Home ownership at any cost - Is it worth it?

[terces]

Doesn't this say that the houses were overvalued to begin with? I look at houses in CA similar to mine that sell for $600k, and just shake my head in disbelief. Who are these people buying homes for these kinds of prices? What do you expect to happen when the bottom falls out?

Definitely they were overvalued. But right before the bubble burst people were jumping to buy a house at any cost. I never would have bought my CA house for the price that it sold at. But all that fancy financing at the time made it possible for anyone to buy.

[TheMom]

Steve:

My rebuttle would be that you are looking short term... The housing market has flopped and its been like what maybe 7years since the market took a dump? Realistically it's only been in the last 3-4 that its been bad... I don't see that as long term.

Lets see where they sit in another 15years or so if they were to hold on to the house.

I bought a house in 1997 for $120,000. I sold in 2002 for $150,000. Houses like it in that neighborhood are now selling for $90,000. So, still below the value of 15 years ago. That is pretty long term, don't you think?

[LivingAlmostLarge]

What happened to the neighborhood Mom? Why did it go down?

[Nika]

I think in this society renters are kind of seen as second class citizens, as those who haven't attained home ownership yet. There is a lesser status given to them, reinforced by favorable tax break and general push of the government to get people into home ownership. We are told by society than owning is just so much better and than we blame people for being desperate.

Buying a house is used as a benchmark of success, of your life progression, and many would see a person as not doing as well, if they haven't bought a property. Think of it, don't you get the impression that most of America sees renting as a "temporary condition" in a persons life, as if they must strive to buy a house.

[elessar78]

We get congratulated all the time now for buying our first home. I'm not sure why.

[cypher1]

We get congratulated all the time now for buying our first home. I'm not sure why.

LOL I got that a lot when I first bought 3 years ago being able to "own" my home. I always respond "I don't own the house, the house owns me." Still happy with it but do feel kind of restricted.

[TheMom]

What happened to the neighborhood Mom? Why did it go down?

Nothing, other than being in Michigan during the automotive crash . It's still a nice place to live, lots of singles and young families live there. It's safe, it's close to things, etc. It was a very popular place to live and went up very quickly for a lot of years. Then it went down quickly. I'm sure the housing prices increased in that city faster than most metro-Detroit places did and therefore adjusted more when it fell.

Where I live now, we bought in 2005 for $275k and it's worth about $180k now. It's a very nice neighborhood and people like it here. But, we bought at the top and it's a long, slow recovery in Michigan.

[28andlearning]

Bottom line... You cant predict the future. Everyone is saying investing in a home is a bad idea... It all depends on your mindset. I could use the whole 1980's deal where homes were rock bottom, my Grandpa bought 4plexes left and right and made his first million a few years later... I assume that was a bad investment to?

We simply cant predict the future.

Lets focus on the pros...

Home Taxes = reduction on taxes

You can rent rooms out and subsidize your mortgage payments from this having someone else paying for your mortgage.

You have to have a place to live period.

Here is my scenario,

I just bought a 4 bed, 2 car garage home. My mortgage with PMI and interest is right around $1700/mo. If I was to rent the same place it would cost me 2200/mo. So I am saving $500/mo by not renting the same place, but purchasing.

Now I can rent 3 out of the 4 rooms out for $500 each without garage space and $600/mo with garage space. $1500/mo income minimum, my mortgage is now only $200/mo, people are paying my mortgage for me and I have freed up a huge chunk of change... If the market tanks rent prices are usually pretty steady, so my income each month wont change much, and even if it does my mortgage will still be cheaper than renting...

Investing in a home IS always a good idea, people usually arent willing to make the sacrifices to make the investment work.

For other people its easier for them to rent a cheap place and invest in their retirement, stocks blah blah... While these arent bad ideas, you are not garanteed a positive amount of return. I can garantee I will net $1500/mo every month. You show me an investment with such little risk that returns those same results. Oh, and the only real investment I have is my initial down payment. Most other investments require you to contribute every month.

It's all how you look at things. My grandpa made millions in housing and it worked well for him, but he was willing to sacrafice his style of living to make that money. Most people arent willing to do that and therefore housing may not be an investment to you.

It seems a lot of people here arent looking at a house as an investment and thats their main reason their views believe its not an investment.

It's all perspective. A house is an investment, if you choose not to use it as such, well then of course its not an investment. I could say the same things about stocks though...

I have made 500k on Apple stock, so I know stocks are a great option as well, but there is no garanteed rate of return with stocks, and they are a risky business to yield a high return.

After trying both, I am sticking to Housing, especially when everyone else is running scared.

[elessar78]

Home Taxes = reduction on taxes

"It is wise to keep my home mortgage to get the tax deduction."

Wrong! If you've listened to me for any amount of time, you know I strongly encourage people to pay off their mortgage so they have their entire income to use for wealth building. (This is, of course, after you've paid off all your other debts, have an emergency fund, and started investing for retirement and your children's college funds.) But when I talk about paying off the mortgage, I almost always hear from someone touting the tax deduction.

Let's do the math. If you have a home with a payment of $900, and the interest portion is $830 per month, you have paid around $10,000 in interest that year, which creates a tax deduction. If, instead, you have a debt-free home, you would in fact lose the tax deduction, so the myth says keep your home mortgaged because of tax advantages.

If you don't have a $10,000 tax deduction and you're in a 30% tax bracket, you will have to pay $3,000 in taxes on that $10,000. According to the math, we should send $10,000 in interest to the bank so we don't have to send $3,000 in taxes to the IRS. Personally, I think I will live debt-free and not make a $10,000 trade for $3,000."

You can rent rooms out and subsidize your mortgage payments from this having someone else paying for your mortgage.

You have to have a place to live period.

