All Equitied Up With No Place to Go
The mathematics behind today’s “Trapped in a Bubble” story makes perfect sense. Say you decided to buy a $200,000 studio three years ago with 50% down and were selling it now for $300,000 so you could trade up to a one-bedroom. Your $100,000 in equity would now be $200,000. Great, but that one bedroom that…
The mathematics behind today’s “Trapped in a Bubble” story makes perfect sense. Say you decided to buy a $200,000 studio three years ago with 50% down and were selling it now for $300,000 so you could trade up to a one-bedroom. Your $100,000 in equity would now be $200,000. Great, but that one bedroom that was $400,000 when you bought your studio is now $600,000, so despite your increased equity, the mortgage you’ll need a mortgage that’s $100,000 higher than you would have three years ago to carry that one-bedroom ($400,000 instead of $300,000). Oh, and your income has not kept pace with the rise in housing prices. Doh!
Trapped in the Bubble [NY Times]
Lucy, I’m with you. Who takes real estate advice from guys on glorified chat boards who don’t know the diff btw principal and principle?
wait — they only made 100k on an apt they owned for 3 years in London Terrace? Having bought, lived, and sold there, I really find that suspect.
I once read that there is no “right” or “wrong” time to buy — if you are ready in your life to buy, have the financials all in order, etc. then it’s your time. You can read RE articles and projections from all over the world til you’re blue in the face but unless you have a crystal ball, you don’t know what the market’s going to do.
Lucy, can you help me out with my spelling too?
I think I prolly spelt a coulpa hunnerd things wrong
Yeah, I tend to dash stuff off without proofreading, this being the Internet and all. I can spell “pedantry,” though!
Hey Linus: “principal,” not “principle.”
Your posting:
But for most people, the best insurance is a simple rule: never, ever, buy your principle residence with plans that *require* you to make a lot of money off it, especially in the short term.
Linus is spot on (and so is VDH).
“never, ever, buy your principle residence with plans that *require* you to make a lot of money off it, especially in the short term.”
A simple, yet powerful concept. Truer words have never been spoken. I’ve made over 7-figures on the homes I have bought and sold over the past 10 years. While I certainly think of home ownership as an investment in the future, I never ever thought I would make this kind of money. Each purchase was intended to be a long-term committment. And if the value of my home today dropped below my cost, I would be bummed, but I would sty put.
You buy because you are making a long-term commitment – period.
I think that selling into a rising market can benefit the person trading up, but it helps a lot if they combine that with a move to a less expensive zip code. e.g. If you bought a 1BR 10 yrs ago in Brooklyn Heights, you wouldn’t be able to but a brownstone there with the profits, but you probably could in South Slope or Clinton Hill.
Great minds think alike!