Is homeownership truly better than renting?

[OCGuy]

No you won't median family income for almost any area can't support 500K homes.

500K will be near entry-level forever in my area.

 

[DaWhim]

Eh, it will come together for ya, and the economy can't be down forever either. Are you handy? Adding things like decks, upgrades to kitchen/bathroom, etc, can really add value to a home as well. Hopefully you got a decent enough deal + decent down payment (and not one of those god-awful ARMs) that your mortgage payment is pretty close to an average rent payment for the same class of home.

Remember, you're building equity, even if you currently owe more than the home is currently worth, you'll still end up with more than somebody who rents for an extended period of time.

wow, he is down for $80k. strategy default is the way to go. stop paying your rent, you can stretch 9 months+ rent free before the foreclosure. Your bank will probably pay you some more money if you move out peacefully too.

of course, make sure your loan is non-recourse.

equity is just money. you can build it somewhere else like a saving account instead of in a house.

 

[slackerinabox]

500K will be near entry-level forever in my area.

ditto

 

[Arkaign]

wow, he is down for $80k. strategy default is the way to go. stop paying your rent, you can stretch 9 months+ rent free before the foreclosure. Your bank will probably pay you some more money if you move out peacefully too.

of course, make sure your loan is non-recourse.

equity is just money. you can build it somewhere else like a saving account instead of in a house.

Defaulting on the loan is a good idea? He's not paying rent, he's paying a mortgage, and he's gonna nerf his credit if he does that, not to mention the moral intangibility of being a deliberate deadbeat. He bought the thing, agreed to the terms, and seems like he can pay the note.

Equity is building up $ while paying for the place that you live. If he gets foreclosed on, even if he gets 9 months 'free', he's going to have to start paying rent on a new place after that (along with moving expenses), and that $ just goes right into thin air, gone forever. Unless he can save a whole crapload of $ by doing that, or simply can no longer afford the mortgage/property tax payments, this seems insane to me.

 

[BurnItDwn]

You can't compare the cost of renting a 1 bedroom apartment to owning a house. Of course the house will cost more.

You should do apples to apples comparison. compare a 1 bedroom condo to a 1 bedroom apartment ... the mortgage would probably be about the same as the rent .... thus, over time, would cost less.

Find out how much it costs to rent a house similar to the house you bought now .... That's what you should compare cost/savings with.

Anyone could tell you that buying a house is more expensive than renting. It's only going to "save money" if you look over the very long term, and compare to something in the same class.

 

[PrinceofWands]

Finance is only considered "horseshit" by those who can't properly utilize and take advantage of investment vehicles.

Hell, I've always been interested in Business and even when I was making very low money I was doing tiny investments on the side. If you do it properly you can't lose. Stock goes up? Sell it and make some cash! Stock goes down? Great tax off if you want to sell it to free up liquidity for better investments!

But yeah, I suppose making money, looking for a chance at a comfortable life and using your brain to get an advantage in the world is just smart people showing off...

Worked for the richest man in the world though.

(Hmm, that came off a little snide but your comment was so bullshit)

I was raised in a middle class home, perfectly comfortable with 0 investment (beyond a home and a savings account) and despised money/finance from the time I was a child. All of my time in college in all the varying disciplines (including economics) has thoroughly supported my initial feelings on the subject. Seeing the rabid fanaticism of modern free-marketeers and econonuts is nothing but the cherry on my self-affirming sundae.

You see, as I said, many people DON'T GIVE A SHIT about money. We live perfectly well and happy on whatever we have. We achieve exceptional education, participate in world affairs, and become highly regarded in our fields...all without ever worrying about finance or social status. We do it because we adore intelligence and education for their own sake, and for the betterment of mankind. If I were to name the 100 most important, most influential people in the history of the world, very VERY few of them would have been more than barely middle class by our standards. Many would have been flat broke by any standards.

You don't need money to be comfortable. Money has nothing to do with intelligence. But you keep telling yourself that if you need to. I have no problem with people wrapped-up in the illusion of economics, except when they claim that it has any merit beyond their own selfish skins. You need to learn that there are other motivations and personalities in the world, every bit as valid as your own. Or you need to accept being called out for your statements. *shrug* either way, fine by me.

 

[tallest1]

Eh, it will come together for ya, and the economy can't be down forever either. Are you handy? Adding things like decks, upgrades to kitchen/bathroom, etc, can really add value to a home as well. Hopefully you got a decent enough deal + decent down payment (and not one of those god-awful ARMs) that your mortgage payment is pretty close to an average rent payment for the same class of home.

Remember, you're building equity, even if you currently owe more than the home is currently worth, you'll still end up with more than somebody who rents for an extended period of time.

