http://www.reuters.com/article/2012/02/15/us-housing-americandream-idUSTRE81E1LG20120215

Some interesting stuff to consider when buying a home...any thoughts? Some of the stuff seems common sense overall, but I found it was crazy that 100% of the samples in this guy's research concluded that renting was better than owning.

Quote :

"Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, "100 percent of the time it was better to rent, rather than own." That's right: 100 percent. The reason is simple. While a home is the main repository of wealth for many Americans, it comes with numerous hefty expenses. The carrying costs - what's needed to hold and maintain the asset - range from property taxes and home insurance to emergency repairs and renovations. In a rental situation, the landlord covers those costs, leaving the occupant free to invest revenue in other areas."

Quote :

"McBride crunched the numbers in a pre-bubble era (2004) 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. His conclusion gave Arzaga's view credence: "Homeownership may not be the moneymaker you think it is." (See the full chart at link.reuters.com/hej66s)"

2/16/2012 9:37:46 AM

For me, home ownership isn't just about the monetary consideration. I personally hate all the bullshit that goes along with renting. Dealing with shitty management, shitty neighbors, shitty construction, not being able to do anything to the rental property to make it in line with your personal tastes, etc. From a peace of mind standpoint, I like that home ownership allows me to do what I want with my property without having to worry about what a property manager thinks.

2/16/2012 9:42:09 AM

^^pretty bold statement and I'm not sure I agree with the way it is presented. There are a ton of factors of course to weigh, and we spent a lot of time weighing them all and crunching numbers before we bought, but I am definitely happy we purchased our home.

^Agreed. I've said this in at least another thread, but based on what we were paying for rent and other things associated with renting (had to pay for a gym, had to pay a ton for cable if we wanted TV vs paying much less for satellite, would have had to pay extra for a garage, rent kept increasing) I still think we would come close to breaking even or even slightly ahead even if we had to sell within the next few years. And we didn't buy a home for investment reasons. We bought a home for the reasons you described: Privacy, storage, ability to have our own home gym, ability to have lots of people visit without everyone sleeping on the couch or the floor, ability to have a place to play music with a full band, ability to fully decorate how we want, ability for my wife and I to do projects together. All this for less per month than what it would cost to live at our old apartment after we write off taxes and interest.


[Edited on February 16, 2012 at 9:52 AM. Reason : ]

2/16/2012 9:42:54 AM

That is pretty interesting. The only reason I am wanting to buy a house instead of continuing to rent is I want to be able do whatever I want to the house to make it my own. Other than that, renting is great. I love being able to call the landlord whenever something needs fixing and not having to worry about it.

2/16/2012 9:46:13 AM

imo, its relatively simple, if you plan to stay in one location for 5+ years and you can own for approximately the same monthly payments as renting, it's worth it....If not, it's not.

2/16/2012 9:46:24 AM

While I agree, a lot of instances the better financial decision is to rent, I believe the below statement is misleading. The whole article does not give a rent comparison and seems to imply renting is a break even proposition. No matter what happens, you will never 'break even' renting. It's possible with a house but not probable. The article doesn't seem to take into account the cost to rent.

Quote :

"McBride crunched the numbers in a pre-bubble era (2004) 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. His conclusion gave Arzaga's view credence: "Homeownership may not be the moneymaker you think it is." (See the full chart at link.reuters.com/hej66s)"

2/16/2012 9:51:06 AM

I think I've seen a systematic skew in American perspectives that allows them to value a home as more than they would if fairly compared against other consumption.

If any family had a daily decision between spending the amount they're spending on housing versus other consumption, they would gladly halve their living space and spend the resources on something else. In the event they want a bigger space, they'd do better to rent a larger space on a temporary basis, like a vacation home.

I'm just saying, people go irrational whenever homes come up. When you consider the fraction of total earning potential that a productive American puts to their home, it just wouldn't make sense based on personal preferences fairly judged.

All of these pro-ownership arguments are rationalizations. You can tell that something is a rationalization when someone can't put a value on it. What's the monetary value to you of being able to do construction on your home? I'm talking a per-month value. I'm not pushing you direction or another. I'm just saying, you probably don't know because your reason is a rationalization. That means, you already had the pro-home attitude and weren't actually interested in comparing the options.

