....the present market has higher rates and much less potential for appreciation, especially as the boomers start to pass
Spline, that is the gigantic elephant in the room. As the sheer number of people decline over the coming years, the housing market will continue to implode. The idiotic "housing meltdown" we're currently experiencing will be dwarfed by what follows. The economies of the world will experience this over the next 30 to 40 years!
No kidding. We move 2 years ago from CT to NC and were able to put 40% down on a 15 year, and live in a better house and neighborhood.
Way back when the dinosaurs were roaming the Earth and my wife and I were married with no children, we made a decision to move away from the very expensive beach area and move inland. A lot of folks like to chide that decision (including some on here) but the reality is that unless you want to run to stand still, you need to insure housing costs are reasonable and affordable.
Quote:
Originally Posted by trick fall
I bought because I wanted to have a place that was mine. I always hated renting and I had a good deal when I rented. I paid between 900-980 for a ten year period in Manhattan. I knew when I purchased my house in August of 2006 the market was topping out, but I also knew that historically the neighborhood I was purchasing in was very stable and I wanted to be there for a long time. I'm also surprised that no one has mentioned the tax advantages to owning.
As you note, there are several tax incentives to buying. No matter what the numbers have to make sense. It won't do anyone any good to think they own a home when the numbers really don't make sense. This is a very big part of the last bubble.
I made it a really clear point to people by noting that at the height or even run up of the bubble I wouldn't have purchased the very house I was residing in. I told them I would have rented because it made sense. You do have to have discipline to invest the portion of money above the rent that you would have left over by not buying. Most people are not disciplined enough in this area.
Quote:
Originally Posted by Splinemodel
So, in this bull market study, the tax advantage is the only thing that makes ownership more desirable than renting. However, renters have better mobility (if that's an issue) and, more importantly, the present market has higher rates and much less potential for appreciation, especially as the boomers start to pass.
The other points are fun but I really have to give this one a whack. There is NO, repeat NO estimate I have seen whereby just because the boomers die, the population of the United States actually declines. If anyone is screwed it is the boomers themselves since they are used to the market accommodating their every wish and that may finally no longer be true. They may want to move from a four bedroom home to a two bedroom condo and while they may not get the inflated dollars they want for their home, it also doesn't mean anyone is going to run out and build a bunch of retirement communities for them to go retire to when they can't supposedly sell those homes.
The need for housing will not disappear. The population will still increase. The boomers may have trouble cashing out but that means it is a deal for everyone who needs a home and tries to cash in.
Quote:
Originally Posted by ShawnJ
Okay.
I have over $100,000 of student loans. That's kind of like a mortgage in a way, isn't it? What do you think the best repayment plan is? I was thinking of putting as much as I can into my 401k, living like a Spartan for a few years, and paying off as much as I can at first. Is there a better way? (Although I have a feeling that just paying the minimum might be difficult on any budget).
This would be a mortgage for many people. I'll tell you what I would do.
There is a reason people tease about trailer trash. It is because trailer parks, or living in mobiles or recreational vehicles is much cheaper than even an apartment most times.
If I were you, I would get a nice older class C motorhome and live in it as cheaply as possible for a couple years. Keep your car (which is a great car) and you can even use your "home" for cheap vacations and travel. Most of the "advantages" of stick and brick homes have been offset by technology. You can get satellite television. You can use your cell phone.
There is huge money in law depending upon what field you are in and where you are employed. You've never disclosed this so it could radically affect the answer for you. Family law versus underling district attorney are huge earnings differences. So if you are going the big money route, you might not need to do above (you might just need to drink a lot instead.)
Spline, that is the gigantic elephant in the room. As the sheer number of people decline over the coming years, the housing market will continue to implode. The idiotic "housing meltdown" we're currently experiencing will be dwarfed by what follows. The economies of the world will experience this over the next 30 to 40 years!
I'm going to have to radically disagree with that. Just because white, western baby boomers are declining doesn't mean anyone else or anything else is doing so. The population of the world is still slated to go up. Wealth will still go up.
The reason the boomers are screwed is because they didn't save and spent themselves into a whole while promising themselves the moon and stars. They want the lawn man and the 1.6 children they had to pay for all this. The lawn man and their kids are going to tell them to screw themselves.
So if you are going the big money route, you might not need to do above (you might just need to drink a lot instead.)
Haha.
