Are homedebtors going to get more and more pissed at the "bitter renters" and "bubblesitters" as we move into the 2007 meltdown?
And will renters be seen as financial geniuses, whereas homedebtors will be viewed as suckers and fools who got played by the REIC in the ultimate con game?
December 05, 2006
HousingPanic Stupid Question of the Day
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46 comments:
"My hair's on fire!!!"
Homedebtors will lose trillions while renters walk around town with sh&t eating grins on their faces
Yes. The anger will increase as things get worse.
No. The REIC is backed by the majority of the media. Renters will always be portrayed as suckers and second class citizens by the print media and most of TV's talking heads.
I hope not too bad...since I am a renter who REFUSED to buy into such buyers market (I asked in a first-time home buyer seminar "You have to wait don't you?"...the answear was "If you NEED a house you just HAVE to buy it"). I am happy i am going to save 120k or so, but i do feel really bad for a lot of people (except flippers).
Following up on previous post...Funny thing was that after i found about this blog and saw that yeah we are in a bubble I emailed my wife..."HONEY I WAS RIGHT: I LOVE BEING SMART!!!" lol
There will be a lot of misguided anger. People simply won't take a good look in the mirror, ever. If anything we should be mad at them for insane house prices and the coming depression. This country is rife with greedy idiots.
I think renters, like myself, will always be seen as second class. However, when all is said and done, us renters will be in a much better financial situation not being a debt slave to our homes and/or a HELOC (home equity line of credit).
My wife and I came very close to buying in 2005, and stopped at the last minute because the payments were simply going to be too high. I was advised to use an ARM, but that just didn't appeal to me; my gut told me an ARM was just a bad idea and my wife felt the same way about it. We rented a new place, since we were force out of our apartment during the boom (the complex went condo). We were depressed, and felt like we were forever priced out of the market.
Now, I can't help but laugh at all those suckers who bought all those units with a cost of ownership nearly 3 times what the rent was. They're going to be in for quite a shock come December 2007 when this country is in a full blown recession, and they're thousands of dollars upside down on their mortgage.
-Dragasoni-
Time to get out your abacus...you "buy" a condo for $350K - you "think" it's worth $750K - you owe 1.5M on the mortgage (over 30 years) if you ever get to sell this "investment" you'll make how much? The banks are not in business to make working stiffs rich - wake up! What is this "the attack of the pinheads"?
FB's will be victims.
"buzz kill said...
There will be a lot of misguided anger. People simply won't take a good look in the mirror, ever."
Most of the long haul construction workers in my area have little or no work, first time in quite a few years for an 'extended' Christmas vacation.
Imagine loosing your job a month before Christmas, and the prospects of going to back to work in ANYTHING in construction, after the 1st, looks pretty bleak.(I can remember turning down Christmas day double time, but had to work New Years day,double time again, to make up for it, missed the damn Rose Parade)
A desperate and hungry man will do anything to feed his family. Make that man desperate, hungry and very angry, and he won't very much care how he does it. Americans have become far to spoiled, stupid and infantile for anyone half a brain to dare piss them off.
I have started to very much "low key" my attitude, conversation, outwards signs of prosperity, etc., not a good time to rub it in other's faces that you are doing good with no worries!
My advice to a satisfied renter is to do the same!
Remember: "It's God's will, or SOMEBODY ELSE'S fault"
You don't want that somebody else to be YOU!
Renters are going to learn a lesson about inflation not taught since the 1970s. Their rents and cost of living are going to rise dramatically and higher interest rates will lock many out of the RE market. Five years from now when the average house costs $600K and rates are 15%, they will look back on the 6% mortgages available in '06 and kick themselves. If they are lucky, they might buy a sh_tbox condo for $300K when their complex gets converted.
anonymous said
Renters are going to learn a lesson about inflation not taught since the 1970s. Their rents and cost of living are going to rise dramatically and higher interest rates...
I completely disagree. I sold my house at the peak and pocketed a good bit of cash. Now I have saved an additional chunk of cash in one year because rents are about 1/3 the cost of owning in my area. At the fast rate prices are dropping and the slow rate of inflation, I'm going to be much better off by not owning a home for just two years. Trust me, I loved my house, but I made the right decision.
