September 06, 2007

HousingPANIC Stupid Question of the Day


Is buying a new home today kinda like buying a new car?

- Plummets in value as soon as you get the keys
- Resale value keeps dropping every year
- Sold to you by a salesperson on commission motivated to screw you for their personal gain
- Slick marketing brochure and website played to your emotional versus rational side
- All kinds of taxes and fees added on at the end
- One of the dumbest financial moves you could make

45 comments:

Anonymous said...

Homeownership is in and of itself NOT empirically a "bad move". It all depends upon your life circumstances. However, it is appalling that we've taken homeownership and dropped it to the level of used car huckstering, and having every worthless parasite gatekeeping troll demand a fee for permitting the transaction to move forward and have homebuilders jack up price beyond market price. There was a time when a new build was a luxury and where due to uncertainty as to market price developers had to safe side pricing at a clear below market price to attract buyers. Now pre-construction pricing exceeds market price and then they sell you a healthy dose of toxic waste loans on the side to both move the unit and to guarantee foreclosure in a few years!!

Rent until this has all passed, once homeownership returns to the empirical good that it can be when life circumstances are right for you, do not rush in like its a gold rush, because its only fools gold and you will get burned in this modern age of home hucksters

Mortgage Broker now poor said...

The crisis brought on by worries about shaky subprime mortgages continues to rattle Wall Street. Even as the storm rages, Fortune's Peter Eavis says the blame game has begun.

I BLAME HOUSING PANIC! Thanx keith

foreclosureboy said...

many years ago flipping homes would have seem redonkulous and predatory, not 'upwardly mobile and smart'.

imagine people making 200k a year flipping new cars. thats how crazy it actually is to flip a home in a real economy that isnt run by the NAR/NAHB lobbyists and the international bankers flipping homes wouldnt work ever.

Big D said...

I agree it's like buying a car these days, A few more comparissons to add:
-Marketed based on the monthly payment, not the total cost
-Balloons used to sell new homes like cars at a car lot (We actually saw huge balloons at least 100 feet in the air over a housing development during labor day weekend.)
-cheesy slogans on banners draped across homes like the one we saw that read "Don't Roam, Buy This Home"

I'm predicting that in 12 months, condos in Dallas, Texas will be sold in 2 for 1 sales.

Anonymous said...

And with Cars you don't pay outrageous taxes year after year (most states) and the taxes do no go up if you improve the car...

Marky Mark

Anonymous said...

We bought our 3 yr old "used" home in the last down turn straight from the bank.

This year we bought a 1 yr. old "used" 2007 Tahoe straight from the seller.

Saved about least 30% on each transaction.... Who needs new? (Or a salesman for that matter).

Anonymous said...

Nah, home values will go back up eventually. 20 years from now a new car bought today will be worth $0. 20 years a house bought today will be worth more than purchase price.

Agent #777 said...

- One of the dumbest financial moves you could make

I just don't (necessarily) agree. OK, sure, going and just handing the dealer your money at list and trading in a vehicle and financing is not too bright. However, if one goes in low on aa no-trade basis, buying new is just plain smart. How about an example?
I was thinking of buying a brand new Mustang in late 2004, before the style change. They were being marked way down, and I could have got a basic one with AC, CD and a 5-speed for 13k.
I have been thinking about getting a low mileage one now, thinking I would buy the first 5-speed or convertible (bonus points if it is both) from any year 2000-2007, as long as it seemed to be a good buy. Well, that same 2004 on kbb.com with 53000 miles now goes for...$11,800 retail!! Are you kidding me?!?
Funny thing about your cartoon, we are looking at a Durango, but thinking only around 22k, not the 30k+ MSRP (asking) price. Or I could wait 2 years and 30k miles for the guy to ask the same price. At least if I buy now, I know how it has been treated, and we will likely keep it 10 years.

Stuck in So Pa said...

But I look SOOOOOOOO good behind the wheel of my favorite toy!

In the living room of my house, who cares!

Anonymous said...

Yes, house buying and car buying are similar, except for the value of the underlying land of the house, which has its own trends. You need transportation and shelter, and you should calculate if buying or renting (leasing) is better. Generally, buying a used car is cheaper than buying new or leasing one.

sam said...

Interesting post. Home ownership doesn't necessarily have to be cheaper than renting. In a perfectly efficient credit market, home ownership probably would be MORE expensive because people prefer owning to renting.

Many people will pay a premium for the security of owning and "being able to paint the walls any color". Female nesting instinct, etc. This obviously makes no sense to me or anyone who prizes mobility. But you can be damn sure the new home builders know their customers and their customers will pay a premium for that shiny new home. In a normal market they will charge a premium for it.

