Selling The ‘Cult Of Home Ownership’ Short
A pair of reports looks at the rent or buy question. “John, a chiropractor in Los Altos, California, has just committed the financial equivalent of heresy. To the surprise of many of his friends, he has defied the cult of home ownership, selling his historic five-bedroom house in favour of renting.”
“‘I don’t feel that house prices can support more appreciation and will probably drop back for the next few years, so it seemed the right time to cash out,’ he says. ‘We pay about 40 per cent less in rent than our mortgage and don’t have to spend a cent on repairs.’”
“An exhaustive survey of the US housing market by HSBC has highlighted the appeal of renting in many parts of the US. ‘It’s fairly common to say that renting is like throwing money down the drain, but people forget that there is a lot of that in owning too,’ says Ian Morris, an economist at HSBC. ‘There is not a lot of difference between paying rent to a landlord or interest to a bank.’”
“Even taking account of the generous tax subsidy, new homeowners are paying an increasingly hefty premium over renters. The annual cost of home ownership in Los Angeles, for example, is now more than double the cost of renting. LA homeowners have long been paying more than renters, says Mr Morris, but the premium for owning is now 40 per cent more than its average over the past three decades. The figures for many of the other leading US property markets are no less alarming.”
From Newsday. “Ray Smith knew the heyday of real estate had to end sometime. So last fall he and his wife, Michele, sold the five-bedroom Port Jefferson home they bought in 1988, getting $856,000, or more than 2 1/2 times what they paid for it. Instead of using their profits to buy another home, they chose to rent a house in Stony Brook. A bit like a short-seller in the stock market, Smith is betting the housing market will falter.”
“‘”I think I sold at the peak,’ said Smith. ‘The more I looked at the numbers, I said, ‘This can’t go on forever.’ It was not an easy decision to make, especially because Long Island lacks a significant supply of rental property. Nearly six months later, however, they’re pleased with the decision. ‘Now all of a sudden, we have money for things like furniture instead of constantly living with credit cards and debt,’ said Smith, who has paid off what the family owed and invested some of the money in a mix of stocks and bonds.”
“Some homeowners, however, aren’t worried about buying again in the future. They’re getting out of ownership altogether. Take Beverly Slott, who now lives in a rented apartment in Rockville Centre, sold her home in Oceanside last July, a home she bought 47 years ago for $16,000. Although Slott wasn’t thinking about the housing market realities, her son, Rockville Centre certified public accountant Ed Slott, was. And he backed his mother’s decision the whole way.”
“‘What are you going to do, buy another place that’s highly overpriced?,’ Ed Slott said. ‘It seemed better to invest the money and rent.’”
Looks like foks are beginning to listen to the cult of Ben’s blog.
The number of Americans coming to a similar conclusion has been on the rise. According to the confidence survey from the University of Michigan, close to 30 per cent of Americans now think it is a bad time to buy - higher than at any point since the early 1980s.
I know nothing of this term ‘rent’ they are referring to…
SoCalMtgGuy
Another F—ED Borrower
FB FORUMS
Get ready for the surge of cash outs in the next few months.
who’s going to buy?
Not enough…that’s the point.
I’m already seeing a surge of listings, noticeably rising by the day, in N. SF Bay.
I assume you don’t mean “cashout-refi”?
Yeah!
Yes, Virginia, there are investments other than real estate.
According to the confidence survey from the University of Michigan, close to 30 per cent of Americans now think it is a bad time to buy - higher than at any point since the early 1980s.
Hm, interesting: thats the same percentage of people that are non-homeowners.
I’d also guess there’s a correspondence between people who think it’s a bad time to buy and people who live in places with a big rent/buy disparity.
We sold at the end of last Summer right at the peak (I wasn’t trying to time the market, it just took me a year to convince my wife it was the right thing to do.) I now rent a nice 1600sqft home (we have no kids) for $975 per month. This same house, if I were to buy it, would cost at the peak last summer about 400K, today I’d say about 375K. No brainer here, huh? I’ll tell you what, house prices will have to drop a long way before I consider it even an option to buy. There is no way renting doesn’t pencil positive right now.
