Dear folks who wish you owned your own home

[Two-er]

At $306k, that puts D.C. back up to 2003 prices...

Yep - like I said earlier in the thread, folks who think the home they live in is a great investment still have the bubble mentality or they don't drill down. Look at any historical data and it shows that homes are lousy investments.

I hear lots of folks say stuff like "WOW - my home has DOUBLED in value in only 20 years". Well, good for you. That's a whopping 3.5% annually. My Fidelity Growth Fund earned 61.35% last year.

 

[TrueSOMDGirl]

Yep - like I said earlier in the thread, folks who think the home they live in is a great investment still have the bubble mentality or they don't drill down. Look at any historical data and it shows that homes are lousy investments.

I hear lots of folks say stuff like "WOW - my home has DOUBLED in value in only 20 years". Well, good for you. That's a whopping 3.5% annually. My Fidelity Growth Fund earned 61.35% last year.

But I think of all the money paid to rent and I will own nothing in 20 years, as opposed to paying the same amount for housing and actually owning it in the end, is that not a advantage?

 

[somdrenter]

But I think of all the money paid to rent and I will own nothing in 20 years, as opposed to paying the same amount for housing and actually owning it in the end, is that not a advantage?

Who's advocating renting for 20 years?

Now, if you rented for the last few years at half the cost of owning, and are now able to purchase at 2003 prices, do you see no advantage?

 

[Two-er]

But I think of all the money paid to rent and I will own nothing in 20 years, as opposed to paying the same amount for housing and actually owning it in the end, is that not a advantage?

I guess that depends. My mortgage payment including, principal, interest, taxes, HOA, PMI, and insurance is about $2200 a month. A house like mine could rent for about $1500 a month. The renter gets a pre-tax savings of about $11,000 a year. If the renter invests that $11,000 a year wisely, then in 20 years he'll have $750,000 give or take, and this takes into account inflation.

If the renter spends that $11,000 a year on beer, then I guess buying would be a better choice. Even though I own, I sometimes wonder why.

 

[Monello]

Who's advocating renting for 20 years?

Now, if you rented for the last few years at half the cost of owning, and are now able to purchase at 2003 prices, do you see no advantage?

You need a good crystal ball to pull this trick off. Home ownership has a lot of hidden benefits besides financial. Neighborhoods where most of the people own their own homes are, on average, better and safer than places with lots of transients.

Plus I don't get to 'use' my 401K unless you count staring at the statement. A house, now you can make that a home.

 

[Two-er]

Plus I don't get to 'use' my 401K unless you count staring at the statement. A house, now you can make that a home.

You must be a young whippersnapper but that's OK. Age 59.5 comes at you fast. Too fast.

 

[BOP]

What market indicators do you follow that indicate that the market will pick up?

I'd say the 2010 Elections is a big one.

 

[czygvtwkr]

Yep - like I said earlier in the thread, folks who think the home they live in is a great investment still have the bubble mentality or they don't drill down. Look at any historical data and it shows that homes are lousy investments.

I hear lots of folks say stuff like "WOW - my home has DOUBLED in value in only 20 years". Well, good for you. That's a whopping 3.5% annually. My Fidelity Growth Fund earned 61.35% last year.

What they don't realize if they added up all the payments they probably paid more than double for their house when you count the interest of the mortgage.

 

[Two-er]

What they don't realize if they added up all the payments they probably paid more than double for their house when you count the interest of the mortgage.

If I owned my house for 30 years, I will have paid $425,000 in interest, taxes, HOA, and homeowner's insurance. And that's assuming today's cost for taxes, HOA, and insurance.

That's about $1200 a month, every month, for 30 years that goes into someone else's pocket other than mine.

 

[somdrenter]

You need a good crystal ball to pull this trick off. Home ownership has a lot of hidden benefits besides financial. Neighborhoods where most of the people own their own homes are, on average, better and safer than places with lots of transients.

Plus I don't get to 'use' my 401K unless you count staring at the statement. A house, now you can make that a home.

Crystal Ball? In the example provided, no need, the MRIS stats show it clearly.

 

[somdrenter]

I'd say the 2010 Elections is a big one.

In all the stats I have looked at, that is one that I have never seen. How does one account for it? Will one party bring back loose lending and toxic mortgages and continue to prop up prices?

 

[DallasRed]

Who's advocating renting for 20 years?

Now, if you rented for the last few years at half the cost of owning, and are now able to purchase at 2003 prices, do you see no advantage?

I don't remember if it was this thread but it was def in this forum...Saying to not buy a house if you were in the military..So what serve your country for 20 years and never buy a house..I'll pass on that.

 

[kom526]

I don't remember if it was this thread but it was def in this forum...Saying to not buy a house if you were in the military..So what serve your country for 20 years and never buy a house..I'll pass on that.

I think the point of that posting was if you are only going to be in an area for 3 years then buying may not be the best option because if you have to sell you're going to lose money more than likely.

 

[DallasRed]

I think the point of that posting was if you are only going to be in an area for 3 years then buying may not be the best option because if you have to sell you're going to lose money more than likely.

