My long ass Rant...and there is a question in there to

gamecock43 · #1 (**permalink**) 05-28-2008, 01:51 PM

So today I am in a financial bad mood. I feel the economy crunch. There is less spending money after the bills are paid. Money in the bank is not growing as it used to. And I am especially sensitive to seeing the people around me spending money on items that I have to live without.
But the biggest thing? The final straw for me this morning? The 'makes me want to just forget all this frugal financial hoo-ha lifestyle' trigger? People around me spouting ideotic financial advice and living financially dumb and trying to get me on board.
Serously I want to scream. I want to go off on these people. I think the deeper in a financial hole a person is, the more they want to drag you in there with them.

What is up with people pressuring me to buy a house right now in the face of this housing mess? How do they think they are more sucessful and smarter than me because they have bought a house? Somehow they get self satisfaction because they have not LOST their home and I feel like a loser because I'm still renting.

They spout off nonsense phrases and cliche but untrue advice that the real estate industry has been saying to keep the market afloat. One friend wrote me this: "You're taking it way too seriously - don't! Home ownership is almost less commitment than renting - just find something that you like and buy it - and watch the appreciation increase and mortgage decrease as you make payments to yourself rather than your landlord. Why wait a year? Do it now - the market is at the lowest it's been in a loooooong time and sellers are anxious to get their homes sold because inventories are so high." (I just copied and pasted her words).
The more I research home ownership- the more I'm realizing how much $$ it really is! People end up paying almost double the cost of their house in intrest payments! (for you guys-common knowledge, for my generation, not so much) Why am I the only one who realizes this and where do misinformed people get off educating me how to mis-spend my money?
Another friend who is buying her 4th house now tells me not to worry about realtor commissions because "you don't pay the realtor - the seller does."-any amount of research will teach you that realtor commissions get built into the price of the house so no, the buyer DOES pay those fees. Otherwise, why do people expect to get a better price on FSBO houses?
And finally, a friend who is in debt to her eyeballs with mortgage loans and on her way to maxxing out all of her credit cards to pay for basic living because her paycheck goes to keeping afloat on the multiple cars and boats wrote me this email saying: "Yes, investing in real estate is the best possible thing you could do right now. Actually, owning a home is probably the best investment you could ever make. I get satisfaction just knowing my house is worth 100k more than what I purchased it for 2 yrs ago."
Dont these people get that they are in the middle of a marketing sheme and are being manipulated?
So what can I say to these people? These people who are in over their heads, who have been manipulated to buy into catch phrases and who have been living large with no consequences? What do I say when they smuggly sit there and 'educate' me on the virtues of home ownership?
I know they have made a mistake. These people. But they still look down on me.

sweeps · #2 (**permalink**) 05-28-2008, 01:59 PM

As Home Prices Drop Low Enough, a Committed Renter Decides to Buy

gamecock43 · #3 (**permalink**) 05-28-2008, 02:12 PM

Thanks. I have not seen that article before. Ironically, I am getting this unsolicited advice because I am in the market to buy a house. I have the money now but I am getting cold feet after really researching the housing market. Now everyones trying to push me in the pool with silly phrases that sound good on the surface but are not so wise. People are trying to spend my money and its making me mad.

AmbitiousSaver · #4 (**permalink**) 05-28-2008, 04:47 PM

Quote:

Originally Posted by gamecock43

I think the deeper in a financial hole a person is, the more they want to drag you in there with them.
"You're taking it way too seriously - don't! Home ownership is almost less commitment than renting - just find something that you like and buy it - and watch the appreciation increase and mortgage decrease as you make payments to yourself rather than your landlord. Why wait a year? Do it now - the market is at the lowest it's been in a loooooong time and sellers are anxious to get their homes sold because inventories are so high."

