September 25, 2007

HousingPANIC Stupid Question of the Day


Why do people say they "bought" or "own" a home when all they did was take out a massive loan that takes nearly half their life to pay off?


64 comments:

Anonymous said...

A highly leveraged purchase using the asset aqcuired is still a purchase none the less, despite its high level of financial instability based upon the loan product's structure used to lever the purchase.

Anonymous said...

Oh I don't know, my parents bought a house in the wine county in california. Their payment for 30 years was 130 a month with insurance. They paid it off 3 years ago. There is no way that rent for a 4bdr house on 3 acres would rent for that. If you have the means and not moving and like your house buy, dont rent. I done the same thing in Oregon and got a great deals years ago and could not rent the house for what I have to pay the loan. The people that are going to get killed are the ones that took helocs and used their house as ATMs or bought too much house!

ApleAnee said...

It isn't just homes. It's cars, big screen tv's, furniture, distressed wood floors, granite counter tops, travertine tile, stainless steel kitchens, ad nausem. America confuses wealth with debt. Illustrates how shallow America truly is. It is all in "the show". If it looks rich, it is rich. American's don't understand that in order to own anything you must have clear title. No one has clear title to anything in the U.S. But if Harry and June next door, or Bob and Martha at the office are impressed, it works. You really expect these empty vessels to wake up?

mcgovern said...

brainwashed.

Anonymous said...

Because the new definitions of bought and own in the new economy have changed to "it's in my possession" from "it's paid for and in my possession". I live in it or drive it therefore I own it.

Anonymous said...

Why do people say they "bought" or "own" a home
You are absolutely right, I never understood that. "Bought" means it's paid off.
BTW, the say the same about cars.

So, if someone's house was foreclosed it means he sold it? LOL

Mark in San Diego said...

Agree with Oregon. . .I owned property (paid it off) from 1986-2006 and made a lot of money. . .as I recall, Keith bought a place in Scottsdale and made money. . . so what we are really talking about here is not the long term value of owning (positive), but people who got in WAY over their head and can't get out. If you bought in 2005, and can afford the 30 year fixed, and plan to stay in your house for 20 years, the fine. But, if you earn 80K and bought a 800K house, with an ARM, then you are screwed and should be!

GT said...

how many HPers will EVER buy? the longer i'm an HPer the more i have no desire to ever buy unless it is outright/ dirt cheap

Anonymous said...

.



I love a person who say's, "I own my home outright, it's mine"!

Just wait until you miss your property taxes!


.

Anonymous said...

Definite difference between "bought"/"purchased" and "own". Anyone with a pulse could have bought a home in the last couple years (though wouldn't surprise me to learn that a corpse bought a house in the last couple years... does brain dead count?), but even fewer of these people "own" their home.

Saying "I bought a house" is accurate even if you put nothing down. Saying "I own a house" can only be accurate if it is 100% paid off and you have the paperwork to show it.

Anonymous said...

"We'd short your house if we could". LOL.

Actually, I think you can now with options on the Chicago options board.

Anonymous said...

its all a lie, just like the land of the free and the home of the brave. we may be brave from time to time but we are not free and never have been..now then, what about 50 and 100 year mortgages that are coming up? what then? work your whole life and still not pay it off......work for the lie of home ownership......the american dream.........but as george carlin said, you have to be asleep to enjoy it.....

Owner Earnings said...

Half their life to pay off? Try 100 years to pay off or better yet never pay off.

$500,000 house in CA.

$50,000 income PRE TAX.

That house will NEVER get paid off.

bryce in canada (Vncvr&Clgry bubbls) said...

Because it makes them feel good about it, because it is a misleading Half-Truth which sounds more impressive than the Full-Truth, since the Half-Truth takes advantage of the word "own" which semantically implies 100% ownership that is fully paid and is not at risk of being legally taken back by someone else with an interest in it.

The Full-Truth is:
"Well, technically I own it in the strictly legal sense, but I borrowed $500,000 to technically own it, and I have paid off only $XXXX of that loan and accordingly in the equitable and monetary sense I really only own($XXXX/$PurchasePrice*100) percent of it.
Which isn't much of a percentage, really, is it?"


.....I've always found the "I own it" terminology irritating. When I was a teenager and first learned that, except for the senior citizens, nobody truly "owned" any of these houses that they said they owned, I wanted to kill people for having distorted my childish/teenage mind as to the value of a dollar and how much money even a moron could presumably earn.

More accurate would be: "So far, I've got X percent of it and I'm on pace to have 100% of it in X years."

The Thinker said...

How dare you question the "ownership society"!

