[henderson702]

Originally Posted by ScoopLV

I knew it would get around to the Bavarian Illuminati sooner than later.


You keep mentioning the "average investor." The average investor isn't going to do well no matter what. Why? The average investor is a herd animal. By the time the herd makes a move, it is already too late. The market has already shifted. And the herd is then sheared once again. (The quote from The Magnificent Seven has always been true: "If God did not want them sheared, He would not have made them sheep.") I don't support the system as it stands. But let's face it, the herd has NEVER done well. Not once throughout history. The world was never conquered by Genghis Milquetoast, Ivan the Dull, or Alexander the Mediocre.

The fact that the game is rigged does not excuse anyone for bending over and taking it. There are people who are content to let the system roll over them (debt slaves). There are others who hear the metaphorical starter's pistol, and never run. They just stand there and point accusatory fingers. And then they have the nerve to be indignant when they lose the race.

It's no coincidence that people who feel this way always think it's their "job" to educate the poor, poor herd about the evils of an unfair system. Here's a tip -- smart people already know that the game is rigged; and they know HOW it's rigged. Dumb people are too busy chewing their cud to pay attention to what's going on. You cannot lead such people to water. You cannot make such people drink. And they're never going to get ahead.

The trick is not to be one of the herd.

The world takes advantage of the naive, that was the point I was making. There are new suckers born every day, and the world takes advantage of them. I am doing my part to teach people to grow up and stop trusting banks, real estate agents, and other self-centered narcissists running this place.

You bring up the BI, like a fool. Stop that, please. And grow up. And yes, they do exist and have great power, but there is no need to bring them up.

[SportyandMisty]

Originally Posted by henderson702

You forgot the insurance you have to pay for the house as well.

No I didn't. In my original post I clearly stated "We also have some expenses associated with that income such as depreciation expense, and various other landlord expenses for repairs and the like." That is, in the comparison of the two cases: (a) owning a home that you live in and (b) owning a home that you lease to someone else while renting an identical home, you have expenses. Insurance is an expense. So is changing the HVAC filters, so please don't reply that I forgot HVAC filters. I didn't forget anything whatsoever.

I'm sorry you don't like the answer, but the answer is clear: when you own a home and live in it, you "pay yourself rent" in the amount of the fair market rental rate and that imputed income is tax free.

Originally Posted by henderson702

If you invested as much time discovering the purpose of life, as you do on meaningless money issues, you would have 100 mansions waiting for you when you pass.

You don't know me, nor know how I invest my time. As to those 100 mansions waiting for me when I die, in your view does that include the 71 virgins?

Originally Posted by henderson702

Home ownership is vastly over-rated…and you can't get around that…like I stated earlier, you have to have mobility in this job market. We are not living in 1950s America. It is VERY DIFFICULT to find stable and good employment unless you are a doctor, nurse, teacher with tenure, or have a specialization that companies value (Cyber Security, etc).

Economists call things that detract from mobility "friction." I addressed friction in a previous post. There are always frictions in the marketplace, and is 100% irrelevant. Homeowners have tax-free imputed income in the amount of the fair market rental rate.

Originally Posted by henderson702

That is a glaring mistake in your argument as well: you assume that people will always have income and can afford the responsibilities that come with owning a home.

<sigh.> Are you assuming that renters will always have income and can afford the responsibilities that come with being a renter?

Originally Posted by henderson702

You are naive because you probably came from some money (I had a very good middle class to upper middle class upbringing btw)

My father died unexpectedly of a heart attack when he was in his mid 40s, leaving behind a widow unprepared to be a head of household, an autistic son, a daughter was severely mentally retarded, and me. We lost everything, not that we had much to begin with. I grew up on the wrong side of the railroad tracks, dodging street gangs.

Originally Posted by henderson702

... have a good education,

When I graduated from high school, there were 660 in my graduating class. Exactly 12 of us went to college or junior college; the only reason I know this is it was newsworthy as it was the worst high school in the state of California. Police came through on horseback to break up race riots several times/year. How does that compare to your high school?

I did pursue higher education, ultimately studying under Merton Miller, George Stigler and Gene Fama -- each of whom went on to win the Nobel Prize in Economics.

So I'd say you're right -- I do have a good education. Do you?

Originally Posted by henderson702

and haven't lost a job due to company cutbacks.

Yes, I have. I spent my career in high tech in Silicon Valley, which is analogous to a salmon swimming upstream. Most don't make it. Some do.

Originally Posted by henderson702

So, you are living in a fantasy land for the most part unlike the majority of the country, who struggle.

Again, you don't know me, so I don't know how you could concoct that statement.

Originally Posted by henderson702

Another repeat: transaction fees are deadly! When you want to sell a house, it is a royal pain, and you lose a nice chunk to the agents trying to sell.

Another repeat: transaction fees are part of what economists call "friction" which put a drag on the reallocation of capital. At the same time, when it makes economic sense, you hire agents and sell your house -- or you sell it yourself without an agent.

Originally Posted by henderson702

That money is better invested in stocks that are easy to sell OR getting more education to get a better job OR starting a business that can generate more profit.

Academic research shows the majority of the returns to a portfolio result from asset allocation among the various asset classes, one of which is real estate. If you fail to include real estate in your portfolio, that portfolio carries more risk and is not pareto efficient.

[quote=henderson702;41025276]Housing is bust [quote]

No its not. This is fun. Your turn.

Originally Posted by henderson702

and you just can't get that around your head because you think you are smart

Actually, I wish God had made me smart instead of so damn good-looking.

Originally Posted by henderson702

Thanks for your efforts to convince me…it is NEVER going to work, because I am very confident that I am correct ...