I think you are doing things right. I'm still regretting reading David Bach's Automatic Millionaire Homeowner book cause its his advice that made me think buying as many properties while I am young will secure my retirement since I lack a pension. Instead... I am... oh, well over half a million in mortgage debt between two homes. I rent one out at a loss... I can make the payments and all, I'm not hurting but I'm starting to realize how dumb it was. Cause that $600/mo loss on the rental I take could be invested at a 5% rate of return and by the time the mortgage would be paid off I'd have $440K generating $20K/year. Much less stressful than being a landlord.

My Dad... he rents, has always rented in HAWAII of all places. He could have bought when the market was prime in 1980... but he didn't. He has no desire to buy because he doesn't want the hassle. His net worth probably isn't as great as my FIL who has 10 acres of land in Missouri, but my Dad has a lot less stress to worry about. This is the lifestyle he wanted and he is very confident about it, he travels, he does a lot and doesn't have to worry about maintenance and repairs.

Don't worry... just do what is right for YOU! Its your dreams and lifestyle that you want... not theirs.

maat55 · #5 (**permalink**) 05-28-2008, 05:01 PM

Tell them you are looking for a really good deal and that you are waiting them out for when they have to sell to you at half price.LOL. Homes are not an investment, to minimize the cost you can buy only what you can afford on a 15 year note at 25% of your take home pay with 20% down.

gamecock43 · #6 (**permalink**) 05-28-2008, 05:06 PM

Tell them you are looking for a really good deal and that you are waiting them out for when they have to sell to you at half price OMG thats hysterical! I wish I could say that to shut them up! Next time I will think it in my head and hope to get self satisfied. I know I'm doing it right, taking my time. Its just similar to the other thread where people give you unsolicited advice about how you should spend your money. Implying that their situation is so much better.

Joan.of.the.Arch · #7 (**permalink**) 05-28-2008, 05:56 PM

They probably really are genuinely happy at the idea of you getting a house. They probably are happy with their own houses and want you to have some of that same kind of happiness. But I imagine it can come across like some sort of proselytizing. People can get that way with all sorts of things that they think are just so grand and they want others to experience.

rob62521 · #8 (**permalink**) 05-29-2008, 08:59 AM

Many of your "friends" appear to subscribe to "misery likes company" adage. They figure if you do it, it justifies what they have done. Stand firm to what you know is right for you.

I'm considered the cheapskate among many of my friends and most of my coworkers. I take my coffee and lunch to work. If I'm on vacation, I plan my driving to keep from using gas, we save up for projects and instead of going into debt. I do use a credit card, but pay it off each month. I do a lot of cooking at home, but we do eat out some, but our choice and nice places. Do my friends try to convince me to "live a little"? Sure, they do, because they want me to be like them. Do I? Not really. We have nice things and our home and cars are paid off because we have worked hard at being careful. Plus, we've learned the satisfaction of being content with what we have instead of always wanting the newer, bigger, better. The only thing many of them have that is truly bigger, better, and newer are their bills. Stay strong!

gamecock43 · #9 (**permalink**) 05-29-2008, 09:29 AM

I talked to one of these friends in depth last night and I think its ignorance. I dont think people do research before buying! Or my friends at least. She had blanket statements such as "buying is the best investment you'll ever make" then I ask her about diversification of investments and she says "you cant think like that." She had nothing to back up her reasoning, but she refused to admit the risks. She said that this housing crisis is temporary (tell that to the people who have lost their homes, I dont think they think this is a temporary problem), and when I said I am worried about my downpayment decreasing in value as opposed to growing as it is in the bank now, she told me to take out an 80/15 loan like she did and just put down 5% so the rest of the money will sit in the bank earning interest.
So I think its as Joan says. They had a good experience, dont realize that they may have lost some money in the process and just want me to enjoy the feelings of pride, accomplishment that they felt. One friend bought at the height of the market but says that the market was shaky at that point.
Once people go through the process, they dont really want hear what they did wrong.

feh · #10 (**permalink**) 05-29-2008, 11:00 AM

This is a great time to buy a house. Mortgage rates are very low, and it's a buyer's market (with the disclaimer that all real estate is local).

