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Old 05-23-2010, 07:51 AM
 
Location: The brown house on the cul de sac
2,081 posts, read 4,123,654 times
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Quote:
Originally Posted by Yankeerose00 View Post
I can't stand to hear people old enough to know better pushing 23 year old newlyweds into buying because they think renting is a waste. It's not.
Quote:
Originally Posted by dazzleman View Post
Owning is definitely a long-term proposition, and I believe that for most people, owning is better over the long run. With renting, you're never done paying, and the rent is always going up.
I disagree with the first quote and agree with the second quote!

I can only speak for my experience but thankfully I was one of the newlyweds who was told renting is throwing your money away! I will admit I have had luck and timing on my side but I am so glad we held onto our rental for all these years.

We have a rental that we were able to cut almost 10 years off the mortgage by doubling payments that we will own in a few years. Despite dropping value, it is still worth double what we paid for it. We haven't decided yet what we will do with it...hold on to it for our children or sell it and downsize to our dream waterfront cottage!

And the tax breaks (combined with our primary residence) have cut our tax rate by more than half, as well.

So my advice for newlyweds who know they want to stay in the area, is buy your home, do not rent it!
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Old 05-23-2010, 07:58 AM
 
Location: Fairfield, CT
5,536 posts, read 8,194,880 times
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Quote:
Originally Posted by renovating View Post
I disagree with the first quote and agree with the second quote!

I can only speak for my experience but thankfully I was one of the newlyweds who was told renting is throwing your money away! I will admit I have had luck and timing on my side but I am so glad we held onto our rental for all these years.

We have a rental that we were able to cut almost 10 years off the mortgage by doubling payments that we will own in a few years. Despite dropping value, it is still worth double what we paid for it. We haven't decided yet what we will do with it...hold on to it for our children or sell it and downsize to our dream waterfront cottage!

And the tax breaks (combined with our primary residence) have cut our tax rate by more than half, as well.

So my advice for newlyweds who know they want to stay in the area, is buy your home, do not rent it!
One of the things I noticed in recent years was that many newlyweds with no kids were buying these huge 4-bedroom houses, and no doubt putting themselves deeply into debt to do so. Many used those 'creative' loans that provided low initial, but sharply increasing, payments because they really couldn't afford the homes.

For financially stable people, I'm a proponent of buying, but there are limits. They should buy what they can afford, even if it's not their dream house. You can always upgrade later. And they should not buy in a market that shows a lot of signs of being overheated, as the market in the 2003-06 period did.
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Old 05-23-2010, 08:11 AM
 
Location: The brown house on the cul de sac
2,081 posts, read 4,123,654 times
Reputation: 9305
Quote:
Originally Posted by dazzleman View Post
One of the things I noticed in recent years was that many newlyweds with no kids were buying these huge 4-bedroom houses, and no doubt putting themselves deeply into debt to do so. Many used those 'creative' loans that provided low initial, but sharply increasing, payments because they really couldn't afford the homes.

For financially stable people, I'm a proponent of buying, but there are limits. They should buy what they can afford, even if it's not their dream house. You can always upgrade later. And they should not buy in a market that shows a lot of signs of being overheated, as the market in the 2003-06 period did.
I have no idea what many newlyweds were buying except in my cirlce of friends and all of us started with smaller homes that have allowed us to upgrade to larger homes for growing families.

However, we bought a 4 bedroom home when pregnant with our first child knowing we would not outgrow it anytime soon. It was a great move for us!

I agree that people should only buy what they can afford with standard fixed rate loans. That's what we did, however that doesn't mean that we didn't have some tough months or didn't have to buckle down and put ourselves on a budget.
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Old 05-23-2010, 11:01 AM
 
Location: Central Virginia
834 posts, read 1,942,921 times
Reputation: 636
Guys, if renting was wasting money and buying is always the better option, then why are we in this housing market mess? Obviously buying is not for everyone. Most people who bought a house within the past 5 years have lost money on it. The majority of mortgages written in the past 5 years are now upside down. I may be reading it wrong but are you really saying that buying is always better than renting? Because the economy says otherwise. I personally think that buying is great IF a person is financially stable and ready and so many people were given loans when they weren't ready. Or they were given loans for way more than they could afford. Hence the current market.