At last we truly agree. Psychologists call this "reduction of cognitive dissonance."

Again, in a rational world, a portfolio manager can earn positive expected returns only by incurring a risk that someone else did not want to bear, and in the real world that contains some irrationality, a portfolio manager can extract some positive expected return at the expense of someone else's mistake.

Some landlord someplace is making some positive return because of your mistake.

[Cold Warrior]

The Bavarian Illuminati are living among us. I see their symbols everywhere.

Spoiler

[ScoopLV]

Originally Posted by SportyandMisty

No its not. This is fun. Your turn.

You're wasting your time.

This is Kevin, under a new screen name. And this time he's managed to go almost six months before having a complete Illuminati meltdown. He and Joe will now trip over each other agreeing with themselves about the evil Federal Reserve and the network of lies that props up the world economic system.

[Raiderman]

Originally Posted by ScoopLV

You're wasting your time.

This is Kevin, under a new screen name. And this time he's managed to go almost six months before having a complete Illuminati meltdown. He and Joe will now trip over each other agreeing with themselves about the evil Federal Reserve and the network of lies that props up the world economic system.

I think Squibb may be the 3rd incarnation... just a hunch.

[BBMW]

When I read some of these posts, I end up wanting to reply in a way that make me sound like I'm disparaging home ownership. I don't. It's usually a great way to build net worth. If you're planning to live somewhere long term, it's almost always a good idea to buy a home. I did, and in a place that's known for long term renting, and have done very well by doing so.

But some people spew the strangest crap to justify home ownership. This post fall under that category.

When it comes down to it, they way to determine the rent vs buy decision is to compare the projected costs and returns from both choices over the period you plan to be in the area and the particular residence. This includes transaction costs, maintenance, interest paid, lost return on down payment money, etc. In the long term, this is almost always going to push the decision to the buy side. In the short term not so much.

Originally Posted by SportyandMisty

Most people don't really understand the value of owning a home. It affords tax-free income in the amount of the fair market rental.

Stay with me...

When you own a home & live in it, you "pay yourself rent" in the amount of the fair market rental rate. This is, of course, not reported as income on an IRS form 1040, so that income is tax-free.

Stay with me...

Imagine you and I own otherwise identical houses right next to each other. Under normal circumstances, we each live in the house we own. Now, let's do a thought experiment. Imagine that you rent your house to me, and I rent my house to you. As a tenant, you pay me rent. As a tenant, I pay you rent. Because they are otherwise identical the dollar amount of those rent payments is identical. They cancel each other out, right?

But not when it comes to income tax time. When calculating our respective tax obligations, each of us has jobs with income, and maybe some stocks/bonds, and under this thought experiment, each of us would also report rental income.

Let's say for the sake of argument that the fair market rent is $2000/month. So, each of us pays the other $24,000/year, and each of us receives $24,000/year. At tax time, each of us reports that extra $24,000 in extra income. We also have some expenses associated with that income such as depreciation expense, and various other landlord expenses for repairs and the like.

At the end of the day, though, we pay our marginal tax rates on that extra $24,000 in income.

So, coming back to reality... when we own a home & live in it, we "pay ourselves rent" and that rent is tax-free income. If the fair market rental rate is $2,000 per month, we have tax free income in the amount of $24K/year. Not too bad.

That, boys and girls, is the true financial benefit of owning a home and living in it.

[ddrhazy]

Originally Posted by BBMW

When I read some of these posts, I end up wanting to reply in a way that make me sound like I'm disparaging home ownership. I don't. It's usually a great way to build net worth. If you're planning to live somewhere long term, it's almost always a good idea to buy a home. I did, and in a place that's known for long term renting, and have done very well by doing so.

But some people spew the strangest crap to justify home ownership. This post fall under that category.

When it comes down to it, they way to determine the rent vs buy decision is to compare the projected costs and returns from both choices over the period you plan to be in the area and the particular residence. This includes transaction costs, maintenance, interest paid, lost return on down payment money, etc. In the long term, this is almost always going to push the decision to the buy side. In the short term not so much.

I agree. Buying's not for everyone. If you know that you'll be in the area for only 2 years, buying makes little sense as you open yourself up to risk that you may not want to incur. Housing "isn't always a sure thing" we've all seen that. When the market corrects, it corrects hard. I would say that housing's value is based more on real things such as the cost of building but the value of the land is largely set by the same economic forces that are in the stock market save for certain areas that have already been built out for decades(SF and NYC). Even then those areas could see a drop in prices if the governments decided that the zoning height for new buildings could be much higher than currently is.

[SportyandMisty]

Originally Posted by BBMW

But some people spew the strangest crap to justify home ownership. This post fall under that category.

I'll take that as a compliment, as I'll be the first to admit I'm a bit strange.

And I compliment the way you disagree with me: you disagree with my point of view without personally attacking me. Thank you. Sincerely.

By the way - my economic analysis is not supposed to justify home ownership. As you point out, the decision to own vs. rent takes many things into account, and it is perfectly reasonable and rational to choose not to own a home assuming you've done the analysis correctly.

[ScoopLV]

Meh. He managed to keep it relatively together for a few whole months. That's a record.

[BBMW]

You're correct that it isn't personal. And I'm not so much not agreeing with you as not getting the point you're trying to make.

Originally Posted by SportyandMisty

I'll take that as a compliment, as I'll be the first to admit I'm a bit strange.

And I compliment the way you disagree with me: you disagree with my point of view without personally attacking me. Thank you. Sincerely.

By the way - my economic analysis is not supposed to justify home ownership. As you point out, the decision to own vs. rent takes many things into account, and it is perfectly reasonable and rational to choose not to own a home assuming you've done the analysis correctly.