If you are sound financial footing and have a decent down payment saved up, why wouldn't you want to buy now?

gamecock43 · #11 (**permalink**) 05-29-2008, 12:08 PM

Because I have 20% of my ideal purchase price range in the bank but am not sure I could make the monthly payments once all was said and done.
And because there are a million people out there who are going to 'help' me buy a house and make money in the process off me and I am starting to learn how much money gets spent on interest, taxes, insurance ect that renters dont pay.
And because I realize this is a long term comittment and will be officially giving up the chance to say "you know I like it here, I want to move here" when I visit Key West, Texas, or Alaska.
Also I will be starting a career in the next year and am not sure about being tied down to all the jobs in just one city.
Also because I am not handy at all and think I might spend more han the average homeowner calling people to fix things that others can do for themselves.
And I worry that I am in love with the idea of homeownership but the reality of it might get old and I will have regrets.
And I worry that I am too young/inexperienced/uneduated/poor/and I will end up making every mistake in the book, and it will be my ass moving in with my parents- in -law with maxed out creditcards. I worked very hard for this down payment/ I worked hard for excellent credit/ I worked hard to be in a position of independence and I am afraid that I will be one broken water heater away from losing it if I give in to friends telling me to buy now but not having the sense to really see if I should buy now.
Maybe now is the time for 'people' to buy, but I still have issues to resolve before I know if its the right time for 'me' to buy.

feh · #12 (**permalink**) 05-29-2008, 12:29 PM

Quote:

Originally Posted by gamecock43

Because I have 20% of my ideal purchase price range in the bank but am not sure I could make the monthly payments once all was said and done.
And because there are a million people out there who are going to 'help' me buy a house and make money in the process off me and I am starting to learn how much money gets spent on interest, taxes, insurance ect that renters dont pay.
And because I realize this is a long term comittment and will be officially giving up the chance to say "you know I like it here, I want to move here" when I visit Key West, Texas, or Alaska.
Also I will be starting a career in the next year and am not sure about being tied down to all the jobs in just one city.
Also because I am not handy at all and think I might spend more han the average homeowner calling people to fix things that others can do for themselves.
And I worry that I am in love with the idea of homeownership but the reality of it might get old and I will have regrets.
And I worry that I am too young/inexperienced/uneduated/poor/and I will end up making every mistake in the book, and it will be my ass moving in with my parents- in -law with maxed out creditcards. I worked very hard for this down payment/ I worked hard for excellent credit/ I worked hard to be in a position of independence and I am afraid that I will be one broken water heater away from losing it if I give in to friends telling me to buy now but not having the sense to really see if I should buy now.
Maybe now is the time for 'people' to buy, but I still have issues to resolve before I know if its the right time for 'me' to buy.

A sane, reasonable person (not your average American) will do their research before buying a home and know if they can afford it or not. All of your points are valid, but if you know how to take care of your finances and don't buy more house than you can afford, home ownership is not the black hole that is so often portrayed in the press these days.

Banks and realtors will (or at least used to) provide people with plenty of rope to hang themselves, but you don't have to accept the offer.

Is there a difference between your "ideal purchase price" and "what you're able to afford"? It sounds like there is, if you worry about being able to make the payments.

LuxLiving · #13 (**permalink**) 05-29-2008, 12:35 PM

And at some point if you do decide to permanently settle in one place you might want to resolve the 'my home is an asset/investment' or 'my home is a place to lay my head' or 'my home is a liability' debate that we were recently discussing here in the forums.