Anonymous said...

"If you have the means and not moving and like your house buy, dont rent. I done the same thing in Oregon and got a great deals years ago and could not rent the house for what I have to pay the loan."

Many people, who live and work in the Boston-DC corridor, don't have that option. It's like a lot of former Bostonians, living in NH or southern Maine, and hoping that they can make that 1.5 hr commute plus telecommute, 3 days/wk , indefinitely. Unfortunately, once the company relocates to TX or NC, either they'll have to sell or move with the company and pay the NH/ME mortgage, with the hope of occupying the place during retirement since rural properties don't sell very quickly.

Sigma said...

Whenever I see someone brag about their car, I make a simple comment "That's a nice rental" and I guarantee at least 90% of the time, I'm right.

Anonymous said...

You know the market has bottomed when the average American can afford a home with a 15yr fixed mortgage.

Anonymous said...

That's just like all the tools that run around bragging about the great "Greenspan Rate" they got on their home loan that somehow get lower with every passing cocktail!

Look... dude, the ONLY way your loan is going to be at 5 1/8% (or whatever) is if you STAY in that loan for the LENGTH of the loan!

Right now you're paying ALL interest! They just don't get it. Let's say my loan was at ___ (double digits, pffftt) whatever, but "I" pay the loan off in... 5 years. Well they can't charge me interest on money I no longer owe!

YOU... on the other hand..

Conversekidz said...

My parents have always taught me the bank owned the note, and that once it was paid off we owned it.

Same thing goes for my car, I tell people the bank owns it for a couple more years.

Frank@NeverColdCall.com said...

Because their fragile little egos need feeding.

Now there's nothing wrong with buying a house on a mortgage if it was a good deal, in fact 98% or so of people have no other choice, but please, don't tell me you "own" it.

It's like the typical Scottsdale tool who says "look at MY Porsche" when it's really on a 5-year lease for $299/month and he will never own it and will be stuck with it when it's high-mileage and breaking down.

GT said...

they OWN a mortgage and they will always OWN a mortgage, they will not live anywhere for 30 yrs. they will keep upgrading, fear of true ownership (what to do with that extra $ when paid off), etc.
in most cases they own a mortgage, the county owns them with prop tax, and the hoa owns them with no freedom

Anonymous said...

Someone mentioned Scottsdale.

Isn’t it time for Frank@never a cold call.com to (giggle) provide his daily reminder of how he (giggle) left the shallow town of Scottsdale and mover to unpretentious southern California?

Ha ha ha ha ha ha!

Anonymous said...

I flipped houses in Phoenix from 1998 through 2005 with IO loans.

I sold them all by October 2006.

I took the proceeds and paid off my primary residence, my cars, credit cards and everything else I could find. I bought new appliances, added granite countertops, travertine/hardwood flooring, re-surfaced the pool, painted inside and out and generally brought the property into pristine condition. All paid for without debt.

The point is, I still owe 3500 dollars a year in property taxes and lost a deduction off my Federal taxes. I still pay insurance on it.

I still don't own my property.

The State could come in and condemn it under eminent domain and take it from me. If a military action ever happens (god forbid) in the area, my home could be confiscated or bulldozed over for national security. Who know?

Ownership is a facade, even if you have paid off every dime of your mortgage.

One cannot buy love, but you sure can rent it.

smitty said...

I suppose in america, "I bought a house" and "I paid off the house" are two different things.

area 51 said...

To "gt"

WORD!

The thought of buying (via borrowing or paid-in-full) a giant slab of wood and concrete that is planted in the ground for $500,000+ and with perpetual property taxes, maintenance and barely 5% appreciation, makes me sick to my stomach.

And to all the DOPES, DOLTS, and 1000 Word Douches:

How quickly can you liquidate your house "investment"?
I can liquidate my stocks in 3 seconds.

Anonymous said...

Because that is what they do!

buy low, sell high said...

There's a time to buy. There's a time to sell. To wit,

buy gold
buy foreign currencies
buy foreign stocks

sell the U.S. dollar
sell U.S. residential property [like 2 yrs ago]
sell U.S. stocks [like 7 yrs ago]

The Sun is NOT shining on the USA right now.

anon said...

>> My parents have always taught me the bank owned the note, and that once it was paid off we owned it.

That's right - you own the note, while the State owns the actual house via property taxes.

Dante said...

For the same reason the cubicle slaves here post their fantasy-land dreams of revenge upon all those who seem to live better than they do: the deadly sins of envy & pride. Have a nice day.

planobcl said...

Just a reminder to those who thinks they are "Free at last", when they finished paying off their loans (30 years or earlier). That is the title and deed to your property is under your name.