What’s interesting, though, in talking with people I find it is an ego thing. In their minds they see it this way, renting = loser. Isn’t funny how emotions play such a huge part in the financial damage people get themselves into. Who gives a *%$# what people think!!!!……do the right thing before it’s too late.
“renting = loser”
You’ve got that right. And I suspect it will always be that way regardless of the economics.
don’t think so. By the time ‘buying = loser’, it’s time to buy
that will take a long time though (in my country the latest housing crash is more than 25 years ago; it will take many years of deep RE pain to weed out all the crazy ideas about housing as an investment).
People just need to stop caring what others think. It truly frees you when you do. For instance, I have no kids. I’ll come right out and say it - I can’t stand kids. And yet, even if you say that, people try to convince you that you’re wrong and you’d really really love it if you’d just try it. Personally, I think they’re miserable and want everyone else to be miserable too.
I don’t know about the rest of you but to me, freedom is the ultimate asset. Being a debt slave or forced to work at a job you don’t like or live in a place you’d like to leave because of a bad purchase decision in a house is something I’d never consider. I was in position to buy in 1990 and was offered several properties that have hugely appreciated since then, even in Dallas. But I was very influenced by the difficulty people had selling. So, any potential appreciation was, for me, far outweighed by the possibility that I could not sell and leave when I wanted to. Hence, I have been a renter for over 10 years and could care less what anyone thinks about it.
I’m not a fan of kids either. I used to be one… no kidding… a long time ago. It was a miserable experience. I didn’t like kids even when I was one!
That’s one thing I’ve always had no doubt about. Don’t want kids. More power to the people who love them and take care of them. It’s a full time job and if you’re not up to it do not apply.
Who is going to take care of you when you are too old to wipe your oun butt? I guess you will be looking to other peoples kids to do it. Oh wait I forgot , the Govt will keep well cared for
Yeah, that’s a common argument. And yet, as a volunteer in a nursing home, I see many many elderly people whose kids won’t have anything to do with them.
Thanks for your concern but I can afford to hire someone to take care of me.
Seems to me that it is the parents that are usualy helping out their kids. (This is my observation almost intirely!).I Maybe the kids used to help the parents out about 100 years ago. They were an asset because they worked on the farm and took care of their parents when they got old.
Now, having kids is just a luxery.
Some kids just seem to look forward to what they will get from their parents when they die.
I agree about the kids. When people push me on it, I sometimes push back a little, until I see them hurting a bit, then back off. I suspect that most people don’t really enjoy having them…but they have to convince themselves that they do so they can carry through their responsibility. I’m not going to burst whatever illusion they need to sustain them.
As for who takes care of who when I get old, well, the parents have been getting tax breaks for their kids, and I have been paying for their education, so the way I see it it comes out even. I’ll sit in the rest home with the parents and get my butt wiped by the Philipino nurses along side them.
well, if you didn’t take care of your kids very well when they were with you, how do you expect them to treat you. and by the way i got a lot of Filipino nurse friends. By the time they get old, they probably will have enough money to pay for you to do it to them.
txchick57, the more I read your posts the more I enjoy them. Unlike you though, I don’t mind kids, its adults I hate. I think many are miserable and want everyone else to be miserable too. I’m almost 50 and have never owned a home that I actually lived in. I have the freedom to come and go as I please and disposable income to back it up. No lawnmowing or home improvements for me-life is too short.
I can see the appeal of kids, but neither my wife nor I want any. There certainly are no guarantees that having kids means you’ll have support in your old age.
As someone once said, “They say you can’t choose your parents, but you can’t choose your kids, either.”
i love kids! but I can tolerate–if not understand exactly!–people who don’t, as long as they don’t vibe it at me or especially my kids too loudly. I admit it sometimes bugs me when people think it’s okay to bitch about how kids stink, as though it would be okay to say of some other undifferentiated group of folks, like ’short people suck’, or ‘people with curly hair have no reason…’ etc. I think adults who talk on cell phones while sitting next to you in public places can far more reasonably said to be ‘miserable and want everyone else to be miserable too’!