In the spirit of this thread I was actually wondering what the best way to pay back a loan is: slower or faster. I have six figures worth of subsidized, unsubsidized, and private loans. This thread got me thinking because of Flounder's idea that investing money will more than recoup the extra payments of a 30 year mortgage. I'm a novice with this long-term financial stuff.
Yeah, it should really depends a lot on the specifics, what sort of return you think you can get on your money, and how much risk you're willing to take in relation to the return on your money that you seek
For instance, if I was my sister, I'd probably pay off that house quickly. Psychologically, I don't like debt hanging around my head, no matter what the numbers say.
I am terribly critical of housing. Where I live, run down shacks cost $300k and nice places can be rented for $750/month. In San Diego, average houses cost twice as much per month to own than rent, not counting insurance, taxes, etc. There is no rational economic argument for owning in much of the country unless you count on appreciation three or four times the rate of inflation, which has never existed except for the past few years.
I have a great rental house, I am mobile, I can treat the house as my own in regards to landscaping, can paint, have no worries about the landlord, etc. Because of rental prices, I save enough each month by not owning that the money I didn't spend on a house will, by the time I retire, be enough of a nest egg that I could rent a mansion off of the interest alone.
Despite all of this, I'm constantly looking at realtor.com and shopping for houses not only where I live but in towns and cities where I used to live. I can't seem to get the idea out of my head that I really need to own a house, even if that idea is totally irrational.
I often wonder, what is the psychology behind this? There is no material difference between owning and renting.
I suppose I'm just brainwashed. I'll buy when I have 20% down and the year is 2011, I tell myself. Then at least the market will again be rational.
As others have said...it's where you live and what the market is like. I just bought a townhome in this area (new construction...closing in two weeks) for several reasons:
1. I need more space than my 1 bedroom apartment offers
2. My rent is over $900 a month currently, whereas my raw mortgage will be just over that (not counting taxes).
3. I was able to get a good price in this market (also, the market here is not tanking...it just slowed).
In my case it makes perfect sense. My house will likely appreciate while I'm living in it, especially given the price point. I'm paying around $220K for a three bedroom townhouse with garage and full walk-out basement (with some nice upgrades as well, such as a deck, Corian countertops, etc.)
As the home appreciates, my net worth will increase. I'll have equity if I need it. But in your situation, I agree...it's better to rent.
Quote:
Originally Posted by ShawnJ
Haha.
In the spirit of this thread I was actually wondering what the best way to pay back a loan is: slower or faster. I have six figures worth of subsidized, unsubsidized, and private loans. This thread got me thinking because of Flounder's idea that investing money will more than recoup the extra payments of a 30 year mortgage. I'm a novice with this long-term financial stuff.
It's more than just the long term. You also need to look at what that loan debt is going to do to your credit. It's usually my advice that it's better to pay off revolving or unsecured debt as quickly as possible (loans other than auto or home). I think I would look at your rates and see if you can consolidate to a low rate. Then, once you have an actual job , I'd work out a 10 year payment schedule (or less).
Quote:
Originally Posted by trumptman
I'm going to have to radically disagree with that. Just because white, western baby boomers are declining doesn't mean anyone else or anything else is doing so. The population of the world is still slated to go up. Wealth will still go up.
The reason the boomers are screwed is because they didn't save and spent themselves into a whole while promising themselves the moon and stars. They want the lawn man and the 1.6 children they had to pay for all this. The lawn man and their kids are going to tell them to screw themselves.
Agreed. And why is that no matter what kind of market we get into, people think it will last forever? When it's great, people live like they are on a drunken shore leave. When it's bad, they are shopping for guns to blow their brains out. Nothing is constant or forever in real estate. We're going through a pretty steep correction. In my opinion we're near the bottom (maybe another 6-12 months away). Give it 2 years, and the market will have stabilized. Give it 5 years, and it will be on its way back up, albeit at a reasonable pace. Even the hardest hit markets cannot go down forever.
For instance, if I was my sister, I'd probably pay off that house quickly. Psychologically, I don't like debt hanging around my head, no matter what the numbers say.
And that's the thing financial planners can't put a price on ... so it's never figured into their analysis. So they can make a big mortgage sound like a "good investment strategy" on paper... never mind the stress of being in debt.