How can he afford such pricey upgrades to his home if he's 80k in the hole?

 

[Exterous]

We bought our house last year so definitely not at the height of the bubble but not quite at the bottom. I think this will have a big impact on your view point right now. We are very very happy with our house. It has gone down slightly in value - which means it is now work ~5k less than what we bought it for. Granted the people next to us, who have a comparable house, have lost 40% of their house's value since they bought it 5 years ago so they may not feel so good about it

Having rented apts, townhouses and houses I can say we are the happiest here. We don't share a wall, we have a garage and 'it's ours' (We were surprised at how much of a difference the feel of this last one made.)

It also turns out that I really like doing projects around the house. I've already done quite a few and we are currently planning on quite a few more. I get a nice sense of accomplishment out of it

Yes, we pay more now than when we rented but in our opinion we would do it again in a heartbeat

 

[Arkaign]

How can he afford such pricey upgrades to his home if he's 80k in the hole?

80k in the hole doesn't mean shit, it just means he owes 80k more than it's worth in today's market compared to what he bought in at on the bubble.

It definitely doesn't mean he can't afford to do upgrades, that just depends on how much $ and time he has left over after taking care of the bills, mortgage, food, etc. And whether or not he even feels like messing with it.

As anyone with common sense knows, prices don't stay the same for very long, they go up, they go down, they go round and round, that's the way shit works.

If you buy a house, and intend to stick with it a while, it's best not to sweat the ups and downs of the market at large, just get the shit paid off and perhaps even pay more in when the income is there to support it. I have a friend who paid his mortgage off 16 years early due to an unexpected minor inheritance, and now he only has electric/gas/HOA/HOI/property tax, all of which add up together to about $310/mo. This is for a 3-bedroom, 2.5 bath, 2 car garage modern home with a deck, pool, and a nice lake view.

 

[BoberFett]

600 dollar mortgage payments? How the hell are you guys making payments that cheap?

Bear in mind that mortgages payments are fixed. You're still making the same payment after you've been there for 10 and 20 years. People that are towards the end of a 30 year loan right now only pay a couple hundred per month. Rent goes up constantly.

 

[Arkaign]

Bear in mind that mortgages payments are fixed. You're still making the same payment after you've been there for 10 and 20 years. People that are towards the end of a 30 year loan right now only pay a couple hundred per month. Rent goes up constantly.

Truth times eleventy billion!

And the exception to that are those dumbass ARM's .. but common sense just says that's a bad idea under any circumstance. You can never predict what the economy is going to do in the future with anything resembling reliability, about the only constant is change. An ARM can leave you twisting in the wind if things get sour.

 

[BoberFett]

A renter could do this as well and then ALL his money from housing expenses is freed up.

You can rent for free where you live?

 

[SunSamurai]

I think this is yeilds a ' no shit ' answer.

 

[coldmeat]

I don't know much about this kind of stuff (never owned a house and only rented for 1 year) but I like the idea of putting my money into something I own rather than putting it into something that when I leave I come out with nothing but less money.

 

[Bignate603]

How can he afford such pricey upgrades to his home if he's 80k in the hole?

Unless he's paying for upgrades with home equity (which is usually a lousy idea anyways) it doesn't matter if he's 80k in the hole when you look at his monthly cash flow (assuming that he played it safe and got a fixed mortgage). He's still paying the same amount each month even if his house's market value has dropped. What I'm getting at is that money that he's 'lost' is only really something that affects him when he sells.

Arkaign's suggestion of doing things to increase the value of the home is a good one if he plans on selling. Depending on the improvements he chooses and if he can do most of it himself he can drastically improve the value of the home without having to invest much money.

Landscaping can be pretty cheap and is relatively easy to do yourself if you're willing to put in some work. Same thing goes for a nice coat of paint. The actual cost to the owner is very low but the impact it can have on the value of the home is surprisingly large.

 

[Slew Foot]

LOL at all the idiots who think yes is the universally right answer.

 

[Arkaign]

I don't know much about this kind of stuff (never owned a house and only rented for 1 year) but I like the idea of putting my money into something I own rather than putting it into something that when I leave I come out with nothing but less money.

Yep. About the only rational counter-argument is this :

Rent a place for cheap, and invest the difference into X investment / bank account.

For that equation to work, you must first find a suitable/comparable place to rent that costs enough less than a mortgage payment to yield some investment potential, and then you have to have enough ROI to make this work.

Common sense tells you that for the most part, buying is better than renting, and as Bober pointed out above, a fixed-rate mortgage will only get more affordable as time goes by.

 

[BoberFett]

What's funny is many of you think housing prices have hit bottom when that "home equity bailout bill" $8000 is still out there floating market and alts have yet to hit. Y'all have seen nothin' yet take that to your insolvent bank.