HOA? (probably not in older neighborhood)
new roof?
new fridge, range, washer/dryer etc.
new energy efficient windows/doors?
new paint exterior/interior?
insurance? (a bitch in hurricane alley)
property tax (a bitch if you live in Texas, 3%)


remember a house is nothing but a box of wood sitting in the rain slowly rotting away, albeit, a well built house will rot away slower than the recent stucco boxes.

Anonymous said...

Hmm...

And to think if you have that money instead in gold you're insulated from the rapidly falling dollar.

Anonymous said...

when i signed up for my first mortgage i told my father i now owned a condo. he said "son, the bank owns the condo. You own nothing but the mortgage on the condo".

here in Ireland people are obsessed with owning because they have engrained in their mind the image of an English landlord booting down the door and sending the family into the cold before setting fire to the turf hut.

There is probably no bigger bubble in the world than the real estate mearket here (they call it "property" here). you will also find no more compliant media than the irish newspapers who are STILL beating the drum of real estate, sorry, property. they are calling critics of the bubble "unpatriotic."
pass the brain pills..

Anonymous said...

Can't think of anything ele to call it? This is my property which I owe on???? Thats a bit much.

Also your missing the point of choosing where you want to live. I can walk to the beach, carry my surfboard, or surf rod. When I retire I plan to live here. When my knees go and I can't surf I can still boogie board. I get to walk to the store and my favorite bars.

Damn right I had to take a 30 year loan for this, and I would do it again in a heart beat. Still have 18 years to go.

life is more than a balance sheet. So up yours bitter renters. And if you block me driveway trying to park to get to the beach I'll have your pos towed.

Anonymous said...

Alot of these posts have a convoluted half hearted legal definition of ownership. If a person has a deed to real property granted fee simple they own it - period. Now, if they leveraged it, the bank has a mortgage or deed of trust , which in most (but not all) states is a mere lien. Further a deed and a mortgage are two separate instruments. The same goes for property taxes, HOA fees, etc. - none of these constitute ownership but at best a potential lien - thats all.

The original HP point is one of semantics & attitudes toward debt in the US -but at the same time for those who say the deed holder doesnt "own" their property because it it is leveraged or potentially lienable are denying the legal meaning of the term ownership.

Anonymous said...

You are right everyone. Let's all live in tents, then we'll have no HOA, no property tax, no maintenance and we'll OWN our tents free and clear.

What a bunch of dolts on this board.

Anonymous said...

interesting how "owe" and "own" differ by only one letter

Anonymous said...

Because people want to believe lies, because the truth hurts. We call them credit cards what should be called debt cards. We call it investing in common stock when it should be called gambling in common stock. We even try to convince ouselves that there is good debt and bad debt, when it should be called slavery. We call it using equity in our homes instead of taking a loan on the roof over our heads.

Anonymous said...

"It's like a lot of former Bostonians, living in NH or southern Maine"

Maine's one of those quaint places to retire in, if you like the northeast weather. Personally, if I were of that sort, I've rather live in Nova Scotia (near Halifax) than New England, nicer people, a lot of space, beautiful scenery, and it lacks the interior deep freeze of a Maine, NH, or Vermont which can be in the single digits a/o below zero in Jan/Feb whereas NS is more like eastern Mass.

bryce in canada (Vncvr&Clgry bubbls) said...

RE: "A lot of these posts have a convoluted half hearted legal definition of ownership... ...are denying the legal meaning of the term ownership."

Well, if you want to get Legalistic, one then has to be more specific as to the terms and conditions of ownerhsip... and, thus, accordingly, what people should be saying is:
"I own it SUBJECT TO A CHARGE in the name of ZZZBankIncorp'd which will be discharged in XX years, PROVIDED THAT I keep making payments every month UNTIL I DISCHARGE IT by paying the principal amount of $XXXXXX, of which I have so far paid $XXXX, AT WHICH POINT I WILL FINALLY OWN IT FREE AND CLEAR OF ALL CHARGES; failing which, it will be seized from me and sold, because I do NOT OWN it FREE AND CLEAR, I OWN it ONLY SUBJECT TO A MAJOR CHARGE CURRENTLY WORTH $XXXXXX, registered in the name of ZZZBankIncorp'd."

"So.... as you can see, for all practical purposes, I really don't own much of anything unless I've been making blended payments of principal + interest for at least half the term of that CHARGE, at which point I will have actually paid down a quarter of the principal, which might mean I at that point own almost one-third of the house if I made some sensible amount of a downpayment."

planobcl said...

