I always love hearing fools say "we bought our house", or "we own our own home", when indeed, all they did was take out a massive mortgage they can't afford, and are nowhere near actually "owning" anything.
I love it when people tell me they "bought" something nice for themselves at the mall, using their credit card of course. All they did is take out a loan for that nice little thing, and it's they who are owned.
So HP'ers, bubblesitters, bitter renters - tell the other peeps about how sweet the debt-free lifestyle can actually be. Maybe you'll inspire a few folks with your stories, and more will join us in this crusade against crushing debt and consumerism run amok.
Or not.
December 06, 2006
HP'ers with no debt - tell the other half how sweet life can be
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105 comments:
People in this country just do not believe that there will ever be a credit contraction in this country. Yeah, right. Discover Card called again, begging me to open account. I told her I didn't have any use for it. LOL
If you need more evidence of how idiotic people are with credit cards, check out the lunatics who missed Thanksgiving so they could buy a discounted plasma TV on Black Friday -- figuring that most of those people probably put it on a credit card, they end up paying more in the long run.
What is the highest purpose for money? Is it to buy junk at Walmart? Is it to get that 1080p flat panel HD-TV for $2,000 and every channel under the sun for $150 a month?
Is money best spent on luxury items?
No friends, the highest purpose of money is to buy security and your own freedom. We should all have a zero balance on our cards and 3 months salary in the bank because that is the price we pay for our freedom to do as we please.
They say that we have no debtors prisons in the United States, but to owe money is to loose your freedom to pursue your carrier of choice over your carrier of convenience.
Our freedom is the most valuable asset we own, don't be so quick to trade yours in for NFL in HD.
Can anybody tell me what a bitter rener is?
Correction what is a bitter renter?
Are there really any people out there under 30 that are debt free? Is it possible with student loans, car payments, the new wife, the new kid, the new toys, the new house?
Part of the problem is the "me generation" wants it NOW. I am amazed when I see so many or hear about so many people who are under 35 and living in homes and having cars and toys usually associated with the 50 and over crowd after 30 years of hard work, savings, trading up, and at the peek of their earnings.
I can't imagine the stress. It was hard enough to be young and poor without debt. I remember not eating since bills (and I mean rent, electric, gas) came first (which amazed me when I saw friends choose beer or cigarettes first and then complained about not paying the rent). Our first apartment we had a fold up table, two folding chairs, our mattress was newspaper stuffed into a sheet and we had two glasses, two dishes, a couple of knives and forks. As an airman in the AF in Miami before the military adjusted house stipends to reflect high cost areas, I earned $300 a month base pay, house stipend, food stipend before taxes and rent on a small one bedroom and I mean less than 600 sq ft by the base in Homestead was $175 a month.
We had no car payment as we had an old used car, no credit cards-so if you ran out of cash until pay day you had no money period, no credit card to put gas in your car. We lived like this for the first five years of our marriage and as we acquired things we paid cash or we didn't buy them.
We'll never escape all living expenses, taxes, and most will not be able to pay cash for a house or a new car, especially if you have to have the Best to start. Still, not having bills, having enough savings to quit a job and not worry about getting another for two or three years is satisfying.
It is a shame we don't have financial planning in high school as a requirement to graduate. So many kids I've worked with I show them options they never thing about like buying a small fixer with a 15 years note with 20% down instead of the house twice as expensive with a 30 year note. Live in the fixer for five years, clean it up, pay extra on the note and then sell and use the proceeds to do the same on the next house or keep the first as a rental and move up to another when you can afford it.
Interest is income for the rich and debt may raise your standard of living artificially today but will lower it everyday after that as all that interest instead of going toward your standard of living and paying off your house is going to the rich who are non-productive (not all rich are) living off other peoples earnings.
Excellent comment Thinker
I am of the belief that markets, advertising, retail are there because the global elites wish to shift wealth from the ignorant masses to the wealthy and deserving few, ie capitalism at is best. the sheeple can barely handle there own little "world" let alone understand why they are racking up such horrendous debt and the consequences to them and their family
bitter renter = someone priced out of the housing market and missing out on all the glorious risk-free appreciation that home ownership brings. That is the definition according to the housing heads.
bitter renter = someone who is smart with their money to the bubble heads.
We've turned it into an inside joke on the housing heads.
Hey all,
Please dont forget the biggest debt expense of all, RENT thats debt to your landlord keith, and not doesnt it EVER go away and must be paid every month, it generally goes up on average about 4% a year long term on average nationally...
NOw the guy who rents for 30 years will have that debt into retirement most probably, and if rent is 1500 month now, his DEBTLOAD in retirement of monthly rent may be easily 10,000 a month by then
now if the same person bought a home with a 30 year payment for the same 1500 a month, in 20 years the principal and interest payment is still 1500 a month-- AND THE REAL COST cloesr to 1000 mth due to tax deducitons!!!
After 30 years the owner has no more mortgage, while the sucker who rented still has teh debt of 10000 a month!!!!
And maybe even Keith would agree that its statistically probable that over 30 years the value of a fairly priced 300,000 house in Iowa, wyoming or wherever will easily be over a million due to compounding... so theres another 700,000 to the homeowner
You all need to wake up and see which path leads to better cashflow over time , LOL this site is getting ridiculous!!!!!!
Our story is rare...
We recently downsized into a house we could pay cash for. We bought our previous home two years ago for $815 and sold it in June 2006 for $1.535. We were able to buy our current house for $817. It was the best move we ever made. People look down on us for downsizing and not living in a Mega mansion and keeping up with the Jones. But my husband and I look forward to retiring at 55 (which is in 15 years). I am always amazed at how far beyond their means the majority of our neighbors live. Happiness is living debt free (no credit cards either). Those days my husband has had a tough day at work, it is nice to say, go ahead and quit. We can do it. Freedom is priceless.
There are two types of people...
Those with a BIG HAT and no cattle, and those with a small hat and lots of cattle.
I was a home owner and sold in 6/06. I had too much debt as a result of buying out my ex 50%. I am now debt free but I can't tell you how stressful it was holding too much debt on a house gowing down in value. I had a significant investment in the house with the hope of selling to retire. I can see how someone could commit a crime or hurt oneself over the grief of such a horrifying situation.
I am now debt free with a diversified portfolio and happy!!!!
At this point in my life (53) I plan on renting and being able to travel more and enjoy my life.
Watch out for debt! It can kill you!
anon:
I would suggest that mortgage interest is a far bigger expense than rent
Last anon - timing is everything. The time to own a home came and went. The time to rent is here. The time to own a home again will come again.