If and when the market truly crashes in the manner you predict, I'll be glad to have my house and not be a renter. I'll have a much easier time defending my house than I would an apartment. I've got some good second story vantage points to snipe from.

 

[BoberFett]

LOL at all the idiots who think yes is the universally right answer.

Laughing equally hard at the douchebags who think no is any more a universal answer.

The correct answer is "depends."

The question is "I'm having bladder control problems, can you suggest anything to help?"

 

[DaWhim]

Defaulting on the loan is a good idea? He's not paying rent, he's paying a mortgage, and he's gonna nerf his credit if he does that, not to mention the moral intangibility of being a deliberate deadbeat. He bought the thing, agreed to the terms, and seems like he can pay the note.

Equity is building up $ while paying for the place that you live. If he gets foreclosed on, even if he gets 9 months 'free', he's going to have to start paying rent on a new place after that (along with moving expenses), and that $ just goes right into thin air, gone forever. Unless he can save a whole crapload of $ by doing that, or simply can no longer afford the mortgage/property tax payments, this seems insane to me.

for 80K underwater, i would walk away. 20k-30k, i probably would trash my credit.
WSJ just runs an article on strategy default today and it is getting common. the only issue is the moral on.
http://online.wsj.com/article/SB126100260600594531.html

equity basically just mean money. what you trying to say is home equity. I am not gonna argue with you. you are the type of people that will spend $1 to save 30 cents.

 

[BoberFett]

for 80K underwater, i would walk away. 20k-30k, i probably would trash my credit.
WSJ just runs an article on strategy default today and it is getting common. the only issue is the moral on.
http://online.wsj.com/article/SB126100260600594531.html

equity basically just mean money. what you trying to say is home equity. I am not gonna argue with you. you are the type of people that will spend $1 to save 30 cents.

Why would you walk away just for the sake of walking away? Doesn't he need to live somewhere anyway? How much is rent for something comparable? Stop being a knee-jerk reactionary.

 

[Bignate603]

for 80K underwater, i would walk away. 20k-30k, i probably would trash my credit.
WSJ just runs an article on strategy default today and it is getting common. the only issue is the moral on.
http://online.wsj.com/article/SB126100260600594531.html

equity basically just mean money. what you trying to say is home equity. I am not gonna argue with you. you are the type of people that will spend $1 to save 30 cents.

That moral issue is a pretty big one. You thought the house was a good deal when you bought it. If things went well and you made out like a bandit on the house you wouldn't think that you owed the bank a dime more than the mortgage. If interest rates went up and the bank could make a killing if they loaned money to someone else instead of you they'd have to just take the loss. Yet people think it's ok to have the bank take the loss for their purchase because it didn't turn out how they hoped.

Shifting the loss from your choice to someone else is a pretty low thing to do.

 

[DaWhim]

Why would you walk away just for the sake of walking away? Doesn't he need to live somewhere anyway? How much is rent for something comparable? Stop being a knee-jerk reactionary.

read the article on WSJ first, so you get an idea why people walk away.

 

[Arkaign]

That moral issue is a pretty big one. You thought the house was a good deal when you bought it. If things went well and you made out like a bandit on the house you wouldn't think that you owed the bank a dime more than the mortgage. If interest rates went up and the bank could make a killing if they loaned money to someone else instead of you they'd have to just take the loss. Yet people think it's ok to have the bank take the loss for their purchase because it didn't turn out how they hoped.

Shifting the loss from your choice to someone else is a pretty low thing to do.

This. Not to mention that the market NEVER stays the same for long. Unless you live in some bumfuck place that's gonna be a dead market forever, prices will go back up again. And what's a guy with trashed credit to do in a few years when the market goes up? Bah.

 

[IronWing]

That moral issue is a pretty big one. You thought the house was a good deal when you bought it. If things went well and you made out like a bandit on the house you wouldn't think that you owed the bank a dime more than the mortgage. If interest rates went up and the bank could make a killing if they loaned money to someone else instead of you they'd have to just take the loss. Yet people think it's ok to have the bank take the loss for their purchase because it didn't turn out how they hoped.

Shifting the loss from your choice to someone else is a pretty low thing to do.

There are two sides to that story. The bank put its money at risk with every intention of profiting handsomely. When banks made stupid loans during the bubble they had the same mindset as many borrowers - "We'll make this loan and if the borrower defaults, we don't care because housing prices will always go up so we can't lose." The banks aught to share in the pain.

When the banks made stupid loans they often required borrowers to pay PMI (extra interest really) to protect the bank's interest even though the interest that borrowers pay, in theory, already compensates the banks for the risk of default. So the insurers who provide the PMI coverage should also share in the pain as they shared in the potential profit.