As others have said...it's where you live and what the market is like. I just bought a townhome in this area (new construction...closing in two weeks) for several reasons:
1. I need more space than my 1 bedroom apartment offers
2. My rent is over $900 a month currently, whereas my raw mortgage will be just over that (not counting taxes).
3. I was able to get a good price in this market (also, the market here is not tanking...it just slowed).
In my case it makes perfect sense. My house will likely appreciate while I'm living in it, especially given the price point. I'm paying around $220K for a three bedroom townhouse with garage and full walk-out basement (with some nice upgrades as well, such as a deck, Corian countertops, etc.)
As the home appreciates, my net worth will increase. I'll have equity if I need it. But in your situation, I agree...it's better to rent.
If I could buy a 3 BR townhome with fancy countertops for $220k, I probably would. that said, it will probably be 5 years or more before much appreciation occurs.
in my neck of the woods, the only hope for a 3BR townhome at that price is an "affordable housing" program, which includes deed restrictions relating to income, resale price, etc.
I'm going to have to radically disagree with that. Just because white, western baby boomers are declining doesn't mean anyone else or anything else is doing so. The population of the world is still slated to go up. Wealth will still go up.
The reason the boomers are screwed is because they didn't save and spent themselves into a whole while promising themselves the moon and stars. They want the lawn man and the 1.6 children they had to pay for all this. The lawn man and their kids are going to tell them to screw themselves.
Sorry, you're wrong about it being limited to white western Baby Boomers. A cursory glance at demographic data worldwide will tell you that the working populations of all nations are falling. So much so that in Japan and South Korea, they are very worried about having enough caretakers for their aging population, which has resulted in both governments pushing the development of robot assistants and workers.
Sorry, you're wrong about it being limited to white western Baby Boomers. A cursory glance at demographic data worldwide will tell you that the working populations of all nations are falling. So much so that in Japan and South Korea, they are very worried about having enough caretakers for their aging population, which has resulted in both governments pushing the development of robot assistants and workers.
Sorry if it wasn't clear enough but I consider Japan and Korea to be countries that have adopted Western style beliefs.
There will still be plenty of people. There may not be plenty of Japanese and Korean people but if they want to die alone in their countries while hoards beat at the door, let them wallow in their racist ways.
Demography is destiny. There isn't a law or rule that can overcome that.
Sorry, you're wrong about it being limited to white western Baby Boomers. A cursory glance at demographic data worldwide will tell you that the working populations of all nations are falling. So much so that in Japan and South Korea, they are very worried about having enough caretakers for their aging population, which has resulted in both governments pushing the development of robot assistants and workers.
The same concerns exist with China due to the one-child policy and the aging population.
If I could buy a 3 BR townhome with fancy countertops for $220k, I probably would. that said, it will probably be 5 years or more before much appreciation occurs.
in my neck of the woods, the only hope for a 3BR townhome at that price is an "affordable housing" program, which includes deed restrictions relating to income, resale price, etc.
That it exactly....the area. I don't blame you for thinking like you do. It's all about what one can get for the money. Don't feel you have to buy. You're likely better off renting something given the market you've described.
There is NO, repeat NO estimate I have seen whereby just because the boomers die, the population of the United States actually declines. If anyone is screwed it is the boomers themselves since they are used to the market accommodating their every wish and that may finally no longer be true. They may want to move from a four bedroom home to a two bedroom condo and while they may not get the inflated dollars they want for their home, it also doesn't mean anyone is going to run out and build a bunch of retirement communities for them to go retire to when they can't supposedly sell those homes.
The need for housing will not disappear. The population will still increase. The boomers may have trouble cashing out but that means it is a deal for everyone who needs a home and tries to cash in.
The issue is that property values in the middle to upper end markets, especially, will decline as the boomers move out of their houses or die-off. On the flip side, there might be a nice bonus for real estate in the sun-belt, but all indications seem to show that the market for middle to upper end single family homes in most parts of the nation are going to enter an increasingly supply-driven phase for quite a while. The population that will replace the boomers is younger and does not have the same level of wealth. There's also the potential for increased migration to cities and towns as energy prices appear to continue to rise, so the US suburban real-estate legacy may take quite a hit.
So the point that "now is a bad time to buy" rings as loud ever. We are in agreement that property values will rise more slowly and even drop, so the $212K offset in my example, above, will simply not exist. Until the market reacts and the sale prices reach equilibrium (which may take years), it will continue to be a better idea to rent than buy.
