Owning a home…or not…

[JanS]

This is a subject that has been brought up here in the past, so thought I’d throw this out there…for your thoughts…

http://www.nytimes.com/2008/06/23/opinion/23krugman.html?_r=1&th&emc=th&oref=slogin

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[Sue]

As long as I can rent a nicer home in a better neighborhood than I can afford to buy, I’ll be a renter. I can afford to buy the 700 square foot house across the street from me if I wanted to. I’d rather be renting the 1,700 square foot house with rent half the price of the mortgage on the house. If that makes me unpatriotic, so be it. :)

I’m a legal assistant dealing in large part with bank business. I can’t even begin to tell you how many foreclosure warning letters I’ve written this month on behalf of our clients. The saddest part is how “small” some of these amounts are that are missed payments (compared to house payments on new mortgages today). Looks like a lot of people can’t afford their homes . . .

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[charlabob]

I think Krugman is absolutely right — owning a home has been deemed a badge of entry into the middle class and everyone is supposed to want to enter. Now the value is dubious and not getting any brighter.

We own–we’re probably still above water, since we bought in 1999. The tax break is good. Not being at the mercy of landlords who want to sell or refuse to fix anything is good. Being at the mercy of ourselves, when it comes to fixing anything, isn’t always good. :-)

Personally, I’m hoping this market will encourage cooperative house purchasing and other forms of creative living — for example, groups of people making plans to live together and grow old together. If one single-family or person can’t afford a house, perhaps several can.

Sue, do you think some of the folks you see are just walking away from houses that will never be worth what they paid? Buying a house was supposed to be an investment — even for people who didn’t buy to flip and invest. Now, people have lost tens of thousands of dollars on their investment over the past couple of years.

I’m not sure what they’re “supposed” to do.

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[Sue]

Charla, in the case of what I’m seeing personally in my job, it’s mostly people who overextended themselves and then something goes wrong (loss of job, medical bills, etc.) causes them to not be able to make payments. Which is exactly why I didn’t buy when I had the opportunity – I thought I would be too close to a danger zone financially and didn’t want something unexpected to wipe me out.

My family back in NY still wants to know why I don’t buy a nice “cheap” condo somewhere. Meanwhile, I have to remind them that they bought their 2 bedroom co-op many years ago when it was $34,000 – not gonna find much at that price point now, especially in a city. I’m 45 years old and they (parents/inlaws) still treat us like we haven’t “arrived” yet because we rent and we didn’t have kids. Whatever. :)

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[WSB]

We enjoy being homeowners, but we bought our hovel (not an inappropriate word, as it is really not good for anything but teardown beyond our tenure of ownership) in 1993, and even then, we could only do it with the help of a low-interest low-down FHA-insured loan. The condo we rented on Beach Drive for two years before that was nicer (TWO bathrooms!!!! half a century newer!!!). I think you have to evaluate your financial situation and don’t let anyone guilt you into doing what you don’t want/need to do, either way.

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[TheHouse]

This is simple.

Own a home=saving money for your own future.

Rent a home=saving money for your landlords future.

If you are comfortable making other people financially rich, then continue renting.

No guilt. Just the facts ma’am.

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[PSPS]

Krugman’s reference to the Bloomberg editorial that mentions renters living in “Soviet-style concrete-block high-rises” makes me think of these ugly mega-size “mixed use” monstrosities that are being built in West Seattle.

It’s nice to own a house, but now is not the time to buy unless you have a very motivated seller selling at a pre-2000 price or are buying a fully-inspected and desirably located REO, foreclosure or short sale. The trouble is that there are many unethical real estate agents around that scoop these off the market for themselves. That’s why so many houses for sale show the listing agent as the deed owner. This is an ethical breach in the real estate industry, but we live in a time when the mission statement for business in general seems to consist of three words: lie, cheat and steal.

Anyway, the last time I ran the numbers a few weeks ago, West Seattle had over two years of inventory of homes for sale when a healthy market usually has, at most, six months. Prices are still way too high and will continue to go down because people can’t afford to buy them. (You can’t get “pretend” no-doc loans anymore; you have to actually qualify for a mortgage now.)