Or you can just buy a home and wait 30 years.
foxwoodlief,
That sounds about like me. I started out with my bed, a folding table and chairs, and a set of dishes when I had my first apartment. I ate potatoes and butter or spaghetti many times. Hard times are coming and this generation won't know how to cope in the least.
Of course the homeOWNER needs to pay taxes and those dont go away (and go up)
But since many here have no understanding of the big picture of how business and the world of housiing works Ill spell it out--YOU CAN BET THE LANDLORDS TAXES GO UP AND HE PASSES ON THIS COST TO YOU THE RENTER...
as a matter of fact the landlord at least gets the tax deduction for real estate tax (its an expense in his schedule E) you the renter get nothing!!!
And since this is a lesson to some of you who have no clue--- guess what the tax code favors and encourages owners, not landlords, in other words as an owner especially in your senior years you may get a tax reduction or senior tax freaze on the real estate taxes, while the "investor" landlord is less likely to get any break, and this added expense gets passed through to the RENTER debtor
Jeez, you guys need to grow up and see the big picture and stop simply focusing on overpiced investment condos in phoenix, housing is much bigger then this, and renting is the losing propositon as to monthly debt over time, please wake up...for your own good
Rent vs. own. . .as a Debt Free person on this blog with over 1 mil in investment capital, I am renting now, because it is foolish for me to buy here in San Diego. . .check Craigslist and see what $2900 a month will rent downtown. . .a place that rents for $3000 costs 700-800K. . .say 6% on 700K is 48K but the rent is only 36K a year. . .then the owner has to pay 700 HOA, and 750 Property tax a month. . .I want to buy, but if I pay cash at 700K, I am stupid, and also loose control of my money. . .living debt free is WONDERFUL - I will be back in Zurich for Christmas, and skiing at Flumserberg and Davos (yes gloating) if they have snow. . .
(You all need to wake up and see which path leads to better cashflow over time)
right now it's much cheaper to rent than to buy, especially when home prices are falling and inventory has been building.
I don't think it is a generational problem. It crosses all ages. When we hear how the rest of the world hates us, it is things like our overspending consumption society that makes me think maybe there is something wrong with the way most Americans live. Seems like our values are all out of wack and only getting worse.
-- Mother of Three
mortgage interest in most parts of the country is NOT much more then rent, especially after tax cost
and eventually you can get rid of it.. THE DEBT OF RENT NEVER ENDS you are on the losing side of someone elsesprofits over time (and i dont mean those fools in phoenix, yes id rent from them a 700000 dollar home from them in desperation for 1000 mth too)
anon 11:57:10,
Things change. It takes about fourteen years for money to double at 5%. Add in property taxes, insurance, and mortgage payments in an environment of declining house prices and rising interest rates and the renter could very well come out on top. Besides which, he/she can easily move whenever he/she wants.
John LAw,
Im not a flipper, are you were talking about buying a house you can enjoy at a fixed monthly cost and paying it down, much better off then the renter over time
and long term the value of a fairly priced house in most of the country (who says buy junk in ca or az) will be more after 30 years,, much more..
straw buyer,
Im trying to help you all really- IM both an owner and a landlord for almost 30 years so see both sidess
yes taxes insurance and maintenance go up,, but over time you pay them if you rent too the landlord or apt complex passes on these costs to you,, or they wouldnt be landlords very long... its for this reason you cant count on the idiot landlords in az being there very long, theyll be shaken out and the profitable landlords which pass on costs will remain
I have seen for myself (as a landlord investor and attorney) the comparitive net worth over time of renters vs owners---keith is not leading you down the right path-- the owners are consistently in a better position over time (again were not talking flippers in ca or az here)
please buy a fairly priced home and pay it down till you owe nothing- youll be better off REALLY over time then the 30 year renter whos then paying 10 or 15 thousand a month (including increases for all the landlords maintenance and taxes) in retirement whiole you owe no mortgage interest and a reduced senior homeowner real estate tax bill
IM telling you all the truth, doesnt ANYONE see it????
Tune in to "Big Spender" on A&E to see how buried some folks are...
please buy a fairly priced home and pay it down till you owe nothing- youll be better.
We are so used to trolls around here so we don't know how to deal with someone who is sincere. Buying a fairly priced house is exactly the point of this blog. Right now, in many areas, it does not make sense to buy due to insane prices. As Keith said, timing is everything. Most here will not buy using exotic financing and either have saved for a down payment or are working on it. We just don't want to see anyone get killed from buying at the top.
The nicest thing about being debt free is being able to blow extra income in Vegas if I feel like it and not have to worry that I'll have to pay it back for the next 12 months. No second thoughts, no nagging regrets. It's freedom, baby, yeah!
Of course, I suppose I could trade that for some negative equity and new granite countertops, but those just don't sound like as much fun.
Cripes, my eyeballs are underwater. I owe gobs of money to untold many. The nice bank is getting their 4.99% every month, the nice credit card companies get their 0.0% and 1.9% as well. Makes me a debt slave right? Well, yeah, I've more than that in laddered CDs and such earning more than that but....
Anyway, I'm not a landlord now after near 20yrs because I sold for 272x rent. I'll be a landlord again many times over at 100x rent after things settle out. Man, then I'll really be in debt. Can hardly wait.
When is Big Spender on?
$0 debt
renting
100k+ in the bank (cash, gold & silver)
saving $6k/month
straw buyer,
thanks for the kind words-- there are many fairly priced homes out there, no need to be in Phoenix-- for the vast majority owning and pying off the home is a better bet long term
too be fair there are a couple of exceptions--
if htere are absolutely no fairly priced homes and they are so out of whack vs owning incomes etc, and you cant negotiate a fair price (hard to believ but ok)-- the ok to rent ,but not forever even if you have to vuy in a more reasonable area
2-- if you ALREADY made your money ie living off investments and you can afford to rent forever even if rent goes up, doing it for the flex
Other than my mortgage, I am debt free, the money i work for is all mine, just bought a brand new truck..cash!.
.just bought the wife a brand new Saturn Aurora..cash.. no painments! yup that correct PAINMENTS! not Payments.
Have not had a credit card in all most 8 years..dont need it dont want it..but i did get one with a $300 limit so i could establish my credit..why ...i ask myself that question if i am paying cash do i need credit...?? silver is down today..buy buy buy!!
High ho silver! I ain't never gonna sell my silver. I'm gonna be buried with it. I don't care if it hits $1000/oz I aint gonna sell.
Here's a CPA that tells you ALL ABOUT debt and interest:
http://debt.cpa-site.com/
I'm under 30 and debtfree - worked my way through university, travelled the world while teaching, arrived home with nothing but a partner and a $1000 bucks. After years of eating beans and sweat equity we have sold our home and are debt free happy renters with over $200k in investments and cash just waiting.... It is possible - you just can't have everything, immediately. We don't have kids, manicures, or fancy cars. and we did it all on less than 60k a year between the two of us.
the best part of being debt free is that now we get to start the process all over and get the hell out of N America...