The issue is that property values in the middle to upper end markets, especially, will decline as the boomers move out of their houses or die-off. On the flip side, there might be a nice bonus for real estate in the sun-belt, but all indications seem to show that the market for middle to upper end single family homes in most parts of the nation are going to enter an increasingly supply-driven phase for quite a while. The population that will replace the boomers is younger and does not have the same level of wealth. There's also the potential for increased migration to cities and towns as energy prices appear to continue to rise, so the US suburban real-estate legacy may take quite a hit.
So the point that "now is a bad time to buy" rings as loud ever. We are in agreement that property values will rise more slowly and even drop, so the $212K offset in my example, above, will simply not exist. Until the market reacts and the sale prices reach equilibrium (which may take years), it will continue to be a better idea to rent than buy.
I'm sorry, but I think you're really off base here. The market is not going to decline because the boomers "die off." If that was the case, the same would have happened when their parents were their age, some 20-30 years ago. But that didn't happen, because as they aged, their children aged along with them, getting better jobs and accumulating wealth. One generation becomes the next, so to speak. In addition, the assumption that younger people don't have the money is not necessarily a good one. We tend to become more affluent with each generation, despite the predictions. Generation X was supposed to be "the first generation not to have it as good as their parents." That turned out to be rubbish, as on the whole, we have far more.
All that said, the market is going through a very steep correction. But like all corrections, it will not last forever. The market will recover over time. Even in hard hit areas, we're getting close to the bottom. One example is where my father lives (Naples, FL...one of the largest bubble markets in the nation). In 2000, he bought a new construction home for about $220,000. Over the next 5 years, the home appreciated to nearly $700,000. Now it's come down to perhaps $350,000 and holding. In other words it's become nearly affordable again. It will appreciate more slowly than it did, but the market is not likely to tank, either.
I'm sorry, but I think you're really off base here. The market is not going to decline because the boomers "die off." If that was the case, the same would have happened when their parents were their age, some 20-30 years ago.
Perhaps, but you're missing the major point here: I hypothesize that, in most areas, the opportunity cost of renting and investing outside of real estate is -- and will likely continue to be -- more financially wise than is home ownership.
In support of this, they are called "the baby boom" for a reason. There are larger numbers of people in that age bracket than there are in the age bracket below, and as a result the housing vacancies will cause the market to be more supply-driven than it had been previously. There's no smoke and mirrors or doom and gloom. I offer a further hypothesis that suburban land values will be hit especially hard, due to rising energy costs and the popularity of city living among generation x and post-x professionals (feel free to check the figures), but these are not central to the argument.
I invite you to take a gamble on real estate. The appreciation that makes home ownership financially viable, in general, will not occur at the kinds of rates that are required to make home ownership a more sensible investment than other alternatives, should you buy at today's prices. That is all my message has ever been. You can track-back through this thread and verify that if you choose.
Perhaps, but you're missing the major point here: I hypothesize that, in most areas, the opportunity cost of renting and investing outside of real estate is -- and will likely continue to be -- more financially wise than is home ownership.
In support of this, they are called "the baby boom" for a reason. There are larger numbers of people in that age bracket than there are in the age bracket below, and as a result the housing vacancies will cause the market to be more supply-driven than it had been previously. There's no smoke and mirrors or doom and gloom. I offer a further hypothesis that suburban land values will be hit especially hard, due to rising energy costs and the popularity of city living among generation x and post-x professionals (feel free to check the figures), but these are not central to the argument.
I invite you to take a gamble on real estate. The appreciation that makes home ownership financially viable, in general, will not occur at the kinds of rates that are required to make home ownership a more sensible investment than other alternatives, should you buy at today's prices. That is all my message has ever been. You can track-back through this thread and verify that if you choose.
Nice to see someone has done their homework on this subject. I've bypassed home ownership for years, preferring apartments and investments. Now, though the stock market is currently in the tank, it will likely recover quicker than real estate. I agree, there will be more opportunities for new buyers in the low-end of the housing market, and I also agree that we may be looking at a decades long slump. "Generation X" and "Y" are going to have a very rough go of it as the Boomer peak lays waste to our country with massively increased taxes to cover their ill-prepared retirements and skyrocketing medical expenses.
I often wonder, what is the psychology behind this? There is no material difference between owning and renting.
