- Nearly 4 Years After Buying the Land, Phillips 66 To Move Into Westchase Headquarters in July [HBJ; previously on Swamplot]
- Houston Housing Market a ‘Cause for Concern’ as Florida Atlantic University Report Forecasts Housing Price Decline [HBJ]
- College-Educated Houston Residents Need at Least 2.2 Years To Save 20% Down Payment on Starter Home [Houston Chronicle]
- New Restaurant Taverna Now Open at River Oaks District [Houstonia]
- Owners To Close Maria Selma Next Month, Reopen as Texas Shrimp Shack Amid Mexican/Tex-Mex Competition in Montrose [Houstonia]
- Recent Flooding Damaged or Destroyed About 880 Homes in Montgomery County [Houston Public Media]
Photo of Buffalo Bayou: Marc Longoria via Swamplot Flickr Pool
Headlines
Re: College Educated Houstonians need 2.2 yrs for 20% down payment
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A bit over 2 years is nothing so this is good news. The article said those with student debt would need 4.5 years, which is still a relatively short period of time if one is taking out a 15- or 30-year mortgage.
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I’ve never understood why someone is in a rush to take on a big debt – take an extra year to plump up that down payment, which saves on interest cost. More cash down = more financial freedom.
Here’s a link for the HBJ article that isn’t behind a paywall
http://www.fau.edu/newsdesk/articles/housing-market-moving-deeper-into-buy-territory.php
Houston housing market is in bad shape. All you have to is look at HAR to see how many houses are for sale and how few are pending (at least at the $750k price point and up).
I didn’t bother to go too far into the details, but did see they’re finding most grads making between $60-65k a year and saving $350 mo (no debt) or $250 mo (with debt). That means in that 2.2 years the average grad with no college debt would accumulate $9,240. That seems to be around 10% of post-tax income which I guess would be acceptable if that person is still putting at least 15% in a 401k. How many homes in Houston do you think are selling with less than $10k available for down payment and closing fees?
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@htown, the $750k plus is a small fraction of overall sales though. I’m expecting next summer will be the worst of it with the low O&G activity from 2015 really biting hard, but we won’t see anything that would be considered “bad shape” overall. However, at this point I certainly wouldn’t expect much difference in selling prices between 2015 and 2020 sales. There’s just so much for rent right now it’s crazy and I still consider the current asking prices way too high. It will be a slow balancing act.
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I’m surprised there’s still been a lot of talk about Dallas. Was Dallas picking up after Houston did or why has it continued to fare better than Houston at this point? I can only think they have a slightly more diversified economy still pulling in the NYC/CA moneybags with a heavier finance footprint than us.
“…amenities include a soccer field, a sports deck with putting greens…”
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I have been trying to figure out what they were putting on top of that parking garage for months now. Figured it might have been something sports related when the netting went up last week. that or they decided to stick a giant aviary on top of it.
@Major Market, more cash down DOES NOT equal financial freedom. Putting more money down only sucks liquid assets out of your balance sheet and only reduces your monthly payment by about $40 per $10,000. You can get an 8% average return on one of those robo-investment accounts and still remain liquid. You can use that cash to cancel high interest debt somewhere else (12% credit card). You can payoff student loans and besides effectively lowering your interest rate, you are transferring that debt to a bankruptcy dischargeable debt vs non-dischargeable. So, the idea of putting as much money down into a house is overly simplistic and outdated.
@ joel: DFW (particularly the Dallas side of the metro) is much, much more diversified economically than Houston. Reportedly the slowdown in upstream oil & gas has been but a blip for them. Dallas has become very tied to the overall national economy, rather than Texas-specific industries. It has benefited from corporation expansion and relocation by a diversity of industries from around the nation (most notably California). Expect it to do very well as long as the national economy isn’t in the total dumps.
@commonsense – I agree with most of what you said, other than the 8% return. Very few investments [available to the masses] are returning anything close to that these days. Returns have been getting worse each of the past few years.
@ commonsense: I have to echo Superdave that making 8% nowadays is not easy. Some people prefer to sleep easy at night knowing that their monthly interest nut on the McMansion is easily covered.
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I’d agree that student debt OR high-interest credit card debt should be retired first since the former is not dischargeable and the latter is expensive. After that, it becomes a bit more of a personal choice on what the priority is. So, I think everyone’s situation is different but no one loses with less debt – except bankers.
@htownproud,
You don’t need to read a university study to know the Houston housing market is going through a downturn. You don’t even have to look at HAR. To gauge the health of the Houston real estate market, you only have to look at the Daily Demolition Report: only 2 residential permits today; only 1 yesterday. Crisis!
I got the 8% number from a review article of various discount automated brokerages averaged over last 12 years, not trying to defend it or vouch for it, wasn’t really my point. My overall point is that there are so many better uses for cash than locking it in and never seeing it again if you’re pro-active with it. Especially with sub 4% mortgage rates these days, it’s “cheap money”.
