Behold, one of the biggest myths of the American Dream

[madokie]

Why buy a house?

By Mark Morford

http://sfgate.com/cgi-bin/article.cgi?f=/g/a/2008/11/21/notes112108.DTL&nl=fix

Amid the assault of economic horror stories of late -- entire towns collapsing, 750-home megadevelopments sitting vacant, the most severe downturn in new-home construction in four billion years, Marc Jacobs forced to cancel both the gold-dipped male strippers and his entire Christmas party -- I happened across a fascinating tidbit of blasphemous wisdom from an economist whose name I forget and whose article vanished into my brainpan almost instantly, but who dared to reiterate a grand and forbidden truth.

It's this: Owning your own home is, for the most part, just a little bit insane.

Wait, no, that's not exactly right. His comment was more along the lines of: The hard fact is, at any given time, no more than about 50 percent of the American population should own their own homes, at the very most. Everyone else should rent. Or live in a van.

It just makes more sense. He argued that any more than 50 percent ownership -- the current rate is about 85 percent for married couples with kids and 70 percent for everyone overall -- is fiscally irrational, actually does more harm than good to the economy, and that millions of Americans who own right now would've been far better off never buying at all (and not merely because all the foreclosures and lending debacles). ...

[fasttense]

1. Here's to hoping you are not one of those living in a van. n/t

[MadHound]

2. It really depends on your personal situation

A lot of places the costs of owning are less than the costs of renting, plus you get the added security bonus that you won't have to shell out rental money in your old age.

But for other people in other places, renting makes much more sense. The best way to do this is not to make blanket statements, but rather go on a case by case basis. If renting is right for you and your situation, great, then rent. If owning makes more sense, then by all means, go ahead and do so.

For myself, owning a place out in the country made the most sense in the long run. I can grow my own food, and enough food for commercial purposes. I can put up a wind turbine and/or solar panels. I can have a wood stove. I'm not moving from this place unless it's feet first, so paying off a house will be a good investment in my old age security.

For others though, owning doesn't make sense. So again, it needs to be on a case by case basis.

[Lyric]

3. Because others don't need old-age security?

Seriously, if we accept your premise as true (that owning a house is "old-age security") then why wouldn't that universally apply to everyone? I can't think of anyone who would be better off in their retirement years if they were stuck with rental payments, as opposed to their own home, which requires only a property tax payment and occasional maintenance.

I happen to agree with your premise about owning a home and being more secure in retirement. I just can't think of a significant group of people for whom home ownership *wouldn't* make sense. Maybe for billionaires who can easily *afford* to rent, rather than own, but while that might be sensible, it isn't practical. There are few (if any) rich people who don't own at least one house.

I would say that the people who need that kind of security *most* are the people who have the hardest time affording it. Maybe there should be a home-ownership program for struggling retirees, subsidized by the government. Or else rental vouchers (similar to Section 8) but specifically targeted toward elderly people, and redeemable for either rental payments to a private landlord, or a place in a decent retirement community.

:shrug:

[MadHound]

7. It really depends on your own situation

What are home prices like, how old you are, do you foresee yourself moving around a lot, what your income is, etc. etc. For many people owning a home could be a bad deal and it would make more sense to rent:shrug:

I know that during the housing bubble I wouldn't, and couldn't, buy a house out on the coast, prices were simply to high. Now that prices are coming down, it is almost impossible to get a loan. Thus it would make more sense to rent.

If I were in my sixties, I wouldn't buy a house unless I paid for it in cash. Paying out the mortgage, property taxes, maintenance etc. would be more than many could afford on a fixed budget.

It would be ideal for everybody to own their own home, no doubt. But due to individual differences, it simply doesn't make sense for everybody at this point.

That's all that I was trying to get across.

[madrchsod]

4. my house payment is 350 dollars

for a house with 1500sq ft built in 73 in a nice neighbor hood. add the tax and insurance it`s about 580 per month. to rent the same house here is around 800 and apt. go for 550- 900.

ya maybe i should rent.

[Trailrider1951]

5. I call BS on this

My mortgage payment, including taxes and insurance, is about $750 a month, about the price of a nice 1 bedroom apartment in Austin. But, since I live a ways out in the country, I have about 1/3 an acre where I can have a large garden and some chickens. Or a goat or two if I want, plus a dog and some cats. Also, I can deduct my mortage interest and taxes from my income. Every little bit helps. And I will have most of the mortgage paid off by the time I retire, like the poster above. AND I have an asset I can pass down to my children and grandchildren. Rent? No thanks.

[dmallind]

6. The problem is

People tend to view things from their experience, so you get a lot of young mobile professionals in San Francisco or NYC calling anybody who buys an idiot, and stable middle aged folks in the rust belt saying you're stupid to rent.

Both are correct.

