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This Is Why I Rent: Median Incomes Do Not Support Median Home Prices
eFinanceDirectory ^ | September 17, 2007 | Ben W

Posted on 09/21/2007 10:49:53 PM PDT by Freedom_Is_Not_Free

Sep 17, 2007 -- When you rent, most people mistakenly assume the decision is made out of necessity, not rationality. But there is a very good reason to rent in today's bubble-stricken market: median incomes do not support median home prices.

By Ben W. (bdarbs)

Median income household cannot buy median priced home

The graph above demonstrates three very important facts.

* Whenever prices rise more than the normal trend, they eventually correct and drop back in line. * This housing bubble is an absolute giant when compared to the housing bubbles of the previous decades. * Income levels haven't come close to keeping up with home price inflation. For decades, home prices strongly correlated with median incomes. In 1997, everything changed.

What does this mean?

Now is perhaps the best time in US history to be a renter. You are far better off paying high rents for the next few years than buying a home and watching your equity disappear while the market takes a freefall.

Not convinced? Here's my argument...

The home prices that we are seeing today are artificial and not sustainable. This is because home prices have deviated from the fundamental formula that has always ruled the real estate market. Nationally, median home prices increased by nearly 50 percent in the last decade. The median income, on the other hand, has gone up 10 percent in the last ten years--a very meager increase compared to the change in home prices.

Incomes simply cannot support the bubble-inflated prices. In many places, Americans earning the median income have no chance of reasonably affording a median priced home with a conventional home loan.

(Excerpt) Read more at efinancedirectory.com ...


TOPICS: Business/Economy
KEYWORDS: bubble; homes; housing; rent
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I tend to agree with this assessment. YMMV if rents are locally in line with home prices. In most major markets, homes are way over priced against incomes and current conforming mortgage rates. Those looking to sell will find that today's buyers can't afford to buy. Prices will have to adjust accordingly. At least, that is my take on things.

My name is Freedom Is Not Free and I approve of this message...

1 posted on 09/21/2007 10:50:02 PM PDT by Freedom_Is_Not_Free
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To: Freedom_Is_Not_Free

My reason for buying and not renting is because I have five kids. I can’t always worry that the landlord is going to come by and expect the house to be spotless because he only has one child and that’s how his house is. Plus, I can make any improvements I want. Yes, I read the article. I just wanted to say why I prefer to own.


2 posted on 09/21/2007 10:53:35 PM PDT by HungarianGypsy
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To: Freedom_Is_Not_Free

OK, ‘freedom’. What will you have to show for your money ten years from now?

Your landlord will be paying off the mtg. with your money - he will own the place, and you will have nothing but reciepts.

IMHO, I am totally against renting. Buy a teenie little house - pay it off, sell it, take the equity and buy a bigger house - pay it off, etc. At least it is yours.


3 posted on 09/21/2007 10:55:08 PM PDT by yorkie
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To: Freedom_Is_Not_Free

OK, ‘freedom’. What will you have to show for your money ten years from now?

Your landlord will be paying off the mtg. with your money - he will own the place, and you will have nothing but reciepts.

IMHO, I am totally against renting. Buy a teenie little house - pay it off, sell it, take the equity and buy a bigger house - pay it off, etc. At least it is yours.


4 posted on 09/21/2007 10:55:10 PM PDT by yorkie
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To: Freedom_Is_Not_Free
i rent because i live in one of the most expensive places on earth and cannot afford a down payment. i could afford a mortgage, just not the initial payment. sucks, but i never have to worry about my investment value going down.

but what's the big deal with a down payment? everyone gets their money. is it just proving that i can save money? hell, i have to make it first! i have very steady income, there just ain't enough of it to save 100K for a down payment.

5 posted on 09/21/2007 10:57:32 PM PDT by thefactor
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To: yorkie

heard you the first time. ha!


6 posted on 09/21/2007 10:58:14 PM PDT by thefactor
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To: Freedom_Is_Not_Free

I think renting is fine if folks are more comfortable with it

owning a home is a lot more than just paying mortgage, taxes and insurance monthly

and they don’t all appreciate like the dickens


7 posted on 09/21/2007 10:58:22 PM PDT by wardaddy (if God is your co-pilot, you need to switch seats)
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To: Freedom_Is_Not_Free

Get a better job.


