Why haven't desperate homedebtors come to the realization that there are over 2 million vacant homes (houses and condos) for sale in America today, and many more bought as "investments" by really desperate homedebtors, which are now available as rentals?
Why don't they understand that "renting" doesn't mean a Three's Company apartment complex anymore?
Don't they understand there are plenty of McMansions to be had as rentals these days, for pennies on the dollar versus the cost of "ownership", and without the stress of collapsing value?
Why don't desperate homedebtors realize that they don't own anything - that instead they're renters too - just renting money from a bank?
And when will it get through to them that bitter renters and bubble sitters have total life freedom during these glorious stress-free days, with the ability to move on a whim, and not have to spend all weekend at Home Depot or slaving on the home?
Finally, what will it take for desperate homedebtors to understand that bitter renters are out there having a great time with all their disposable income, and actually doing this bizarre thing called SAVING, while desperate homedebtors are lucky to have enough left at the end of the month after their massive mortgage payment is paid for a dinner at the Olive Garden?
It's not the bubble sitters and bitter renters who are owned today. Nope, it's the desperate homedebtors. Even if they can't see it yet.
February 04, 2007
Why do desperate homedebtors assume bitter renters and bubble sitters live in apartments?
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Olive Garden?, pre-ARM adjustment maybe! Post ARM adjustment maybe that Happy Meal that Casey Serin has pledged to him if they are luck. Of course they will be eating it on the curb sitting next to all the crap the now foreclosed homedebtor will have sitting next to them after the bank has ejected them from the home.
Desperate homedebtors assume that bubble sitters are all bitter renters because it makes them feel better. Many people, such as myself, are waiting out this madness because prices are too high and houses are too big. I don't rent, but I refuse to "move up" just because the builders and FBs are in a bind. Construction standards are a joke, speculators are a joke.
they're in denial and they're scared
HP posts like this (from the "who has higher net worth" thread) makes me assume you all live in decrepid apartments.
Because I'm getting sick of living in a small, old apartment like a pauper and saving 70% of my income
QWEEFIE,
"with the ability to move on a whim, and not have to spend all weekend at Home Depot or slaving on the home?"
1. Living in a rented McMansion and paying $1500, $2000, $2500 a month is great...if you're in the 10% tax bracket. If you're in the 31% bracket like me it's awful. Out of a $2500 mortgage of which $2000 is interest, I get back $620 every month as a tax break. I don't pay state income tax, but if I lived in say California at 9.3% I would be saving an extra $185 a month there makingthat $2500 a month payment really a $1695 payment.
2. I have Mexican laborers slave for me. They clean the home, maintain the landscaping and the odd time something breaks such as a pipe freezing last month and bursting (you know that global warming and all), they come and fix it. I'm looking at getting the house painted and courtesy of the lack immigration laws, I can have the whole house painted for under $1000+paint. I painted one summer in high school and for a comparable home we would have charged $2000+paint...15 years ago. Hyperinflation my ass.
3. I have moved 3 times in the past 7 years, each time selling then buying a home. Yes there are transaction costs involved, but the gain I made on each sale dwarfed those costs. Selling a home is no harder than giving notice to the landlord. All thse dimwits staying on the markt 6 months have to do is lower their price $25K and they sell the next day.
4. I go to Olive Garden for lunch all the time. The soup/salad lunch special for $6.50 is probably the best deal out there.
"Living in a rented McMansion and paying $1500, $2000, $2500 a month is great...if you're in the 10% tax bracket. If you're in the 31% bracket like me it's awful. Out of a $2500 mortgage of which $2000 is interest, I get back $620 every month as a tax break."
Let me get this straight... I pay a bank $24,000 for the privilege of saving $7440 on my taxes? Am I missing something?
PANIC mode,for homedebtors!
In my area sales are down 50% YOY !
Zipcode 60133
01-2007 29 $201,000.00
12-2006 57 $210,000.00
11-2006 63 $216,000.00
01-2006 74 $201,000.00
12-2005 65 $208,000.00
11-2005 117 $209,000.00
Zipcode 60193
01-2007 52 $229,000.00
12-2006 56 $287,000.00
11-2006 62 $253,000.00
01-2006 101 $256,000.00
12-2005 93 $259,000.00
11-2005 133 $258,000.00
Those NAR -8% numbers are bogus ! Check Mellissadata.com
That's what happens when someone knows the truth and it doesn't suit their wishes... they become angry and lash out. So if you didn't jump on the housing bandwagon, you must be a renter and must be bitter.
Nevermind how the populace was qualifying to buy. I mean for how long was down payment and fixed rate the way to go? Then all of the sudden it becomes no money down and state your income and pick your payment.
