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Thread summary:

Home purchase not the investment once thought, market bubble, location importance, rental income, property flipping, property taxes, fixed income rental options and home buying

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Old 04-13-2007, 01:28 PM
 
121 posts, read 413,869 times
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We've all been moaning about housing prices lately and I've been browsing the forums quite a bit lately. I see all sorts of real estate investors, developers, and a few regular folks talking about how renting is just throwing your money away and that home ownership is a substantial financial benefit for everyone.

While I do concede that the past few years have let lots of folks make a fortune in the r/e market, I don't think it's historically representative of how much owning a home REALLY pays off. But, I've been too lazy to run the math and do the research necessary to prove or disprove my theory.

But, when I came across this article in the Wall Street Journal, I wanted to post it and see what you folks think.

Quote:
The Wall Street Journal
March 12, 2007

Nest Egg: Why Your Home Isn't the Investment You Think It Is
Too many people rely on their home as their primary savings strategy. That's a mistake.
By DAVID CROOK

Planning your retirement? Don't bet the house on it. Your home means a lot of things to you, most of them good. Your home gives comfort and protection to you and your family, and it could well embody all your material hopes and dreams. But houses have become much more than just places to live. Your home is probably your biggest asset, and the price you could ask for it today is almost certainly much higher than what you paid for it back whenever.

Moderator cut: Removed bulk of copyrighted material (quote brief excerpts only)

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Old 04-13-2007, 02:07 PM
 
2,775 posts, read 2,848,955 times
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Quote:
Originally Posted by tewhann View Post
We've all been moaning about housing prices lately and I've been browsing the forums quite a bit lately. I see all sorts of real estate investors, developers, and a few regular folks talking about how renting is just throwing your money away and that home ownership is a substantial financial benefit for everyone.
While I do concede that the past few years have let lots of folks make a fortune in the r/e market, I don't think it's historically representative of how much owning a home REALLY pays off. But, I've been too lazy to run the math and do the research necessary to prove or disprove my theory.
But, when I came across this article in the Wall Street Journal, I wanted to post it and see what you folks think. *snip*
I think this brings to the surface a problem, partially. With small exception, the "house" doesn't go up in value, at all. It goes down in value and ends up also costing more and more money to maintain as time progresses. What goes up in value, potentially, is the land your house sits on. This is a concept which is very fundamental, but for some reason most people don't get it. What do realtors say? = "Location, Location, Location."

Unless you plan to rent out your home, fix & then efficiently flip it, or benefit from the beginnings of a housing bubble, it will not make you money. It's the value of the location and land that it sits on that is key.
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Old 04-13-2007, 02:11 PM
 
Location: Missouri
6,047 posts, read 21,665,781 times
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I don't think real estate is any way to get rich. But having to pay rent in your retirement years can be a huge burden. I think it's financially wise to buy a home while you are still relatively young, and have it completely paid off before it's time to retire.
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Old 04-13-2007, 02:21 PM
 
3,042 posts, read 8,093,065 times
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tewhann,

i think it is all about personal values and beliefs. It is your money so you should judge what is best for you and your family. Lots of people who never had a house of their own or grew up not having a home, feel that owning a home IS the American Dream.
Others of us who have been in America since its inception for generations may have a different view of it. My family has always owned our homes for many many generations so its not a big deal about buying a house. We know that it can be a tremendous burden and joy but we dont worship it. Others worship the house so much they place all their personal worth on owning and saying they own one.

