Don't own a house? Don't plan on buying one!

[careless hal]

http://finance.yahoo.com/news/new-american-dream-is-renting-to-get-rich.html


I see a lot of the points made in the article.  One of my places is now worth 25% less than I paid for it.  The other, is worth more, but at least 25% less than I could have got several years ago.
Motrgage interest is a tax deduction, but politicos have long been making noises about taking that away.  (welcome to another great depression. )  Of course, we could pull out of that when WW3
starts.  But, life will not be the same in the post nuclear war world.

[Just Saying]

There was a sales tax on real estate inserted into Obamacare to help finance that program. Of course Queen Nancy said, "We have to pass this bill so we'll know what's in it."
That is one scary statement.
 Now the seller of a house has to give yet another pint of blood to the pols on every transaction.

[Hugh Jass]

I'll be honest I did not read the article, but when you can buy a house for a mortgage payment thats

cheaper than paying rent I see no down side period.

[Hugh Jass]

http://finance.yahoo.com/news/new-american-dream-is-renting-to-get-rich.html


I see a lot of the points made in the article.  One of my places is now worth 25% less than I paid for it.  The other, is worth more, but at least 25% less than I could have got several years ago.
Motrgage interest is a tax deduction, but politicos have long been making noises about taking that away.  (welcome to another great depression. )  Of course, we could pull out of that when WW3
starts.  But, life will not be the same in the post nuclear war world.

BTW you're lucky my house has lost about 40+ percent but luckily I sold everything else during the boom

before the bubble burst.

[careless hal]

I'll be honest I did not read the article, but when you can buy a house for a mortgage payment thats

cheaper than paying rent I see no down side period.

It depends on your situation.  For long term living in the same place I would say yes, go ahead and buy.  Young folks often will move several times over lets say the next 20 years.  That makes it more of an iffy situation. I always sold any house I owned for a nice profit, after 5-12 years of living there.  Now, that may not be the case.   You could lose your downpayment and still not get enough to cover what is left after paying the mortgage off and the commissions.  The city also has a tax you have to pay on real estate transactions.  Add to that the Obamacare tax and you may be in a situation that you can't sell because you are underwater.  That is why we see people just walking away.   Also, it is not as easy to buy with a small or no down payment theses days.  Just another thing you have to worry about. 

[The Giss]

Those who are currently cash rich are far better off buying a house, even a second one for their kids right now. Since most of these homes can be purchased for 50-60 cents on the dollar of their true value (they were not worth as much as what the peaked at and they are not worth as little as they are priced now).
With cash paying less than 1%, buying a home is a better investment in the long term. Short-term, bridge jump a couple show bets.

[Danville]

Those who are currently cash rich are far better off buying a house, even a second one for their kids right now. Since most of these homes can be purchased for 50-60 cents on the dollar of their true value (they were not worth as much as what the peaked at and they are not worth as little as they are priced now).
With cash paying less than 1%, buying a home is a better investment in the long term. Short-term, bridge jump a couple show bets.

Agreed !! Well might make an exception on the show bets.

So much depends on the individuals circumstance and location.
Here, in Central Kentucky the housing bubble burst had little consequence. Our place was appraised at $17K more than the last time we had it looked at (neighbor down the road is a bank real estate appraiser). Of course the tax assessor will love that but he hasn't been around---yet.
Our mortgage has five years to run but it was opened at 5.625% and a substantial down payment was made at the time of purchase. Not a lot of sense in re-financing since the payment is below $400 a month. If the liar - in - chief ever disallows the home mortgage interest deduction we'll simply pay the damned thing off.
The big thing making this place attractive is the property tax bill each year. Five acres, three stall barn, de-tached garage and attached two car garage. Three miles from town and taxes are less than $1K per year.
Point is, we ain't hurtin'!!  We got out of Chicago just in time.

[Hugh Jass]

Agreed !! Well might make an exception on the show bets.

So much depends on the individuals circumstance and location.
Here, in Central Kentucky the housing bubble burst had little consequence. Our place was appraised at $17K more than the last time we had it looked at (neighbor down the road is a bank real estate appraiser). Of course the tax assessor will love that but he hasn't been around---yet.
Our mortgage has five years to run but it was opened at 5.625% and a substantial down payment was made at the time of purchase. Not a lot of sense in re-financing since the payment is below $400 a month. If the liar - in - chief ever disallows the home mortgage interest deduction we'll simply pay the damned thing off.
The big thing making this place attractive is the property tax bill each year. Five acres, three stall barn, de-tached garage and attached two car garage. Three miles from town and taxes are less than $1K per year.
Point is, we ain't hurtin'!!  We got out of Chicago just in time.

