The Pervasive Myth of Homeownership
By billdeegan Follow Thu, 14 Jun 2012, 1:41pm 2,476 views 33 comments
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Um I own a home, last week end my daughters painted the Jamroom, and I bought new shelves to organize the clutter for easy access to stomp boxes and cords. Then we went to dinner and later that night the wife and I went to the Jazz club.
It seems to me people have forgotten how to live and appreciate what they have. Everything is about how much they spend or don't spend(I'm talking about those that actually have any money to spend).
While all the while, while they are contemplating their money on their mind and their mind on their money. Ben Bernanke and his band of crooks are figuring ways to destroy your 401K nest egg.
Dude it doesn't have to be so hard. And if you can't afford to live in the neighborhood of your "Dreams" then you're probably dreaming the wrong dream anyway.
The market IS so much better than the bubble years. I'm not calling bottom, because "the bottom" is a misnomer. I rented for 11 years because the numbers didn't work. But eventually I did find a house where the numbers work. While personally I wouldn't want to rent, or trade my life style and liberties as a homeowner for that again.
But it is nice to know, that there are people that think renting is some new American dream, not my America, but I'll be more than happy to rent you my house. When I buy an ever better house, that you could have bought instead. And I'll pay mortgage on that second house cheaper than what you'll pay me rent for the house I'm in now.
I think the author is probably an RE investor trying to brainwash a generation of willing sheep to pay his bills.
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Bronx, NY
I actually think that overall this article is pretty fairly worded. It may be skewed slightly toward renting but I think nowadays renting makes more financial sense than owning for most. One thing I find ridiculous is yearly maintenance estimates being 2% of current value. There is just all kinds of things wrong with that number. Things don't break or wear out according to whether or not the value of your home is going up or down. According to that my house would cost me about 4800 in yearly maintenance, and I can tell you I spend nothing near that, and I expect it to go down further in the short term since I have been slowly renovating many things over the past couple years.
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Bronx, NY
Housing sheriff has earned himself an ignore due to a lack of contributing anything of value to any thread. Nice job!
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Bronx, NY
Oh and also stocks gaining 10% a year. LOL I wish. Good luck trying to hit that mark for the next 10-20 years.
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woppa says
I also think the article is realistic and fair. The thing to realize is that the author is making his point based on the financial aspect only.... not the emotional one, like the Captain hints at above.
I've been on both sides of the fence, and in many ways, renting is both financial beneficial and saves me a bunch of time on all the home projects. I now would rather spend money on fun things and travel, instead of spending weekends spending money and my time on projects.
I believe the 2% maintenance number is close if you include upgrades and replacements. You might not spend it one year but if you get stuck replacing a roof or HVAC system, it will add up. If you have to do a kitchen upgrade, you'll blow a lot more than 2%. If you average it over all the years you're there, it will be close to that number, maybe more.
The BIGGEST Myth of Ownership.... is the myth that you "own" versus "rent". The reality is that you're just sending a check each month to a different entity, either a bank or landlord or real estate tax office.... Stop sending the checks and the end point is the same... the Sheriff shows up to "escort" you away....
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Bronx, NY
True, but then the point is never even mentioned in the article that if you do actually pay your mortgage off in a reasonable amount of time, you realize an incredible amount of savings by way of never having to send another check. Also it mentions very lightly that rent may go up over time, but if i were writing the article I would have emphasized that a little more, but of course that is dependent on the locale.
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Call it Crazy says
There are a lot of people here in California who have made nice retirements from their homes. My Dad built a house in 1961 for 35k(including lot). Sold it for 410k in 1980. Bought a townhouse in Laguna Beach that year for 210k. At its peak it was worth 1.5mil. Now about 1mil. Also, he bought 8 ocean view lots just south of Laguna for about 10k each in 1970. Sold them for about 200k each in 98 or 99. Those lots today, even after the bubble, go for close to 500k. (2 just sold - the others have homes on them now.)
Now I don't expect that kind of appreciation to continue, but I do believe the best locations will rise in value.
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To be fair, you never own a home. The government owns the land it's on so it's technically theirs whenever they want it.
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Ross, CA
StoutFiles says
The government does not "own the land". If you are talking of eminent domain, the government can force you to sell the land for the "public utility" at fair market value.
It doesn't happen very much.
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woppa says
True, but your mortgage payment goes up too, due to real estate taxes that go up and homeowners insurance that goes up. These rises get reflected in the rent, which is why rent can go up.