Buying does make sense over renting. AT THE RIGHT PRICE. Suppose renting is 1/10 of the fully amortized mortgage payment? Even with interest deduction, property tax deduction, increases in rents yearly (maintenance will also increase yearly though), renting still is smarter. At some price points, renting is smarter and at some, owning is smarter. There is no all time universal answer. "You're throwing your rent away!". You're throwing your interest payments away! SEe how easy that is?
It's smarter to rent NOW. But 20 years ago, of course people who bought came out way ahead. They were buying at much lower house prices relative to rents.
Around here there is a woman at work who bought a new house and is renting her old for $1400 a month. It was either rent for that or sell for...(are you ready) 160K. That's what houses go for around here.
So you're saying that people in CA should choose to buy a house like this for 700K rather than rent for $1400? Because they people who bought at 100K 20 years ago made out big. That's fallacious logic. That's like saying it's smart to buy the Nasdaq at 5,000 b/c the people who bought at 2,500 won big. If houses go back to mean levels of rent then you will lose your shirt buying a house here.
Anyway for me. My house 3/4 acre, brick, 3br 2ba, nice house. Bought 9 years ago 80 / sq foot, now it's worth 105 sq foot!! Big bubble here.
Paid off the mortgage a long time ago. No credit card debt. No car payments/ student loans. Save 4/5 of my take home pay, have a large 401K (6 figure +). No worries.
I have no debt. Fully fund my retirement, $400k in CDs (im afraid of stocks right now). And yet I will never relax. Sometimes I envy those who have less worry than me and spend with abandon. Even with the money I have now, I still feel poor and like a slave to my jobs. I'm only 30 and have a long way to go.
Money doesn't make me happy. I don't spend because I hate "stuff". I strive for the most simple life and hate clutter. I'll probably die working and saving - but at least my kids will be well taken care of.
There was a really good book written a while back called, 'Your Money Or Your Life'. One of the most important points of that book was that you should take your hourly wage and use it when you consider buying things. For example if you made $20 an hour then if you buy a pair of boots for $40 they represent 2 HOURS OF YOUR LIFE. Then the decision you had to make was whether or not they were really worth TWO HOURS OF YOUR LIFE, or not.
This is the point that 99.9 percent of the population misses. You can't go thru life without buying things (at least now you can't) so the solution isn't to be a miserable cheap sonofabitch, the solution is to make wise purchases.
I'm a bitter renter by the way, have been all my life and I'm pushing 50. We rent a house in a nice place for less than we rented a one bedroom apartment for in a not so nice place not long ago. I've lived in more than 50 places, Russia, China, all over the US, Canada, Europe, etc. and looking back the worst decision I could have EVER made was to buy a house. I wouldn't trade the places I've lived and things I've done for any house, big or small.
Because I own no house, I'm taking this whole year off, sitting on my ass, watching my kids grow up, plus all the time we've been married, the wife hasn't had to work a day in her life. It's all about the decisions you make - we buy all the things we need and really want, and pass on those superficial, keeping up with the Joneses pieces of crap that serve no real purpose.
Life is about choices - you make the wrong choices and you get to be a slave, always working because you have a thirty-year bullwhip (also known as a mortgage) hanging over your head. Or you can be free.
As for all the other crazy stuff that is coming down the pike (war, depression, etc.) I've known it was all coming since 1997 when I read the Fourth Turning book and they predicted 911 - right down to the 'terrorists crashing airplanes into buildings'. Next comes a long slide down - which I've prepared for by buying gold, silver and oil - years ago.
I feel like a prophet who has been handed to the keys to the future and it is supremely amusing to stand in one place off to the side, watching the rats running around the ship as the first leaks begin to appear - no one bothering to listen to a word I say (other than my wife and father).
The housing crash isn't over, it's barely even begun, and what comes afterwards will make it seem like Sunday tea in comparison.
Anyways, never mind me, just resume your panicked wailing and gnashing
of teeth - I don't have TV, so I need all the entertainment I can get.
Ozymandis
Debt free.
It's the same feeling as having people stare at you when you ride 1st class on the plane. Debt burdened people give us that unwelcomed evil stare of envy.
I have no hat and no cattle.
I'm 26 and most people in my generation lead completely leveraged lives. BMW: leased. Overpriced bubble condo: no-down payment 25-30 years am. Credit cards all maxed.
There's no concept at all of saving to buy things, it's crazy.
My '97 Ford is paid for, does that count?
Keith Keep up the good work! Can you recommend a good place to stay in London for the New Year? I'll be traveling and having fun with all the money I didn't piss away on an overpriced box of sticks and stucco.
Landlords cannot simply pass the sky-high costs of ownership onto their tenants. Landlords can only charge what the market will bare. If investment condos are overbuilt, and I think that they are, and too many f'ed-buyers can't unload their condos then they will have to put them on the rental market. The price goes down as the quantity supplied exceeds the quantity demanded and thus you have an f'ed landlord who subsidizes the living expenses of his tenants because he is "owned" by the real landlord, the underwriters.
Don't carry on about the tax breaks, that may have sweetened homeownership when houses went for $50,000 but when the same house sells for $400,000 or more, that tax write off isn't going to make apple pie out of turd.
After 30 years the owner has no more mortgage, while the sucker who rented still has teh debt of 10000 a month!!!!
That is true, if the landlord bought at the right time. We have been renting for 12 years a condo that our landlord bought in 94 for 250K. We pay 1,950 per month (went up only once a couple of years ago from 1,700 to 1,950). I figure in the years we've been renting he's already paid off his apt. with our money. So, in a sense you are right. However, here's the other side of the coin. In this building, a couple of units went for 1M in 2005. The FB who bought them are paying probably close to 6,000 per month between mortgage, taxes, etc. That means they are spending more than three times what I spend out of pocket to live in the exact same space. My conclusion? I wish I had bought something in 1995. Now it's time to wait.
After 30 years the owner has no more mortgage, while the sucker who rented still has teh debt of 10000 a month!!!!
That is true, if the landlord bought at the right time. We have been renting for 12 years a condo that our landlord bought in 94 for 250K. We pay 1,950 per month (went up only once a couple of years ago from 1,700 to 1,950). I figure in the years we've been renting he's already paid off his apt. with our money. So, in a sense you are right. However, here's the other side of the coin. In this building, a couple of units went for 1M in 2005. The FB who bought them are paying probably close to 6,000 per month between mortgage, taxes, etc. That means they are spending more than three times what I spend out of pocket to live in the exact same space. My conclusion? I wish I had bought something in 1995. Now it's time to wait.