So who, exactly, should be bitter? I've got a guess: seniors living on fixed income who more than likely had no role in the recent boom. Their costs are going to go up and their benefits will probably be cut. That's the way to treat your elders.
We are doing exactly this right now in Arizona. Renting out a wonderful brand new 2100 sq ft. home in a nice neighborhood. No HOA, no property tax, no maintainence costs (when something is wrong I just call the owner!) Saving $700+ per month over what he wanted to sell it for. This is going into our home downpayment fund, which we will use when the time is right. It's a no-brainer until this market evens out.
And believe me, it will. I would estimate that approximately 8-10% of the homes in this new neighborhood are for sale or rent. When our lease is up, if our landlord decides he wants to put his house on the market, we will just move down the street to the next one!
On a side note, I have noticed a drastic increase in both Realtor and home builder advertising on the radio and on TV. They tell me that now is the perfect time to buy or sell and with interest rates at near-historic lows (hmmm....seems contradictory to the reports I heard this week about them rising) that now is the perfect time to buy.
I think I will wait a little longer.
Don't they understand there are plenty of McMansions to be had as rentals these days, for pennies on the dollar versus the cost of "ownership", and without the stress of collapsing value?
This is true. But be careful not to rent from a landlord whose property is about to go into foreclosure.
After paying first, last and cleaning deposit, a tenant could be faced with an eviction notice during the first month of occupancy.
My situation, several miles out of Boston, 2 bdrms, 2 baths (76 sq ft for restrooms), around 1200 sq ft interior (which includes bdrms, kitchen, living room, commonspace), plus 6'x 12' outdoor balcony with a view facing the city renting for $1325/month. The last I'd checked, the purchase price for an equivalent place in the neighborhood (but without the view) was ~$500K or ~$2700K per month with a 30 yr/6% mortgage with 10% down not including taxes, closing costs, and condo fees which could easily add a grand to that amount. So how's having an additional $2.3K in the bank every month suppose to make me feel like a bitter renter?
I've been trying to make this point for over a year to the HHs. I always have to say, "I'm renting A HOUSE." Some of my coworkers (senior software engineers) still live in apartments for some reason even though they make more money than me. I guess they have to be more careful with money since they have to support their non-working wives and kid(s).
When I cashed out (sold out) of the bubble, I felt like I was going to be the only long-term winner between the buyer, the bank, and myself.
CNN just answered the question for all human kind and HP. Making money does not make us happy, spending it does.
Don't bitter renters have more disposable income?
iw
I get back $620 every month as a tax break
In my case, I don't even spend $620 a month for rent and that includes heat, a garage and extra storage....
Additionally, in minnesota, I think I get a tax write-off for renting since I can deduct the taxes that were paid on my behalf!
And, because I had a business last year, I can deduct "rent paid."
So, as you can see, there are many ways to get tax breaks if you want them.
Yes there are transaction costs involved, but the gain I made on each sale dwarfed those costs.
And, as you can imagine, since you spend $1500+ a month on a mortgage, and I spend $545, I can save $1000 a month and probably more since I never have any direct repair or upkeep costs.
The people who live in the converted condos near me paid $125,000 for them...
so they pay twice what I do in rent and, additionally, they'll probably get assessments, a much bigger tax bill, HOA dues, etc...!
Regardless of if you buy or rent, the ones who are careful with their money stay ahead, while the others struggle...
The only winners during the bubble will be those who cashed out
Unfortunately that includes Bob Toll
If you don't buy now, you can't lose!
I cashed out in seattle in july 2006 looks like I made the right move, and am renting a great 3 bedroom apt while sitting on my money in 1 year cert of deposits,and no stress
I have to say, I have been a huge housing bear for several years now, much to the chagrin of several of my colleagues. My, how the tables have now turned.
Lunches at work now consist of them telling me their financial woes while I tell them how much money I save every month! And despite the blatantly obvious, they are STILL in denial!
So be it. I used to give a damn and now I don't. I am no longer going to waste my time warning people not to be stupid or place themselves at financial risk. They are in control of their own lives and decisions. As am I. Let Darwinism unfold as it should. >-)
Just signed a lease for a 4/2 restored 1904 2 story Queen Anne here in N. Humboldt Ca. It has two enclosed sun porches one off the kitchen (which is getting new stove, frige, and floor covering) and one off the upstairs master bedroom. This is a nice BIG house in a nice neighborhood. $1350 a month. Bitter renter??? You Bet!
"Living in a rented McMansion and paying $1500, $2000, $2500 a month is great...if you're in the 10% tax bracket. If you're in the 31% bracket like me it's awful. Out of a $2500 mortgage of which $2000 is interest, I get back $620 every month as a tax break."
