patrick.net

Troy says

it’s impossible to catch the bottom of any market

Yeah, very possible when bottom is still way off cuz there are very few high paying jobs/exotic loans to support the current bubble prices.

schmitz_kris says

My home metro area, Minneapolis, is DOWN over 11% y-o-y - ditto for many formerly “stable” metro areas.

Formerly stable probably means they resisted price declines longer than other areas...perhaps?

gameisrigged says

SubOink says

gameisrigged says

They won’t be free, but they will be cheaper.

You are right, the 500k house is already only 498,500.00 now - too bad you spend $2500 last month in rent (if you live in a 500k house) so for you it would have been better to buy it last month than now.

Math is not your best friend I see…

Wow. My previous post about the inaptness of your comparison just went right over your head, didn’t it? When you read stuff like that, do you just kind of hear gurgling noises in your head?

It's pretty straightforward...your "inaptness" is that you don't realize it. Rent is throwing out money every month. You do have to live somewhere, don't you? - So in essence as a renter you lose that amount every month except you will NEVER own the house. I will own my house one day and my payment will be exactly what it is now until then. Renting only makes sense if you are paying way less for the same place then buying.

When the market is basically flat, your wait period is very expensive. If you buy a house for 500k now OR wait for a year, then buy it for 482k ( but spent 30k on rent in the meantime ) you are not doing well waiting. The wait cost you 10k!

I think we will stay flat for a while now. Keep throwing out that rent gamesrigged and tell yourself its a financial smart move.

The question is...what happens when the world does not end?

SubOink says

gamesrigged won’t give you a prediction. He just waits until some data comes out and then tells you that he told you so in hindsight. Useless.

Predictions ? See below.

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

SubOink says

Rent is throwing out money every month. You do have to live somewhere, don’t you? - So in essence as a renter you lose that amount every month except you will NEVER own the house. I will own my house one day and my payment will be exactly what it is now until then. Renting only makes sense if you are paying way less for the same place then buying.

So what words do you use to refer to the interest you pay on the loan you took to buy the house? Are you "throwing that away?"

SubOink says

When the market is basically flat, your wait period is very expensive. If you buy a house for 500k now OR wait for a year, then buy it for 482k ( but spent 30k on rent in the meantime ) you are not doing well waiting. The wait cost you 10k!

Many homes in CA before the bubble were half of 500K and some less than that. After all is done many will save well over 200K in future obligations and increase savings.

Or you rather have the same bubble inflate for self-serving purposes?

http://www.housingbubblebust.com/OFHEO/Major/SoCal.html

GOD i love people from LA.
Its all about getting $$$$$$$$$$$$$$$$.
especially when its someone elses.
LOL! Somethings never change.....

FunTime says

So what words do you use to refer to the interest you pay on the loan you took to buy the house? Are you “throwing that away?”

Yes, I am. To a point because they are a tax deduction. Here is a breakdown...my mortgage is about (I am gonna use slightly rounded numbers) $2400 - $1800 of that is interest that I am throwing out. That interest is a tax deduction so I pay 500/m less in taxes - I am effectively throwing out 1300/month. If I rented my own house, it would be $2850.- on the low side. (Both of my neighbors across the street have a slighly smaller house and are renting it for that) -

So would you rather throw out $2850 every month or 1300? If I go as far as putting in prop tax - okay there is more money I am "throwing" out...another 500-600/month (not even figuring in tax deduction) - still 1800 vs 2850 and over the years I am building equity and own the house one day. I don't care what its worth at that point because I live in it. I am not trying to get rich of it just don't want to pay somebody else's mortgage off.
Renters don't realize, you do have a mortgage. It's just not your own. Somebody else will one day own the house that you have paid of for them. In the meantime, my life quality is very different. Not worried about a landlord. I can improve the home. Have you ever noticed how rentals are in such shitty shape compared to primary residences? Look at the houses your friends rent, how they live and then look at houses that friends have that own. Renting vs owning cannot even be compared, its a whole other lifestyle. It's apples vs oranges. So I totally get people that choose to rent because they dig that lifestyle (for example not renting a house but a super nice apartment with gym and pool in the premises). But if you are renting because you think you are the "slick" guy that waits out the storm in hopes of picking up a 5000sqft house in Malibu with ocean views for 500k - Keep dreaming! Won't happen!! That's my predicition. (Disclaimer: Unless a big swell wipes half of CA coast down the ocean..)