How is life without any dept?
To quote a line from a movie: "It doesn't suck."
Robert Coté, Congrats! I sold for 312 times rent.
Some observations:
All situations are individual and vary at various points in time.
Many people with invested assets can and are saving money by renting RIGHT NOW. Owning might be preferable a few years down the road; we'll know when we get there. But the vast majority of renters do not hold significant invested assets, median renter net worth is less than $5K and a large proportion of renters have zero or negative net worth.
For most people, mortgage interest is NOT a larger expense than rent; median monthly housing expense is (and has been for many years) greater for renters than for homeowners! (Simple explanation: many homeowners bought their homes years or decades ago at much lower prices; many own free and clear today; renters always must pay current (and trending upward) rents.)
Property tax rates are higher on rental prop than on owner-occupied homes in most states. For example, in Michigan, the school prop tax rate on rental prop is four times the school prop tax rate on owner-occ primary residences. Why? Because the politicians and the (homeowner majority of) voters can.
Renting is usually an excellent DEFENSIVE financial action, if not necessarily a good OFFENSIVE financial action. For many low earners, it represents the difference between ultimately being able to enjoy a modest retirement and never being able to retire at all.
I havent had any debt in the last 15 years. I pay myself instead of the bank. How does it feal? Feels good. How does it change things. I don't have to be the lowest bid on a job. I survive if you buy my product or not. I dont need to respond to your low ball offer or be upset by it. I go where I want , when I want. I find I am careful how I spend because I earned the money. My kids respect and understand money. I am free, cast off those bankers and breathe in the liberty.
anon 2:02:04,
"i'm 26 and most people in my generation lead completely leveraged lives..."
isn't casey serin 26 yrs. old?
"IM telling you all the truth, doesnt ANYONE see it??"
I doubt anyone on this board is contemplating renting for 30 years so it's a pointless comparison. I've owned rental properties since '90 and I've sold up because housing is currently ridiculously overpriced. I've taken my profits and I think anyone entering the current market is naive or stupid.
Buy an overpriced asset now - or wait 4-5 years and pay a reasonable price instead. That is the nature of debate on this board.
If you look at the net worth of the individuals you've referred to, I'm quite sure you'll find they didn't prosper by buying at any price.
Haggis
I can tell the debtbuilders this. I'm 31 yrs old, and have zero debt. No, I don't own a house. But I own a metric shit-ton of other things. I have a positive net worth...not as high as I'd like it to be at my age, but its a good start.
I do spend a lot of money on my hobbies. But its money that I have, not money that I borrow. I've learned that debt is monkey I don't want on my back.
Owned one house in my life, and if I had kept it I would have been making double payments on it at this point. *If* I buy another house any time soon, it will only be if I can put down at least 25% and afford to pay it off in 15 years or less.
Living without debt is damn good feeling though.
Correction on that last post...I didn't own a house, I had a loan on a house. Haha, slipped up and used the common terminology.
Keith.
I'm about to purchase a house around salt lake city utah. The house is in a nice area and they were asking 329,000 and i will buy it for around 307,000. I will put 220,000 down get a fixed rate 6% for the rest. The house is around 2800sqft. I will still have around 200,000 in bonds, 401k, cash. What do you think about buying this house to live in?
Bitter renter is a type of dinosaur that became extinct in 2005.
Coconutz!
I'm 47, married, No kids, NO debt, live in San Diego, but i actually feel sorry for those that can't control their spending, what a beast that must be constantly fed!
I'm frugal (or cheap) and always have been...I just can't live with uneccessary debt hanging over my head! Especially when it comes to toys, bling.....etc!
You debt-free folks are amazing and an inspiration. That's a goal of mine. I have about $6k credit card debt, tons of student loan debt I refied at a lower interest rate, no car note (car has been paid off for three years and I have absolutely no intention of buying another anytime soon -- Thank You, Honda Motor Co!), and I'm waiting out the CA housing bubble in my area by renting in a nice suburb at below-market rent. Sometimes in the hurly-burly of day-to-day work and other people's expectations of how I should be living given my salary, I forget that there are folks out there who are debt-free, and that they got there on a salary a lot lower than mine ($93K by myself -- my husband will soon be making $100K, and we have no kids).
You debt-free folks inspire me and give me hope. Now I don't feel so foolish for skipping Black Friday and the flat-screen TV madness at Wally World. Like you, I intend to become the captain of my financial fate. And it ain't being a Visa slave.
Debt-free folks, YOU TOTALLY ROCK!
When I was a kid my dad was trying to teach me to be frugal, "You can't have everything you want" he'd say. Jump ahead 30 yrs, The old man now say's, "Spend some money, you can't take it with you"!
Thanx dad!
If you actually want advice try this. Don't worry about keeping up with the Jones's, let them spend like out of control idiots! You don't have to!
32, just married, debt free and loving every second of it. $175k in retirement plan. $80k in savings/CDs/other investments. Paid off a BMW. Renting. Just married. Combined income $200k.
Only regret? Was a moron in my 20's. Leased a 745Li. Bought a 50" plasma 6 years ago for $15k. Went out waaay too much. Yeah, it was fun. But if I was wiser, I would have more than twice in assets right now.
Absolutely HATED being in debt!!!!
genome alteration, may be the only way we get fuel and food and lifespan enough in this new century
My husband and I have no debt. We pay our credit card off every month, paid cash for our cars, have a fully funded 401(k) that should pay out somewhere around $3 million when we are ready to retire, send our daughter to private school and I have been an at-home mom for our daughter since she was born. She's now nine.
How did we do it? Our story is unique. In college I had almost no money for tuition so I worked three jobs, one that gave me room and board, so that I could get through school. After 4 years, I graduated with a BA in 1990 with no debt. My husband is in the sciences and was able to graduate from 2 ivy league schools with just a $4k loan, which we paid off before we married. It helps that he's really smart, he had tons of scholarships! At that time people didn't need to pay for cell phones, or internet, and part of the allure of being a college student was that no one expected you to have any money!
When my DH and I got together we paid for our wedding. Cost us a grand total of $2k which stressed us out but we paid for it. Then law school for me. At the end we had $50k in debt. I sat down, looked at all the loans and figured out how much extra money we'd be spending if we paid them in the time required. (It was almost double the amount. At that point we used our 401 (k) savings to pay them off, and then aggressivly paid back our 401 (k) (had to, it is the law) until we were clear in 2002.
In the meantime we bought a house ($140k) sold it, bought another ($270k) sold it and had the freedom to fulfill a life-long dream and travel around the world. We did it all on the proceeds of our house. Now that would not be many people's choice on how to spend their money, but we felt it was worth every penny and was a "reward" for living within our means!