You are not including your property taxes and upkeep on your house. You may even be paing HOA fees on top of that.
The mortgage interest deduction is great, but normally it is mostly eroded by property taxes.
The only reason to buy a home is for the call option on price appreciation. In a falling market, that call option will lose value. So, if you aren't paying at or less than a renter for the same property, you are losing money.
I forget why I was supposed to want a house.
Ok. There is a huge housing bubble. I am under 40yrs old, my 4500 sqr feet mcmansion is paid off. I am glad that I bought in August 1995. The US was just coming off its last housing bubble. People just do not like to hear bad news. The people who are trying to sell realize there is a problem. I was in home depot the other day, and it was deserted, not like two years ago. Things have changed. Seems like we have a short memory. I remember the late 70's and early 80's. High interest rates, gas lines, gas hog cars. Now we have high gas, gas hog suvs, and soon to have high interest rates. High interest rates in the early 80's had a slump in housing sales and prices, then rates came down, and we had the roaring 80's real estate bull that lasted till 1988. Housing took till the mid 90's to recover. This bull in real estate because the Fed lowered interest rates to the Eisenhower era. Now that rates have come up, and people are maxed, the real estate bubble will deflate. Seems like history repeats, now I know I am getting older. So some of us are secure in our homes, come rain or shine, come bubble or bust. I do not assume people who know the truth sit in an apartment. Do not assume that people in a mcmansion have lots of debt or any debt. Nevertheless, if you are wating for a deal, your time is comming.
Let me get this straight... I pay a bank $24,000 for the privilege of saving $7440 on my taxes? Am I missing something?
Better than paying a landlord $18,000 and saving $0 in taxes.
Here we go again.
Homeowner: I pay $2500 for big house and save $650 in taxes for a cost of $1880.
Renter: Yeah well you are a sucker I only pay $650 for rent on an apartment.
Yes renter, but Y-O-U L-I-V-E I-N A-N A-P-A-R-T-M-E-N-T. You live live a college student. I lived like a college student and liked it...in college. The I grew up and joined the adult world. Adults do not live in apartments.
Why do you continue to make this apples to oranges comparison? Obviously you pay less, you live in a shithole apartment with neighbors above, below, to the left and to the right of you. I live in a home 3 to 4 times bigger than your apartment. I have no neighbors. I have a big private yard. I have a pool that I don't have to share with anyone. I have a 3 car garage. I have a basement. Obviously I pay more, I get more. For me an extra $1200 a month for all that is more than worth it.
Why is this so hard to understand?
In many markets it would be dumb to buy and not rent. We are moving down to Coral Springs, FL. in 3 months. Our choices are to buy a 2500 square foot house for $575,000 and 20% down. Property taxes $11000/year. Insurance $3000/year.
Or rent the same house for $1700/month and put our $115,000 down payment in a 6% CD.
Seems like an easy choice to me.
Because with their lack of equipment (short-peckered) to satisfy their wives or boyfriends they have to pick on someone!!
I rent a very nice 3-BR, 2.5-BA townhome in La Jolla near the beach from an owner who did not overencumber their rental so I'm able to pay less than $2,000 a month for an $800k place, which will eventually be worth $250k in my opinion. My rent in the 4 years since I cashed out has only gone up 2% : )
All the idiots who overencumbered their properties will take it in the shorts as more and more renters begin to rent for less on properties whose cost basis is lower because they were acquired via a short sale, trustee sale, auction or foreclosure.
I'm loving it and I have 2 more one-year options to renew - Yeaaaaaah Baby!!!!!!!!!1
"Yes renter, but Y-O-U L-I-V-E I-N A-N A-P-A-R-T-M-E-N-T. You live live a college student. I lived like a college student and liked it...in college. The I grew up and joined the adult world. Adults do not live in apartments."
------------------------------------
I rent a very nice house in a very nice neighborhood for a price I couldn't touching if I were to purchase the house. (Just because people say they rent doesn't mean they are renting an apartment or live in a bad area. Here in Sacramento there are lots of homes for rent and many of them brand new in great neighborhoods.)
Anon512. --Renter
P.S. Only adults live in apartments... they won't rent one out to you unless you are and judging by your post (Anon 1:22:31) it appears that home owners are just as capable of "Juvenile Intellect Syndrome".
Why do I see this same question posed basically every week?
Why do tons of people here make blanket statements with no regard for regional cost of living/housing prices??
This is the Boston anon:
I believe the ratio is 1.2:1 for mortgage to rent for a particular market for it to be worth one's investment.
