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Is it? If you're going to buy, and the premise of this conversation is whether it's a good time to buy or not, the general theory is to buy while it's on sale. Prices are down now and so are interest rates. Even if prices 10 years from now are the same as they are today the homeowner will have a good amount of equity from paying down the principal. The renter will have nothing to show for their monthly payments.
LOL. More NAR fuzzy math and logic.
There's a pretty good chance VALUES (if not prices...with the way we are devaluing the dollar, it's key to make that distinction) 10 years from now will be less than they are today. Renters will have nothing to show? Oh yeah, only the substantial savings versus their cost of ownership (and any income generated off of said savings).
The Japanese RE market peaked in 1990-91. It's been "on sale" ever since. Tell me, if I were to buy into their market in 1993, only two years into the bloodbath, when it was "on sale" for 33% off the peak prices, would that be a good time to buy?
We're certainly following their playbook, and now it seems where into the slow-the-freefall-to-a-crawl phase, where they kept their fed interbank rate at 0% for how many years?
If I bought into the Nikkei at 20,000, a year and a half after it had plummetted from 30,000, since it was "on sale" obviously...what should I do for the next 10 years while slowly spirals down below 10,000?
then wait dont buy a home . you can still come out way ahead not buying a home and renting, and i mean way ahead..... but my home is not my piggy bank
dont mis-understand as an investment a house is pretty poor, it hardley beat out the treasury bill which was in last place.. if you have the discipline to take the down payment money and the difference each month that you save by renting in the early years and just throw it into some diversified index funds you can have enough most likely to buy 2 homes 20 years later even after subtracting out 20 years of rent.
here in nyc i bought my home in 1986 for 169,000... i sold it a few years ago for 335,000 or so... the same 169,000 in my investment portfolio is over 1.2 million .
i could subtract off all the rent i wpould have paid and bought 2 homes today.
the point is my home is looked at differently from my investments. my home is a consumption item, like fine art or a collectable car its something i use and enjoy... the difference is i can sell the art or sell the car and buy a different asset class or buy nothing at all.
when i sell my home no matter what the value is i still need a place to live. if i never sell my home then what my equity is becomes a moot point . it matters to the taxman or my heirs but makes no difference to me.
if i sell the house and buy another for equal value or more then thats a moot point again. if i buy no house then i have to take that money i got and pay for a lifetime of rent for myself or spouse..
even retiring and moving to another area thats cheaper dosnt mean you will ever see that equity as cash... our little apartment we are giving up in nyc cost the same as the 3 bedroom house we bought in pa .
while my wife and i only needed a small apartment in nyc the fact is now the kids will becoming to visit and staying over.
there really is no efficiant low cost way of getting equity out of your home and not owing it. a reverse mortgage is brutaly expensive for the amount you can get, an equity loan has to be paid back and unless you want to sell off your kitchen or take in boarders basically what your house is worth is a moot point. the same way i have nooooooooo idea what my art collectables are worth as i enjoy them and have no thought of selling them i feel the same about where i live. i couldnt care less where my home is priced today.
if you can sell it, have a place to live for life and cash left over then thats the only efficiant way.
soooooooooo i buy a home not to make money or be my piggy bank for retirement, but i buy a home to enjoy and as a place to live
THANK YOU! Now this all makes sense...so we are on the same page. I thought from your previous posts you were pushing far more for people to buy RE now. I think we both would agree that an individual should weigh the costs and benefits of owning and renting, and thanks to KCfromNC for posting the rent versus mortgage calculator from the NYTimes.
It is also possible that prices will shoot up again. Sure this is possible (in fact it is likely over time - however you do not indicate a trime frame, region/location, etc.), but in the current reality of the RE and job markets it is all but an impossibility in virtually of the country over the next few years if not a decade or longer. The only long term trend is that real estate has increased in value. Certainly not everywhere, and certainly there are experts that would argue that it loses over time to inflation, particularly when you add in the associated costs. But I concede the point that none of us truly know where it will be in 10 years. But we can certainly make educated guesses, informed decisions, particularly those based on historical precedent. The one thing I do know is that after 30 years the owner will have a home that is paid off while the renter has nothing.Again, his load of bull time has been debunked time and again...not to mention, the millions of foreclosures that have taken place over the past couple of years - what do those owners have to show for it? Less than nothing, with many being wiped out financially. I also know that even if prices decrease more and the owner pays it off, they still have it paid for. The renter still has nothing. Well, besides what the renter could earn, as previously mentioned, off the difference between the costs of ownership and their rent, the owner is still paying the property tax, the maintenance, the HOAs (if any), the insurance, etc.
THANK YOU! Now this all makes sense...so we are on the same page. I thought from your previous posts you were pushing far more for people to buy RE now. I think we both would agree that an individual should weigh the costs and benefits of owning and renting, and thanks to KCfromNC for posting the rent versus mortgage calculator from the NYTimes.
to tell you the truth if i could have found the house i really wanted but as a rental and the numbers made sense i would rent it vs buy for just a shear numbers game
... from a purely financial stand point from 1987 to 2003 my house gained about 300% in new york city (kew gardens ,queens) when i sold it. my investment portfolio was up over 1100 % over the same time frame. in fact i have one fund right from 1988 and its up 1300 % . thats why i never would count on my house as my piggy bank to plan a retirement off of
There's a pretty good chance VALUES (if not prices...with the way we are devaluing the dollar, it's key to make that distinction) 10 years from now will be less than they are today. Renters will have nothing to show? Oh yeah, only the substantial savings versus their cost of ownership (and any income generated off of said savings).
The Japanese RE market peaked in 1990-91. It's been "on sale" ever since. Tell me, if I were to buy into their market in 1993, only two years into the bloodbath, when it was "on sale" for 33% off the peak prices, would that be a good time to buy?
