TIME: The Case Against Homeownership

[marmar]

Homeownership has let us down. For generations, Americans believed that owning a home was an axiomatic good. Our political leaders hammered home the point. Herbert Hoover argued that homeownership could "change the very physical, mental and moral fiber of one's own children." Franklin Roosevelt held that a country of homeowners was "unconquerable." Homeownership could even, in the words of George H.W. Bush's Secretary of Housing and Urban Development (HUD), Jack Kemp, "save babies, save children, save families and save America." A house with a front lawn and a picket fence wasn't just a nice place to live or a risk-free investment; it was a way to transform a nation.

Houses owned by the people who lived in them, we believed, created social and financial stability — more-involved citizens, safer neighborhoods, kids who did better in school. No wonder leaders of all political stripes wanted to spend more than $100 billion a year on subsidies and tax breaks to encourage people to buy.

But our leaders, with our encouragement, went much too far. The dark side of homeownership is now all too apparent: foreclosures and walkaways, neighborhoods plagued by abandoned properties and plummeting home values, a nation in which families have $6 trillion less in housing wealth than they did just three years ago. Indeed, easy lending stimulated by the cult of homeownership may have triggered the financial crisis and led directly to its biggest bailout, that of Fannie Mae and Freddie Mac. Housing remains a drag on the economy. Existing-home sales in July dropped 27% from the prior month, exacerbating fears of a double-dip recession and accelerating the accompanying slide in stock that took the Dow Jones industrial average to a seven-week low. And all that is just the obvious tale of a housing bubble and what happened when it popped. The real story is deeper and darker still.

For the better part of a century, politics, industry and culture aligned to create a fetish of the idea of buying a house. Homeownership has done plenty of good over the decades; it has provided stability to tens of millions of families and anchored a labor-intensive sector of the economy. Yet by idealizing the act of buying a home, we have ignored the downsides. In the bubble years, lending standards slipped dramatically, allowing many Americans to put far too much of their income into paying for their housing. And we ignored longer-term phenomena too. Homeownership contributed to the hollowing out of cities and kept renters out of the best neighborhoods. It fed America's overuse of energy and oil. It made it more difficult for those who had lost a job to find another. Perhaps worst of all, it helped us become casually self-deceiving: by telling ourselves that homeownership was a pathway to wealth and stable communities and better test scores, we avoided dealing with these formidable issues head-on. ................(more)

The complete piece is at: http://www.time.com/time/business/article/0,8599,2013684,00.html#ixzz0zK1kb9Z6

[SpiralHawk]

1. "Our solution - RepubliHovels. Smirk." - Republicons

"Once we finish Shocking & Awing the bejabbers out of you little people, we can move you into RepubliHovels. That should shut you up, while we party down in our RepubliMansions. Smirk. Deal with it. Sneer.

"What we need are more more more more more tax cuts for rich republicons!"

- Republicons

[slackmaster]

2. Let me give you a basic lesson in home buying based on many years in financial services

Don't buy during a bubble.

[stray cat]

3. So how do you know it's a bubble and not continuing to increase in value?

Would you have bought in NYC 5 years ago?

[slackmaster]

5. I would never buy in NYC under any circumstances, but to attempt to answer your question...

Public information about present and historical housing values for a given property, for its surrounding neighborhood, and larger areas, are now readily available for free to anyone with a Web browser. For example, Zillow. (This is not meant to endorse Zillow or any other particular provider.)

I just looked up the home of a couple I know who just refinanced a home that they had bought in June 1999 for $176,000. They switched to a 15-year loan at a much lower rate, for a slightly higher monthly payment. They'll be saving shitloads of money. But I digress.

The house across the street, also on a corner lot and similar in most respects, was bought by a couple just six years later for $480,000. They're hurting, but both are well employed and they are not in any danger of losing the home. However, Zillow estimates the present value at $329,000 which is almost certainly more than their principle balance.

If the second couple had looked at very long-term trends and seriously thought about what they were getting into, they might not have bought that place. If they had waited just five years they could have had it for much less.

They're stuck with a set of bad choices: Suck it up and keep paying it down until they can qualify to refinance at a lower rate, or sell short and take a big loss, etc.

