How important is home ownership to you?
Has your view of the rewards of home ownership changed? Permanently?
Housing will eventually recover from its great swoon, the New York Times reports. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg, NYT writes.
The wealth generated by housing in those decades did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming, the NYT writes.
More than likely, that era is gone for good, the NYT says.
“There is no iron law that real estate must appreciate,” Stan Humphries, chief economist for the real estate site Zillow, told the NYT. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”
Instead, Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.
Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up, the NYT says.
With that in mind, what is your game plan?
Sell when you can? Stay put?
Buy when you get a chance, especially at these depressed prices? Buy, but spend less than you would have before the housing crisis?
Rent? Now or forever more?
Is your home worth less than the mortgage amount? Think it will get back to that level over time? How long? Plan to bail out before that?
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98 comments Add your comment
Owner
August 23rd, 2010
12:53 pm
Its all about timing just like anything else no one can predict the future or outcome but GOD. I recently purchased a home got a great deal in a move in ready home not a forcelosure no work to do. My mortgage not including taxes, insurance, etc. Is less than what my landlord was going to charge to renew my lease in a 1 Bedroom Apt. I am now in 4 bedroom home. I got the first time home buyer credit. I used a portion to pay off bills and saving the rest. Yes there maybe a lot expenses I have learned being in a home this short period of time. Good thing I am pretty handy. Its nothing like the feeling if owning your home. You have to look at like this 20 years from now. You dont know how much it will be to rent with inflation etc. I know how much my mortgage would be. Hopefully it would be paid off before then. I think its a great time to buy now within your means of course. Its so much out there to choose from with all the over building and forceclosures. Also, with the tax credit ending I would think that should drive prices down even more.
Rent Rules!
August 23rd, 2010
12:54 pm
I sold my home last year at a loss and may never buy another house. I’m renting in midtown at a great deal (40% off the regular rate due to the lack of demand) and have a nicer place than my house. Plus, I don’t have to worry about mowing yards or annoying neighbors with leaf blowers at 7am. Even better, there are tons of hot chicks in my condo who are very “friendly!” YES!!!!
Builder
August 23rd, 2010
12:56 pm
I’ll probably get jumped by everyone here, but I wanted to give my take on things as a homebuilder. Everyone (and I do mean everyone) is to blame for the current situation. Builders like myself, lenders, Realtors, appraisers, underwriters, the government, and yes, even the buyers all had a hand. I do feel sorry for the young folks who entered the market at it’s peak, but everyone else got pretty much what they deserved. Greed took the place of common sense and a lot of people were hurt because of it.
bert
August 23rd, 2010
12:56 pm
R: Not mocking homeownership. I think that people just don’t weigh all of the options associated with it. I will ask you to do the same. Do the calculations, and it is not as great as people have made it out to be, especially in this market. Also, please don’t tell me what I do and don’t understand. I may have a much better understanding than you do. I simply ask that you run the numbers.
Paladin
August 23rd, 2010
12:56 pm
This article points out the obvious – primary homes are for living. I can’t believe that they pay this “journalist” to merely rewrite an article they got from another publication. Own your homes to live in. They are not bank accounts or potential loan accounts. Live within your means and save some money. Do some research on the loaning practices of the 1920’s. Strangely similar to those that took place 2002-2008. Your main house is not going to fund your lifestyle or your kids’ education. Your main house provides you a place to live. Live within your means and save some money. That will give you a chance for the others.
Happy
August 23rd, 2010
12:57 pm
I am happy with my investment, I bought my first home last year at the height of the bubble. I bought a $310.000.00 house with a full basement for $150.000.00, something that I could never afford, and got a 5% interest rate. I plan to be in my home for atleat 10 years, do some upgrades and then perhaps rent it out or even sale it. Nevertheless, I will come out on top and I have come out on top. I did not get caught up in all the hype when the market was Falsely Strong. I remember the DOT COM bubble, when ever there is a swell in a particular market space, you can expect it to collapse…and when it did, I was there to reap the rewards.
R
August 23rd, 2010
12:57 pm
“We are allowing more unskilled illegal immigrants into our country and burdening our schools, hospitals, and courts/jails/prisons. They are a net burden on the country as they consume more resources that they provide to the country. They also raise the unemployment rate for low skilled US citizens. Taxes must go up to subsidize the social benefits being drained by illegal aliens and their children. These illegal immigrants have swelled the population and led to demand for housing, but they will not be able to pay the going rate for housing in the future.”