2/16/2012 9:55:28 AM

sensationalist title is sensationalist

[Edited on February 16, 2012 at 10:13 AM. Reason : .]

2/16/2012 9:55:54 AM

the problem is the study is approached from the assumption that people buy a home thinking along the lines of:

Quote :

"Homeownership may not be the moneymaker you think it is."

unless you own for decades, rent it out for a long time after you move, were lucky enough to get in on the early 2000's mania, or some combo of the three, owning a home is not gonna be a money making endeavor

2/16/2012 9:55:55 AM

Just because something is a reason that you can't put a monetary value on doesn't make it a rationalization. Not EVERYTHING has to have a monetary value. Unless I looked back and felt like home owning was a mistake or I looked at the numbers I crunched and felt like we shouldn't buy but we did anyway, then I have no need to rationalize buying our house. When we bought we weighed the options for about 6 full months before even going to see a home in person or contacting a seller's agent.

And if you really want to be picky, lots of the things I listed do have monetary values: renting a band space, paying for a gym, paying more for cable, paying extra on top of rent for a garage.

Also, the author ends with this:

Quote :

"Fortunately, homeownership provides the ability to recoup many, if not all, of these expenditures when the house is sold. But homeownership to the exclusion of investing for retirement, saving for a rainy day, or lifestyle choices such as travel, recreational pursuits, or charitable giving may ultimately prove less financially rewarding than expected. "

I think that is a key point there in the article though. Too many people are "house poor" in this country. However, if you are contributing healthily to retirement, have your emergency funds, and still have the money to travel and do the things you'd like to do, then there is nothing wrong with owning a house because you want to own a house. Just don't buy something that you might really lose your butts on and don't buy something planning to make money off of it.

[Edited on February 16, 2012 at 10:12 AM. Reason : ]

2/16/2012 10:00:06 AM

Didn't read the article, just what was posted. But no one can disagree that financially, renting is better than owning for short-term housing. That's a given. Long-term, you are much more likely to come out ahead by owning. And did the author consider rent prices and increases? Is a family of 5 in a 3/4 bedroom apartment in a nice area really going to come out ahead? What about with pets? Lots of big fees there. Garage rental? Amenity costs (home gym vs gym membership, etc.)? Rent increases? My rent is going up by $100 next year (not renewing though). Most mortgages stay the same or decrease (other than ARMs).

2/16/2012 10:21:31 AM

Quote :

"unless you own for decades, rent it out for a long time after you move, were lucky enough to get in on the early 2000's mania, or some combo of the three, owning a home is not gonna be a money making endeavor"

This is the key. Home ownership isn't supposed to be a money making endeavor (despite what HG TV might want you to think). In fact, the home itself is more like a depreciating asset when all things are considered, it just doesn't depreciate like your car does so most people don't think of it like that.

2/16/2012 10:22:37 AM

Property tax, renovations, repairs, etc., etc. eventually just get rolled into the rent. You're paying for those things either way.

2/16/2012 10:23:38 AM

^^^

False. Houses are highly illiquid and in a globalized job market nailing yourself down geographically is a death warrant for your career.

[Edited on February 16, 2012 at 10:27 AM. Reason : a]

2/16/2012 10:27:03 AM

that's a bit of an exaggeration

2/16/2012 10:30:39 AM

Owning a house isn't necessarily nailing yourself down geographically though. Several of my good friends/co-workers own houses and we have offices and projects all over the world that people take assignments at. Just because they had a 12 month assignment in China or a 6 month assignment in Oregon etc. doesn't mean they had to sell their house.

Anyway, this is just one of those things that you have to look at on a case by case basis. It is very hard (almost impossible) to do blanket studies and say that buying or renting is better.

[Edited on February 16, 2012 at 10:39 AM. Reason : ]

2/16/2012 10:34:07 AM

Quote :

"False. Houses are highly illiquid and in a globalized job market nailing yourself down geographically is a death warrant for your career."

What an overly broad and incorrect generalization.

And you know you can rent your house out if you have to move, right?

Fuck, people...this isn't rocket science.

2/16/2012 10:46:00 AM

Seems like a lot of the people in this thread saying it's better to own than rent are comparing renting an apartment against owning a house. Obviously those two things are not comparable.

