dave

fear of missing out disease

83 posts in this topic

What you posted is classic fear-driving stuff - buy now or miss out forever because things are going to get even more expensive even faster.

I don't know why you felt that way. I'm not fearful, its the timing and other family circumstances making me want to rethink the need for delaying any further.

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I don't know why you felt that way. I'm not fearful, its the timing and other family circumstances making me want to rethink the need for delaying any further.

I don't know why either, I'm just reporting the way I felt.

But having read the calcs, etc, I can comment on those: I think you can summarise your thought process by saying "it doesn't make much sense to buy a house now, financially, but 2 years from now it could be an even poorer proposition". Your conclusion is that "therefore, one should buy now".

My thoughts (other than "lol") are that if that's the situation you face in 2 years time, then the right decision, financially, is to not buy now and not buy in 2 years time.

Non-financial considerations are separate, of course. What are your timing/family circumstances that are pushing you to buying sooner rather than later?

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I made a typo. In my calculation I was meant to say 220k savings and a 330k loan amount, adding the stamp duty and other expenses the total purchase price is 550k.

The savings while renting would have been 20k and rent paid for 2 yrs would be approx 38k. Whereas the loan repayments without including maintenance costs and council/water rates would be around 33k. I did not include annual maintenance assuming you buy a home that doesn't require any major repair in the first 2 yrs.

Purchase price of a home after 2 yrs would be still 603k. You would still need to borrow 363k at year 2 to buy a home. The point Im trying to make is that you dont borrow less by saving more within such a short period, unless there is something major impacting the price.

I used 5% for home price growth and you have made an assumption saying IR will not go down any more than 4% in the next 2 years? I suppose you could say my assumption of 5% is vague too but I took that from past sales over two years. A home which was purchased 2 yrs ago for $470k is now up for sale asking price over 499k. The owner has done bit of reno probably worth max 8-9k. Highest offer received was 540k+ - that to me is almost 7% price change. The same suburb has recorded 9% price increase since last year, of course thats just media price.

I agree some crazy buying going out there and unemployment scare is the only one thing that can slow this down. Please feel free to disagree.

Ah OK. Here's the revised Rent versus Buy calculation based on a 220k deposit and growth at 5% per annum. I gave myself 5% return on my 220k as well. Chances are if property is rising at that level then the economy is doing ok and I can make 5% net. Telstra was paying me 8% franked for example.

RentVsBuyResult2_zps837b0732.jpg

I'm not sure where you get the 603k value for a house purchased @ 530k and rising @ 5% p.a

530,000 * (1.05)2 == 584,325

From the calculator:

The property price after 2 years 584,325

The accumulated savings from renting vs buying of the renter 281K

The additional 20K (rather than the 30K per annum) they were able to save on top from your changed assumption 20K

So had the renter saved even 20k over two years they would require a loan of 584 - (281 + 20) == 283K

Add the stamp duty and the total loan is 303K to buy the property for 584K. (27K saving) :)

You're right I have made the assumption that rates will not fall over the two year period. If they did fall then that would indicate that economy was worsening so that would call into question your 5% growth assumption. I also assumed they wouldn't rise.

You may not spend 2K maintenance in the first 2 years but then again you may have to spend 20k. I think the cost needs be included as it a risk to home owners that doesn't apply to renters. We are looking at the total cost of ownership.

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Agreed. only with one correction, I would put saving at 4% instead and there is a very good chance of the IR going down further.

Did the above on the same site - By buying your home instead of renting we estimate your wealth should be $8,042 less greater over the next 2 years.

And if you add 6k approx principal paid off the loan and the IR payments you would have reduced my sending your savings to an offset account, the difference of rent vs buy is very minimal.

Jobs are being axed... today smh posted the old news of QLD govt outsourcing IT costing 1700 IT workers. I'm in IT and strangely also working for a public dept but I'm not overly worried. Im hoping this would be a wake up call to NSW and other dept's, they need to perform to keep their jobs. On other hand, outsourcing does not come cheap... Projects gets funded and highly paid 'consulants' and 'contractors' get hired and half way through the project things stop and they get axed. .. we went through a restructure which lasted for nearly 2 years! If it was private I bet it would have been done in a quarter.

I better not go off-topic smile.gif

Edited by hpk

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Agreed. only with one correction, I would put saving at 4% instead and there is a very good chance of the IR going down further.