Dear All:
The slump in housing is over- Bob Toll and David L. said so. So, go out and buy a home.
MSM is referring to bubble sitters as "people who got burned by bad real estate investments in the past or got priced out of the current market, and are hoping for its destruction out of bitterness". So we're the bitter ones for now. When we all make a killing they'll be plenty bitter.
The Toll brothers are offering toll house cookies with the purchase of a house!
So get going!
MSM is referring to bubble sitters as "people who got burned by bad real estate investments in the past or got priced out of the current market, and are hoping for its destruction out of bitterness". So we're the bitter ones for now. When we all make a killing they'll be plenty bitter......
Where is this to be found?
short term- depending where you live now (not everywhere has rents 1/2 the price of mortgage) and your personal situation, its possible that renting may be a solid alternative
longer term- its most probable that everywhere except some absolutely overvalued house in an area with a poor supply demand outlook that you will DEFINITELY be better off owning in terms of net worth , cash flow and , stability
rents go up say 4-5% per year-
no tax deduction on mortgage interest or real estate tax-
sorry the LANDLORD gets these deductions- rent NEVER ends, you cant pay it off over time
the landlord can kick you out at the end of a lease, your stuck, pay movers etc, re rent
so 12 years from now you may be paying about double the rent you do now, while the guy next door who bought locked in his payment at todays level, and getteing the deduction in taxes-
so your kidding yourself big time if you think the renters in better shape
15 or 30 years down the road- a smart homebuyer prbably has no mortgage payment - youre paying RENT at maybe 200 or 3005 higher then now, whoose better off???
yes the homeowner pays taxes, and they go up- but the LANDLORD you can bet will pass his increase on to you in higher RENT- so its a wash at best (remember at least the homeowner gets a tax deduction on real estate tax, and may get a homeOWNERS tax freeze, the landlord will simply keep raising the rent to pay for his tax increase..
Now this assumption that the owner is better off then the renter over time is assuming NO appreciation whatsoever in the home price-- now outside of some crazy investment subdivision in nevada etc, its statistically reasonable to assume a 3-4% increase average home price per year, so in 12 years the guy who actually bought the 300,000 dollar hous has another 150,000 in net worth over the renter- and can use this as emergency reserves if needed , at a lower interest rate (and tax dedutible interest) instead of the credit card option the renter has twice the interest rate and no interest deduction
and the owner who is responsible never has to worry about the landlord selling the place from out from under him at his whim
so sorry, you are all deluding yourself if you think statistically over the long term in most places in this country (WHOS SAYING TO BUY the junk overpriced 800,000 condo overlooking the parking lot in phoenix here, there are better options!) the owner will be WAY better off, dont kid yourselves
PS befor e you all attack viciously cause someone dares to disagree, please note that I agreed, that if you live in some crazy speculative phony area like scottsdale where the rent is half of owning and home prices are out of whack with income and you MUST choose to live in a town like that- then rent ing may mke sense short term-
but longer term MOVE OUT of that overpriced area and buy something, youll be better off long term
rent never ends- and who wants to be kissing up to some landlord in some rental complex in their retiremenyears , sorry its not something to aspire too...
Also, the homeowner never has to ask the landlords permission to change the color on the walls, put in hardwood flors or update the kitchen etc etc, theres some psychic income there for sure...
and married guys can attest to the fact that most wives want to decorate the way they want too, not the way some (porbably) male landlord did it for renters, if she had the choice...
see comment above, kissing up in this case means having to ask permission to redecorate, change a faucet etc., put up painings, asking for the floors to be resanded etc dont kid yourself (and ive been a landlord for years)
Well, do not forget renting from a FB Flipper who in the process of getting forclosed on, is in troble with code enforcement, or is just CRAZY? Been there, done that.
MAY be very risky renting, imo.
Yoda
OR NOT...........
Renting is not for me.
iw
Last Anon,
You arguement is critically flawed, you assume that all things are equal without taking into account the unreallistic and unstainable appreciation over the last 5 years or so. Everyone here acknowledges that owning a home is a good idea under the right circumstances, however now is not the right time to buy. Over the long run owing a home is a good idea, however that does not mean that you should go out and catch the first falling knife you see. Timing is everything, it is my guess that most people on this blog are form the mold of by low and sell high, not bye high and sell low like most of the people chasing past performance. Fortunes are not made by following the heard, but by leading the heard.
