Housing prices continue freefall
By adamg - Mon, 03/24/2008 - 2:08pm.
This chart (detailed here), would probably be good news for home buyers, if only they could get new mortgages - or sell their current homes.
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More real estate for the barons
So, let's see: housing prices are falling, mortgages for even people with perfect credit are hard to come by.
It's doubtful large landlords will have much trouble securing mortgages (if they even need them) to snap up more property. Which means that we'll only have more property in the clutches of landlords, who will grow more and more powerful.
Anyone want to place bets on how long it takes before we're a nation of renters?
What's wrong with renting?
Other than the stigma that the housing industry, and banks, have placed on renting (because renters don't make them any money), there's no reason for anyone to look down upon renting. Moreover, there are many people who don't have the financial stability, or the plain old motivation, to own and maintain a house and for whom renting is a very good thing. People who should never have bought (and were duped into doing so by banks) are part of the reason we're in this mess in the first place.
Renting is not a bad idea...
At least from a financial standpoint, a mortgage can cost just as much, if not more, than monthly rent. If you're single (or a single parent), a empty-nester, or a college student, renting makes complete sense as you're no longer forking over annual property taxes to the state - the landlord takes care of it all.
On the flip side, the landlord has the flexibility to raise rents to their liking, so if you'd rather have a predictable payment every month rather than a rent hike, owning a home may be the best route.
Of course, you don't have to live in Downtown Boston to rent - plenty of apartments are available in the suburbs for less than $1,000 per month.
the same old scare tactics to keep people from owning their home
Other than the stigma that the housing industry, and banks, have placed on renting (because renters don't make them any money), there's no reason for anyone to look down upon renting.
When you pay your mortgage, you're paying at least some equity; same for maintenance or improvements to the property, that money isn't necessarily gone; when you have to replace the furnace 'cause it blew up, well- now your house has a new furnace. When you pay rent, that money is 100%, completely, totally, absolutely GONE from you.
The NY Times blew the door open on the myth that it's sometimes better to rent. They were extremely comprehensive and fair (for example, assuming you'd put your down payment and closing costs into high-interest investments if you took the rent path) and yet it was still overwhelmingly better to own than rent.
If you're single (or a single parent), a empty-nester, or a college student, renting makes complete sense as you're no longer forking over annual property taxes to the state - the landlord takes care of it all.
Where do you think the landlord gets the money for property taxes from? The Easter Bunny? Tooth Fairy? It comes from your rent check.
Of course, you don't have to live in Downtown Boston to rent - plenty of apartments are available in the suburbs for less than $1,000 per month.
Right, because nobody wants to live in the burbs because they're socially isolating and not where the jobs are (so you have to pay a lot of money to commute- even a commuter rail zone pass costs a fortune these days), thanks at least in part due to overzealous zoning and the state focusing on businesses in Boston, not in the communities where people live.
Not always the right idea
When you pay rent, that money is gone.
Whey you buy in a overvalued market that is rapidly declining, your money is not only gone, but you can't even move without coming up with $50,000.
Something to think about.
I bought during a time when rent was escalating and home prices were still reasonable. Interest rates were dropping, too. I have equity as a result, and will continue to have equity because I bought close in where the depreciation has only been 3% in the last year. This place would not have rented for less than my mortgage payment at any time since 1987 (I know because I looked in the neighborhood back then).
I know people who aren't buying now and are renting because rents have stabilized and even dropped. If they bought a house, they would have no equity for years because the prices are still high and still dropping.
Thanks, Captain Obvious
Whey you buy in a overvalued market that is rapidly declining, your money is not only gone, but you can't even move without coming up with $50,000. Something to think about.
No, here's something to think about. A house owner who after 5 years has to "come up with" $50k to move is $22k ahead of someone who was paying $1200 a month in rent over the same timeframe who lost $72K.
Your argument is predicated on the position that a total loss is somehow better than potential for loss. The homeowner potentially has the option of waiting it out and doing better later; the renter will never, ever see that money back again.
Please read the NY Times article I linked to.
And how much did the
And how much did the homeowner pay towards property taxes, mortgage interest, insurance, and maintenance in that time period? Oh yeah, and fees for the mortgage broker and realtor. You should read the article you referenced.
money doesn't grow on trees
And how much did the homeowner pay towards property taxes, mortgage interest, insurance, and maintenance in that time period?
Where does the money for property tax, mortgage interest, and maintenance for your rented apartment come from?
OH YEAH, your rent check.
Here's a scenario, fairly
Here's a scenario, fairly common to my neighborhood: a condo that would cost at least $300k to purchase, rents for $1200 per month. A 6% loan costs $18k per year in interest, that's money an owner will never get back, and it's more than the rent. Nevermind the rest of the expenses that go along with owning. You can keep protesting, but the fact is that renting does make more sense sometimes.
ok so either way you're
ok so either way you're paying for those things, by your logic.
so then the rest of the money i can "build" equity by investing in a home in a losing market, or i can put it into an online savings account, money market, or some other relatively safe bet. I've made much more in interest over the last 4 years on my investments than if I had used that money towards a mortgage. More than enough to make up for the fact that I rent. I have most definitely come out ahead
not to mention that my value system is not a binary of $1s and $0s.... that i can afford to rent in a neighborhood that i would not be able to buy puts the value of my expenditure even higher
Brett, did you actually READ
Brett, did you actually READ the Times article?
Somehow you missed the bit where it says that it's often MUCH better to rent than to buy... this is very much dependent on the cost of rent and the cost of property.
For my part, i'm way way way ahead renting compared to buying. The money I am not spending on rent is earning a bunch of interest... my insurance is even lower than it would be if I owned this place.
Your presumptions about "some equity each month" really do not stand up to scrutiny. Run it in a spreadsheet.
There are places I'd buy, and places I'd rent. Renting in boston is a lot cheaper than buying right now, so I rent.
You mean this spreadsheet?
nytimes.com/packages...data4.xls
Interest rates and property values have both plummeted, while rents have done nothing of the kind. The article's circa 2005 comment (that in the Northeast it's smarter to rent than own) is no longer accurate.
No jobs in the suburbs?
I wish that were true. The only jobs I can seem to find are in the suburbs. Every time someone calls me about a job it's in Andover or Woburn or even farther from Boston - Framingham, Hopkinton... I'm working in Burlington now, even though I live in Roslindale. I know Adam "reverse-commutes" to Framingham.
So if you were willing to live in one of these places, for cheap rent, you might be closer to the jobs not farther.
I don't need to read anything
There's too many people and not enough houses. It's really that simple. Build bigger condo towers, and execute more criminals. Period.