This can and will be stopped. Take a look at the foreclosures notices in Gwinnett County alone, many, MANY names of Hispanic origin. If people would dive deeper into what illegal immigration has already cost us and what it will cost us in the future, we will demand to stop it!
Atlanta12
August 23rd, 2010
1:00 pm
Well I heard all your views on house buying, but remember trying to be like the Joneses got you where you are today. Broke and unhappy with the white picket fence that is the American dream. It cost money to be happy you all living in a rent to own home. Look at it’s not your unless you have the deed to the house. Which most of you all don’t, what can you do think positive and pay the house off. And move on with you life it is what it is.
Paladin
August 23rd, 2010
1:02 pm
Builder – You are right on. Everyone is to blame. It was a joint greed run. It feels better to most to blame it on Wall Street. Wall Street pushed the prices higher, Wall Street forced people to sign loan documents, Wall Street forced people to not read loan documents, Wall Street forced people to take out ‘No Doc’ loans.
bert
August 23rd, 2010
1:02 pm
R: I thought this was about the housing market as a whole, not just Gwinnett. The last time I checked therer were foreclosures everywhere in Atlanta, including Tuxedo Rd. So could we please stay on the issue
R
August 23rd, 2010
1:02 pm
bert I have “run the numbers” and homeownership works for me (bought & sold 6 homes in the past 25 years) . Again may not work for you with your numbers and that is fine. Just don’t mock the rest of us, everyone’s “numbers” are different!
Happy
August 23rd, 2010
1:03 pm
NOTE: It was not Clinton that started the deregulation of the housing and finance market that got us in the mess. Bush Sr, started the ball rolling, then Clinton with the help of both parties (believe me, the repubs are just as must to blame) they of course love big bank, so they are all for lax restrictions. Also, as I recall, Bush Jr, said on National TV (U can look this up) he said, every american that wants to own a home, will be able to own a home. That was in 2002 or 2004, not sure. That is when the Tankers (Bankers) and Fallstreet (Wallstreet) went crazy and started underwritting then crazy azz loans. Bush Jr, open the flood gates. Don’t get to twisted, both parties and equally blamed here. We only have RECENT HISTROY to look at.
Talented 10th
August 23rd, 2010
1:03 pm
If you’re lucky enough to live to a ripe old age in your home, the best you can hope for is to pay it off and pass it on to your children/relatives to give them a HUGE leg-up in life.
If you’re paying a $1600 mortgage for 30 years, you really won’t reap the “true” benefit of home “ownership” like your child would if they get a mortgage free home. Imgaine if your kid could graduate college, get a job and have only property taxes, insurance and maintenance to pay on a house for their lifetime? That’s called building generational wealth.
My husband’s 80 year old mother has a home out of state worth about $350k and it’s PAID OFF. She doesn’t want to sell it. I’m trying to convince him to relocate to where the house is and pick up life there. We’d keep our $1600 per month mortgage payment in our pocket and only pay for insurance, taxes and up-keep. Of course, the home would stay in the family and would never be sold.
Talk about a leg-up in the world. No 401K or investment could beat that $1600 in our plain old SAVINGS ACCOUNT every month.
Paladin
August 23rd, 2010
1:03 pm
Thank goodness for the ‘Cut & Paste’ feature. Otherwise, many of these posters would not have anything to say.
bert
August 23rd, 2010
1:03 pm
R: So you admit that you were flipping. Thus, you were not the one we are talking about. Flippers made a ton, but the article is about primary home ownership.
Atlanta12
August 23rd, 2010
1:07 pm
And move with your life, it is what it is.
Babs
August 23rd, 2010
1:08 pm
The American dream is no longer a reality. Unless there is plenty of extra cash laying around, it is difficult to maintain a house and the property. The cost of repairs and maintenance is part of home ownership. Renting or maybe buying a condo may be the answer. I like the privacy of a home but don’t like to have to worry about the maintenance required for a home. We may sell later down the road but now the home sales are not that good. Two homes sold in our area in the last two years. There was one foreclosure. These homes were just built in 2005 and already there are problems with homes not selling. So many empty homes that are new and that were never sold due to the economy. What a shame.