So for instance, back in '01, an equivalent 2 bdrm/2 bath condo would go for ~$280K or $1.6K+/month with 30 yr/6.5%-to-7% mortgage with 10% down and that's about a 1.2 ratio which was when the market was appropriately valued. Today, that condo's at a bubble level (~$500K) which could take around 20+ years to reach its appropriate evaluation based upon today's inflation.
As the economists say--you cannot make interpersonal comparisons of utility. Some guy thinks its smart to buy and have a big house w no neighbors a basement, big screen TV and the mortgage payment and maintenance to boot. Lucky you, if you enjoy being out in some burb in your house. Been there done that--I am an adult and man do I like renting my apartment. Its small, but hey I walk outside and viola--cafes, movie theatres, bars, park (lovely one at that) museums (two). So yea I rent, I pay 1000 per month total and the world is at my door. Get to save a lot of money and have a lot of fun that does not involve driving, working on the house, or watching TV. If that is your view of the adult world, knock yourself out Mr. Been Brainwased that lving in a big house in the burbs is the way adults live.
Regards, Lucky renter who can tralve anywhere, has five years income in bank and can walk to the best museums restuarants and bars in Manhattan. You--a Mcmansion and debt in bunbfuckville burn close to Chilis and home depot....
anon sed:
Yes renter, but Y-O-U L-I-V-E I-N A-N A-P-A-R-T-M-E-N-T. You live live a college student. I lived like a college student and liked it...in college. The I grew up and joined the adult world. Adults do not live in apartments.
Uh, like, you can, um, actually, you know rent, like a house. And you can buy an apartment!!! (Although if you buy it then they call it a condo.) Pretty shocking that your method of payment doesn't have a direct correspondence to the type of residence, huh?
And [rather obviously] not all adults live in houses. I don't and none of my friends around here do because we live in a real city. New York City. Sure if you live in BFE, then you can live in a house for the paltry sum of $2500 a month. In Manhattan that will get you a small one bedroom apartment. Maybe 400 sq ft. So, I guess everyone in Manhattan who makes less than six figures is somehow a child?
We rent a 4 bedroom house with a recent assessed value of $728K for only $1600...and we have rent controls in our area so maximum potential increase is a few per cent. But we've not had an increase since we moved in 2 years ago - we're good tenants and anybody and their dog who could pass a credit check have already bought.
Friends keep asking us when we'll buy. We tell them that with rents like this we can't afford to buy!
Our biggest conundrum is what to do with our savings which keep piling up. We have two kids, and no debt. Maybe we should spend the money on something before the government takes it away to help bail out some DINK baby boomer speculators.
Here is a better one -- why do bitter renters and bubble sitters assume that everyone who "owns" a home bought it in 2005 or 2006? There are plenty of us who bought years or even decades before that.
Out equity is not going to be wiped out in a crash. Get over it.
HarbourView CDO Class Downgraded
The class A notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, has been downgraded from B to A-minus by Fitch Ratings.
Fitch also lowered the Distressed Recovery rating on the class B notes from DR5 to DR6, and assigned a DR2 rating to the class A notes. The rating agency said the deal has been in default since March 2005, when the principal balance of the collateral debt securities fell below the aggregate balance of the rated notes.
HarbourView III has exited its reinvestment period with a portfolio consisting chiefly of "diversified structured finance assets" as well as corporate debt and the debt of real estate investment trusts, the rating agency said.
Moody's Downgrades WCI
The ratings of WCI Communities Inc., a Bonita Springs, Fla.-based homebuilder and the parent company of WCI Mortgage, have been lowered from B1 to B2 by Moody's Investors Service, and its senior subordinated notes have been downgraded from B3 to Caa1.
The ratings outlook remains negative. The downgrades were triggered by WCI's "persistently unfavorable performance vs. expectations in 2006 and Moody's concern that this underperformance may last for much of 2007."
The rating agency said WCI's cash collections were hurt in the fourth quarter by delays in construction, in receipt of certificates of occupancy, and in getting buyers to closings, as well as by higher cancellation rates.
Moody's said WCI's ability to reduce debt leverage from its "unacceptably high" rate of nearly 67% to its target rate of 50%, and its ability to comply with financial covenants in its credit facilities, will be "greatly challenged."
Terwin MBS Class Downgraded
Class M-2 of Terwin Mortgage Trust 2004-EQR1 has been downgraded from A2 to Ba1 by Moody's Investors Service.
The downgrade was attributed to low credit enhancement levels vis-a-vis current loss projections. "This transaction is not performing as anticipated due to the rising loss severities, delinquency rates, and realized losses," Moody's said.
