patrick.net

Agreed, so if you buy property where it produces cash flow when rented, then take that cash flow and pay the rent to live wherever you'd like, then you kinda beat the system, eh?

You can buy for cash properties cheaply in some places like I said above and rent them and still have cash flow past the taxes, insurance and HOA.

There are great deals out there if you are willing to do the research.

You guys have been out in the cold too long.
You've gone from "I refuse to buy at bubble prices" to
"Down with home ownership".

It seems to me, you folks in California are working against your own self interest. Do you know what the difference between places like South Florida and the Bay area is? In Florida we ignored homes after jig was up.
You folks worship the high prices of your over inflated egos and place an unrealistic value on living there. Then you realize you can't afford it, so you inject, nobody should buy a house, because you can't have your dream place at a price you can afford. But truth be told, if the Bay Area was to become affordable, most of you would consider it an undesirable place to live.

Go buy a house and be happy, and quit trying to be someone you can't afford to be.

Yes, mortgage debt in particular drives up the sticker price on a house and turns formerly independent and proud people into meek obedient workers.

I'd clarify, though, that our current system of ever expanding credit and money supply creates this problem because nobody has to save one one end of the transaction in order to lend via the mortgage on the other. This causes prices to rise in the first place.

In a non-expansionary / honest money environment where loans had to be backed by legitimate savings, you'd find that any increase in house prices would = increased demand, which would translate / have to correlated with decreased demand elsewhere in an economy, resulting in lower prices to balance things out.

Moreover, lending to mortgages would be more naturally governed as mortgages would not be subsidized or government backed in any way, causing lenders to more diligently / prudently diversify their lending portfolios. As lenders hit their mortgage limits, rates would naturally have to rise in order to draw in additional lenders, which in turn would increase monthly payments, which in turn would apply a natural brake on housing in the economy as a whole.

We've allowed policy makers and legislation to short-circuit this under the idea that it is everyone's right to have a home, and it's the government's job to make it a near entitlement via its power.

It's wonderful in a way that you cannot borrow money to pay rent.This makes rents much more honest. No debt involved.

But you have to keep in mind that the landlord is often mortgaged. Hence, artificially low rates = artificially lower costs of business = artificially lower rent.

Granted, though -- to your point -- in the end, you can overpay for your mortgage, but rent will only be what's affordable to renters.

Still, I suspect there's too much intervention for us to have a truly honest rent rate, even if it is more legit.

GraooGra says

So this is also psychological issue.

LOL. Now renting v/s buying is a psychological issue? not a financial one?

John Bailo says

Why can't I go into an area and say rent a one-bedroom cottage in a community of small cottages w

The local jurisdictions won't allow building of reasonably sized housing because they can't justify bloated property taxes for them. Gotta pay those bloated union pensions somehow!

I do agree with the basic premise from the OP about job insecurity being a barrier to buying a house. If the price is right for the house, a lot of the problems go away. Or just wait until you can retire before you buy a house. It also helps if you live in a big metro area where you can potentially get another job if your current one disappears (although that tends to setup the commute from hell).

Own/Rent issue has been discussed endless times. Following is my take:

1.You are financially better off if you rent.
2.If have the urge to buy, there are ulterior reasons, example, like showing your friends "you have arrived."
3.If you do buy, you should pay cash. (If you do #1 right, you will be able to pay cash one day). House is consumption, just like buying home entertainment system, you shouldnt borrow to get them.
And if you need loans to buy, make sure you can pay it off in 7 years.

“Now renting v/s buying is a psychological issue? not a financial one?” It is BOTH, of course you want to buy a house so you feeeeel successful, and fitting in with all your neighbors who have all been taught that buying a house is the American Dream (psychological), then on the flip side your Realtor™ makes bank CHACHING (financial)! It’s a WIN WIN, you feeeeeeel good and your Realtor feeeeeeels good.

Hey scam, Didn't the oracle of Omaha say recently that buying property now is a super great investment? But warren is a poor old man, huh?

http://www.ibtimes.com/articles/306749/20120229/real-estate-forecast-2012-warren-buffett.htm

I paid something like 34K (that's with closing costs) in 2003 and have saved more than that in rent since then, so for me it was a good. For the people 5 houses down from me that paid $150K for essentially the same house, not so much (since they can maybe sell it for 75K now).

Yes, buying a house is like marriage. It is a commitment. This is very psychological issue.