Did the above on the same site - By buying your home instead of renting we estimate your wealth should be $8,042 less greater over the next 2 years.

And if you add 6k approx principal paid off the loan and the IR payments you would have reduced my sending your savings to an offset account, the difference of rent vs buy is very minimal.

Jobs are being axed... today smh posted the old news of QLD govt outsourcing IT costing 1700 IT workers. I'm in IT and strangely also working for a public dept but I'm not overly worried. Im hoping this would be a wake up call to NSW and other dept's, they need to perform to keep their jobs. On other hand, outsourcing does not come cheap... Projects gets funded and highly paid 'consulants' and 'contractors' get hired and half way through the project things stop and they get axed. .. we went through a restructure which lasted for nearly 2 years! If it was private I bet it would have been done in a quarter.

I better not go off-topic smile.gif

I'm glad we agree. :) The buy now or miss out forever argument is a furphy and FOMO is debunked for the mindless spruik that it is.

Although 4% return on the renters investments would assume that they kept everything in term deposits and didn't have a diversified portfolio even then the renter is still better off by 8K after two years.

I can now sit back and not buy for at least two years safe in that knowledge. :D

There is an Increasing your wage thread in the off topic forum that is the default IT career whinge area. Happy to discuss outsourcing woes. Sounds like we have that in common. :(

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Thanks hpk and staringclown for the the conversation.

That calculator takes the emotion out of the situation, and it may just prove helpful to others who are exhibiting the same symptoms, and/or hearing the same tired argument.

Still. Human beings can be a mindless lot at times, and we are driven both by our mind and our heart.

It can be difficult to convince someone differently, if they have their heart set on a particular outcome.

Convincing the mind in that case requires an extra degree of influence.

At some point, I think everyone wants to own their own little piece of the planet.

For some, it is just the security factor, for others its the prestige associated with being a land/home owner.

I have a hope that my children may one day all have their own home, but I'm not encouraging them to jump in at current price to wages ratios.

They are struggling enough just to live, let alone adding that to their stress levels.

I wait for that day where sanity rules again.

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1373193547[/url]' post='68157']

Thanks hpk and staringclown for the the conversation.

That calculator takes the emotion out of the situation, and it may just prove helpful to others who are exhibiting the same symptoms, and/or hearing the same tired argument.

Still. Human beings can be a mindless lot at times, and we are driven both by our mind and our heart.

It can be difficult to convince someone differently, if they have their heart set on a particular outcome.

Convincing the mind in that case requires an extra degree of influence.

At some point, I think everyone wants to own their own little piece of the planet.

For some, it is just the security factor, for others its the prestige associated with being a land/home owner.

I have a hope that my children may one day all have their own home, but I'm not encouraging them to jump in at current price to wages ratios.

They are struggling enough just to live, let alone adding that to their stress levels.

I wait for that day where sanity rules again.

+1

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My thoughts (other than "lol")

I hate the phrase "lol" and yet that was still one of the best things I have read tonight (SS peregrinations thread wins in that regard)

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I hate the phrase "lol"

Yeah, sorry. I didn't like typing it either, but it seemed like a reasonably apt (and brief) way to describe the particular mix of incredulity and derision I have for the "buy now or miss out forever" so-called 'logic'.

I'm unsure if hpk is having a bit of a troll, actually. Everything, except his length of tenure on this forum points that way, in my mind.

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One could argue the whole property argument is a troll to those who are under 30-35.

I really am curious how it all turns out.

Can't afford to buy and pay off a house.

No wage push inflation.

Can't afford reasonable education for family.

Super pays less than required for retirement.

Have fun with that.

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One could argue the whole property argument is a troll to those who are under 30-35.

I really am curious how it all turns out.

Can't afford to buy and pay off a house.

No wage push inflation.

Can't afford reasonable education for family.

Super pays less than required for retirement.

Have fun with that.

Surely all that says "costs are too high, so costs will come down"?

Maybe we will need to wait for a sufficient shift in the demographics for all these things to begin to be resolved, but I think some external jolt or fundsmental internal financial limitstion will come earlier...

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I'm unsure if hpk is having a bit of a troll

You can label me whatever you like but I'm speaking the facts. I was told by the agent yesterday that the sold price for the property I offered was more than 20k. My offer was based on 6% growth each year. This suburb def matches the median price growth of 9% quoted on soldprice.com. If you feel that is upsetting you or anyone I will stop posting.