The underlying collateral consists of nonperforming, fixed- and adjustable-rate, first-lien residential mortgage loans.
Morgan ABS Classes Downgraded
Two classes from Morgan Stanley ABS Capital I Inc., series 2002-HE3, have been downgraded by Moody's Investors Service. Class B-1 was downgraded from Baa2 to B1, and class B-2 was downgraded from Baa3 to B3.
The downgrades were based on credit enhancement levels that are low in view of loss projections, Moody's said. "The overcollateralization amount is declining far below its required level due to the rising loss severities and realized losses," the rating agency said.
The collateral consists of fixed- and adjustable-rate first-lien residential mortgage loans.
Moody's Downgrades Homestar ABS Class
Class M-5 of Homestar Mortgage Acceptance Corp. asset-backed pass-through certificates, series 2004-3, has been downgraded from Baa2 to Ba3 by Moody's Investors Service.
The downgrade was based on deteriorating credit enhancement, the rating agency said. "While the collateral is performing better than expected, the overcollateralization has consistently been falling below its target as a result of lower-than-expected excess spread levels," Moody's reported.
The deal is backed by Homestar-originated collateral consisting primarily of alternative-A loans, with a small percentage of subprime loans.
CSFB MBS Class Downgraded
Class DB3 of CSFB Mortgage Securities Corp. mortgage pass-through certificates, series 2002-22 (groups 3 and 4), has been downgraded from B to C/DR6 by Fitch Ratings. Fitch also affirmed the ratings on 59 classes from 16 CSFB issues.
The downgrade was attributed to the deterioration of credit enhancement relative to monthly losses.
Another Subprime Lender shut its doors.
Dallas-based Concorde Acceptance Corporation, a subprime mortgage banking operation, has stopped funding new loans.
The company will shut its doors after funding the loans currently in its pipeline, according to an industry source.
http://www.housingwire.com/
2007/02/02/concorde-
acceptance-latest-lender-
to-close/
You dumbass homedebtors live in a shithole 30 yr-old house and pay more than I do for my brand new apartment and I get a garage with my unit. I live 5 minutes from work. You spend 2 hours commuting each day.
BTW - Have fun fixing the leaking plumbing and roof on the weekends while I relax at the park.
Boy, I'm glad I got into $700K debt so I could become and adult. We all know being an adult in America requires that you get into more debt than you can handle. At least you have that nice garage for the $700K
I live in a house bought at the bottom of the last crash so I'm all in the money. I want to get a newer, bigger and better house. I'm not a renter but I'm still disgusted with the run up in house prices caused by speculation. I'm not going to pay 800,000 for a house that was selling for 200,000 5 years ago.
For example, this listing from foreclosure.com of the town I want to buy in, notice one person who has 14 homes in foreclosure. WTF!!!
http://tinyurl.com/25hybc
This is a precursor to what is coming to YOUR town soon.
I'll buy at the very bottom, after prices have crashed 60% and people are afraid of buying real estate.
Please post the names and tickers of the Companies being sued over Option ARMs in California.
I might want to buy some puts after doing some research.
Methinks most sub-prime lenders will close by the end of March.
"Better than paying a landlord $18,000 and saving $0 in taxes".
We take the standard deduction so your statement is not true.
Get ready for higher rents boyz and girlz. I know on HP rents are going down everywhere, but here is what happens in the real world. I'd be bitter too if my rent increased 14% since 2004. But luckily my mortgage payment has increase 0% since. It will increase 0% this year, 0% next year, 0% the year after that too and 0% every year for the next 20 years until I will have a $0 mortgage payment.
Keep living the dream renters!!
Updated 2/4/2007 11:57 PM ET
By Noelle Knox, USA TODAY
Renters be warned: Landlords are expected to raise apartment rents for a third-straight year in 2007, forcing tenants to turn over a growing chunk of their pay and making it harder to save for a home, a report to be issued today by Marcus & Millichap finds.
With the projected rise of 5% this year, rents would be 14% higher than at the end of 2004, the report says. Over the same period, paychecks are expected to rise 4%, adjusted for inflation.
The widening gap is likely to worsen the crisis for workforce housing, especially in coastal cities, says Hessam Nadji, a managing director at Marcus & Millichap, a real estate investment brokerage. "This is a national trend. We're seeing rents rise in the majority of markets, and we see this continuing for at least three years."
From 2000 to 2004, most landlords couldn't raise rents because so many tenants were leaving to buy houses or condos. To feed that buying frenzy, about 300,000 apartments were converted to condos for sale in the past three years. Now, even with 92,000 new rental units this year, the stock is still too little to meet rising demand.
Dittio to the renter, but I bought from a FB.