8 posted on 09/21/2007 11:04:51 PM PDT by dragnet2
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To: thefactor

Sorry - I don’t know why it does that double post.


9 posted on 09/21/2007 11:09:23 PM PDT by yorkie
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To: Freedom_Is_Not_Free

I rent because I am living a lifestyle of my own choosing and that means I don’t make a lot of money, BUT I am happy in work I like AND I have flexibility and time to do the other things I want to do in life.

Therefore, I’ve cut a lot of things from my life. Sure, I’ve missed out on a lot of things, but I’m the envy of my married-couple friends with their mortgages and multiple cars. I’m not against those things, and if I had the cash I’d have them, too.

But some people simply don’t care about that stuff.

I pay a pretty steep rent, but I live in the city, don’t have to worry about a car or the insurance, gas, upkeep, etc.

My landlord of one year has never once stepped into my apartment. In fact, she’s given me a break on raising the rent (the rest of the building is going up) because the previous tenant was a pain and I stepped in.

The one argument I hear over and over is “You’ll have nothing to show” for paying rent, etc.

So what?

I also don’t have the heart attacks, ENDLESS upkeep, expenses, wasted time...

Renting isn’t for everybody, but owning, while something I hope to do someday, isn’t the guarantee of security people wish it were. In many ways, owning is a ridiculous burden that takes up in time and effort and expense any benefit that may appear down the line.


10 posted on 09/21/2007 11:09:40 PM PDT by Darkwolf377 (Pro-Life atheist living in Boston...)
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To: Freedom_Is_Not_Free
While I agree that there will be an adjustment downards, They will not fall down to match the trends that existed before the bubble began. In fact they never, ever, ever have before, so why should they now?
Past trends do not support this articles theory.

Think about it. If every time there was a spike, and the market fell back down to join the slow, gradual trend up wards line that preceeded the spike, we'd only be paying about 60,000 for a house that sold for 17,000 in the sixties. (an average 12,000 sq. ft. 3 brm bungalow)

11 posted on 09/21/2007 11:11:24 PM PDT by Nathan Zachary
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To: Freedom_Is_Not_Free
Someone who has some expertise with statistics, I have a question: Why is the median used instead of the mean, in this and other cases. It seems to me that the median ignores the vast bulk of the data, being based on only one or two numbers in the set. To my mind, it seems that the mean would be more useful for summarizing a set of values.

(I've had a decent amount of math education, through Calculus II, but never took statistics.)

12 posted on 09/21/2007 11:17:40 PM PDT by TChris (Governments don't RAISE money; they TAKE it.)
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To: Freedom_Is_Not_Free

Do what you want to as long as you can afford it. I subscribe to the Dave Ramsey school of thought. My only debt is my house and I am just a few years away from owning that free and clear.


13 posted on 09/21/2007 11:18:07 PM PDT by aliquando (A Scout is T, L, H, F, C, K, O, C, T, B, C, and R.)
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To: yorkie

Exactly. Buy what you can afford, not what you really want.
Work your way up to it.
It’s always better to buy than rent. When you buy is important yes, but most people when they buy their first house have been following the market for a while and can see when thinks get hot and cool down.

If you stay in a house long enough, you will not loose money when it comes time to sell and upgrade.

If you sell in a “spike” or hot market, remember you also have to buy in one too, unless your parents are willing to let you move back home till the market cools down again.

I’d say, wait till about Jan or Feb, the market will probably have cooled as much as it’s going to, and buy before the spring market spike.


14 posted on 09/21/2007 11:19:20 PM PDT by Nathan Zachary
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To: Darkwolf377

You sound just like my cousin who is a prof/researcher at Harvard. It is nice to be free to choose!


15 posted on 09/21/2007 11:20:42 PM PDT by aliquando (A Scout is T, L, H, F, C, K, O, C, T, B, C, and R.)
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To: Freedom_Is_Not_Free

It just goes to show all real estate is local. If you can find a place that would rent for what the mortgage is *today* then you should be OK.