The housing market in Southern California has always been cyclical. It's not hard at all to see the trends when you take the time to look at the data. My friends' neighbors fell victim to a combination of greed and impatience. (I know enough about them to say that without speculating.)

Buy your home as a place to live in, not as a speculative investment.

Final note: Don't be taken in by what appears to be an exponentially rising curve in home values. Those ALWAYS top out and are usually a good sign that a reversal is nigh.

[bettyellen]

16. NYC is one f the most stable markets in the country, but it;s $$$$

[slackmaster]

20. The reason I wouldn't buy there is simply that I wouldn't want to live there

Not to cast asparagus on New Yorkers, and I love visiting that city.

I have a special rock in Central Park where I have eaten lunch on several visits.

[bettyellen]

27. i used to love having lunch in central park too when i worked uptown there was a cottage in the

corner near columbus circle that had a sweet old lady from Brittany who made the best fresh crepes. she;d sit outside peeling apples most mornings. i love central park.

[FunkyLeprechaun]

19. Hard lesson to learn!

We bought 3 years ago right before the bubble burst. We paid £102,000 for our three-bed terraced house, put more or less £15,000 into it (new windows, buying the freehold, redoing the kitchen, other costs). We have to sell because we're moving to the east coast of the UK (hubby's new job) and we are selling it at £95,000. So we've lost just about £20,000 so it's a bit of a bitter pill to swallow.

We are definitely buying our next house for sure as it's a great time to buy.

[Art_from_Ark]

29. If you look at it this way

You were basically renting your place for about £6600 per year. I don't know what rents are like in the UK, but it comes out to less than US $1000 a month, which doesn't sound too bad for the type of house you described.

[xchrom]

4. Recommend

[Monique1]

6. I owned a home five years ago

and sold during the right time. I have no desire to own a home again. For the past five years I have been renting and love it.

[FreakinDJ]

7. Company Housing, Company Store - Company Slavery

Maybe we could bring back Debtors Dungeon too

Its bad enough they steal our retirement savings, now they want us forever in servitude

[hollowdweller]

8. How "the man" screwed up Home Ownership

OK we got our house when we were 27. It was low cost enough that we financed it for 15 years and paid it off in 13.

The price was also such that the way we had it set up if one of us got unemployed the other could still make the house payment on one salary.

After we paid off our house it was like a huge pay increase. Also if the economy tanked we could still live here even if we had min wage jobs.

BUT- That was the 1980's.

NOW- the man has it set up where the price is so high that you have to finance the whole damn thing for 30 years or more and that salaries are so low that it is hard for a young person to pay it off in 15 or 20 years.

So what you have is people who are buying houses at like 40, 50 years old when their salaries go up and then financing for 30 years. Hell, if they are LUCKY they will pay it off before they die.

So THE MAN wins. He gets you to pay "rent" for 30 years, meanwhile you are responsible for all upkeep and taxes plus you pay him interest on the loan.

If you rented, no interest, no maintainence.

Home ownership only works for the consumer if you buy young and the price is low enough to pay it off when you are still young so it helps you with financial independance. This middle age 30 35 year loan bullshit is just like the 401K think where they promise financial independance but drain off all the money in fees and screw the consumer.

[Vinnie From Indy]

9. The Mt. Everest sized OMISSION from the TIME article is...

that American companies have sent MILLIONS of jobs overseas. No jobs - no recovery - no American middle class homeowner.

In fact, because TIME omits the millions and millions of jobs that have left the country over the last two decades, their article sucks.

[Mimosa]

11. Yay Vinnie from Indy!

Time is not a genuine disinterested source.

[Mimosa]

10. Renting is horrible

If you live in an apartment the owners can have people come in and inspect the premises. They have keys. They can send in workers when you're not home.

And don't get me started about neighbours who smoke crack. And noise. One can feel helpless in a place owned by somebody else.

We lived in apt. for about a year after Katrina. Couldn't wait to buy a place of our own, no matter how humble.

[hollowdweller]

12. True, but-

If you move into a bad apartment it's a lot easier to move out than buying a house and finding out the neighbors are evil.

Sort of like getting married VS dating ;)

[marmar]

13. "And don't get me started about neighbours who smoke crack"

WTF does that have to do with renting? :wtf:

[Mimosa]

18. Had a couple who lived right above us

Their friends would knock on our door at 2:30 a.m. And they would drop the junk from their little porch onto our porch.