I'm somewhat in between those demographics, being mobile but in the rust belt, and I still believe it is better for ME to own. Why? 1)Because mortgages are cheaper than rent here just like yours - in my case about $1500 and $2500 respectively 2) I'm at a career level where generally companies pay to move me so I don't have to cover real estate fees etc 3) I have a large athletic dog who likes a lot of exercise off a leash, and any rental that makes this possible (few indeed) are as seen above lots more expensive than buying. 4) I have not yet lost on a sale of a home. It's possible that may change depending on when/where I move next, but then again this area did not see much of a drop in housing prices because it didn;t see much of a bubble earlier. 5) tax deductions for owners far exceed those for renters.

Frankly it would be stupid for me to rent even while still mobile, let alone if I find a company and an area I like enough to stay there for life, in which case it would be insane as I would be exchanging $1500 payments for 15 years or so for $2500 for ever, and still have no asset at the end of that forever or tax deductions throughout that forever.

[bean fidhleir]

8. Step back and think of a different world: a world where housing is a right

Then nobody has to own, but everybody has a place to live. When you need to move, you move. The quality of the place you can move to depends on the quality of the place you're leaving. Depending on how you treat your current place each time, you could end up in a mansion (if that's your goal) or in a "coffin hotel" somewhere.

The world doesn't have to be the way it is today.

[fed_up_mother]

10. No, thanks.

Housing is a "right" in Cuba, but divorced couples are still living together years later because of the severe housing shortage. How chummy. :(

And it's like that in every other country where the government controls housing. We can do better without resorting to complete socialism of housing.

No thanks!

[bean fidhleir]

14. What makes you think it has to be THAT way either?

Open your mind to other possibilities! The ones holding us back are the nay-sayers. What do you personally get out of being one of them?

[fed_up_mother]

15. I like owning my own house.

It's mine. I like that.

I'm not a pure socialist. Never have been. Never will be. I believe mixed economies are best at lifting people up. I don't want to live in a 3 room flat just like everyone else in the name of equality. Frankly, that kind of equality sucks, and drains the life out of folks. No dreams.

[bean fidhleir]

16. In other words, you don't know anything about it --but you're agin it anyway!

You think you own your house? You don't even come close unless you've paid off the mortgage. And even then, you only come close.

If some natural disaster happens and the insurance refuses to pay up - as happens to people every single day in the US - where are you? Out in the street.

If you become disabled and can't work - who pays the taxes? Nobody. And sooner or later the city will grab the house. Then where are you? Out in the street.

If you lose your job and need to move during one of the many housing downturns, so that you can't sell. Where are you? Off somewhere in some other city, maybe, hoping like hell that nothing happens to the house you left behind. Or maybe you have a giant hole in your pocket instead, from being forced to sell to some "investor" because you couldn't juggle the bills.

Open your mind! Think of a world where the system works *for* people, not against them.

[fed_up_mother]

17. I have travelled to countries where the government owns the housing.

My mind is quite open. If - in any of the scenarios you envision - I lose my house, I will rent or I will live with my kids. Those might be good backup plans, but they certainly aren't what most Americans dream of as their first choice!

[bean fidhleir]

18. Dear, you're *living in* a country where the government owns the housing.

They can take "your" house any time they want to. Eminent domain: the government asserting its power of ownership.

Some crook comes in off the street and takes "your" house away from you at the point of a gun, you can go get the cops to help you get it back. But if it's the government that comes in and takes it, you think the cops will help you get it back? Of course not!

The big difference between this country and others is that we're so steeped in individualist BS that we really think we have some power. It's only when we get crosswise to the people that really DO have power that we find out we have nothing. Not even the right to the necessities of life.

[fed_up_mother]

24. Many Europeans own their houses

I wouldn't say that they're steeped individualist BS.


You don't have to be for pure socialism/communism? to be a democrat. And last time I checked, the government has to pay you if they take your house by eminent domain.

[bean fidhleir]

27. Wealthy Europeans do, yes. Working class? Much less often.

Most people rent or lease.


As for the government paying you if they take your house? Find and ask 100 people who've had it happen whether the government paid a fair price - and whether they were given any choice about whether to "sell".



Public ownership of housing doesn't require either socialism or communism. Housing could just as well be owned by local co-operatives, for example.

There are MANY possible ways to do a better, more humane job than is being done today. The first step is the same in all cases: get rid of the profit motive. Why should anyone have the right to turn our basic human needs into moneymakers for themselves?

[Johnny Noshoes]

19. Housing should be a right.

If housing were a right I don't think anyone is saying that your house would be taken from you. Nobody in America should be homeless - certainly private ownership of a home, condo, etc. would not be outlawed. We can decide to spend the majority of our money on positive life affirming things like food, shelter, education, health care, sustainable renewable energy, and meaningful employment for all our citizens. Or we can continue to waste billions on weapons of war, death, destruction, and the upkeep of the corporate empire.

[malaise]

22. Ideally I wish there was no private property

but as long as I'm living in this fugged up capitalist system, we will own our space to avoid the rapacious predatory capitalists known as landlords.

