April 14, 2007

"Why renters are dumb and why you should buy a house now" NAR spin piece

Seriously, this "Smart Money" magazine article reads like it was written by the NAR and The Corrupt David Lereah. I wonder if the writer, Colleen DeBaise, and her rolodex of "experts", or Smart Money itself, was paid by the NAR. Or maybe she's a Desperate Homedebtor looking to get out from under her debt trap by pumping the market. Whatever the case, something is not right in Denmark.

Written in the Faux News "Fair and Balanced" approach and being neither, this article really shouts out to me "renters are stupid fools, and now is a great time to buy!"

You can email the "reporter" at cdebaise@smartmoney.com, and email Smart Money for being so stupid in publishing the exact wrong advice at the exact wrong time. Man, Smart Money is now from here on out an untrustworthy rag in my book. Here's the low-lights:

Embracing Real Estate

EXCUSE #1: "Everyone is way too insane about real estate." Count this as the "protest" renter — the person who perpetually rents, who thinks they're too cool for school and doesn't want to be one of those people who talks about renovation projects at a cocktail party. (The true "protest" renter also protests cocktail parties.) These people might also fear growing up, becoming their parents, owning guest towels, etc.

Counter: Well, owning your own home IS a responsibility — and if you're not ready for it, then don't do it. Of course, you'll miss out on nice tax breaks for mortgage interest and property taxes, which make owning a compelling proposition for many. Not to mention, you're not exactly building equity when you split the rent with the roomies

EXCUSE #2: "Renting is a good deal." Truth be told, there is some logic to that. After all, if something breaks in your rental apartment, you just call your landlord. You don't spend money on pricey renovations. Heck, you don't have to pay property taxes. And if you've got enough money for a down payment, why dump that cash into an expensive home, when you could use it to buy something like stocks instead?

Counter: Many people consider their home an investment. That means even if your home doesn't appreciate as much as your favorite stock or exchange-trade fund, you still gain because it doubles (hopefully) as a nice place to live.

EXCUSE #3: "Buy a house on my own? Then I'll really never get married. What do I do next — buy a cat?"

Counter: Tsk, tsk, says Francis, who hosts "Savvy Ladies" seminars to counsel women on personal-finance decisions. She's heard this excuse hundreds of times from female clients. "I call it the 'Prince Charming' syndrome," she says. "They put their life on hold until they find that Prince Charming.

EXCUSE #4: "I'm afraid of commitment."

Counter: Most experts recommend that you stay in your house at least three to five years, to recoup costs associated with closing and to see an increase in the home's value.

EXCUSE #5: "I'm worried about disaster striking." But should it stop you from buying a home?

Counter: Nope. Historically speaking, property values bounce back, especially if the disaster happens in a desirable area


panicearly said...

I just emailed her and asked if she is sleeping with David Lareah. Also told her that crack whores have more integrity.
I doubt she willreply..tsktsk

A Doctor said...

Did the author ever stop to consider maybe alot of us ARE looking to buy, but were long ago priced OUT of the market after we rationally decided we're NOT willing to commit financial suicide like the rest of these lemmings?

I mean, granted: we all cannot afford the fancy $720k home unless we're making the big-time ($15k/yr) salary of a field worker! For example:


Sure, I understand that we all can't be stupid field workers who can easily be defrauded (since we can't read ANY language, let along comprehend the fine print of a contract in English), and hence why we're NOT smart enough to buy?

Foolish, stoopid me, graduating with a doctorate degree from U.C. Berkeley, and just sitting on the sidelines as a renter, pulling in a six-figure income!! What a fool I am, when I could've been picking crops and living the good life in a luxurious home (at least until they foreclosed on me)!

Perhaps the BETTER QUESTION is why some of these idiots are willing to rush to buy in a market where even the "angels" fear to tread?