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rooemoore says
That's exactly it, we can't "flash back" to the past... it's a lot different NOW, which was what the OP was referring too. I don't think you'll see that type of appreciation for a long time like you did in the past bubble years...
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rooemoore says
They most certainly DO... Try paying your mortgage but NOT paying your real estate taxes and see who shows up at your door.
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woppa says
That's one of the best points of ownership!! But in today's mobile world, very few people stay put and actually pay off their mortgages because they move frequently.
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Ross, CA
Call it Crazy says
That does not mean they own the land any more than San Francisico "owns" the printer in my office because I pay business property taxes on it. It is a means to collect revenue, not a declaration of ownership. You've been drinking too much tea.
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elliemae's website
The article doesn't say that first couple will never buy again - it says that if the do, they'll buy something affordable.
A novel concept.
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Madison, WI
That's my theory, if affordability is out the door, which it looks to be, then I'm cool with renting and banking vs. being a personal slave to the banking/insurance/property tax cartel.
When owning I was spending 5 or 6/10ths of my salary on housing, I can do better than that, also that's money I could be investing now for retirement instead.
I was just up in vacation territory a week ago, most of the housing in some areas are 2nd homes or vacation homes, not everybody can be a have, got to be lots of have nots to support the haves.
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everything says
That's exactly the point of the OP... it becomes a individual personal calculation to determine what everyone wants to pay to put a roof over their head. What does someone "need" versus "want" and how much you want to pay for either one or where you want to spend your dollars.
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rooemoore says
OK, let me phrase it different way.... if you don't pay the real estate taxes due on the house, who becomes the "owner on record"? You or the city??? If you don't pay the taxes, does the city "allow" you to continue to live there??
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Bronx, NY
Couldn't you just flip it and say, since I pay my taxes I get to drive on these nice roads and take my kids to these nice parks, and use my electricity and gas. Look at all that I benefit from just cause I pay my taxes.
We know if you don't pay your taxes its not a good idea, but come on now.
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Ross, CA
Call it Crazy says
And if you don't pay your income tax, who becomes the owner of your body? Ask Wesley Snipes.
I understand your point, but really you are just complaining about taxation and the government's remedy if you default. That is much different than saying the government "owns" the land.
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CaptainShuddup says
Yes, I'm sure lots of people also felt 2008 was a great time to buy with the lower prices, tax credit and all.
Time will tell if we are simply in a new bubble fueled by historically low interest rates, inventory and lack of lucrative investment options just waiting to burst as the economy continues to slide into a depression or if it REALLY is different this time.
Best of luck to you
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New renter says
I didn't buy in 2008, and if RE was any cheaper in South Florida, they would be giving it away.
Somewhere between trying to be the smartest man in the room by squeezing the last dollar out of the bottom, and finally just getting on with your life for the same cost you would spend to rent anyway. Your sanity and quality of family life should be considered.
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Hey I'm not a cheer leader and I'm not selling you anything.
But I can guarantee that the Money powers that be, will not allow the Real estate to be the classic American dream market we once knew when prices do get rock bottom.
By that time RE will be a cash business that will be kept in check by an investor class that will have the money and resources to out bid the classic home buyer/Owner occupier.
Be careful what you ask for, you want to rent? Then that's what you'll get. Banks wont be lending because it will be a conflict of their interest, to sell houses, they will be actively seeking to add to their portfolio of properties. Sure you could save up money to buy a house, but chances will be the seller will be an investor, and they will be willing to sell to other investors, that will be willing to out bid those private bidders just to keep a leg up on the market.
So far I've been right about what I thought would happen in RE since 03 before the bubble reached the ceiling. Even in 07-08 when I said on the old Patrick forum that Banks will rent them out before they let them go for cheap. I was told "Banks aren't in the landlord business."
It's just common knowledge if you make the profit to great for big business and investors, they will use every cent they have to their advantage to make sure they corner the market on any Mom and Pops situation they encounter, in this post regulation exempt society.
They'll beat the hell out of Joe and Sue home maker, just like they squashed Brad and Ann Storekeep.
This wont be a concern for me, I'll be grandfathered in, with property.
Hopefully two or three before we get there. I do know I'm not waiting until the end of this Act to find out, how the movie ends. It keeps playing over and over in my head, and it don't end pretty for you contemptuous renters.
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CaptainShuddup says
CaptainShuddup says
Just who's being contemptuous here?