Regardless of what you rationalize I think it's fair to say that buying a home isn't a "no brainer". I've grown up being told that buying a house is the right, financially sound move to make after you've gotten yourself a good job and settled down outside of college. It is not. Naturally if you want to make large changes to a house to make it your own and have some nice landscaping, well then yes owning a house is for you.

I've lived in a house for going on 3 yrs (with 2 roommates). Our rent has never increased. We are allowed one pet for a minimal fee ($15/mo). Several things around the house have broke over time (water heater, HVAC unit) and we've had insect problems as well. No big deal; I pick up the phone and tell my landlord who in every instance has sent someone over within a day. We are free to use whatever TV & internet provider we want. On the downside the yard doesn't look that great (there's no point for us to maintain it-other than cutting the grass-as we don't own it) and several of the "rental" neighbors are even worse.

I feel like if you're a single individual who doesn't care about spending the time modifying and maintaining a home "just" the way you want then why buy? The future can be unpredictable as well. Who is to say you want to stay there for at least 5-10 years? How financially stable are you (job security, etc.) as taking on 6 figure debt loads makes a lot of people uneasy and can be risky.

2/16/2012 10:46:31 AM

^ I would have to agree with this.

My parents owned homes for over 40 years. When my Dad died, my Mom sold the house and rented a townhouse. She absolutely loves not having to worry about maintenance, and has the piece of mind that comes along with it. That being said, she is a 65 year old Widow, so she is at that point in her life where maintaining a home (yard work, repairs, etc) isn't exactly feasible.

Me on the other hand, I enjoy owning my home. Yard work / gardening is like therapy for me. I really enjoy having projects around the house and fixing things. Sure it can get expensive, but there is something very rewarding about home improvement. I am also very fortunate to have friends in various industries (HVAC, Electricians, Landscapers, Roofers etc.) so when I do need to fix/upgrade something it doesn't cost me an arm and a leg.

To each his/her own I suppose.

2/16/2012 11:05:54 AM

I agree that part of this article was skewed, in that they looked mostly at the housing market right around when the bubble burst.

One of the things that stood out to me was how they mentioned a "one-company town", in that if you bought a house there and the company went under, you were screwed. That's sort of the situation I am in/going into, since I moved to a tiny town because of the company I came to work for. Eventually I'm planning on buying a house once I save up enough cash, but still I feel somewhat tentative about it since its a small company. Still, I figure that this is a busy area and houses for rent go extremely fast I guess due to the proximity to Charlotte, and this sounds to be a good time to get a house due to the down market.

Right now I am renting a house, have been for over a year now. The moderately high rent sucks but works for now.

2/16/2012 11:36:34 AM

^^^ the reason I use an apartment is because (broad statement here depending on where you live) apartments are usually cheaper when comparing base monthly rent vs monthly mortgage payment so a lot of people try and compare apartment renting to house owning to say how expensive it is to own a home.

When it comes to house renting, if you compare buying vs renting the same exact house in the same exact area, the rent would already be higher than the mortgage, assuming a decently competitive renting market and a landlord who knows what he is doing and is actually using the house to attempt to make money. In other words, the landlord is going to roll every penny of property tax, repairs, etc. that they can into the monthly rent while still staying competitive in the market. As the renter you are essentially paying for the convenience of not having to handle them yourself and the ability to leave (within the minor limitations of a possible contract/lease) whenever you'd like, but you are still paying for the standard repairs and renovations that the landlord anticipated.

For an example, I could easily rent my house for $200 more than my mortgage right now based on the few houses in my neighborhood where I know people are renting (and they were on and off the market very quickly). The renters would cover all of my principal, interest, insurance, and most of my taxes (taxes would be slightly higher if I am renting it). Even if I only had $125 net after my mortgage as a result of the increase in taxes that's $4500 over the course of 3 years that my renters would have paid toward repairs. That's one entire HVAC unit repair and the hot water heater right there.

Once again, I'm not saying one is better than the other for everyone. It depends on location, job, market etc. Lots of things to consider.

[Edited on February 16, 2012 at 11:47 AM. Reason : ]

2/16/2012 11:39:08 AM

Quote :

"That is pretty interesting. The only reason I am wanting to buy bought a house instead of continuing to rent is I wanted to be able do whatever I want to the house to make it my own. Other than that, renting is great. I love being able to call the landlord whenever something needs fixing and not having to worry about it."