The managers of even nice apartments can't control everything that goes on.

I was always afraid somebody would start a fire too. If you live in apts you have less control over living conditions.

[FunkyLeprechaun]

22. That's why I will never rent again

Primarily because our next door neighbour was our landlord. They often went into our house when we were away and one such example, when we were in the states for two weeks, they went in and painted without telling us.

It was such a stressful time I now refuse to rent again. I don't mind if my hubby rents for himself (while I take care of the house as it's on the market). We have a dog and it is so hard to find pet-friendly landlords.

[krabigirl]

24. It can be, but you can rent a single family home..if y ou have a good landlord, you can be lucky.

[lunatica]

14. When my ex and I rented realtors kept selling the houses to each other and evicting us

It's quite legal for renters to be evicted when the property changes hands. Realtors sell, or used to sell to each other. It's kind of like flip this house only the house was never upgraded. It just changed hands and the renters were evicted so they could charge higher rents. After the second eviction we decided we were going to buy.

But the article is also right. There's been a huge price for that American Dream. My mother and I bought a condo with the intention of living in it for life. My mother died in her bed in the condo with auspice care. Now I've declared bankruptcy and fear the buildup to foreclosure starting because I can't pay the equity loan. I'm beginning to think I would be better off renting.

[MindPilot]

15. This pegged my BS meter

SOMEBODY has to own that property and if it's not the person living there, then who?

If you rent a house maybe it's owned by someone who bought it as a starter a few years ago and then bought another place. In that case you--the renter--are simply paying that individual's mortgage. But more likely the house, and definitely the apartment building, is owned by some nameless financial entity and maintained by a property management company whose primary motivation is to spend as little as possible. Of course we all know that nameless financial entities and property management companies don't spend a great deal of time being concerned about neighborhoods, infrastructure, schools or community.

Your house will now be owned by off-shored holding company because you Joe Wageslave, need to remain mobile, you know, so you can go where the jobs are.

Yeah, telling us ownership=bad, renting=good is just the latest scam to transfer more and more individual wealth to the 1%.

[mmonk]

17. It sures makes getting credit easier though.

[Octafish]

21. Middle class doesn't need the homes. Sell 'em to the rich for pennies on the dollar.

They know how to best use the property, anyway.

:sarcasm: , for the literal minded.

[AnArmyVeteran]

23. Tent prices are very good right now!

For less than $300 I can buy about 4 very nice tents. I could set them up by a lake and fish and grow crops. And I'd have plenty of fresh water. Monthly mortgage = Zero

[LWolf]

25. I like owning my own place, but I'd like it better

if I could do it without a mortgage. Otherwise, it's like renting, but with more security.

I like being able to paint, to remodel, to do whatever I want without asking permission. I like stability. I hate moving. I like the fact that, even though I have a mortgage to pay, that mortgage is not going up. Unless rentals come with rent control, that's not true for renters. I like the fact that, as long as I make my mortgage payments, I can't ever be evicted. No one can decide I need to vacate, decide they don't want to renew my lease, etc..

[DirkGently]

26. Ideally, we'll all someday live in factory dorms, soldering

computer chips for $0.17 an hour, committing suicide on a regular basis. It's working wonders in China.

[starroute]

28. The way things are these days, you're screwed either way

My experience with renting was similar to what someone posted up-thread. We rented one place for 15 years until the landlord decided to kick us out and double the rent. We rented a second place for 10 years (with a 50% rent increase halfway through, after it changed hands) and then the same thing happened.

Renting can also mean waiting for months to get a problem fixed because the landlord is too busy to deal with it. Or living with failing appliances because the landlord is too cheap to replace them.

But it's also true that owning can be an enormous financial burden and make it difficult to move away from an economically depressed area.

The common factor to both, of course, is that housing prices are way too high compared to incomes. If houses were actually affordable on an average income, buying wouldn't be such a struggle. If it was possible to rent something decent and not have to deal with a landlord who's struggling to cover his own mortgage, renting wouldn't be a crapshoot.

And if more moderately priced housing was being built -- as it was in the 1950's -- finding a decent place to live at an affordable price would be less of a nightmare all around.