  Or really moving into a much cheaper house in some way?

Edited August 21, 2021 by Lecka

[Carrie12345]

3 minutes ago, Lecka said:

What I mean is — what do people do who want to retire but are young retirees, who don’t want to move into a retirement community, but don’t have cash?

I agree it’s very rare to be able to leave a family home, I agree most people need to sell at some point to raise funds.

What I am saying is more ——- my ILs have a nice house but not so much cash, and want to stay in this house but also retire.

My parents don’t have nearly as much home value (it’s a fraction) but they have cash.  
 

(I say cash — I mean retirement account or whatever.) 
 

Maybe this is just something with my ILs?  Right now they are looking at retiring, but they don’t want to move.  They have a lot of money in their house, but how does that turn into money for them to live off in retirement, unless they downsize drastically or move out of the area?  
 

Well, that’s part of why we’re building a nice house, but not nice as in the highest mortgage we can get approved for - so we can also save for retirement. And pay the house off before that, knock on wood. And maybe hope that we get a little bit of the social security we’re promised. 😂 

There are reverse mortgages. The supermarket doesn’t take “I own a house” as payment, and they’re gonna have to cope with that one way or another!

 

[elegantlion]

13 hours ago, GracieJane said:

These are insightful responses, thank you! 
 

If you live in a LCOL area, do you still have access to cultural centers like art museums, concerts, botanical gardens, etc.? Forgive my lack of knowledge, I didn’t grow up in the US.

I live about 35-60* minutes from "the big city." My town (~75k people) is pretty historical, so we have a number of small historical museums, a small art museum, a small orchestra & theater scene, a smaller venue for concerts but no botanical gardens - although there are parks, greenspaces, & hiking trails throughout a parkway system. 

 

For larger cultural needs, the big city is close enough. It's also a LCOL area, in a national comparison. It has everything.

 

 

 

*35 minutes to outskirt suburbs *60 minutes to downtown

[RootAnn]

A starter home here can be had here for $40-50k. That's usually a 2 Bdrm, 1 bath but could be different/more depending on condition. That is achievable for a single person on a teacher salary or two people on full time fast food jobs.

[JustEm]

No idea if it is the American Dream or not but I'll certainly be encouraging my children to save young, buy affordable property early,  rent it out to roommates, and then keep it as a rental once you upgrade houses. The two best things we have done for our future is to have roommates early in our marriage because they paid for the house we had a mortgage on. And to find a house in 2018 that had an area where we could rent to my parents.  After they are out of that area we can rent it to someone else.  So, having rental income on our primary house will always be a thing.

The worst financial mistake we made was selling out first house when we bought this one.  It would have been a perfect rental property.  Unfortunately, we just couldn't swing it at the time we had seriously outgrown it.

[Hoggirl]

My ds lives in L.A. and has a very good job, but I look at prices there and can’t imagine how long it will be before he would be able to purchase a home there. Even coming up with a down payment will take a significant amount of time, and he is a good saver.  If he married someone with a comparable salary and similar savings mindset to his, then maybe. I do think he wants to own a home at some point and has indicated he doesn’t want something with shared walls.  So, a single-family home. Both by necessity and desire, he is in no hurry.   

He and three friends just rented a 4 BR/3 BA house for $7,500 per month. His share of the rent is equivalent to my gross starting salary in 1986!

@HeartString - check out Garvan Woodland Gardens in Hot Springs when you move back to Arkansas. There is also a botanical garden in Fayetteville.  No idea where in the state you are moving to. We no longer live in Arkansas but did for MANY years (my dh is from Little Rock) before downsizing and moving to Florida. Crystal Bridges Museum in Bentonville is not to be missed for anyone traveling to Arkansas. 

We have always been home owners and have owned second homes (small cabin or condo) for a significant portion of our marriage.  We are now in a condo (that cost significantly more than any of our previous single-family homes did) on the Gulf Coast. We never made a ton of money on any of our homes, but we never lost any either.  I am thankful we bought this place when we did as prices for our units in our building have increased substantially over the last 15 mos. 

[HeartString]

33 minutes ago, Lecka said:

But he will save for the future in some other way, at some point, I assume.

His domicile won’t be his retirement fund.  
 

My ILs have a lot of value in their home, but how do they retire, and get to live in their house while also having money?

 

They don’t want to sell their house.  They don’t want to move out of the area.

 

What I am saying is more — we have less house value, but we have other assets.  We can have a paid-off house.  We foresee being able to stay in our house until we want to move or have to move.  
 

My ILs  want to stay in their house, too, but I don’t know if they will be able to.  Because all their money is in their house, basically.  
 

Do other people in HCOL just do better planning?  
 

Edit:  my understanding is that it’s always a rational choice to invest in more property value because it will appreciate so much and you are using leverage. 
 

But then how do you pay off your house, and how do you eventually realize that money without also not having a house?  Or really moving into a much cheaper house in some way?

I think living in a very high cost of living areas skews the whole idea, honestly.  Buying a house in the 7 figures on a modest income is really choosing to invest mostly in a house at the expense of other investments. If most of your assets are in the house like your ILs and you are cash poor because you couldn’t invest elsewhere you are going to have to sell the house, wether you want to or not.  

[HeartString]

25 minutes ago, Hoggirl said:

@HeartString - check out Garvan Woodland Gardens in Hot Springs when you move back to Arkansas. There is also a botanical garden in Fayetteville.  No idea where in the state you are moving to. We no longer live in Arkansas but did for MANY years (my dh is from Little Rock) before downsizing and moving to Florida. Crystal Bridges Museum in Bentonville is not to be missed for anyone traveling to Arkansas. 

I had forgotten about Garvin Woodland Gardens, I was stuck on the word botanical. That place is so nice at Christmas.  

[Lecka]

I think it is an open question whether it’s better to be a small-time landlord or invest in the stock market.  Like — which one is *better.* 

My family members have done small-time landlord and for one of my sisters, she turned out to live somewhere that it turned out to be a poor investment.  

I think it’s one of those things where it can be hard to believe, if you live one place, that it could be different another place.

But my sister has had a horrible experience while doing “everything right” as far as what my family would say was doing things in a good way.

It’s just not a good market. 

It is a sad thing to feel like — she had bad advice.  
 

But she could have chosen to diversify, too.  
 

She didn’t want to be in the stock market after the stock market crash and switched to rentals.  Then the rentals — she is getting out of them now, and it’s break-even (slightly more than break-even I guess) over 10-15 years, and in the meantime, look at what the stock market has done.

And other rental markets have done great, too.  But not her town!