gamecock43 · #14 (**permalink**) 05-29-2008, 12:55 PM

Yes, I have 50k in the bank for a house as a result of alot of saving and discipline so that puts me in the range to buy a $250k house, but the payments will be around 1200 month plus taxes and insurance and I dont know what those numbers would be. So I am guestimating I might be paying around 15-1600 month, plus there are unknowns like things breaking, and we have an unsteady income.
On good months its about $2000 month, low months its guarenteed $1400 month, but thats before I get a job, which I will be doing in Sept...so the job would clear us to make the payments easy...but you can see why I am feeling like I want this to be a slow process and not get rushed into anything. I just get nervous about the payments. Theres a couple of 'ifs' going on.
Of course I have not looked with a realtor yet...maybe I will like a house for $150k and our problem will be over..but I have been on realtor.com and I know myself well enough to fall in love with the larger/upgraded house and having the choice between lower monthly payments or a nicer house- I'm going with the nicer house.
I will be on the 'worst justification you ever heard' thread by saying "I know I cant afford the monthly payments but I have the 20% down and I worked hard for a nice house, I just want to be happy with my purchase when I come home at night and I deserve it." LOL.
So I can see myself screwing myself over. Why rush into that scenario?

But the one thing that keeps running in my head to BUY (besides everyone in my ear telling me now is the time to buy) is that this past year I really didnt add much to the house saving fund. Maybe $2000. The economy got tight, and I'm just burned out on the living frugal with nothing to show for it while my friends are living large and pitying me 'for being broke.'
In the past I have 'paid my saving account' several hundred dollars a month. But not this year. I didnt get into debt, but I spent those monthly payments on junk, and if I continue to do that then I SHOULD buy to force myself to make that several hundred dollar payment into my house fund (in the form of a mortgage) rather than waste another year buying junk. Especially since the money market is no longer helping me grow my money much.
I am a complex person. I exhaust myself on this issue.

feh · #15 (**permalink**) 05-29-2008, 01:20 PM

Quote:

Originally Posted by gamecock43

Yes, I have 50k in the bank for a house as a result of alot of saving and discipline so that puts me in the range to buy a $250k house, but the payments will be around 1200 month plus taxes and insurance and I dont know what those numbers would be. So I am guestimating I might be paying around 15-1600 month, plus there are unknowns like things breaking, and we have an unsteady income.
On good months its about $2000 month, low months its guarenteed $1400 month, but thats before I get a job, which I will be doing in Sept...so the job would clear us to make the payments easy...but you can see why I am feeling like I want this to be a slow process and not get rushed into anything. I just get nervous about the payments. Theres a couple of 'ifs' going on.
Of course I have not looked with a realtor yet...maybe I will like a house for $150k and our problem will be over..but I have been on realtor.com and I know myself well enough to fall in love with the larger/upgraded house and having the choice between lower monthly payments or a nicer house- I'm going with the nicer house.
I will be on the 'worst justification you ever heard' thread by saying "I know I cant afford the monthly payments but I have the 20% down and I worked hard for a nice house, I just want to be happy with my purchase when I come home at night and I deserve it." LOL.
So I can see myself screwing myself over. Why rush into that scenario?

But the one thing that keeps running in my head to BUY (besides everyone in my ear telling me now is the time to buy) is that this past year I really didnt add much to the house saving fund. Maybe $2000. The economy got tight, and I'm just burned out on the living frugal with nothing to show for it while my friends are living large and pitying me 'for being broke.'
In the past I have 'paid my saving account' several hundred dollars a month. But not this year. I didnt get into debt, but I spent those monthly payments on junk, and if I continue to do that then I SHOULD buy to force myself to make that several hundred dollar payment into my house fund (in the form of a mortgage) rather than waste another year buying junk. Especially since the money market is no longer helping me grow my money much.
I am a complex person. I exhaust myself on this issue.

You remind me of my wife. She has trouble making decisions, especially big ones. She gets frustrated and overwhelmed trying to process all the considerations that are part of such a decision, and just kind of grinds to a halt. I think I understand why you use the word exhaustion. Analysis paralysis.

All I can suggest is that you try to be as objective as possible when making the decision. Use a spreadsheet to come up with a budget, and see if you can afford it or not. Look at the numbers only - don't think about what your friends are doing or what they think.