Upon our return DH got a job pretty quickly and I am working part-time as well. We are currently renting a comfortable 4 bed house at a price much lower than it would cost to buy a POS in our neighborhood. Still have 1/2 the proceeds of the house sale for a 20% down payment on a $500k home, but that does not mean we will spend that much on a house. We are bubble sitters right now, waiting to find an affordable (key being affordable) house where we live.
Years ago we did a study group about voluntary simplicity. Loved what came out of the group, our commitment to pick and choose what we wanted to spend our money on and not follow the whims of the crowd. The key word was voluntary, and never did we feel denied. I've read Your Money or Your Life and it was one of the most life-changing books I've ever come across.
I dont know why we are like this, debt free and happy. Except that many family members we know have lived lifes where they buy everything they want. No one seems the happier, and those who dont have the money to start with are just stressed.
We have no financial stresses, and have time to worry about other things, like world peace, etc. BTW, we're not old people, both 39. So not boomers, but not pups either.
Thanks
held new york realestate for more than 10 years that would not sell for a quarter of its tax assessed value, sold gladly for a third of it tax assessed value, to avoid the taxes that amounted to 15 percent of the sale price due out every year, the new owner now pays less tax, but any improvement means higher tax,he may have got a
deal in the vampire state
Hey Salt Lake! That part of the country was the last to go up. When all the other areas were hiting the top Money magazine ran an article on it being the next place to buy. Those 300 sq.foot Mormon mansions were under 200 just months ago. It sounds like you dont know the area. I hoe that if you do buy it you are Mormon because you will need to be to geta respectable job.
Here's a younger perspective, from the guy trying to shed light on the Billings (MT) housing market. Keith posted my video awhile back. I just turned 27.
It is a little tricky to be debt free under 30, but you have to want it. I got into a little student debt in an extended college stay (<10k) and borrowed a bit to buy a used car.
Then I decided to get serious. I'm single and share a rental house, $250. So it's fairly easy for me. Especially since I love to live simply. I'll be out of debt by Christmas, and then I can save nearly 40% of my take home pay.
Even if houses become affordable, I don't think I even want one now. Buying furniture, buying lawn care stuff, buying all kinds of crap you "have" to buy when you get a house, not to mention a 15-year weight around my neck. Forget it. I don't want to deal with it. Maybe if I get married and want to stick around a place for a time. Then I'll think about it.
For now, I'll keep my life simple, thanks. And continue to warn others of the impending trouble in the housing market.
If real estate were a good investment, the government would not have to give a tax credit to get people to buy it.
Get it?
I guess not.
Ooops. Not a tax credit, a deduction.
No, you're stupid.
The easy way to prevent the upcoming wave of loan defaults is to inflate the dollar by easy loans. This way people can refinance their overwhelming debt at lower rates. Just borrow more to pay your already existing debt. Nice. Hopefully you will die before you have to pay it off.
However, inflating the dollar destroys debt and creditors don't like that. If you pay them back with inflated dollars, they make a lot less. The rich are creditors. They won't like their wealth diminished.
If the Fed chooses to save the economy by dropping rates, the rich will invest in assets that negate the dollar inflation, gold, silver, oil and foreign assets.
So there it is. What do YOU think is going to happen?
Debt = slavery
WE ARE RENTERS,AND CAME VERY CLOSE TO 'DEBTING' A 230,000 HOUSE. AT THE VERY LAST MINUTE BEFORE SIGNING THE "DEED OF DEATH"(FRENCH DEFINITION OF 'MORTGAGE'), I SAID 'NO'!!,THERE ARE TOO MANY RED FLAGS HERE!! MY WIFE WANTED TO KILL ME, BUT AFTER SEEING WHAT FAMILY AND FRIENDS ARE GOING THROUGH IN THIS REAL ESTATE HELL, I AM HER KNIGHT IN 'GREEN AND GOLD ARMOR'
NO MORTGAGE AND CREDIT CARD DEBT,VEHICLE PAID OFF, UNDISCLOSED AMOUNT OF GOLD BAR AND COIN,IRA IN PERMANENT PORTFOLIO FUND(INVESTS IN GOLD AND SWISS GOVT.BONDS)NON-IRA IN PRUDENT BEAR GLOBAL INCOME/SAFE HARBOR FUND( GOLD CO.STOCKS,BULLION,SWISS BONDS,EUROS,SINGAPORE DOLLARS,HONG KONG DOLLARS,NORWEGIAN KRONAS} AND WE ARE OPENING UP OUR SECOND TREASURY ONLY MONEY MARKET FUND(DREYFUS US TREASURY AND USGI US TREASURY SECURITIES CASH FUND)
ALSO HAVE DIRECT SHARES OF BP,CHEVRON,VEOLIA ENVIRONNEMENT{WORLDS LARGEST WATER COMPANY}AND CALIFORNIA WATER SERVICE GROUP.
TO THE MORTGAGE BROKERS AND REALTORS WHO ATTEMPTED TO KEEP ME AND MY SWEETIE FROM AMASSING THIS BULLET PROOF PORTFOLIO....KISS MY YOU KNOW WHAT AND HOW SWEET IT IS!!!!
If the Fed chooses to save the economy by dropping rates, the rich will invest in assets that negate the dollar inflation, gold, silver, oil and foreign assets.
So there it is. What do YOU think is going to happen?
What is best for rich, powerful global elite?
What screws normal people?
Answer pops out.
My guess: plenty of free money gets shoveled to wealthy financial institutions (with powerful stockholders, and the masters of the universe employees) when they get a wee widdle hangnail for being totally f@cking idjits.
Everybody else gets the shaft.
From New Jersey...I'm under the impression to do all it takes to out do your neighbor. ;-)
Been shopping for a house for a little over a year now. The listings we are getting have changed during that time. I see the same houses over and over still for sale; 90-180+ DOM. Price reductions are everywhere. Some sellers even indicate "make offer" in the address line so you cant miss it. Houses that had an OLP of $450k are now down to $340k - $370k. Pretty cool! Remember sellers, you have to find a buyer willing to agree to your price before any transaction occurs. Market values seem to be declining. Buyers wait it out for a while. Let the market pay for your down payment. You wont find this advice on CNN.com.
By the way, all of the new construction homes in NJ, at least, are all mansions. It's unbelieveable. I mean do my wife and I need a 6 bedroom house with 4 bathrooms? What ever happened to the modest 3 bedroom split, or 4 bedroom colonial or cape?
My situation:
1. No debt
2. Brand-new paid off car.
3. New HD TV since my 14yo TV failed, otherwise I wouldn't have bought it.
4. Enough cash in the bank to live for 10 years without working.
Needless to say, I sleep very well at night.