From your weak, arguements I would guess, that you either just bought a home that is losing money, or better yet you have a personal investment in insuring that there are misinformed suckers out there to burn, in order to fuel your habbit of consumption.
Lastly I say that most of the arguements you are using are what has been the problem over the last few years, using the threat of being priced out only works when there is widespread hysteria and insecurity. Scare tatics must be backed up by real danger, or they lose there effectiveness. I beleive we are approcahing the point where people are no long afraid.
LOL,
my background- institutional trader (Officer) for many years (primary dealers) traded otc options FX(volatility) institutional fixed income and foreign exchange-and you claim to know markets better
no im not a recent homeowner, have owned for most my life, landlord too (positive cash flow) 20 plus years-never bought inot az ca etc
my argument showed owning better long term ie 10 years or so even if NO home increase
then i assumed 3-4% appreciation rate (naionally - get your head out of just az and ca already would you guys)- thats reasonable and i can assure you MUCH more statatistically probable then housing prices NATIONALLY -not YOUR neighbors overpriced house (stop being so self important please) then housing prices being lower on average in 10 years
now which part of the post, if youd actually read it objectivelly is so out of whack, the fact that rent goes up 4-5 % a year forever, and rent never ends while the owner has a fixed payment??? or the tax breaks and stability???
you are so biased and focused on 5% of the national market that you choose to attack and attack facts with ranting...
maybe its better to rent short term in your neighborhood, i said that twice inoriginal post- but to keep doing that forever is not going to put you in better shape then a renter long term in the vast majority of areas of the country , thats jsut a fct , wake up
OH and bye the way "FORTUNES are made by leading the herd, not folowing the herd" - you said it not me- well YOU are the one following the herd- there is extreme bearishness in housing right now , and you are the follower of that herd not me-- meanwhile supply/demand nationwide is generally improving, so wheres the crash from here, this might be about it ( OUTSIDE of florida investor stuff blah blah blah- the country is bigger then that)
Large fund mangers have been BUYING housing stocks recently and they are up almost 15% last two months- lates mortgage apps over the last mont show new purchase index climbing yes climbing and latest sales #'s showed 3.5 % decling in median price WITH 140+ areas gaining in value vs 40 or so declining...
so whos gonna be better off in ten years, not renters paying 200% fo current rent vs someone who bought a fairly priced house- there are plenty of those get outside the overpriced crazy aouthern california neighborhood if you have too..
LOL,
my background- institutional trader (Officer) for many years (primary dealers) traded otc options FX(volatility) institutional fixed income and foreign exchange-and you claim to know markets better
no im not a recent homeowner, have owned for most my life, landlord too (positive cash flow) 20 plus years-never bought inot az ca etc
my argument showed owning better long term ie 10 years or so even if NO home increase
then i assumed 3-4% appreciation rate (naionally - get your head out of just az and ca already would you guys)- thats reasonable and i can assure you MUCH more statatistically probable then housing prices NATIONALLY -not YOUR neighbors overpriced house (stop being so self important please) then housing prices being lower on average in 10 years
now which part of the post, if youd actually read it objectivelly is so out of whack, the fact that rent goes up 4-5 % a year forever, and rent never ends while the owner has a fixed payment??? or the tax breaks and stability???
you are so biased and focused on 5% of the national market that you choose to attack and attack facts with ranting...
maybe its better to rent short term in your neighborhood, i said that twice inoriginal post- but to keep doing that forever is not going to put you in better shape then a renter long term in the vast majority of areas of the country , thats jsut a fct , wake up
OH and bye the way "FORTUNES are made by leading the herd, not folowing the herd" - you said it not me- well YOU are the one following the herd- there is extreme bearishness in housing right now , and you are the follower of that herd not me-- meanwhile supply/demand nationwide is generally improving, so wheres the crash from here, this might be about it ( OUTSIDE of florida investor stuff blah blah blah- the country is bigger then that)
Large fund mangers have been BUYING housing stocks recently and they are up almost 15% last two months- lates mortgage apps over the last mont show new purchase index climbing yes climbing and latest sales #'s showed 3.5 % decling in median price WITH 140+ areas gaining in value vs 40 or so declining...