If you don't trust yourself to stick to a budget, or if you fear you'd fall in love with a particular house (one you may not be able to afford), then it probably is best to wait.

gamecock43 · #16 (**permalink**) 05-29-2008, 01:28 PM

analysis paralysis. YES! That is what I have! I dont like this aspect of my personality and have not exhibited signs of it before, but I cought it from someone, somewhere and I have it bad.
I keep telling myself to be patient, it will all come together when it is meant to be. If I force the issue then I will make a bad decision.
In the meantime I will keep up with the boards. I think I have alot in common with scrimpandsave and I will see how her situation progresses.

Cylenchar · #17 (**permalink**) 05-29-2008, 02:45 PM

As someone who works in the Mortgage market (for a home builder no less), I think your friends advice is much too simplified to be useful at all.... Home prices are dropping, but they had been at RECORD highs... something that may interest you is find a hous for sale in a neighborhood you like, and look at the county appraisers page, it tracks the value the home has sold for, it's impressive to see some of the jumps.

Snave · #18 (**permalink**) 05-29-2008, 02:56 PM

I'll throw my two cents in. I am in the middle of a house being an investment. Here is my reasoning. If you pay rent for 30 years at $1000 month, then you are out $360,000. If you get a $200,000 loan at 6% on a $250,000 house, then you will pay $431,000 total or (231,000 in interest). At the end of the 30 years, you will have a paid for home which probably has gone up in value. If you continue to rent, the only thing that will probably go up is the price of rent. That means, you will be out much more than $360,000. So, in that regard, a home is an asset. Now, there are other expenses along the way such as insurance, upkeep, etc... so that needs to be factored in. That is how you end up on the liabilty side of things.

cicy33 · #19 (**permalink**) 05-29-2008, 08:07 PM

Quote:

Originally Posted by Snave

I'll throw my two cents in. I am in the middle of a house being an investment. Here is my reasoning. If you pay rent for 30 years at $1000 month, then you are out $360,000. If you get a $200,000 loan at 6% on a $250,000 house, then you will pay $431,000 total or (231,000 in interest). At the end of the 30 years, you will have a paid for home which probably has gone up in value. If you continue to rent, the only thing that will probably go up is the price of rent. That means, you will be out much more than $360,000. So, in that regard, a home is an asset. Now, there are other expenses along the way such as insurance, upkeep, etc... so that needs to be factored in. That is how you end up on the liabilty side of things.

Okay, please help me to understand this one. You are basically saying above that the person buying the house is paying double the cost? Isn't that a lot more interest than 6%? Or is it because it is over such a long time to pay it back? Which in that case if you paid it back quicker it would be less, right? I personally agree that right now is a good time to buy houses if you are careful and look for the deals. My reasoning is simple, everyone is selling to avoid losing and selling lower than they should. If you (not meaning you specifically) were to buy say a few houses then rent them out you could make a really nice profit in a few years. I really wish we had the money to buy about 5 houses right now.

gamecock43 · #20 (**permalink**) 05-29-2008, 08:25 PM

Yes, if you pay interest over 30 yrs you end up paying about double the original price of the house. Snave up above explains it nicely; If you get a $200,000 loan at 6% on a $250,000 house, then you will pay $431,000 total or (231,000 in interest) At the end of the 30 years. On top of that, you will be paying taxes, insurance and maintance.
Now to add to that example, lets say over the 30yrs you spend $5,000a yr in insurance, taxes, maintance. Thats an additional $150,000? (am I calculating that right? holy cow!) that has been paid over the 30 yrs and also needs to be recouped when selling the house. Your $200,000 house needs to sell for $581,000 to break even. (is that calculated correctly? I'm still very new to this business) But regardless- its these numbers that scare me. Do I have almost $600,000 to spend on a house over the course of my lifetime? maybe. Have I found a single listing yet that costs $200k but looks worth over half a million? not yet.
Disclaimer- before people jump down my back on how I am still going to be spending a large amount in rent over those 30yrs if I choose not to buy- I know that. Thats why I'm still considering buying.