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Old 10-17-2007, 07:22 AM
 
Location: LEAVING CD
22,974 posts, read 26,863,130 times
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I guess the way I look at it is you have to pay to live somewhere (unless it's under a bridge) and owning a house is the only way that would end after it's paid off with the exception of maintenance and taxes of course. If you rent you pay for life.
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Old 10-17-2007, 07:25 AM
 
Location: Cary, NC
43,016 posts, read 76,519,527 times
Reputation: 45323
[quote=midlander008;1752575]

The first baby boomer is starting to take social security benefit and they will also be putting their houses on the market for sale and moving to town house or apartment or nursing home. That may make the housing market more miserable.[/QUOTE]

The first baby boomer has registered for Social Security, will draw next year, and will be 62. There will be an effect, but not near term at all.

It will be several years until the peak BB population retires, and many folks just stay put in their home. Some buy their retirement home prior to retirement.
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Old 10-17-2007, 11:54 AM
 
30 posts, read 83,650 times
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I am not saying buying a house is not good, I am saying buying a house Now is not good. If you have enough down payment and the prices of the houses stabilize which usually means the prices are much lower than today's and more inline with the salaries. I will calculate carefully to make sure my monthly mortgage payment plus all other fees, taxes are only slightly higher than my local rent. It is at that point I will buy. I do not want to be a home debtor, I want to own a house because I do have the money and I would also make sure when I do own a house, i will still have the luxury of buying the things I want (not borrow money on credit card) when I am in an apartment, this is quality of life. I just can't imagine myself being in a pretty house but live by a strict budget, I wouldn't be happy that way.

When people retire like my dad and the workers in the company, they will relocate to a place that has good weather, affordable housing, or move to a city where their children are. In my spouse's company, many people are talking about when they retire, they will move since houses and condos in many places are falling in price, they will wait until prices fall to a certain level.

Take an example, if you are in CA, your house costs more than houses in other cities, if there is another city that housing is more affordable, you can sell your CA house, make some profit (for retired people, they should have lived in the house long enough to have some equity) and go to other city and buy a condo at a cheaper price. This happens not just to the baby boomer, but people retire all the time. There are plenty of choices in many states, they are no longer tied to the place where their job was.

The effect of the baby boomers may not come into full play years later, but it is starting up. For sellers who plan to hold onto the houses until market gets better, i think you may need to keep this in mind, because things may get even worse before getting better.

Look at these consumer credit numbers:
Consumer Credit change
August: $12.2B
Consensus estimate: $9.0B
previous month: $7.5B

it looks like cnbc did notice:

Credit Card Borrowing - Economy * US * News * Story - MSNBC.com

Wonder if people who have too much housing debt can't afford regular living expenses and are charging groceries and other necessities (maybe even paying bills with a credit card), or if they just can't let go of bad habits to overspend.
Here come the bankruptcies. People with a high debt load aren't doing fine. They are just kidding themselves.

There is no way I am going to pay the high price for a house today, I maybe also paying for the owner's credit card debt.

Last edited by midlander008; 10-17-2007 at 12:30 PM..
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Old 10-18-2007, 01:02 AM
 
Location: Columbia, SC
10,891 posts, read 21,846,800 times
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Look guys, lets not get to hung up in the investment side of a primary residence. There will always be owners and renters. Owners have normally profited in the long term but it can't be guaranteed. I can guarantee this though-no renter has ever profited in the long term!

The biggest thing to remember is you can't live in a portfolio but you can live in a home.
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Old 10-18-2007, 01:29 AM
 
30 posts, read 83,650 times
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Quote:
Originally Posted by Brandon Hoffman View Post
Look guys, lets not get to hung up in the investment side of a primary residence. There will always be owners and renters. Owners have normally profited in the long term but it can't be guaranteed. I can guarantee this though-no renter has ever profited in the long term!

The biggest thing to remember is you can't live in a portfolio but you can live in a home.
You are assuming people do not save money. People can use that extra money from NOT buying a house and put into a CD or invest in other places. I remember you said your local normal appreciation is 3% in an average year. I just put some of my money into a CD in late September that earns me a garanteed 5% APY (I can easily take money out of a CD than from a house, it takes so much effort to sell a house and you have to pay all the fees and commissions), I also put 7% of monthly salary into 401k to make sure I get the full company match, a 401K is also tax deductible. When people spend all their money on houses, they could only put so little into their 401Ks and bank accounts. What happens when they retire, rely on the shaky social security benefit or hope they are lucky the house price will go up?

Even in the midwest where there is not much of a bubble as coastal states. In the city I live, the average property tax alone for a $170,000 house is $3000. My one year rent (heating is included in the rent price) only ($545x12=$6500). It is a two bed room apartment, with large balcony, outdoor swimming pool, free gym membership, reserved car port, professional management.