From a practical standpoint, do you want to live in a neighborhood where everyone rents or everyone owns? I'm sure there are other, more practical considerations, but this one is pretty obvious.
i get your point, but it's a funny question where i live. the 'owned' houses are second homeowners that are here a few weeks of the year. the grass is long and the houses are poorly kept. the rental homes are lived in by year-round folks, who take reasonable care of their property.
Comments
You don't save your way to prosperity.
Did you mean to say "you don't SPEND your way to prosperity?" Just want to double check before I write a long reply.
....the present market has higher rates and much less potential for appreciation, especially as the boomers start to pass
Spline, that is the gigantic elephant in the room. As the sheer number of people decline over the coming years, the housing market will continue to implode. The idiotic "housing meltdown" we're currently experiencing will be dwarfed by what follows. The economies of the world will experience this over the next 30 to 40 years!
No kidding. We move 2 years ago from CT to NC and were able to put 40% down on a 15 year, and live in a better house and neighborhood.
Way back when the dinosaurs were roaming the Earth and my wife and I were married with no children, we made a decision to move away from the very expensive beach area and move inland. A lot of folks like to chide that decision (including some on here) but the reality is that unless you want to run to stand still, you need to insure housing costs are reasonable and affordable.
I bought because I wanted to have a place that was mine. I always hated renting and I had a good deal when I rented. I paid between 900-980 for a ten year period in Manhattan. I knew when I purchased my house in August of 2006 the market was topping out, but I also knew that historically the neighborhood I was purchasing in was very stable and I wanted to be there for a long time. I'm also surprised that no one has mentioned the tax advantages to owning.
As you note, there are several tax incentives to buying. No matter what the numbers have to make sense. It won't do anyone any good to think they own a home when the numbers really don't make sense. This is a very big part of the last bubble.
I made it a really clear point to people by noting that at the height or even run up of the bubble I wouldn't have purchased the very house I was residing in. I told them I would have rented because it made sense. You do have to have discipline to invest the portion of money above the rent that you would have left over by not buying. Most people are not disciplined enough in this area.
So, in this bull market study, the tax advantage is the only thing that makes ownership more desirable than renting. However, renters have better mobility (if that's an issue) and, more importantly, the present market has higher rates and much less potential for appreciation, especially as the boomers start to pass.
The other points are fun but I really have to give this one a whack. There is NO, repeat NO estimate I have seen whereby just because the boomers die, the population of the United States actually declines. If anyone is screwed it is the boomers themselves since they are used to the market accommodating their every wish and that may finally no longer be true. They may want to move from a four bedroom home to a two bedroom condo and while they may not get the inflated dollars they want for their home, it also doesn't mean anyone is going to run out and build a bunch of retirement communities for them to go retire to when they can't supposedly sell those homes.
The need for housing will not disappear. The population will still increase. The boomers may have trouble cashing out but that means it is a deal for everyone who needs a home and tries to cash in.
Okay.
I have over $100,000 of student loans. That's kind of like a mortgage in a way, isn't it? What do you think the best repayment plan is? I was thinking of putting as much as I can into my 401k, living like a Spartan for a few years, and paying off as much as I can at first. Is there a better way? (Although I have a feeling that just paying the minimum might be difficult on any budget).
This would be a mortgage for many people. I'll tell you what I would do.
There is a reason people tease about trailer trash. It is because trailer parks, or living in mobiles or recreational vehicles is much cheaper than even an apartment most times.
If I were you, I would get a nice older class C motorhome and live in it as cheaply as possible for a couple years. Keep your car (which is a great car) and you can even use your "home" for cheap vacations and travel. Most of the "advantages" of stick and brick homes have been offset by technology. You can get satellite television. You can use your cell phone.
There is huge money in law depending upon what field you are in and where you are employed. You've never disclosed this so it could radically affect the answer for you. Family law versus underling district attorney are huge earnings differences. So if you are going the big money route, you might not need to do above (you might just need to drink a lot instead.)
Spline, that is the gigantic elephant in the room. As the sheer number of people decline over the coming years, the housing market will continue to implode. The idiotic "housing meltdown" we're currently experiencing will be dwarfed by what follows. The economies of the world will experience this over the next 30 to 40 years!
I'm going to have to radically disagree with that. Just because white, western baby boomers are declining doesn't mean anyone else or anything else is doing so. The population of the world is still slated to go up. Wealth will still go up.
The reason the boomers are screwed is because they didn't save and spent themselves into a whole while promising themselves the moon and stars. They want the lawn man and the 1.6 children they had to pay for all this. The lawn man and their kids are going to tell them to screw themselves.