CGG
Anonymous, how is it that you apparently visit this site yet cannot comprehend, through all of your imploring people to buy and not rent, that NO ONE here is suggesting that people rent forever? There certainly are advantages to buying a house - at the right time. If you are smoking crack and believe we are not in for a big correction in the housing market, so be it. But since most people here believe that we are, they rent so as to save money and buy at the LOW end of the market cycle. At that point, yes, it will make sense to own. But not now.
You are really coming across as someone with something to sell.
anon,
"My situation:"
You rebel you. Good job. You get a pat on the back from me. Have a good day.
Going from $30k combined debt to debt-free for the past year and savings in the bank has been great!
Anyone thinking they have to borrow money to own a home, read Mortgage-Free by Rob Roy.
I hope everyone on this board buys a house one day.
BUYS a house. Not "rents money from a bank to sit in a house that's not theirs"
And I hope everyone on this board buys that house when it's smart to buy it - in other words, when it is priced correctly
After meeting my rent and utility expenses, my child support payment, my necessaries like groceries and insurance, I have enough money to do what I enjoy on weekends with my friends and do a one time per year vacation (Apostle Islands in upper WI this year and it is very pretty). My only contractual obligation is a child support payment that will be completed in 17 months (but whose counting HA!). I bank roughly 45% of my net pay in a money market account paying 5.15% (umbrellabank.com by the way) and am watching the news and housing prices. I am hopeful that the full deflation of housing prices will coincide with the completion of my child support obligation - like a plane coming in for a smooth landing.
Smug Bastard
All debt is evil. Only idiots are in debt.
- Gotta love those blanket statements!
I owe $230K, total, on my residence and rental houses. My rental house brings in $1080/month. 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.
My residence is on 2½ acres with two ponds and a stream that runs across the land. There are fruit trees, a garden and a couple of greenhouses that I put in. In case everything falls apart, as some on this blog believe will happen, this land will be able to sustain me. This property will be paid off in ~12 years.
Debt is a tool to obtain what you need. Use it wisely and you’ll be alright.
-Mammoth
I can assure you I have nothing to sell-
Am just trying to pass on lifelong experience, as a renter (when I started) then landlord and owner for over 20 years
Also I have more direct experience in most in makrets (and housing is a market), this doesnt make me unhumble, ill gladly defer to others in subjcets i dont know, but Ive been and institutional trader in many different products through the early 80s and 90's, foreign exchange, mortgage backed, instutional fixed income both OTC, bank intermarket, spot, futures, and opptions (volatility trading)
And I dont have to work anymore, and would love to see others succeed too...again as a lamdlord and owner for most of my life (and trader) I just see a broader picture then some, and my advice is sound-
You dont have to buy a way overvalued house theres plenty to choose from, and many areas, do your homework
AND to suggest Im on crack, to say that there is NOT a housing crash coming from here in all areas of the country makes the trader in me simply laugh my friend--=you are classic retail we used to fade in the markets (no hard feelings though)
the "housing is gonna crash" play is old news already , there are SOME areas overvalued, dont buy there- but on average , supply is decreasing, new mortgage applications is at a SEVEN MONTH HIGH for new purchases, and most are still bearish, while institutions have pushed the homebuilders index up 29% over the last 3 months (fading a greater amount of retail sellers like you guys) as the smart money is setting up for recovery, just a fact..
Now , having seen the net worth and cash flow firsthand for 20 plus years of renters vs owners, I can assure you that in the vast majority of time , the owner ends up better in terms of net worth , cash flow, and stability ovewr time
the owner can pay off the asset and have no monthly payments other then taxes and maintenance ets (the renter pays this maintenance too anyway as the landlord passes costs on)- while the renters rent NEVER ENDS- just hard reality, and rent on average goes up over the years, mortgage payment can be constant
NOW- if you are risk averse to the max like a poster above me-- and want to justrent forever and have tons aof cash to absorb the rent increases forever and are a great saver, more power to you, so long as you make an informed decision, thats fine
BUt 95% of renters are NOT renting cuase they are great savers or have a trust fund and want flexibility to be able to move to aspen or monte carlo tomorow-- for the 95% of real world renters, they absoulutely WILL fall behind over say 10 years the guy next door who bought a fairly priced home
And IM not talking buying an investor owned subdivision in scottsdale.. im talking buying in a less volatile area where rents are fairly close to motgage payements (and probably mortgage payment cheaper from day 1 on after tax basis)
AND since I have to repeat this a million times since you all refuse to look at national averages and facts, but still talk about the option arm crazy areas as representative of the whole country and coming crash
THESITUATION NATIONWIDE IS NOT DETERIORATING FROM HERE OFF THE CLIFF--HELLOOOOOO
supply has been going down in the vast majority of areas- new mortgage apps at seven month high- 10 yr note down almost 100 basis points- unemployment near historic lows- institutions buying housing sector in huge way over last three months (up 29% against large number of retail bears like you all)- EXTREME bearish sentiment... this is all a botomming pattern!!!!!!!
ANd this is why I dont have to work anymore, I traded this psychology ( ie bearish or bullish perception doesnt equate to reality) for years... you dont see that you are the bottom of the market, the last to know
so lets put it in writing THE NATIONAL HOME MEDIAN (note national-theres life beyond the self important az and ca folks who think they are the whole mrket)-- THE NATIONAL HOME MEDIAN OF HOUSING PRICES IN 1 YEAR WILL BE FLAT OR HIGHER THEN TODAY
now step up to the plate and fade me, put your prediction down that national median price will be 45% lower in a year , go ahead -- so you can look like the retail fools you are, come on well see-
I "own" my condo in ABQ. Well, as much as you can own...I don't have a mortgage payment, but pay the condo fee ($160) and the taxes. I paid off the mortgage about 2 months after I moved in. I use my credit cards for all expenses every month, and pay them off every month. Cash back on that is a nice little bonus. No student loans, paid them off years ago. Cash in the bank, some gold.
If I want to buy something, I never operate on the "credit" policy--never think, "but it's only $X a month if I finance it." I may be buying a new car this month, my first new car ever (previous 2 cars were used) and I will be paying cash. I'd put it on my cash-back credit card if I could, but the dealer would never let me...they have to pay 3% on cc transactions!
TO THE HOME DEBTORS AND OWNERS....
THE FEDERAL RESERVE IS GOING TO RAISE INTEREST RATES IN ORDER TO SAVE THE DOLLAR WHETHER YOU LIKE IT OR NOT.
THAT MEANS THE VALUE OF YOUR HOUSE WILL DETERIORATE LIKE A LONG TERM BOND.
