Should You Buy a House?
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Should You Buy a House?


Thank you to ‘Brilliant’ for supporting PBS Digital Studios. When you hear the phrase, “The American
Dream,” what picture comes to mind? For a long time, the classic version included
a white picket fence, 2.5 children, and of course, a house. The importance of home ownership is still
embedded in American culture. 7 in 10 adults say they want to own their
own home someday, and yet… actual ownership has dropped to its lowest level since 1967. The biggest culprit? Those pesky millennials, with an 18% decrease
since 2004. If owning a house is still important, then
are young people just being foolish? Or are they reacting rationally to a changing
economy? In theory, owning a home still makes a lot
of sense because it kills two financial birds with one stone: It’s a place to live, and
a long-term investment. Every time you make a mortgage payment or
the value of your home increases, you’re saving money for your future self. It’s like a piggy bank you can sleep in! But the world is changing in ways that make
this scenario harder to pull off: Younger people have more debt than previous
generations, mainly thanks to student loans. The average amount that a graduate owes has
tripled in the last 25 years, which means that many young people already have a house-sized
debt cloud hanging over them, without even having an asset they can sell. As if that wasn’t bad enough, millennials
have a larger burden for retirement. In ye olden days, the average American could
expect 3 sources of income to support them in their autumn years: A pension, social security,
and personal retirement savings. But thanks to shifting labor trends and shrinking
unions, pensions are quickly becoming a thing of the past, and it’s giving this three-legged
stool a major wobble. And since we can’t expect social security
payments to substantially increase anytime soon, younger people will be expected to make
up the difference with larger retirement savings, which means less cash on hand to put towards
a house. The shifting labor market has also led to
more pressure to be geographically flexible, instead of being tied down to one location. And the importance of travel for young people
is at an all-time high. In the US, millennials rank travel as MORE
important than home ownership and report that they’re more likely to set aside money for
that rather than buying a home. Considering these factors, it’s no wonder
millennials are viewing home ownership as more of an option than a necessity. So is it an option that’s right for you? Here are some questions to ask yourself: 1. Can I get good mortgage terms? Unless you’ve got hundreds of thousands
of dollars sitting around in cash, you’re gonna have to borrow the money and pay for
the privilege. How much you’ll pay in interest is determined
by a number of factors, but generally speaking, in order to qualify for terms that make homebuying
a good investment, you’ll need a consistent, provable source of income, a credit score
of 760 or higher, and a down payment at or close to 20% of the home price. If you can’t meet these requirements, it
might not be the right time to buy a home. Will I have emergency money left over? The money you have wrapped up in your house
isn’t liquid, meaning you won’t be able to get to it easily if you need it. So if your A/C breaks down
or your car needs repairs, and you don’t have any emergency funds set aside, the only
thing you’ll have to cling to is debt–which is more of a lead weight than a life-vest. So be sure to have at least three times your
monthly expenses left over after your down payment. 3. Can I stick around for at least 5 years? Buying a house that you have to sell again
quickly probably won’t end well. You have to consider up-front costs like realtors
and inspections. Plus, at the beginning of your mortgage most
of your monthly payment is going towards interest — meaning your debt isn’t actually shrinking
that much. For many buyers, it can be a decade or more
before that ratio is even 50/50. So how do these factors shake out in a real
world example? Let’s…. RUN THE NUMBERS! This is Ramon. Ramon has a good, steady job, he’s been
saving money and he’s thinking about buying a house for around $200,000. He only has enough for a 15% down payment,
and no emergency fund. Also, there’s a chance Ramon might decide
to relocate to New York with his girlfriend when she graduates from law school in three
years. By that time, Ramon will have only paid off
around $9,000 of the loan principal. If the home value increases by an average
of 5%, he’ll be able to sell for bit more, but that’s not counting the realtor fees,
taxes, and upkeep. If everything goes perfectly smoothly, Ramon will just break even. But if just one thing goes wrong – like losing
a job for 6 months or he has to replace his home’s roof or AC, it’s a different picture. Ramon might want to hold off on buying a house right now. If you’re like Ramon, don’t freak out! You could never buy a home but still be okay
financially. There are even some perks, like not being
responsible for maintenance costs, and being able to easily pack up and move if you get
a better job opportunity. But, investing is like exercise: some workouts
deliver better results than others, but anything is better than doing nothing. So, if you’re not going to buy a house,
it’s extra important that you’re making investments in other areas, like a 401(K),
or a company that you own. There’s no sugarcoating it: When it comes
to homebuying, Millennials got a tough deal. But you can overcome that disadvantage by
understanding your situation, and starting to plan for it now. And that’s our two cents! One of our favorite segments of Two Cents is “Run the Numbers!” We take a financial concept and put it in the real world. With real financial calculations. It’s pretty cool to see how small things can become big things over time! From compound interest rates to hidden fees that stack up! Maybe you want to see how much interest you’ll pay over the lifetime of a mortgage. Or how much you’d end up with if you quit your gym membership and invested that money instead. With a little hands-on practice, you can master the art of personal finance too! One fun, easy way to hone your financial math skills is at Brilliant.org They offer hands-on, practical lessons in math and science. Each lesson puts you in the driver’s seat and allows you to “Run the Numbers” for your own life. For more information about Brilliant, head to Brilliant.org/twocents [MUSIC]