R
August 23rd, 2010
1:08 pm
bert I was responding to something that Rick brought up!
bert
August 23rd, 2010
1:10 pm
R: Sorry. I glanced at the post
R
August 23rd, 2010
1:10 pm
bert I wasn’t flipping I was moving due to job promotions and career opportunities, like many of the people that moved over the past 10 years!
bert
August 23rd, 2010
1:13 pm
that is a ton of moving….anyway….I have to get back to work, lunch is over.
Chris
August 23rd, 2010
1:18 pm
My plan is to stay put, mainly because I like my house and also, unless you have to move, it’s generally not a wise idea to sell low. If you don’t currently own and are considering buying, I would jump all over it now. The combination of depressed real estate values and historically low interest rates make home buying very attractive. Be cautioned, however, that you’ll need to hold the home for at least five years to make any kind of return on the sale after deducting transaction costs.
-As for the articles bearish view on housing, I agree that we’re not going to see home values appreciate like we did from 2003-2007, that level of appreciation really isn’t healthy. However, I think the general statement that housing values will appreciate at about the rate of inflation is a bit shortsighted. It’s not unreasonable to believe that you can make a little money on a house if you do your diligence. When our economy turns around, a good home in a desirable area with good schools and healthy supply/demand should appreciate in value faster than the rate of inflation.
-as for rent vs own, just depends on your situation. If you are going to move around then its better to rent. If you can stay put then you’ll probably come out ahead on buying. Think of interest, tax, insurance, and an occasional repair bill as your effective rent payment. Given mortgage rates in the mid 4s for a 30 year fixed, housing costs are very low relative to normal times. If you can refinance, and there are govt sponsored programs in place now that can allow a refi at up to 125% loan to value, then I would consider it.
-To get home values moving in the right direction, I think employment needs to stabilize first; that will get more money flowing through the economy and help home values. It’s going to take a while to get employment back to the historical average. Furthermore, the distress property needs to wash through the system. So, expect home values to take some time to start moving in the right direction again.
R
August 23rd, 2010
1:20 pm
bert Just look around you at the people that moved HERE from all over the country in the past 10 years due to jobs. Many sold very expensive RE in places like NY, IL, CA and moved. Ask any HR person in a Fortune 100 company and they were relocating people like crazy, many families. Our economy was thriving on these families moving. They mostly moved South!
R
August 23rd, 2010
1:24 pm
@ Happy Dude, what is HISTROY? LOL, go back and study, you’ve got it wrong!
sally
August 23rd, 2010
1:35 pm
Obama can’t be blamed for this mess. The man hasn’t even been in office for two years while Clinton and Bush were both in office for 16 years total. Anyway, a lot of blame goes on dirty banks and folks who were just plain greedy, ie banks, home builders, and home buyers. People were spending far more than what they could afford and the only person you can blame is yourself in that case and builders and sellers were only too happy to see huge profit margins. This was bound to happen.
LOL
August 23rd, 2010
1:36 pm
How did I know there would be plenty of people dumping all the blame on the Democrats and trying to explain away any and all Republican culpability? There’s plenty of legitimate blame to go around both parties. Don’t make this a partisan issue. In fact, there’s enough blame for us citizens, as well. Everyone was complicit in the bubble. It’s hardly as easy as saying it’s Clinton’s fault or Obama’s fault (which is utterly laughable, anyways) or Phil Gramm’s fault.
Brad
August 23rd, 2010
1:38 pm
“Is your home worth less than the mortgage amount? Think it will get back to that level over time? How long? Plan to bail out before that?”
It’s very tough to ask someone who could afford to buy a house at the time and was not over exended to suck it up and except the mortgage payment for a house that is $60k underwater today. I am sorry but that money will probably never be recovered. Do you know how long it will take to just breakeven? It’s like setting fire to your mortgage payment each month. Probably the equivalent to renting nowadays. Although you will probably be out less money renting in the long run. Homeownership in most cases is better in my opinion but it definitely depends on your situation. In this scenerio you will not get any benefit in this lifetime which is the case for many Americans.