I bought small and its somewhat comforting to know that If I decided to rent my place out I would make about a 5% profit over the mortgage. I would lose money on maintenance but I wont take a bath..


16 posted on 09/21/2007 11:24:09 PM PDT by N3WBI3 (Light travels faster than sound. This is why some people appear bright until you hear them speak....)
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To: Freedom_Is_Not_Free

i’d like to see a graph with home prices vs. gold and i bet it would show that they have pretty much stayed in line with one another. the dollar is falling. i bet exports are gonna start booming.


17 posted on 09/21/2007 11:25:27 PM PDT by jjw
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To: Darkwolf377

Renting is good for some people, true enough.
But owning isn’t a burden either, it all depends what you own.
Obviously for you, owning a 10 acre spread would be too much work for the lifestyle you want to live.

A condo however, isn’t, and may be better choice for you than throwing away money on rent. At the very least you can recover what you would have otherwise spent on rent.


18 posted on 09/21/2007 11:31:16 PM PDT by Nathan Zachary
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To: TChris

The median is used because it is at the midpoint of house values- that is: one half of all the houses are priced above the median point, and one half are below the median point. If an average were used, very high priced homes would skew the $$ value amount to a higher point above the midpoint...

Imagine a horizontal line...draw a ‘camel’s hump’ on top of it ( i forget what the statistical terminology is) ..at the very top of the hump draw a vertical line...half the home values should be below it, the other half above. That is a graph of a median....calculate the horizontal line by $10,000 for each ‘block’ of the hump...prices would cluster around the median...low at the lowest values and low again at the highest values...Now if you used an average value, the hump would be lopsided towards the higher priced end...and if you are still awake at the end of this, you are really paying attention.


19 posted on 09/21/2007 11:35:22 PM PDT by billmor (Good things come from S.C.....Laura...Marines...Magnolias)
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To: Darkwolf377
It is just not true that you will have nothing in ten years if you rent.

You have to look at all the costs of home ownership, not just the mortgage payment.

While homes can appreciate in value, it is guaranteed that they will depreciate unless you keep up with the maintenance on them. Roofs, water heaters, furnaces, water fixtures, electrical wiring, carpeting, wall coverings, etc., all go bad from time to time and need repair or replacement.

For the first ten years of your 30 year mortgage, the vast majority of the payment is interest.

If you truly figure up all of the costs, it is entirely possible to come out way ahead by renting (assuming you invested the money you saved by not owning).

20 posted on 09/21/2007 11:36:11 PM PDT by j. earl carter
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To: Nathan Zachary

12,000 sqft??? I guess size does matter and I am behind with my 1,500 sq footer!!! LOL


21 posted on 09/21/2007 11:37:46 PM PDT by biff
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To: Freedom_Is_Not_Free

In most states EVERYONE rents... just from their local taxing authority. Don’t think so? Just try to get away with not paying your yearly rental payment and see if you still have a home.

As far as buying vs renting.... in the end it really is a matter of your personal choice. ALL things considered, except for the occasional value blip, both in the end are about equal.

The decision is about how and when you want to use your money.


22 posted on 09/21/2007 11:37:53 PM PDT by JSteff (Reality= realizing you are not nearly important enough for the government to tap your phone.)
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To: thefactor
there just ain't enough of it to save 100K for a down payment.

It's all about location and you live where you live because that's where you want to live and I respect that but there are places in this country where you can buy a fairly nice house for what you referred to as "down payment"

I am currently looking at a place in Missouri that has five bed rooms, four baths, full finished basement with a kitchen in it, large in ground pool with a pool house, 10 fenced acres and 2 horse barns at $185,000. 5 miles from the nearest store to buy so much as a loaf of bread and about 15 miles from more shopping. The pool is a negative to me because I don't want it. Another negative is a septic system, I know from experience that they are nothing but trouble but you don't get city sewer in the country. I live in Illinois and I want out of this socialist hell hole and Missouri is looking good. The house I now live in is paid for and would more than pay for the one in Missouri.