so whos gonna be better off in ten years, not renters paying 200% fo current rent vs someone who bought a fairly priced house- there are plenty of those get outside the overpriced crazy aouthern california neighborhood if you have too..
and who said I suggested to buy the first falling knife you see!!!!
stop putting words in my mouth please, i have never bought a falling knife and would never suggest that--- actually said to get out of az, ca, or fl if you have to (HOWEVER there are even deals there now if you have the experience to value one and negotiate it, but wouldnt recomend this for most)...
your advice is simply rent for the long term, and every house is a falling knife
mine is own long term, you dont have to buy a falling knife..
which advice is more reasoned and objective???
If the rantings of certain folks in my neck of the woods are at all indicative, then I would say that the answer to this question is an unqualified yes.
http://tinyurl.com/ynz8jj
The tinyurl'ed website is heavily funded by local real estate agents and condo developers, and regularly censors real estate bears (and leaves untouched outright abusive posts from real estate bulls). On the other hand, Kannekt has also become a laughingstock over at the New Jersey Real Estate blog.
ok ,
but payments are NOT 3-4 times rents in most of the country
I think the problem here is that many of you live in these "bubble " areas ie california or phoenix for example where rents are less thaen half of payments...
asn maybe thats why you all think real estate is gonna crash all over the place--- believe me there are plenty of other areas where rents approximate payments or even higher then payments!!!!
And you dont have to buy in california or phoenix, the country is much bigger then that...
there are places where you save NO money on a monthly cash basis by renting (and are good solid locations) so you can buy there and be fine , no need to keep renting if you dont want...
I'm a renter.
Far from a financial genius.
But I can smell bullshit a mile a way.
What does it say to you that you can find out here in Orange County, CA 3 bedroom, 2 bath stucco shitbox homes without a basement for over $600,000.
Yeah, you know what I'm sayin'.
Now don't forget your f*ing shovel.
> rents go up say 4-5% per year
Funny, and purely anecdotally, but my rent now in Chicago is lower in nominal dollars than it has ever been for almost a decade, and my living situation has continually improved (a freaking palace at the moment).
1997-1999 $537 (Hyde Park)
1999-2001 $525 (Bucktown)
2001-2003 $825 (Printer's Row)
2003-2006 $525 (Wicker Park)
2006+ $490 (Old Irving)
(I know.. each can't be directly compared, but still. A step up every single time).
It's all the same to me-- either I pay rents to a landlord for a place to live, or I pay rents to a bank to borrow a huge pile of money to buy a place to live. Compare, contrast, and hope for some convergence.
Right now smells like a dead cat bounce...
MArkus,
again, PLEASE listen , you are talking about orange county, JEEEZ thats the place thats probably least likely to have rents even come close to mortgage payments, im not talking about there, other places rents are even higher then mortgage payments on many properties for example some places in the midwest
why are so many people in california etc so self important and think thats the whole country IT NOT for the 10th time ...
yes rents and incomes are out of whack to housing in California, whos saying you have to buy a home there for crying out loud
IS renting forever in CA gonna get you anywhere in terms of net worth or stability , no its not
maybe somone here will see the light one day and be better off for it...
Cihicago,
youd have to go back to each specific property youve lived in and see if the rents are actually lower now then 5 yrs ago, I doubt it, unless youve just found the most charitable landlord on the planet...
Whether renting looks better than owning over the next 10 years depends on one's individual circumstances, and assumptions one makes regarding the future direction of housing prices and job market in a given area.