OT but...Chart idea: I don't know if Patrick has done this, but recently he had the inflation adjusted house prices graph and the value of the dollar on roughly the same time period. I was wondering if anyone ever combined these graphs. I know you have nothing to do Patrick (ha ha) but I thought it might be interesting.

Take care and thanks for your work.

KILLERJANE says

Agreed, so if you buy property where it produces cash flow when rented, then take that cash flow and pay the rent to live wherever you'd like, then you kinda beat the system, eh?

Thinking saying and doing need to line up.

These people cannot understand anything that is not negative about housing. I think they have sour grapes, they want to own but cannot get it together for whatever reason. So they speculate about a subject that they really have no experience about. I won't be basing my decisions to buy or sell real estate from a bunch of perpetual renters.

I think the real problem is that people need to buy a house they same way they would buy a used car.

Zzyzzx, but you cannot sell your car for more than you bought it for. A car truly has a short life. A house can last much longer. And in other older countries where houses and structures were made by masons and concrete, not wood frame, they last centuries.

MoneySheep says

3.If you do buy, you should pay cash. (If you do #1 right, you will be able to pay cash one day). House is consumption, just like buying home entertainment system, you shouldnt borrow to get them.
And if you need loans to buy, make sure you can pay it off in 7 years.

I would disagree with this for a number of reasons. Basically because if you compare real estate to overall stocks in the long run stocks outperform real estate by a fairly good margin. In many circles its suggested to take as long as possible to pay off a house. In doing so you're taking the money you're not spending on a mortgage payment and putting it into investments that will over the long run give you more return. Likewise if you pay for a house with cash, your cash is then tied up to again- an investment that isn't going to perform as well and in many ways puts the money at more of a risk come something awful- like if you lost the house for some reason.

* Not financial advice

I could disagree because paying cash for a property frees up your income and you are actually paying sticker price. Financial stress is reduced. You always have a place to live in hard times without the added mortgage payment pressure of losing your home. Try it, you'll like it !

I'd rather pay 200,000 cash than 350,000 over 30 years. That's 30 years of being responsible to holding on to that job because of the house, painful. I did that for 10 years, hated it. And we bought in 2000.

Buying a house make sense IF and ONLY IF:

1. The house is accurately and reasonably priced.
2. If you plan to pay it off in 10 years or less.

Once a house is paid for, it's fantastic. My Boomer generation parents took 25 years to pay off their house (through several refis). Did they get hosed on interest? Yes!

But ... the house is now paid for. It's theirs. All they have to do is pay modest Utah property taxes. Not having to pay rent after retirement will be a HUGE savings to them.

I'd agree that a house is a depreciating asset, unless you have an inflationary economy, which is what we have. Then the house can rise faster in price due to inflation, than it falls in price due to depreciation.

Having a house paid off lets you sleep good at night - plus the landlord can't raise the rent, and you can paint the place any color you want without asking permission, have as many pets as you want, etc.

Depreciation is a concept used in accounting to measure the decline in an asset's value spread over the asset's economic life. Depreciation allows for future investment that is required to replace used-up assets. In addition, the U.S. Internal Revenue Service allows a reasonable deduction for depreciation as a business expense in determining taxable net income. This deduction is used only for property that generates income. For example, a building used for rent income can be depreciated, but a building used as a residence cannot be depreciated.

Is buying a house (ever) a good idea?

With millions of homes sold and bought over time in different economic cycles and markets, sure, sometimes it was/is a very good idea.

I think with this most recent and huge economic meltdown of 2008 opened a window, just for moment, just for a glimpse of the greedy tyranny of the global financial elite. This game has been going on for many decades!

http://theeconomiccollapseblog.com/archives/the-number-one-tool-of-financial-enslavement

In my opinion, a huge red flag is Fannie Mae selling $321k 1 bedroom trendy condos in Sherman Oaks.

http://www.redfin.com/CA/Sherman-Oaks/14141-Dickens-St-91423/unit-207/home/4835790

Is buying a house (ever) a good idea?

It depends. I'd rent forever rather then paying 500K for a crappy 1500 sq. ft. wooden box - I'll let the landlord take the tax break and make a wise use of my money somewhere else. :)

Leopold B Scotch says

We've allowed policy makers and legislation to short-circuit this under the idea that it is everyone's right to have a home, and it's the government's job to make it a near entitlement via its power.