23 posted on 09/21/2007 11:39:52 PM PDT by Graybeard58 (Remember and pray for SSgt. Matt Maupin - MIA/POW- Iraq since 04/09/04)
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To: aliquando
and I am just a few years away from owning that free and clear.

You and the bank own it now, soon only you and the property tax assessor will own it.

24 posted on 09/21/2007 11:42:16 PM PDT by Graybeard58 (Remember and pray for SSgt. Matt Maupin - MIA/POW- Iraq since 04/09/04)
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To: TChris
The median works better in this case. Rich people cause the mean to be skewed upward.

Example: Imagine a population of 100 people: 99 of them make $100,000 and the 100th person is Warren Buffet. Assume Warren Buffet made $50 million last year.

The mean income for the group is about $600,000. This really doesn't give an accurate picture of the typical person in the group, since $600,000 is six times the income of %99 of the people in the group.

That's why they use the median.

25 posted on 09/21/2007 11:43:58 PM PDT by j. earl carter
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To: Freedom_Is_Not_Free
I own my residence free and clear. Just property taxes...and the exemption on that just moved to $100,000. I have an investment rental as well. The tenant pays enough to cover the taxes and part of the interest. It's nearly a wash, so I don't get hit for additional income tax. The property values in the area are appreciating...unlike some of the overblown markets e.g. California & Nevada. Rent is money tossed down the drain unless it is a business expense. If it is a business expense, the business better be showing a positive cash flow.
26 posted on 09/21/2007 11:51:13 PM PDT by Myrddin
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To: j. earl carter
I rent a house that is worth over a million dollars for $1800 a month. Yes I am paying it off for my landlord but I could not buy a house for $1800 a month where I live.
27 posted on 09/21/2007 11:52:35 PM PDT by troy McClure
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To: aliquando
You sound just like my cousin who is a prof/researcher at Harvard. It is nice to be free to choose!

This is going to come off as overly grand, but I don't care.

For me, most people who live in America do not take advantage of the GREATEST freedom we have here, which is the freedom to choose one's own way of living.

I think too many of us haven't been exposed to how other people live in other cultures; multiculturalism is this silly, Sesame Street-rendition of "culture" but our young people don't realize what it's like to actually LIVE in another culture.

If they did, they wouldn't be thinking about Kwanzaa or such garbage--they'd be thinking "Wow, America is awesome!" and not just because of malls and TV.

It is nice to be free to choose, but ALL Americans have that freedom.

Yet so many just fall into patterns they've seen enacted.

Of course there are always drawbacks to every choice, and I'm aware of the things I've missed out on by living as I do. But everyone misses out on things in life. Not all of us take the reins and make choices their family and friends may not agree with. Too many people just go along and end up sitting in front of the tube after midnight when they're 60 wondering how the heck they got there.

28 posted on 09/21/2007 11:55:39 PM PDT by Darkwolf377 (Pro-Life atheist living in Boston...)
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To: HungarianGypsy

The article discounted lifestyle and looked at the cost/benefit of renting vs. owning. Of course, buying is often more desireable for any family with children. He was just saying, when houses are too high compared with renting, it may not make financial sense to buy. Just like it makes no financial sense to buy a $40,000 car, when a $20,000 car will do the same job of moving people.

Your reason for owning is typical and a good reason.


29 posted on 09/21/2007 11:56:10 PM PDT by Freedom_Is_Not_Free
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To: Freedom_Is_Not_Free

This is a really interesting topic...central point is that Median Income has not kept up with Median House prices..

During the past 20 to 30 years there has been a slowly developing problem in that incomes have not kept up with prices..While the Fed kept the tight lid on wages (income) and prices, and that kept inflation in check, over the years, prices slipped out of the control box and went through the roof-—everything from groceries to health insurance to auto repairs, you name it..now since a home is the average person’s largest ‘investment’ they figure that the home must increase in value in order to keep up with the huge increases in prices all around them..We average joes understood that—the Fed did not..and now homeowners who want to sell are paying the price..best strategy is to stay put for the time being and let the market forces bring the prices down on homes...it will take the top off the bubble, but it still will not bring house prices down to near the median incomes...should say—down to the average ‘net’ median income...Incomes need to rise more- and the Tax Code, especially the AMT (Alternative Minimum Tax-cuts in at $70,000 Income) should also be adjusted to give relief to the working people in this country...and to think the Dems want to raise taxes to pay for ever increasing costly universal health care...


