June 11, 2007

HP's message for recent college grads: I want to say one word to you - just one word. Rent. Shh! Enough said.

Mr. McGuire: I just want to say one word to you - just one word.

Ben: Yes sir.

Mr. McGuire: Are you listening?

Ben: Yes I am.

Mr. McGuire: 'Rent.'

Ben: Exactly how do you mean?

Mr. McGuire: There's a great future in renting. Think about it. Will you think about it?

Ben: Yes I will.

Mr. McGuire: Shh! Enough said. That's a deal.

48 comments:

BuyBonds said...

Good point. Do you think they will listen?
A note to recent grads: Pay attention. Listen to HP. Don't even think about buying.
Rent.
Really.

Anonymous said...

Most college grad's (unless they had significant financial assistance) will be saddled with so much education debt that it will be years before its feasible for them to own. That being said, for those who have the means to own, RENT. There is no rush, get you're retirement & investment portfolios established and then when its time to settle down in your late 20's early 30's this bubble will have played itself out and you'll be able to live a comfortable lifestyle.

Anonymous said...

rent and precious metals. the world alchemists of modern finance have have whipped up a mess, which when it runs out of upside momentum, will result in one hell of a pyrotechnic fireball.

Anonymous said...

"Plastics!"

As in Americans will charge and charge and charge; there will be a huge demand for plastics for credit card production.

Anonymous said...

Yes indeed rent. Nothing like the joys of paying rent for 30 years after which you have nothing. Nothing like living next to drug dealers, illegal mexicans and deadbeats.

Yes indeed young men and women of America, rent and you to shall be an honorary member of the tin foil hat club.

Anonymous said...

Check this in FL:
http://www.winknews.com/news/local/7896352.html?video=YHI&t=a

Homes sold at 50% discount

http://countrywide-foreclosures.blogspot.com/

Pit

Anonymous said...

That's an awesome post.

Guy Daley said...

Sunshine doesn't pay the bills

Exodus from Florida for a number of reasons - expense, crime, congestion.

http://www.sptimes.com/2007/06/11/State/Sunshine_doesn_t_pay_.shtml

People don't like congestion and yet government pushes unlimited immigration on us by not enforcing current laws. That's a nice rosy future our government has in store for us unless we change who represents us.

Stephen said...

How I found this blog --

I graduated from law school in spring of 2005, and got married that fall.

My wife and I got a lease on an apartment that was conveniently located for both of us to get to work. Like many young couples, we wished to buy our own home. However, we didn't want to buy in the area where we had to live (Prince Ghetto county) while she was on internship in Northern Virginia. Coupled with our student loans, and lack of a sufficient down-payment, we decided to put it off for a couple of years, so that we could get our careers, and our financial house in order.

But it is always good to plan ahead, so I started doing some research and talking to people. I had known before that home prices were high, but when I began to realize that I would need to accumulate about $80k in cash to put a traditional 20% downpayment on any home outside the ghetto, I became distraught. I talked to my dad about this, and he advised me about the first-time homebuyer programs available, and the possibility of putting 10% or less down on a house.

I then asked him about the first house that he and my mother had purchased. It was a modest split-level, in a decent neighborhood; a house that I would be more than happy with as a starter-home. It cost them just north of $60k in 1979, but it was very affordable for them on their income (my mom was working at the Naval Academy as a librarian, and my Dad had a job at a factory in Baltimore, and was working his way through college). They didn't have much money, but they were able to put 20% down, and by living frugally, they were able to begin a nice life together in this home, and give me and my younger brother everything we needed, paying the mortgage on time every month.

Now, in 2007, there is no way that my wife and I would be able to afford the same house, be able to start a family, and have one of us stay home with kids. How could a factory worker and a librarian in 1979 be better off than a lawyer and a psychologist in 2007? I felt bitter.