Fixed for my situation. I didn't buy the place to make money off it. I bought it to be able to do what I want, when I want, how I want.

2/16/2012 11:39:54 AM

I think that making money on your investment should never be a consideration when buying a home, unless of course you are in the flipping business.

I would assume that most people (myself included) who live in a house long enough to build equity just end up borrowing against it for improvements.

2/16/2012 12:03:16 PM

Quote :

" What an overly broad and incorrect generalization. And you know you can rent your house out if you have to move, right? Fuck, people...this isn't rocket science."

I actually own two homes in NC and live in CA. While it isn't rocket science it is a huge pain in the ass. The first being some HOAs do not allow you to rent, or make you jump through all kinds of hoops if they do. Once you find an HOA some want you to do a background check or make other concessions or pay fees. Then to boot, lets say your renter moves out at the lease end and it takes longer to find a new renter (which has happened to me more than once). That puts a huge burden that could lead you into having to move back away from the better opportunities for which you left or take a job in the interim you hate. It's clearly going to effect you in a lot of ways. Then if the job market is hot in say, timbuk2, then you can take your thousands of dollars and move your ass to the hot job market without worrying about going broke when you get assessed by the HOA, your renter moves out, and you're between jobs. Not to mention if you bought pre 2008 your rent fee is most likely not going to cover the mortgage. So you'll almost always have a deficit of X. There are also a lot of pain in the ass tax issues that the CPA I use, my wife, has to figure out.

The other issue is the illiquidity. There are a lot better things you can do with the money (especially the down payment) than buy a house. There's a huge lost opportunity cost once you fork over the $10s of thousands of dollars for a down payment. If you put that in Apple in 2008 you'd have $20s of thousands of dollars and you could cash out.

I'm all for buying a house if you have mad cash reserves and are appropriately diversified but tying up all your net worth in one thing is a bad idea.

http://www.comedycentral.com/videos/index.jhtml?videoId=11887

Quote :

" Owning a house isn't necessarily nailing yourself down geographically though. Several of my good friends/co-workers own houses and we have offices and projects all over the world that people take assignments at. Just because they had a 12 month assignment in China or a 6 month assignment in Oregon etc. doesn't mean they had to sell their house. Anyway, this is just one of those things that you have to look at on a case by case basis. It is very hard (almost impossible) to do blanket studies and say that buying or renting is better. "

But why the fuck have that much financial burden when you are travelling that much for work? Why not get a furnished apartment when you are in the city of your choice instead of shoving money up bankers' asses?

Of course, yes buy a house if you're rich and it doesn't effect your life. Otherwise head with huge caution. We do not live in the same world as our parents, not even in the slightest.

TKE-Teg sounds smart as fuck. I wish I was that smart when I was a newly minted professional. I wouldn't have 2 homes in a state a never plan on going back to

Quote :

"I think that making money on your investment should never be a consideration when buying a home, unless of course you are in the flipping business. I would assume that most people (myself included) who live in a house long enough to build equity just end up borrowing against it for improvements."

That wasn't the common train of though 5+ years ago. EVERYONE was buying property like mad and trading it like baseball cards. In hindsight it seems more than silly.



[Edited on February 16, 2012 at 12:46 PM. Reason : a]

[Edited on February 16, 2012 at 12:48 PM. Reason : a]

2/16/2012 12:41:10 PM

Quote :

"I actually own two homes in NC and live in CA. While it isn't rocket science it is a huge pain in the ass. The first being some HOAs do not allow you to rent, or make you jump through all kinds of hoops if they do. Once you find an HOA some want you to do a background check or make other concessions or pay fees. Then to boot, lets say your renter moves out at the lease end and it takes longer to find a new renter (which has happened to me more than once). That puts a huge burden that could lead you into having to move back away from the better opportunities for which you left or take a job in the interim you hate. It's clearly going to effect you in a lot of ways. Then if the job market is hot in say, timbuk2, then you can take your thousands of dollars and move your ass to the hot job market without worrying about going broke when you get assessed by the HOA, your renter moves out, and you're between jobs. Not to mention if you bought pre 2008 your rent fee is most likely not going to cover the mortgage. So you'll almost always have a deficit of X. There are also a lot of pain in the ass tax issues that the CPA I use, my wife, has to figure out."

You're still making a broad generalization because apparently you've had some bad experiences and made some incorrect decisions.

