Challenge to Dogma on Owning a Home

[ruger17hmr]

Challenge to Dogma on Owning a Home

Whatever happen to the American Dream of Home Ownership?

The great feeling of owning a home is turning into a nightmare as studies show that increase in home ownership correlates with increase in unemployment.

Do these studies have any merit?

What do you think Ingo'er?

Challenge to Dogma on Owning a Home - Yahoo! Finance

 

[indykid]

I have to admit I didn't read the story because I gave up on the idea of home ownership when reality is that in most states, and especially over tax-em Indiana, you merely rent your home from the state (property taxes).

Regardless, home ownership is expensive. People forget that it is more than just the mortgage. Many people put everything they have into the monthly payment and forget the accompanying reoccurring payments of utilities, the constant increases in home owners insurance, taxes which always seem to go up regardless as to how they are calculated, property upkeep, and general internal upkeep as items wear and need repair or replacement over time.

Ok, so I just looked at the article, and like anything else, you can make statistics show anything you want. The article also looks like a nice "left wing" ploy to increase our federal taxes by doing away with the mortgage interest deduction. I would be ok with that as long as the state also did away with the property tax on the "American Dream".

 

[possum_128]

I will admit, I did not read the article, but as far as the American Dream of Home Ownership goes I have mine, all payed for, this is the true American dream.

However, I see foreclosed homes all around me and it's sad. The trouble more times that not is people buying homes well above their means and banks loaning more money than people can afford.

I believe in living well belong one's means and it has worked well for me.

 

[Scuba591]

Changing times and perspectives, IMHO, will fade away in time. The lasting feeling and building of wealth in a home is always going to be around. I can't imagine running around the country for jobs. Stability is important to me and my way of life.

 

[littletommy]

My mom and dad moved into the house I grew up in in 1964. They raised 5 kids in that house. After mom passed away, we rented the house for a year and then put it on the market. The realtor told us it had to be listed as a starter home, because everyone wants a "new" house. I work with a guy who has a $1500+ house payment to live in a "new" house. He doesn't make any more than I do, I pay $475 a month for my house payment, and it's almost paid off, and I would never even consider going in debt that deep.

People, especially young people, who think they have to live in a new home in a new subdivision get what they ask for. I'm just shocked foreclosure isn't more rampant than it is.

Oh, and no, I didn't read the article either.

 

[KellyinAvon]

Challenge to Dogma on Owning a Home

Whatever happen to the American Dream of Home Ownership?

The great feeling of owning a home is turning into a nightmare as studies show that increase in home ownership correlates with increase in unemployment.

Do these studies have any merit?

What do you think Ingo'er?

Challenge to Dogma on Owning a Home - Yahoo! Finance

Hi, I'm Kelly, I'm an Analyst (that's pretty much a statistician with people skills). I could show correlation between a company's workforce and the number of employee parking spots. That doesn't mean the company has the right number of employees to accomplish the job. I'll now read the story.

 

[KellyinAvon]

Ok, I read the story. You would think people with "Economics" in their titles would understand the cyclical nature of a market economy. Just because peaks are followed by valleys does not mean home ownership causes unemployment.

 

[churchmouse]

Have owned (and lost...divorce) several homes. Have owned as many as 12 rentals at one time (or more, memory fad) with 4 to 6 on contract above that. We currently own 2 living in one and renting to my daughter.
The key is to stay within your means. If you can not afford it, do not buy it. Live in your home, not for your home.

 

[88GT]

Challenge to Dogma on Owning a Home

Whatever happen to the American Dream of Home Ownership?

The great feeling of owning a home is turning into a nightmare as studies show that increase in home ownership correlates with increase in unemployment.

Do these studies have any merit?

What do you think Ingo'er?

Challenge to Dogma on Owning a Home - Yahoo! Finance

Ok, I read the story. You would think people with "Economics" in their titles would understand the cyclical nature of a market economy. Just because peaks are followed by valleys does not mean home ownership causes unemployment.

^^^Homeowner never causes unemployment.

I've been working in residential real estate sales for more than 10 years. Anybody stupid enough to hypothesize that homeownership is in anyway causally related to unemployment is not to be taken seriously.