I've done the math for owning in Minneapolis where I live. It's a better option to rent right now unless you're willing to buy a 1 bath property. Those are the only "deals" right now. I expect prices to continue to fall too for a few reasons.

First, gas prices are too high. The public transit routes don't go where consumers need them to go. 95% of this market is moved by fuel costs. I've toured neighborhoods that I am scouting. You can find a few on every block, but the mcmansion squatters stick out. You'll see four to five Jaguars, Lexuses, BMWs, or Mercedes packing the whole driveway and the yard will look like crap.

Prices will only fall faster once interest rates rise. I'd wager there's another 15-20% in price declines in Minneapolis.

thomas.wong1986 says

Many homes in CA before the bubble were half of 500K and some less than that. After all is done many will save well over 200K in future obligations and increase savings.

What's your point? You think that a $500k home in LA will sell for 200k..by when?? That is such a ridiculous prediction. About as ridiculous as a "buy now" statement. If a house in LA would sell for 200 that is right now 500 then EVERYBODY (a bagger at the grocery store even) could buy a house. That's why it won't happen.

thomas.wong1986 says

GOD i love people from LA.
Its all about getting $$$$$$$$$$$$$$$$.
especially when its someone elses.
LOL! Somethings never change…..

Well, we are having a discussion here about $$ and if its wise to buy or rent or hold or wait etc...has nothing to do with "people from LA". That's nonsense.

We all want basically the same. We just don't agree on how to get there...

Reading through the bi-polar nature of the discussion on this thread made me sit down and consider the realities facing real estate, banking and the economy. After 15 minutes of this, I started crying. Four shots into my bottle of Southern Comfort, I feel grounded again. So here's where I'm at.

In September of 2008 a lot of people, (including myself,) crapped their pants and declared the end of banking and the U.S. economy. And if you think about it, the people who panicked had a really good point. According to the rules, the big 5 or so banks were bankrupt. After all, they were hopelessly over leveraged and the collapse of the housing market would bankrupt them, unavoidably and irrecoverably. Right?

Fast forward to 2011. The banks are still insolvent. They are still producing the toxic sludge they were three years ago. And instead of snorting it like they used to, they're now mainlining it with a rusty needle and a charred metal spoon. Yet the banks are still chugging along and the economy seems to have stabilized. Confusing, no?

My take from all of this is that banking in the United States is a game with certain rules. And when those rules threaten to destroy the players, the rules are bent. Changed. Warped. Destroyed utterly. Remade anew.

In short, we play whatever game the big boys come up with, no matter how ridiculous or sad or pathetic. We play along because the alternative is utter and complete annihilation of modern life as we know it.

Will this new mutant form of capitalism survive? I don't know. I suspect it will in the short term. After all, how can you lose a game when the rules are as malleable as an 18 year old girl on prom night in the back of a limo? We all need this thing to work after all. The guys on wall street and just about every politician knows this.

In the long term... well, on a long enough time line, everyone's chances of survival drop to zero.

SubOink says

So would you rather throw out $2850 every month or 1300?

Aren't the numbers you're using only the beginning of the comparison though? If you do the "improvements" you talk about later in what your wrote, isn't that going to add to the amount you "throw out?" My friends who own spend additional huge sums of improvement money on top of the purchase price.

It just seems like huge amounts of debt-taking/spending with no numeric rationale whatsoever. The most uncomfortable part for me is the ratio of purchase price to income. That seems so fundamental and yet people just ignore it. It must mean living on a personal budget which includes savings is rare.

Yet the banks are still chugging along and the economy seems to have stabilized. Confusing, no?

Has it stabilised? All that has happened is to stabilize US banks the United States exported inflation to the rest of the world. We can't just throw shit beyond our shores without something coming back at us.

FunTime says

living on a personal budget which includes savings is rare.

That's okay. Dream of big time equity build up is the only thing that matters to the delusional. Negative equity in short term does not matter, it is even better then a $ sitting on hand earning 0% interest rate :)

Or do you think we’re in for a 15 year bear market?Is every asset that is "toxic" already known?

The problem with this crisis is it friggin huge. It's not just contained to one emerging economy like Russia, Argentina or Mexico. It's the reserve currency of the globe.

SubOink says

What’s your point? You think that a $500k home in LA will sell for 200k..by when?? That is such a ridiculous prediction. About as ridiculous as a “buy now” statement. If a house in LA would sell for 200 that is right now 500 then EVERYBODY (a bagger at the grocery store even) could buy a house. That’s why it won’t happen.