We're certainly following their playbook, and now it seems where into the slow-the-freefall-to-a-crawl phase, where they kept their fed interbank rate at 0% for how many years?
If I bought into the Nikkei at 20,000, a year and a half after it had plummetted from 30,000, since it was "on sale" obviously...what should I do for the next 10 years while slowly spirals down below 10,000?
japan made every tragic flaw a central bank could have done and that sent them into a deflationary spiral that they cant break out of. they decreased their money supply, they tightened credit , they raised rates. they had banks owning the very real estate that they held the loans on and they couldnt foreclose on themselves. it was a huge mess they created there.
we did mostly the opposite here so hopefully even if we have a little deflation it wont spiral into what they did to themselves. there market was even worse when it came to speculation. remember how much they paid for rockerfeller center. that was insane.....
Last edited by mathjak107; 11-03-2009 at 05:34 PM..
japan made every tragic flaw a central bank could have done and that sent them into a deflationary spiral that they cant break out of. they decreased their money supply, they tightened credit , they raised rates. they had banks owning the very real estate that they held the loans on and they couldnt foreclose on themselves. it was a huge mess they created there.
we did mostly the opposite here so hopefully even if we have a little deflation it wont spiral into what they did to themselves. there market was even worse when it came to speculation. remember how much they paid for rockerfeller center. that was insane.....
LOL, that and 2 Rodeo Drive. I recall they sold it at such a massive loss, to a group of investors from Scottland or Ireland, who held it and turned around and sold it for a huge boon around the height of the market.
Delron, I really don't see the point of arguing with you. I've said my piece and I'm comfortable with my position. I don't have anything to prove to you and I'm not going to change your mind. I just hope the readers weigh both sides and make the choice that's right for them. Whether you agree or not, the bottom is the wise buyer in this market will come out with something to show for their purchase that the renter won't have over the long haul.
Whether you agree or not, the bottom is the wise buyer in this market will come out with something to show for their purchase that the renter won't have over the long haul.
That's not true. I'm not sure where you get the idea that a renter would have nothing over the long haul. This is absolutely false in my own case.
We've saved over 6 figures in the last 3 years. This is hardly nothing. Had we purchased 3 years back, we would have nothing to show for. Instead we have a hefty savings.
You are making a blanket statement that is just as false as the ones who say you are dumb to buy in today's market.
Delron, I really don't see the point of arguing with you. I've said my piece and I'm comfortable with my position. I don't have anything to prove to you and I'm not going to change your mind. I just hope the readers weigh both sides and make the choice that's right for them. Whether you agree or not, the bottom is the wise buyer in this market will come out with something to show for their purchase that the renter won't have over the long haul.
i love this stuff, i can just write about stuff for days (and have, ha ha ha ) because there are so many myths and beliefs out there that are just nothing more then old wives tales passed around and after a while we all begin to believe our own bull-*hit.
id hardly call an 1100% gain in 20 years in other asset classes vs less then 300% for my house walking away with nothing. if anything i could have walked away with 2 houses today and thats after subtracting out 2 decades of rent in new york city. AND IM NO FINANCIAL GENIUS . thats just simple unmanaged index funds.
becareful about being short sighted and thinking because you bought a house your the winner .
FOLKS THERE IS A BIGGER PICTURE THEN THE ONE YOUR LOOKING AT BY LOOKING ONLY AT A HOUSE. ITS ONLY A PIECE OF THE PUZZLE
suppose someone bought a rental property and chose to rent where they themselves live... if that asset generated enough income to pay his rent and kept up with his own rent increases and give him extra cash forever left over is he had a disadvantage to the home buyer ? of course not.
suppose instead of just a rental property the renter diversified even more and owned stocks, commodities, reits etc which soared even more then the rental property?
this FIXATION ON A HOUSE is why sooooo many retirees today are house rich and cash poor and end up having a miserable retirement. ideally you need a balance. you need to be smart enough to realize a house will not give you the growth you need to sustain a retirement unless you do your investing elsewhere. if you can do both and get a house, you could have lower housing costs later but even that is not a given . 12,000 in real estate taxes after a while isnt low cost living. ... again all this only applys to those who can afford a houseand have a choice . a renter because of no money will always be a renter with no money unless they have the money to act. then they have a choice of a house and other assets or renting and other assets.
its all part of a master plan, which is to have a a place to live and money to live on when you retire and the paycheck stops .. thats the goal folks.. ill say it again,, our bottom line goal is to have a place to live and money to live on that lets us live the lifestyle we want... how we get there dosnt matter. personally even though we recently bought our retirement house in PA if i was more secure my investment income could handle it id love not to have a house in pa but to rent a nice luxury apartment over by central park and retire right here in nyc. i think that would be pushing our income to tightly though.
im smart enough to realize that wouldnt be smart of us but non the less i may be able to do it based on our other investments ..
a house and no money = a failed retirement
a house and money = lower cost retirement and maybe lower income in retirement
renting = if you invested well a pig pile of money and higher housing costs
but folks you need both........you need housing and you need money. how you do it dosnt matter
GET THE POINT!?
Last edited by mathjak107; 11-04-2009 at 03:34 AM..
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Again, his load of bull time has been debunked time and again...not to mention, the millions of foreclosures that have taken place over the past couple of years - what do those owners have to show for it? Less than nothing, with many being wiped out financially. I also know that even if prices decrease more and the owner pays it off, they still have it paid for. The renter still has nothing. Well, besides what the renter could earn, as previously mentioned, off the difference between the costs of ownership and their rent, the owner is still paying the property tax, the maintenance, the HOAs (if any), the insurance, etc.