Several months later, I overheard one of the secretaries at work talking about how she and her husband worked hard and saved to buy their first home, and that she expected the same from her son. She would never give him any help toward his first home. I confronted her. I pointed out how much higher home prices are now than when she bought her first home, and asked how any young person could be expected to afford a house in the D.C. area. She responded by saying that she wanted her son to move to the midwest, where houses are more affordable.

This prompted me to go online, and see what other prople were saying about this. Were there any other young people who felt they'd been disinherited by ridiculous housing prices?

That is when I found the housing blogs. First, D.C. Housing Bubble Blues. Then iTulip. Then HP.

They tought me that instead of being resentful that I could not afford a home, that I should be patient and responsible, that I should work toward paying down my student loans, and that I should start saving up for a downpayment. I have learned the value of renting, and I have also learned (though I shougld have known this through common-sense) that I cannot be priced-out forever.

For people staring out in life, the value of this, and similar blogs is that they spread the word that the days of 20% down are not over, that it is foolish and dangerous to stretch your finances and take out exotic loans to get on the housing ladder, and that your money is better-off in places other than real estate.

As one poster put it here one time, "these days you have to think, people." It's not like it used to be, where you could purchase a home, and depend on this being a reasonably sound financial decision, or where you could dollar-cost-average into an IRA, and expect things to turn out OK.

We live in a bubble economy, and if young people stumble blindly through their financial lives like their parents did, depending for their fiancial well-being on steady and reasonable economic growth and asset appreciation, then they will be screwed.

HP does not have all the answers, but it has been a real wakeup call for me. And now I think hard about my money and my future.

Thanks, Keith.

guy n. cognito said...

like they have a choice between renting or buying... well, maybe in podunk flyover country... but definitely no choice in the non-manufacturing, services-based (i.e. debt-driven) local economies of the coasts.

Anonymous said...

Actually, 3 words Keith: move back home.

realtors are dumb said...

Live next to drug dealers and be $800,000 in debt for a 2/2 crackshack in Compton or rent in a nice area and save up tens of thousands each year? What should a 22 yr-old person in California do these days? Hard choices.

mohamid said...

Kurds report Turkish, Iranian shelling in northern Iraq; wider conflict feared

Christopher Torchia, Associated Press
Published: Friday, June 08, 2007

ISTANBUL, Turkey — Turkish artillery shelled suspected positions of Kurdish rebels based across the border in northern Iraq on Friday, according to reports. U.S. Secretary of State Condoleezza Rice warned Turkey that it risked expanding regional tensions with any “robust” move of troops into Iraq.


http://www.canada.com/topics/news/world/story.html?id=616e3381-ae4e-4407-80d3-1bf1863cfe26&k=86187

Anonymous said...

guy n. cognito said...
like they have a choice between renting or buying... well, maybe in podunk flyover country... but definitely no choice in the non-manufacturing, services-based (i.e. debt-driven) local economies of the coasts.

-----------------------------------

Only if they make $12 an hour like you renting fools do. I graduated from college in 1998. I moved to Boston shortly after graduation. I was paying $1800 a month in rent on 2 bedroom apartment. After 6 month of that I thought hell why not buy something and when my lease was up I did. I bought a condo for $320K. My parents in Texas, where a 3000 sq ft home went for $175K thought I was insane. Luckily I didn't listen to them. I sold that condo a little over a year ago for $522K.

I could afford a $320K condo out of college because my starting salary was $68K a year. That year I actually made over $80K with bonus. I did some interviewing this spring and we made an offer to this one kid for $73K starting. He turned it down. We upped it to $78K and a $10K signing bonus, still said no.

So quit this nonesese about college grads being destitute. You know who is destitue? People with degrees in bullshit areas like women's studies from state colleges. Yeah, they will be serving lattes this coming fall and will not ever be able to buy anything. However, anyone with a degree in engineering or business from a top school will have nothing to worry about.

Anonymous said...

Anonymous said...
Yes indeed rent. Nothing like the joys of paying rent for 30 years after which you have nothing. Nothing like living next to drug dealers, illegal mexicans and deadbeats.