You do recall how prices in LA (not to mention Beverly Hills, Malibu) dropped by 40% back in 1991 and stayed down for a long time.

How many people jump back into RE when priced dropped back than. Nada! People were burned once and stayed away.

Yes, prices will go back down to their long term fundemental prices adjusted for inflation. Its happened before and will happen again.

Yes, prices were irrational in 2003. They have been irrational since 1998.

thomas.wong1986 says

Yes, prices were irrational in 2003. They have been irrational since 1998.

Prices were irrational in 2003 and since 1998. In most of the BA, prices are still above the 2003 prices, and way above the 1998 prices. Therefore, prices are still irrational in most of the Bay Area (period).

They are already talking about an end to subsidized mortgages. What happens when 4 years of no new construction turns into 6 and 8 and 10? You think the 1% annual increase in population will simply move to tents?

I think if the subsidized mortage market ends prices will fall even more with the reduction in credit worthy buyers. Banks may still lend, but it will be at higher rates.

The whole idea behind subsidized mortgages is to stablize the market. We now know that is obviously a load of crap since Fannie and Freddie were really just good at politicking their way through the DC minefield. Now that they are wards of the state I they might find new life in wheelchairs with square wheels so to speak.

Despite all QE1 and QE2, credit is still tight. Naturally, the herd - you might find this to be a mistake - is reducing their debt burden. They're recapitizing banks through savings, but they way financial markets now work is very different from the way they worked in the 80s. There's no such things as investment banks anymore. They're all commercial banks whether they operate 10,000 deposit windows or just one in the hills of Utah.

StoutFiles says

Why does everyone here care what he thinks so much

Because we've spent a long time listening to him talk about how the housing market has bottomed. We knew it would continue its downward trajectory when the tax credit ended, and form a new bottom, but he enjoyed the temporary condition of "hasn't happened yet" as his platform to deny the impending reality. Like having bet on a team that's now losing 20-1 in the eight inning, while taunting those who bet on the team that's inevitably going to win, asking them to pay up.

Furthermore there’s all the cash in the world to start a new bull housing market if rents continue to climb and vacancies continue to drop.

Really?

Do you accept capital for investment? I'm basically astonished you wrote this, but you seem pretty confident that you're right.

I got my number wrong. Seasonally adjusted for San Francisco, Feb/Jan, is "-1.6%" Same question though.

klarek says

SubOink says

When the market is basically flat, your wait period is very expensive. If you buy a house for 500k now OR wait for a year, then buy it for 482k ( but spent 30k on rent in the meantime ) you are not doing well waiting. The wait cost you 10k!

LOL

What about that $30+k you just spent on interest, brainiac?

$30k on interest??? HUH?

Please breathe in, exhale slowly - now read my post again, SLOWLY...Get it now?

I don't see the three-month moving average numbers in the press release, so I'm still not sure what numbers you're using. The numbers in the press release don't suggest what you're writing.
Also, you must be looking at seasonally adjusted numbers which Case Shiller warned against last April. It looks like they found an error in the way they were adjusting for seasons.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DCaseShiller_SeasonalAdjustment2%2C0.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243679046081&blobheadervalue3=UTF-8

But wait! CoreLogic says prices went up last month. Here's the quote from Calculated Risk:
"CoreLogic: Home Price Index increased 0.7% between March and April

by CalculatedRisk on 6/01/2011 01:55:00 PM

Notes: Case-Shiller is the most followed house price index, but CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average of February, March, and April (April weighted the most) and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010

CoreLogic ... today released its April Home Price Index (HPI) which shows that home prices in the U.S. increased on a month-to-month basis by 0.7 percent between March and April, 2011, the first such increase since the home-buyer tax credit expired in mid-2010. However, national home prices, including distressed sales, declined by 7.5 percent in April 2011 compared to April 2010 after declining by 6.8 per cent in March 2011 compared to March 2010. Excluding distressed sales, year-over-year prices declined by 0.5 percent in April 2011 compared to April 2010.
...
"While the economic recovery is still fragile and one data point is not a trend, the month-over-month increase based on April sales activity is a positive sign. ..." said Mark Fleming, chief economist for CoreLogic.

I was expecting the CoreLogic index to increase over the summer because it is not seasonally adjusted, however the seasonal increases usually start in June (when the Spring home purchases start to closes). This is just one data point, but it is possible this index will have small increases all summer..."