I can't wait to escape from this state !  Hopefully in a couple more years if not sooner, I am looking.

[careless hal]

I can't wait to escape from this state !  Hopefully in a couple more years if not sooner, I am looking.

My doctor has said I should move to Arizona or Vegas.  Although he wouldn't write me a prescription so I could claim all costs as medical costs.  There are only about 20 places I can think of off the top of my head where I'd rather live.

[Just Saying]

Sure is odd that people's home value drops like a rock, but the proprty tax bill doesn't.

[Dolfan]

This article is so flawed, it leaves you scratching your head.

"for a home purchased at $200,000 by a buyer in the 27 percent marginal tax bracket. Factoring in a 30-year mortgage, $1,200 in annual home insurance, closing costs of $5,500 and maintenance costs of $100 a month, along with property taxes, he calculated that it would take a selling price, 10 years later, of $395,404 just to break even."

1 - a 30 year mortgage at 6% (they're allot lower now) means $1,000 per month in interest (At the start & it goes down from there) + his $100 maint., $100 insurance & lets say $200 in taxes, which is $1400 a month in "wasted" money over 10 years is $168,000.

2 - You'd still be paying rent & for a $200,000 property it's got to be at least $1500 a month which means you'd have paid $180,000 in rent over 10 years.

3 - You"re "break even" number is now reduced to $188,000 but remember if your amortized that $200,000 loan you'd owe $33,000 less meaning your real break even number is $155,000. 

That's a pretty big difference from $398,000!

[careless hal]

This article is so flawed, it leaves you scratching your head.

"for a home purchased at $200,000 by a buyer in the 27 percent marginal tax bracket. Factoring in a 30-year mortgage, $1,200 in annual home insurance, closing costs of $5,500 and maintenance costs of $100 a month, along with property taxes, he calculated that it would take a selling price, 10 years later, of $395,404 just to break even."

1 - a 30 year mortgage at 6% (they're allot lower now) means $1,000 per month in interest (At the start & it goes down from there) + his $100 maint., $100 insurance & lets say $200 in taxes, which is $1400 a month in "wasted" money over 10 years is $168,000.

2 - You'd still be paying rent & for a $200,000 property it's got to be at least $1500 a month which means you'd have paid $180,000 in rent over 10 years.

3 - You"re "break even" number is now reduced to $188,000 but remember if your amortized that $200,000 loan you'd owe $33,000 less meaning your real break even number is $155,000. 

That's a pretty big difference from $398,000!

I think the $398,000 is high also.  However, $155,000 is low.  Somewhere in between would lie the real cost.  It all depends where you live.  I pay $600 a month for real estate tax(my place is about 2500 sq ft.) $100 a month for maintenance?  I think that is way on the low side.  Obviously,now interest rates are at historic lows.  However, I'd bet most first time buyers get a 5 yr
ARM.  Most younger people I know don't live in one place for 10 years.  If you are planning on living in the house for 10 years I'd say buy.  If you are looking at 3-5 yrs,I'd say rent. 

[Dolfan]

I was just using his example with his numbers.  If you consider his numbers accurate, the $155,000 is not low.

Hal, I wrote mortgages for 5 years in the 90's.  I ran these numbers hundreds of times for home buyers & while I agree with you that $100 maintenance is low, it absolutely depends on where & what.  In South Florida, you can't touch HO Insurance for less than $2500 on a $200k policy.

Remember I also used 6% & his numbers, which are just plain silly.  He failed to take into account the $180,000 you'd pay in rent over those those 10 years.  And that's assuming the rent never goes up, which NEVER happened to me when I was renting.

[Danville]

That homowner/property insurance thing is becoming a real problem. Granted that our taxes are unusually low considering most of y'all. Our yearly insurance costs are approaching the amount we pay for taxes.
Cannot figure that one out !! 11 years on the place and zero claims. The price has increased 71%.

[Just Saying]

Before I retired (early) I had everything paid off. House, trucks & cars, and trailers. But the damn taxes & insurance keep going up. I've had one homeowner's claim, and that was in 1972. For years hospitals have done what's called "cost shifting", where they jack up the fees on insured patients to cover for the un-insured. I suspect that the insurance companies jack up the rates on the 'non-claimers' to cover big payouts for things like Hurricane Katrina.