So if you are going the big money route, you might not need to do above (you might just need to drink a lot instead.)
Haha.
In the spirit of this thread I was actually wondering what the best way to pay back a loan is: slower or faster. I have six figures worth of subsidized, unsubsidized, and private loans. This thread got me thinking because of Flounder's idea that investing money will more than recoup the extra payments of a 30 year mortgage. I'm a novice with this long-term financial stuff.
For instance, if I was my sister, I'd probably pay off that house quickly. Psychologically, I don't like debt hanging around my head, no matter what the numbers say.
I am terribly critical of housing. Where I live, run down shacks cost $300k and nice places can be rented for $750/month. In San Diego, average houses cost twice as much per month to own than rent, not counting insurance, taxes, etc. There is no rational economic argument for owning in much of the country unless you count on appreciation three or four times the rate of inflation, which has never existed except for the past few years.
I have a great rental house, I am mobile, I can treat the house as my own in regards to landscaping, can paint, have no worries about the landlord, etc. Because of rental prices, I save enough each month by not owning that the money I didn't spend on a house will, by the time I retire, be enough of a nest egg that I could rent a mansion off of the interest alone.
Despite all of this, I'm constantly looking at realtor.com and shopping for houses not only where I live but in towns and cities where I used to live. I can't seem to get the idea out of my head that I really need to own a house, even if that idea is totally irrational.
I often wonder, what is the psychology behind this? There is no material difference between owning and renting.
I suppose I'm just brainwashed. I'll buy when I have 20% down and the year is 2011, I tell myself. Then at least the market will again be rational.
As others have said...it's where you live and what the market is like. I just bought a townhome in this area (new construction...closing in two weeks) for several reasons:
1. I need more space than my 1 bedroom apartment offers
2. My rent is over $900 a month currently, whereas my raw mortgage will be just over that (not counting taxes).
3. I was able to get a good price in this market (also, the market here is not tanking...it just slowed).
In my case it makes perfect sense. My house will likely appreciate while I'm living in it, especially given the price point. I'm paying around $220K for a three bedroom townhouse with garage and full walk-out basement (with some nice upgrades as well, such as a deck, Corian countertops, etc.)
As the home appreciates, my net worth will increase. I'll have equity if I need it. But in your situation, I agree...it's better to rent.
Haha.
In the spirit of this thread I was actually wondering what the best way to pay back a loan is: slower or faster. I have six figures worth of subsidized, unsubsidized, and private loans. This thread got me thinking because of Flounder's idea that investing money will more than recoup the extra payments of a 30 year mortgage. I'm a novice with this long-term financial stuff.
It's more than just the long term. You also need to look at what that loan debt is going to do to your credit. It's usually my advice that it's better to pay off revolving or unsecured debt as quickly as possible (loans other than auto or home). I think I would look at your rates and see if you can consolidate to a low rate. Then, once you have an actual job
I'm going to have to radically disagree with that. Just because white, western baby boomers are declining doesn't mean anyone else or anything else is doing so. The population of the world is still slated to go up. Wealth will still go up.
The reason the boomers are screwed is because they didn't save and spent themselves into a whole while promising themselves the moon and stars. They want the lawn man and the 1.6 children they had to pay for all this. The lawn man and their kids are going to tell them to screw themselves.
Agreed. And why is that no matter what kind of market we get into, people think it will last forever? When it's great, people live like they are on a drunken shore leave. When it's bad, they are shopping for guns to blow their brains out. Nothing is constant or forever in real estate. We're going through a pretty steep correction. In my opinion we're near the bottom (maybe another 6-12 months away). Give it 2 years, and the market will have stabilized. Give it 5 years, and it will be on its way back up, albeit at a reasonable pace. Even the hardest hit markets cannot go down forever.
For instance, if I was my sister, I'd probably pay off that house quickly. Psychologically, I don't like debt hanging around my head, no matter what the numbers say.
And that's the thing financial planners can't put a price on ... so it's never figured into their analysis. So they can make a big mortgage sound like a "good investment strategy" on paper... never mind the stress of being in debt.