If you’re renting, stay put for now. There’s a huge wave of toxic “option-ARM” loans that will reset beginning late this year through 2010. Most of those will go NOD then into foreclosure and become REO’s. If you were to buy now, it would be horrible to discover that your entire down payment disappeared in the loss of equity that will hit every house over at least the next two years. Let’s hope the real estate industry starts showing some sign of a return to ethical behavior in that time.

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[Shibaguyz]

Check out a book called The Automatic Millionaire Homeowner by David Bach. It taught us a LOT about how to save up and plan for purchasing and keeping our home. In addition, our realtor and mortgage broker talked to us a lot about being careful to not overextend ourselves.

People say we “got lucky.” I think we just planned way ahead and sought out good financial advice from reputable professionals before we made our purchase. It really didn’t seem that difficult to us once we did our research and walked into our purchase well educated.

I was listening to this topic on NPR today and I just really don’t understand how people could make such large purchases… for most THE SINGLE LARGEST purchase in their lives… without doing a LOT of research and finding out everything they can possibly know before signing over that check and closing.

I’m not criticizing… I just don’t understand it.

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[TheHouse]

Shibaguyz, you and I finally meet on common ground and agree. Bach’s book is one of the easiest and informative books I’ve ever read on real estate (and I’ve read many).

I highly recommend reading his series as well.

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[GreenSpaces]

Real estate agents are people too, and because of their specialty they particularly understand the value of investing in real estate. Just because they have become an expert at something doesn’t make them a criminal. People who believe in investing in real estate and being a landlord often own multiple properties – regardless of what they do as a day job. It’s called leveraging your assets and I think anyone who has the brains and ability to do it, should. You don’t create wealth or a retirement fund by just sitting there.

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[JanS]

I think before one makes statements that are generalized about how wrong renters are, one has to understand economics of individuals who may have owned at one time…for instance, a woman who was divorced later in life, with a teenager..who struggled financially because of said divorce, and a newly formed business, who had a major illness, and had to sell a home that had been purchased 20 years before, who had to split the proceeds with said deadbeat ex, who had sole custody, who became independent to watch housing prices soar. So now we have a real estate market where a 300,000 (good luck finding that) house requires, say, 60, 000 down…with payments double what that person pays in rent. It’s not an easy thing to do for a lot of older people, especially women, in America on what is NOT an executive salary. Two incomes are needed…one can’t hack it, even if one was to move to a market far away from here just to be able to own. There are many things to be considered…sh*t happens in some lives…I have friends that make twice as much money as I do who are barely holding on to their homes now because of divorce, and refi, and mortgage payments close to 2,500 a month.

It’s not all cut and dried out there as some may think…renting doesn’t look all that bad when one’s payments are below 700 a month.Not everyone is lucky enough to be fairly young, life stretched out in front of you….when you get close to retirement age there are many things to look at and to consider.

hard decisions all around…(unless there a sugar daddy forthcoming, of course – lol)…would that life were always as easy as some people make it out to be…

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[Shibaguyz]

JanS – I know we’ve discussed this particular topic in the forums before and I don’t think anyone believes that life is cut and dried… I know we certainly don’t.

A person can’t be forced to purchased a home so it is still a free choice as whether to rent or own. We never thought we could buy a home of our own until we were told about the Automatic Millionaire series of books by David Bach. Reading two of those books, including “Homeowner,” really gave us our jumping off point and encouraged us. It was the first time we thought it might be a real possibility.

We were afraid of what might happen in the future if life did go south but we always try to move forward without that fear stopping us.

I just want to make sure there is a hopeful point of view when this topic is discussed. If you choose to not make an investment in a home, that’s fine, but I feel strongly about representing the fact that it CAN be done and I have supplied what I feel to be a great resource for anyone interested in becoming a homeowner.

BTW, House – we are on common ground a heck of a lot more than you think and a scary lot more than I’m comfortable with!! LOL Kidding… sort of… ;)

JanS – let me know if you find that sugar daddy… we have some single friends…

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[JanS]

hehehe…bring ’em on, I say…but just so you know my philosophy, I won’t live with ’em, but I’d consider living next door…actually all couples should do that, in my book..you always have your sanctuary to go to – lol…

S’guy…I’m 61…not ever gonna retire, since I don’t play golf – lol…but..the market in this area has passed me by, and having lived in WS for 33 years, and only daughter here, it would be difficult to relocate to some little town where buying a house might be cheaper – and trying to establish a clientele all over again.I’ve done it twice…that’s enough :)

Would I like to own? Damn straight…a little 2 bedroom…white picket fence…doesn’t have to be huge – lol…anyone out there wanna help? I can deal…a lifetime of massage if you buy me a house – lol..or even the car of my dreams…

think that’ll get a response? ;-)

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[Shibaguyz]

Deja Vu…

I seem to remember this thread going exactly this way before… minus the sugar daddy theme.

