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Old 08-07-2012, 02:21 PM
 
1,730 posts, read 1,821,687 times
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Quote:
Originally Posted by gwynedd1 View Post
You are not looking far back enough.
Just don't suggest to look at the Great Depression...
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Old 08-07-2012, 02:22 PM
 
5,588 posts, read 9,868,336 times
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Its slam dunk math at the moment for anything but high value homes except in a handful of markets. Only way it doesnt work is if you figure the sales price of your home after fees will be lower. Hard to make that assumption, but of course it could happen. Otherwise if you get a loan with less than 5% down there is minimal opportunity cost and you get incredible leverage on what should be an appreciating asset. Even if the home goes up only 10% over whatever number of years the return on investment is 200% if your expenses are the same. Thing is in most cities the costs arent the same, low rates have made mortgages much cheaper in many cases. In my situation I bought a condo in a slightly better location than my apartment and even with HOA fees and taxes my cost is $350 a month less and as the mortgage insurance premium goes down and rents go up its not even a close equation. Oh and $100 per month in equity is getting paid down to boot.

For people at the lower and middle tiers of the housing market its really hard to see why so many want to find ways this math doesnt work. You can always find an area or situation where its not quite as good, but I'd say they are in the minority. But since the media is so NY and LA centric I guess you could make counterarguments for those cities and it might be why this story is told at a somewhat reserved level.
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Old 08-07-2012, 02:44 PM
 
48,508 posts, read 88,477,907 times
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I think your ignoring circumstance. I think your exmaple of a condo is not what mnay want if theyare goig to buy and certainly inmnay palces condos price has dropped since occupancy has dropped to low levels which increase cost per perosn to maintain. But younger people are less likel;y to buy in a market where the 5 year appreciation is not greta and in mnay might actauly f drop. that s e cause younger worker move more often than in the past, The bbule was great ebcause it emant that moving every five eyars broguht rewardsnot avilable i other sections of the market. goif forward ist not like that as we see tighten oan requiremnts and a treasury politcy thast wnat to returen to the historic level of 65% of homeownership.I dn't thnik anyone disputes that homeowenrship as a investment is wehat it was and can be a real problem when needing to move on because of career.its nt the same with everyone has to what is best and what is desired.
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Old 08-07-2012, 02:45 PM
 
Location: The Triad (NC)
31,345 posts, read 69,561,491 times
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Quote:
Originally Posted by Willy702 View Post
Its slam dunk math at the moment for anything but high value homes except in a handful of markets.
It's not a slam dunk ANYWHERE for one simple reason: job volatility.

Until and unless you KNOW you're not going anywhere within X years
AND can be certain you'll be able to un-encumber yourself from the mortgage.
THEN you get to add in all the other factors related a specific property at a certain price/terms.
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Old 08-07-2012, 04:36 PM
 
5,588 posts, read 9,868,336 times
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Quote:
Originally Posted by MrRational View Post
It's not a slam dunk ANYWHERE for one simple reason: job volatility.

Until and unless you KNOW you're not going anywhere within X years
AND can be certain you'll be able to un-encumber yourself from the mortgage.
THEN you get to add in all the other factors related a specific property at a certain price/terms.
People who tell me that are looking for the 100% risk free solution, which doesnt exist. To people who think renting is less risky, suppose you lost your job and you had little saved up. What options do you have then? If you get evicted it takes les than a month and you are out and good luck getting into another place quickly unless you can hide the eviction. Foreclosure takes 6 months plus giving you time to find another job and/or come up with some agreement to stay if you choose to. As for job stability, really how many people move out of an area each year for work? 2-3% maybe? More than 95% do not. And if you move and you bought reasonably you could be a landlord if necessary.

What other blown out of proportion ideas do you want to throw at the situation? People who get scared about every little thing end up renters for a lifetime. I have a tenant in my property who has been a model of what a landlord wants. She told me when she moved in she'd only stay a year because she was going to buy something. She's been in the same job 4 years and she still hasnt moved. The times I talked to her I could tell she was insanely cautious about money and I am sure that is why she never has moved. I'm happy she hasnt left, but she is the poster child for people who let fear keep them from doing simple things like buy a nice house and keep the equity for themselves.
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Old 08-07-2012, 04:42 PM
 
Location: The Triad (NC)
31,345 posts, read 69,561,491 times
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Quote:
Originally Posted by Willy702 View Post
People who tell me that are looking for the 100% risk free solution...
No... just the common level of risk that existed before we had unemployment approaching 20%.