In an area where there is not much of a bubble, the rents also tend to be much cheaper than the bubbly areas. If you buy a house, the property tax + mortgage payment+ interest you pay to the bank+maintenance cost+heating bill (I live in a state that has a very cold winter), adding all these up, renting seems much better than buying now. I can put the extra money into a bank CD and earn interest (a guaranteed rate of return). I am an accountant, I have done some math on that. I will buy but it will be when house price is not inflated and sellers stop saying buyers are unrealistic. When I buy I will put down a lot of money I saved and only borrow 60-70K the most if interest rate is low or even pay all in cash if interest rate is high. So I will not be paying much interest and monthly payment only slightly higher than renting.

Is Your Mortgage Interest Really Deductible?

Congress is still debating whether to reduce the highly prized mortgage interest deduction which every realtor will tell you saves you a ton of money. The reality is that for many people with loan balances smaller than $200,000 this will really not effect them very much. People have an inflated perception on how much they are saving from the deduction. In 2006 the standard deduction for a married couple has grown to $10,300 which is more than many middle income households pay in interest and property tax per year.

Last edited by midlander008; 10-18-2007 at 02:31 AM..
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Old 10-18-2007, 05:37 PM
 
Location: Columbia, SC
10,891 posts, read 21,846,800 times
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Don't forget to factor in paying down your mortgage into account. Now if you get 3% appreciation a year, and in 15 or 30 years your mortgage is paid down you've put yourself into a great situation. Many people can buy a home and save money because the mortgage is less than their rent.

Everyone's situation is unique and it's inaccurate to paint such a broad picture.
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Old 10-18-2007, 05:55 PM
 
30 posts, read 83,650 times
Reputation: 12
Quote:
Originally Posted by Brandon Hoffman View Post
Don't forget to factor in paying down your mortgage into account. Now if you get 3% appreciation a year, and in 15 or 30 years your mortgage is paid down you've put yourself into a great situation. Many people can buy a home and save money because the mortgage is less than their rent.

Everyone's situation is unique and it's inaccurate to paint such a broad picture.

You are right every family is different, I agree on that. Our family income is way above average household in my area. After all the 401K (we actually put 9% of our monthly salary into 401K)+rent+all normal living cost you can think of, we still have enough after tax money left to be able to buy an average house all in cash in just four years, it will be no mortgage no debt at all for me from day one, no need to wait for 15 or 30 years to pay off the mortgage and the interest I have earned in the past years from the bank will be part of the cash payment for the house. What do you think it will happen for the next 15 or 30 years, suppose I can live in the house for that long, we have virtually no debt at all. I will save even more since I no longer need to pay rent. My car was bought all by cash also. 15-30 years paying off a mortgage is such a long life time. I don't want to be in debt for that long. I will enjoy a lot debt free in the coming years and feel free to spend my money on other things I like or invest the money else where to get a better rate of return, or the most conservative put into some bank CDs.

It may not work out for everybody. But for people with less income, they should protect themselves by putting more down payment.

In my last post, I said I would buy given the house price is no longer inflated and I will buy with very large down payment or even cash so no need to pay interest to the bank. I am not saying it is not good to buy at all, I am saying right now it is not a good time to buy and it is not a good idea to borrow a lot from the bank in a housing market that many houses are actually depreciating in value.
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Old 10-18-2007, 08:27 PM
 
Location: Wouldn't you like to know?
9,116 posts, read 17,645,220 times
Reputation: 3722
Quote:
Originally Posted by midlander008 View Post
You are right every family is different, I agree on that. Our family income is way above average household in my area. After all the 401K (we actually put 9% of our monthly salary into 401K)+rent+all normal living cost you can think of, we still have enough after tax money left to be able to buy an average house all in cash in just four years, it will be no mortgage no debt at all for me from day one, no need to wait for 15 or 30 years to pay off the mortgage and the interest I have earned in the past years from the bank will be part of the cash payment for the house. What do you think it will happen for the next 15 or 30 years, suppose I can live in the house for that long, we have virtually no debt at all. I will save even more since I no longer need to pay rent. My car was bought all by cash also. 15-30 years paying off a mortgage is such a long life time. I don't want to be in debt for that long. I will enjoy a lot debt free in the coming years and feel free to spend my money on other things I like or invest the money else where to get a better rate of return, or the most conservative put into some bank CDs.

It may not work out for everybody. But for people with less income, they should protect themselves by putting more down payment.

In my last post, I said I would buy given the house price is no longer inflated and I will buy with very large down payment or even cash so no need to pay interest to the bank. I am not saying it is not good to buy at all, I am saying right now it is not a good time to buy and it is not a good idea to borrow a lot from the bank in a housing market that many houses are actually depreciating in value.
Your post does make alot of sense. I look at what happened over the past couple years as a college student w/a new credit card. They (buyers) went bonkers and bought more home than they could afford. The majority of ARM's won't be resetting till next year so we're going to be in for a long ride until things can start to somewhat normalize again.
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