Oh, yeah: they were spurred on by widespread realtor and mortgage fraud, for one, with naive buyers foolishly trusting a "licensed professional" who only had their eye on the fat commissions they'd earn REGARDLESS if the buyer could afford the house or NOT. How's THAT for the embodiment of "professionalism"?

FWIW, people like me who ARE regulated by a state professional board are thoroughly disgusted by the stunning lack of enforcement by the Dep't of Real Estate (DRE); they've completely and utterly failed at their primary mission, as an office of the Department of Consumer Affairs, i.e. they've failed to protect consumers from rampant and widespread fraud.

Here's the winning quote from the article, quoting a lawyer representing defrauded borrowers:

"I neither expected nor have I seen anything like this in all the years I've practiced law. It's as if in real estate it's gone back to the Wild, Wild West of San Francisco in the 1800s."

And you ask why I won't jump in to the fray? You've GOT to be kidding....

chris g said...

I agree that waiting for disaster to strike is an exercise in futility...don't bother predicting what Mother Nature will do. Heck, the weather forecasters are always lambasted for being wrong more often than even David Lereah. Why trust them?

On the other hand, the notion that people want to talk about renovation projects and other dull topics about real estate at cocktail parties is part of the whole problem why people continued to buy real estate at ridiculous prices. Is your life so dull that you don't have anything better to talk about at a party? I can think of much cheaper things to do, that are actually worth discussing. Just about anything on the map, other than real estate, would be a better idea.

samac said...

Good one, but you should go easy on her. Remember though that she writes for SmartMoney, which does not indicate a high level of financial/ analytical ability. People don't go to business school (or learn math for that matter) to get that job.

SmartMoney is the Star magazine of the finance publication industry. Low grade drivel with a readership comprised primarily of people trapped in dentists waiting rooms. Also financial illiterates seeking investment advice without the ability or desire to consider pesky details like numbers. In my estimation- I am a bit of a snob when it comes to these mags, barrons, WSJ, FT & economist are intelligent person's staples.

But seriously, if someone admits they subscribe to this mag, maybe they can identify other moronic articles for amusement.

bickerer said...

Had to be paid for, that's my take.

Maybe thru advertising deal, advertising thru affiliates, something.

It might not be ethical for me to put this wad of cash in your pocket. I'll put it in your brother Fredos pocket, you got me?

Anonymous said...

Renters are Dumb and help others like me get wealthier.

Anonymous said...

The Truth hurts
BUBBLE BUTT LOSERS!!!!!!!!!!!!!!!!!

house of pain said...

Heebner Says Home Prices May Fall 20% Amid Bad Loans
By Sree Vidya Bhaktavatsalam and Brian Sullivan

April 12 (Bloomberg) -- Kenneth Heebner, manager of the top-performing real-estate fund over the past decade, said U.S. home prices may plunge as much as 20 percent because of rising defaults on riskier mortgages.

Subprime loans, made to borrowers with a history of missed payments or untested credit, and ``Alt-A'' loans, which require little or no documentation, account for about $2.5 trillion of the $10 trillion in outstanding mortgages, according to Moody's Economy.com. As much as 40 percent of these loans may default, flooding the real estate market, Heebner said.

``It will be the biggest housing-price decline since the Great Depression,'' Heebner, 66, said today in an interview in Boston. Prices may fall by a fifth in some markets, he said.

That would leave home prices at levels last seen in 2003 and 2004, the middle of boom that lifted prices to a record in 2005. The damage from high-risk mortgages will slow the U.S. economy, though not enough to send it into a recession, Heebner said. Fourth-quarter growth was revised to 2.5 percent from 3.5 percent because of housing, the government said March 29.

Heebner, who co-founded Capital Growth Management in 1990, manages the $1.6 billion CGM Realty Fund. The fund has gained an average of 20 percent a year in the past 10 years, the most of any real estate fund over that period, Bloomberg data show.