Been there done that--I am an adult and man do I like OWNING my apartment. Its small, but hey I walk outside and viola--cafes, movie theatres, bars, park (lovely one at that) museums (two). So yea I BOUGHT, I pay $1050.00 per month total and the world is at my door. Get to save a lot of money and have a lot of fun that does not involve driving, working on the house, or watching TV.
Here's the other thing... aren't there any good investors out there? I mean owning a piece of RE doesn't exactly correlate vis-a-vis with an investor's frame of reference.
Using a tax-deferred IRA or self-directed 401K, you can actually grow your savings w/o annual capital (or short term cap if swing trading) gains plus dividends which also saves in taxes since that income isn't on the income stream radar for the IRS. Why is it that only RE is considered a way of deferring taxes?
We like our landlord, he's a nice guy. We've been renting this 2b/2ba house from him since April 05'.
He knocked off 100 dollars a month for a 1 year lease with us, and in return he gets dependable tenants that take care of his property, and we pay rent on time. Nothing ever breaks and we dont cause him any grief, so he has not increased our rent one penny.
It's a win-win situation for both of us.
From what I have seen, renters generally have smaller places but live in BETTER neighborhoods than homeowners, and always closer to work.
"Let me get this straight... I pay a bank $24,000 for the privilege of saving $7440 on my taxes? Am I missing something?"
LOL! I love this blog. Really, I mean why spend $1 to get $.25 back?
I rent and save looking to buy sometime in the future. Whenever, no emergency. If you knew what my cost of living is (rent vs. what I earn in simple interest) your jaw would fall off your head. Who knows, when I feel the price is right, Ill buy. Again, who knows, maybe Ill put 75% down.
I love being different.
"I'm not going to pay 800,000 for a house that was selling for 200,000 5 years ago."
Please get out of my head...
Funny thing is, if you ask someone who bought pre-boom whether they would buy today...they all say no way f'ing way prices are way too high...
Looking forward to the return of rational thought.
You people are idiots, learn how to build a house and you won't be pissing your money down the drain every month. The winners in life own homes, name me a rich individual who rents. Bunch of poor jackasses. You keep working for the man, and keep touting all the money your saving. Don't have a clue.
Can some of you that are current homeowners explain to me why you keep a house that has so much equity it in when you foresee a price drop? You can extract up to 250K (more if married) in tax free money. If you're anywhere near the average income earner then that would take years to save.
If it was a family inheritance with a lot of history to it I could understand but a house in a subdivision? I'm not trying to be patronizing here but when some of you talk about a change in value of 20-50K without batting an eye I'm curious...if it takes you a year or two or more to save that kind of money it just seems like a decision made on emotion and not logic.
Okay -
I have a condo - I live in it and pay a mortgage. Why - because I like where I live and get tax benefits from the mortgage interest deduction and property taxes. It costs me to own this unit ($808 p/month) less than it would be to rent ($1,000) something with the same features - without the tax benefits.
I have a second condo - I rent it out. Why - because it costs me "nothing" to own. The renter's payment to me ($895) covers the mortgage, taxes, HOA fee, etc. It isn't a "cash flow" producing property - just break-even - prior to any tax advantages, depreciation or deductions.
I live in an area of the Pacific NW where neither property has resulted in a significant "bubble" loss of value. They are holding steady. And, I purchased these units (at different complexes) prior to the bubble crash. My ownership plan for each unit is long term....
So, I'm staying the course, holding steady, and holding out for long term benefits for ownership of each property.
Am I buying additional property right now? No. Will I in a year or two - perhaps.
My real estate ownership is part of a diversified portfolio - I also have stocks, mutual funds, a Roth IRA, 401(k), and cash savings. I've gone from a "negative" networth (debts only) five years ago to almost $500,000 today by living below my means, saving agressively and doing research on any thing I buy or invest.
Let me get this straight... I pay a bank $24,000 for the privilege of saving $7440 on my taxes? Am I missing something?
Apparently you are. Through principal buydown and lump-sum savings, I should be able to pay off my mortgage completely sometime in early 2008.
And the comments I got (first from my family, then from my coworkers) were all "Why would you want to do that? You'll lose your tax deduction!"
So I explain that I'm paying $3 in mortgage interest for every $1 I save in taxes, and paying $3 to save $1 is a losing proposition.
Their reply? "Why would you want to do that? You'll lose your tax deduction!"
From what I have seen, renters generally have smaller places but live in BETTER neighborhoods than homeowners, and always closer to work.
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Exactly right Anon!
"You can extract up to 250K (more if married) in tax free money. If you're anywhere near the average income earner then that would take years to save".