They shouldn’t be seen as an ‘investment’ though, lol! imo, having kids is just a beautiful and profound responsibility and opportunity to learn about yourself and your fellow human–a challenging one at the same time. But there are many ways to have that in your life of course…
Amazing how many people, my hubby included, feel that if you’re not raising your kids in a house you own then you’re not ‘doing right by them’ somehow.
cheers…
And I heartily disagree. Once the dust settles on the bubble collapse, those who kept renting when everyone who could fog a mirror and wanted a loan was getting one will be seen as the smart money…
oh, its even worse at the next level, bigger house = *winner*
i like my kids. i give them noogies, nose grinders and indian burns.
Isn’t funny how emotions play such a huge part in the financial damage people get themselves into.
It’s the ownership culture, a big part of American life, but perhaps that will change when people realize that sometimes the house you “own” actually owns you!
How right you are. There is nothing so degrading than in living in the low-rent district of Rancho Bernardo, unless you keep in mind how stupid these people are for harboring such thoughts…
I’m getting ready to sell my place after finding this blog. I’m truly scared of the impending doom. I can honestly say I hope someone out there will buy my place.
I’d love to hear any advice from others as to tips on what I should do to move the property. I’m located in the triangle between DC, Baltimore, and Annapolis.
dump that bitch at a loss
Kalifornia is about to bifurcate. If you bought in the last 4-5 years the cash out value makes sense but if you are a long term owner Prop 13 property taxes make it important that you stay put. Indeed much of the lack of supply these last 4-5 years is because people didn’t want to move for fear of a new tax base. I bought in ‘95 and pay $210/mo in taxes. Same house today pays $1300/mo. No thanks, I’ll stay put rather than buy half the house elsewhere and pay triple the taxes for the effort.
I bet Prop 13 has made a not-to-insignificant contribution to the current bubble, because when the tax differences become extreme, existing owners are less motivated to sell, and supply falls even more.
Well, then you have the flip side where people can’t bear seeirng their new neighbor fairing better, so they find a way to get out of their property and lock-in to something better. My co-worker bought a house this summer for a handsome sum, and she and her husband are pinching pennies and feeling nauseous about the locked-in high property tax rate.
from my knowledge, here in san diego, property taxes also goes up or down with the value of the house. BUT, there is a cap to how much it can change (3%, i think, someone correct me)
It contributed on the way up, and will contribute on the way down, as (contrary to Robert’s claim), the rationale for holding property in order to capture permanently low property taxes becomes a lot weaker when the value of said property is dropping.
Prop 13 “contributes” only inasmuch as it provides a degree of stability in the future people are willing to pay for. Fixed rate mortgages have been a bad deal (sold for a premium) for the last 15 years yet they still sell, Why? Because they assure future stability. Same thing with Prop 13. People in Florida are looking at 50%, 100%, even 300% tax increments. Me? 2% written into the Constitution. People pay more for that. Ventura County has seen a similar effect. Our restrictive land use policies have preserved private property values and as such raised prices and raised the value of the protections afforded. Tuesday the voters of Moorpark rejected a massive development (1600 homes) project that would have added too many people and too much traffic by 3:1. Good laws make for good neighborhoods.
These restrictions on development are typically not good laws but rather ways for past residents, who already “got theirs” to keep other people out. It is a significant contributor to high housing costs on the coasts and strikes me as basically not fair.
The simple answer for anyone who wants to make housing more affordable for current and future generations is to build more houses. In the long run, more people=more houses. Attempts to “curb growth” through development restrictions is selfish and unjust. The population is growing. Do the responsible thing and build more houses.
“…ways for past residents, who already “got theirs” to keep other people out. It is a significant contributor to high housing costs on the coasts and strikes me as basically not fair.”
Not fair? So, if you paid for a home in a low density, low crime, low traffic neighborhood and then the zoning was changed to allow ultra high density affordable housing next door you would say “fine?”
Thanks, PeterBob, for taking the words out of my mouth…
Prop. 13 is a NIMBY law, which is deliberately misconstrued to be for the common good by those whom it unfairly protects against tax increases. Nothing like shifting the tax burden off the back of old wealth onto young families if you want to destroy the productive economy.
GS,
Prop 13 might keep supply constrained, but it should also do the same for demand. I will not BUY a house right now because of Prop 13. Therefore, there is less DEMAND.
The reason buyers are so willing to overlook the higher prop taxes is because of appreciation. That appreciation is due to demand coming from **unqualified** buyers with suicide loans.