How else you gonna get elected to office?

duckhead says

“Now renting v/s buying is a psychological issue? not a financial one?” It is BOTH, of course you want to buy a house so you feeeeel successful, and fitting in with all your neighbors who have all been taught that buying a house is the American Dream (psychological), then on the flip side your Realtor™ makes bank CHACHING (financial)! It’s a WIN WIN, you feeeeeeel good and your Realtor feeeeeeels good.

Do you...YOU...feeeeeeel like I do?

I'm loving the comments. I think the volume of passionate & conflicting opinions suggest that the question is best answered locally, and personally. It's a good idea sometimes. And like all industries, a few unscrupulous professionals (realtors, bankers, etc...) cast a shadow over the hard-working, honest few. Here's how I came to my own answer. It may differ greatly from yours, in your world and in your circumstances; I respect that. The process of answering may be the same for all of us, though our individual answers will no doubt (and should) vary greatly.

I am comfortable putting more than 20% down. I love this area, (Austin), and see employment options long into the future. I hate moving. I love working on a home--maintenance for me is a pleasure, not a chore. I plan on using every square foot of my new home--i.e. it is neither too large nor too small. I am happy with the current value, even if it never goes up (or declines) down the road. My monthly payment (property taxes included) is significantly less than my current rent. I am a picky homeowner and have been a picky renter. Conditions of rental units often offend me. I like the freedom of having a roommate or family member stay with me unconditionally for long periods of time. I do not, however, care about the tax write-off and I'm not foolish enough to believe I could flip this house in three years (like I did in 2005) and make a profit. Those days, for know at least, are gone. Pragmatism is king... and I'm just being a good subject.

That said, Austin is not San Francisco or Detroit or Miami. The things that make me happy may not make you happy. Rates will likely rise, which means home values may likely decline even more in some areas. But buying a home is a complex, multi-faceted experience--which is why a blog like Patrick's is so valuable to anyone in the midst of that decision-making process...

I bought a home for 325K and sold three years later for 565K. I've bought artwork that I later sold for more than 300% profit. The mustang I paid $3,000 for as a teenager paid for most of my undergraduate tuition.

I've tried to be nice here... in both of my posts. But you should take a closer look at what you believe is truth. There are exceptions to everything. I'm not recommending that those exceptions be the rule for making the decision to buy a home--in fact, just the contrary. But nobody benefits from such absolute statements.

I'm obviously in the wrong place. I've been reading this blog for years now... I guess engaging in a discussion was a mistake.

Buying a house can be a good idea if you:

- have a secure job in a stable industry
- plan to stay where you are for at least 5 years (longer is better)
- live in an area with stable house prices
- would be saving enough money on rent to justfiy the mortgage interest, maintenance, property taxes, insurance, and possible HOA fees
- don't mind doing yard work (or paying someone else to do it)

Scam is just that

She can't help it

“I'm obviously in the wrong place. I've been reading this blog for years now... I guess engaging in a discussion was a mistake.” Absolutely not! I welcome your tail of REAL ESTATE SUCCESS. Good to counter all the negative nancies around here who apparently paid for a round the world trip on the bitter bus. LOL. As always when faced with a big financial decision put aside all negative possibilities and engage in POSITIVE FINANCIAL FANTASIES!!! Good energy will mold reality. Soon you will be tycooning big time.

@patrick,

The new look does not tell which threads are new or I have read it.

No, Scam. Everything I said was true. I bought a home in 2002 and was fortunate enough to sell much higher in 2005, before things went south. I made enough to pay off the mortgage, a home equity line of credit and some nasty student loans. I don't see those days returning anytime soon, and I learned my lesson about buying (and leveraging) more than I ought to have. I shared here openly in the hopes it would help anyone debating about whether or not to buy a home. Apparently, you get off on attacking people not as open-minded and intelligent as you are. I hope you feel better soon.

The last thing I'll say is this: emotion (or hubris) ought to play no part in the decision to buy (or sell) a home.

bubblesitter says

The new look does not tell which threads are new or I have read it.

Oops. OK, that should be fixed now.

Should I add the "unread" image and the "new" blinky to the home page forum too?

bubblesitter says

The new look does not tell which threads are new or I have read it.

Ditto. I like that feature.

Can you see the new/unread thread graphics now?

Can you see the new/unread thread graphics now?

It's fine now. Thanks.

What a joke. :-)