And the point that savings you make each year is not that great when you consider the principal payments you would have made to the loan if you were to buy.

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You can label me whatever you like but I'm speaking the facts. I was told by the agent yesterday that the sold price for the property I offered was more than 20k. My offer was based on 6% growth each year. This suburb def matches the median price growth of 9% quoted on soldprice.com. If you feel that is upsetting you or anyone I will stop posting.

And the point that savings you make each year is not that great when you consider the principal payments you would have made to the loan if you were to buy.

There are many people who have purchased while members of this forum. I have no issue with that. Numerous reasons including family, stability etc are valid.

A financial argument is not so easy to make. The median price in my suburb is around $800,000 and I pay $390 rent per week. If house prices double every 7 years or inflation skyrockets then it might make sense. But even at 5% interest rates (historical lows) it's approximately $40,000 vs $20,000 per year with a saving of around $20,0000 a year or over a third of the net income of a median income earner.

For what it's worth your comments strike me as troll-like. Though I'm unsure if you intend them that way.

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yep I understand. I'm just being too impatient and little frustrated. I've decided to continue looking and wait. I cant understand what is driving this mad rush, even after reading about so many job loss/outsourcing recently.

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Well, where I'm looking and what I'm looking for the difference between rent and a P&I* over 30 years is a mere $70 a week.

*at current emergency level interest rates and 10% deposit

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Well, where I'm looking and what I'm looking for the difference between rent and a P&I* over 30 years is a mere $70 a week.

*at current emergency level interest rates and 10% deposit

Maybe its because I'm getting older, but 30 years is a long time.

A lot happens in 30 years now.

A lot happens in 1 year.

30 years ago, computers had only just appeared. There were no such things as mobile phones, etc.

Somehow this has to be averaged out so that those entering into such a mortgage, can be sure that at least in the first 10 years they can meet the fluctuations.

(I know, when you're young, you just don't anticipate life being difficult - we are bullet-proof in our thinking)

I don't want to stop anyone from owning their own home.

In fact that is what I want for my own children.

I know how difficult it was though for us (my wife and I) as young people to get ahead, and our mortgage at the time was just $35,000. (And we were out of the mould because my wife and I both worked at the time)

I dearly want all you young people on here to have the privilege of owning your own little nest, but I'm concerned it will be at the expense of enjoying life. That's my dilemma.

I want it to change so that you can afford to do it a lot cheaper and with a lot less hardship. I just don't know how to make that happen.

We have all allowed this to happen, (we like the bigger wages, credit lifestyle, etc)and so we are all going to have to be a part of the solution.

That will require current owners to settle for less value on their properties, and that is the one variable I have trouble identifying an answer to. En masse, that is.

What I do know is that doing something out of fear, is not always the best motive.

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That will require current owners to settle for less value on their properties, and that is the one variable I have trouble identifying an answer to. En masse, that is.

I thought I needed to qualify that statement a little more.

Would any of us, having forked out $500,000 for a home, within a short period (eg; 5 years) suddenly be prepared to accept $250,000 for it? Given that we still had a mortgage attached to it, and that to purchase elsewhere would require a similar amount again. That is the dilemma for me.

I know that there are downward pressures associated with job loss, or mortgage stress, but where is the crack in the armour going to come from to drive prices anywhere near that level.

Unless the world global banking system has a catastrophic collapse, and that will mean all investments lost as well, I can't see where the change is coming from. We have seen the extent that governments have gone to, to ensure it doesn't happen. I can imagine they would go to the extreme of totally taxing the population and stripping them of all assets before they would even consider a reset of the extent many of the younger generation require to compete.

I should clarify, as well, that this is not just a young person's dilemma.

There are many people around my own age who are facing a retirement in a renting situation.

Divorce is one cause of this, as dividing the assets of a marriage severely curtail each partners spending capacity.

With the divorce rate in older people rising, there may be a few more contemplating their future.

I think the situation of fear-of-missing-out may well affect them as well.

Sorry I've posted a couple of long posts.

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Interesting... I always thought older people are downsizing and selling their existing home for a profit. Never considered divorce rates.

So what will slow this madness? i dont see a recession as bad as the US hitting our shores. APM thinks you are silly if you think there is a bubble.

from SMH...

Lisa Jones, who rents a home, has been trying to secure an inner city terrace in an auction.

She attributes her lack of success to the low number of listings.