Buying a house is ideal and it's something a person should have as a goal. But if a person is not ready to buy, they should not buy. I wish we had continued renting back in 06. Between losing our down payment and putting money into the house, we lost just about 100k. Had we been renting, we would have lost 0.
If a person has no money in the bank and no money for a down payment, they are NOT ready to be homeowners. When our house was on the market, one couple wanted us to give cash back for them to use as their down payment because they had nothing! Turned out, their loan prevented them from doing that. But it blew my mind that a young couple, with no savings, could come looking at a 3 bedroom house.

Also, these days, the wiser thing to do is buy a house you can live in comfortably for the next 10 years. In the past, people got married, bought a 1 bedroom house, and a couple years later needed more room for kids, only to find they were upside down and stuck in their house. These days, you are better off waiting to get something you can see yourself living in for at least 5 years, preferably 10. The days of buying a house with the notion of, "oh we'll just sell in a couple years later for a profit" are over.
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Old 05-23-2010, 11:38 AM
 
Location: Fairfield, CT
5,536 posts, read 8,194,880 times
Reputation: 5788
Quote:
Originally Posted by Yankeerose00 View Post
Guys, if renting was wasting money and buying is always the better option, then why are we in this housing market mess? Obviously buying is not for everyone. Most people who bought a house within the past 5 years have lost money on it. The majority of mortgages written in the past 5 years are now upside down. I may be reading it wrong but are you really saying that buying is always better than renting? Because the economy says otherwise. I personally think that buying is great IF a person is financially stable and ready and so many people were given loans when they weren't ready. Or they were given loans for way more than they could afford. Hence the current market.


Buying a house is ideal and it's something a person should have as a goal. But if a person is not ready to buy, they should not buy. I wish we had continued renting back in 06. Between losing our down payment and putting money into the house, we lost just about 100k. Had we been renting, we would have lost 0.
If a person has no money in the bank and no money for a down payment, they are NOT ready to be homeowners. When our house was on the market, one couple wanted us to give cash back for them to use as their down payment because they had nothing! Turned out, their loan prevented them from doing that. But it blew my mind that a young couple, with no savings, could come looking at a 3 bedroom house.

Also, these days, the wiser thing to do is buy a house you can live in comfortably for the next 10 years. In the past, people got married, bought a 1 bedroom house, and a couple years later needed more room for kids, only to find they were upside down and stuck in their house. These days, you are better off waiting to get something you can see yourself living in for at least 5 years, preferably 10. The days of buying a house with the notion of, "oh we'll just sell in a couple years later for a profit" are over.

I agree with just about everything you said. There are times when it makes no sense to buy, particularly when the costs of renting vs. owning are way out of whack, which signals the potential for a downturn in the market.

In the past, people expected to sell their house pretty much for what they paid for it. That was a better philosophy. The reality is, as long as you need a place to live, any 'profit' will be put back into another house anyway. That's why homeowners didn't truly benefit from all the false appreciation of the past 10 years.

I don't totally agree on buying a bigger house than you need at the outset. Many people buy too big, and never grow into the bigger houses. It's just a lot of additional expense to pay the mortgage interest, taxes, heating, upkeep, etc. on a house that's bigger than they need. Typically, in the past, virtually nobody was 'under water' on a mortgage because they put down some down payment, and values were stable, at the least. So in a normal market, there's really nothing wrong with buying a starter home and moving up in a few years time, as long as there isn't the expectation of a profit (which, as I said, would only go into the next house anyway, since the market moves roughly in tandem).
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Old 05-23-2010, 06:31 PM
 
Location: Connecticut
24,603 posts, read 40,168,569 times
Reputation: 6961
Quote:
Originally Posted by JViello View Post
Oh sure, that's great except you are now handing several hundred thousand dollars of your estate over to a bank, and leaving your family with no inheritance.

I'd rather sell the house, rent a nice place for close to what my property taxes would have been anyway, create a trust, invest the money and let it earn a return as I use it instead it costing me money to use it. I would rather not hand over my hard earned assests to a bank that already made over twice what my original loan was in gross profit. A reverse mortgage is as poor of an investment as is a first mortgage. Only banks get rich.
Tell that to my 80 year old aunt who is in the last couple of years of her life (she is very ill now) and would have had to sell the home that she lived in for all but the first couple of years of her marriage and that has been in the family for 90 plus years. She was actually born in that house.

She took out a reverse mortgage to stay in this home for these last few years left. She had given her kids everything she could which left her with little for herself. Now at least she has money to have help come in and has been able to avoid going to an assisted living or nursing home. Yeah it would have been nice for her to have left her kids something including the home her parents built but a few of her kids had already bled her dry and the ones that did not do not really need the money from an inheritance.