I’ll dive back in again and take the hits. I know we’re younger (39 & 41) and we got slammed for not having enough life experience to have made real sacrifices in gaining our home.

I’m saying it is relative and we’re not trying to one up anyone on who’s had a rougher time of it in life. All I’m saying is that I honestly believe that anyone can find the means to purchase their own home if they are capable of working and have the means to put away the necessary money. I do not feel that makes me naive. I have seen it work for us and seen the others it has helped… even met some of them in person at seminars.

We did not purchase zero down paper but we certainly didn’t pay 60K down. Maybe we got in just under the cut off line of decent rates but we’re doing pretty well. We had to make sacrifices for a few years and will again for a few more years to get in the home we eventually want to settle in.

An investment in a home is a long-term investment just like any other well thought out investment of your money. Don’t just put your name on a note promising to pay hundreds of thousands of dollars with gaining all the knowledge you can.

I can accept there are exceptions to this but I’ve just seen too many people make it happen to simply write the whole concept of home ownership off.

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[JanS]

Oh, believe me…I agree with you totally. You aren’t the one/ones that have stated in the past that if you rent and don’t own, you’ve made the wrong decisions in life. At the age of 39 I was safely in a home at the top of Genessee Hill, with a quarter acre of land around it (and a peek view)…paid 39K in 1977. We were the first in our group of friends to buy, and they even wondered if we could really afford it. Our house payments at the time were $325/mo. When I sold it in 1997, because of the big D…I was supporting my 15 yo daughter, and barely ekeing out a living as a massage therapist…I hadn’t been able to work at all the year before.

Oh, if I had been able to hold onto that house for a few more years.I sold for 190 K in Nov. 97…now valued at..drum roll..512K. But..circumstances wouldn’t allow that.

I think you’ve done marvelously well, and you’re well on your way to your dream home. :)

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[Kayleigh]

I want very much to buy a condo on my own, that is, without my ex. I have great credit,savings, etc. But what I can afford in the Puget Sound area, what I qualify for, and what I want are three separate things (and I don’t want a mansion; just a two-bedroom condo in a safe neighborhood that isn’t an hour commmute to downtown.)

I will buy someday, no doubt. But now is not the time for me—both in terms of the market and my own personal readiness.

Is it wise to buy the proverbial “fixer-upper” or poorly built home if your mortgage takes so much of your take-home pay that you can’t afford the “fixer” part? I was floored at how crappily built some of the condos in this area are—even the remodeled and upgraded ones. If you have to replace things in 5-10 years, how much of an investment is that?

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[Bayou]

My partner and I researched and prepared for over 3 years before finally buying a place in November. We rented a house in Gatewood during that time and in those three years, I put $36k into my slumlords bank account. Thinking about that fact (along with being young and stable) made it feel like the right time for us. We have a good friend of over 8 years who is in real estate and she helped us through every step. It certainly makes the experience so much better when you can work with people you know and trust.

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[guidosmom]

My partner and I are hoping to buy a home within the next year or two, but after reading all the comments I am really skeptical. Does anyone have any recommendations of resources out there for first time home buyers in this area? Thanks!

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[Bayou]

Guidosmom, I really can’t say enough good things about our agent and broker. I was terrified of the process but they got us through it. If you are interested in meeting with a professional to discuss your options, my agent’s website:

http://www.rebeccarealestate.com/

She’s also a local West Seattlite! :)

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[walfredo]

I think with the market right now, it probably doesn’t make sense for anyone who doesn’t: plan on staying in their place for 10+ years, have at least 6 months mortgage in an emergency fund, make a lot of money and file an itemized tax return.

Otherwise, I hate to say it, but wait. It is stupid to try to time the bottom. Wait out a year or two, until things actually start going up for a little while, then get in.

A very rosy scenario for a homebuyer today would be to break even over 5 years, when accounting for transaction costs associated with selling (your first 7.25% appreciation goes there). That is assuming prices hold steady the next two years, then have modest increases over the next 3.