Here is my scenario,

I just bought a 4 bed, 2 car garage home. My mortgage with PMI and interest is right around $1700/mo. If I was to rent the same place it would cost me 2200/mo. So I am saving $500/mo by not renting the same place, but purchasing.

Now I can rent 3 out of the 4 rooms out for $500 each without garage space and $600/mo with garage space. $1500/mo income minimum, my mortgage is now only $200/mo, people are paying my mortgage for me and I have freed up a huge chunk of change... If the market tanks rent prices are usually pretty steady, so my income each month wont change much, and even if it does my mortgage will still be cheaper than renting...

And if you have a family to fill up your 4 bedrooms?

Investing in a home IS always a good idea, people usually arent willing to make the sacrifices to make the investment work.

For other people its easier for them to rent a cheap place and invest in their retirement, stocks blah blah... While these arent bad ideas, you are not garanteed a positive amount of return. I can garantee I will net $1500/mo every month. You show me an investment with such little risk that returns those same results. Oh, and the only real investment I have is my initial down payment. Most other investments require you to contribute every month.

Jeez. Don't even know where to start.

It seems a lot of people here arent looking at a house as an investment and thats their main reason their views believe its not an investment.

There is a big huge difference between "home ownership" as the thread title stated and "investment property"

[disneysteve]

Everyone is saying investing in a home is a bad idea... It all depends on your mindset. I could use the whole 1980's deal where homes were rock bottom, my Grandpa bought 4plexes left and right and made his first million a few years later... I assume that was a bad investment to?

You are mixing up two completely different things: buying a personal residence and investing in real estate. The first is not an investment. The second certainly is.

I've never said that investing in real estate is a bad idea. What I have said is that your personal residence should not be considered an investment.

[bjl584]

I just bought a 4 bed, 2 car garage home. My mortgage with PMI and interest is right around $1700/mo. If I was to rent the same place it would cost me 2200/mo. So I am saving $500/mo by not renting the same place, but purchasing.

Now I can rent 3 out of the 4 rooms out for $500 each without garage space and $600/mo with garage space. $1500/mo income minimum, my mortgage is now only $200/mo, people are paying my mortgage for me and I have freed up a huge chunk of change... If the market tanks rent prices are usually pretty steady, so my income each month wont change much, and even if it does my mortgage will still be cheaper than renting...

Not really a 1 to 1 ratio. Don't discount taxes and upkeep in your calculations. You probbly aren't saving $500 a month when you consider those factors.

Are you actually renting those rooms, or is that just theoretical? Do you really want that many people living in your primary residence anyway?

Why are you paying PMI on a mortgage if you just made $500,000 on Apple stock?

[disneysteve]

Home Taxes = reduction on taxes

Do you really think it makes sense to PAY $1 to save $0.25?

You can rent rooms out and subsidize your mortgage payments from this having someone else paying for your mortgage.

That's true, but now you are talking about something other than just a personal residence. I have a wife and daughter. I'm not interested in having strangers living in our home with us. Plus, we'd have nowhere to put boarders anyway as we only bought a house that fit our needs. We don't have extra rooms.

My mortgage with PMI and interest is right around $1700/mo.

How little did you put down?

Investing in a home IS always a good idea

Unless the value drops, renters trash the place or it sits vacant for extended periods because you are unable to find good tenants.

I can garantee I will net $1500/mo every month. You show me an investment with such little risk that returns those same results

there is no garanteed rate of return with stocks

Can you explain how the return on the rental property is guaranteed? How are you guaranteed that it will always be fully occupied? How can you guarantee that every tenant will always pay in full and on time? How can you guarantee that a tenant will never trash the property or, if you are renting rooms in your own home, that a tenant won't steal anything from you?

I think you are greatly underestimating the risks of being a landlord. That's not to say that you shouldn't do it or that it isn't a good idea. I think it can be a great idea, but it is most certainly not guaranteed or risk-free.

[28andlearning]

I am going to bow out of this convo. Obviously we have gotten off track. A lot of people here are not going to agree with me and say there are better ways to save money. I agree, there are some great ideas here.

However, I could tought the same stuff a lot of you are here about living debt free, no payments etc just to get a good rep. I don't because its unrealistic. Sure, I could pay cash for a mobile home, live in that year round and be debt free, have a ton of money in the bank, never buy anything and be wealthy... But whats the point if your living in a mobile home and never spending your money? I mean I could come up with some great ideas, but they arent realistic, and Im going to die in another 30years anyhow. So why not enjoy life instead of worrying about saving forever.

Everyone's situation is different, and with that their investment options should be different. But bashing someone for a general statement is just stupid.

Im not going to go into the Apple Stock thing. Again, I need a place to live and I prefer to pay $200/mo instead of $2200 month for rent for the same style of living. The people who I live with go through credit checks, background checks, employment verification etc. I own a nice place and most people would feel lucky to stay there for $500/mo.

[bjl584]

But bashing someone for a general statement is just stupid.

I don't think anyone was bashing you. I just think a lot of what you said had a lot of people scratching their heads, as there were definitely a lot more questions than answers.

[disneysteve]

Sure, I could pay cash for a mobile home, live in that year round and be debt free, have a ton of money in the bank, never buy anything and be wealthy... But whats the point if your living in a mobile home and never spending your money?

bashing someone for a general statement is just stupid.

I didn't see where anyone suggested you should live in a mobile home and save all of your money. I wouldn't agree with that any more than you would.

I also didn't see where anyone was bashing you. Disagreeing yes, but not bashing. You made some statements that some of us quite simply feel are not true, and we said so. That's the great thing about a discussion forum like this - getting to read different opinions. Don't take it personally when others disagree with you. I hope you'll stay around and continue to post your opinions. That's what makes the site interesting.