100 Comments

  • Raymond Whitehouse

    I love your You tubes and they applie to the UK 🇬🇧 so much, I share your films with neighbours, friends and family great work guys and thank you 👍

  • CW4 Miller WG15

    Gen X here. No excuse millennials. College is a luxury and you decided to go. It’s your fault. When did college become a necessity? I am a college drop out. But my house is paid for. My wife and I own 2 rentals. Millennials rent them. I make 400 dollars profit on top of my mortgage. I have one millennial asked for advise how to buy a house. I told the guy I worked 6 days a week for 3 years and saved up 20 k for a house. My renter yells at me. That’s crazy! I will not work 6 days a week. How can I go on my trips and wine tasting? I fucking laughed and said. I gave you my advice. What do I know? I drive a 2018 BMW X5 and own rentals….
    I had bad credit and nothing in my early 20s. I spent my 20s working hard and not spending money at all. Now I go on big trips to Hawaii and New York. I am married 19 years and have 6 year olds. My wife and I dated for 4 years before we married. Then we busted ass and worked. No kids till we purchased a house and situated our jobs. I meet many millennials who never worked in high school or college. Your parents told you not to worry about making money. I had to get a job all year long in high school. Many Gen X had shitty cars and had to work. We stayed working at 16. That’s why we have a heads up. Many of you guys still live at home and rent apartments. You do not get it. I shrug my head when I get my daily Starbucks and my barista is 32 and works 2 part time jobs…

  • RICHARD1974

    The American dream? I immediately thought of Dusty Rhodes….lol. I have never thought of buying a house. I would rather buy land to build my own house.

  • Real Estate Dad

    This information is extremely wrong, at least for Houston Market. You definitely dont need 20% down and 580 is currently the lender minimum credit score here in Texas.

  • Paola Hernandez

    Honestly, I don't know if I ever see myself being a homeowner. I may consider it later in life, but right now, is just not the right time.

  • Pangaea Menslijk

    What about apartment vs condo vs craigslist rental? Would be an interesting comparison for those of us who don't plan on having kids or don't want to do all of the maintenance that comes with a house.

  • Josiah Benson

    Once again, this channel is total bullshit. I bought my house with a 5% down payment with a 700 credit score and I got a conventional loan. You guys are just NPR propaganda

  • Ciara Diamond

    A credit score of at least 760 for a good interest rate?! And I thought I had a decent credit score for home ownership… sigh… guess this millennial might be renting longer than she thought.

  • Sarrah Wilson

    Listen to Dave Ramsey. Anything you want is possible. It's all about your attitude and how you take it on. This is for all generations. Because the generation before us is struggling too.

  • fireflocs

    Look, I need to get the fuck away from my parents, alright? So I either need to buy a house of my own, or I need to remove them from their house, and that second one it a bit more troublesome for various reasons.

  • Ray Bands

    ( ● )"|/"( ● )
    Oh ! Now She Wants To Trap The General Public With Economic Enslavement, Yeah That's What We Millennials Need More Government Debt!
    Lets See 100k Student Loan Debt, Each Illegal Alien 37k Free Stuff, 50k For Ebola Treatment, 200k HIV Treatment, ……….

  • Derrick Bommarito

    It's really weird hearing the PBS opening melody and not seeing a black hole or some abstract astronomy diagram.

  • Heartluxe

    I currently put 6% in my 401k because the company matches it. You can use the first 10k for a first home with no penalty.

