What is the furniture of American Suburbs?

[westsideboy]

Originally Posted by Chriz Brown

Sorry in advance for the long post, but I want to make sure I'm being clear.

Most people don't understand why the "taxes" argument is weak. Yes, you get a nice tax deduction for your mortgage interest.. which is the government's way of skewing the market. And as any economist will tell you, this does not really serve to "make it cheaper" to own a home, but just raises prices higher, as any economic stimulus does.

Thus, for example, in a market where the average middle-class person can afford $1000 a month for a home, the price of the home can be calculated with exact certainty based on the property taxes, the insurance cost, the interest rate available, and the mortgage interest deduction. People buy on monthly payment, not on overall cost, and as a result, the cost, in terms of real dollars, reflects only the "affordability" based on monthly cash flow.

Raise property taxes to $6,000 a year, and the home price will plummet. Lower the interest rate to 2.9% and the price will go up. Eliminate the mortgage interest deduction, and well, a lot of people will end up out on the street.

Regarding the "renting is throwing money away" argument.. this is probably the only real valid argument. Still it is not as valid as people think. It largely depends on the numbers and timing. For example, suppose you rent an apartment that costs $1,600 per month in rent. You look at a home with an effective mortgage payment of $1,600 a month, after taking into account property taxes, insurance, and the home mortgage interest deduction. For the same amount as renting, you could own your home.

And since you are paying down a mortgage over time, you are increasing your equity in the home, and also making a 2-3% rate of return on the overall value. In fact, if you put down only $10,000 on the home, you could argue that the "rate of return" on that investment is far higher. (But for an investment property with positive cash flow, this rate of return could be even higher).

And yes, such a scenario can make a lot of sense, as you have to pay for housing anyway, and if owning cost the same (or less) than buying one, then, yes, it makes sense to do so. But even then, you are hardly "making a killing" on your home as an "investment" over time.

As I said earlier.. repairs and maintenace can be a MAJOR expense. If you live in a house for 15-30 years, you can expect to put on at least one new roof, a furnace, hot water heater, washer, dryer, entire kitchen, bathroom, siding, windows, driveway, gutters.. you name it. And some of these things you may do more than once. And things like foundation re-parging and the like, well, they get messy and expensive.

And we are not talking small amounts of money here. HVAC systems can cost $5,000 to $15,000 depending on the size of your house and the complexity of the system and how much needs to be replaced.

Some people buy homes because they like the property and want to live there for the rest of their lives, or at least a very long time.

I figure this is a more foreign concept in urbanized areas with that "move up in the market" mentality. Still, the best way to make sure you stay in the nice house you like for as long as you wish is to buy it. That is the truest value of homeownership.........possessing the house you want to live in.

[Chriz Brown]

Originally Posted by westsideboy

Some people buy homes because they like the property and want to live there for the rest of their lives, or at least a very long time.

I figure this is a more foreign concept in urbanized areas with that "move up in the market" mentality. Still, the best way to make sure you stay in the nice house you like for as long as you wish is to buy it. That is the truest value of homeownership.........possessing the house you want to live in.

Absolutely true.

I'm just saying that people who buy homes as an "investment" or to "make money" are usually wasting their time UNLESS its an investment property with positive cash flow. If you buy a house for other reasons, there is nothing wrong with that.

[BigCityDreamer]

Originally Posted by Chriz Brown

As I said earlier.. repairs and maintenace can be a MAJOR expense. If you live in a house for 15-30 years, you can expect to put on at least one new roof, a furnace, hot water heater, washer, dryer, entire kitchen, bathroom, siding, windows, driveway, gutters.. you name it. And some of these things you may do more than once. And things like foundation re-parging and the like, well, they get messy and expensive.

Some people enjoy remodeling their homes and the sense of ownership and satisfaction that kind of thing brings, even if it costs a lot of money.

Anyway, everything in life is a big trade off. I never liked the idea of living in an apartment, so I went straight from my parents' house to owning my own townhouse. People do what suits them best.

[papichulo2]

All i know is owning a house is something to be proud of and u get to collect ur money instead of renting and losing it all. i dont own one yet but wen i do ill be renting it out to folks and collecting money

[Chriz Brown]

Originally Posted by BigCityDreamer

Some people enjoy remodeling their homes and the sense of ownership and satisfaction that kind of thing brings, even if it costs a lot of money.

Anyway, everything in life is a big trade off. I never liked the idea of living in an apartment, so I went straight from my parents' house to owning my own townhouse. People do what suits them best.

Sure they do. Doesn't make it a smart financial decision.

[Chriz Brown]

Originally Posted by papichulo2

All i know is owning a house is something to be proud of and u get to collect ur money instead of renting and losing it all. i dont own one yet but wen i do ill be renting it out to folks and collecting money

Owning a house is not something to be proud of until you actually own it. If you're in debt and paying a bank, then you don't really own it.

Which is why renting it out (like you said) is smart because you can transfer your debt to someone else while gaining equity and making extra $$$.