However, the assumption that landlords always enjoy increasing rents and the ability to pass on costs and taxes is false. (Rents in my area have stayed flat for at least 3 years and are at present, falling.)The argument that in the long run, owning trumps renting is reminiscent of the argument that in the long run, stocks always go up. The individual stock, the individual house, the individual's employment fortunes, the economy, the price of a particular property etc., all impact whether or not owning or renting proves the better choice. No one can know which will end up the beter choice for certain.
yes and the same is true for housing prices!!!
all those here who assume all housing will simply go down in price are mistaken
anon,
yes each case is unique, but for the sake of discussion, you have to use averages
its probalby fair to say OVERALL that rents increase average 3% a year on average , this wont be all areas or particul;ar years
yes and some housed individually are always under/overvalued... but on AVERAGE id say my 3-5% assumtption as an AVERAGE over the 10 years is pretty fair
for most of the country , id say the odds of an owner doing much better then a renter over time is simply statistically probable in the vast nmajority of cases round the country (NOT just ca. or az for the 11th time)- you can lock in a fixed home payment, you cant with rent, and if rents stay so low nationally, many landlords will get out, leading to less apt supply and upward pressure on rent
and the tax advantages are real
so you made a wise comment , but i would say there are always exceptions, but most owners statisticaly have and will continue to do better then renters in net worth stability and cash flow ove the long term, this has been the case way befroe the housing boom recent period as well....
> 2003-2006 $525 (Wicker Park)
The only one I can speak to definitively is this one. Rents have been unchanged since the building was opened in 2001. The lease cycle is not up for renewal until next August.
To a degree though, this misses the point-- I'm moving and feeling like I'm upgrading each time, but able to do so for the same or less money?!?
It's a good life. Maybe I have a knack for finding value holes. Or maybe Chicago has an amazing cost of living for a city like that. But if I can do, I can't be the only one...
I would never buy anything based on "averages". Should I buy Google? Let's see what the averages indicate....
One trend I never see discussed is whether the length of time people hold a primary residence is increasing or decreasing. Transaction costs will start to become a factor if real estate prices flatten or even return to long term "average" trends.
The trend in the U.S. I believe will be to be moe mobile and not tied to a 30 year mortgage. Maybe 15 year mortgage. The boomers are getting older and want to experience traveling and living in other places. To do this they don't need to be tied to a mortgage. The next generation of home ownership will be the generation which will be looking for smaller and more unique living arrangements. I can't imagine the next generation wanting to own a big Mcmansion. Tooooo much expense and work!!!!!
ANON,
Let me see according the CNNmoney.com the midwest is down 2.6% and the carnage has only begun.
so its down 2.6% thats the end of the world... and new purchase apps UP over the last month, supply down over the last month
thats reason to panic??
and what about the latest home sale numbers nationally ..median down 3.5% - and 140+ GAINING areas vs. 40 or so decreasing ones
why isnt that the headline???
gotta face the facts, theres NO meltdown in the midwest and id bet that the national median price a YEAR from now will be HIGHER then it is today (not everywehre is overpriced investor subcdivisions)- and most economists agree with me, most bloggers agree with you,,
well see whos right
just remember at the peak of the internet bubble everyone was sooooo bullish, then the market turned (noone left to buy)
Now everyone is sooooo bearish (especially journalists, not so much economists or ex fed reserve chief etc, they are just idiots and the reporters are the samrtest).. so when everyone is sooooo bearish and noone left to sell at a panic, what happens here market turns
this happens virtually everytime. the marekt is closer toi bottoming then topping nationally (not talking about the ca house that is 300k overpriced).. and youll see this for yourself
youll be long gone from this board when you see the median price avg a year from now HIGHER then today, wish i knew you so we could bet a few hundred onm it...
"If anything we should be mad at them for insane house prices"
Absolutely. These same home owners who looked down their noses at anyone who rented are now going to have the nerve to actually blame us??!!
I have stopped talking about housing with any of my friends or acquaintances because of the immediate defensiveness that ensues. Reactions run the gamut from mild irritation to outright anger when I even mention the empirical data available, let alone the anecdotal evidence.
Clearly, there is a "party line" in the political sense of the term and if you go against it, you will be met with defensiveness. It's not unlike the reaction that couples w/out children get from those who do.
People with children, houses, or both have made major MAJOR life-altering decisions and tend to experience some cognitive dissonance regarding whether they have done the right thing. Some HAVE to believe at all costs that they have done the right thing and get really "funny" when evidence is presented to the contrary.
A house is a roof over your head that tends to keep pace with inflation and that's all there is to it.
Hard call. The bubble does affect everything. I'd say if a house wasn't bought at a bubble price then you only have to contend with inflation, then you'll probably come out ahead with a fixed interest rate. If you bought in a bubble you have to absorb the bubble prices before inflation really has a positive impact to your debt.