When I first heard she was getting a reverse mortgage I thought it was wrong but then when my cousin explained the situation and I have seen what it has allowed my aunt to do in her final years, I have changed my mind.

Is a reverse mortgage the way everyone should plan for the future, definitely NO, but it is an option that some people have and can actually be useful. Jay
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Old 05-23-2010, 06:44 PM
 
Location: Connecticut
24,603 posts, read 40,168,569 times
Reputation: 6961
Quote:
Originally Posted by Yankeerose00 View Post
Guys, if renting was wasting money and buying is always the better option, then why are we in this housing market mess? Obviously buying is not for everyone. Most people who bought a house within the past 5 years have lost money on it. The majority of mortgages written in the past 5 years are now upside down. I may be reading it wrong but are you really saying that buying is always better than renting? Because the economy says otherwise. I personally think that buying is great IF a person is financially stable and ready and so many people were given loans when they weren't ready. Or they were given loans for way more than they could afford. Hence the current market.


Buying a house is ideal and it's something a person should have as a goal. But if a person is not ready to buy, they should not buy. I wish we had continued renting back in 06. Between losing our down payment and putting money into the house, we lost just about 100k. Had we been renting, we would have lost 0.
If a person has no money in the bank and no money for a down payment, they are NOT ready to be homeowners. When our house was on the market, one couple wanted us to give cash back for them to use as their down payment because they had nothing! Turned out, their loan prevented them from doing that. But it blew my mind that a young couple, with no savings, could come looking at a 3 bedroom house.

Also, these days, the wiser thing to do is buy a house you can live in comfortably for the next 10 years. In the past, people got married, bought a 1 bedroom house, and a couple years later needed more room for kids, only to find they were upside down and stuck in their house. These days, you are better off waiting to get something you can see yourself living in for at least 5 years, preferably 10. The days of buying a house with the notion of, "oh we'll just sell in a couple years later for a profit" are over.
You were looking at it short term. You invested money in a home and the value went down. You got nervous and sold so that money is gone. Most likely home prices will go up again and if you kept the place you would have been back where you started in a few years and most likely ahead because you would have had equity that you built up by paying the mortgage. Now you don't have the home, the money you invested or the chance of getting it back and are paying rent on something you do not really get anything back on except a receipt for living there. I don't know if there were other circumstances involved in your selling but with the limited information you provided, this is how I see it. Jay
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Old 05-23-2010, 06:54 PM
 
Location: Central Virginia
834 posts, read 1,942,921 times
Reputation: 636
Quote:
I don't totally agree on buying a bigger house than you need at the outset. Many people buy too big, and never grow into the bigger houses.
I agree with that. I think the answer is somewhere in the middle and it depends on the buyer. I don't think a single person or newlyweds need a 5 bedroom house, especially if they can barely afford it. However, I cringe when I watch these HGTV shows like House Hunters or My First House and you see young couples buying a 1 bedroom condo with the notion that they will just sell it in a couple of years when they are ready to have kids. Up until the 1990's, I always heard of the 5 year rule, as in, you should plan on staying in a house 5 years before selling otherwise run the risk of losing money. Then for a short time, people could buy and sell within a year or two and turn a profit. The past 5 years have put us in such a bind that now financial experts are saying to get a house you will be in 5-8 years, even 10 years.
I read this message board occasionally that is just for the housing market. It's really sad how many people are stuck in their house because it's depreciated so much. There are many who are renting their house at a loss each month because they couldn't sell it and their job required them to move. I can't imagine having to rent and be a landlord and put $200-300 a month into a house and know that I'm going to have to do this for the next 10 years or longer.


Quote:
You were looking at it short term. You invested money in a home and the value went down. You got nervous and sold so that money is gone. Most likely home prices will go up again and if you kept the place you would have been back where you started in a few years and most likely ahead because you would have had equity that you built up by paying the mortgage.
Not a few years. We're looking at 10 years. Where we lived in Virginia is nothing like it is here. I'm amazed at how little new construction there is in CT. We bought in an area that was far from the city because at the time, that was all we could afford, There are half finished subdivisions all over our area. Directly across the street from our house they started a subdivison meant to have 25 homes. They cleared 25 lots and 4 years later, there are only 5 homes built. It's a huge mudhole. Only 3 of the 5 homes are sold. There are tons of foreclosures and short sales in that area. Believe me, I would have been delusional to think we would have been able to break even, let alone make a profit had we stayed another few years. There is such a thing as throwing good money after bad. Sometimes you have to cut your loses and move on.

