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Old 06-04-2009, 10:29 AM
 
Location: Virginia Beach, VA
5,517 posts, read 5,506,945 times
Reputation: 2432

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Quote:
Originally Posted by jhrichmond View Post
I'm not interested in a tit for tat here, but I stand by my statements. Not sure where you are getting the 2.7%,
Im using the 2.7 percent because your calculator doesnt go in the fractions, and 2% nets a loss on the investment, and 3% an 89k return, so, without doing much math, I figured youd need a return in the high mid 2%'s to get a positive return at all.


Quote:
Originally Posted by jhrichmond View Post
but you are forgetting about the 20% down payment,
20% downpayment? What does that have to do with owning a house? You cant be adding in a whole bunch of riders. This is flat out owning vs renting, not "renting vs owning assuming a huge down payment".

Sure, if you are able to dump enough of a downpayment in to a house, you can offset the interest expense, lower the total purchase price of the house, and realize a larger gain. Thats not what we are talking about here though.


Quote:
Originally Posted by jhrichmond View Post
meaning that in 30 years, your return would be $159,041 (I am using 3% appreciation as a compromise, though I find it hard to believe that in 30 years a $300,000 house would only be worth $737,000).
There are houses in Detroit, Cleveland and Buffalo right now selling for less then they would have 30 years ago. Do you really want to gamble on what condition your city is going to be in 30 years from now?

Quote:
Originally Posted by jhrichmond View Post
Though that number does not include taxes, it also doesn't include the income tax advantages of home ownership.

Nor does it include the maintenance of home ownership.


Quote:
Originally Posted by jhrichmond View Post
I also find it very hard to believe that in 30 years, rent payments would not at least double.

Eventually your mortgage payment will be less then the prevailing rent, in your average market, however, the fact that the savings in the first 10 years or so youd be realizing with rent over owning, compounding interest, will erase much of the benefit of the mortgage being less in the later years. Even if the house did have some advantage in these years, it would literally take a person more then 15 years sitting in that house to realize them.


I will say it once again. There are two advantages to owning.

1. You can do what you want (unless you have a HOA down your neck)
2. You will eventually be finished paying for it

Leasing and renting is always the smarter option if you do not plan on possessing the item long term, normally past their payoff or depreciable life.


Why is it smarter to buy a car over leasing? Well, the hope is that you will own the car long enough, that the price plus any interest and maintenance costs (less the residual or resale value if you are selling it) will be lower then the accumulated lease payments over the life of the purchased car. Depending on the lease price, this usually will take somewhere between 7-10 years. So, what if you dont want to have the car that long? Well, then its stupid not to lease. You will simply end up with endless negative equity switching vehicles every other year.


Same thing with a house. It only makes sense to buy the house if you plan on staying in it a tremendously long time, long enough to see the benefits of lack of housing payment, or if you are confident in the market, and can pay for all of it, or a huge chunk of it in cash.
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Old 06-04-2009, 11:01 AM
 
Location: Virginia Beach
486 posts, read 1,292,646 times
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20% isn't a huge downpayment. It's what most lenders require. If you don't have that, I do not recommend buying.
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Old 06-04-2009, 11:46 AM
 
Location: Virginia Beach, VA
5,517 posts, read 5,506,945 times
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Quote:
Originally Posted by jhrichmond View Post
20% isn't a huge downpayment. It's what most lenders require. If you don't have that, I do not recommend buying.

1/5 of 300,000 is 60k. I dont know on what planet that isnt a huge chunk of change, but on earth it certainly is.
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Old 06-04-2009, 01:04 PM
 
Location: on the road again
1,272 posts, read 2,604,825 times
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Quote:
Originally Posted by Randomdude View Post
1/5 of 300,000 is 60k. I dont know on what planet that isnt a huge chunk of change, but on earth it certainly is.

20% is what should be required to buy any home......If it was we would not be having the issues we are having now....