I guess if you bought a house in Phoenix in 2001 for $212,000 and it was selling for $425,000 in 2005 and you owe $180,000 at a fixed interest rate of 6% five years from now you'll still be ahead if inflation soars to 6% and interest rates hit 10%? But if you bought for $425,000 in 2005...you'd probably had been better off renting.
Then again, why don't some of you posters post rent prices for comparisons where you live. I've been trying to assess that issue.
I'm not talking listing some 1 bdrm class C apartment that someone working at McDonalds would rent, I'm talking the typical Class A apartment, 1, 2, 3 bedrooms, 800-1500 sq ft. in a good, central location, not out on the fringes where everything from new homes to commerical property is less, but in a typical central location.
Here in Central to SW Austin I see Class A rentals going for $1 to $2 a sq ft and Class B for .75-90 a sq ft. Basically a 2 bdrm 1,000 sq ft is going to cost between $900-1200 in a good area here with top-end or hot locations going for $1500-2100. How about where you are?
My rent is $1285 for 3 bedroom 1 and a half bath in Ontario, CA. Any comparable property to own runs for minimum $400K. My landlord is coverting to condo but I will most likely leave for another rental. I can't tolerate the though of paying $3200 PITI for the same property. I'd rather save $1900 per month.
It sounds like many are waiting for the other guy to become bitter.
There will be enough bitterness to go around.
Some people will be responsible for their own grief, others will not.
I'm sure that each one of us has done what we could to optimize our situation and we think our future forecasts are almost perfect.
Let's concentrate on what to do when it's time to buy. Let's talk about how to keep our money from shrinking.
Let's consentrate on what to do whe it's time to buy. Let's talk about how to keep our money from shrinking.
“Then again, why don't some of you posters post rent prices for comparisons where you live. I've been trying to assess that issue.”
----------------------------
My rental house, located in a working-class suburb north of Seattle, rents for $1080/month. I have not raised the rent in over five years. (Still have the original tenants.)
The house has 980 sq. ft., 3 BR, 1 BA, single-car garage, and was built in 1960. Zillows for $288K; the crappy house next door sold for $310K earlier this year.
The house payment = the $1080 + $40 out of my own pocket each month. Got a 5.5% fixed rate; the loan will be paid off in ~10 years. Then the house will be a source of income for me.
Not a bad deal - the tenants are making my house payment. Not too bad a deal for the tenants, either - they have a decent place to live, any problems with their residence are fixed right away at no cost to them, and their monthly rent is slightly lower than comparable rents in the area.
-Mammoth
mammoth ,
so who will be better of the owner or the renter- hmmmm many here say the owners or "homedebtors" like you will lose trillions while renters walk around town with grins
ok lets use your example, good deal for both of you... in ten years you own the house and if tis woth 350,000 k then you have this in cah if you want to sell, or you can use the market rent received (probably 20000 as an ongoing ammuity or house payment on your own house whatever
in the meantime, you can deduct the real estate taxes and mortgage interest, and more specifically offset the rental income on schedule E in this case
also get depreciation deduction, givning you more cash at end of year too
if you want to pay for kids college you can borrow off the house without selling (if you want and makes sense for you) at a lower interest rate (as secured) then the renter can get for an unsecured loan or credit card rate, and the interest is tax deductible ( or interest expense on schedule e)
or you can simply move into the house and have no payment other then taxes and mainteneance forever-
now the renter has to keep paying rent, move when the lease is up at the whim of the landlor, doesnt get the tax breaks, cant change the walls floors decorate etc w/o landlord permission, and builds no equity- yes and he pays for the landlords taxes and maintenance anyway in increased rent, the cost is passed on
this is a perfect example of how renting is NOT better then owning in most cases long term----and in most areas rents are NOT less then half a mortage payment-- if you live in one of these areas maybe you should rent short term and buy somewhere else (the whole world is not ca or az etc)
so all these snub HP'ers who think they are so smart for renting should look at this example and see reality for a home bought at the right price...
anon at Tuesday, December 05, 2006 11:57:23 PM
We must have the same acquaintances
;-)
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