January 25, 2007

HousingPANIC Stupid Question of the Day


It's significantly cheaper to rent a home today than to rent money from the bank to possess it (mistakenly called "buying" by some people").

As a matter of fact, it's not even close - you can rent for
pennies on the dollar compared to the cost of buying today.

So, now that home values are dropping, and won't be rising again for years and years, and now that there are
millions of unwanted empty homes across the US to choose from, why would anyone consider 'buying' a home today?

37 comments:

Anonymous said...

I read a great article online about how it takes about 41 years on average between two peaks in real estate. for the life of me i can't remember where i read it. anyone come across such an article.. please post.

Budvar said...

If the last 2 in UK are anything to go by, they seem to go on a 18 year cycle give or take a year or 2.

Anonymous said...

If you're certain you're going to live in a location for a long period of time w/o the need to alter your housing situation (a rarity in this modern age but possible) and/or you're in the non-bubble areas then its safe to buy because chances are you will not be hit by the slide. However that being said, this slide will be historic in terms of its depth and length so no one maybe safe. The bubblette in NoVa that popped in the late 80's took a decade to work itself out. (1988-2000). The latest bubble allowed prices to recover and put them where they should have been if there was normal 1% above inflation appreciation by about 2000-2002. The problem is from 2002-2005 prices doubled, a much larger bubble than the 80's bubble that popped. So if that one took a decade to recover then this one will take much longer. The only wild card that may actually facilitate a faster recovery is that all the overstretched FBs with all the toxic mortgage products may result in a much faster deflation than previous bubbles. So if we race to the bottom more quickly then recovery MIGHT be closer than one would predict relative to past recoveries. But if rapid drops results in more damage it might not be possible.

Anonymous said...

I think people will buy because they are lied to by the REIC. People react like there is no tomorrow.. which is fine if you are trying to get a number from a hottie at the local watering hole.. but to sign you life into a 30 year payment plan... more thought and understanding is needed.

michael said...

because your wife wants one.

MarkIFC said...

Our parents have drilled it into us that Real Estate is our best investment. So we go with the flow.
An interesting thing has happened in Japan however. After 15+ years of falling RE values, the Japanese youth have come to believe that only suckers buy RE. That has driven values down further.

FlyingMonkeyWarrior said...

Anyone who buys a $300,000.00, as an example for say $250,000.00, takes a HELOC or a cash back for the other $50,000.00, or even 125% ltv counting on a flip or the appreciation to cash them out, is old skool and they are doomed, imo. If you put $83,000.00 down and fix your rate for 15 or 30 at todays low rate, in a good area, you should be set to ride things out, I reckon.
But maybe I am stoopid. (:

Anonymous said...

With the way gold is up, soon I'll be able to trade a few coins for a home.

messier11 said...

because my wife wants to move to a town where we want to raise our kids and doesn't want to rent again (we are renting now in a town we don't want to stay in). But even though we can well afford to get ripped off, I'd much rather either rent another place or wait till at least the anger phase kicks in(because we are definitely still in the denial phase around here). I'd much rather buy from an angry seller than from a happy one in denial.

Anonymous said...

Up, Down, Up bigger, Down bigger

brokersleaveyoubroke said...

I read a great article online about how it takes about 41 years on average between two peaks in real estate. for the life of me i can't remember where i read it. anyone come across such an article.. please post.

I didn't see that one but I saw an article in prudentbear.con that had a graph to show that there was a housing bubble in 1914 and the prices in 1914, adjusted for inflation, were not again reached until 2005. The jist of the article was that house prices have always and will always rise at the rate of inflation in the long run

Anonymous said...

>> With the way gold is up, soon I'll be able to trade a few coins for a home.

Keep dreaming, precious metals boy...

Anonymous said...

Notice how it always overcorrects on the way back down

Anonymous said...

$654 gold today!

MMAfia said...

Gold is an excellent long-term investment. Along with oil.

devestment said...

Once all the greedy stupid people with money or good credit are gone, what will the realtors do?

Anonymous said...

Because there's a vast pool of lowly educated American stupids out there...the same reason why millions keep on buying all that junk put out by the American auto industry...the same reason why the stupids shop at Wal-Mart and think its "cheaper"...
there's just a lot of ignorant low class trash in this country and barely anybody will acknowledge it.So the great all-Amercan circle jerk marches on.

FlyingMonkeyWarrior said...