 

[AtTheMurph]

I have to admit I didn't read the story because I gave up on the idea of home ownership when reality is that in most states, and especially over tax-em Indiana, you merely rent your home from the state (property taxes).

Regardless, home ownership is expensive. People forget that it is more than just the mortgage. Many people put everything they have into the monthly payment and forget the accompanying reoccurring payments of utilities, the constant increases in home owners insurance, taxes which always seem to go up regardless as to how they are calculated, property upkeep, and general internal upkeep as items wear and need repair or replacement over time.

Ok, so I just looked at the article, and like anything else, you can make statistics show anything you want. The article also looks like a nice "left wing" ploy to increase our federal taxes by doing away with the mortgage interest deduction. I would be ok with that as long as the state also did away with the property tax on the "American Dream".

I think your logic is completely flawed. You seem to make the assumption that renting an apt/home shields you from the total costs of the owner. How can it be cheaper to rent than to won when the owner is almost certainly making money on the transaction?

 

[churchmouse]

I think your logic is completely flawed. You seem to make the assumption that renting an apt/home shields you from the total costs of the owner. How can it be cheaper to rent than to won when the owner is almost certainly making money on the transaction?

I know 88 GT has rentals as did we. We always rolled the expense of owning/maintaining into the rental agreement. Insurance/taxes/upkeep etc.

This is the same mindset that is sure the Gov. has unlimited funds and it is the Gov. money.

 

[Leo]

6 houses bought and paid for. I have never made any actual money with home ownership. Yes, I have bought a home for $35,000 and sold it for $62,000. If you consider costs and inflation over those years, as well as the increased price of a replacement home, I didn't make a dime, maybe I lost a little. I just bought a home that cost $175,000 9 years ago for $113K, in a distress sale. In 5 years, I'll still not make any money, but I will have a house without a mortgage. If I keep making my "rent payments" (property tax) to the government, maybe they'll let me keep living here.

Of the 100's of thousands of dollars I have paid to mortgage companies for interest, and financial fees as well as sales commissions for the ones I didn't sell by myself, I would have done way better investing in a business. This is strictly from a tangible return on my money. I did make money on a small apartment building, as I bought it right and had positive cash flow 8 out of the 10 years I owned it, and I sold it at a good time. I did however spend a lot of my time being a landlord, I probably worked for minimum wage. I did not live there, that was a "business"

A private home is really the only hard asset most people will ever have, so at least you will have that as a savings (really loss minimalization) financial tool.

The bottom line is, you need a place to eat, sleep, and store your stuff. You need a place to protect your wife and children from the weather, wild animals and bad people. If they are important to you, the cost is well spent, even better than quality wax on the paint job of your new car.

 

[88GT]

6 houses bought and paid for. I have never made any actual money with home ownership. Yes, I have bought a home for $35,000 and sold it for $62,000. If you consider costs and inflation over those years, as well as the increased price of a replacement home, I didn't make a dime, maybe I lost a little. I just bought a home that cost $175,000 9 years ago for $113K, in a distress sale. In 5 years, I'll still not make any money, but I will have a house without a mortgage. If I keep making my "rent payments" (property tax) to the government, maybe they'll let me keep living here.

Of the 100's of thousands of dollars I have paid to mortgage companies for interest, and financial fees as well as sales commissions for the ones I didn't sell by myself, I would have done way better investing in a business. This is strictly from a tangible return on my money. I did make money on a small apartment building, as I bought it right and had positive cash flow 8 out of the 10 years I owned it, and I sold it at a good time. I did however spend a lot of my time being a landlord, I probably worked for minimum wage. I did not live there, that was a "business"

A private home is really the only hard asset most people will ever have, so at least you will have that as a savings (really loss minimalization) financial tool.

The bottom line is, you need a place to eat, sleep, and store your stuff. You need a place to protect your wife and children from the weather, wild animals and bad people. If they are important to you, the cost is well spent, even better than quality wax on the paint job of your new car.

I tell sellers this all the time when they're trying to make a profit after 3 years of ownership. Owner occupied homes are NOT investments. Not in the sense of making more than you paid in.