30 posted on 09/21/2007 11:56:52 PM PDT by billmor (A nation that squanders it's Freedom is poor indeed)
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To: Nathan Zachary
A condo however, isn’t, and may be better choice for you than throwing away money on rent. At the very least you can recover what you would have otherwise spent on rent.

For me, it's not money thrown away, though, it's freedom. I've changed my job (from boredom) many times, and ditto with my location.

The freedom to quit work, give my landlord notice, pack up and move on is worth the price of the rent.

31 posted on 09/21/2007 11:56:59 PM PDT by Darkwolf377 (Pro-Life atheist living in Boston...)
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To: troy McClure

We built a house in Vegas 4 years ago. We sold it, pocketed $135,000 and have since rented the same house we sold for less than our mortgage was originally. Sometimes the market dictates whether it is wise to rent or own.


32 posted on 09/21/2007 11:58:44 PM PDT by WesternPacific
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To: jjw

No they haven’t. But your right about exports. Imports will take a beating, in fact you should hear all the whining across the border, Canadian manufacuters crying about the high cnuck buck and low dollar. We can expect the same whining is going on in Europe and elsewhere. A low dollar is great for American exporters, so you won’t be hearing complaints in that part of the economy.

I noticed another peculiar thing today, Canadians are rushing to buy American greenbacks while it’s at par. That could drive our dollar back up again, depending on how much they are buying. Long, long lines today though.

Plus the weekend shoppers pouring over the border today from Canada. It’s like Christmas time.


33 posted on 09/21/2007 11:59:06 PM PDT by Nathan Zachary
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To: j. earl carter
You have to look at all the costs of home ownership, not just the mortgage payment.

Yes, that's what I meant when I talked about the time and expense involved. I think some people who defend ownership don't think about all those weekends spent working on the house...

My parents owned, and all of my closest friends own, so I know the headaches.

(assuming you invested the money you saved by not owning).

I imagine that if I had the money to save and invest that, for all my protesting, I'd give in to the impulse to own.

34 posted on 09/21/2007 11:59:21 PM PDT by Darkwolf377 (Pro-Life atheist living in Boston...)
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To: yorkie

We rent. A nice place. Nice neighbors. Nice area. And a whole s-load of money left over to play with investments. I could buy a house outright right now. Why? In ‘03 I looked at a nice condo in Santa Clarita for $175K. Four years later the same thing goes for $450K. Something is wrong. And my money says no.


35 posted on 09/22/2007 12:02:47 AM PDT by BobS (I><P>)
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To: troy McClure
You ain't even coming close to paying it off for your landlord.

The taxes alone must be over $1000/month.

If you bought the house and put down %20, you would be carrying an $800,000 mortgage. At %6 interest, your payment on a 30 year loan would be over 4 1/2 thousand/month.

Only 6 or 7 hundred of that would go toward principal, and 4 grand would be interest.

You aren't "renting" that house: you're stealing it.

Or to put it another way: Your landlord could just sell the house and invest the money. Even government bonds would pay a lot more than $1800 a month if you bought a million dollars worth.(and that's ignoring the fact that your landlord isn't getting $1800 since most of your rent is going for the taxes)

36 posted on 09/22/2007 12:05:22 AM PDT by j. earl carter
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To: Freedom_Is_Not_Free

Seattle’s median home price shot up over 500K this past month.

They figured that a single person whould have to have an average salary of 120,000 a year to be able to handle the mortgage payment. That’s fine, except the average income for seattle is less than half of that.


37 posted on 09/22/2007 12:06:26 AM PDT by Proud_USA_Republican (We're going to take things away from you on behalf of the common good. - Hillary Clinton)
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To: Darkwolf377

>>I think some people who defend ownership don’t think about all those weekends spent working on the house...<<

You are so right. It is always something, when you own a house. A few years ago, I woke up to water squirting out of a crack in my slate patio. It took a jack hammer, and five guys working for two days to repair the break in the line.

