Posted on 09/14/2014 10:35:20 AM PDT by 2ndDivisionVet
We’ve all heard that millenials are the key to the housing recovery and that home prices are set to skyrocket just as soon as all the people renting or living in family homes (read: basements) get out, get married, get employed, and settle down in their new homes. However, for some reason, the estimates for when all this will happen just keep moving farther and farther out. In an effort to determine just what is delaying renters from becoming homeowners, the New York Federal Reserve conducted a Survey of Consumer Expectations to address the issue. The study found that while most renters have a “desire to own,” a number of factors are preventing them from buying. Some of these factors are very real hurdles to homeownership, while others are literally all in the renters’ heads.
The biggest hurdle to buying a home for most renters is a very large, very real one. More than half (55.7 percent) say that they simply do not have enough money saved or that they are paying too much money out toward debts. 52.7 percent report that they do not make enough money to purchase a home, and 41.4 percent report that their credit is not good enough. Interestingly enough, however, many renters do not actually do any research before coming to these conclusions. About two-thirds of renters reported that they simply think it will be “somewhat or very difficult” for them to get a mortgage versus actually knowing this to be true[1]. Furthermore, many renters do not even check their credit to determine whether they have a viable score for buying but simply assume that they do not; more than a third (35 percent) “think that their credit score is below 680” rather than actually knowing this to be true. “They are convinced that they would not be granted credit and thus may fail to apply for a mortgage even after an easing in standards,” explained Fed researchers in their report. The researchers also added a caveat regarding lowering borrowing standards. “Relaxing credit standards may…have undesirable consequences down the road since borrowers with lower credit scores are at higher risk of default,” they wrote [2].
WHAT WE THINK: While we want to believe what so many rose-colored-glasses-wearing analysts are selling (namely that we can get back to a serious real estate boom before 2020), reports like this indicate that we are simply living in a new era for real estate in which appreciation is not fast and not guaranteed, in large part because an increasingly large portion of the population is opting out of homeownership and feeling okay with that decision. While the NY Fed did determine that most renters think buying a house would be a good investment, those renters’ perspectives on their own personal homeownership experience do not indicate that they will actually buy. As long as they keep renting, the face of the housing market is going to continue to change and the dream will be less and less universal because these individuals are going to raise families and socialize among friends who do not necessarily think homeownership is crucial to happiness, productivity, or professional success.
Do you rent or own? Wish you did something differently?
Our single daughter (who actually does residential and commercial property appraisals as part of her job) decided to take advantage of the lunatic tax credit and buy a home at that time.
By purchasing a little post WW2 bungalow 2/1 with large back yard in a low crime working class neighborhood, she now has a fixed housing outgo which is half of comparable rents in that city. She predicts that the house will neither gain nor lose market value, which is fine with her. If inflation drives up rental prices she is protected. Her property taxes are already at the max millage allowed by law, so by having an essentially stagnant market value, she has a pretty firm grip on that aspect of living cost.
She absolutely rejects the notion of buying more house than she needs just because (right now) she can afford it. The other day she told me that she has 1 year living expenses in savings, at a reduced living standard, of course. Yeah, I’m bragging /grin
Never owned a house. I got divorced at the age of 32. When my two sons were growing up, I would have loved a home, but couldn’t afford one. By the time I got a good paying job, my kids were out of highschool and basically on their own so I didn’t have the need for a house.
And will be taxed more and more and more as you fix it up and time passes. Eventually, you'll be taxed out of your home and then what? That's where our neighborhood is.
That is the smart way to do it.
as predicted by our nutty uncle in the attic, Ross Perot, in 1992
Then you take your equity, and move. If you rent, you would be facing the same problem without equity to cushion the blow of moving.
Another problem is mandatory HOAs. These are very widespread in Texas. If you buy in one of these areas your home can be taken virtually without recourse. Sure you can try to fight it but you will go broke doing it and thus lose anyway. In Texas property taxes are so high by the time you make your last payment on a 30 year note you will have paid the full price of the home in property taxes alone. Yes you litterally buy a house for you and a house for the state.
I live in a small apartment complex (not Section 8). Been here for the past 14 years. I’ve got two bedrooms, central air, and a dishwasher, plus storage area. My water and trash collection is included. I pay my own gas & electric, cable/internet, and phone. They plow the snow, shovel the walk, and cut the grass, plus provide maintenance when you need it. When I moved in, my rent was about $380. It’s now $435. I’m retired, and would be crazy to move from here.
Kudo's you raised a realist.
I have an interesting take on homes. They are in La-la land not the real world compared to other investments.
* 1st you get a tax break for the mortgage, gov't underwriting.
* 2nd the banksters win that game, look at the interest you pay.
* 3rd, unless you make > than 250k single and 500k married cap-gains on the sale of your home it is tax free.
* Now compare that with Cap Gain taxes or Dividends on Stocks or Bonds? How come there is no parody? Why it is sold as an "investment" than why the heck isn't it playing by investment rules?