I just spoke to a Real Estate researcher in the Government Property Management Department for the County and asked him his "off the record" opinion about the bubble.

He said that taxes and insurance are up because they followed the bubble, so prices will "Have to stay flat, as this high tax and insurance infrastructure will prop them (prices) up indefinitely.

just postin, not agreein.

gt said...

why would anyone buy? maybe they're in my shoes and the wife's nesting instinct is out of control

hemorrhoidforhousing said...

Because I'm tired of paying money to jerk who doesn't want to maintain the house we rent. I'm at a point where we can afford to buy and I want to be able to do whatever the hell I want to do to the residence I'm living in. I want to build a recording studio but can't. I want to tear out some ivy which is a problem to maintain...but I can't.

I want control of my life.

I'm well aware of the risk I am thinking of taking but at this point I'm feeling like taking advantage a schmuck who got in too deep.

RipeDurian said...

Well it is a valid question because many many people are still buying houses.

A certain amount of these many are doing well in terms of income, and for life/job reasons now is the inescapable time to buy. (We know there is no defense for this position but remember many of these many have never read a housing bubble blog).

I am speaking of folks who do not want a house as an investment, but simply to live in and eventually actually own (ok ok well at least have the mortgage paid off). This was me in 1995 and through utter dumb luck I bought at a good time (there were no blogs back then). Zillow has my house valued now at over 3 times what I paid, sheer madness.

I shudder to think if I was me now blithely shopping for a house. Back then I could barely afford the house I bought because the bank would only offer me a fixed rate loan and only if I put down 20% because they had just finished getting there asses handed to them during the last bust.

Would I be stupid enough to accept the interest only no money down smiling faces rah rah glad handing of today?

I would like to say absolutely not.

But there are no absolutes.

I guess this is a bit of a gloat, but there is part of me (the non schadenfreude part) that really feels sorry for the good intentioned but ignorant buyers of today. I have tried to stop some friends from buying with mixed results.

Anonymous said...

"With the way gold is up, soon I'll be able to trade a few coins for a home."

LOL! Hope the shorts have enjoyed the ride up from $600!

Anonymous said...

How come everyone forgets that a mortgage is a loan? Because whenever I tell new buyers that they need to carry a 30 year loan on buying a house, they correct me saying that it's a mortgage as if a mortgage has more cachet than a loan agreement.

Anonymous said...

millions keep on buying all that junk put out by the American auto industry...the same reason why the stupids shop at Wal-Mart and think its "cheaper"...
there's just a lot of ignorant low class trash in this country and barely anybody will acknowledge it


Mr. Superior To Everyone Else,

I own three properties (one I live in, one I rent, one is a ski condo). All three are worth more than double what I paid for them. The condo is worth 3-4 times more as I've owned it for close to 10 years. I have a BA from Cornell and an MBA from Duke. I make well into 6 figures yet I shop at Walmart quite often despite the bullshit attacks on it made by socialists like yourself. Of the 3 cars I own, 2 are American made, not because they're American because I thought they were the best choice.

If that makes me an ignorant, low class white trash, so be it. You go on renting, driving your Hyundai, paying 2X the price while boycotting Walmart and feeling smug if it makes you feel better.

Anonymous said...

Because I have animals and I hate paying outrageous pet deposits. When we were first married we looked at an apartment. They didn't allow pets so we left. (We had 1 cat at the time.) As we are walking out of the office we are about run over by three children riding their bikes through the flowers at the front of the office. We wondered what the child deposit was like.

Because I am sick and tired of having to assure landlords that their precious $hitbox won't be irreversibly harmed by my animals. Every rental I have ever had was in better shape when I left than when I rented it - because I maintained it. Even though every landlord has tried to keep the pet deposit for "cleaning." Bite me, the house is cleaner now than when I rented it. "Would you like to see the documentation, photographs, talk to the neighbors?"

Yes I am a "homedebtor". I have a fixed mortgage. If I did enough homework before I bought I will survive. But the fact is no one knows how it will all play out. You do the best you can with what you have at the time and you move on.

Anonymous said...

DONT BUY DONT BUY DONT BUY BOO YAH

Anonymous said...

ah. i found the article about the 40+ years between RE tops.

http://www.prudentbear.com/articles/show/130

tiny http://tinyurl.com/2otpgg

Stuck in So Pa said...