15 years from now, granite countertops will look like green lineoleum floors of the 60's and people will be breaking them up with sledge hammers to put in something new (my bet is shiny chrome countertops).

PablitoRun said...

I was just thinking about that on the drive in to work.

I wonder how long it will be before home insurance companies start offering Gap insurance...to cover the amount the average homeowner is upside down.....

Anonymous said...

I would have to say, strictly on buying a car that depending on the make/model the price may not be that much different. Example, 2006 Lexus IS250 used is 28k-30k+, new 2008 is $32k MSRP. Why would I buy a 2+ year old car with 20-30k miles on it for only a 2-4k difference? Depending on the demand for the vehicle, or its supposed demand, the amount may be negligible.

LauraV said...

I agree with Keith that homes are really no better than purchasing a car.

Homes for more than the past 30 years have been marketed to sell to the masses as "investments".

Anyone notice how Mercedes, BMW and Lexus advertise their vehicles as an investment to prospective buyers?? Just because a sales person (car sales or RE agent) uses the buzz word "investment" doesnt really make it one....

Since when has an "investment" required these types of expenses: closing costs, maintance, updating, upkeeping, insurance, beautifying, sprucing up, taxes, etc, etc etc???

Buying a home should not have becomed commercialized as an investment. Houses have been molded, advertised, coined and shaped into something to make money from the big wigs in the housing industry -rarely do homes make money for the (owner) end users... they are really the ones holding the bag by paying forever through property taxes, insurance and maintainence costs.

I hope after this biggest housing bubble in history pops, homes will never be considered "investments" again....

Mammoth said...

Is buying a new home like buying a new car?
-------------------
For some people, buying a new home is an attempt to fill that empty void within oneself – “I DESERVE to live in a new house,” and also a way to try to impress others with the stigma of having something expensive and brand-new.

For these same people, buying a new car makes one feel “special” and better than others – “I’m not going to be seen driving an old car,” and “Hey, look at me in my new car!”

But this pretentiousness is just a thin veneer over an unfulfilled need within this type of person, and deep down inside he/she is aware of this feeling but they just ignore it.

Contentment and satisfaction with yourself, and with your life must come from within. You can not shop your way to happiness. Get it?
-Mammoth

Anonymous said...

from South Bergenite (Northern NJ)

Close to NYC, Wall St. bonuses, jobs, easy commute, near Giants/Jets stadium, Nets and Devils.

I guess NJ does not need its 40 millionth "Luxury" condo unit. So f@*king pathetic!!!!

http://tinyurl.com/23t9cn

Veronica Lodge said...

RE: Is buying a new home today kinda like buying a new car?

One of the few advantages to buying a new car is the zero down, zero percent 72 month financing offered by some manufacturers.

If houses could be bought with zero percent interest, today's bubble prices would seem cheap by comparison.

V.L.

not facing foreclosure said...

What utter nonsense. Being a landowner is totally different from owning a gadget that rolls around on rubber tires. No one in history has ever become poor from controlling the ownership of land over long periods (40+ years). Outside of a few specialty vehicles that become collectible, cars are depreciating assets.

Like Rockefeller said,"Control everything, own nothing". Land, and RE in general, can be controlled with minimal capital compared to most investments. That is why rich people own land and losers own pimped-out cars.

Anonymous said...

Go buy some land in Arizona or Florida today Mr. Troll

40 years from now you might have broken even (adjusted for inflation)

Anonymous said...

Whos talking land we're talking Miami Condos!

Anonymous said...

Big difference between cars and houses. Car prices haven't doubled in the past 5 years. In fact, it is amazing how flat the prices have been.

Example: In 1994, I bought a new Suzuki Swift for $5999. They no longer make a Swift, but an equivalent 2007 car would be a Chevy Aveo which can be had for $6990. Thats about 1% yearly inflation for subcompacts.

Kenduffelsniffenspotzen said...

A car can always move to a new location. Not many homes can say that.

AmazingRuss said...

Mammoth Said "For some people, buying a new home is an attempt to fill that empty void within oneself – “I DESERVE to live in a new house,”

I had this very problem a few years back. I was working like a fiend, making gobs of money, and spending it all on crap to make me feel better, because I was miserable from working all the time. Thank god I had the presence of mind to pay down all my debt, or I would probably still be trapped in that cycle.

I think the only reason I escaped is I don't give a damn what anybody else thinks of me...that would probably have been enough to keep me on the hamster wheel until my plumbing blew.