REMEMBER, THE FED DOES NOT GIVE A RATS ASS ABOUT THE VALUE OF YOUR HOME!!
well Mr. capital letters, you must be brilliant cause the futures market is predicting a cut in rates next year..
the dollar is one factor of many- a cheaper dollar could help trade deficit for example
and the fed is watching inflation figures more then the dollar no doubt--- rates arent gonaa be raised, more likely a cut , sorry, theve already raised rates 17 times and so long as inflation remains in check thats it my friend
"well Mr. capital letters, you must be brilliant cause the futures market is predicting a cut in rates next year.."
EXACTLY why u should short it.
they are not cutting rates. job numbers today were better than expected, goldilocks style. the perception they're giving is tres goldilocks. from greenspan to bernanke. orderly slowdown, as planned. giving them leverage to jack rates.
only risk is if the housing slowdown crashes and burns sooner than expected. then they may have to lower rates. but we're not there yet. we barely finishied chapter 1. more to come.
don't be fooled by the cheerleaders. while not as liquid as equities, housing markets DO experience dead-cat bounces, albeit in slow motion.
history has shown, we still have WAY to go, unless you want to seriously convince yourself that "this time it's different" when history has shown, FACTUALLY that we are still in the midst of it. do you really think that "IT'S DIFFERENT THIS TIME?"
Click and READ THE FACTS YOURSELF
some may think it IS different this time. me? i don't think so. ESPECIALLY when you consider that this is a unprecedented housing bubble that dwarfs all previous ones.
so, you want me to believe that the biggest housing bubble in history will have a really mild downturn, going against ALL historical, factual DATA?
Sorry, no can do.
respect your opinions, but you may be overdramatizing the downturn like many others here... SOME AREAS wnet up , straight up , out owhack with rents income whatever...but this is NOT the factual picture nationwide,, its the EMOTIONAL picture.. in reality l;ast numbers national median down 3.5% 140 areas gianing while only 40 or so declining , its almost funny that people are emotional and dont look at facts...
all said done you have a case about rates, but i still think they wont raise rates simply to protect the dollar from here, inflation is what theyr looking at ,, and there are many reasons that a lower dollar isnt the end of the world,, trade deficit for example cheaper US goods helps our trade deficit..
but a thought out discussion, and no personal attacks, commend you for that!!!
Saying renters pay property taxes is like saying both the limo rider and the bus commuter pay for gas. The renter usually pools his money with many others while the owner, like the limo rider, shoulders the cost alone.
yes you bring up a good point about taxes,, but i think we have to compare apples to apples... you could of course rent out part of your house as an owner and the roomate would pay taxes there too,, so its still a wash..
but I can see the point that if you cant afford a house at all ,, its a reasonable way to save money by renting with a roomate (did that myself in my younger days too)
cheers
wow everyone is so civil today, must be the holidy sprit, cool!
Anon said:
"Saying renters pay property taxes is like saying both the limo rider and the bus commuter pay for gas. The renter usually pools his money with many others while the owner, like the limo rider, shoulders the cost alone."
Say what?
Man, I am glad not everyone "gets it". We all can't be business owners, the system would break or it would be unprofitable.
the limo rider does pay for the gas like the renter pays the property tax and mortgage. They are not directly responsible for it but, in the end, over time, they do pay it plus some.
One last time: Consumers of a product (rental, bus fare, etc) pay for the cost (maybe not bus fare since that is subsidized by taxes and if you pay little or no taxes then you come out ahead), over the long term, pay the total cost of the consumed product plus a profit. there maybe isolated periods in time when you get a "true deal" where you pay less than cost but it happens infrequently. Otherwise there would be no apartment complexes, or businesses, etc.
To those who believe in real estate... most white collar work is not in places like Omaha, Buffalo, or Indianapolis where housing prices are stable over the long haul.
Much of the well paying white collar work is in Boston, NY, DC, Chicago, LA, SF, and San Jose all RE bubble zones. So if you're working there and earning enough to pay a local mortgage, but decided to rent in order to save half that amount of monthly cash flow, you can buy a retirement pad in Buffalo or Maine with that savings. That suffices for both, having a place to live and not being a renter, as a retiree w/o being caught in a RE bubble that can easily destroy your net worth during a RE crash like in the early 90s in LA or the Houston oil bust of the mid 80s.
I was fortunate enough to lose my house (sold while in forclosure, during the tulip days, after I lost my job) and pay off all debt, and gain the perspective of one recently de-loused: how could I have had so many parasites? But I am very cautious of doing business with these people again, and will avoid even getting change for a dollar at certain banks, a very healthy fear of robbery.
If I could buy a house that I could rent out and be cash flow neutral (factoring in all costs and a normal vacancy rate) I would buy as many as the bank would loan me money to buy. I'm letting someone else purchase the asset for me and I come back in 30 years and have made half a million and it didn't cost me a cent. God bless debt!!!
Who the fuck goes in buying a house CASH. Very few. No matter waht you are ending up taking out a loan. Especially now with the prices of homes. Even if prices drop 50%, in some markets that would mean the buyer would still take out aloan to cover the remaining balance. Lets not fool ourselves.
:Especially now with the prices of homes. Even if prices drop 50%
Ok, but combine prices dropping with having to move every 6 or 7 years for a job/career? I think that's a major problem and no one seems to recognize it. Gone are the days when you can get a $100K-$120K/yr job in one city and be able to stay at that earning level or sometimes higher (w/ bonuses, options) w/o moving around. Today's reality is that one year, you earn $100K/yr and the next, you're laid off and have to scurry for a job in the same locale for a 20-40% paycut (and sometimes no job at all for a couple of years) but could probably find equivalent pay by simply moving (and polishing the old resume w/ new projects, etc). That's the 21st century where mobility equal employability but it's not reflected upon the price of owning real estate in most major markets from DC to LA.
Here's my perspective...
A really nice retirement home should cost one ~$150K in Buffalo NY. At $40K done, which is the bare minimum for any kind of 6% loan to buy a place in a RE bubble city like DC to LA, where the $100K/yr+ jobs are to be found, that winds down to $1K per month payment for a 15 year mortgage. That $1K per month tab is only half the tax on a condo in DC, with mortgage you're looking at a $3K bill just for housing alone for a whole 30 year loan period whereas I can shop around, rent a place for $1.5K (or less), have the flexibility of moving and not worrying about a RE crash, and put money towards a retirement pad that'll be paid off in 15 years.
And from a $100K/yr salary, one's monthly take home is usually some $5.5K-$6K depending upon 401K contributions, deductions, etc. And by having mobility, it's more likely that you'll be able to keep that salary level for much of your career.