Listen, perhaps what you are saying is true. Maybe in a few years you'll have hundreds of former PatNet bear marketeers begging you for your landlord's grace to shelter them from the unwashed hoards of homeless. Maybe Mr Bernanke really HAS found the magic formula to turn dead cat housing markets into unobtainium fueled helicopters which will never, ever come down. It's certainly seemed that way for the past 22 years as home prices have increasingly headed away from all traditional metrics of affordability.
Then again Detroit and many other Midwestern cities seemed awesome once upon a time. Giant, FIXED asset industries (metal smelting, auto manufacturing, farming, ranching, shipping, the list goes on), If you bought there a hundred years ago and sold it 40 years later you probably did OK just like thousands of BA home buyers in the 60's to 70's and sold in the 2000s If however you had bought a house in Detroit in the 60's and sold anytime after that you likely have taken a VERY painful loss.
Will the traditional benefits of home ownership perpetuate? Will we always have the mortgage interest deduction, the low interest rates, the hoards of unwashed renters bidding rents ever higher? Or will a massive earthquake - as has been expected in the BA for decades - provide the spark for a mass exodus and driving BA real estate prices to the dirt? Maybe Europe will get its act together and finally succeed in cloning the BA formula. Only time will tell.
You sly dog! You got me monologuing! I can't believe it.
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rooemoore says
I'm not. You don't own land, you own an estate in the land. It comes from the times when the King owned all the land and granted estates to law-abiding, tax-paying citizens who support him.
Replace King with government, and give us a few extra rights, and it's essentially the same thing. You do not own your house because you do not own the land it sits on. You pay for the right to stay there assuming you follow the rules and the government doesn't want to use the land for something else.
You can own pretty much anything except for land, and since your house is tied to the land, you don't own that either. Even if you had a way to pick up your house and move it, you probably couldn't because of some city/county code. You could always gut the house I suppose, you do own the refrigerator and stove.
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CaptainShuddup says
And that is the best reason to buy. As a former homeowner turned renter with pets I understand how difficult it can be to find a good SFR for a reasonable monthly rent that also allows pets. The BA rental market is tight and for those of us with pets and modest budgets it's even tighter.
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StoutFiles says
+1
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StoutFiles says
Practically identical. You need to bone up on the constitution - the U.S. Constitution.
I said
you said
and then you go onto say:
Which says you have to obey laws (newsflash) and there is this thing that allows the government to buy the land from you if they need it. eminent domain.
Your argument and others like it remind me of the line in the Chicago song about the guy who answers the question what time is it with "Does anybody really know what time it is?"
In reality, we own nothing. Not even our bodies.
But this ain't reality. It's America and land ownership is a fundamental right.
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rooemoore says
Wait... I thought you said we "own" our houses, now you say "we own nothing"....
Are you trying to confuse me????
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New renter says
Man I love you guys.
I'll admit I was as jaded for many years here in South Florida, perhaps our market has fallen more in line with realistic fundamentals than California. So perhaps I'm speaking out of context when I refer to my market.
Down here gone is the average starting listing of 225K for a 500sqft crap box.
$150 to $175 buys a decent house now. Not to say there still isn't 3, 4 and 5 hundred K houses out there to be had. But I don't feel the need to live next door to Jim Marino in some gated community next to a Panera bakery.
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CaptainShuddup says
We love you too Capt'n ;)
Did you mean 500sqft or 1500sqft? For the sake of argument I'll assume you meant 1500 sqft. According to Zillow this is the fight size range for the prices you used.
Around here - SF Bay area where PatNet is based a 1500 sqft house in a decent neighborhood with good-for-CA schools was going for up to $750k at the peak of the bubble. That's for a "good" neighborhood, not even in "the fortress". I have friends who paid twice that for a house of that size in Palo Alto, the heart of the fortress.
Today the house in the good neighborhood may be listed for $550k. That same 1500 sqft house will typically rent for $2500/mo. Houses with lower rents and purchase prices can be found but they tend to have significant and expensive deferred maintenance or are in less desirable areas (near commuter trains, airports, freeways, on a busy street, etc).
If houses here were priced like they are where you are I very much doubt this web site would exist. We'd all be complaining instead about spending our weekends doing household maintenance.
Location, location, location.
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Fred Flintstone says
That's where you're wrong. You're an idiot to think that everyone has a mortgage. I did the numbers and what I pay for tax and insurance is a third of what I would pay to rent my house. Not everyone has a mortgage, you see. Neither do my parents and in- laws. We actually doubled down on paying all debt off over time. But I will admit that the IRS and insurance companies will continue to own us forevermore.
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The Real House Sheriff says
then you are indeed fortunate but for the rest of us YMMV