"RipeDurian said...
Well it is a valid question because many many people are still buying houses.....I have tried to stop some friends from buying with mixed results."

Same here. I'm running about 50/50. No housing bubble here, but the credit buble is as full blown as anywhere. Even if someone buys a nice place at a decent price, if they can barely afford that No Doc,I/O,ARM now, what happens when in resets!

Foreclosure is foreclosure, whether you go from $75,000 to nothing or $750,000 to nothing, you still are left with NOTHING!

Anonymous said...

the funny thing about mortgage is it has 'mort' in it.

Shakster said...

Buying is still good if you are an educated HPer.Options include-Lowball,Causing reverse bubble panic to the downside,Build yourself,Take the 100,000 dollar cash back after lowballing down another 30%,demanding upgrades,warranties,writing in a comprehensive lemon law clause,biding your time till they cave,telling them that you have a better offer just before you sign,make them prove that the home was built with experienced labor,point out the shoddy workmanship,have your fireman buddy inspect the home (wink wink),make the seller actually pay the fees,act disinterested,stall,threaten,and if that doesn't work,just wait a while till the prices crash summor.Last but not least be sure to rub it in.

Anonymous said...

Housing costs were rising more than the rate of wage increases, it was not sustainable.

The dollar was yet falling. Costs of imports rising. Low prices are but a temporal thing.

d_lereah said...

Time2Buy

bozonian said...

With the way the prices for precious metals are rocketing, I'll be able to trade in my 24k gold plated Bentley for a hovel in L.A!

Anonymous said...

Mr. Superior To Everyone Else,

I own three properties (one I live in, one I rent, one is a ski condo). All three are worth more than double what I paid for them. The condo is worth 3-4 times more as I've owned it for close to 10 years. I have a BA from Cornell and an MBA from Duke. I make well into 6 figures yet I shop at Walmart quite often despite the bullshit attacks on it made by socialists like yourself. Of the 3 cars I own, 2 are American made, not because they're American because I thought they were the best choice.

If that makes me an ignorant, low class white trash, so be it. You go on renting, driving your Hyundai, paying 2X the price while boycotting Walmart and feeling smug if it makes you feel better.
----------------------------------

Hey Trump wannabe,
WOW really impressed by your petit bourgeais "achievements".Since you're into boasting:
I'm a 55 year old high school dropout who owns 2 commercial buildings (free and clear) in Manhattan,(real LANDLORD), and drive a 20 year old BMW while shopping in NYC boutiques.
My business checking account has a bigger balance than your entire net worth. Those degrees you got made you a job applicant and Wal Mart shopper...are you also fat, disheveled and wild-eyed like your fellow shoppers?

FlyingMonkeyWarrior said...

Because I'm tired of paying money to jerk who doesn't want to maintain the house we rent. I'm at a point where we can afford to buy and I want to be able to do whatever the hell I want to do to the residence I'm living in. I want to build a recording studio but can't. I want to tear out some ivy which is a problem to maintain...but I can't.

I want control of my life.

I'm well aware of the risk I am thinking of taking but at this point I'm feeling like taking advantage a schmuck who got in too deep.
++++++++++++
Yep.
iw

Mammoth said...

Thinking of purchasing the ~2 acres of land behind my house & property, just to keep it open and undeveloped. It fronts on the main road going through town and yes - it is indeed likely to hold its value (if purchased at the right price).

This parcel was listed for $232K from Sept. - Dec., then the sign came down. Talked to the owner who told me “the realtor wasn’t doing his job, so I decided to lower the price to $199K and sell it myself.”

Then he went on to enthusiastically tell me there is still a lot of interest in the property, and that when he put it on Craig’s List, it immediately received a number of hits. “So,” I asked him, “is the sale pending yet?”

“No, but I’m sure it will sell soon,” he said. When I told him that I may be interested in it myself, he suddenly brightened up and invited me to make an offer.

Looks like the seller is right now at the tipping point from denial into fear. Should I wait until news of the spring crash is under way and then offer $140K?

-Mammoth

Anonymous said...

EVERY time one of my attornies says 'I have six years at xyz' I tell them 'I have two years in the eleventh grade, you're fired.' Many people say 'my attorney'. I always have six on staff. Degrees are garnered by children for whom their parents paid to have babysat by pedestrian colleges. The situation is sad that you must bring up something so old as an inadequate training that left you barely above the poverty level in some States.