As others have said...it's where you live and what the market is like. I just bought a townhome in this area (new construction...closing in two weeks) for several reasons:
1. I need more space than my 1 bedroom apartment offers
2. My rent is over $900 a month currently, whereas my raw mortgage will be just over that (not counting taxes).
3. I was able to get a good price in this market (also, the market here is not tanking...it just slowed).
In my case it makes perfect sense. My house will likely appreciate while I'm living in it, especially given the price point. I'm paying around $220K for a three bedroom townhouse with garage and full walk-out basement (with some nice upgrades as well, such as a deck, Corian countertops, etc.)
As the home appreciates, my net worth will increase. I'll have equity if I need it. But in your situation, I agree...it's better to rent.
If I could buy a 3 BR townhome with fancy countertops for $220k, I probably would. that said, it will probably be 5 years or more before much appreciation occurs.
in my neck of the woods, the only hope for a 3BR townhome at that price is an "affordable housing" program, which includes deed restrictions relating to income, resale price, etc.
I'm going to have to radically disagree with that. Just because white, western baby boomers are declining doesn't mean anyone else or anything else is doing so. The population of the world is still slated to go up. Wealth will still go up.
The reason the boomers are screwed is because they didn't save and spent themselves into a whole while promising themselves the moon and stars. They want the lawn man and the 1.6 children they had to pay for all this. The lawn man and their kids are going to tell them to screw themselves.
Sorry, you're wrong about it being limited to white western Baby Boomers. A cursory glance at demographic data worldwide will tell you that the working populations of all nations are falling. So much so that in Japan and South Korea, they are very worried about having enough caretakers for their aging population, which has resulted in both governments pushing the development of robot assistants and workers.
Sorry, you're wrong about it being limited to white western Baby Boomers. A cursory glance at demographic data worldwide will tell you that the working populations of all nations are falling. So much so that in Japan and South Korea, they are very worried about having enough caretakers for their aging population, which has resulted in both governments pushing the development of robot assistants and workers.
Sorry if it wasn't clear enough but I consider Japan and Korea to be countries that have adopted Western style beliefs.
There will still be plenty of people. There may not be plenty of Japanese and Korean people but if they want to die alone in their countries while hoards beat at the door, let them wallow in their racist ways.
Demography is destiny. There isn't a law or rule that can overcome that.
Sorry, you're wrong about it being limited to white western Baby Boomers. A cursory glance at demographic data worldwide will tell you that the working populations of all nations are falling. So much so that in Japan and South Korea, they are very worried about having enough caretakers for their aging population, which has resulted in both governments pushing the development of robot assistants and workers.
The same concerns exist with China due to the one-child policy and the aging population.
If I could buy a 3 BR townhome with fancy countertops for $220k, I probably would. that said, it will probably be 5 years or more before much appreciation occurs.
in my neck of the woods, the only hope for a 3BR townhome at that price is an "affordable housing" program, which includes deed restrictions relating to income, resale price, etc.
That it exactly....the area. I don't blame you for thinking like you do. It's all about what one can get for the money. Don't feel you have to buy. You're likely better off renting something given the market you've described.
There is NO, repeat NO estimate I have seen whereby just because the boomers die, the population of the United States actually declines. If anyone is screwed it is the boomers themselves since they are used to the market accommodating their every wish and that may finally no longer be true. They may want to move from a four bedroom home to a two bedroom condo and while they may not get the inflated dollars they want for their home, it also doesn't mean anyone is going to run out and build a bunch of retirement communities for them to go retire to when they can't supposedly sell those homes.
The need for housing will not disappear. The population will still increase. The boomers may have trouble cashing out but that means it is a deal for everyone who needs a home and tries to cash in.
The issue is that property values in the middle to upper end markets, especially, will decline as the boomers move out of their houses or die-off. On the flip side, there might be a nice bonus for real estate in the sun-belt, but all indications seem to show that the market for middle to upper end single family homes in most parts of the nation are going to enter an increasingly supply-driven phase for quite a while. The population that will replace the boomers is younger and does not have the same level of wealth. There's also the potential for increased migration to cities and towns as energy prices appear to continue to rise, so the US suburban real-estate legacy may take quite a hit.
So the point that "now is a bad time to buy" rings as loud ever. We are in agreement that property values will rise more slowly and even drop, so the $212K offset in my example, above, will simply not exist. Until the market reacts and the sale prices reach equilibrium (which may take years), it will continue to be a better idea to rent than buy.
