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Comment by junkscience2017 | Hacker News Reader

junkscience2017

For most people, moving to Silicon Valley will simply accelerate their personal financial ruin. For most people, buying, owning and then selling their home is the accepted and straightforward path to financial independence. The common case now is to rent perpetually at very high rates. Most of these people will end up much worse off than someone in a podunk uncool city who was able to buy a home.

If you are here and do not see a clear path to financial independence within five years, leave. If you turn forty and are still renting your primary residence out of necessity, leave.

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>For most people, buying, owning and then selling their home is the accepted and straightforward path to financial independence.

This commonly held wisdom seems to be a holdover from the pre-2008 days, and I wonder how much longer it will last.

http://www.businessinsider.com/map-of-us-housing-market-grow...

Unless you're buying property in a coastal city, odds are good that your home value will, at best, stay the same year over year. If you buy a house in flyover country it might actually depreciate.

Add to that the costs of a mortgage, property taxes, repairs, buying/selling fees and home ownership seems like one of the worst possible investments to me.

You can rationalize it however you want, you can find data to support any position....but you will one day be sixty seven and you better have a plan.

In any case, I bought in 2010 (not my first home) and so far the assessed value has doubled. Even if there is a housing "crash", I will probably lose only about 25% off that. By 2030, recessions or not, it will have probably gone up 4x. I'm not trying to rub it in your face, I'm merely suggesting this is still a great way to retire and you probably don't have a better plan.

Levi Strauss built an empire selling clothes to gold miners, most of whom would end up in ruin. Many many people in SV have made fortunes housing the equivalent of today's gold miners.

From 1968 to 2004 the average home value in the US had an average 6.4% YoY growth[1]. An index fund will grow your money much faster than that, all without saddling yourself with debt or exposing you to the risks of the housing market, both as a whole and in your area.

You were lucky to buy your house at the bottom of the 2008 housing crash, it doesn't mean that houses are a good investment today.

[1] https://www.investopedia.com/articles/mortages-real-estate/1...

That is simplistic and doesn't account for the ability to get loans (investing more money than you have), tax breaks, and the fact that you need to live somewhere in the first place. Buying a house with cash and not living in it is probably a very poor investment, but that isn't what you are comparing.

What are the returns on renting?? Because that is where your money will go if you don't buy. If I forgo a house, I save $1500/month on a mortgage, but now I have a new expense called rent, I can't allocate it to investing.

I can easily borrow against my home equity. I cannot easily borrow against my index funds. Home equity also delivers an almost-fixed tax rate in California (prop 13) and numerous other deductions and incentives, none of which stock investments provide.

Home equity is much more powerful than a fund investment, they are not equals.

> "this is still a great way to retire"

what is? having a home that's appreciated 4x over decades to liquidate or having locked in a home to live in?

You coulda also buy Bitcoin 2 years ago, and get way more than that.

You kinda live in the past homie... Is not 2008 anymore.

I don't understand this argument. Let's put some numbers up:

Single: income starting at $130k a year. That's 7k/month after tax. Rent a room in SV for $1000 (or Berkeley), and spends $1000/month. That's still $5k/month in savings. If you're senior, that number goes up to $200k a year. That's $11,500. That turns into $9500/month in savings.

Couple: 2 income at combined $260k a year. that's $14k/month after tax. Rents a house in SV or berkeley at $3000/month. Spends $2000/month. That's $9000/month in savings.

etc

find me the room for $1k/month. find me that home for $3k/month. oh and be sure to lock in those rates for five years

ok let's say you were lucky enough to find a $1k room in a neighborhood not littered with gangs, bullets and drugs...

okay, now get married. where will you live?

okay, now your wife is pregnant, what now?

is success to you renting a bedroom in an apartment with three people when you are forty five?

Different strategies work for people in different situations. Renting cheaply and saving while single has worked for some people. If the situation changes, you'll have the down payment (and then some) to buy a house somewhere when it's time to make a change.

Maybe not in Silicon Valley. Or maybe the housing bubble will be over by then? There's no crystal ball.

Try using craigslist; there are many many rooms in SV for $1k/month. and many standalone house for $3k/month.

I am also thinking about these issues such as career growth vs. buying a home. Can you tell me why buying a home when working is so important? What about saving money and buying home when you are close to retirement?

No bank is going to hand out a first-time mortgage to someone when they are fifty-five.

Lots of people think they will pile up the savings while they rent. But life happens and they want to live somewhere nice in the present, so they end up making their landlord rich and no one else.

I am almost fifty. I now see life from the perspective of approaching retirement. At this point, if I were renting, I would be in deep trouble.

And forget this idea that you love your job and will just keep coding/growth hacking/whatever until you are seventy five...no one will want you around the office. This is just a myth people are constructing for themselves.

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