Falling Home Sales

Sales of new homes will tumble 16 percent in 2007, according to the National Association of Realtors. Existing-home sales will fall 2 percent, the first drop on record, the Chicago-based trade group has forecasted. Subprime mortgage delinquencies climbed to a four-year high of 13.3 percent in the fourth quarter, according to the Mortgage Bankers Association.

Fallout from subprime-loan defaults will also hit hedge funds, and to a lesser extent, mutual funds, that bought collateralized debt obligations and other securities backed by such mortgages, Heebner said. The investment banks and brokerage firms that package and sell these products won't get hurt because they have passed on the biggest risks to the investors, Heebner said.

``They know the product is toxic; they're not going to get caught,'' Heebner said.

The CGM Realty fund does not invest in such securities, he said. Heebner said he has sold his shares of real estate investment trusts that invest in apartments because they will face competition from single-family homes that have been converted into rentals. His fund had 35 percent of assets in apartment REITs such as AvalonBay Communities Inc. at the end of last year.

Mining Companies

He's buying shares of mining companies that benefit from growing infrastructure needs in India, China and Russia. CGM Realty Funds also holds shares of Las Vegas Sands Corp., the casino operator that is developing real estate in Macau, China, and Mexican homebuilder Desarrolladora Homex SAB.

Heebner is known for making concentrated investments in a few industries. He sold homebuilders after owning them from 2001 to 2005, record years for home sales. He bet against technology and telephone stocks in 2000, correctly timing their collapse.

Heebner, whose Capital Growth Management has more than $6 billion in assets, also manages the $2.3 billion CGM Focus Fund. The fund has advanced 13.5 percent this year, making it the top- ranked diversified U.S. stock fund, according to Chicago research firm Morningstar Inc.

bubbleglum said...

Excuse # 6:

I don't want to get financially raped in a housing market collapse that's going on now.

Counter: Why not? Everyone else is.

Anonymous said...

the information seems to counterdict itself... 1st it says you get tax breaks and so buy a home and then it says you don't pay property taxes if you rent... so who gets the bigger tax break? actually, renters still pay taxes but their landlords fight to keep them low. the homeowners don't have such clout...

belchorama said...

A Doctor:

I'm also a UCB PhD, I'm of the 05 vintage. I'm renting half of a duplex on the peninsula and am apparently in the same financial boat as you, unfortunately I am also making more than 15k and have a better understanding of mortgage contracts than the average strawberry-picker, so I too am priced out by way of competence. Always good to find myself in the company of a fellow UCB alum, even when it means that we are "BUBBLE BUTT LOSERS". I love that the bubble pumpers have begun resorting to third-grade name-calling now that the mainstream news has finally turned and they can't even justify their positions with the pumped-up happy numbers quoted from the NAR. This is really getting fun to watch now eh? I've found that taking out some put options on RE industry stocks has made it even more entertaining. I bet I have more equity in put options at this point than the average home"owner" that has purchased in the last couple of years has in extractable equity on "their" house.

dumbmoney loses said...

she's convinced me to take out a suicide loans for that $500,000 starter crackhouse in the East LA barrios.

bitterrenter4life said...

Reading that makes me want to hop in my 12 year old honda - hope it starts!, and head down to the library to get a book on buying my first home.

Anonymous said...


Anonymous said...

PKK grandma here:

Re Tax breaks for interest on real
estate home loan:

?You haven't come across mention of
proposal to drop that? I have in last
two years more than once.

Very worrisome.

Shakster The 4th horseman said...

Well I Guess I don't have to envy them(renters) so much anymore.All because some Ditz can write an article.My payments are really easy,but I miss the days of renting.The renters are the ones who will get unamaginable deals on homes when they decide to pull the trigger.Until then ,I will be practicing my Low baller technique on real trolls ,FBs,and banks.

Anonymous said...

EXCUSE #4: "I'm afraid of commitment."

Counter: Most experts recommend that you stay in your house at least three to five years, to recoup costs associated with closing and to see an increase in the home's value.