It’s easy to blame everything else: Prop 13, MID, speculators, etc. — when the problem is lax lending standards.
I promise you…if they started requiring 20% down, 28% DTI ratios, good credit scores and 3-6 months reserves after the sale, prices would plummet. It has nothing to do with Prop 13.
Great analysis ca renter
Bifurcate? Ooooo… isn’t that something Metrosexuals do?
Don’t ask, don’t tell.
Seriously, bifurcation is a real issue. As long as the next person was paying more for an equivalent home there was no problem but when houses start selling for less than the last house people resent higher taxes AND less equity. I don’t care, I pay 0.18% annual property taxes based on current prices. BUt, that was the deal I made, I don’t care what others paid. Think about it. You get a great deal on your car at the dealership. 4 months later the State excise tax board says you owe more because someone else was willing to pay more than you.
Seriously, the bifurcation is between old money who benefit and new residents who are unfairly treated under the tax law. Prop. 13 also contributes to urban sprawl by giving a distortionary incentive to stay put when other factors would favor moving on; in other words, Prop. 13 contributes to the chronic “shortage” of housing in CA. But otherwise, it is a great law…
“Old Money?” We are talking about everyone treated equally. And “sprawl?” What is sprawl and why is Prop 13 involved?
Ditto Here……
Have to agree with Robert about staying in place. However, when we turn 55, we will look at moving up because we can carry our $140,000 tax basis with us. Is it fair? Otherwise, we couldn’t afford to move up and
provide an opportunity for a young couple to be able to buy our $600,000 “affordable” first home.
Only if you stay in or go to a qualified county. San Luis Obispo Co.won’t let others from out of county use their over 55 exemption.
“Ray Smith knew the heyday of real estate had to end sometime. So last fall he and his wife, Michele, sold the five-bedroom Port Jefferson home they bought in 1988, getting $856,000, or more than 2 1/2 times what they paid for it.
This comes to about a 5.2% annual appreciation rate over 18 years. Nothing extraordinary but typical over the long run in RE. And, depending on where the house is, 1988 may have been at the peak in the last RE bubble. If we are at the peak today, then the 5.2% appreciation is measured “peak to peak.”
Subtract off the 2.7% annual inflation rate since 1988, insurance, maintenance, etc. and you’re not left with much.
Good point. Very few sellers back out inflation. Fewer still bother to take out their HP-12C and figure the annual rate of real appreciation. That’s what makes the last five years so remarkable–high nominal appreciation coupled with relatively low inflation.
of course the ‘low inflation’ is a scam.
in my country the average homeprice appreciation over the last 15 years is around 15% (that includes some years with just a few % increase). Sure beets the stockmarket …
And most of that time inflation was officially 2-3%.
After 15 years it’s no surprise that many people consider this ‘normal’, instead of the historical appreciation of inflation plus 0.5-1%.
just to be sure:
I meant to say average yearly homeprice appreciation is around 15%
Have you factored out inflation?
where is your country?
to Haven’t bought and nancy:
I’m from the Netherlands. Over the last 15 years, cumulative inflation was officially about 45% (2-3% per year). Household income increased by about 65% in those same years (more than inflation, mostly because of more women in the workforce). Individual home prices increased by 500-1000%, depending on area.
Inflation was totally irrelevant compared to the gains in house prices. History shows that in several countries, in the very long term, home prices increase 0.5-1% yearly above inflation. That 0.5-1% is certainly not enough to cover taxes, maintenance etc. Housing as an investment is a historic abberation; there is much to say for housing as a store of value, but it comes at a cost.
Give me the stock market any day for capital appreciation. Much easier to play and profit on the downside too (my specialty, lol)
Txhchick57,
Where do you get your stock ideas and do you do this for a living? I am always interested in a good investment.
Yes, I do it for a living. That’s why I can read this blog and post all day
I trade the same ones over and over and over. They’re like old friends. It’s not exciting but it pays the bills and gives me that ephemeral “freedom” I’m looking for.
That is great! Beats reporting to work and sitting in a cubicle every day. I was wondering how you post all day.
It makes sense to trade the same ones so you have an edge on others in the market due to knowledge and experience. Good for you!
Don’t forget about interest.
At the time, interest rates would have been around 10%+. That alone would make the gains negative.
