Author Topic: A Very Antimustachian Housing Decison  (Read 3395 times)

Masstache

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A Very Antimustachian Housing Decison
« on: May 02, 2017, 12:32:03 PM »
The Boston area is not the most affordable area in the country, but there is no reason to be stupid about it.  A house in my neighborhood (1950s Ranch, 1800sf, 3BR 2 bath, plenty big for a family of 4) sold last year for $520k, and the developer tore it down and put up a McMansion with all the Antimustachian bells and whistles that some people seem to require for some reason (4500 sf, 5BR, 3.5 bath).   The house just sold to a young couple with 2 small children, for the low low price of $2M.   But the couple was wise enough to put down 25%, so their mortgage is just $1.5M.  And thanks to today's low interest rates, their P&I payment is only $7500/month.   Town property taxes will be $28,000/year, and homeowners insurance another $3k/year.   

So EVERY YEAR this young family will be paying the following, all for the honor of having the freshest, trendiest McMansion on the block: 

$90,000 mortgage P&I
$28,000 property tax
$3,000 homeowners insurance
---------
$121,000 total annual housing cost

 I don't think we should plan to see them on this forum any time soon...

talltexan

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Re: A Very Antimustachian Housing Decison
« Reply #1 on: May 02, 2017, 12:46:27 PM »
Agreed that it's a shocking amount of money. But what if they're not financing a 30-year fixed. What if they got an interest-only mortgage? It's possible their P&I is really more like $3,800/month.

And that part of boston sounds like it's appreciating. With 25% down, they won't be under water any time soon, even with a pullback.

Chris22

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Re: A Very Antimustachian Housing Decison
« Reply #2 on: May 02, 2017, 01:25:03 PM »
Pardon me if I'm not going to worry about people who were able to put $500k DOWN on a house.  You may not agree with their lifestyle but it's the people trying to buy that house at 2.5% down that will have a problem, not 25% down.

jeromedawg

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Re: A Very Antimustachian Housing Decison
« Reply #3 on: May 02, 2017, 01:37:49 PM »
Maybe the dude is a hedge fund manager or anesthesiologist... you never know. That is an outrageous price for what sounds like an outrageous home though. Hey, you can have your cake and eat it too :)

BTW: how big is the lot? The original home was 1800sq ft and the developer tore it down and more that doubled the square footage of it, so it sounds like it's a pretty large lot (well, this is coming from CA standards where 5000sq ft or more is a "huge" lot)

ketchup

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Re: A Very Antimustachian Housing Decison
« Reply #4 on: May 02, 2017, 01:46:04 PM »
Maybe the dude is a hedge fund manager or anesthesiologist... you never know. That is an outrageous price for what sounds like an outrageous home though. Hey, you can have your cake and eat it too :)

BTW: how big is the lot? The original home was 1800sq ft and the developer tore it down and more that doubled the square footage of it, so it sounds like it's a pretty large lot (well, this is coming from CA standards where 5000sq ft or more is a "huge" lot)
I wouldn't be so sure of that.  Near where I work there seems to be a trend of knocking down a 700 square foot 1940s house and putting in a 3500 square foot 3-car-garage monstrosity that takes up almost the entire lot.  They look really silly, especially right next door to the old houses.

jeromedawg

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Re: A Very Antimustachian Housing Decison
« Reply #5 on: May 02, 2017, 01:52:55 PM »
Maybe the dude is a hedge fund manager or anesthesiologist... you never know. That is an outrageous price for what sounds like an outrageous home though. Hey, you can have your cake and eat it too :)

BTW: how big is the lot? The original home was 1800sq ft and the developer tore it down and more that doubled the square footage of it, so it sounds like it's a pretty large lot (well, this is coming from CA standards where 5000sq ft or more is a "huge" lot)
I wouldn't be so sure of that.  Near where I work there seems to be a trend of knocking down a 700 square foot 1940s house and putting in a 3500 square foot 3-car-garage monstrosity that takes up almost the entire lot.  They look really silly, especially right next door to the old houses.

lol, yea I've seen a couple full teardown/rebuilds in my neighborhood and it seems as though they'll usually sacrifice half the yard to expand sq footage of the home. Most of these homes look completely out of place too. One of these houses is apparently a business front for a psychic, as they put out a little sign in the front saying so - I'm not even sure how that works in my city in terms of advertising your business in front of your house.

MgoSam

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Re: A Very Antimustachian Housing Decison
« Reply #6 on: May 02, 2017, 01:59:53 PM »
I think ranch typically implies just 1 story, so it would be pretty easy to triple the size of a house without even messing up the yard if you're willing to build up.

Yup, I have a relative that lives in suburban Boston. I believe their house was about $1M and it is 3 stories and was a new development when they bought it. My guess is that since land is so valuable new houses will be built taller.