Alecia
August 23rd, 2010
1:40 pm
I have been in the rental property business for 12 yrs and enjoy having other people pay my mortgage. During this period I have definetly made more than the stock market. None of my properties are upside down. ROI is based on cash invested in the property. If a person puts $20k down on a $100k loan for a home that appraises for $150k, then they come out ahead. If the property is rented for the next few years at $400-$600 above the mortgage, even better.
Bert-Calculate 3% on 100k but realize the investor only has 20k invested. Gee, now we have $3000/yr return on 20k initial investment.
Not to mention the instant equity of 50K. The remaining 80k gets paid by renting it out. You calculation goes out the door if our government starts to print a lot of money and inflation takes off. There’s money to be made in real estate. It just takes some level of ambition, intelligence, and money.
The real problem is that people failed to look at housing as an investment. Too many folks got caught up with the emotional side of ownership instead of researching the area and calculating incomes and looking at comps. Also, too many realtors were inexperienced. Right now we have a hidden demand from folks that are unemployed or are living with relatives. Also, the inventory of new homes is at a 39 yr low. Inventory is dwindling and the population is growing. Values will depend on wages and employment. To say that real estate will not appreciate is to say that America will remain unemployed.
Bill
August 23rd, 2010
1:51 pm
For all of you looking for a politician to blame it on, you are not going far enough back if you pick Obama, Bush (either one) or Clinton. This mess resulted from deregulation of the banks, which began under Reagan. Unfortunately, this direction was continued by Bush, Clinton and Bush.
R
August 23rd, 2010
2:01 pm
No one is directly blaming Obama! All I said that the recovery won’t happen until 2012 and he is out of office. Him being in office in and of ittself is hurting our economy and recovery. The banks and those who hold the bulk of the wealth in this country are not going to let their money go until HE is out of office. Obama never has been and never will be part of the solution!
Boy, oh boy! LMAO! You can certainly tell those who are blogging that “don’t have a dog in this fight”.
lkjlkj
August 23rd, 2010
2:05 pm
I never bought into the expectation that it would always go up due to my parents’ experience. The houses we lived in during my youth without exception appreciated at less than the value of inflation. They weren’t dumps, either — great school districts, upper-middle class neighborhoods. Someone I knew in the same city, same type house once told me that for 20 years, the appreciation on his house had been next o nothing, and suddenly it increased sharply in a few years in the late 90s.
I’ve always viewed home ownership as a lifestyle choice, not as an investment. If I sell at a loss in a few years, so be it. I’ve lost a lot more in the stock market multiple times than I’ll lose on my house.
wendell
August 23rd, 2010
2:09 pm
Welcome to the Obamanation. I’m sure King Obama will take care of your mortgage payments for you – just as soon as he returns from his 10th vacation of the year…
Underwater
August 23rd, 2010
2:13 pm
I’m $70,000 underwater, the bank will not modify the loan—so I’m walking away from this debt. Why keep paying money on a loser investment? the bank took the risk, wouldn’t deal and now they will be stuck with it. They never learn.
R
August 23rd, 2010
2:14 pm
@ Bill It really started back in 1977 with Georgia’s own Jimmy Carter with the original CRA. Carter couldn’t get a thing done and it wasn’t until Clinton got in office until his version really drove homeownership to where we have it today. Go back and look in depth with Reagan’s part in bank deregulation, your barking up the wrong tree!
R
August 23rd, 2010
2:17 pm
Underwater – it’s not that the bank won’t the bank CAN’T in most cases. Stop blaming the bank for all that took place. Trust me, you have much more to loose in this equation than the bank does. Consider yourself forever subprime if you walk!
Brad
August 23rd, 2010
2:31 pm
@ Underwater
I am in a similar situation. For those of us who can afford the mortgage but are stuck with huge amounts of negative equity are most of the foreclosure that are happening now. The loan modification program does not address this issue. It cannot be ignored because it is causing such a impact on the housing market. I am not sure if the Obama administration saw this coming but it’s here and has to be dealt with. From the bank’s perspective there is no incentive to modify your loan because they will get paid the balance regardless of whether your home is foreclosed on or not. Only of course if the loan is FHA or has PMI which is common. The ironic thing is that half of the loans that met the standards for approval of a loan modification have all defaulted after help anyway. It’s people like us who if helped would keep our homes and stabilize this mess.