Now I work when I get a notion to, and earn and spend very little. It's a damn fine way to live. People think I'm crazy, but that's kind of fun too.

A line from a song comes to mind...Ani Difranco, Garden of Simple:

They never really owned you
You just carried them around
Until one day you put them down and found your hands were free

Freedom is greatly devalued at this point in history. It's a great time to buy.

Amtex said...

The truth is that over 120 years, up until 7 years ago, home values did not have any real increases, when all their costs and the effects of inflation were factored in.

This myth that housing is an investment is just that, a myth. A house is a place to live, not an investment.

Anonymous said...

Hmmmm...I agree with all the supermaterialistic hating...I just sold last year in september...got divorced in october and downsized everything to just my necessities as a whole...BUT I still love my nice car...I don't want to drive a junker to save a few dollars...I actually enjoy my car...I work with people who take it to the extreame at work on both sides.

The young ones drive Hummers/Jags/Souped up Acuras.

The older ones drive these POS cars..."Beaters" we call em.

Hey how about a newer 325i?...Great looking car, good gas milage, very few probs and if it does they TAKE care of you at the dealership? I could get a Toyota but come on those things don't weigh anything...a gust of air and you're swarming all over the freeway.

MODERATION PEOPLE...Shoot for what's in the middle range for your income.

Stephen said...

Anonypuss

"Nah, home values will go back up eventually. 20 years from now a new car bought today will be worth $0. 20 years a house bought today will be worth more than purchase price."

I disagree. Considering that real estate typically appreciates to keep up with inflation, I doubt that homes will ever again go for what they are going now in REAL dollars (at least in any HPer's lifetime).

hendry said...

Overpaying for anything is always bad. Getting a bargain on a needed essential is always good.

Econ_E said...

I guess you didn't see the realtor quote I linked you to from Seattle in the recent post Keith where he said that we should look at condos up here in Seattle like cars and drive them a few years and then get a new one.

And he didn't even recommend a 30 year fixed loan.

Anonymous said...

Anonymous said...

I would have to say, strictly on buying a car that depending on the make/model the price may not be that much different. Example, 2006 Lexus IS250 used is 28k-30k+, new 2008 is $32k MSRP. Why would I buy a 2+ year old car with 20-30k miles on it for only a 2-4k difference? Depending on the demand for the vehicle, or its supposed demand, the amount may be negligible.

September 06, 2007 3:53 PM

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

Dude you really have no clue how to buy a used car. For the car you desrive the KBB is $25K for private party. That means you can find someone who needs to sell fast for $23K. That's a $9K difference plus the sales tax saved on $9K, plus cheaper insurance and cheaper registration.

Your $28K is if you buy retail and only a complete doofus buys a used car retail.

Anonymous said...

so a real beauty at a very good price last week and might buy it for just that reason although I do not need another...and keep it for 14 years

brokersleaveyoubroke said...

15 years from now, granite countertops will look like green lineoleum floors of the 60's and people will be breaking them up with sledge hammers to put in something new (my bet is shiny chrome countertops).

That's funny. My parents bought a house in the 50's that was built in the 1800's. It had granite countertops because back in the 1800's the choices were wood or stone. They ripped out the granite and put in Formica because only poor people still had the "old" stone counters. It's funny how some things that were bad are now good and will probably be bad again some day. People who are slaves to style waste a lot of money

Deek said...

why buy a used car? it is someone else's headache.

I have owned two cars in my lifetime. Had the first one for 10 years and will have had the second one for 10 years this December. Would I have really saved an appreciable amount of money if I purchased a used car?

I will probably purchase another new car some time next year.

www.TeesMyBody.com said...

Good point on the granite countertops. I can see us looking back in 20 years and going "ugh.."

Anonymous said...

I disagree. Considering that real estate typically appreciates to keep up with inflation, I doubt that homes will ever again go for what they are going now in REAL dollars (at least in any HPer's lifetime).

September 06, 2007 7:15 PM

=====================================

You keep saying that to yourself over and over renter. Maybe it can lull you to sleep on those nights when your ghetto apartment neighbors are playing the jungle music extra loud.

Mammoth said...

"Why buy a used car? it is someone else's headache."
---------------------
The second car I ever bought had 126,000 miles on it. 13 years later, when it had been driven 318,000 miles, someone ran into it and totaled it.

Because I took good care of it, the car held up fine with few problems. If you don't take care of your sh1t, it won't last, but you can make up all kinds of excuses about why it didn't hold up.

Paying for a new car is be a headache that may be avoided.
-Mammoth

Anonymous said...