"You are right everyone. Let's all live in tents, then we'll have no HOA, no property tax, no maintenance and we'll OWN our tents free and clear.

What a bunch of dolts on this board."

The trolls here still equate renting to living in a tent.

The truth is that most renters here (myself included) live in houses better than most FBs for fraction of carrying cost. In my case, the landlord's PITI = $1950, my rent = $850

AnotherAnon said...

I agree with Conversekidz'd defenition. You may have bought it, but you don't own it until it's paid off. Anything else is just lying to yourself.

Now, why buy instead of rent? In my opinion and experience, it's because you want to be able to have pets, children, paint walls, remodel/change things, garden, have company, and so on without pissing off the landlord because you're *lowering his property value*. If that matters, buy. Buy what you can afford, including the taxes and insurance, and tell youself it's a monthly *housing* bill, not an investment, not your retirement.

If none of that matters, rent, and save yourself the hassle.

JimAtLaw said...

7:27 hits the nail on the head. Unless you can sail it into international waters on short notice, you don't own jack.

Just wait until the municipalities stop getting paid their property taxes - it's already happening, but this is a very slow process, and will get much, much worse before it gets better. And when it does get worse, you'll see tax sales 'til the cows come home... here in L.A., the property taxes and HOA alone on a lot of these specuvestor-owned McMansions are as much as the rent on a nice apartment.

Consider this. said...

My grandfather bought a house in the the lovely west baltimore Union Sqaure park neighborhood in 1935. Its was a great area. By the time he paid it off in 1965, the middle class neighborhood started to become a ghetto and the house in adjusted dollars was worth a fraction of what he paid. Real estate does not always go up. Oh yeah, the house next door belonged to a doctor from 1940-1975 is now a crackhouse. It always goes up--yeah whatever.....

Anonymous said...

you didn't buy sh*t, and you aren't rich. Equity is only realized when you are out of the game, if you are still in the game you are paying rent to a bank.

Makes me ticked off when I hear people say house prices are only going to go up. Get out from under your f-in rock.

sorry- that's a mini rant

Anonymous said...

It's a WARM FUZZY
makes you feel good inside- It's ours, we bought it, we own a home

sorry to rain on the parade:(
It's a house,
a liability unless you get positive cash flow on it

all propaganda to get you to feel like crap for being a lowly renter

Another Anon said...

Another example for a reason for "buying" rather than renting, I have yet to see a bank or tax man evict someone for getting a piercing or a tattoo

http://www.cnn.com/video/#/video/us/2007/09/25/avila.apartment.bans.tattoos.woai

Anonymous said...

Should have attached his leg to a Stucco Crap shack.

Anonymous said...

I can liquidate my stocks in 3 seconds.
--------------------------------

Your portfolio must not be very large.


Do you really "own" those stocks? Stocks are just an illusion of ownership too.

Anonymous said...

Because people want to believe lies, because the truth hurts. We call them credit cards what should be called debt cards. We call it investing in common stock when it should be called gambling in common stock. We even try to convince ouselves that there is good debt and bad debt, when it should be called slavery

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

Geez. I am not sure where to start, so I won't. The quality of posts and discussions has really gone down. Lately I have found myself only reading Keith's top level posts and laughing at the photos and never delving into the general population posts.

Just hasn't been the same since Richard's mom took his computer away.

Seems like it is getting very crowded here, which makes me think we are, perhaps, 12 months or so away from the bottom. I do think it will be a very long termed bottom, so don't worry about missing it.

former law student said...

Buy and hold, like anything else. I knew I was in good shape when the same house next door was renting for twice my mortgage payment, and I knew I was in real good shape when the house next door was renting for three times my mortgage payment. Plus, thanks to Prop 13, my property tax is not tied to what the neighbors can sell their house for. The money I'm not throwing away on rent I invest.

the other trader said...

Remember when it was an accomplishment to even get a mortgage approved?



I do...
And bought.




Sold my house when anyone could get one (mortgage), at an inflated price...

But most still think that owning, if the monthly payments are reasonable, is the way to go.
But those people bought before the turn of the millenium.

Those who bought after?


good luck...


Back then (pre-1999), it WAS owning a house, if you got the loan...
Banking requirements were strict, approval was enough to tell you "it was yours".


CTPJA.OB @ $1.26.
?????????????

the other trader said...

GT said,
Why buy ever?

My wife will make me buy a housewell before it is time to do so, that does not mean I will not get it dirt cheap...

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

Area 51 said.
"I can liquidate my stocks in 3 seconds."

Ya, but for a gain?

lol

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

planobci,
If those numbers are true, expect an eviction notice soon...


sorry..

