Posted on 12/29/2006 6:45:01 AM PST by Labyrinthos
The housing slump has been painful for millions of people who work in real estate or recently bought a house.
For Patrick Killelea, however, this year has been one long victory lap. Mr. Killelea, a 41-year-old software engineer, has long preached that it makes more economic sense to rent than buy homes. He recalls shouting "Wow!" when he heard about September's 9.7% drop in prices of new homes.
"I didn't want to gloat," he says. "But then again, maybe I did."
For years, Americans who refused to buy real estate at what they considered excessive prices were ribbed for failing to profit from one of the greatest booms in history. "Are You Missing the Real Estate Boom?" needled the title of a 2005 book by David Lereah, chief economist of the National Association of Realtors.
Now, with the housing market in a slump, renters who sat out the boom are finally getting some satisfaction...
(Excerpt) Read more at biz.yahoo.com ...
So a place to lay your head down every night is not an asset? Is food in the fridge an asset? I a closet full of clothes an asset? Is a car an asset? Is a plasma TV an asset? I guess not under your definition.
Agreed. My most ambitious project was re-vamping a Victorian in an historic river town in Wisconsin. I was never so glad to be rid of a house as I was that one, LOL!
And I never tried anything stupid like that, again. :)
What an odd way of looking at it. Almost anything can be an asset. My computer that I am using to post is an asset, but it is a depreciating asset. The trick is to acquire appreciating assets.
So by your logic a home that is depreciating (renters can do that to homes) but rented is an asset, while a home that I am living in that is appreciating is not an asset. I think you need to learn some basic accounting principles.
Every calculation I've ever seen on this matter is biased falsely toward ownership. I've owned and rented and nobody is honest about all the hidden costs of ownership. Repairs and maintenance are more than people admit. Taxes are a much bigger impact than people admit. Also, most buyers buy more house than they would be renting if they rented. Hence there is a thriftiness to renting. When people buy houses they furnish them with things they don't really need. They throw parties that cost a lot of money. They buy lawnmowers and snowblowers and leaf blowers and get new gutters put on that only need to be replaced. Water heaters, furnaces, duct work etc.
Of course it is better to be a landlord than a tenant. But that has nothing to do with whether it is better to be a renter or a buyer. I drink milk and I'm left with nothing while the farmer still has the asset, the cow. Does that make me a sucker?
Americans are just too stupid to think this through. If I'm paying $1200 a month in interest on my mortgage plus $300 in taxes and $200 in utils on my house and my neighbor is paying $1000 a month in rent including utils, I'll think he is throwing his money out the window.
It all depends on how much the employer matches.
Haha,
Yea, rust belt ain't like what you see on TV.. you can't buy a house, screw everything up for a year and still expect to make a huge payday, because appreciation bailed you out.
In these markets finding a good solid buyer is far more work than finding the deal property.
Hard for folks in those high demand markets to grasp.. they just see cheap purchase price, and think Wow, $20k for a livable condition house?? That's a steal.... Then they buy it and find out, its only worth 20k because its in crime central in a depressed economy, and can't be rented to anyone of means, and so they wind up renting to someone who trashes it, and find themselves a few years later with a house needing 10-30k in repairs and only worth 20k total.
Happens all the time.
There is no such thing as a real asset in your mind then. Whatever, it is pointless.
By the time he retires, he'll have 5 or 6 houses or a small aprtment building.
So. Are you going to sell?
Did I miss something here? Did rents go down?
I didn't think so.
I hate to state the obvious, but buy when the market is down and sell when it is up if you want to make money. That applies to real estate as well.
Renting makes a lot of sense if you are disciplined enough to calculate the difference between the rent you pay and what it would cost you to own a home (including mortgage payment, taxes, insurance, maintenance, etc.) -- and invest it wisely. This is especially true in some metro areas where property taxes are so high that nobody really owns their homes anyway.
When a home that would cost $3,000+ per month to own is renting for $1,500 per month, you can't tell me that owning it makes any sense at all.
Exactly. Ironically, under today's tax laws the ideal scenario would be to rent the place in which you live and own the house next door as a rental property.
In my area, rents actually went up because of the high demand from thjose who were priced out of the buyer's market.
Isn't that like saying a mortgage is a liability only on the books--on paper--not in reality?
Nice! They aren't making many more waterfront properties. Enjoy!
Exactly. It's called opportunity cost. But only if you invest the difference between your rent and what a mortgage+taxes+assessment+maintenance would have cost you. I would agree though that renting a $3,000 place seems kind of like a bad investment.
Until you actual sell that "asset," the only ones making money off that appreciation is your tax assessor. The truth is rather odd, now isn't it.
Owners gloat as renter pay their mortgages.....
It all depends how fast the home is appreciating and what value you put in living in a 2400 sq ft home with a yard, or living in a 1500 sq ft condo.
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