The way I see it, if you're talking about a straight out purchase with cash, buying a car is completely different from real estate for obvious reasons. However, if you consider that most people are buying real estate the same way they buy cars...no money down...then it is pretty much the same. You're destined to lose money unnecessarily unless you find the 'bigger fool'. Its just that in the last few years, fools were able to profit to some extent because of all the free money. But that party's over now.

Anonymous said...

Cadillacs are the most close thing to homes in the auto world. They can't move any metal these days because the home as a piggy bank is over. Cadillac STS is supposed to retail for over $55K. They are offering them for $38K in many dealerships. If you want to know how the housing market is doing just look at Cadillac sales and prices.

Oh, and pretty much every Cadillac that sells for over $40K ends up on the $4999 lot within 8-10 years.

Anonymous said...

Anonymous said...
Go buy some land in Arizona or Florida today Mr. Troll

40 years from now you might have broken even (adjusted for inflation)

September 06, 2007 5:14 PM

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

Adjusted for inflation, current prices will NEVER be seen again in the bubble areas... or at least not until the bursting of the current bubble is a distant memory.

Anonymous said...

not facing foreclosure said...
What utter nonsense. Being a landowner is totally different from owning a gadget that rolls around on rubber tires. No one in history has ever become poor from controlling the ownership of land over long periods (40+ years). Outside of a few specialty vehicles that become collectible, cars are depreciating assets.

Like Rockefeller said,"Control everything, own nothing". Land, and RE in general, can be controlled with minimal capital compared to most investments. That is why rich people own land and losers own pimped-out cars.

September 06, 2007 5:07 PM

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

How much "land" do you think you'll be "controlling" by buying a bubble-area McMansion? We're talking about a 4000 sq. ft. "house" (giant shoebox) on a 4500 sq. ft. lot in many parts of SoCal.

Oh, and that leverage thing... watch out... it really burns on the way down.

Anonymous said...

At this point in time, a new car is a much better buy than a home in a bubble area.

Anonymous said...

You can drive your car to work and it can take you to the grocery store. A house cannot get you to work or get food for you.

I like having newer cars still under warranty because the repair costs today are ridiculous.

Anonymous said...

@ agent777

Dude, you have a taste for the crappiest cars. Mustang and Durango?

Anonymous said...

@ not facing foreclosure

"No one in history has ever become poor from controlling the ownership of land over long periods (40+ years)."

Tell that to the folks in Detroit, Flint, Cleveland, New Orleans, and to the million dollar homes that went down with the mud slides in Laguna Hills and La Conchita, etc.

www.laconchita.net/photos.htm

BTW, insurance doesn't pay for land slide. Once the land is gone where the home sits, the property is gone forever. Good luck!

Anonymous said...

"I disagree. Considering that real estate typically appreciates to keep up with inflation, I doubt that homes will ever again go for what they are going now in REAL dollars (at least in any HPer's lifetime)."

You are correct if you purchase the house in cash. However, if the house is purchased with good financing and good leverage - 15 to 20% down so the rent makes the payments, you are in a sense getting a dividend every month (Rent) then the appreciation that keeps up with inflation is leveraged so you make a good after tax return. If the tax laws change, then the bet is not as good, but in this environment I expect more tax breaks for RE moving forward not less. A car purchase on leverage is just worth $0 in the end. If you were Hertz or Avis you would make the money on renting a car as well.

RE will never be a car. Car depreciates in all economic climates, a house just depreciates in a deflationary one. Once prices are back in line with fundamentals, everything will return to normal. Sorry, no great excitement there. The housing bust - like the boom are way over hyped by the papers and media. they have to scare people on both sides of the sword to make ratings.

Anonymous said...

"Tell that to the folks in Detroit, Flint, Cleveland, New Orleans, and to the million dollar homes that went down with the mud slides in Laguna Hills and La Conchita, etc.

www.laconchita.net/photos.htm

BTW, insurance doesn't pay for land slide. Once the land is gone where the home sits, the property is gone forever. Good luck! "

No fundamentals can change a poor land purchase decision. That has NOTHING to do with RE as an investment. If you buy a home on a mountain side where you know that a heavy rain is going to wash it down the hill, in earthquake country - you are an IDIOT or a movie star, not an investor. If you purchase land in a place where dikes keep the ocean water from doing what ocean water does - collect at the lowest point and then are surprised when the ocean reclaims the land - again, you are an IDIOT, not an investor - BTW did you notice that the rich in New Orleans actually bought on high ground? And as far as Detroit and the other rust belt states, they are all tied to US autos and they have not been making money for years. It is all about location location location. If you are buying a stock, know what a PE is, if you are buying real estate, know what the location is.