''We go to auction with what we think is a fairly handsome sum of money and we miss out on properties that I don't even want to live in,'' she said.

''We keep thinking that there is a bubble happening at the moment … but we've never seen prices go down except for short little blips.''

Figures released by SQM Research show the number of Sydney homes listed for sale is at a three-year low. Last month, there were 23,707 properties listed, 23 per cent less than in June last year.

RP Data senior research analyst Cameron Kusher said that while Sydney prices seemed ''awfully high'', in real terms the long-term growth was underwhelming.

''Adjusted for inflation, there has been no growth over the past decade,'' he said.

Also please do not generalise the whole of youth as big spenders and want-it-all without much effort.

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Here's an interesting thing I learned today. In Queensland if you sign a contract to buy a property, you as the buyer are responsible for insuring the property. That's right, you don't own the place, you don't have finance sorted, nor the Building & Pest arranged but you're 100% liable for the property ....... What the censored.gif:huh:???

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APM thinks you are silly if you think there is a bubble.

Nice one HPK - referencing APM. So do you think we are silly?

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from SMH...

RP Data senior research analyst Cameron Kusher said that while Sydney prices seemed ''awfully high'', in real terms the long-term growth was underwhelming.

''Adjusted for inflation, there has been no growth over the past decade,'' he said.

Doesn't this just confirm that the whole FOMO issue is null and void? If your wages are rising faster than inflation, and house prices have remained relatively stable, there is absolutely no rush to "jump in" (and for future reference, when you read of young hopeful couples "jumping in", make sure you picture them standing on a platform with a hole in the middle and a heavy noose around their neck).

I was only advised a few years back (by a car salesman who'd just signed a rather large mortgage with his grlfriend) that I should hurry up and buy a house. Why? He went on to explain that if I don't buy a house now I probably won't ever be able to afford one. My respect for his work ethic never fails, but my respect for his cognitive ability certainly slumped in a big hurry.

If no one can afford to buy a house, I really don't understand who you are going to sell them to.

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One could argue the whole property argument is a troll to those who are under 30-35.

I really am curious how it all turns out.

Can't afford to buy and pay off a house.

No wage push inflation.

Can't afford reasonable education for family.

Super pays less than required for retirement.

Have fun with that.

The ABC had a segment on the economy and the thought that property and other sectors will pick up the slack of the mining boom. The HIA were predictably saying that the government needs to do "much more" to achieve this and then an economist came on and casually stated that even with rates at record lows even middle income families would struggle with entering the market now. This strangely didn't seem to be ringing any alarm bells.

The admission was that house prices were "beyond the price point" (sic) of a majority of middle australia and that the government should be doing more on affordable housing seemed unremarkable to the economist. Chris Joye then proceeded to blame government taxes and high transaction costs.

I'm not sure whether we are headed for a society with a new landed aristocracy or a bust. Neither choice appeals.

Edit: Joye was pretty keen on super funds being used to purchase more property and infrastructure. All that lovely money going begging

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Well, where I'm looking and what I'm looking for the difference between rent and a P&I* over 30 years is a mere $70 a week.

*at current emergency level interest rates and 10% deposit

$70 isn't much, but how quickly could you pay off the principal (if you went pretty hard)?

Edit to add: does this mean that interest-only at current rates would be cheaper than rent?

Edited by Peachy

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and for future reference, when you read of young hopeful couples "jumping in", make sure you picture them standing on a platform with a hole in the middle and a heavy noose around their neck

:laugh:

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$70 isn't much, but how quickly could you pay off the principal (if you went pretty hard)?

Edit to add: does this mean that interest-only at current rates would be cheaper than rent?

The assumption is that rates remain at emergency lows for 30 years. IMHO a more realistic assumption is that the long term rates would sit at ~6.5%.

As sol says 30 years is a long time. The problem I have with taking out a large mortgage (apart from my abhorrence of paying banks large amounts of interest) is that the interest is front loaded. Borrow 500K and after 10 years your principal is still 406K and you've paid the bank 358K even at the current lows. Even if you hammer away and pay extra the extra goes on bank interest rather than the principle.

It gets worse at 6.5%. After 10 years you've paid 429K and increased equity by 70K. Sure inflation does it's work over the time scale. The risk on period for housing purchase is the first 5-10 years. If you can survive this period only a real crunch will see you in negative equity. The principal doesn't really start decreasing much until 20 years. Even then you still owe 195K.

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