Why do we want to own houses? - Page 2

What's the interest rate on those loans?

If they are in the 7-8% range I would suspect you'll be better off repaying them. Repaying them is a guaranteed return. While a 7-8% return doesn't seem that great, look at the 10 year performance of an S&P Index 500 fund. Now it doesn't look so bad, eh?

I think many people are expecting stock market returns like those in the 80's and 90's and that's probably not likely.

I don't think that's accurate at all. It's not been the case over the long term, historically speaking.


That's really just a supposition on your part. There's no evidence to support it actually happening. Secondly, you're really hung up on the term "baby boomers," as if they are the only ones causing the demand for housing. Families are now headed by generation X parents, who have created their own baby boom. Evidence of this is the growing school populations in many areas. In fact, much of the growth has been fueled by those who are now in their 30s and 40s. Boomers haven't been demanding bigger and newer housing for a good 10 years, just by function of their ages. Yet growth has still happened.


I think you're reading your own press, so to speak. While urban living has become more popular, the suburban lifestyle is still desirable to millions of Americans, including generation x and post-x. I think you're overestimating the impact this will have. Moreover, how much harder can suburban land values be hit? You're not going to see some wave of people leaving the suburbs. There is still demand for housing.


I realize you believe that, but it's the reason you believe it I take issue with. Either way, home ownership is still a good financial decision in most areas of the country. You're looking at this solely from a financial perspective as well...which is not all that factors into the equation. In many places, one cannot save/invest enough on the difference between renting and ownership to support your position, especially if we take housing needs into account.

For example, I'd have to spend at least $1,400 a month in rent to get a 2 or 3 bedroom town home in my area. That would save me about $200 a month. However, I'd lose a huge tax deduction in the process (as in about $12,000 a year) and not build any equity whatsoever. The rate of return on the money I was "saving" would have to be huge just to make up for the lack of equity and tax deduction.

In other areas, there is more disparity between rent and housing prices, so perhaps then it would make sense to rent.

Get out of debt first! Any amount of debt drastically increases your chance of bankruptcy - I have come close three times by being over-leveraged. I am much happier now with no debt.

Retired people owning an house, statically have a better level of life than people renting it,

Depends on the area. in LA / SoCal, you need atleast 600k to get a decent-size house (2000 sq.ft).

In Dallas, you can buy a 4000 sq. ft. house for 200k.

Is there a causal correlation there?

Good question, because we can see two answers to this statement :
- when you don't have to rent a house (because you own it) you save money
or
- people owning house are in a statitical point of vue more rich, than people renting.

Perhaps it's a mix of both

pride of ownership

Buy low -- sell high. I bought the lowest priced 3br/2ba house in the zip code 18 months before the market went south. It had been a rental for about a dozen years and was in clean but functionally obsolete shape. Oh, I also bought in one of those upscale neighborhoods everyone wants to live in and took nine months to find the right house. House is still worth more than 100K more than when I bought it even though the general market in the region is down 33%. My immediate neighborhood is up! When we get around to fixing it up to bring it into equivalence with everything else around we will clear an additional 200K after all expenses.

I don't want to hear about houses being bad investments. That's complete bullshit. People do dumb things, but I have made 20%+ on every house I have ever owned and most of that was over the long dark market of the early-mid 90's and around the dot-com crash.

If you are not stupid and willing to get your hands dirty, buying a house is like printing money.

I hope you can say that 5 years from now.

BTW, where do you live? I think that makes a big difference.

I expect the market to be relatively flat in my neighborhood for the next 5 years, but I bought low into the right neighborhood. Fixing-up will bring me 3 to 1 returns just to get back up to par with my neighbors.

Where you live only makes a difference with the absolute numbers. Percentages are about the same. It all has to do with buying smart, knowing what the local micro-market it likely to do and basing buying decision on that. You buy either at 30% below todays market or 30% below where you think the market will be in a couple years, taking the lower number. There are always houses available at those prices, even more now. You do have to have a clue about what fix up costs will be, but that really isn't that hard if you are willing to spend $200 on a couple estimation books.

I bought knowing a downturn was coming, and knowing I would still make money unless the entire nation goes anarchistic, and then it wouldn't matter anyway.

Well i don't know the particulars about your situation but that's *really* optimistic. Many renovations, a kitchen for example, will yield at best 90%.

Good luck. Your situation may be unique but you're gonna need time and luck to get a 3x return.

Why own a home?

Everyone seems to be focusing on the financial side of things...
But finances aren't everything in life.

Owning a home means that I can do whatever I want with it. Repairs are done to my specification and in a timely fashion. Best of all? There is piece of mind in knowing that I won't have to move unless I want to. No chance of being evicted at the end of the year when the property is sold out from under you.

You must have a nice landlord. Mine would never pay me back for any repairs. You're situation is not the norm.

I would rather own my property than rent from someone else. Its that simple.

That is only true when you use a general contractor to do the whole job. I do the work myself and with a sub here and there. It costs me a third of what it would with a general contractor. I see a 200% return, and I won't do it if I can't get at least a 100% return -- which gives plenty of cushion for surprises. Hardly optimistic at all, just good old-fashioned sweat-equity.