Last edited by rtandc; 06-04-2009 at 01:27 PM..
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Old 06-04-2009, 01:32 PM
 
Location: Virginia Beach
486 posts, read 1,292,646 times
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Quote:
Originally Posted by rtandc View Post
20% is what should be required to buy any home......If it was we would not be having the issues we are having now....
exactly!!
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Old 06-04-2009, 02:39 PM
 
520 posts, read 1,009,859 times
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Quote:
Originally Posted by jhrichmond View Post
I disagree. Since 1968, houses averaged an appreciation rate of 6.34% a year. While rents go up, if you have a fixed rate, your house payment stays the same. I do not know of any financial experts who would advise renting rather than buying, unless you plan on moving in the near future. Here is an excellent resource for an equity calculator:Real Estate Equity Growth Calculator - Mortgage-Info.com
6.34% a year? I call incorrect:

http://www.1stmillionat33.com/posts/.../house_his.gif

If that was the case, given that incomes haven't risen at nearly that rate... then you will hit a wall where there will be no one able to buy.

If you look at recent years it is all out of wack because people were given loans where they were putting nothing down and buying at ridiculous prices. Now they can't afford the payments (they never could) so they will walk away. The high prices will revert to what can actually be paid back.

If lenders require a 10% down payment, I think it would eliminate like 80%+ of all buyers. Americans are broke.

I'd like to also remind you. Homeowners pay no mortgage. Let's end the madness of calling people with a 103% Combined loan-to-value neg-amort loan a homeowner. They are not. No deed? You rent from the bank.
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Old 06-04-2009, 02:49 PM
 
Location: Virginia Beach, VA
5,517 posts, read 5,506,945 times
Reputation: 2432
Quote:
Originally Posted by telemonster View Post

If lenders require a 10% down payment, I think it would eliminate like 80%+ of all buyers. Americans are broke.
I agree. The US savings rate has been under 8% since 1990, and has dipped into the negatives in both 2001 and 2005, an has been virtually non existant from the middle of 1999 until now.

http://research.stlouisfed.org/fred2/data/PSAVERT.txt


Few Americans have much savings at all, forget about rediculous amounts like 60k for 20% down on a 300k house.
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Old 06-04-2009, 03:08 PM
 
Location: on the road again
1,272 posts, read 2,604,825 times
Reputation: 640
Quote:
Originally Posted by Randomdude View Post
Few Americans have much savings at all, forget about rediculous amounts like 60k for 20% down on a 300k house.

Why is 20% so ridiculous? If you take the proper industry standard of 3 times your annual salary then someone wanting to take out a 300K loan should make at least 80K a year based on the 60K down which would have them financing 240K which is where it should be....
If this was the case then the local housing market would have to stay within the local cost of living where they should be and not the major jumps we have seen over the past 5-6 years....I would think with the preaching you do about the local housing doom and gloom and cost of living you would be all over this type of thinking
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Old 06-04-2009, 03:41 PM
 
Location: Virginia Beach, VA
5,517 posts, read 5,506,945 times
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Quote:
Originally Posted by rtandc View Post
Why is 20% so ridiculous? If you take the proper industry standard of 3 times your annual salary then someone wanting to take out a 300K loan should make at least 80K a year based on the 60K down which would have them financing 240K which is where it should be....
If this was the case then the local housing market would have to stay within the local cost of living where they should be and not the major jumps we have seen over the past 5-6 years....I would think with the preaching you do about the local housing doom and gloom and cost of living you would be all over this type of thinking
Forgive me, but Id like you to point out where I expressed any opinion on downpayment before attacking that position.

My comment was solely in agreeance with the notion that most Americans would be plain shut out of ownership if a large down payment was mandated.

But to take a position, I think down payments are no litmus test of ability to pay for the life of the mortgage. I think they also artificially restrict younger home searchers from the market, even though they may have higher incomes, a longer potential work span, and lower expenses, then people twice their age.

Where real concentration should have been put is restricting people with gross incomes of 32k a year from getting in to 450k houses, like my mother's, friend's daughter was able to do. That is the problem. Not lack of down payments.
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Old 06-04-2009, 07:28 PM
 
103 posts, read 244,890 times
Reputation: 37
Quote:
Originally Posted by rtandc View Post
20% is what should be required to buy any home......If it was we would not be having the issues we are having now....
You neglect the fact that a large portion of buyers in HR are getting VA loans which require no down payment.
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