June 27, 2007

Forbes magazine puts a dagger in the heart of the housing industry: "Don't Buy That House"

The MSM is going HP


The dream of owning your own home is as American as apple pie--and (supposedly) better for you. Over and over, we are told that homeownership will make you happier, healthier and wealthier. Heck, it's even supposed to make you a better citizen.

Of course, there are times when, depending on your age, your savings and your income, buying a home can be a smart decision and an excellent way to build wealth. But is buying a home really such a universally good idea?

It's hard to separate fact from propaganda.

Certainly, the virtues of ownership have been preached loudly and from on high. As early as the 1920s, Herbert Hoover extolled home ownership as a pillar of family life. Nearly 80 years later, President Bush reiterated the message, stating "there's no greater American value than owning something, owning your own home and having the opportunity to do so."

But to realize that America's mania for home-buying is out of all proportion to sober reality, one needs to look no further than the current subprime lending mess. In the last decade, riskier lending practices combined with historically low interest rates and federal subsidies have encouraged a wave of low- and moderate-income households to buy homes.

As interest rates--and mortgage payments--have started to climb, many of these new owners are having difficulty making ends meet. At the moment, a record 250,000 mortgages are in foreclosure--that works out to more than 0.5% of the entire U.S. mortgage market.

So if something in your gut--or on your bank statement--tells you that now is not the right time to buy, resist the pressure. There may be no place like home, but there's no reason you can't rent it.


Anonymous said...

Bitter home owners all over America now will rue the day they got Suzanned.

Anonymous said...

But to realize that America's mania for home-buying is out of all proportion to sober reality, one needs to look no further than HOUSING PANIC.

Oh Keith I thought they were going to give you that mention.

Anonymous said...

Does Paraguay have a national anthem or just a fight song?

w used to be a cheerleader in college afterall...

Anonymous said...

Just today, person I work with closed on a 2/2 condo in the chicago burbs. Says she got a 'steal' and her agent is so good, that she got her 4k back at closing.

Prime example that the sheeple are nowhere near fear yet. I'm hoping more MSM articles like this turn the herd.

Anonymous said...

Now that the MSN is saying not to purchase real estate, perhaps it's time to starting looking for real estate deals?

Anyone else starting to get ichy?

Any speculation on how far we are from the bottom?

Anonymous said...

yeah how many people in the sub-prime world read Forbes. talk about preaching to the choir.

Anonymous said...

Anonymous said...

Does Paraguay have a national anthem or just a fight song?

w used to be a cheerleader in college afterall...

June 27, 2007 7:06 PM


true. but unlike clinton he didn't burn the flag at anti-war rallies in England.

Other cheerleaders in college:

Dwight Eisenhower was a cheer leader too.

RiperDurian said...

"U.S. Nearly 70% of all Americans own their own homes; only 34% of the Swiss do. Thriving cities like Hamburg, Amsterdam and Berlin have rates of ownership of just 20%, 16% and 11% respectively, according to the United Nations."

Darn interesting numbers. Americans have been so completely duped.

SPECTRE of Deflation said...

Hell even Ray Charles could see it, yet the MSM is just now catching a clue, and also remember that these are the same goofballs that the sheeple watch or read. I can't help but chuckle at the absurdity of it all.

Anonymous said...

Only people duped were readers like riperdurian.

Comparing cities in Europe with the US is a little apples to bananas. How about comparing city vs. city. NY City's rate is 30%.

Home ownership in most big US cities below 50%. And by cities I mean just city, not surrounding suburbs.

It's the suburbs, exurbs and rural areas where ownership is high, 95%+ in some parts of the country. And I'm sure if that is the case in Europe as well as I don't see many farms rented out in Germany or Switzerland either.

The lack of analysis from the MSM is to be expected. What I don't expect is HPers to be so glible as to believe everything they read.

sam said...

"yeah how many people in the sub-prime world read Forbes. talk about preaching to the choir."

Some of the idiot lenders out there do read Forbes, and that will do more good. Access to excessive credit has enabled the smart and the stupid to do stupid things.

I was analogize that subprime became akin to giving a 5 year old a loaded weapon and encouraging him to go play with it unsupervised, but mid analogy realized that 1) subprime borrowers must take responsibility for their predicament and 2) children can handle guns when properly supervised.

Frank@NeverColdCall.com said...

Heck, it's even supposed to make you a better citizen.

This is especially true in Scottsdale where all renters are automatically classified as common criminals.

Even the option-arm idiots who are in foreclosure get more respect than renters in that town. It's pitiful. Ego gone out of control.


Mark in San Diego/Zurich said...

Glad they mentioned only 30% or so of Swiss own their homes - a very prosperous country, stable population that votes at an huge rate, and most rent!!! With a nice stable currency backed with a lot of gold. . .so much for homedebtors of the USA.