Yes indeed young men and women of America, rent and you to shall be an honorary member of the tin foil hat club.

June 11, 2007 11:53 AM
--------------
And what, you'd rather see them experience the joys of foreclosure and ruined credit just so a couple of realtwhores & an slimey mortgage broker can make their lexus payments? (a.k.a., you!!)

Pay down you're student loan debt (which is at an all time high!!) get some pay raises in and/or some different jobs under you're belt (which FYI usually requires alot of moving when your career is first starting out). The elimination of student loan debt will put you in the prime rate zone, allow you to afford more home and you'll likely know where you want to live by then.

While you rent, you can also focus on your retirement savings, and the earlier the better on that process.

And FYI, not all rentals are in bad areas, may are in nice, safe clean neighborhoods. The converse is true, that be careful when you buy because not all RE for purchase is located in nice safe areas.

If nothing else, avoid & ignore anyone that just makes short, quick, glib/trite sound bit statements like anon June 11, 2007 11:53 AM. They are just salespeople who have their own interests in mind, and never your best interests, because all they want is to get paid and could care less as to how they ruin your financial, personal and professional life.

The NoVa lawyer post below is very sage advice!!

Anonymous said...

DONT BUY DONT BUY DONT BUY

Anonymous said...

BTW, "The Graduate" was a phenomenal film. I put it above "Citizen Kane" because it made all of its points w/o bludgeoning the audience the way Orson Wells did with his so-called classic.

Anonymous said...

at 22 best bet is rent a killer house or apartment with roomates. Each of you can spend $1K on a shithole or pool your money and pay $1K amd live in a mansion.

With so many FBs out there desperate for rent, they'll rent even to just graduated punk ass frat boys.

Where do you think the honeys will be more apt to visit? Exactly.

And whether or not housing is tanking at 22, 23, 24 you don't need to be bogged down with owning. Fuck that. Your only concern at this age is getting as much pussy as you can. You'll have all the time in the world for living responsibly. Enjoy life at this time.

Anonymous said...

Mosy people in the "good old days" rented for about 10 years before they could save up enough money to buy a house. Now we have college grads who think they should live like their parents INSTANTLY...

Marky Mark

Anonymous said...

ha ha ha 6:04 nailed it (no pun intended).

the proud gringo said...

stephen:
very moving story, good for you! wait till the market returns to sanity, then buy and watch the flippers et al. on the sidewalk, begging for pennies.

Anonymous said...

amnesty bill is coming back. unreal.


Bush and the Amnesty Senators are now preparing to bring
the Bush-Kennedy Amnesty bill back for a vote immediately.

Yesterday, Commerce Secretary Gutierrez said the administration
is "more determined than ever" to pass amnesty and Tony Snow
added that the Senate "could wrap this up in two days." Now,
Bush has scheduled a meeting with Senate Republicans on
Tuesday to plan strategy and Majority Leader Reid is saying
he is ready to move the bill to a vote.

Just last week, the American people soundly rejected Bush-Kennedy Amnesty. The New York Times even featured Grassfire.org and three of our team members in a Page One lead story yesterday
entitled "Grass Roots Roared". Now, they are bringing amnesty back!

See the NYTimes article linked here:

http://www.grassfire.org/19042/offe
r.asp?rid=13552473

Two crucial action items:

Action Item #1-- Call Your Senators and the White House
and tell them to "Back Off"!

Downtown O-Town said...

Yes. There is an instant sense of entitlement amoung college graduates . . . they think that they should have it all. I talked to a single male recently who rents a BMW and bought a 3 bedroom house last year (at a good price, no doubt)by himself . . . and is whining about not having enough money now that taxes are going up.

There is no driving reason I can see for a purchase by a single person right out of school unless they have major case reserves. Renting was how it was always done . . . but they want it all, now.

Old-fashioned thinking . . . I know.

Downtown O-town

ShaKSter said...