Anonymous said...

I paid cash for my mobile home free and clear.I still pay space rent of 1380 a month.I do live at the beach in the of though and I have the equity.I bought it with funny money from selling my bubble priced stucco box in 2005

CadorBolin said...

I bought my house just before the insane runup in prices. I refused to jump on the bandwagon and treat my house like an ATM.

Well, I still don't call it "my house" -- I am just renting it until the bank is paid off.

turdly said...

worst drivel yet.
Who'd left here, just basement dwellers?
A tirade on the definition of ownership. All respect I had for Kieths experiment is lost. Children seem to play here when the nintendo is down....

Anonymous said...

Perhaps instead of saying "I bought a house", they could say "I'm currently buying a house - only 359 paymens to go!"

Anonymous said...

Because regardless of the value, you OWN it, if it goes to value of $0.00 You still OWN it. You get a mortgage against your ability to pay it not against the value of the house. You own the liability of the taxes and insurance too.

Stephen said...

To expand upon Anonypussy 9:34's comment, there are two legal theories of mortgage: lien theory and title theory.

Under lien theory, the mortgagor (buyer) owns the property, but the mortgagee (bank) has a lien on it. This is the majority view.

Title theory applies in a minority of states, including Maryland. Under title theory, the mortgagee (bank) has legal title to the property, but the mortgagor (buyer)has equitable title to the property.

But what this realy comes down to, is that ownership consists of a "bundle of rights" to a piece of property.

Ownership over, say a coffee mug, is almost complete. You can use it however you want, sell it, destroy it, etc.

Ownership over animals is not as complete. The law prevents you from being cruel even to animals that you "own".

Ownership over is house is even less complete. If you have neighbors, you can't turn your house into a nightclub. If you dont't pay your taxes, you lose all of your rights in the house. You can't destroy your house without a permit. Maybe you can't even paint your house a different color.

If your house has amortgage attached to it, you have even fewer rights; e.g. you can't sell your house under certain circumstances, and you need to make your mortgage payments.

So it wouldn't necissarily be improper to say that you "own" a house that you have a mortgage on, but if you want to be realistic about it, your "ownership" is at the far end of the bundle of rights spectrum. "Owning" really carries a connotation that you have more rights in the house than you actually have.

Anonymous said...

If you have a mortgage, you're a debt slave. You have an equity interest. You're a part owner. Live with it.

I pay about as much in rent as I would pay in taxes, insurance, HOA dues, and maintenance on a depreciating stucco crapbox. I guess I'm just throwing my money away. And bitter. But it just feels so good.

Anonymous said...

THEY WANT TO FEEL IMPORTANT!!

I have mentioned this to a few home debtors and their sympathizers, and I was shocked as to how hostile and defensive they became!! Did I inadvertently POP THEIR BUBBLE?

Happy Homedebtor said...

Lets run the #s to show how ALL of you haters screwed up in your calculations - this is based on our house, and the rent is for what it would cost to rent a house like ours.

Rent: $2200-2800
$$ towards principal: $600-750
Extra $$ via tax deduct: $700-750
Total: $3500-4300
Mortgage: $3700

Worst case: "wasting" $200/mo
Best case: "saving" $600/mo

Over time, as our income increases, taxes increase, our balance decreases, and rents increase, this number will *quickly* shift to being grossly in favor of us. In 5 years, it will be ludicrous, and in 10 (we're leaving in 5-10), it will be obscene.

I'll be spending $600 on tools so I can do crown molding (and probably other molding too) all over the house. After spending about $1500-2K for tools, materials, etc, I'll have $1K+ in tools, and have added $5K+ in value to my home. 200% ROI as a hobby, with leftover assets.

What do you do for fun?

Anonymous said...

Hmmmm I don't get that question, because going into debt and buying a house has always been the scheme, not many people purchased their house straight up that I can think of, the fact is people have gone into more debt than their predecessors..so nothing really hasn't changed as far as Americans and Credit...its always been like this for the buyers...its that the banks and brokers have turned it into a scam with their clever loan products that take complete advantage of the borrower....this opened up the market to the speculators and flippers....I really dont think all of the blame should be pointed to people that went into debt just buying a house to live in, thats always been the norm when homebuying..thats why there is such a thing as a mortgage, its something you wont pay off overnight right???

Anonymous said...

You are right everyone. Let's all live in tents, then we'll have no HOA, no property tax, no maintenance and we'll OWN our tents free and clear.

What a bunch of dolts on this board.

September 25, 2007 9:53 PM

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

You just shot yourself in the foot. Nice going!