Schiller report doesn't reflect the truth of the housing market: analyst

BK Capital President and Fast Money contributor Brian Kelly says in a CNBC video above that Standard & Poor's Case-Shiller U.S. National Home Price Index does not really reflect what's going on in the housing market. Kelly cites what he calls more up-to-date CoreLogic statistics, used in a Toll Brothers report, showing regular (non-distressed) home prices in New York, New Jersey and Washington, D.C. up 10 percent. He attributes a fall in prices to the distressed sales market.

"I'm not talking about another housing boom where you can start flipping houses," he said. "I'm just talking about the bottom in the housing market and not only that, when you look at the distressed sales that are going on, that's actually become a shrinking percentage. That has kind of stabilized for the first time since 2009, so you're starting to see things turn."

http://therealdeal.com/newyork/articles/schiller-report-doesn%E2%80%99t-reflect-the-truth-of-the-housing-market-analyst-brian-kelly

HousingWatcher says

Schiller report doesn’t reflect the truth of the housing market: analyst

We're not talking about the truth, which would become quite philosophical. We're talking about specific ways to analyze sales data. I don't view any of them as the truth. Generally, though, I don't find Fast Money contributors or CNBC helpful toward meeting my goals since their main goal is TV ratings not helping me. TV ratings are based on appealing to the biggest number of people, usually with little concern for what causes the appeal.

CASH ON THE SIDELINES is a bunch of BS.
Are the unemployed paying cash for houses? Those lucky enough to still have jobs would take out loans. I have cash which I have been saving since roughly 2003, and guess what? I will be using the smallest possible downpayment amount, because should it all tank again is another cluster-fuck, guess who is walking away with his cash intact? That's right, me!

Tony FL says

CASH ON THE SIDELINES

Just like there is no sex in the champagne room, there is no such thing as "cash on the sidelines":

http://www.hussmanfunds.com/wmc/wmc060710.htm
http://seekingalpha.com/article/231710-putting-an-end-to-the-cash-on-the-sidelines-myth

When Jim Cashholder buys a house from Jim Homeseller, then Jim Cashholder gets the house, and Jim Homeseller now has "cash on the sidelines" -- the same cash that Jim Cashholder supposedly had "on the sidelines" prior to the transaction. No net change. Only used house salesmen and idiot stock market analysts use this phrase, and they always use it to be misleading.

Just for fun, let's also throw in this old quote:

http://www.ritholtz.com/blog/2009/09/1930-money-on-the-sidelines/

Love that quote, Corntrolio.

“There’s a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.”

Wonder if that line was penned by Irving Fisher himself.

Tony FL says

CASH ON THE SIDELINES is a bunch of BS.

Are the unemployed paying cash for houses? Those lucky enough to still have jobs would take out loans. I have cash which I have been saving since roughly 2003, and guess what? I will be using the smallest possible downpayment amount, because should it all tank again is another cluster-fuck, guess who is walking away with his cash intact? That’s right, me!

Unemployment rate - 8.7% . So in 100 people 9 do not have a job, 91 DO have a job.

You sound like NOBODY has a job.

So if you buy a house that you can afford...then the house looses value on paper..you're gonna walk away just because of that? Pretty stupid. Where are you going to live?

Instead, if you used your saved cash to buy something nicer and have a lower monthly payment, then you can freeze in a 30 year mortgage (which you can always pay off earlier if you want/need to) - so your payment will NEVER change no matter what your house is worth. Why would you walk away from that?? With your precious but worthless cash in your hand. You cash now will be worth half in 10 years from now...don't forget that. Cash sucks!

Unemployment in California is 12% by the way.
There are a some of reasons people aren't buying real estate, maybe more than I mention.
1. They think prices are going down, so not buying.
2. they are unemployed
3. they think the whole thing is a scam or con by realtors and banks. (right or wrong)
4. they can't get loans
5. they are afraid to take the plunge.
Cash is always worthwhile to have, if you are making it and can add to your pile. I like to put it to work in some way.

SubOink says

Unemployment rate - 8.7% . So in 100 people 9 do not have a job, 91 DO have a job.

U-6 is 16%, so 1 out of 6 do not have a stable job.

http://research.stlouisfed.org/fred2/series/U6RATE

The situation is so dire that a recovery to 1991's worst would be seen as a miracle:

http://research.stlouisfed.org/fred2/series/UNRATE

The difference between now and 1991 is:

1) leading edge of baby boom is 65 and not 45. We've got a demographic wave coming that is going to turn active producers into retired consumers, of medical care and also their pension payouts, including an increasing drawdown of the $2.5T SSTF.