I bought,and have a low payment.I still think renting is more reality than the fantasy of owning.I bought ,and still have theives,and crackheads,and drunks,and Churchies,and oldpsychos,and scammers,realtors,and dumbass zoning laws(Voters are dicks),and on ,and on ,and on,but lastly,I will never own it anyway.

Shakster said...

Hey Mr Owner,Can you say "REVERSE MORTGAGE"?Yup you own that one.

Anonymous said...

sounds like a lot of jealous renters in their 40s and 50 still driving cars made in the 80s.

you people are losers. you have always been losers and will continue to be losers.

Anonymous said...

Yeah; Since YOU had to RENT, everyone else MUST as well.

No one ever be thinking they are BETTER Than you that's for sure.

Wanting something NOW isn't as bad as you make it out to be. Most of the time this is called "Internal Drive" However, you seem to misplace this for Having something you did not at his age. Go buy yourself a corvette as your obviously having a mid-life crisis.

From an anon-still-renting-20something.

Anonymous said...

stupid.

saying you should **always** rent makes as much sense as saying real estate **always ** goes up

anyone who believes in absolutes has a very small mind

Anonymous said...

We could say that Ann Bancroft was the original MILF.

Anonymous said...

Another message to graduates: Push against this current amnesty bill to secure your jobs and avoid overall depressed wages.

Corporations are drolling with the idea of increasing the number of H1-B visas per year, so they can depress wages by 30%. Greedy corporations are trying to increase the number to 180,000 visas per year!

Folks, we are in a class warfare, make no mistake about it. The sheeple is too stupid to understand that this amnesty bill is bad for American workers who ACTUALLY pay taxes.

happy2rent said...

Stephen, great post. You're not alone in your thinking. Thanks for telling us your story. I know you'll be glad for your choices in the long run. But you already know that -- keep the faith!

Anonymous said...

"I could afford a $320K condo out of college because my starting salary was $68K a year. "

You were paying $1,800 in rent out of college and earning $68k. Let's see: $21,600 in rent per year + $10,000 in taxes (low ball) + $12,000 in living expenses = aprox $44,000, which leaves you with $24,000 to max your 401(k) at aprox $15,000 per year = only $9,000 leftover.

You could NEVER afford a $320k earning that little and paying that much in rent. Not even with your ALLEGED bonus. All that you did was getting an exotic loan and flipping (for a profit or not, considering the small period you hold it), if that's true. So don't come saying that you could afford a $320k condo out of college.

The numbers don't add troll. Nice try, though, maybe the sheeple who know nothing about math will believe you.

PS: I studied Real Estate Analysis in College.

turdly said...

Dearest anon 5:05,

We couldn't be prouder of you. Making less than a car salesman and with your education! I made double that selling cars in 1994! AND I had been since 1989, figure out what you'll need to catch up!
And you just offered someone far less money than you made in 1998, I see you're also generous.

The 78k you offered that guy will buy him a 234k mortgage using an overwhelming 3 times his annual income/mortgage.
That makes him destitute for anything but renting.

By the way, I started selling cars because the 'new' immigration laws applied to Filipino immigrants allowed ENGINEERS to come here and work for 2 years at 50% of wages, and then they could bring over the whole extended family. It really spanked the engineers then. No one is safe. Your degree may just be a pompous version of an english lit degree when the boss cuts the jobs.

I once asked an attorney waht the difference was bewtween a 80k per year attorney and an 800k per year attorney. he told me; the 800k attorney really really wanted to be an attorney. The 80k attorney; his mom really really wanted him to be an attorney. Sometimes college is just a babysitter because your family doesn't want you around.
So, you see, anyone can be hurt with words. Nice work on belittling the waitresses and womens studies and such.

Anonymous said...

How do you document real life
blah blah blah fiction each day
Rent!

Well, we're hungry and frozen,
It's the life that we've chosen!

Anonymous said...

FLASH 1: If you have a mortgage, you don't own a home. The bank does.