And, then there was the time that that the washing machine filled up, and didn’t turn off, and flooded my house in the middle of the night.

Another time - a microburst took off half my roof and it all had to be replaced.

This stuff is not ‘duck tape’ stuff. And, it all had to be repaired asap. (At my expense).


38 posted on 09/22/2007 12:09:03 AM PDT by yorkie
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To: Darkwolf377
I am not saying that you shouldn't own a home, only that renting is most definitely not "just throwing money down the toilet."

You should do whatever makes you happy and won't get you thrown in jail.

39 posted on 09/22/2007 12:11:11 AM PDT by j. earl carter
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To: Darkwolf377

But where do you move too? And why can’t you just pack up and sell?
A condo is freedom too, not much different than renting. They usually sell fairly fast, OR you can even rent them out.

You can have freedom without being foolish with your money.

I won’t argue with your freedom to throw it away,However. I rent out several places and people like you are how I make some good money.

If I were you, and really wanted the max freedom to just quit my job and pack up and go where ever my heart desired, I’d buy a nice sailboat. You can pretty much go anywhere you want and live a pretty nice life. I have a few friends that do exactly that.


40 posted on 09/22/2007 12:11:13 AM PDT by Nathan Zachary
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To: BobS

>>Something is wrong. And my money says no.<<

Bob, you are no doubt the smart one, here.

Yes - something is wrong. And that is why I am keeping my gas tank full, extra cash on hand, my cupboards full of staples, and several months of bottled water in my garage.

Something is very wrong..........


41 posted on 09/22/2007 12:17:01 AM PDT by yorkie
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To: BobS

>>Something is wrong. And my money says no.<<

Bob, you are no doubt the smart one, here.

Yes - something is wrong. And that is why I am keeping my gas tank full, extra cash on hand, my cupboards full of staples, and several months of bottled water in my garage.

Something is very wrong..........


42 posted on 09/22/2007 12:17:04 AM PDT by yorkie
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To: Nathan Zachary

Your point is well taken.

What many fail to mention in favor of home, condo, or co-op ownership are the tax advantages. The interest on your mortgage is tax deductible, a good portion of the maintenance in a co-op ( up to 60% in some) is tax deductible, and part of condo charges are tax deductible.

This often makes owning actually cheaper than renting. So where renting might be $1500 per month, thrown out money, IMHO, paying off your monthly mortgage and maintenance or carrying charges on a coop or condo might make your after tax deduction outlay quite a bit less than your rent. And you are building equity in your property as well.

Rent also goes up. Fixed rate mortgages do not.

One suggestion I would make to people debating whether to rent or own : If you are planning on making this house or apartment your long term home, you should own. Making a profit when selling is only a consideration in the short term, for properties bought as an investment, not your own home .


43 posted on 09/22/2007 12:18:23 AM PDT by Cincinna (HILLARY & HER HINO :: Keep the Arkansas Grifters out of the White house.)
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To: yorkie
"OK, ‘freedom’. What will you have to show for your money ten years from now?

Your landlord will be paying off the mtg. with your money - he will own the place, and you will have nothing but reciepts.

IMHO, I am totally against renting. Buy a teenie little house - pay it off, sell it, take the equity and buy a bigger house - pay it off, etc. At least it is yours.

He's saying that when you sell that teenie house the price will be less than you originally paid, because house prices will be coming down. When the time comes to buy that big house you will have been far better off renting all along instead of buying at today's inflated prices. You will have more equity down the road if you just pay a teenie rent to live in that teenie house (for much less than it would now cost to own it) and invest the resulting savings wisely.

44 posted on 09/22/2007 12:18:38 AM PDT by Neanderthal
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To: yorkie
OK, ‘freedom’. What will you have to show for your money ten years from now?

Your answer, Part I: I honestly don't know.

I am a single man who owned a home in Sacramento from 1987 to 1996, and moved to San Francisco, where I simply can't afford a house on one income. I'm planning a move back to Sacramento and struggling with whether to buy or to rent...