Too many people are stuck and unable to make a move BECAUSE they can't sell.
The sales pitches and the rah rah in that article and from the NAR don't add in the other side of it.
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Old 08-07-2012, 04:47 PM
 
85,472 posts, read 82,956,884 times
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Quote:
Originally Posted by Willy702 View Post
People who tell me that are looking for the 100% risk free solution, which doesnt exist. To people who think renting is less risky, suppose you lost your job and you had little saved up. What options do you have then? If you get evicted it takes les than a month and you are out and good luck getting into another place quickly unless you can hide the eviction. Foreclosure takes 6 months plus giving you time to find another job and/or come up with some agreement to stay if you choose to. As for job stability, really how many people move out of an area each year for work? 2-3% maybe? More than 95% do not. And if you move and you bought reasonably you could be a landlord if necessary.

What other blown out of proportion ideas do you want to throw at the situation? People who get scared about every little thing end up renters for a lifetime. I have a tenant in my property who has been a model of what a landlord wants. She told me when she moved in she'd only stay a year because she was going to buy something. She's been in the same job 4 years and she still hasnt moved. The times I talked to her I could tell she was insanely cautious about money and I am sure that is why she never has moved. I'm happy she hasnt left, but she is the poster child for people who let fear keep them from doing simple things like buy a nice house and keep the equity for themselves.
i say it all the time. financially speaking owning can turn out to be the smallest bang for the buck. but renters have demonstrated little discipline to invest elsewhere if they didnt buy.

so at the end of the day at least a homeowner ends up with a consolation prize,the house. the renter usually ends up with a more expensive apartment,better car or more expensive trips but they rarely end up with much in other assets.

study after study shows homeowners accumulate more than renters. now you could argue that people who rent may not have the money to buy and so they have no money to invest either .

but i think if we all think of those folks we know who have fairly decent jobs and income the renters seem to accumulate less in assets.
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Old 08-07-2012, 07:49 PM
 
Location: Metro Detroit, Michigan
17,982 posts, read 16,462,389 times
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Umm... Job security! I'm 25. I had to move once for work. I imagine this won't be the last time. In fact, I don't see much holding me down here for 10 years. There's a reason homes are so cheap...
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Old 08-08-2012, 04:21 PM
 
577 posts, read 933,888 times
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Quote:
Originally Posted by Willy702 View Post
People who tell me that are looking for the 100% risk free solution, which doesnt exist. To people who think renting is less risky, suppose you lost your job and you had little saved up. What options do you have then? If you get evicted it takes les than a month and you are out and good luck getting into another place quickly unless you can hide the eviction. Foreclosure takes 6 months plus giving you time to find another job and/or come up with some agreement to stay if you choose to. As for job stability, really how many people move out of an area each year for work? 2-3% maybe? More than 95% do not. And if you move and you bought reasonably you could be a landlord if necessary.
You aren't comparing like circumstances. You are assuming the renter has no extra money and the homeowner also has no extra money. If I buy, I have to give up a down payment amount (may be small for an FHA loan), there is an opportunity cost to that. If I'm renting that down payment amount still in my bank account leaves me with flexibility in a job loss and gives time. Sure there are plenty of renters out there with no money, and plenty of homeowners with no money, but that buyer had to put some initial cost into that house that is now tied up until they sell. You have to compare somebody that actually has the potential to buy.

Renting does leave you with much more flexibility. You can quickly move into a much cheaper and smaller place to rent if you have to on a month to month lease, or you can pick up and leave and move to a new area for a new job in that month. That is much simpler and faster than selling or renting out your current residence while you try to find a new one. I don't think a person's game plan should be foreclosure and living rent free pending a job loss.
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Old 08-08-2012, 04:43 PM
 
Location: Whittier
3,007 posts, read 5,493,555 times
Reputation: 3068
*Except California.
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