FLASH 2: If you lease a car, you don't own a car. The bank does.

FLASH 3: If you pay taxes and are an American citizen, you are not entitled to crap. China, Mexico, Saudi Arabia, India, and Bush cronies are the ones entitled to everything in this country.

Pay up and pass amnesty, suckers.

Anonymous said...

""sounds like a lot of jealous renters in their 40s and 50 still driving cars made in the 80s.

you people are losers. you have always been losers and will continue to be losers. ""


Being just out of college myself, and having a good understanding of basic economy, I would have to be mentally challenged to purchase property in this market.

My fiancée and I make well over the average income for the Bay Area. To take out a logical loan, 30yr fixed, with 20% down, we could afford a place in the 325k to 370k range. If you do some research you would notice that the best we could get for that is a 900sq ft "condo" (apartment built in the 60's).

Being anti-rape, we decided to rent. We are in a nice 2bd house with a yard and garage for $800 less than it would cost to purchase one of those condos.

Now we are just saving, waiting for the 3bds in the area to come down from 500k so we can purchase an actual starter home.

Ohh and the bonus is, I only have to drive, (06 Subaru), Once a week to work. BART saves me over $3 a day and hundreds in insurance.


CVRentin -

my2cents said...

To Stephen (and other grads):
Don’t listen to these morons telling you to buy, and leverage yourself into debt. Misery loves company, and they want to justify their bad judgment.

(from a page in my life) Pay off all of your bills. Save and invest wisely yet cautiously. I’m in my mid 30s and have rented my entire life. I have always lived in clean, quiet places (not dumps). I have over 1mil+ in investments, and currently rent a nice 1500 sq ft home for <$500/mo. Yes, $500/mo. It’s old, but it’s quiet and clean. My wife and I bring in over 200K a year. We live quietly, comfortably and peacefully. If you really want to understand a millionaire’s mentality, I suggest you read the Millionaire Next Door. My wife and I are in no hurry to purchase. Yes, we wanted to during the boom because we thought we were 'missing something', but good judgment won out. We will wait another 2-3years for a nice property at <50% 05/06 prices. Pay cash for the house, and not worry about dealing with crooks called mortgage brokers.

So, you can always be a 'loser renter' with the flexibility to do what you want, or buy what you want, or retire earlier,
or

you can always leverage yourself with a depreciating asset.

Oh, and btw, historically, on average, homes don’t return more than 2%.
http://tinyurl.com/22xxew

Anonymous said...

I just loved that movie! Why can't I be someone's Mrs. Robinson?

SH

Anonymous said...

Mrs. Robinson?

Yeah!

I'd tap that.

Anonymous said...

" I have over 1mil+ in investments, and currently rent a nice 1500 sq ft home for <$500/mo. Yes, $500/mo. It’s old, but it’s quiet and clean. My wife and I bring in over 200K a year."

Yawn, yawn, yawn. More internet bragging. Or should I say fantasizing?

I really find it amazing that everyone in this group just happens to be in that top 5% - 10% of income earners.

Anonymous said...

>> Yes, we wanted to during the boom because we thought we were 'missing something', but good judgment won out.

You mean BAD judgment. You WOULD have made a small fortune during the boom.

turdly said...