The only way to "extract 250K" is to sell the house outright. Refinancing only gets you higher taxes and bank fees.
Renting a small place. Small enought that there is nothing else to buy such as furniture, carpet, cookware etc. Wifes commute: two miles. I can walk to my mass transit. Money saved on commuting cost in our environment amounts to sizeable cash. Convenience, a big plus.
The only way to "extract 250K" is to sell the house outright. Refinancing only gets you higher taxes and bank fees.
Which is clearly what was being suggested. If you think there is going to be a significant drop in house prices and you currently own a house the obvious thing to do is sell it and buy it (or one similar) back again when the prices fall.
Don't forget the time consumed dealing with all those gazillion bills; dealing with all those crooks involved in real estate, from sleazy contractors to real estate clerks. Meanwhile, my online bank sends, automatically, just one check for rent, while utilities are debited automatically on credit cards. The rest are automatic transfers into stocks and savings, and my Quicken program downloads everything automatically. It feels great to not have bills or crooks to deal with. It must be crazy for these homedebtors to deal with all that mess, plus commute with leased gas guzzlers from the boonies, everyday. No thanks; I pass on that stupid and phony lifestyle.
"We are moving down to Coral Springs, FL. in 3 months. Our choices are to buy a 2500 square foot house for $575,000 and 20% down. Property taxes $11000/year. Insurance $3000/year."
Let it go again, the people who want to move to hurricane state, but won't be able to find or afford insurance. BTW, $3,000 for home insurance in Florida is way too low, if you can find any. There's no way you will find any company willing to insure a $575k home for just $3k / year. That's a myth. I've lived in Florida for 15 years. Did you see all those home owners in central Florida that were hit by tornadoes? The majority of them don't have insurance and are waiting for the government to bail them out, even though their homes were expensive. Why anybody would move to Florida, a hurricane and tornado state, with no company willing to insure homes or businesses, low paying jobs and high crime, high inflation, crazy traffic, low quality of life, is beyond me. Do you know how much you need to live in Florida these days, according to Money magazine? $100k minimum. How many people make that kind of money? People want to play the role or be a retired bum in Florida but end up in a huge financial hole, like those homeowners hit recently by tornadoes. And the hurricane season is around the corner, which will certainly bring more unpleasant and costly surprises.
"Living in a rented McMansion and paying $1500, $2000, $2500 a month is great...if you're in the 10% tax bracket. If you're in the 31% bracket like me it's awful. Out of a $2500 mortgage of which $2000 is interest, I get back $620 every month as a tax break."
Only a fool would calculate return that way. Mr. Big Shot, learn first to calculate "CAP Rate" before thinking that you are making a killing with you McMansion. Things are not what they appear in Finance.
Don't forget the time consumed dealing with all those gazillion bills; Meanwhile, my online bank sends, automatically, just one check for rent, while utilities are debited automatically on credit cards.
HUH?
My mortgage payment is automatically taken out of my bank account and every utility bill is paid via e-bills.
Do you honestly think only renters can pay bills online? God you are dense.
8:32,
So hat you're saing is you are living the life I led 10 years ago in college. Small, shithole apartment, barely any furniture and close to work (school). But see, that's why I went to college, to be able to afford better in life.
I just don't get you people.
"If you think there is going to be a significant drop in house prices and you currently own a house the obvious thing to do is sell it and buy it (or one similar) back again when the prices fall."
It all depends when and where yo bought the home. I bought in 2002 well under bubble price. House tripled it's value in last 3 years. Let's say i sold now and bubblesat (tempting!). Even if the home values dropped by 50% I still wont be able to afford the same home under convemtional terms. That's the crazy shit. Plus I would be giving up my rock bottom interest rate of 5.375 on a simple 30 year loan for probably some toxic shit loan FOR THE SAME HOME I AM IN. Fuck that, you see it doesnt make a lot of sense for some of us to sell. Plus my commute is a hellish 15 minutes,a nd yes I am in the boonies ;-(. BUT I make non-boonies salary. I am very lucky.
why do all you renting freaks assume every home owner
a) has $700K of debt
($280K mortgage on $700K assesed home which I bought for $345K)
b) lives in a suburb
(live downtown)
c) bought at the peak
(bought in 2000)
d) can't afford the payments
(could afford it in 2000, can afford it today at double 2000 salary)
e) pays more than what the same house rents for?
(mortgage payment about $500 less than what similar house would cost to rent today)
Your capacity to generalize is outstanding, I'll give you that much. your ability to reason/think critically...not so good.