Each year from now until 2022 the annual class of retiring baby boomers will grow by 100,000, moving from 2.8M/yr now to 4.3M/yr in 2022. This is a cumulative $1B/yr growth rate.

2) Trade deficit with China & Mexico was $10.5B (Mexico was in surplus by $2.1B). In 2010 the trade deficit with just these two was $340B.

This is the earning power of 7M jobs at $50,000 that is being sucked out of our economy.

3) Same thing with oil in 1991 oil was $20 and it later fell to half that in the 1990s. Now oil is pushing $100 and will probably double again this decade instead of falling 50% like it did in the 1990s.

$10 gas is nothing but bad news for housing, outside Alaska, Bakersfield, and other oil-producing areas.

4) Government spending. Right now the government is deficit-spending $1.5T/yr. While this may possibly continue indefinitely, it also may not. Just a $100B/yr reduction is about 1M jobs that will be cut each year in response.

Tax rises or spending cuts are equally deflationary, though spending cuts more so since they obliterate local economies that are dependent on Uncle Sugar.

Year-over-year (generally) accounts for seasonality more than just looking at month-over-month.

Versus a year ago, the March numbers are down in the C-S 10 city and 20 city composites roughly -3.5% and -4%, respectively.

Versus March of 2006, C-S shows a rough drop of -32% for the 10 city and -28% for the 20 city.

ChrisLA says

Thats actually funny, because in the summer prices historically tick up a bit and go down in the winter.

The rationale he offered was that the winter doldrums came early in 2010. He didn't say how that could happen, rather he just expected everybody to believe he's serious and to accept it as an explanation. The needle on the bullshit-o-meter was buried.

Gimmicks I've seen supporting the "it's cheaper now to buy than rent" argument.

Gimmick #1) Assuming a lower interest payment with a 5/1 ARM or a 15yr mortgage.

Depending on your life situation, it might be appropriate to use one of these mortgages, but they each come with additional risks relative to a 30yr mortgage. With a 5/1, if rates are much higher in year six, you either have a big jump in your monthly payments or you need to find a buyer who can afford those much higher payments themselves. For a 15yr mortgage, you're buying a house priced below what you can afford OR you're stretched thin and exposed to any 'life event'. These two mortgage types expose the buyer to significant additional risks over a 30yr fixed mortgage, which itself has additional risks beyond renting. The most appropriate product to use when comparing rent vs buy is a 30yr fixed mortgage.

Gimmick #2) Including home price appreciation and rising rents in your model. Arbitrary and inconsistent forecasts about tax rates, opportunity costs, etc...

Maybe it happens, maybe it doesn't. But guess what, if home prices stabilize and start going up, you should be assuming a much higher 'opportunity cost'. If you rent today, you can 'safely' earn only ~3% on the downpayment which you didn't make. If home prices rally, you missed that pop but the implied upturn means you're probably earning more than 3% on the capital that isn't tied up in a house. As a decision tool, you should definitely consider future home price, rent and opportunity cost scenarios - so that your election includes your personal view on home prices. However, determining what's cheaper TODAY, you should keep the forecasts out of it.

Gimmick #3) Pretending you can live in a house for a decade, without spending 15%-20% of the home's value into repairs, replacements or improvements, yet still somehow sell the place 'on-market'. Can you live in a place without shelling out money? Yes. Can you sell it or rent it without shelling out money? Yes, but you move down to a lower relative price point. You buy a luxury home home and sell a fixer-upper, which price will reflect.

Gimmick #4) Just ignoring opportunity costs

Downpayment, principal paydowns and improvement costs go into your home equity. It is not available to invest in the market or other opportunities. If you rent, you can invest that money according to your risk tolerance.

Gimmick #5) Failing to discount cashflows

If you pay $100 for 5 years and receive $100 for the next 5 years, did you break even? No. You got ripped off, because you made a $500 investment and earned a 0% return. If you look at the year-by-year rent-vs-buy cashflows, the near years matter more than the far years, and should be weighted accordingly.