some of us do make a squat load of money, thank you for noticing. I'm one of those 5%CD people that many think disparingly of.
I don't make that much more than my contemporaries, but I live differently. I don't have a 15k monthly mortgage. I live in a modest home that's paid for. I drive a 4 year old car and a 5 year old car that replaced the 11 and 13 year old cars. My contemporaries have $1900 month Beemer payments and $1200 merc payments.
I am the topic of discussion among my friends; 'how in the hell can you travel all over the world at a whim?' I always ask what their mortgage payment is. Then I explain that my mortgage can with a travel plan; if I had a 10k mortgage then I couldn't travel either. Since I don't have a mortgage, I get to take an incredible trip every month, and STILL be $6k ahead of their mortgage.
I have a 3% debt ratio. I only publish this so others will see that if you hang on and retain a modicum of modesty that eventually ALL the good things will come to you. It's gradual, and then suddenly it's there. It certainly wasn't always this way but it certainly always was the plan. I turn 50 soon.
While my home is modest,it's the place where everyone gathers and it's always my boat everyone is on. Pretension=tension. I have no designs on impressing my neighbors.
When I was 20, I was sitting in a dentist office and saw a bright orange magazine. It was designed to catch your attention. I picked it up and started to read it. It was in huge 32 point font and only about 12 pages. It said over and over again, in many ways so that any educational level could find a comfortable passage; pay yourself 10% of your income and pay yourself first. If there is not enough to pay the rest of the bills, get a different job, get an additional job, or cut back the expenses. I opened my first savings account that day and I still remember the day we hit $1000 in the bank. Rent at the time was $160 per month, so it was quite an accomplishment. I never swayed from the plan. I later learned that the pamphlet/magazine was printed byh a wealthy guy who just wanted people to see how simple it all was. Please do not think that buying a home is the ultimate answer to anything. The facts are that my 'free and clear' homes cost me $3300 monthly in lost revenue. If I had the money in the bank and was renting instead I would ne $2200 more monthly. We all have our foibles. Mine is the house and guest house. Maybe yours is cocaine or something.

Todd Tarson said...

Every situation is different and EACH person should look out for their own best interest.

I tell young would be clients to consider renting in this current market. Renting is cheaper on a monthly basis in most cases in my local market.

I don't know if it's the entitlement attitude or not, but many folks WANT to buy their own home and call the shots.

Can they afford the payment?? One bit of advice is to price out a mortgage payment on a starter home based on a fixed rate with a healthy down payment. Then see if there is a similar rental available for a much lower monthly cost. Then rent the unit, but save the surplus in monthly savings for the down. I look at this as practice on whether or not a person is ready to be a homeowner.

Fixed rate financing is the key in these troubling times if the insistence is purchasing a home.

Anonymous said...

I get a real kick out of the "bull shit" prescriptions for saving yourself in a crash. "precious metals, "cash", renting, etc.

As if there was ever really a "garlic clove" which would prevent Count Dracula from sucking your blood dry.

The US dollar is worthless since Sir Alan Greenspan turned on the printing presses in an attempt to bail out his $300 trillion derivative monster.

As paradoxical as it may seem the only way to get off the Titanic and into life boats is the use of government power to place the system into bankruptcy reorganization and write off all the ficticious debt , most of which will have to be written off.

On your own you are as good as dead, whether youre holding precious metals, cash, or holding whatever passifier floats your boat.

Imagine living in this country under conditions of mass homelessness? Collapsing infrastructure, no hospitals etc.

There's no way you can survive this crash on your own. You either revive the FDR principle in Government or you've had it.

Anonymous said...

I think 6:04 also nailed it.

Of course, if someone out of college actually produces something and earns some money they can take advantage of the market and still buy that place, or a sane TH, and rent to their ding-dong college friends who will pay most of that mortgage for them...

I strongly recommend as renters, ex-sorority girls, now in sales, for all the obvious reasons.

A little risky, and non HP approved, but still a good plan if you can actually earn a decent living out of school.

Cheers!

Anonymous said...

Like my ex-Secret Service friend says: "people who use their real names, pictures, and IPs all over the Internet are crazy!

Anonymous said...

>> My contemporaries have $1900 month Beemer payments and $1200 merc payments.

God damn, for the last time! Beemers are BMW motorcycles - Bimmers are the automobiles!

turdly said...

anon June 13th 3;21,

Proove it.

p.s. couldn't care less about your colloquial diagnosis, I just want to see some proof, or please continue to debate this with your mom. I'm sure it comes up so often that it will be importnat to her to know of your vague talents of correcting others instead of staying within a titled parameter.

caring less, less, les,le,l....