Sorry I have to disagree. Moving around every 2 years with small kids is not an option for me. I trongly believe in establishing a 'base camp' if you will and staying there a while and not uprooting your famile like a bunc of gypsies all in the name of upward mobility. The key is timing and locatopn. I bought pre-bubble here in CA, in an area that is very central. Exaclty 30 miles to Irvine, LA, and Pasadena every way, all the IT hubs. If I get laid off today, chances are I will bounce back in one of those aread. Meanwhile my mortgage payment is a modest 14000 a month. Hell I paid more rent during my bachelor years for a studio apartmentin the OC.
Sorry I meant 1400 a month. My yearly salary is 90k. If I was to take a 30% haircut it would suck, but I would survive. That scenario would suck more for the guy paying 3000 a month on a home.
"your famile like a bunc of gypsies all in the name of upward mobility"
The term gypsy professional or in academia, gypsy scholar, is becoming more and more common these days.
Yes, your timing was impeccable, that early 90s was a perfect time to by in southern Cal, however, do realize that since then, the work world's been changing, asset bubbles have been ballooning, and I suspect that as time moves forwards, those who want to stay put, will be experiencing downward mobility, epochs of joblessness, etc. That's just the nature of things as the workforce evolves (or de-evolves) over the next few decades.
"Moving around every 2 years with small kids is not an option for me."
Also, my idea is to try to keep the moves within 5 to 7 year cycles so that one builds contacts, experience, equity in the firm, etc, so that the next jump is either lateral (or upward if lucky). I think it would be really tough for teenagers unless of course they want to go to the h.s. in my retirement home's town/locale.
anon wrote: "After 30 years the owner has no more mortgage, while the sucker who rented still has teh debt of 10000 a month!!!!"
What if the renter actually saved and invested equivalent to the amount he would have put into mortgage interest after deductions? What if his savings returned more than the net return to the equity in the property?
Over the very long term, the median price of a house in the US has risen 6% and 3% after inflation. Since '74, the median price has risen 6%, but the rate of inflation has risen 4.3%/yr. for a 1.7% real gain in the median house price.
Over the past 30 years or so, a buyer of the $32,000 house in the mid-'70s, for example, with 20% down would have received a 9% ROE and a 5% real ROE (not counting buying up, maintenance, insurance, and non-deductible portion of property taxes).
The S&P 500 during the similar period received a 10-11% compounded return to date and a 5-6% real return. The VERY long-term real total return for the S&P 500 (going back to the 1920s and 1870s) is 4-5%, including the 4% compounded dividend.
But the exercise above is hardly applicable to today b/c the increase in the real median house price in the US has diverged so far above historical norms and from comparable rents (thanks to the Fed giving away reserves in real terms from '02 to '05) that, unless there is a 25-30% nominal decline in the median price in short order(40%+ decline in the real price), the net real return to real estate for years will be inferior to negative. It is during such a period that renting will be the preferred option for many, especially for couples who can take a half a million dollars in equity tax free from selling their McMansion, investing the proceeds, and renting at 60-70% of current mortgage costs.
Ironically, the more severe and short-lived a decline in the median house price, the sooner the correction would resolve itself and the sooner prices could return to the long-term trend.
However, that the federal gov't and the Fed bankers are likely to intervene in an unprecedented fashion to bail out everyone in the years ahead, i.e., a de facto socialization of the real estate market, the workout process is likely to be a much more protracted affair, with the worst damage occurring in inflation-adjusted terms (with the nominal price perhaps only falling 10-15%) 7-10 yrs. or more hence.
Professor, that's a good post, but one point I disagree on is the Fed. They are not inclined to lower interest rates now, in fact, if they had to guess, the next move (no time soon) would be up not down. Bubble chumps will not be getting any relief from Bernanke unless the housing crash brings the rest of the economy down with it, and looking at the data, that is not happening.
In other words, homedebtors, you're on your own, suckas!
Professor,,
nice try but the examples are renting vs mortgage (lets assume 20% down)
so if a guy buys a house and it goes up at a sustainable rate over time which is about equal to the 5% growth in S&P you used
buy 300,000 house instead of rent- at 20% down , 60,000 out of pocket
in 10 years at 5% (just estimating dont have my calculator) home appreciation (even without tax breaks) home worth about 500,000
so 60,000 outlay, make 140,000 profit on this (AND NO CAPITAL GAIN IF YOU SELL PRIMARY RESIDENCE PROFESSOR THE S&P guy pays CAPITAL GAINS!!!!)SO FULL 140,000 PROFIT
Lets say you put the same money , 60,000) in stock market (S&P).. and goes up same 5% for 10 years- worth about 100,000 in to years 40,000 profit - then you pay cap gains of 15% on this- so less then 35,000 profit vs 140,000 profit on house at 5% avg per year return---
so this is the truth, you obviously are being mislead as to the reality of the calculations you made
Again fellows, you're talking about hugh monthly loan payments (mortgages, now ~2x equivalent rent), property taxes, and upkeep in a time when jobs are no longer forced onto one locale or another like is was before globalization during the 70s, 80s, up until the mid-to-late 90s. This is a megatrend which has negatively affected employers' desire to stay in bubble zones but at the same time, since much of the psychological underpinning of the RE bubble (aside from the easy credit policies of the banking industries) is that the macroeconomic conditions of the 70s and 80s still apply to the 00s and 10s when it clearly doesn't. With tools like netmeeting, telecommuting, etc, location is becoming less and less important even to companies which engage in consulting, sales, and marketing, nevermind production facilities which automatically ended up in the cheapest locations.
To the anon that is making the case for buying.
You will find that most of the people on this blog are people who
A) Started looking for houses in 2004/2005 and realized how much houses went up in last 4-5 years and determined that it was very similar to the stock bubble
B) People who already owned a house, made nice gains, realized that these prices can't last, sold and are waiting for prices to drop to buy a house again.
I am renting for 1/2 of the total carrying costs of an average house in my county (1400 vs 2800).
If I pocket the 1400/month (16,800/year) and buy an average house next year by putting extra 16800 down, assuming that house prices and mortgages stay flat, I would be able to pay off my loan 5 years sooner, than if I bought a year earlier before I put the extra 16800 down. 5 years of no mortgage payments just because I delayed my purchse by 1 year.
On top of this, my county median price also dropped 50k yoy, so that would mean that by keeping the same payments as in 2005, I could pay off the house in 16 years, in half the time than I could if I bought at the peak of the bubble. 14 years of extra mortgage freedom, but delaying the purchase by 1 year.
This is why I and other visitors of this blog are delaying our house purchase.
higher value and higher taxes,set to pay off the owners of the politicians, to build their outsourced factories slave labor systems.
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