1) Your fault for buying a house with a strict HOA. Either you didn't do your research on the HOA before purchasing, or you just shouldn't have done it.

2) Get a property manager to handle your rental situation. Yeah, they might take a small cut, but it's better than having your house stay un-rented for long periods of time and having to deal with that shit yourself (costing time AND money).
Apparently YOU shouldn't have bought a house. I don't know what your field of work is in, but there are a lot of people who work in areas where they are pretty secure and even if they weren't, there are available jobs in the area (Yes...even in this economy). But even if they do have to move, it is possible to feasibly manage your property from out of state. Does shit happen? Yes. But it also seems like you're complaining about simple things that can be fixed.

As someone has already mentioned...it's definitely a case by case basis. Obviously we're not amidst the real estate boom that happened 5-7 years ago. That means you should just take a few more precautions and think a little harder before you buy (which you should have done 5+ years ago anyways). But that doesn't mean you have to be rich or have a 30 year employment contract before you buy. Just be smart about it.

2/16/2012 12:55:10 PM

^

1) You're making a lot of assumptions. I was primarily just outlining how risky it is. Most people, especially ones that planned on staying in the area, can't just up and move and won't hedge their bets that well. My HOA is strict, but I hedged that by negotiating a rental contract before I even considered renting or thought I was leaving the area.

2) I have a property manager, but they don't guarantee a renter. Some times people just can't be found particularly in areas surrounding Greensboro and other downtrodden areas that lost the manufacturing base. Yes there are jobs, there are jobs in Raleigh, but if you get a GREAT opportunity you shouldn't pass up it's a pain in the ass if you have a house. In my case I had the opportunity to move to silicon valley and rub elbows with some of the biggest names in the valley and put my work in front of lots of people. If I didn't have the house, I'd of done it sooner.

I'm not complaining about anything--I just stated its much more complicated than you make it out to be. I fixed all my problems and moved with little burden at the moment. However, in the future shit could get bad fast because of my obligations. I value career mobility more than a white picket fence in NC. I know people that are not in that boat and that's great for them.

[Edited on February 16, 2012 at 1:25 PM. Reason : a]

2/16/2012 1:24:33 PM

Quote :

"Your fault for buying a house with a strict HOA."

This. And I imagine a lot of the issues you are facing are why people hire companies like Preiss to manage their rentals. Or sell their rentals when they become more trouble than it's worth.

2/16/2012 1:35:29 PM

Quote :

"There are a lot better things you can do with the money (especially the down payment) than buy a house. There's a huge lost opportunity cost once you fork over the $10s of thousands of dollars for a down payment. If you put that in Apple in 2008 you'd have $20s of thousands of dollars and you could cash out."

If I had a crystal ball, I'd be doing a lot better than doubling my money in 4 years.

2/16/2012 1:37:45 PM

Quote :

"I fixed all my problems and moved with little burden at the moment."

Then what's the problem?

Quote :

"However, in the future shit could get bad fast because of my obligations."

Then sell the house? Maybe you'll lose some money, but since you're "rubbing elbows" with all these big timers, shouldn't hurt you too bad in the long run.

Quote :

"I value career mobility more than a white picket fence in NC. I know people that are not in that boat and that's great for them."

Which is what people have been saying:

Quote :

"As someone has already mentioned...it's definitely a case by case basis."

Look...if you purchased a house during the bubble, you're kind of SOL right now (unless of course you have made a lot of money, then you can eventually get over it). That shit happens. The economy isn't always rainbows and carebears. You can write an article just like this for about every financial investment out there.

But right now, if you can afford a home, its not a bad idea to purchase. Re-sale values aren't horrible (compared to what they would be if you had bought during the bubble and are trying to re-sale) and TONS of people are renting (because of the economy of course), so it's a little bit easier to fill up the house if you have to go somewhere.

But again, it definitely comes down to whether or not you want to own a house. Unless you're in the business of flipping, you shouldn't bank on buying a house as a big investment. Can you make money on it in the future?? Sure, there's a decent possibility...but you shouldn't definitely have other reasons to buy rather than to make a buck.

2/16/2012 1:37:55 PM

Rubbing elbows != making money. It just means opportunity and good networking.

Quote :

"Then what's the problem?"

