why some of us shouldn't mortgage
I've never had the slightest desire to own a home. The only time my name was on a mortgage was when I was married, and that was his idea.
April 8th, 2007 4:06pm
> tradition tell me how to live my life.
Here are some other traditions you might also want to reconsider:
* don't worry, be happy
* burn the candle at both
* All that glitters is not gold
* An apple a day keeps the doctor away.
* Beauty is only skin-deep.
son of parnas
April 8th, 2007 4:42pm
It's hard to move every 2 - 4 years with a mortgage, but real estate has been a great wealth builder for the middle class.
April 8th, 2007 4:49pm
The meltdown is in sub-prime mortgages, that is mortages with a 12% or so interest rate.
There is no reason a middle-class employed person need get one of these loans.
Now, if you are not living somewhere you are sure you will be staying ten years, then renting becomes a reasonable option, but that has little to do with the sub-prime meltdown.
April 8th, 2007 4:51pm
If you live in an overheated market like the West Coast, NYC or Boston, there is.
April 8th, 2007 5:00pm
I don't see NYC going down. Sideways for ten years won't make you rich, but beats renting.
April 8th, 2007 5:16pm
When you're away for several days, and arrive back at the house, there's nothing like the feeling of saying "Ahh, home."
It's worth it for that alone. The financial aspects are nice too, don't get me wrong, but having a place of your own is terrific.
April 8th, 2007 5:23pm
TFA mentions transaction costs of upwards of 10% -- I think if you include the cost of moving in, you might get that high. But I can't see it.
There's a lot of discount real estate agents springing up. I saw an ad for one the other day for 3.9%, which was both sides of the deal. Customary in this market is 6%.
With the rise of automation, there's no reason to pay even 3.9%. You shop for a house online, you apply for a loan online. The only thing that requires a person is the showing, and the closing.
April 8th, 2007 5:27pm
'When you're away for several days, and arrive back at the house, there's nothing like the feeling of saying "Ahh, home.'
I have a lovely rented apartment, and it feels like home to me. Just because someone else has the hassle of repairs and maintenance doesn't make it more or less of a home when you rent.
Nothing wrong with home ownership, but it's not for everyone.
April 8th, 2007 5:33pm
Well, fortunately, your apartement IS owned by somebody, who's renting it to you.
This is not a zero-sum game, folks. The "bad" part of owning is owning with a high-interest ("sub-prime" indeed!) loan which you can't afford, and buying at the top of a speculative bubble. Combine those two, and YES it's better to rent than to put yourself in that position.
But that's not a problem with home ownership, that's a problem with getting "a bad deal".
April 8th, 2007 5:40pm
STH, You're as wordy as Albert these days. Are you trying to say "subprime loans are a bad deal" ?
April 8th, 2007 6:05pm
Ech - don't even get me started...
Why does my country [UK] have a tax/fiscal policy that rewards me for having a modestly paid solid job and then putting myself into debt for most of my life.
I'm 25, have only just spent more than 1 yr in a job, and haven't kept a residence anywhere for more than 6 months. What about me?
It all just rigged to create little Camronites and Camronettes. :-p
April 8th, 2007 7:55pm
Home ownership blows, but renting blows worse.
Having a place that's yours means you can fix it the fuck up and make it a pleasing place to live, and not just a hole carved into a wall that was built and furnished by lowest bidder.
"Why does my country [UK] have a tax/fiscal policy that rewards me for having a modestly paid solid job and then putting myself into debt for most of my life."
The US does too. I would imagine many other places.
The thinking goes that when you own your own home, you spend all sorts of money you wouldn't have spent otherwise. You don't need a lawnmower if you've got no lawn, and you don't put new cabinets or carpet in an apartment.
That may well all be true, but I think in some cases it is at least partially motivated by a desire to keep people geographically sedentary.
April 9th, 2007 11:18am
Most of the UK economy is propped up by consumer spending using the equity gained from the increasing value of home ownership.
April 9th, 2007 11:29am
Buying a home forces people to save more money as mortgages are inevitably bigger than rent. Savings is good. It is used as capital for investment by other people. If everyone rented, there'd be far more Mahlo Blaniks filling up people's closets (as in the rent-centric NYC, say).
April 9th, 2007 11:47am
Buying a home forces people to spend more money as mortgages are inevitably a bigger expense than rent.
Fixed that for you.
April 9th, 2007 11:52am
In more 'normal' times, it's good to buy. The mortgage interest gets taken off your taxes. Inflation results in your gaining equity in your home.
And home-owners do tend to take better care of their homes than renters do. This is not an absolute -- many people take care of either equally well.
For instance -- let's say you purchase a $100,000 home with 10% down (to keep the math simple). You've borrowed $90,000 at 5% interest, and put $10,000 cash into the house.
The first year, your house increases in value (with inflation) 5%. Your house is now worth $105,000. You've paid $4500 in interest, which you WOULD have paid in taxes if you hadn't bought. You now have 15% equity, after the first year.
The analysis gets better and better after that, with your paying off the $90,000 loan with 'inflated' future dollars -- note for the entire 30 year timespan of the mortgage, your house payments never rise. Unlike renting, where your rent will rise with inflation every year.
That's when it's a good idea. Now, if that $100,000 house costs $150,000 because it's a market bubble, and that $135,000 loan has a 5% ARM which rises to 10% in the next three years, then you might as well rent until the bubble is over.
April 9th, 2007 11:56am
>Inflation results in your gaining equity in your home.
Unless you have a log home and appraisers won't touch it, leaving you fucked when trying to access any equity.
>And home-owners do tend to take better care of their homes than renters do. This is not an absolute -- many people take care of either equally well.
Or equally poorly. Which is sort of what you said implicitly, but it needs clarification.
April 9th, 2007 12:00pm
Quite true, equally poorly happens. Though I hope your log home IS actually increasing in value. Getting somebody to actually APPRAISE that value sounds difficult, yes.
Once upon a time, when interest rates were lower, it was possible to get a new loan for an existing property without an appraisal. Sadly, at the time I believe your gas company was dunning you for bills you'd already paid.
On the good side, in a year or two the situation should be much better.
April 9th, 2007 12:03pm
Also, it doesn't help that the prior owners drove the place into the ground, but frankly, appraisers only ever do a drive-by anyway for appearances, then base the whole thing on comps. I don't understand why they have jobs anymore.
April 9th, 2007 12:09pm
"partially motivated by a desire to keep people geographically sedentary."
What advantage is that? Just curious to hear the reasoning. I never thought of that before.
>>> I don't understand why they have jobs anymore.
It's a layer of CYA protection for the banks.
April 9th, 2007 1:44pm
The number they come up with is a made up number, but you're right, the banks can claim they hired a professional and it's not their fault they were duped.
"What advantage is that? Just curious to hear the reasoning. I never thought of that before."
In spite of my tinfoil hat, the aliens told me it was so that the wealthy could have more predictable local economies. They also said it was easier for the government to keep tabs on you.
Kidding aside, the local economy bit does make a little sense. Migrations en masse could really tilt the value of the grocer and fast food place on the corner, not to mention the impact on real estate value.
April 9th, 2007 2:32pm
----"You've paid $4500 in interest, which you WOULD have paid in taxes if you hadn't bought."-----
I don't know about the USA, but in the UK you get tax relief on the tax you would have paid on that $4500 not the whole $4500.
April 9th, 2007 7:12pm