Margin raises the bar needed for a positive return.
I seem to remember a lot of these stories in 89′.
“Might be a good idea to rent” then “Your probably smart to rent” to “Your dumb if buy instead of rent”…..
It would be interesting to see archive articles from the 1989 peak to compare to where we are now and what’s in store.
Rich,
If you missed it, someone reported here that the recent NYT pieces on the relative advantages of renting were more-or-less a reprint of a similar article published in 1990…
I remember in the summer of 1988, groups of 3-4 people in my law firm in San Diego (support staff and attorneys) getting together and buying houses both in SD and LA and then flipping them a week later. I had realtors knocking on my door in OB wanting to list our house for sale (we ended up selling it ourselves). I remember the bidding wars, the “easy” money, etc. Back then, having something sell for 300-400/square foot was scandalous, even in CA. For $300/square foot, you could get architect-designed and top of the line finish out. When it turned, it turned fast and the trap door opened before a lot of the mullets realized what hit them. Of course, you didn’t have the internet in those days. That will probably speed up the process.
Interesting to see how little things have really changed.
The New York Times and the Financial Times have now weighed their considerable clout in favor of renting over owning in the US housing market. How long can the editors of Bo Diddly Tribunes in various major US cities afford to ignore this message before they are seen as out of touch?
This OT but the Washington Post does a chat about real estate every few weeks. I like to read it to get a sense of what people are thinking in this area. Today, the reporter in response to a question said something about inventory and DOM increasing but that prices had not declined yet. This is a misleading I think because prices HAVE declined (9% from July 2005 to January 2006) but there just haven’t been YOY declines (yet!). I submitted that clarification around 1:20pm (the chat runs from 1pm to 2pm). What a shocker - they didn’t publish it.
Bo Diddly Post …
Maryann Haggerty hasn’t got a CLUE. She filled in after Daniella Deane left. I’ve been following her since then and she is really, really uninformed. She does no DD or personal investigation in order to competently answer questions. It’s laughable.
Yeah, she’s not very good. Someone said they were planning to be here for 5 years and asked whether they should buy or rent. She told them that the conservative thought is 5 years is long enough to weather any “little waves” so they should buy.
Today, the reporter in response to a question said something about inventory and DOM increasing but that prices had not declined yet.
Wait a minute, according to the NAR, prices will never decline, only go flat, so what is the deal with this “not yet” b*llshit all of a sudden. Boy if I was an attorney about to cross examine this guy, it would be like in the movies.
I just wrote a post where I talk about how buying a house is hedging against rent increases. This idea comes from standard assumptions in academic finance papers.
I think you’d have to be insane to make such a leveraged investment to hedge the chance that rents will increase. I think a much saner strategy is to invest a percentage of your wealth into REITs (not leveraged! not most of your savings!)
Renting is a hedge against prices falling by 40% and sinking your net worth. It is also cheaper than buying on a current monthly basis. Academics better think about both sides of the coin, or nobody will think they are in touch with reality.
A little off topic, Have you seen this Ben?
Looks like ABC is going to be running a story on the crash.
http://abcnews.go.com/Business/story?id=1659262
It sure does look like it–good find.
American Capital Invests $98 Million in One Stop Buyout(TM) of Leading Debt Collection Agency
http://tinyurl.com/hjpro
I find it interesting if not somewhat telling that the future is in debt collection. These companies buy debt at a large discount and then do whatever they have to in order to recover as much as thay can at a profit.
Flip side, I have a friend that decided not to buy a home because they felt prices would come down in his area.5 Yrs go by he’s renting at 600 a month.He no longer can afford to buy in the area even if prices do come down as they have gone up so much.The owner of the place now wants to sell.He cannot afford the new rents on similar property at 1200 a month.His wife just had their first child and they both will have to work and put the kid in daycare just to afford the current new rents.If he bought 5 yrs ago when he could afford it and have the money they would be just fine.Renting is fine but it does put you at the mercy of the owner if they decide to sell.
Nice SOB story, what is a guy who can’t make a $1200 rent payment doing having kids ? Tell him to move, I’m sure walmart has other locations that are cheaper.