Well, when you first get to an area you don't know if you will get another set of orders in the same place...I remember someone on here ranting that when you are in the military BAH is for rent...Not for buying a house..Getting BAH which is tax free and then getting another write-off on your taxes..BLAH BLAH you get the deal. Or better yet put it this way..Only way you can home-stead anymore is if you are willing to stay at sea and never see your family..Or that house you bought..At least the wife and kids get to enjoy it

 

[ProfMoneyWise]

To peacefully purchase a house I advise one to be/have:

Be Debt Free

Have a fully funded emergency fund of 3 to 6 months living expenses in a separate account set aside for just this purpose. This is not a fund to be used for any other reason.

Have enough of a down payment to avoid PMI (used to be 20%, may be more now)

Be able to afford a 15 year fixed mortgage where the total monthly payment (PITI + HOA) does not exceed more than 25% of your household take home income.

The above criteria keeps home ownership peaceful as it should be. I work with many who are led down the road of "it is an investment" or "yes the payment is high but you will grow away from it" road. Many of these investments end up on the foreclosure list and what no one tells the folks is that while their income rises so will the cost of everything else.

There is no shame in renting. There is no shame in saying "you know what? I just can't afford to buy a home right now."

There is no shame in saving up until one can get out of debt, have an emergency fund to handle life, because life will happen. Have enough of a down payment to avoid PMI entirely. Have enough of a down payment to have a loan that you can see the end of and enough left over after you make your house payment to buy things like gas, food, tires, clothes and plan for your retirement.

I've been called unrealistic. I've been told "nobody can meet these conditions." I disagree.

 

[Two-er]

I work with many who are led down the road of "it is an investment"

I think lots of sellers and agents try and exploit folks who still have bubble fever. These are folks who think that when prices hit bottom that we're going to instantly reenter another bubble.

 

[vraiblonde]

I think that if you folks want to have someone else control your living environment, tell you what pets you can and can't have, tell you what repairs will and will not be made, what plants will and will not be put in your yard, what color your walls must be, how many people you can have over to your house, etc...

...keep renting. :shrug:

PMW is hyper-conservative when it comes to finances, but people buy houses all the time without the strict criteria he lays down, and it's just fine. More people kept their homes than lost them over the last few years. And most of the people who lost their home were on some crap mortgage that they couldn't afford, and should have known better, or they were investors.

Typically you're going to pay almost as much for rent as you would for a house payment, so why keep paying a landlord??

 

[vraiblonde]

plan for your retirement.

PS, home ownership IS a plan for your retirement. If you get a 30 year mortgage on a house when you're 30, you will be 60 when it's paid off. Then, when you retire and are on fixed income, you won't have to worry about shelling out that money every month.

If you keep renting, however, you will be a 70 year old person living in an apartment eating cat food because you can't afford your rent.

I am not saying that some 20 year old kid making $15k a year should go take out a mortgage on a $500,000 house. I am saying that if you *can* afford to buy, you should. And forget having a million $$$ in the bank first as a cushion. That's unrealistic crap.

 

[ProfMoneyWise]

I think that if you folks want to have someone else control your living environment, tell you what pets you can and can't have, tell you what repairs will and will not be made, what plants will and will not be put in your yard, what color your walls must be, how many people you can have over to your house, etc...

...keep renting. :shrug:

PMW is hyper-conservative when it comes to finances, but people buy houses all the time without the strict criteria he lays down, and it's just fine. More people kept their homes than lost them over the last few years. And most of the people who lost their home were on some crap mortgage that they couldn't afford, and should have known better, or they were investors.

Typically you're going to pay almost as much for rent as you would for a house payment, so why keep paying a landlord??

We really are not that far apart on this. My criteria helps keep folks from bad mortgages and investing instead of buying it to live in.

One point to offer to the rent payment vs. mortgage payment point you make is the mortgage payment is not all there is to home ownership. This is sometimes presented to the prospective buyers as a principal and interest payment only. The property tax and homeowners insurance numbers are left out of the equation.

In addition if the furnace breaks in a rental it is a phone call to a landlord. If a furance breaks in your owned home it is on the owner.

I am all for home ownership. I am not for home ownership at any cost. I once had a person tell me "I am buying a home because it is a goal of mine." I helped them run their numbers. I showed them they could not cover their basic living expenses and other debt and the home. I was told, "my realtor said I could and I can get the money (subprime) so you are wrong."

It was foreclosed upon I am told.

Again, we are not that far apart on this. I just listed the criteria that I know will work.

 

[Baja28]

PS, home ownership IS a plan for your retirement. If you get a 30 year mortgage on a house when you're 30, you will be 60 when it's paid off. Then, when you retire and are on fixed income, you won't have to worry about shelling out that money every month.

If you keep renting, however, you will be a 70 year old person living in an apartment eating cat food because you can't afford your rent.

This is what I've been trying to tell these fools but they are too dense to absorb common sense so I gave up.

If Two-er thinks anyone is going to believe he made 61% in the market, he's more delusional than I already had him pegged as being. He's also in fantasy land thinking rents are much cheaper than mortgages. Then again he was unable to answer my earlier questions when he was posting from his ass so I see what we're dealing with here, a delusional schizo living in la la land.