state of the real estate market...in my world (Worth: fit in, renters)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I bought my home in 1989 at the "height of the market". In the early 90's home values tanked, just like they have done recently. However, it was my "home" and I could afford it. Now, 23 years later, and after several market ups and downs, it is still the best investment I ever made. All things considered, I'm glad that I have not been paying rent (and someone else's mortgage) for the past 23 years.
Just curious: How much did you pay for your home in 1989, what is it (truly) worth now, how much have you paid in interest over the years on your mtg --- or how much have you paid in TOTAL for your home?
Just curious: How much did you pay for your home in 1989, what is it (truly) worth now, how much have you paid in interest over the years on your mtg --- or how much have you paid in TOTAL for your home?
Sorry, Amisi, I am not giving out that level of personal information. I can tell you that if I had rented a similar home for that period, I am sure that the rent would have been at least as much as I have spent on interest, insurance & taxes over the same period of time, and I would have zero equity.
I work a lot with landlords. One person I know has had the same tenant for 20 something years. In his words "She paid for this house."
. I can tell you that if I had rented a similar home for that period, I am sure that the rent would have been at least as much as I have spent on interest, insurance & taxes over the same period of time, and I would have zero equity.
I work a lot with landlords. One person I know has had the same tenant for 20 something years. In his words "She paid for this house."
This^. In spite of the fact that a lot of people are claiming that purchasing real estate is a bad idea, I have yet to see someone explain how a person who rents their home for at least 20-30 years will be better off financially than a person who purchases a similar priced home and keeps it for at least 20-30 years.
okay ill be the first to explain it to you.
i bought my home in 1987 in queens for 169k. sold it in 2004 for 335k.
not bad until you figure out that the same amount of money in my plain vanilla mix of fidelity funds was worth 1.8 million . that was enough to buy 2 homes after subtracting out what the rent would have been.
ill repeat that. it was enough to subtract out all the rent that would have ben paid and had enough left to buy two homes.
its not whether you rent or buy but what assets did you buy if you rent.
think of it in its most simple form.
if instead of a buying a home i rent where i live and buy an investment property instead and i earn more in income on the investment property then im paying as rent, am i at a disadvantage ? of course not.
heres the problem, residential real estate historically has only appreciated about 2% ahead of inflation. some areas may be a little more some a little less.
in the past equities ,bonds ,commodities , and gold have seen 3 to 4x that appreciation. it doesnt take rocket science to figure out equal dollars will grow far faster and be able to cover rent increase easily with lots more left over.
will the future work out the same? no one knows but since we can only talk about what was then those are facts.
so there ya go , the first first person to explain it to you has come.
Last edited by mathjak107; 08-27-2012 at 02:41 AM..
Actual numbers depend on the income re tax rate and how much is paid in RE taxes and mortgage interest. In most cases those two items bring it over the standard deduction (and not every homeowner is a couple!) plus then the NYS income tax paid is also a deduction on Sched A, which reduces your AGI (along with possible other deductions once the standard deduction is exceeded).
I've prepared plenty of tax returns for clients in years past (when my focus was on financial planning) and have seen what the deductions CAN do. Of course it doesn't work in every case - it's a case by case situation.
it has nothing to do with tax brackets. it only has to do with the standard deduction. if a homeowner goes over the standard deduction then they have spent out of their piggy bank 11,900.00 minimum if a couple, less if they are single
most homeowners wil get no free lunch as they spent every penny of it.
many renters as a couple can not clear the 11,900.00 hurdle and so they get to fly the empty seats. they may spend 6 or 7k and they pocket a refund on money they never had to spend in the first place.
the homeowner pulled money out of their piggy bank and is poorer , the renter may have more in their piggy bank then they spent.
brackets dont come into play here at all.
remember we are only talking tax implications not whether it will be cheaper to rent then from any other perspective.
all things being equal those deductions are nothing more than expenses. you spend 4 bucks and get back perhaps 1 buck . its no different then any other bill that has a rebate attached. the truth is get rid of the expense and get rid of the deduction and your piggy bank will be futher ahead .
when that mortgage interest stops piggy will be far happier not spending 4 bucks to get 1 back in taxes.
because deductions lower agi folks think they are getting some tax bonus. they are not. they are just pulling the money from their pocket and getting back a fraction of what they spent over and above the cost of the house in their taxes. its not a good deal for sure.
Last edited by mathjak107; 08-27-2012 at 02:24 AM..
Just curious: How much did you pay for your home in 1989, what is it (truly) worth now, how much have you paid in interest over the years on your mtg --- or how much have you paid in TOTAL for your home?
homeowners have terrible memories. they rarely know their true cost of ownership. you see that when they say the paid x for a house and sold it for y but fail to realize that just the un-reimberesed taxes and mortgage interest can require 3x the buy price to break even.
homes have to me maintained , renovated and repaired. its an amazing amount of money over a life time.
a home or renting represent our expenses of housing . they go on forever . at the end of a lifetime they both will leave you in the negtive thats for sure.
the costs of renting or owning will far exceed any residual value the house has if you keep good records. even if you do all the work yourself on the home your time has a value, life has a value .
it all boils down to if you rented what did you do to mitigate those costs by investing in different assets .
its not about which way leaves you financially better, its about which way is the smallest expense and leaves you less poorer..
the problem is usually those renters who have the dough to buy and dont rarely have the discipline to invest that money. they end up with a better apartment ,better car , more vacations etc so the homeowner at least has a consolation prize.
as of right now we sold our primary home, we sold our 2nd home last month and intend to just rent paying the rent out of our investment money.
we do still own other real estate but they are investment properties. we owned quite a few apartments on central park south over looking the park in a building thats an archetectural landmark. .
we are liquidating them too the last few years as we dont want to be a landlord in retirement. we are retiring in 2 years and its to much like work.
the manhattan apartments have held up very well getting only 10% less now than at the peak. it did take 6 months to find buyers which is 3x what it used to.