* Not to mention the maintenance, frankly they are all money pits.
We have been sold a bill of goods, I ain't buying it anymore. If I had to do it over, building it yourself with the cash you have as you go is the only way to go, bag out of this whole Mortgage paradigm it is not in the real world.
Flat Tax with no Mortgage Deductions work for me, Paging Steve Forbes.....
Until the 30 year mortgage is paid, the bank owns your home. For those fortunate to have bought before prices soared (2003) and sold before the market went down (2006), they were extremely lucky.
Closing costs and commissions are a substantial up front expense, so if your career path is causing you to move every few years, it is probably better to rent.
In order to maintain or increase the value of a house, good maintenance and updates are important. Advantages to owning vs. renting - you can have pets, smoke and have any type of fences & landscaping you want. Just stay away from developments with HOA’s especially condos - where there are rules and regs similar to landlord domination.
I would never buy in an HOA. I would go more rural and commute. I have never lived in a subdivision with an HOA, and would never do so. Too much control on your life.
because they can’t pay the property taxes.”
It’s not just the property tax, it’s the homeowner’s insurance, the cost of wind insurance which we are required to have and the cost of repairs and maintenance.
Right now I need to replace my roof, replace my driveway which is beginning to sink, put in a root barrier to prevent damage to my foundation from tree roots, replace my backyard fence - two of my neighbors are refusing to pay their half - and paint the inside.
Maintaining a home in good condition is a must in order to maintain the integrity of a neighborhood and preserve your investment. These costs are often more than the cost of the mortgage and taxes and often not considered by younger buyers.
It seems that “the literary slant of this article” is to impugn renters.
It seems that the ‘organization that funded the research’, wishes more people to be bound to the mortgage industry, but remained silent on all the taxes, levees, fees, and other costs, that are tacked on by the municipality where the prospective home would be located.
It is an old argument. I was caught up in an illiterate boob’s tirade, when I lived on Long Island, N.Y.,(ca. 1988) which included his idea that because I was not paying any property taxes, I had no legal right to use the public library. He went so far aas to call me un-American, because I did not seek to purchase a house. My answer, which froze his mouth open, was that why should I pay into a corrupt local government, and support corrupt politicians? They exist off the taxes and levess assessed on that property, which I would have to pay, above and beyond the mortgage and insurance payments, necessary to buy said home. They, then, decide that the fees and levees are not enough for their lifestyle, and raise them again. Does the increased funding ever go to where they speak so eloquently about? Look at all the years ‘the loterry money is for education’, and then tell me that it has made a difference or that the school budgets have increased in proportion to the increased sales of loterry tickets.
I rent, and here is why:
1. it is a cost that I can manage, without the assessor’s journeys about.
2. if something goes wrong, since it is a building, i have someone that is responsible to fix it, without extra charge to me (until the next rent hike).
3. The grounds are kept, the sidewalks are clean, and there is a security presence in the shadows. Try these days to call a cop.
4. The boisterous, late night party crowd does not live here, we are all working or retired folks.
5. in near to 10 years, my rent hikes per years total, figured for one example month of each year, have been no more than $75.00. Try that on a house, with the ever-elected city fathers of your town, and their growing greed.
The American Dream is not home ownership. Bank’s would like you to think that home ownership and maxing out your credit cards for Santa is the American Dream. The American Dream is what each of us decide it may be for ourselves.
Each persons desires and circumstances determine what is best for them as it relates to home ownership.
I have a very stable job and I rent. Not because I have to move each month after skipping out on the rent. Instead, I want to downsize as my family shrinks. With my kids being educated, with no debt and able to survive on their own they will move out. I do not want a home for 5 when just 2 of us are left. I will continue to live in the same area. Just not the same home.
Sure, you are creating equity in your home. I just put that money into my savings and kids education each semester instead of mortgage payments. And, I will not have to find a buyer to withdraw that value. It will be in my kids education and my savings account.
One day, my view may change. For now, I just prefer to return to the wonderful lake view found on my rental property and enjoy a cup of coffee with my out of debt wife.
The simple things.
I rent and have a dog in a reasonably quiet neighborhood. Maintenance, community pool, clubhouse, air filters and repairs are included in the rent, as is water, sewage & trash, all for less than $800month for a 3/1. I pay my younger next door neighbor $10 to mow when needed.
One good thing about ca. If you stay in your house the property tax only increases slightly over long term.
I have seen people in other states get taxed out of their home. Happened in ca until late 70s.
Texas property taxes are so high...”
Yes they are, but we do receive a homestead exemption plus another exemption when you turn 65 so your rate cannot be raised. Doesn’t keep the taxing authorities from automatically raising the value of your home though to keep their coffers full. Lines of people protesting their valuation gets longer each year.
How could they be when they have the weight of the law thrust upon them, pressing down and enslaving them?
(And many of those laws
are unjust and illegitimate; yet upheld and enforced anyway.)
Even if you payoff your house, you are still “renting” from the government. I effected, they are the final landlord, and we own nothing...
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