  • josh amezcua

    This video is stupid if you buy a house your payment will 100% be cheaper then renting lol the only reason not to buy a house is if you plan on moving alot

  • josh amezcua

    This video was pretty much immediately discredited when they said you need to pay realitor fees when selling your house no one needs a realitor especially the seller

  • TheSnowFoxParty

    I really want to get a house. Ive been in apartments since college and even after college. I just want to date marry and get a house with my future spouse – at least then with our combined income we can both afford it.

  • Wilfred Mena

    A 760 credit score for a home?? Yeah really misleading not even close to the actual score you do need. For FHA you need a credit score of 580, for other loans with more favorable terms you need a credit score of around 680

  • NV2 Noogets

    You Americans complaining about your housing prices smh, a decent apartment here will cost as much as an alright house there

  • Abitamim Bharmal

    Be like Asians. Live miserly and buying a home becomes a hell of a lot easier. Never eat out, never go to a club, never have coffee outside your home, etc. Also, focus on an engineering, computer science, or medicine related degree and make more money in those careers. Who cares about your passion?

  • Stone Cold Fusion

    I just have to say… both the production quality, and the content of this channel is off-the-charts good. It absolutely deserves to reach millions more viewers than it already does.

  • trash hauler

    Well your two cents are worth about half as much thanks for letting everybody know about your narrow knowledge I mean seriously there's FHA and VA loans if you completely left out that you do not need 20% down as a matter of fact you need 3.5% down and before you go off on the Hyatt rest of an FHA loan I'm currently in a 30-year fixed FHA loan with 3.5% down 6% sellers concession I paid 0 closing cost and I have a 3.6 to 5 interest rate try some research before you guys put out videos that helps usually fossil I don't know anybody and I know a lot of people been put down 20% there's not a lot of people that are saving up 40 Grand before they buy a house

  • trash hauler

    In the student debt problem is partly to blame on these retarded students who take out house size loans to go to school in left-handed puppetryif you're spending two to $300,000 in student loans you better be a fucking doctor

  • The White Cat

    It's not as simple as just pick up your thing and go when you are renting a house/apartment. I have a contract that in case of breaking the 15 months lease I have to pay 2 months worth of rent and I lose my deposit so basically 4 thousand dollars to get out of a lease.

  • Danny

    When I hear the phrase "The American Dream", the picture that comes to mind is one of a charismatic overweight man wearing yellow polka dots.

  • k tee

    It's only an investment if you plan to sell your house other than that it is just a building subject to rot and decay that you will never fully own because even when you pay off your mortgage you still have to pay property taxes and maintenance costs. I love renting so much more because it gives me freedom that I didn't have when I owned a house. My family and I vacation way more now and I dont worry about my yard or security. And I'm able to invest the money I save from renting by contributing more to my portfolio and 401k, so yea, if you want a house go for it, but don't get one just because of the overused mantra people tell you. Those are the same people that tell you you have to go to college to make it in life.

  • Joseph Lester

    I wish I could buy a house for $200,000. Try doing that in Australia starting price from a house is at least 500,000 more realistically 600,000 or 800,000 if you live in Sydney and want more then 1 bedroom unit.

  • James Travis

    Compare the cost of home owners insurance on that $200 K home to renters insurance also. Don't forget about yard maintenance & HOA fees (in some areas)

  • marlon nunez

    Just look up 2008 Market crash. ADVICE: Don't buy Homes, there is too much hassle and risk for a long term. Just rent cheap and invest in a business. Avoid loans, taxes, repairs, maintenance, fees, remodeling, and being stuck in one location. It's not worth your freedom. After you are old or sick, you can't maintain a home.

  • marlon nunez

    I would love Two Cents to explain the work and cost that involves home maintenance such as repairs on plumbing, roofing, lawn care, water heater, AC, kitchen appliances. Also yearly cost property taxes, home Insurance. what If Instead you were to invest all that money in a mutual funds for 30 years?

  • M Harless

    WRONG!!! You should check your story. First, the buyer with a 50K income should be at a 150K home. With 30K down he/she would qualify for 180K if they chose to go that high. The buyer can get into a home for 10% down in MANY cases and they don't pay realtor fees if they are the buyer. The seller pays for the agents. Many times, the closing costs are also negotiated into the sellers responsibility. Not sure why you are trying to scare young buyers to keep them from buying a house, but perhaps you should actually know what you're talking about before you post.

  • LBC Santiago

    I really like that you put the "BRILLIANT " Ad at the end and help me learn or think of how it was connected to the original content of your VIDEO.