Rick
August 23rd, 2010
2:48 pm
For those who want a loan modification (their bad gamble)…how does a bank modify the terms of a loan that has been sliced and diced, re-packaged with other loans, and then sold off? Unless the bank still owns the loan, they will be unable to modify the terms of the loan. Some of these banks may still service a loan they originated, but few keep the loan in-house.
Kitty
August 23rd, 2010
2:51 pm
Rick, re-read your 2:48. They either own the paper or they don’t. The homeowner must deal with the Current paper-holder, whomever they may be.
Brad
August 23rd, 2010
2:59 pm
Rick-If banks could not modify loans then what’s the point of the loan modification program? It can happen but it has to be in the best interest of the bank.
Rick
August 23rd, 2010
3:02 pm
Kitty, that is the problem with a lot of foreclosures (same problem with loan modifications). Lenders can not find the original loan papers.
Brad
August 23rd, 2010
3:04 pm
Rick-I see your point.
Kitty
August 23rd, 2010
3:15 pm
The problem is, is that they are finding foreclosures of the Same homes on their books multiple times. Scams dealing with paper purchases and re-financing the home multiple times to Bogus Atlanta buyers is causing a lot of our problmes both in banking and in perspection of who really ‘ownes’ these homes.
Kitty
August 23rd, 2010
3:17 pm
If the bank is holding a note collaterlized against a house, and they also hold the mortgage on the same house in another buyers name, what is the bank to do?
Mr. big
August 23rd, 2010
6:33 pm
For what it is worth Democrats are more to blame. Even under Bush jr it was the democrats that pushed to make homes more available. There was protests and complaints that banks were not lending to the lower class. The only way to make home ownership available to more people is to lower the standards and provide loans to people thatshould not recieve them. This was done at the request and pressure from Democrats. It was not republicans demanding this it was democrats. Yes people from all income brackets and races recieved loans that they should not have, but the problems started because the loan requirements were lowered for the liberals and democrats that wanted lower income less qualified people to be able to buy homes.
J.B. STONER
August 23rd, 2010
7:32 pm
MR164 ….
Look at the heathens, dont matter if it was at East Point or cith of Atlanta.
THEY WANT SOMETHING FOR NOTHING.
Youre wonderful pres promised them that.
The fact they think he is ’so wonderful’ and want him another term tells you something, huh son.
S
August 23rd, 2010
9:43 pm
Phil Gramm from Texas, a Republican, was indeed the Father of this Financial Crisis may he and his fellow cohorts of that bill rest in the lowest of places. You only have to look it up for yourselves. They did the sneaky Xmas, shuffle…wait to the last minute when all our little peons in Washington wanted to get the he!! out of dodge city and rushed the removal of Glass Steagall and as usual the peons were in a hurry and did NOT read all the negatives in the bill and it went thru and walla, Clinton signed it and 10/11 years later Houston we have a problem..the sub-prime meltdown…Thank you PHIL GRAMM and friends, you sold this country down the River, doesn’t surprise me you are/were a republican though, only they could write such a bill as slimy as this to remove regulations for those at the top. Bush Jr. told us to go spend spend spend and I’ll be darned if we all didn’t do it…go figure. Have we learned our lesson. Nope, still not enough regulations out there, why, because the republicans “the party of No” have been blocking everything coming across their desks…WHY would anyone want to vote another republican in, to go to Washington to represent the people, when all this Republican group does is vote for their own self interest…This republican group does not care about this Country, they only care about their own self interests and the power they hold over the people and their corporate brethren.
don't buy
August 25th, 2010
11:11 pm
Rent—don’t waste money on a house that will just go down in value. There are tons of great rent deals out there from homeowners who can’t sell. name your price—they have to take it or they lose big money.
foobar
August 26th, 2010
3:54 pm
i was iffy on home ownership to begin with maybe like 70-30% in favor of it. but i ran the numbers, and for what i was considering in rent, i could own and be ahead after 3-5 years with modest appreciation.
what happened instead is that my house value dropped nearly 30% from the purchase price and is worth about 25% less than what i owe. if i had roots here, i’d take my lumps. but i don’t. so my plan is to walk. i could go into foreclosure, take the credit hit, the fannie/freddie 7 years of probation hit, the possibility of a default judgment hit and still come out ahead financially.
more importantly: i don’t plan to own again until i am retired and/or wealthy enough to pay cash for a house.