Most people in this thread are still arguing buying a good idea, when almost all the data says otherwise. Taking on in debt what most people earn in 5-10 years is ridiculous!

Quote :

"Can you make money on it in the future?? Sure, there's a decent possibility...but you shouldn't definitely have other reasons to buy rather than to make a buck."

NO! That's precisely what the article states. Almost everything you read in financial magazines and blogs corroborates the same thing! If you take into account carrying costs, plus the money paid to interest, taxes, insurance etc it's a loss no matter how you slice it. The only people that make it work are real-estate professionals that do it full time. Just saying that Joe Blow can make money in the industry is a stretch.

On top of the fact it's a net loss you give yourself a huge burden and have a loss of the opportunity cost of the down payment. You could start a business, buy investments, use the money as a reserve in case you lose your job with a down payment for a house. All of which are better financial ideas.

2/16/2012 1:51:01 PM

Quote :

"You could start a business"

Yes...in this economy, start a business instead of buying a house. That way, when you lose your business, at least you won't also lose your house!!

2/16/2012 1:52:41 PM

^

There are plenty of areas where the economy is booming. If you didn't have a house you could move and capitalize on some of the opportunity

2/16/2012 1:58:34 PM

Or you could buy a house in those places!!

2/16/2012 2:05:09 PM

Its easy math to decide how you want to go. I feel most people don't do it or ignore the results because of society pressure. Big boy pants seem like such a good idea....

2/16/2012 2:28:35 PM

Quote :

"Almost everything you read in financial magazines and blogs corroborates the same thing! If you take into account carrying costs, plus the money paid to interest, taxes, insurance etc it's a loss no matter how you slice it. "

The point is if the only reason you're buying a house is because you might make money on it down the road, you're buying a house for the wrong reason.

2/16/2012 2:47:41 PM

^agreed. I understand that the scale is larger in buying a house so it can't be easily compared to other much less expensive goods that people buy because it brings them some kind of joy or entertainment, but I wonder if everyone who is saying buying a house is 100% bad in every way shape or form and "doesnt make sense" also only ever spends $ on things that earn them money in return? I think the majority of people saying that they are still happy homeowners have stated over and over that there was more to it than looking at financial return on investment. They weren't looking to make money off of it. I'm a very frugal person but not every single decision I make in my life is about accumulating more $.

Quote :

"Taking on in debt what most people earn in 5-10 years is ridiculous! "

Agreed completely. However, our mortgage loan was equal to a little over 2 years of my salary (doesn't count my wife's salary). Between cash on hand, CDs, and non-retirement brokerage accounts I could pay off close to 60% of what's left on our mortgage today and still have a few months of living expenses in the bank. I max my 401k and my Roth IRA every year and my wife maxes her Roth and contributes 25% to her 401k. The house isn't the huge burden to us that you make it out to be, it is something we wanted to have. We weren't wallowing in student loan debt and 3 months of living expenses and one income saying "we want a house because HGTV tells us we want one."

Let's say we live in this house for 10 years. I wonder how far behind we would really be compared to renting over that entire time? Not too far I'm willing to bet, possibly even ahead in our position. The biggest argument you can really make would be the opportunity cost of the down-payment. To the apparent surprise of many in here, we did take all this into consideration before we bought. The amount we would possibly come out "behind" averaged per year (barring some housing dooms day scenario) was a pill plenty small enough for me to swallow and well worth the enjoyment we get out of owning our home. It's basically the "cost" associated with enjoying the home. The same enjoyment other people get out of spending $$$ in bar tabs every month or buying expensive cars or whatever else other people enjoy doing that doesn't do anything for us.


Also LOL at anyone you commit career suicide by buying a house.

[Edited on February 16, 2012 at 3:43 PM. Reason : ]

2/16/2012 3:30:16 PM

you rent until family members die and leave you those houses.

/obvious

2/16/2012 3:46:21 PM

I think I'm going to buy a Porsche instead of a house.

2/16/2012 3:49:31 PM

Quote :

"Also LOL at anyone you commit career suicide by buying a house. "

I was using hyperbole without explaining my thoughts. The world has a lot of churn right now, and old companies/industries get replaced at an alarming rate--see a lot of rural NC with textiles, print industry, old music/media, IT staff, etc. If you operate under the assumption that whole industries/companies are being wiped out or moved it becomes a scary prospect, to me at least, to limit yourself to one area.