  • Ray Steelman

    Investment? Homes typically grow only by the rate of inflation. That modest growth is offset by maintenance, upkeep, insurance, and property taxes! Factor in the loss of the use of your money, this is a very poor investment.

  • John Doe

    We all know that showing off pictures of our exotic travels and worldly experiences, is so much more important than building wealth.

  • Alexander Pennie

    What of this "relocation freedom" when renting if you have a contact for a year and, moving early, you will lose security deposit and still be responsible to pay the remaining amount of your lease?
    Having a house, you can sell it within a month (in our area).

  • Melody Lao

    It would be nice if you guys had 2 or more examples for millenials in various stages of their lives (I.e. married but together make $50,000, etc)

  • apmat nlif

    Lets cut to the chase and get to the real reason why people aren't buying homes. There are two basic reasons. One with interest rates being so low, it is super hard to come up with the entrance fee to buy one. Back in the seventies, someone earned 6% on savings and a mortgage was around 15%. This capped home prices to what people actually made, not what some big investor decided. The real reason why is that the Government got into the game. All of the affordable homes are bought up by investors and the Government shoves in people who work part time or don't work at all. The Government pays way more than a cash renter, thus driving up rents and home price. It sucks but that is the way it is. Personally I am saving up a 100k, easier to do than paying 5%.

  • Eric D

    I suppose it also depends on what the cost to rent is vs. the cost to buy. Renting is always cheaper initially but it does increase over time.

  • Matt G

    I remember in high school how many friends, teachers, and counselors were advising against enlisting in the US Army. Now I’m working on my degree and, when I’m ready, have the ability of using my VA home loan for my first house. I’m far from perfect, but I feel rather secure about my future. The more a young person thinks about their future, the better off they’ll most likely be. It becomes harder and harder to bounce back from difficulties the older we get, and I feel like many young people will never actually recover and die in poverty, or on the threshold of it. Very sad.

  • LordsOfSkulls

    Honestly, FHA loan 3.5% downpayment. ($10,000 in bank) for home between $100,000 to $150,000. Its perfect first home you dont need anything better, also instead of home think about apartment or townhouse (yes association is a pain in butt, but if anything goes with driveway/roofing/siding or anything outside of home, you dont have to deal with, also as young owner you be focused more on your career/loved one than taking care of home. You can than either sell it or refinance, or keep it to turn it into rent. Which means with 4.00 – 5.00. You looking at home around $120,000, under $1,000 a month. You want to refinance it than to get rid of PMI (FHA Insurance) which is $100-$175. Also at that point you will/should have lower Interest rate as well, and build some nice credit history. Also Owning a place is "CHEAPER" than Renting, but biggest question is… are you moving outside of state for school,loved one, or job/career. If not, buy a home. Owning home $1000-$1300. Renting $1500+. It will end up saving you at least $200-$500, and money you put into the house will pay itself back when you want to sell (which takes longer than getting out of renting). But honestly, as first time home buyer, you usually can be in your 20s, why buy a place you can use to rent out after you move out. Refiance after 5-10 years. Get some cash out or just lower monthly payment/get rid of any PMIs, usually value of your home will gain at least $20,000 to $50,000 if not more within 5-10 years depending on market/area. Than rent it out to somebody. $1400 – $200-$400 association. BOOM, $1000 extra income every month. (you can repeat this process). Once you own 3-5 properties and getting $3000 to $5000 a month as extra income. = Less stressful life. yes it is that easy, but it will fill hard, annoying, frustrating, lots of paper work, and than just managing.

  • P. Nice

    Don't buy a conventional house. I think that the future trend for home ownership will be either tiny home living, or off the grid vehicle living

  • Chest Rockwell

    Fuck no don't buy a house cause you never truly own it ….just look at the squatter laws…if you go on vacation and come back and some crack heads moved in your pad you can't do shit about it and neither can the cops…..but you "own" the home.😂🤣

  • Steven Lott

    If I would have waited until 20% down, 760 credit score and worried how much interest the bank was making from me I would have never bought my first house. Needless to say, yes a house is a poor investment just like everything else if you only take the consumer approach. But if you build a monopoly of properties you can avoid going through life passing go only to collect $200.

  • dave edvalds

    What is missing is house payment goes down after inflation over time . It also protects you from inflation because house goes up in value.

  • Christopher Johnson

    you forgot something that is very important and not just for gen y. Homes in the U.S. are much larger and more expensive than they were before.

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