However, comparing renting to owning, they are. Renting is literally (compared to owning) throwing your money away because the only thing you have to show for your payment is the immediate benefit of shelter. When you stop paying rent, you cease having that shelter.

With a mortgage payment, not only are you paying for your shelter, but you have a hard asset that contributes to your NET value and the equity can be leverage for other purposes than can become real investments that supply a concrete ROI. And you at some point, you own (property taxes aside) the property and continue to benefit from the shelter without having to pay for it.

Renters do pay a portion of the costs of homeownership. Though I doubt that the renter for a particular property ever pays what an owner of that same property would pay, when all the expenses are added up. And I'm not included the extras that translate into property improvement. Just the costs to maintain the status quo. Rent for a given home is usually more than what the mortgage might be (depending on financing terms, of course).

I've got one 2bd/1ba renting for $675/month. Assuming a 100% LTV and no deductions on the property taxes, 30 year term at a 5.00% rate, the PITI would be $582/month.

I've got a 3bd/2ba renting for $900/month. Same terms as above, PITI would be $718.

So renters absolutely bear the costs of taxes and insurance, as well as the costs of financing the mortgage if it exists. And then some.

 

[Leo]

So renters absolutely bear the costs of taxes and insurance, as well as the costs of financing the mortgage if it exists. And then some.

Exactly, and school taxes unless special arrangments are made by the landlord forbidding school age children in the lease. You cannot get out of school taxes as an owner.

Private home nets break even or a little loss vs. renting nets 100% loss.

Btw, nice positive cash flow on your rentals. I was doing it on the side, so my positive net was only about 5%

 

[88GT]

Exactly, and school taxes unless special arrangments are made by the landlord forbidding school age children in the lease. You cannot get out of school taxes as an owner.

Private home nets break even or a little loss vs. renting nets 100% loss.

Under most circumstances, that's illegal. Only exception would be a 55-n-older community, but that has certain regulations to comply with to qualify for the exemption.

Btw, nice positive cash flow on your rentals. I was doing it on the side, so my positive net was only about 5%

Thanks. Not all of our properties are so hot. There's one I swear I lose money on simply due to the repeated repairs I have to make. It's a low-rent district and damages are a simple fact of life. I just replaced a door that the tenant had destroyed by kicking OUT from the inside. So I make sure the rent is high and that I'm on the ball to evict when things go south (and they almost always do).

 

[TiminMishawaka]

You can buy a house in Indiana for cheaper than a used car. There really is no reason not to have a house here aside from personal choice. That being said, I agree to fully challenge the dogma of having a mortgage. It's a 30 year financial prison sentence. Better be worth it.

 

[88GT]

You can buy a house in Indiana for cheaper than a used car. There really is no reason not to have a house here aside from personal choice. That being said, I agree to fully challenge the dogma of having a mortgage. It's a 30 year financial prison sentence. Better be worth it.

You can get 15- and 20-year [STRIKE]mortgages[/STRIKE] prison sentences too, ya know.

Or save up for the thing. Imagine putting a house payment into savings every month. What would one have at the end of 5 years? Or 10?

I want to know what kind of used cars you've seen if you think a house is cheaper than they are!

 

[TiminMishawaka]

I want to know what kind of used cars you've seen if you think a house is cheaper than they are!

I've got a 3 bedroom in Mishawaka I bought for 12 grand.

 

[smokingman]

There is no way owning a home causes unemployment.That is actually quite insane.It may limit your immediate market if you are looking for a job,but no rational mind would consider it to cause you to lose employment.

 

[zippy23]

Since we have to pay property taxes regardless of if the home is paid off means we never actually own our property. But owning a home is so much nicer than renting an apartment or renting a home. it gives you a sense of ownership and taking responsibility, which is a good thing. Another issue is that the gov't destroys the housing market, ruining your "investment." Lots of rich people own property and rent it out. if you can own enough to pay for your bills on top of the bills for owning the rental properties, this can pay off huge later on. Finding quality renters today is an absolute crap shoot. We are slaves of the gov't, thats it.