Perhaps my sense is uncommon since I plowed all my cash into paying off my 3.5% mortgage as soon as possible after purchasing my house. I could have put it all in Apple stock and made millions, or I could have put it all somewhere else and gone broke. I sleep well at night knowing my home is all mine….
If we’re talking financial freedom, then a typical young person right out of college has no business at all looking at buying a home. You should only do that if you are very confident that you’ll be staying in one place for a long time, four years at the very minimum! Otherwise its hard to recoup the interest-heavy initial years of amortization as well as transaction costs.
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In addition, your first priority should be to carry a substantial amount of liquid assets — cash equivalents. Its not good enough only to save up for a down-payment. You need six months of expenses AT LEAST. You should want even more.
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In Houston, another consideration is diversification of your assets. If the economy turns, then your job is at risk. Your whole industry (in Houston) at risk. Do you really want to be tied into a housing market that is driven by the very same factors that enable you to be gainfully employed?
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And what happens if you get married or have a kid or something? Being young is a time when there are a lot of life changes that come at you from any angle. Its a hell of a lot easier and potentially much less expensive to have the flexibility associated with renting.
I am concerned about impressionable readers now thinking that it is easy to get an 8% return on investments in a near-zero interest rate environment. Whoever made this suggestion fell prey to some broker’s hype, and both parties should be ashamed of themselves.
@Local Planner
Houston is twice the size Of Dallas and despite a temporary oil slump, more people continue to move to Houston vs. Dallas. Houston’s great diversification since the 80’s saved it this go around…but I agree with you it’s got to do better (all Texas cities need to better with diversification). And while it must continue to diversify, it’s resilience thru the slump is remarkable…even while some love to overstate real and perceived negativity. Anyway, Dallas (Texas’ 3rd largest city) should do just fine. Houston will as well.
Yeah, I’d agree that 8% is an aggressive figure. If that’s your alpha then what’s your beta? What other risks are present, aside from those that are cyclical? When the risk-free rates of return are at, near, or maybe even below 0%, yeah I’m not buying this strategy. You can use it, but only if you honestly have a good reason to believe yourself to be better than the market.
@ Honest Truth: In case it wasn’t clear, I was talking about the metro areas of both regions, which are very similar in population (DFW is just a bit larger). By “Dallas” therefore I mean everything east of SH 360 and DFW Airport, which includes the City of Dallas and a large array of suburbs, most notably SE Denton and SW Collin counties where much of the diversified metro area economy is located these days. The Fort Worth side is feeling more of the oil and gas slowdown, though not as badly as Houston.
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I do expect the Houston region to recover just fine in the long run as well; it always has, though it can take a few years. But right now, there’s no question that Dallas, Austin and San Antonio are still zipping along pretty well, especially compared to Houston. I understand that there’s some nervousness in some portions of the tech sector, so Austin might be one to watch for wobbliness in the near term. Tech affects Dallas as well, but it less dominant there due to, again, overall diversification.
@Local Planner
Thanks for clarification. People always use ‘metro’ loosely when comparing Houston and Dallas. Greater Houston is a true metro and anchors alone, whereas the DFW metroplex (a different designation) is a combination of 2 merged metros…(Dallas-Irving-Plano metro + Ft Worth-Arllington-Euless metro). In an effort to better compete with powerhouse metros like Greater Houston, several years ago Dallas’ congressional delegation got Ft. Worths’ delegation to go along with lobbying the govt to combine the 2 metros to create a new designation called a metroplex. Another example of a metroplex is Minneapolis-St Paul (MSP). That 2 metro combination does give DFW slight population and land area edges and a fake bragging right, but in reality Greater Houston is much bigger than the true Dallas metro, and much, much bigger than Ft. Worths’…-(it’s the combination of those 2 original metros that helps what we call DFW compete with Greater Houston. Separately, as they were, neither of the 2 could compare to Houston. Always good to make that distinction…lest Dallas boast.
@Honest Truth – have you ever heard of “distinction without a difference”? Maybe start at http://rationalwiki.org/wiki/Phantom_distinction .
@ HT: I honestly don’t see much point in making a distinction between the Dallas and Fort Worth sides of the greater Metroplex, as there’s no longer any open space between them to demarcate. A lot of commuting happens from one side to the other as well – not so much between the actual cities of Fort Worth and Dallas, but between other places that would otherwise be associated with one of the original smaller metros. I treat SF, Oakland, and SJ the same way, even though they were originally also separate metros. Just no point in making the distinctions. LA and Riverside too. DC and Baltimore are nearly there.
Meanwhile, no one in Dallas could give a flip about Houston and its never ending inferiority complex………..