Chris22

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Re: A Very Antimustachian Housing Decison
« Reply #7 on: May 02, 2017, 02:15:36 PM »
In this area, losing a chunk of your yard isn't a really big sacrifice.  I've got 2 schools (with playgrounds) and a park within 3 blocks of my house.  I don't need a big yard for my own use.

BlueHouse

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Re: A Very Antimustachian Housing Decison
« Reply #8 on: May 02, 2017, 03:45:33 PM »
In this area, losing a chunk of your yard isn't a really big sacrifice.  I've got 2 schools (with playgrounds) and a park within 3 blocks of my house.  I don't need a big yard for my own use.

Even if losing a part of your yard isn't a sacrifice, in some situations where houses are close together (like row homes), a building that builds up next door can block all of your sunlight.  It's pretty awful to see 100 year old homes with beautiful yards or sunrooms or roof decks suddenly get shaded out by a new pop-up. oh well, progress.

Masstache

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Re: A Very Antimustachian Housing Decison
« Reply #9 on: May 02, 2017, 08:04:20 PM »
Pardon me if I'm not going to worry about people who were able to put $500k DOWN on a house.  You may not agree with their lifestyle but it's the people trying to buy that house at 2.5% down that will have a problem, not 25% down.

That's not really the point.  This is the Antimustachian Wall of Shame and Comedy.  Of course we don't agree with a lifestyle that involves plunking down $500k in order to buy a $2M house in order to have to pay $120k annually to live there.

The Mustachian approach would be to use the $500k sensibly in order to guarantee a sustainable lifestyle at a reasonable scale without requiring a 6 figure salary just to pay the mortgage for the rest of your adult life.

Chris22

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Re: A Very Antimustachian Housing Decison
« Reply #10 on: May 02, 2017, 08:33:28 PM »
Pardon me if I'm not going to worry about people who were able to put $500k DOWN on a house.  You may not agree with their lifestyle but it's the people trying to buy that house at 2.5% down that will have a problem, not 25% down.

That's not really the point.  This is the Antimustachian Wall of Shame and Comedy.  Of course we don't agree with a lifestyle that involves plunking down $500k in order to buy a $2M house in order to have to pay $120k annually to live there.

The Mustachian approach would be to use the $500k sensibly in order to guarantee a sustainable lifestyle at a reasonable scale without requiring a 6 figure salary just to pay the mortgage for the rest of your adult life.

In my opinion, you can mock people who are setting themselves up for financial disaster; mocking people who simply have different priorities than you is immature and silly.

Just Joe

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Re: A Very Antimustachian Housing Decison
« Reply #11 on: May 03, 2017, 06:42:26 AM »
Pardon me if I'm not going to worry about people who were able to put $500k DOWN on a house.  You may not agree with their lifestyle but it's the people trying to buy that house at 2.5% down that will have a problem, not 25% down.

That's not really the point.  This is the Antimustachian Wall of Shame and Comedy.  Of course we don't agree with a lifestyle that involves plunking down $500k in order to buy a $2M house in order to have to pay $120k annually to live there.

The Mustachian approach would be to use the $500k sensibly in order to guarantee a sustainable lifestyle at a reasonable scale without requiring a 6 figure salary just to pay the mortgage for the rest of your adult life.

In my opinion, you can mock people who are setting themselves up for financial disaster; mocking people who simply have different priorities than you is immature and silly.

Just mock everyone. That way nobody gets left out. You can't go wrong... ;)

honeybbq

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Re: A Very Antimustachian Housing Decison
« Reply #12 on: May 03, 2017, 10:18:33 AM »
Pardon me if I'm not going to worry about people who were able to put $500k DOWN on a house.  You may not agree with their lifestyle but it's the people trying to buy that house at 2.5% down that will have a problem, not 25% down.

That's not really the point.  This is the Antimustachian Wall of Shame and Comedy.  Of course we don't agree with a lifestyle that involves plunking down $500k in order to buy a $2M house in order to have to pay $120k annually to live there.

The Mustachian approach would be to use the $500k sensibly in order to guarantee a sustainable lifestyle at a reasonable scale without requiring a 6 figure salary just to pay the mortgage for the rest of your adult life.

In my opinion, you can mock people who are setting themselves up for financial disaster; mocking people who simply have different priorities than you is immature and silly.

I agree, sounds like they can afford it. Maybe they are billionaires? Maybe this is cutting back and being sensible. If they have that much cash laying around, sounds like they make/earn/have a fortune.

I have a ridiculously expensive house. I'm not a hedge funder but I can afford it. In competitive and HCOLA real estate markets like Boston, sometimes they are few alternatives to an expensive house.

talltexan

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Re: A Very Antimustachian Housing Decison
« Reply #13 on: May 03, 2017, 01:17:37 PM »
So the problem was sinking $500,000 into a house down-payment? When instead it could be used to finance FIRE in a LCOL area?

I think that's a decent argument, but we're missing one number: the income premium that the couple can achieve by living in that part of Boston. Do you have any idea about whether they can walk or take transit to work?