2/16/2012 4:29:03 PM

career opportunity does not change.

If a company finds you a perfect fit for them, then they will definitely try to do what they can to help you re-locate. Whether it's add to the salary, the up-front signing bonus, incure the loss of the house, or whatever. That's how I look at it.

This is a major reason people move in poor economic times. My neighbor got offered double his salary, so it was a no brainer to leave his house, rent it for a couple years, then sell it for a loss if necessary.

2/16/2012 4:35:59 PM

^^I definitely understand that. I guess it is different for me because I feel pretty confident with the company I am with right. Obviously it is still a gamble but I liked my odds at the time we bought our house.

[Edited on February 16, 2012 at 5:10 PM. Reason : ]

2/16/2012 5:08:20 PM

^

If you actually live in Greenville that is certainly one of the bright spots and understand the security. They've done a lot of good stuff to attract the right kind of business.

2/16/2012 5:18:44 PM

After having to fight a rental company on a dangerous furnace (and getting poisoned), I can't wait to own my own home. Too many sketch balls in the renting business

2/16/2012 5:26:11 PM

Quote :

"career opportunity does not change."

Getting a job as a small town journalist any time soon? Textile machinest?

2/16/2012 5:29:26 PM

^^^ we do. Been here 5 years now. My wife and I actually work for the same company. That certainly has it's own risks associated with it, but we like it right now.

[Edited on February 16, 2012 at 5:36 PM. Reason : ]

2/16/2012 5:35:50 PM

THE COST OF HOME OWNERSHIP IS TOO HIGH

2/16/2012 6:49:31 PM

Quote :

""McBride crunched the numbers in a pre-bubble era (2004) 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. His conclusion gave Arzaga's view credence: "Homeownership may not be the moneymaker you think it is.""

This just simply does not pass the sniff test. This is essentially saying you are burning 20k per year to own a home over renting.

I didn't read the report, but what did he do, worst case the home costs, best case the rental, and best case the yearly money invested on the differential between what is spent on rent and what would be spent on the home. Did he account for the mortgage interest deduction?

2/16/2012 6:53:53 PM

Alright, I looked up his numbers. He clearly did worst case things against the house, we'll look at it one by one

Let's take a look at a home that you buy for $200,000 today. We'll assume the following: The buyer makes a $20,000 down payment

and finances $180,000 at 6 percent on a 30-year fixed mortgage,
The fuck? Who these days is paying 6%? I didn't even pay that in the bubble days.

with closing costs of $5,500.
Again, the fuck? Even if you don't roll them into the loan which is about standard op these days the loan origination will be 1% from a brick and mortar, potentially another $500 broker/bank fee, $150-2 inspection and all the other middling costs and it might come out to 3500.

Our buyer is in the 27 percent marginal tax bracket, pays property taxes fixed at 2 percent of purchase price,
An emphatic nope. Wake County + Cary was .864% in 2011. Where I am on the coast it is .65%

property insurance of $100 a month,
Not in Wake County. I think mine worked out to $500 yr theft/casulty on a 250k home. Where I am on the coast that is similar but I have to shell out another $1500 for wind.

forks over $50 a month to a homeowners association,
Which has gotten me a pool and tennis courts in all three neighborhoods.

and spends $100 a month on maintenance and upkeep.
I don't think I've spent almost $10k on legitimate home maintenance in the nearly 8 years I've owned them. Maybe not even 5k.

When the house is sold, there's a 5 percent real estate sales commission paid.
This one is legit. This is the one limit to flipping a home or getting into a home and getting out of it in a short time frame that certainly tilts the financial equation towards renting.

2/16/2012 7:33:31 PM

^
The 6% he used is pretty reasonable since that is a better representation of historical interest rates on home loans than the crazy low rates we have now. I'm not really sure I believe his model entirely but I can't find a more academic type paper to check out just exactly what he is doing.

My view is that property is more a hedge against inflation since I don't expect property to really do better than it. So in a sense he is right that it is usually better to stuff your money in equities or bonds.

On the other where I live in CA property is selling below what it was 12-13 years ago. And rent is rising. The house I just put a bid on is currently renting for about 55% more than a conventional mortgage. Sounds like a good good buy to me.

2/16/2012 9:57:46 PM

set em up

2/16/2012 10:12:42 PM