Family Values vs market realities..... (insurance, union, expenses, credit)

[radiolibre99]

OK, so my girl friend's sister and her husband and three kids are trying to purchase a home. She works at small insurance firm as a clerk making 11 an hour and he is a plumber making 30k. They want a home to take care of three kids. They already live in a three bedroom home they're renting for 950.

This got me to thinking. Is there some disconnect people have when it comes to their desires to own a home and raise a family and the market realities they will face? What I mean is isn't owning a home only marginally better than actually renting? My gf tells me that renting is throwing money away but home ownership is far better because it's yours, you can personalize it, upgrade it, etc. With fluctuating home prices, property taxes and upkeep, can it really be a better deal than just renting?

The entire point about the debate was that the real issue with them is not that they thought of the actual cost benefit analysis of owning a home vs renting. They're probably just under the impression that they just have to take the next step in their lives and that means owning a home. What pains me is that people all over the US go through the pains, exhaust their resources and get into debt to meet this desire, and it wasn't necessarily because they weighed all the options between the two choices.

Same notion with having children or keeping up with the joneses. I have no stake in this debate really I am just trying to get an understanding. I am not defending either renting over owning, just wondering what others think about either.

[MrRational]

Originally Posted by radiolibre99

OK, so my girl friend's sister and her husband and three kids are trying to purchase a home.
She works at small insurance firm as a clerk making 11 an hour and he is a plumber making 30k.

They want a home to take care of three kids.
They already live in a three bedroom home they're renting for 950.

This got me to thinking. Is there some disconnect people have when it comes to their
desires to own a home and raise a family and the market realities they will face?

There are many.

One is calling that $30K annually guy -something less than $15/hr- a plumber.
(An actual plumber -licensed journeyman at least- should be earning $60K+)

Another is not seeing that a family of five needs over $65,000 as a MINIMUM.
Her income should be available for savings and some fun. Not groceries.

[radiolibre99]

Originally Posted by MrRational

There are many.

One is calling that $30K annually guy -something less than $15/hr- a plumber.
(An actual plumber -licensed journeyman at least- should be earning $60K+)

Another is not seeing that a family of five needs over $65,000 as a MINIMUM.
Her income should be available for savings and some fun. Not groceries.

I don't think he's an actual plumber then I just know he works at a plumbing co. and marveled at the thought of another brother in law making 22 bucks an hour, hinting that he made slightly less than that. I apologize I don't know plumbers salaries.

Yes, they do, and they want a house. A three bedroom home in a nice burb. That is a disconnect to me.

[jghorton]

'Traditional wisdom', prior to the last 5+years, has always been that buying/owning is better than renting, because home appreciation has always stayed ahead of the cost. In the same respect, "buy and hold" has always been considered a good stock investment strategy, but, that, likewise, has not worked-out too well over the past several years.

Over the long run, the economy may recover and the benefit of 'traditional wisdom' in housing and stocks' will likely return. But, for now, one must carefully examine their own circumstances and the market trends in their area, to avoid getting caught-up in the pitfalls of blindly following 'traditional wisdom.' For example, a need to sell quickly (career, other) in a weak market can easily wipe-out any short-term appreciation gains, plus, leave one 'holding the bag' for the significant costs of buying, owning and selling a home.

[radiolibre99]

Pretty much right on the nail, my friend. Exactly what I was trying to articulate.

[MrRational]

Originally Posted by radiolibre99

I don't think he's an actual plumber...

I KNOW he's not.

The point though is the he carries himself like he is the same as someone who has put the time
in through a registered apprenticeship and took the classes to learn the codes and a bit about
running jobs so that some years later he has his own crew where the apprentices (last years
raw helpers) are getting $15/hr or his own service truck doing and selling jobs.

Want to help him and the kids? Point him to the ABC programs. LINK
In a few years they should be able to afford a house.

I'd suggest him looking into the union too but that well established route to
a decent life for a working man is probably against his politics.

[oregonwoodsmoke]

Renting costs more than owning. Seriously. Take your rent amount, use a amortization table to see how much house that will buy you. Landlords do not get their rentals for free. Tenants have to pay rent high enough to cover all the expenses of the property.

If you get a fixed rate mortgage, your payments never go up. Rent will probably get raised once a year.

Taxes go up, but taxes also cause your rent to go up. Property taxes are deductible if you own and not if you rent.

People rent because they can't put together the down payment. Or they rent because they won't be in th area long. Or they rent because they have trashed their credit. Nobody rents because it is cheaper.

[oregonwoodsmoke]

One more thing: it matters naught if house value goes down. You still own a house and still have a place to live. Wait for a few years and prices will go back up again. The economy always goes up and down.

[radiolibre99]

Doesn't it depend on the area?

[Malloric]

In most areas it's cheaper to buy than rent. It's just like buying a car versus leasing it. You generally pay for the convenience/flexibility. In a few places like San Francisco, it's cheaper to rent.