Wow that was brutal, but true
Thats not very nice. Please remember that $1200 in some states is quite a bit. In my state the average annual income is just over 39k. If you are a single wage earner for a family, or if you have any other bills like vehicle ect., it would be a squeeze to pay that much on rent. Are you saying the average wage earner should NOT be able to buy or have kids?
I’m saying if you can’t afford the rent on your income it’s time to move elsewhere where your job makes median income. And don’t have kids if you can’t afford to take care of them. Real simple.
What I am trying to say is in some states like mine (Maine) you can make median income or more and still find $1200 a little much to pay for rent. Trust me, I know. I have a decent job (not Walmart), and I do make more than median income, I do have a child, and I will be buying in a few years. I was able to save 50k from a previous job and the average home price here is 195k now. Saying someone that can’t afford $1200 for rent shouldn’t have kids or think about buying a house is a little narrow minded IMHO. Luckily, rents aren’t that expensive here.
How could you even think about buying if you can afford 1200 a month.
I just shorted some homebuilders after the stocks ran up today. These stocks are going to get hammered!
I wouldn’t short the homebuilders, they are 50% off their peaks, and they can still make a profit at far lower market prices. I think the next year is still a good year for them, and an earnings surprises (on top of lowered expectations) that will continually squeeze shorts. They can canabalize their own speculators this year and possible next. After that, there could be trouble.
The problem with shorting them is they are still widely held by people with a lot more money than us (mutuals etc.) Technically coming into today, they were more buys for a short term trade than sells. I don’t mess with that group too often unless it’s a nobrainer.
Well the no Brainer is the reports that will be coming out over the next 3-6 months. I think TOL will hit $25 before it hits $40.
Speaking of rent, I’m thinking about setting up a tent city on a Superfund site, so all those soon-to-be bankrupt FBs and Flippers will have an “affordable” place to call home at the end of a long day squeegee-ing windshields and collecting soda cans to sell for scrap.
pure comedy thats funny
Record Spec Position in 10s
By Tony Crescenzi
RealMoney.com Contributor
3/3/2006 4:05 PM EST
URL: http://www.thestreet.com/p/rmoney/tcrescenziblog/10271724.html
According to CFTC data that was just released, large speculators were record net long the 10-year T-note contract as of Tuesday’s close, having added 36,000 to their collective position in the latest week. These so-called noncommercial traders were long 183,000 10-year T-note futures as of Tuesday. These data have for a long time served as a good contrary indicator capturing the actions of “dumb money.”
In contrast to the speculative longs seen on the long end of the curve, it is notable that there was again another sizable build in the short positions held in short-term instruments such as eurodollar futures, which have the largest notional dollar amount outstanding of all the futures contracts in the world.
In the latest week, large speculators added 89,000 to their collective net short, bringing the tally to about 530,000, the most since last April. Players have been adding to shorts to express their sentiments on the Fed, where many have thrown in the towel on the outlook for Fed rate hikes. Now that the sentiment is shifting sharply in this other direction, there is a chance of an overshoot that will create value in the short end of the yield curve at some point. The combination of bullish sentiment on the long end and bearish sentiment on the short end is probably one of the reasons that the yield curve steepened this week.
BUY GOLD!!!
I have not abandoned hope yet that Bernanke will defend the currency, but my doubts are growing with every uptick in the long-term bond yields on days when the stock markets go nowhere…
The annual cost of home ownership in Los Angeles, for example, is now more than double the cost of renting. LA homeowners have long been paying more than renters, says Mr Morris, but the premium for owning is now 40 per cent more than its average over the past three decades.
Let’s see… cost of owning is now more than twice cost of renting, let’s leave it at 220%. So the ownership premium is 120%. Today’s ownership premium is 40% higher than the 30 year average. So 120% / 1.40 = 86% ==> for the last 30 years in Los Angeles, it has cost 1.86 times as much to own the same house than to rent it.
LA has RENT CONTROL. EOM
One of the things that no one has really mentioned is the hassle of moving when you’re a renter. It seems we end up moving ever 14-18 months because the landlord gets divorced, decides to sell, etc. We could rent in an apartment complex, but those never feel like home.