During those 5 years, you are paying more per month, and usually sacrificing location and space versus renting. More importantly, you stand to lose your ass if you need to move in the first 3 years for any reason (job loss, relocation, seperation, needs change etc).

Now if you look at less rosy scenarios, and Seattle does what California, Nevada, and Arizona have the last 2 years and you see depreciation in the neighborhood of 10-20%. It is going to take close to 10 years to get to 0. And anything that forces you to move during that time would require you to take a substantial loss on the property…

If you plan on staying 10+ years, don’t like moving, make enough where the tax savings nets you 30 cents on every dollar of interest. Then buy a house, its a no-brainer…

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[Shibaguyz]

guidosmom – my partner and I were helped by a wonderful realtor named Teresa Grassley. She and her partner live here in West Seattle (not far from us) and she works with a great mortgage guy who also lives here in WS with his partner.

Her website is http://www.teresagrassley.com

She was patient and took the time to educate us and never once made us feel like we weren’t one of her “big fish” clients. As a matter of fact, we are still friends with them a year and a half later.

Also, pick up a copy of the book I’ve been recommending in my previous posts at the bookstore or the library. No kidding… if we hadn’t started reading it we never would have known we could get into a home. It walked us through step by step in the process and gave us the ammo to walk into the who process well prepared.

Yes, the markets are out of whack right now but you have to start the whole ball rolling BEFORE you are ready to buy. If not, you’ll miss out when the time comes around.

Finally, the best piece of advice I was given was: Don’t ever take financial or personal advice from anyone who isn’t financially or personally better off than you are.

When we first started talking about purchasing a home, EVERYONE became our personal advisor! LOL We went directly to professionals we felt we could trust (and that took a long time for us to find… someone we felt like we could TRUST) and took our cues from them.

Good luck on your journey to your new home!!

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[guidosmom]

Thank you guys so much! We’ll probably wait a year or two to buy, but want to be prepared and well educated, and also have good resources to go to and work with. I will check out both the links. Thanks!!

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[SuitsarenotBoring]

My two cents is the fact that nobody ever mentions not really wanting to own a home. I have rented since leaving college and have loved the freedom. I have enjoyed making career decisions based on having an adventure instead of paying for a house. In 8 years in Seattle, I have lived in 7 locations and have had a variety of jobs in my career field.

Now after living in West Seattle for a bit, I really like it. As I approach my mid-30s and am in a stable job, I am starting to think about buying – mainly because I now am in a place where I want to stay.

However, I will say I am glad for the flexibility I have had while renting. My parents are in their 50s prefer renting and even my grandparents in their 80s have, by choice, only owned one home – and that was in the 1950s.

Owning a home, like other life decisions should be a choice. I think it is too bad it has become out of reach for so many and that others felt the pressure to buy when they probably should not have.

As for making my landlord rich – right now I love my landlords and if that is how they get rich – good for them! :) Honestly, every service anyone purchases makes someone else money. When I choose to buy, I will happily help my good friend who is a Realtor make some cash.

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[Shibaguyz]

Suits – First… love the name! I like my closet full of suits quite a lot! LOL

Second, I totally agree. We didn’t buy until we were in our late 30’s because we weren’t sure if we were done moving around yet. We’ve lived in several locations in Seattle, we’ve moved to Denver, Wyoming, San Diego and Hawaii all just because we could.

While our ultimate goal was to find a place to eventually settle down, we were in no rush to do it. Once we were ready though, we just didn’t know how to go about doing it. That’s the other side of the story.

But, I totally agree with you. We didn’t buy a home at first because we just didn’t want to settle in one spot yet.

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[Fripp]

Guidosmom,

I don’t want to stir up a huge argument over the merits of buying vs. renting, but if you are a first time homebuyer and want some additional information, I highly recommend http://www.seattlebubble.com for commentary from a non-real estate professional.

We are currently renting as we believe home prices will continue to fall in the Seattle area for at least another year. While it may feel like throwing money away by renting, I think it would feel much worse to buy a $400,000 home and watch it lose 10% over the next year. Long term TheHouse may be right, a house can assist in building long term wealth. However, we are currently seeing the fallout from a credit bubble the likes of which we have never seen before. Now may not be the best time to buy.

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