Last edited by mathjak107; 08-27-2012 at 03:49 AM..
I also cannot complain as we had two other homes to sell. One we bought in 1996 for under 100,000 and sold it over 200,000 this year. So I agree that if you buy, pay the mortgage and do not borrow the equity, you will be ok.
Also try to pay off the mortgage asap. I know the interest is deductable, but if you can do without paying the banks whatever interest, it is better in your pocket.
through out history there are always times every asset class goes through a period where its mis-priced . these assets should never have been at those levels and were eventually corrected.
gold was mis-priced in the 1980's at 900.00 bucks. nasdaq at 5000 was mis-priced and homes appreciating the way they did was a mis-price.
that doesnt mean the mis-price becomes the bench mark. thats where everyones thinking is off base about homes.
like water everything eventually seeks its correct level.
well now that homes fell back to their correct range everyone wants them to come back to where they were at the mis-priced level.
well thats not happening nor should it.
the fact is if your underwater then you bought during the mis-priced stage just like those who bought the dot com's and internet stocks in the bubble and eventually they had to pay the price when things rolled back.
cisco systems is a fabulous company but that doesnt mean because its not at nasdaq 5000 prices that its a poor performer or bad investment and that the mis-price is the benchmark..
the equities markets recovered because corporate profits and revenues beat all expctations but even so we arent even where we were 12 years ago.
we are better priced then 12 years ago as based on earnings stocks were very expensive at these levels , today at the same level stocks are fairly priced.
homes to will start to recover but with the wages and unemployment in the toilet it is going to take a very long time.
markets dont have memories , they only try to price things at what they are worth at any given time and what they were is a meaningless number except for those who bought while the asset was at levels it should have never hit. .
Mathjak: Realtors cannot stand your mathematical reasoning. And it is not because you are wrong. They cannot stand the idea that someone who buys and then owns a house here on Long Island for ten years with a mortgage should remember the price of the mortgage interest, closing cost, actual purchase price, upkeep/maintenance, and Long Island taxes when calculatating what the home cost them when they sell to determine their actual profit or (for the last 8 years of so) rather large loss. On top of that we have your "oportunity cost scenario" wherein one banks/conservatively invests money they would otherwise be spending on downpayment, price, mortgage interest, upkeep/maintenance, property taxes, etc while renting. For those who enjoy math - the opportunity cost is the real deal-breaker. It is enough to drive the realtors crazy. I wonder if a realtor has the guts to say "Home ownership is actually a poor investment...not just over the last 10 years but in general terms" .
One realtor responded that home prices appreciate long term 10, 20 30 years. That is a misdirection as we are talkiing properly calculated profits not home prices. Further, we are in an economy where workers are more transient. This is not the post-war economy wherein one was fairly sure to stay with the same company in the same geographic area long term. Even if there were profits to be made long term (10, 20, 30) - and there really are not - this adds further risk in the home sales market.
(This is NOT to say there are not other good reasons to own a home of course and is not to say that there are no exceptions - life is full of exceptions).
Last edited by Quick Commenter; 08-27-2012 at 04:56 AM..
Homeownership is just another road you can take to survive through retirement.
It reduces expenses and improves cash once the mortage is paid off.
In some cases it may be the better deal for someone who has no knowledge of how to invest elsewhere.
Whether you have cheaper housing costs and less income since the money is tied up in the house or renting and more income from investments it may all get you to the same point eventually.
through out history there are always times every asset class goes through a period where its mis-priced . these assets should never have been at those levels and were eventually corrected.
gold was mis-priced in the 1980's at 900.00 bucks. nasdaq at 5000 was mis-priced and homes appreciating the way they did was a mis-price.
that doesnt mean the mis-price becomes the bench mark. thats where everyones thinking is off base about homes.
like water everything eventually seeks its correct level.
well now that homes fell back to their correct range everyone wants them to come back to where they were at the mis-priced level.
well thats not happening nor should it.
the fact is if your underwater then you bought during the mis-priced stage just like those who bought the dot com's and internet stocks in the bubble and eventually they had to pay the price when things rolled back.
cisco systems is a fabulous company but that doesnt mean because its not at nasdaq 5000 prices that its a poor performer or bad investment and that the mis-price is the benchmark..
the equities markets recovered because corporate profits and revenues beat all expctations but even so we arent even where we were 12 years ago.
we are better priced then 12 years ago as based on earnings stocks were very expensive at these levels , today at the same level stocks are fairly priced.
homes to will start to recover but with the wages and unemployment in the toilet it is going to take a very long time.
markets dont have memories , they only try to price things at what they are worth at any given time and what they were is a meaningless number except for those who bought while the asset was at levels it should have never hit. .
I totally agree here. The best thing to do is buy low and sell high. My neighbour at the above house bought in the 70's for 24,000 and sold in 2008 for 325,000. That was excellent for him. I think it was only worth what we sold for. Real estate is not a quick investment at all and I never thought it was. There is no get rich quick scheme at all. Patience works.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