I used to think that renting for the next 5 years until we could buy a house in cash would be a great idea. Now, I want my next move to be to a place where I can stay for a while, and I’m thinking we may have to buy. Thank God we have a lease until 2007…
I haven’t posted in a while here, but check out the blog pretty much daily. I think that Hopper has a valid point and one that I’ve been mulling for quite some time. In my situation, I purchased my home back in 1999 in Southern CA. area (San Gabriel Valley) and really have been itching to sell for the past year.
But what concerns me is in the near term, I think there are 2 types of landlords, one which has had the property for a very long time and has tons of equity in the home, and the new owner who has bought for “investment” purposes. Both of which, IMHO would be sellers at this point in the game. The first might want to cash in on the current cycle, while the other is seeing their “investment” constantly decline in value or bleeding cash.
Which brings me back to Hopper’s point. If I rent from them, there’s a good chance I’ll be forced to move due to the sale. I haven’t rented in a long time but I’m sure that even with a lease there’s some buyout clause. What, maybe 8K to 15K for hush money. Moving is annoying when your single, a hassle when your married and a downright nightmare with kids.
I don’t like nightmares.
I can commiserate with the last few posts. My parents never bought during my entire childhood in SoCal. We moved nearly every year: new school, new friends, every year a weekend in which everything had to be packed up and schlepped to the new place. As a kid, its wasnt so bad really, but it meant that I developed no long-lasting friendships until we stayed the same place for a few years (high school). The hassles for my parents were mindboggling in retrospect. There were several times that they could have bought but didnt, when the market was rising but not crazy, or actually retreating e.g. when an aunt of mine bought a pretty nice LA place for a song in the early ’70s recession.
We sold last summer and now the kids are in new schools and we live with most stuff in storage. Its great as a temporary bit of “long-term camping” for the family (we are in Europe for a year) but to wait out the housing bubble we are looking at at least one more temporary renter’s place while the knife falls. It would be a real drag to see this as a permanent situation. I wont be waiting until the falling knife clatters to the floor before buying a house again. Just waiting as long as the free fall is in progress.
There’s the hassel our friends who got tired of renting had. Learning to permanently live in a tiny condo that might as well be an apartment for all the lack of privacy and close neighbors. And for more money than renting. I guess life is easy when you’ve got no room for anything. Fortunately they’re more cerebral and can be happy with fewer things.
Now you look forward to buying a house as a sense of permance. Before you take out the IO/ARM, don’t get talked into it because: “You’re only goint to live there a few years, anyway” — you just said you wanted a more permanent place.
I’m not saying this is you, but I know people can think two different thoughts at opposite ends of conversation. Rent is bad, non-permanent, a hassle moving. IO/ARM is good, you’re house is non-permanent, you’ll be moving.
This is an interesting article from the Herald Tribue/NYT on the historical reality of house appreciation or lack thereof, which looks at a single property in Amsterdam and evaluates how much it appreciated over 400 years. It’s based on the research of Eichholtz in Amsterdam, and was cited by Shiller. So if you read his book, then you may already know this. Interesting article.
http://www.iht.com/articles/2006/03/03/news/tulips.php
Sorry if this is a duplicate.
An article from Richard Berner (New York) and David Miles (London) and Gerard Minack (Sydney) of Morgan Stanley, who acknowledge that housing is fading but don’t see think that that will bring down the economy. They also argue that parallels with UK and Australia are incorrect.
http://www.morganstanley.com/GEFdata/digests/latest-digest.html
It’s below the first piece by Stephen Roach.
Just FYI.
Roach is a bear, Berner is a bull. What you have to keep in mind is that Berner works for Roach and has the corner office overlooking Times Square.
Probably too late to post a correction on this thread, but Ray Smith bought his house in 1998 (NOT 1988) for $360,000. In seven years it appreciated over 135% if my math is correct. NEWSDAY got the year wrong.
Also, the sale was negotiated last June (2005) and the deal was closed in September.
Mr. Smith discovered this blog AFTER selling his house, but enjoys it immensely nonetheless.
After just packing from a 2 bd apartment to move, I never want to move again in my life. I hope to stay in our ABQ house until my last breath. And I only have 1 small child. The people we bought our house from, now have to go from a 2700 sq ft home to an apartment. And they have a lot of stuff, as well as 2 children (also fancy car and payments, spent more than they had, etc). Makes me glad to have no debt to worry about. THis purchase is only because need a place to live, and raise my child, and make wife happy.