I personally dont value material things with such importance. i can live on my farm or live abroad for a while, live in an apartment or go to buy another house. I dont want to confine my short life to buying things just to say I own it. you have to think for yourself about the choices you make
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Old 04-13-2007, 02:25 PM
 
Location: The Bay State
331 posts, read 1,483,899 times
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Quote:
Originally Posted by christina0001 View Post
I don't think real estate is any way to get rich. But having to pay rent in your retirement years can be a huge burden. I think it's financially wise to buy a home while you are still relatively young, and have it completely paid off before it's time to retire.
The problem with that is if you have the situation of living/retiring in a house with a big tax burden in a region with a generally high cost of living. It gets harder to pay those taxes and other costs when you are on a reduced income. THAT's why so many retirees cash out and move. My parents lived in an area where housing costs shot sky high in the last 10 years. When they retired, they opted to cash out and move because the property tax burden was becoming astronomical (remember: prop taxes are tied to home value. So as your house appreciates, so do your taxes . . . )
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Old 04-13-2007, 02:29 PM
 
Location: The Bay State
331 posts, read 1,483,899 times
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Quote:
Originally Posted by mbuszu View Post
I think this brings to the surface a problem, partially. With small exception, the "house" doesn't go up in value, at all. It goes down in value and ends up also costing more and more money to maintain as time progresses. What goes up in value, potentially, is the land your house sits on. This is a concept which is very fundamental, but for some reason most people don't get it. What do realtors say? = "Location, Location, Location."

Unless you plan to rent out your home, fix & then efficiently flip it, or benefit from the beginnings of a housing bubble, it will not make you money. It's the value of the location and land that it sits on that is key.
You nailed it.
That's why I swore I'd never buy an apartment. Condos/coops are total scams because (at least as far as I understand it), you don't own the actual land on which the bulding sits.
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Old 04-13-2007, 02:31 PM
 
3,042 posts, read 8,093,065 times
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what is sad is that people thought buying homes were "trendy" and not thinking about whether they could really afford it. Just like all the people living on credit cards acting as if they actually have money to own the purchases they make. I see day laborers with IPODs and SUVs and yet people complaining about how hard the economy is. If I spent like there was no tommorrow i would feel the same way.

most people could not afford these homes, they had never owned one before nor did their parents and yet they were convinced they HAD to have one. That is the reason we are having record foreclosures, why people arent saving and why so many got these adjusted rate mortgages and didnt read the fine print.
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Old 04-13-2007, 02:46 PM
 
121 posts, read 413,869 times
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Oops. I didn't realize that I couldn't post the article here. Sorry for that!

I do agree that owning a home is the American Dream for many folks. I'm only 35 and have already owned 2 homes myself for that reason. But, the more I watch the subprime market tank and the housing bubble start to burst, the more I have to stop and think.

WHY am I so caught up in owning a home? The answer for me is the "stability" that I thought it brings. But, the more I think about it, I think that my emotions were being maniuplated. For those who are wealthy, it's 6 of one and half a dozen of the other.

But for average Americans, the more I do the math, the more you can grow your net worth by investing elsewhere.

Hope NAH sees this!
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Old 04-13-2007, 02:59 PM
 
Location: a primitive state
9,888 posts, read 20,181,181 times
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I believe that owning a home is a significant step towards building wealth and security. It is not the only step, nor is it the only way to invest wisely. If a person is able to, they should buy a home for the long term. Then they may have the stability from paying themselves rather than a landlord all of that money for months and years.

Should a person go out on a limb? No. But unless you have some uncontrollable circumstance which prevents you from doing so, most people should include homeownership as part of their long-term plan.
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Old 04-13-2007, 05:16 PM
 
Location: The Conterminous United States
22,554 posts, read 47,375,823 times
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I was just talking about this to my mom the other day.

When I lived in Florida, I saw a lot of people that cashed out up North in the early 2000s, bought low in Florida, then saw their equity skyrocket in 2004-2005. They suddenly had all this money and it became a huge "Keep Up with the Joneses" game. It was definitely a nouveau riche situation.

But to answer the question...

I'm 45, have never owned my own home, and yes, my parents have always been homeowners. Do I have an emotional need to own my own home? More than you can possibly imagine. I'm not looking to get in over my head. Just have a tiny little house with a tiny amount of land to call my own and pass on to my child.
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