DISQUS

JR · 3 years ago

I'm convinced... now help me find ANY coastal California home that is:

1. not a mobile home,
2. not so worn down it's slated for demolition, and
3. not more than $400,000.

Not going to happen... It does no good to bitch about it, and I've got to start somewhere, so I've purchased a few acres of land. The idea is that I'll build within the next five years, rolling the land loan into a construction loan, then into a standard mortgage.

I know I could always move to Idaho or upstate New York, but I'm unwilling to do that - this area is my home. Hopefully my creative end-run around real estate appreciation will work out OK.

savvy saver · 3 years ago

I do agree that homeownership is a good thing, however I don't agree with the author's logic in the article. There's no indication that homeownership CAUSED people to be more wealthy, just that there's a correlation between wealth and home ownership. It could be that a large number of serial renters tent to have a more spend-thrift lifestyles, or their jobs aren't as secure, or any number of other reasons. The author states herself that part of the reason homeowners acquire more wealth is through forced savings of mortgage payments, something that could be emulated by a savvy renter (just save the difference between rent and mortgage payments with property taxes plus maintenance).

It is possible to buy a house that is a bad investment, both financially and emotionally, just as it is possible to buy a mutual fund that is a bad investment or a car that will nickel-and-dime you.

Flexo · 3 years ago

That was my first reaction to that part of the article as well, but after thinking about it, I don't think she's saying that the cause of buying a house produces the effect of wealth. She's really saying it's momentum or inertia. Buying a house forces you to make mortgage payments, renting doesn't. People tend to not change unless they have to. While many renters can save and invest what they would have been spending for their mortgage and maintenance, etc., most don't, while those who purchased a house have the added benefit of appreciation forced upon then.

That's what drives the averages. While the article states that "Buying a home is the best investment you can make..." reading between the lines, she's saying that it's momentum/inertia that causes net worths to be higher.

So basically, I'm agreeing with you. :>

And JR -- good luck! I suggest you buy east of the San Andreas fault, so when half of California splits off into the Pacific -- almost guaranteed to happen some time in the next several thousand years -- you'll have prime coastal property.

Jane Dough · 3 years ago

As you noted, #1 can be a never ending excuse for renters to never become owners. The other problem is the good intentions folk have to save the money they are not spending on maintenance of a home, etc. But life happens and it is a rare individual who will save that money year after year after year.

samerwriter · 3 years ago

Correlation does not equal causation. It's not clear that these figures take age into account, and it's likely that age causes both increased wealth and inreased odds of home ownership.

I.e. Homeowners tend to be older and have had more time to save. Renters tend to be younger and have had less time to save.

On a tangent regarding home affordability, homeowners get stick with a lot of expenses that renters usually don't. Buying lawnmowers and chainsaws, replacing or repairing appliances, occasional landscaping help, etc.. My wife and I figure that by the time we factor in these costs our "house expenses" are roughly as much as our mortgage payment! We do live on 5 acres, so have more expenses than most.

But on the other hand, We're much happier owning, and that's worth the money to me.

Blaine Moore (Run to Win) · 3 years ago

I have been trying to find a house that I can both afford and would be willing to live in for almost a year now. No fun at all. I have gone under contract once but pulled out after the inspection, and twice almost went under contract but pulled out due to moldy roofs found upon a second visit to the property. My real estate agent says of the last 100 houses he has shown, he's only seen that problem twice, and both times were us. Argh.

Flexo · 3 years ago

Blaine,

That sounds frustrating. What area of the country are you looking at?

Blaine Moore (Run to Win) · 3 years ago

Southern Maine. No interest in moving and no interest in commuting.

Big Mike · 3 years ago

I know lots of home owners who pay more money each year in real estate taxes than I pay in rent. And that's not including landscaping, maintenance and repairs, expensive furniture to fill the expensive house.

I don't buy into the idea that buying a house now, at what may be the peak of a housing bubble, makes any kind of sense.

mepgirl · 3 years ago

Psychologically prepared. Heh. The first week I had my condo, there was a flood in the kitchen from the unit above via the non-working dishwasher. My college friend was visiting me and spending the night and I was leaving on a 10-day vacation in 36 hours. Let me tell you, I totally freaked out on the buyer's remorse front.

I spent my first 2 nights on vacation, totally off-grid wondering if my apartment was going to be a moldy mess. It was just plain awful! That being said, though my HOA fee is a bit high, I sure don't have to worry about mowing the lawn! :-)

JAG · 3 years ago

Its "smarter" to buy rather than rent?

I'm a financial planner with over 30 years experience in investments of all kinds (including real estate).

Generally, owning a home works out but mindlessly buying a home (particularly in a "hot" market) without crunching your own particular numbers, knowing your own potential to increase/decrease your income or the possibility you'll need/want to move in less than five years is a very dangerous proposition.

Home ownership has been a great investment since the 70's for a multitude of reasons (inflation, mostly declining interest rates, increased demand, decreased ability to supply housing-regulatory issues, two income families, increasingly favorable tax policies).
However, many of these fundamentals have been played out and further favorable economic trends may yet appear but they'd have to be pretty hefty to continue to tilt the ENTIRE real estate picture more favorably.
If you don't want to do your home work for an incredibly leveraged investment.........well good luck. When any market goes cold it can get frightening. When YOUR real estate market goes cold and NO ONE shows up at your open house......its a lot worse than just frightening.
Do a lot of homework. It won't guarantee anything but at least you be giving this kind of LEVERAGED decision its due.