The recent NYT piece analyzing buy vs rent concluded that due to current housing pricing one must spend 11 years in a home purchased today to be more cost effective than renting the same place.

anonymous wimp said...

What excuse have YOU come up with to not put a fat commission check in my hand?

The New York Times rent versus buy graph for me:
Rent: $2500
Buy house currently renting:$650000

How long to stay to make it worth buying: NEVER!

Seriously, that's what it said!

On the traditional P/E calculation of 120x gross monthly rent, the house would be worth $300k-400k, roughly half the last asking price. This could get ugly

Hayley said...

Panic Early - Just what do you say to yourself to make that kind of attack OK. Pathetic and lonely man are we now....

So sorry...

Anyway... for the folks at HP worth paying attention to...

This girl's probably at a stage of life and was raised in an income bracket where thinking makes it so, or, if you make a mistake you can always turn around and correct it with mom and Dad and your private school cohort for support... Surely they know someone in investment banking who can bail you out ...

Anonymous said...

"``It will be the biggest housing-price decline since the Great Depression,'' Heebner, 66, said today in an interview in Boston. Prices may fall by a fifth in some markets, he said. "

1/5? Heebner us way too optimistic.

TM said...

The advice in that article would have been just awesome... in 1994.

Some really shitty advice at the moment, though.

Next thing you know, she'll be singing the glories of annuities.

Anonymous said...

"you're not exactly building equity when you split the rent with the roomies"

Yeah, you're baking the extra cash into pies or something, anything but building equity.

Anonymous said...


By Anonymous, at April 14, 2007 5:58 PM"

yeah.. but that other kind is ok!

Anonymous said...

article really shouts out to me "renters are stupid fools, and now is a great time to buy!"

Renters are stupid fools. This article just tells it like it is.

Anonymous said...

Renters are stupid fools. This article just tells it like it is.

Never trust anyone who throws out absolutes: for example, Apple stock is a good value at a certain price/time, but may not be a good value at a different time. Guess what? This is NOT a good time for houses, and I'm putting (or NOT putting) my money there.

Dig your head deep in the sand and refuse to listen to current data: that's your business, as it's YOUR money to "invest" as you see fit.

The reality is many here have run the rent vs buy calculation for OUR area, and you couldn't convince me to buy now even at 50% off asking, knowing what I know about market conditions (I'm in California, which is highly over-valued).

Anonymous said...

Oh, yeah: my town has a GLUT of rentals right now, and rental rates have plummeted. This is a town where basic affordability was touted in the MSM, and hence became one of the HOTTEST markets in 2003-2004.

What happened here is that out-of-town investors flocked here, on the assumption of either flipping the house in a short period of time, OR becoming a landlord, locating a stupid renter to pay for the property for them.

Of course, the sales volume has completely plummeted, as many of these buyers didn't really WANT to buy for themselves or because they LOVED the area; now the houses are sitting on the market, NOT SELLING, since no one's interesting in buying here after the speculative buyers pulled out.

So these trapped buyers of "investment" properties are ALL trying to rent at the same time, to help them buy some time to cover the cash flow loss and sinking property value. But not surprisingly, they are now finding they can't find renters! Everyone and their brother had the same idea of snapping up property as an "investment".

So who's the idiot now?

These greedy "investors" can choke on their homes, for all I care: those who got the greediest and snapped up multiple homes on the market (driving up prices higher) are in the most pain right now.

Anonymous said...

I would rather be called a foolish renter then be in any, or all, of the following circumstances:

a.) homedebtor watching their home value vaporize.

b.) subprime loan changes with no escape route.

c.) face foreclosure.

Anonymous said...

I would rather be called a foolish renter then be in any, or all, of the following circumstances:

a.) homedebtor watching their home value vaporize.

b.) subprime loan changes with no escape route.

c.) face foreclosure.

April 16, 2007 1:15 PM

Good point. Either of those must feel like the huge stomach cramps/sweat one gets after eating too much taco bell. Except the pain drags on and on and on, night after night after night. Ouch.