Long story made short: There are limited cases where places are selling at prices cheap to where they would rent. I'm finding that condos with high HOA fees and high dollar price homes (800k+) make no sense relative to available rentals for similar homes. For instance,

http://www.redfin.com/IL/Chicago/545-N-Dearborn-St-60654/unit-3204/home/12967625

2BR/2BA 1900SQFT - I think this place rents for $3,750
Home Price $784,000
Downpayment (%) 20%
Taxes (annual) 11,759
Assessement (monthly) 1889 (with 2 parking spaces)
Maintenance Rate 1.0%
Marginal Tax Rate 35%
After Tax Opportunity Cost (Rate) 3.00%
Mortgage Rate 5.10% (>417k, 30yr Jumbo)

Real Monthly Costs = $5,892
Sum of:
Mortgage Interest
Taxes
Assessment
Insurance
Maintenance
Opportunity Cost
Less
Mortgage Interest Deduction
Property Tax Deduction

pkowen says

let’s acknowledge that his investments are HIS and his alone and he does appear to have positive cash flow.

That's fine, I don't care. I don't think I've ever insinuated that he is screwed as a buyer/owner. I'm berating him for his dishonesty and his general lack of economic clarity.

pkowen says

My prediction on the BAY AREA market is continued downward sliding in most areas, especially the mid-market areas that remain out of line with incomes. Top end is a special case ($15 mil in Hillsborough or Atherton) and bottom end has already crashed 50% plus.

My own observations:
1) very bottom end = crashed 30%+ as pkowen said.
2) FHA/FNMA/FHLMC buoy range -- e.g. $417K to $900K or $950K has been stronger than it should be because of massive government subsidies. Ideally, we would go back to $417K (or lower) as a cap and stop subsidizing, but realistically we may go to $625K as a cap.
3) $1.5M+ in San Francisco has been doing okay, down at least 7-10%, although the crappy houses, of which there are many, are down over 10%, and the good houses are closer to flat.
4) $1.2M+ outside San Francisco and maybe Palo Alto is having strong moves downward from people's expectations (I've seen $1.7M to $1.1M, although $1.7M to $1.3M is more common and maybe $1.3M down to $1.0M), especially with financing being tighter.

I'm still thinking the overall market will be close to flat for a while in nominal prices for a few years, while real (i.e. inflation-adjusted) prices catch up with income a bit, but the high subsidies from the government are screwing up the natural process, and the stickiness and illiquidity of housing means this process takes time. I think we've already seen the big drops, but there may be a smaller noticeable drop if government support ever dries up (that includes subsidies, but also if government ends the policy of depressing interest rates).

Coogan99 says

Gimmicks I’ve seen supporting the “it’s cheaper now to buy than rent” argument.

You missed the biggest gimmick of all. The assumption that you are going to live in the same house for the entire 30 years of the mortgage. Good luck, In today's world that is a very shaky assumption. If you move in 15 years or less the front end loading of interest payments means that the closing costs (both from buying and selling) will more than eat any forced savings. Of course houses always go up in value much more than the inflation rate (ha ha) so you will have the appreciation to put in the bank.

I'm not against buying, but don't tell me it's a financial wonderland. There are times when buying makes more sense, there are times when renting makes more sense.

bob2356 says

I’m not against buying, but don’t tell me it’s a financial wonderland. There are times when buying makes more sense, there are times when renting makes more sense.

Right, homeownership often functions as forced savings, rather than a true investment. There are certainly good reasons to buy a house, and good reasons to rent. I mentioned several on another thread last week or the week before, e.g. you may need to move soon, you are new to an area, your job situation might change, your financial situation, whether your family could get bigger, etc.

Theoretically, buying a house should be cheaper than renting because the cost of renting should be a cost of buying + a reasonable profit for the landlord for taking on the risk and transaction costs. This makes sense -- when you rent, you would expect to pay a little more for the flexibility, the fact that you don't have to deal with maintenance, the fact that it's shorter term, the lack of financial commitments, etc.

What the recent housing bubble shows is that homeownership is not for everyone. Many people who were not good candidates for homeownership bought a house. We've put way too much virtue into Bush's "Ownership Society." Buying can certainly be a terrible financial decision, and it can prevent you from building wealth, just as it may be a valuable part of your portfolio in other cases.

SubOink says

So if I take 100 of my friends, according to Troy 16 people should be out of work. But like I said, none of my friends are out of a job. That’s my narrow minded reality that I go by not statistics online.

It depends on demographic too. People with more education have a lower unemployment rate. This should not be a surprise. I believe the rate for people with a college degree is considerably lower than the general California rate, and it might be more like 4-5%.

However, in an economy that is largely driven by consumption, as is ours, this could still be a huge problem. We need to spend more money on infrastructure, innovation, and educating our people, rather than stupid wars, bad foreign policy, bad subsidies (to banksters and agriculture), and several other things. But we don't.