Anonymous said...

Waiting in Tampa....
We moved here in the Tampa/St. Pete area May 06 (job related).
Reading sites like this and my own contrarian engineering math abilities caused me pause in buying a house.
In our zip (good schools) a 4-bed house with a pool was MIN $400,000 at taxes were $5000 a year, insurance about 1/2 that.
So, a total payment of MIN $3000 a month at 6%.
The market was just starting to flatten, so I scored a rental home in a nice sub for $1750. You do the math - I save $15,000 a year.
The homes now have fallen to about $335,000 MIN, a 15% drop, but still high.
The tax reform law is to be voted on early next year, and the $5000 in taxes will drop to $1500.
I expect the MIN to drop to $300,000 by then.
Total outlay will be around $2000 a month not $3000 like a year ago.
By then I will have saved $30,000 by renting, and almost $500,000 over 30 years.

Anonymous said...

NPR's audience is 38% college eduacted. Rush Limabugh's is 37%. CNN is 28%, Fox is 23%.

So please from now on relax with the look at me I'm so smart I listed to NPR and watch CNN bullshit, OK?


Anonymous said...

anon 8:59 pm:

"Comparing cities in Europe with the US is a little apples to bananas. How about comparing city vs. city. NY City's rate is 30%."

Yes the CITY of Switzerland comes in at 34%. Doofus.

Assuming your NYC number is correct it is 3 times that of Berlin.

Sounds like someone wants the koolaid to keep flowing. You like grape or cherry?

RJ said...

Anon said:
"Anyone else starting to get ichy?

Any speculation on how far we are from the bottom?"

Nowhere near a bottom yet. We're just getting started. Interest rates on the ten year are hovering around 5.10% and the dollar isn't rallying. In fact, the dollar is losing ground to the Euro, Pound, RMB and even the Yen. Interest rates will have to increase as Treasuries compete with "sovereign wealth funds" in the emerging markets. Rising interest rates are going to destroy the housing sector over the next couple of years. Remember, prices drop below the median in a serious correction. That could mean as much as a 50% drop in prices in areas with bloated inventory and high rates of foreclosure.

SPECTRE of Deflation said...

Keith,good news on the Amnesty front. Drudge has this headline with the siren. Our voices can and will be heard.

Immigration Measure in Doubt Over Senate Defections

Anonymous said...

"U.S. Nearly 70% of all Americans own their own homes"

Oh yeah? I just think of what % of that 70% used their homes as an ATM machine over the last few years....

I would bet, that its MORE than 30% of that 70%.


For once, get your head out of your ass, and THINK for yourself chump.

get it right! said...

WHY, why, why do all the experts pin the housing crash on "people with bad credit scores?"

Ever heard of JOB LOSSES????

Ever heard of PAY CUTS????


Ever heard of BUSINESS DELINES????

Its Not just low credit score (subprime) people that are in trouble. Every week in the news, there is ALWAYS another company letting go of MORE J-O-B-S!!!!!!


Michigan alone has lost 300,000 jobs since the Bush regime implemented the fake 9/11 attacks on America...and thing are getting WORSE!!!!!!! WAKE-UP! IMPEACH THESE GOP CLOWNS! NOW!!!!!!!!!!

ignoring history said...

What a lot of folks do not like talking about is how demogaphic changes and even government policy blast away at the "value" of your investment. Imagine once a famly saved hard and scimpted and save for five years to save for a downmpayment for a house is West Baltimore in 1939. Great German-American middle class neighborhood homes valuable, schools good. By the time the 25 year mortgage was paid off in 1964, West B-more had become a mostly black shithole and houses were worth next to nothing--how many times has this happended in Camdem, Detroit, Bronx, Miami, New Orleans, LA, Chicago, Brooklyn, etc...... Many inner ring suburbs in places like Dallas, Housingon and Phoenix are becomming little Tiajuannas with 8 people lining in 1980s suburban tract homes........Me? I am renting.

Anonymous said...

Other cheerleaders in college:

...that guy in high school that used to wear eyeliner.

Anonymous said...

Beazer Fires Chief Accountant
Amid Probe of Mortgage Unit
June 28, 2007; Page A10
Beazer Homes USA Inc., facing a federal investigation into its mortgage-lending practices, said it fired its chief accounting officer for attempting to destroy company documents.

In a filing with the Securities and Exchange Commission, the Atlanta home builder said the actions of accounting chief Michael T. Rand, a senior vice president, were brought to light during an internal investigation. Mr. Rand, a 10-year veteran of the company, couldn't be reached for comment last night.

It is unclear whether the company's allegations against Mr. Rand, 44 years old, would become part of the federal probe being conducted jointly by the Federal Bureau of Investigation and the Department of Housing and Urban Development. HUD said it is examining whether Beazer violated federal regulations in arranging government-insured mortgage loans, while the FBI said it is looking at issues of possible fraud. Beazer has said it is cooperating.