[fed_up_mother]

25. And if most democrats thought like you did, I wouldn't be a democrat

I'm a democrat - not a socialist or communist. Have you ever been to a country where the government owns all (or most) of the housing? I have. It stinks. Literally. There's no pride of ownership.

People all over the world dream of home ownership. There's nothing wrong with that.

[NashVegas]

20. That's a Wonderful World, But It's Not the One We Live In

Here, building resources are limited and no one's making any new land. As a result, it's impossible to fight 20 centuries of Western thought that place a measurable value on homes.

You can create communes on a small scale, but the people who run our country will never allow it to be adopted here on a large scale.

[bean fidhleir]

23. "the people who run our country will never allow it"

Then maybe we should change who runs the country?

People forget that we already have (or had, maybe it's all gone now) a publicly-owned housing scheme that provided very pleasant housing to those entitled. When they moved, they just moved.

It was the base-housing program the military ran. If you were of privileged rank, you were guaranteed housing wherever you were stationed. They were nice houses/apartments, too, the ones I saw. Nothing wrong with them at all.

We have a tendency to forget that all these schemes that are derided as socialistic and impossible by the ruling class are already implemented for the benefit of certain groups, usually the ruling class.

We pay, but we can't participate.

Why not?

[Edweird]

9. This is just as idiotic as the 'let Detroit die' bullshit floating around here.

It is sick how some people are using the wholesale destruction of peoples lives as some kind springboard for their moronic agenda.

[fed_up_mother]

26. With an emphasis on moronic. :)

[codjh9]

11. It depends - my nephew has made a shitload of money by owning half a dozen houses,

moving with his job from state to state. I was screwed for years by being in a big downturn 20 years ago... so it depends partly on where you fall in the cycle(s) of things.

[gratuitous]

12. It also depends on what you call "home"

Folks with one or two kids living in a six bedroom sprawling spread and with a beach house at the coast are probably overhoused. Perhaps the bursting of the housing bubble will get builders back to thinking smaller. An older couple like Mrs. gratuitous and me are stuck with a three bedroom house, far more than we need. But there just isn't much one bedroom housing stock because developers and builders are stuck on bigger is better. And while a yard is nice if you have kidlets running around, it's a chore and a hassle to maintain. But unless you want to live in a condominium, you must purchase a 5,000 square foot lot, minimum.

[Lydia Leftcoast]

13. Some people got in when housing prices were low, and for them it makes sense

but in the past few years, people have been sacrificing EVERYTHING just to own a house, and if they get foreclosed upon, then they have nothing.

They move so far out of town that their daily commute is over an hour, because they think they HAVE TO own a house. They're constantly exhausted and have no energy to do anything but work, do basic chores, and sleep.

There was an article in the NY Times a couple of years ago about a couple in Southern California whose monthly mortgage payment was close to $5,000. It was sustainable only because they both had very highly paid jobs, but as the article pointed out, 1) If either of them lost their job, goodbye house, and 2) They could have rented a large apartment in the same neighborhood for $2,000 a month, invested $3,000 in other stuff, and had a safety net for the eventuality of one spouse becoming unemployed.

The standard arguments are:

1. "You're just throwing money away." Not really. Is your grocery money just "thrown away"? No, because it provides you with food on a current basis. Similarly, rent provides you with housing on a current basis.

2. "Tax breaks!" As someone pointed out, the mortgage interest deduction means that you're paying the bank a dollar to get 35 cents back from the government.

I made the decision long ago that I would not buy unless I had enough money to pay most of the cost down in cash. Otherwise, there is no way I could afford to buy what I can afford to rent.

Besides, as a single person with no dependents, I can up and leave on 30 days' notice and let the landlord worry about the empty apartment.

I think that what the article is saying is that buying isn't necessarily a good deal for everyone. It may have been a good deal for YOU, but don't generalize.

[malaise]

21. I don't see home ownership as any dream

There are several benefits to owning a home and we certainly see them as outweighing the stress of living at the mercy of landlords. I firmly believe that the most important reason for owning your own home is that it prevents dislocation and provides peace of mind. As we age, moving becomes more stressful. Landlords can give you notice whenever they choose. They can sell the property.
At a time when government regulations are virtually non-exist across the globe, landlords can also increase the cost of rent arbitrarily.

So we have to maintain and repair our property. So what - we maintain and repair everything else we own. When people make decisions based simply on financial issues, common sense disappears. We bought our home for security, privacy and peace of mind. We don't maintain it because we're hoping to make a killing by selling it one day. We maintain it because it's ours. I don't give a flying fuck whether it's fiscally irrational or does more harm than good to the economy. We love coming home to our comfortable space and no fucking landlord can tell us to move. That's perfectly rational to me.

[Fireweed247]

28. I love my house

We built it, it is paid for. It may not be perfect but I love it and to me it means freedom.