Hey anon, here's a rich guy who rents. Look up Dean Baker, finance wiz/economist/author. B/c you're probably not well read, I'm guessing you might have missed this.
http://preview.tinyurl.com/ynrnty
Sorry, Frank Rumbauskas, I had no idea. I guess what I was referring to is somebody who is actually wealthy, not someone with a few mil. You see if you were actually rich, like you claim, you wouldn't be worried about a housing bubble. That was my point. Here is my statement, if you are worried about a housing bubble you are NOT RICH!!! That't to all of you. Here's to your first real riches. Congrats on your #1 spot.
"if you are worried about a housing bubble you are NOT RICH!!!"
Some people don't understand that the real rich understands and plays the system. It's about the principal of Finances, not the succumbing to the pressure of peers or relatives to keep up with the Joneses.
The true rich picks up pennies on the ground. That's why Warren Buffet only trades his cars after 10 years old and leaves on the same discrete house forever in order to build huge equity. Why do you think that the ultra rich Arnold S, the governor of California, sold some of his Santa Monica properties (adjacent to his main house) at the the peak of the bubble for an amazing return? It's about the principal.
Rich people invest in real estate only when the CAP RATE makes sense. I suggest you read the book "The Millionaire Next Door" to understand who the rich people truly are in this country.
You must be thinking that rich is that guy who shows off expensive toys. However, most of the time, people like that are leveraged up to the wazoo.
Anon 6:28 has wisdom. Growing = discarding. Not everone wants the same thing, and our desires change over time.
Many very wealthy people live in apartments like the Helmsley. The Millionaire Next Door comment is also accurate - having large amounts of cash does not imply that you will pay absurd amounts of money for things (just the opposite).
Dollar bill becomes worthless tomorrow, what do you have renters? Some paper to wipe your ass with. The homedebtors, have an asset that can be paid for with less valuable currency in the future. If the own the home outright, they have at least something. This is the main reason the rich own vs rent. Know one can predict the future, if we all claim the housing bubble collapses and most on here believe gold to skyrocket, then what is in store for the dollar. We all know we are japans and china's bitch, what if they fold on us. We'll fold. Could happen, and you renters will be holding nothing but green paper with no value.
"Dollar bill becomes worthless tomorrow, what do you have renters?"
We have common sense and financial knowledge to invest in real estate ONLY when the CAP RATE makes sense.
Regarding the biggest lie ever created to fool naive Americans, that your home is your biggest asset, I don't think that the gazillion home owners in New Orleans, the others in central Florida without insurance who got hammered by the tornadoes last week, and the unemployed in Detroit and Flint, who all lived to pay mortgages and taxes, cannot possibly agree with your reasoning.
Seventy five percent of Americans live from paycheck to paycheck. And since 70% are homeowners, it's clear that homeowners are not doing so well financially. Also, don't forget that 40% of Americans can't afford health care insurance.
Furthermore, only half of U.S. workers participate in employer-sponsored retirement plans, and 80 percent of small business employees have no plan at all.
Nearly 40 percent of all households have no retirement savings accounts of any kind beyond Social Security. Half of the households headed by a worker aged 55 to 59 have $10,000 or less in a 401(k) or in an IRA. Of that age group, 36 percent have no 401(k) or IRA savings.
So, here we are with this mountain of evidence telling you that home ownership is not doing crap to improve the lives of Americans.
That last poster is full of shit. My mother in law bought her SoCal home in 1980 for 110k. Husband died in a car crash, she got a second job and she paid the house off in 2002. She sold at the peak in 2005 for a whopping 627k. What a profit. She bough a condo cash and I invested the rest for her earning her about a cool grand a month. That along with her pension AND social security. The beotch pulls in more cash than I do a month!!!!!! Thats what renters faile to see. The payoff at the end of the tunnel.
"many of us got RICH by shunning the myth that a house is an "investment."
I highly DOUBT there are many of you. You must be an exception. BTW...This is like the 3rd time I have seen your post about how you have a #1 seller, Live in OC, BLAH BLAH BLAH. Almost like you are lying. Like my dad always said...if you have to advertise it..you dont have it!
btw..stop boasting. You sound like a real asshole.ohhhh...and go fuck yourself while you are at it Chad.
LOL thank you anonymous for showing your angry envy!! And if you think I'm lying just Google my name, pal.
I don't brag to "prove" anything other than the fact that there are some very successful people renting, because they weren't dumb enough to buy in the ponzi-scheme bubble market like you did.
Hell, I personally know another author/marketer who made $20 million last year and rents his house in the Hollywood hills for 1/3 the cost of what he could buy it for. Rich people don't make dumb mistakes like you did. It takes brains to get rich.
Something like 80% of Americans are "homeowners" and yet only 2% of Americans are millionaires ... what's wrong with that picture????
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