Aaron Krowne said...

Most of the rest of the world (non-USA) has nothing like the USA's suburb-vs-urban balance. Here in Atlanta, it is about 4 million suburb/exurb to a paltry .5 million urban. The urban here is negligible.

We may be comparing apples to bananas, but I suspect the balance is going to shift dramatically in the US.

NoBuyinNoVA said...

Can someone lay out the "it's a great tax deduction!!!" argument in non-prejudicial terms? From my back of the envelope calculations, it seems to me that it's not so great, but every time I say that, I get a flood of mind-spinning figures thrown back at me.

Something is not right. Either I'm doing something wrong, or they are.

Realtors make it sound as if you get back a huge chuck of your mortgage interest payment (which we all know is astronomical the first several years). I know our Uncle Sam isn't that generous.

Please explain, step by step, how to compare the mortgage deduction against the standard deduction, which I get the feeling realtors blithely don't take into account.

Here's an example:

Say you are single person making $80,000 a year, and you buy a $300,000 condo with 20% down (plugging your ears against the "no one puts 20% down anymore!!!"). It seems to me the amount of interest lost on that $60,000 would be just about the same as the tax savings, wouldn't it?

Forget the fact (which I can't) that the mortgage/insurance/taxes plus a $300 a month condo fee makes the monthly cost of ownership a good $1,000 more than what it would be to rent the same place. (I dutifully sock that $1,000 each month into a CD.)

Oh. And one more thing: Here in Northern Virginia, the condo that I have benn renting has lost 10% in value in the two years I've been here. The funny thing is, the property manager/realtor at the time told me I was crazy and that I should buy. She exclaimed, "Do you think prices are going to go down?!!" And I looked her in the eye and said: "Yes."

Thanks for your help.

Anonymous said...

11:50 is the perfect example of the knee jerk asshole moron on this board. well done sir.

Anonymous said...

Aaron Krowne said...
the rest of the world (non-USA) has nothing like the USA's suburb-vs-urban balance.


Toronto city is less than a million people, metro area is 5 million.

Remember the Paris riots? Guess where they took place...oh yea the SUBURBS. Shocking huh? Paris city has about 2 million, metro area including all suburbs, about 10 million.

Buenos Aires has 2 million in the city, 12 million in the suburbs.

You were saying...

Anonymous said...

>> Anyone else starting to get itchy? Any speculation on how far we are from the bottom?

Put some ointment on the itch and be patient - the bottom is years away...

Anonymous said...

A dagger - more like a sword!

Anonymous said...

As some wise person once said--

If you have PAID your house off you OWN IT....Otherwise, you are just renting from the bank.

SOOOOOO True, isn't it Peeps?? Puts "Rent" in a new perspective, which is exactly what we need right now.

You have drink named Irving? said...

There is no gain in the tax deduction for homeownership. It is a poorly meated bone thrown to the least educated of the disgruntled renters/new homeowners, but hey, it's a bone of some sort and that beats nothing. It's a bit of a forced savings account at best. Yes the interest you lose by putting down 20% is more than the deduction. The arguement for less down vs more down is too personal to make a an educated call.

The interest earned on the down payment compounds over the entire life of the mortgage[if you leave it in the bank] and the tax deduction decreases every single time you make a principal payment, and hey, dumbass, that better be EVERY month and then a few extra....

Just a free clue from me to you; just because you didn't sign up for that 15 year fixed doesn't mean you can't make that payment schedule. If you can't afford extra equity payments; get a second job, make a little on Ebay, make your own coffee, buy your kids shoes at Big5 instead of Nordstroms.

I signed up for the 30 and made the payments of the 15. I couldn't do it every month but I did it about 10 out of 12 times. House is paid for. During the time I ws making payments I didn't buy the Corvette, I got the 1 year old truck. I didn't eat at the Whitehouse [cool restaurant in a wierd part of Anaheim], I ate at Chris and Pitts.
House is paid for many years early...outgrew the Corvette urge. Corvette payment happily goes to direct deposit savings right along with the payment from that 30 year schedule.

Anonymous said...

>> If you have PAID your house off you OWN IT...

Well, not really. If you have prop taxes (who doesn't?), then you rent it from the State until you sell it or die. Don't pay your prop tax bill, and see how long your OWN your home...

Anonymous said...

"Well, not really. If you have prop taxes (who doesn't?), then you rent it from the State until you sell it or die."

So my paid off car that I pay yearly taxes on is owned by the state? Give me an F-ing break. We own our paid off houses. Versus the F'd home debtor that just took out the 40 year IO ARM. You pay taxes too bitch, except its rolled into your apartment rent payment.