First, we have had explosive appreciation of home values in the last 10 years, brought on by cheap money, easy lending practices, and speculation. So the question is, what will homes be worth in 2017? Nobody knows.

We do know there has never been a 15 year period when California real estate did not at least double, so by 2022, it should double again, if history holds.

But house prices are dropping fast and I suspect they will continue to drop for the next 3-4 years, followed by a few flat years, before taking off again.

I owned a home in Sacramento from 1987 to 1996. I paid $102,000 and sold for $124,000. I think the home peaked about $145,000 in 1990 and the bottom didn't hit for a full 6 years after that, which is when I happened to sell.

The home sold for $22,000 over purchase price in 9 years of ownership, or 21%. That is only 2.4% appreciation per year. Ask me why I'm not rich. Further, I paid $4,000 improvements before selling, $6,000 improvements while I owned, and $8,400 in RE commision and selling fees.

Do the math... I made $3,600 on my $16,000 down payment investment in 9 years. If I had just put that $16,000 in the stock market in 1987 and cashed out in 1996, I would have grossed over $18,000 in profit or more than $15,000 after capital gains taxes.

So your answer is, I don't know... I suspect this time the bottom will take longer to hit, due to the magnitude of the runup, and now every Tom, Dick, and Harry can't qualify to buy anymore, which is NOT going to be good for future home values. Nobody knows how far prices will fall. Prices in Sacramento are between 2003 and 2004 levels. Prices are still falling. So who knows?

People have seen great appreciation in their home, but until they sell, it is only on paper. Remember that people saw huge appreciation in their tech stocks, but were wiped out when the Dot Bomb finally imploded. So people say "buy, buy, homes are a great investment, look how much they went up. But current homeowner have to consider how much they have yet to go down. How low will prices go in the next 3-4 years? I don't know.

Ask people who live in a Hovnanian subdivision where their homes today are with 20% to 30% less than before Hovnanian had their "one time" desperation fire sale.

Keep your powder dry. Ask me in 10 years what I have compared to buying a still overpriced home in Sacramento, California. Renting and investing the difference may see my net worth higher than if I buy an overpriced home and have to wait through 4 years of declines and 5 years of flatlining before homes appreciate again.

I don't have a crystal ball, I'm just calling it like I see it. The author of the article I posted is calling it the same way, unless real estate is in fact cheap enough in your location. It is not nearly so affordable compared with renting in my location.

45 posted on 09/22/2007 12:23:00 AM PDT by Freedom_Is_Not_Free
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To: j. earl carter
You should do whatever makes you happy...

Yeah!

... and won't get you thrown in jail.

Well if you're gonna get picky... ;)

46 posted on 09/22/2007 12:23:06 AM PDT by Darkwolf377 (Pro-Life atheist living in Boston...)
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To: Nathan Zachary

re: Condo’s....here in Fla condo’s are a bad word..Because when so many were blown apart by the hurricanes, the condo owners were hit with huge special assessments to replace the entire building..One high rise condo that i heard of had a special assessment of $50,000 per condo owner !..Imagine the owner who had lived there for 15 years and had paid maybe $30,000 and was maybe still paying a mortgage...They can hardly give away a condo down here...

Also, many apartment owners converted their properties to Condos and now they are converting them back to apartments because very few condo s are selling...Guess it all depends on what state you live in and your location to see if it makes sense to buy a condo...


47 posted on 09/22/2007 12:26:24 AM PDT by billmor
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To: Freedom_Is_Not_Free

My rent is 1/8 my income should I care?


48 posted on 09/22/2007 12:27:17 AM PDT by eyedigress
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To: Freedom_Is_Not_Free

You have convinced me. You are doing the right thing, IMHO.

We’ll have lunch five years from now, and compare figures - ok?


49 posted on 09/22/2007 12:28:25 AM PDT by yorkie
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To: Freedom_Is_Not_Free

Rent is throwing your money away. Best to buy your house and pay it off quickly. Once it is paid off, you can live in a nice house for a couple hundred a month for the taxes.


50 posted on 09/22/2007 12:28:54 AM PDT by BJungNan
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