The issue is that property values in the middle to upper end markets, especially, will decline as the boomers move out of their houses or die-off. On the flip side, there might be a nice bonus for real estate in the sun-belt, but all indications seem to show that the market for middle to upper end single family homes in most parts of the nation are going to enter an increasingly supply-driven phase for quite a while. The population that will replace the boomers is younger and does not have the same level of wealth. There's also the potential for increased migration to cities and towns as energy prices appear to continue to rise, so the US suburban real-estate legacy may take quite a hit.
So the point that "now is a bad time to buy" rings as loud ever. We are in agreement that property values will rise more slowly and even drop, so the $212K offset in my example, above, will simply not exist. Until the market reacts and the sale prices reach equilibrium (which may take years), it will continue to be a better idea to rent than buy.
I'm sorry, but I think you're really off base here. The market is not going to decline because the boomers "die off." If that was the case, the same would have happened when their parents were their age, some 20-30 years ago. But that didn't happen, because as they aged, their children aged along with them, getting better jobs and accumulating wealth. One generation becomes the next, so to speak. In addition, the assumption that younger people don't have the money is not necessarily a good one. We tend to become more affluent with each generation, despite the predictions. Generation X was supposed to be "the first generation not to have it as good as their parents." That turned out to be rubbish, as on the whole, we have far more.
All that said, the market is going through a very steep correction. But like all corrections, it will not last forever. The market will recover over time. Even in hard hit areas, we're getting close to the bottom. One example is where my father lives (Naples, FL...one of the largest bubble markets in the nation). In 2000, he bought a new construction home for about $220,000. Over the next 5 years, the home appreciated to nearly $700,000. Now it's come down to perhaps $350,000 and holding. In other words it's become nearly affordable again. It will appreciate more slowly than it did, but the market is not likely to tank, either.
I'm sorry, but I think you're really off base here. The market is not going to decline because the boomers "die off." If that was the case, the same would have happened when their parents were their age, some 20-30 years ago.
Perhaps, but you're missing the major point here: I hypothesize that, in most areas, the opportunity cost of renting and investing outside of real estate is -- and will likely continue to be -- more financially wise than is home ownership.
In support of this, they are called "the baby boom" for a reason. There are larger numbers of people in that age bracket than there are in the age bracket below, and as a result the housing vacancies will cause the market to be more supply-driven than it had been previously. There's no smoke and mirrors or doom and gloom. I offer a further hypothesis that suburban land values will be hit especially hard, due to rising energy costs and the popularity of city living among generation x and post-x professionals (feel free to check the figures), but these are not central to the argument.
I invite you to take a gamble on real estate. The appreciation that makes home ownership financially viable, in general, will not occur at the kinds of rates that are required to make home ownership a more sensible investment than other alternatives, should you buy at today's prices. That is all my message has ever been. You can track-back through this thread and verify that if you choose.
Perhaps, but you're missing the major point here: I hypothesize that, in most areas, the opportunity cost of renting and investing outside of real estate is -- and will likely continue to be -- more financially wise than is home ownership.
In support of this, they are called "the baby boom" for a reason. There are larger numbers of people in that age bracket than there are in the age bracket below, and as a result the housing vacancies will cause the market to be more supply-driven than it had been previously. There's no smoke and mirrors or doom and gloom. I offer a further hypothesis that suburban land values will be hit especially hard, due to rising energy costs and the popularity of city living among generation x and post-x professionals (feel free to check the figures), but these are not central to the argument.
I invite you to take a gamble on real estate. The appreciation that makes home ownership financially viable, in general, will not occur at the kinds of rates that are required to make home ownership a more sensible investment than other alternatives, should you buy at today's prices. That is all my message has ever been. You can track-back through this thread and verify that if you choose.
Nice to see someone has done their homework on this subject. I've bypassed home ownership for years, preferring apartments and investments. Now, though the stock market is currently in the tank, it will likely recover quicker than real estate. I agree, there will be more opportunities for new buyers in the low-end of the housing market, and I also agree that we may be looking at a decades long slump. "Generation X" and "Y" are going to have a very rough go of it as the Boomer peak lays waste to our country with massively increased taxes to cover their ill-prepared retirements and skyrocketing medical expenses.
I often wonder, what is the psychology behind this? There is no material difference between owning and renting.
From a practical standpoint, do you want to live in a neighborhood where everyone rents or everyone owns? I'm sure there are other, more practical considerations, but this one is pretty obvious.
but in general, i get what you're saying.