It's true that eventually a person who has lost money on their home will make that money back. Eventually. But the question is how long? Anyone who is under water 30-40k or more and thinks they are going to make that back in a couple of years better think again. We knew we wanted to move back up north. Had we waited until we could break even, we could have been waiting 10 years or more and we aren't exactly getting younger. My husband got a job opportunity and we weighted it out and decided to cut and run. It sucks but I have no regrets. We sold our house a year ago and now it's worth even less than what we sold it for according to zillow. The number of foreclosures in that area are up 15%. Real estate is local and CT has been very lucky in this regard. There are parts of the US where homes are worth 50% of what they were in 2005! Do you know how long it's going to take to rebound from that? That area has a long way to go before it hits the bottom.

Another example, my aunt bought her house in Arizona in 2005 for 300k. Today, it's worth maybe 150k though there are hundred of homes just like it for sale in her area. Realistically if she went to sell it, to make it stand out, she'd have to price it at 130k or less. When is that house going to be worth 300k again? Nobody knows exactly, but just a little bit of economic sense will tell you that it's not going to be in 3-5 years.

Again, I would never advocate a person selling at a loss unless it's really what is best for their situation. For us it was. I could not live in the south any longer. I gave 20 years of my life living someplace I wasn't happy. I could imagine another year of waking up and seeing a giant mudhole across the street with big ugly for sale signs from the un-finished subdivision. I was done. Buying was the mistake. Not selling. At least for us.

Last edited by Yankeerose00; 05-23-2010 at 07:17 PM..
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Old 05-23-2010, 06:57 PM
 
Location: Fairfield, CT
5,536 posts, read 8,194,880 times
Reputation: 5788
Quote:
Originally Posted by Yankeerose00 View Post
I agree with that. I think the answer is somewhere in the middle and it depends on the buyer. I don't think a single person or newlyweds need a 5 bedroom house, especially if they can barely afford it. However, I cringe when I watch these HGTV shows like House Hunters or My First House and you see young couples buying a 1 bedroom condo with the notion that they will just sell it in a couple of years when they are ready to have kids. Up until the 1990's, I always heard of the 5 year rule, as in, you should plan on staying in a house 5 years before selling otherwise run the risk of losing money. Then for a short time, people could buy and sell within a year or two and turn a profit. The past 5 years have put us in such a bind that now financial experts are saying to get a house you will be in 5-8 years, even 10 years.
I read this message board occasionally that is just for the housing market. It's really sad how many people are stuck in their house because it's depreciated so much. There are many who are renting their house at a loss each month because they couldn't sell it and their job required them to move. I can't imagine having rent and be a landlord and put $200-300 a month into a house and know that I'm going to have to do this for the next 10 years or longer.
You're right that the middle of the road approach is the best one. I always ruled out buying a 1-bedroom place for the reasons you stated. I knew I wouldn't be happy in it for very long, and I didn't want to be stuck. It really doesn't pay to own if you're going to sell every couple of years.

The best thing is to buy a place that would meet your needs for the forseeable future, but not stretch to a ridiculous extent to buy your dream home as a property virgin. I think it's absurd for 27-year-old newly married childless couples to take on tons of debt on questionable terms to buy a huge house that will sit mostly empty. At the same time, a 1-bedroom place is not a good idea for them either, since they're likely to have children at some point.
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Old 05-23-2010, 07:07 PM
 
Location: The brown house on the cul de sac
2,081 posts, read 4,123,654 times
Reputation: 9305
Quote:
Originally Posted by dazzleman View Post
The best thing is to buy a place that would meet your needs for the forseeable future, but not stretch to a ridiculous extent to buy your dream home as a property virgin. I think it's absurd for 27-year-old newly married childless couples to take on tons of debt on questionable terms to buy a huge house that will sit mostly empty. At the same time, a 1-bedroom place is not a good idea for them either, since they're likely to have children at some point.
You keep posting about questionable debt and terms....have you driven around a lot of our state?

I am so amazed in my own town about the young stay at home moms living on one income with no struggles in a gorgeous home. I am not so sure about how many couples are taking on so much debt??? And, they seem to be weathering these awful economic times ok, too.

You buy your home to be your home. And forget about whether or not it's a money maker or not. And my final thought on this is that the real estate market is cyclical...it will go up again.
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