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Should You Buy A House?
Submitted by Ramsey Su via Acting-Man.com,
Why Buy a House?
Examining the reasons to buy a house today may give us some idea where the housing market is heading in the future.
There are three reasons to buy a house:
Reason 1 – Utility
A house (any dwelling) is a shelter. It provides enjoyment, a home to raise one’s family, or just a place to watch that big screen TV. Utility is not quantifiable and it differs from household to household.
Reason 2 – Savings
If financed, a mortgage is a way of saving something every month until the mortgage is paid in full. If paid for, the savings come in the form of “owners’ equivalent rent”, which is what the census bureau uses to measure inflation in housing.
Reason 3 – Asset appreciation
At 5% appreciation per year, a $100k house today will be worth $412k in 30 years. Even a more modest 3% appreciation would result in better than a double.
Why Not to Buy a House
Based on the reasons above, it appears to be a slam dunk decision. Why would anyone not want to buy a house? There are three obstacles:
Obstacle 1 – Affordability
Housing, as a percentage of household income, is too expensive. A decade of ill-conceived government intervention and Federal Reserve accommodations prevented natural economic forces from driving house prices to equilibrium. As a result, not only is entry difficult, but many are struggling and are stuck in dire housing traps. Corelogic estimated that as of the 1st quarter of 2015, 10.2% of mortgages are still under water while 9.7 million households have less than 20% equity.
Obstacle 2 – High Risk
Say you are young couple that purchased a home two years ago, using minimal down financing. The wife is now pregnant and the husband has an excellent career opportunity in another city. The couple has insufficient savings and the house has not appreciated enough to facilitate a sale, which results in negative equity after selling expenses. The house can become a trap that diminishes a life time of income stream.
Obstacle 3 – “Dead zones”
Say you live in the middle of the country, in Kane County Illinois. For the privilege of living there, you pay 3% in property taxes. That is like adding 3% to a mortgage that never gets paid down. Your property would have to appreciate 3% per year just to break even. By the way, “appreciation” is unheard of in Kane County, good times or bad. There are many Kane Counties in the US. Real estate in these counties should be named something else and should not be co-mingled with other housing statistics. Employment is continuing to trend away from these areas. What is going to happen to real estate in these markets?
The Kane County court house: where real estate goes to vegetate
The factors listed above are nothing new. They provide some perspective as to where are are heading. Looking at each of the reasons and obstacles, they are all trending negatively.
The country is spending too much on housing, a luxury that is made possible by irresponsible Fed policies. 50% debt to income ratios are just insane and Ms. Yellen has the gall to call mortgage lending restrictive. Can we not see what is happening to Greece?
Mortgage backed securities held by the Federal Reserve System, a non-market central economic planning institution that is the chief instigator of house price inflation. Still growing, in spite of QE having officially ended – via Saint Louis Federal Reserve Research, click to enlarge.
Real estate is an investment that matures over time. The first few years are the toughest, until equity can be built up. With appreciation slowing, not to mention the possibility of depreciation, it is taking much longer to reach financial safety. The current base is weak, with too high a percentage of low equity and no equity ownership. The stress of a recession, or just a few years of a flat market, can impact the economy beyond expectations. The risks that might have been negligible once upon a time are much higher today. Many who purchased ten years ago are still living with the consequences of that ill-timed decision today.
By stepping back and looking at the big picture, we can see that real estate should be correcting and trending down. The reasons why our grandparents bought their homes have changed. Government intervention cannot last forever. It will change from accommodation to devastation, when they finally run out of ideas.
Conclusion
In summary, my working life had its origins in real estate and I am not trying to bite the hand that fed me. However, the reality is that the circumstances that prevailed when I entered the market are non-existent today. I seriously doubt that I would chose real estate as a career, or as an investment avenue, if I were starting over. As for buying a house, I would consider it more of a luxury as opposed to an investment, and one has to be prepared for the possibility of it being a depreciating asset, especially if one decides to move.
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Real Estate has seperated from wages. An epic shit show will follow.
If you haven't bought it yet, you won't be buying one in the lifetime of this nation!
not a problem.
i'm happy to wait til the nation dies.
shouldn't be too long, now.
One can only hope. #amievil
It's tough to buy stuff at zero-percent interest rates. Who knows what anything is worth? Can you imagine what the current energy and housing prices might be if the interest rates were six percent? Oil might be 20 dollars a barrel. This is a deflationary nightmare.
You have, hands down, the worst blog of all the blog pimps here. Why do you even bother? No one gives a shit about your day. I bet your wife even hates you, she is probably fucking someone else, id bet on it. You should just quit, and give up on life.
#yesIfuckingam
PT's reasons to buy a house:
1. Protection from weather. You can die of exposure faster than you can die of thirst.
2. Somewhere to put your stuff. If you like tinkering with stuff, you need somewhere to put it all.
3. Grow your own food (if you have land. Not so easy in an apartment).
4. Eventually inflation eats the mortgage repayments. For many, mortgage and associated costs are now lower than renting but lets get real here - they were lucky enough to get in BEFORE the boom.
5. Once you've paid off the mortgage, that's one less expense, so you don't have to work so hard in your retirement years.
6. If, once you have grown old, you decide you would like a smaller house, you should (ha, ha, ha) get a decent profit in the downsizing. Beware those retirement villas. I've seen the size of their on-going fees! Basically, "Give us your house plus 95% of your pension cheque and you can stay here but we still own the land..." or something like that.
PT's reasons NOT to buy a house:
1. They are simply unaffordable. Cheapest mortgage on house in cheapest suburb = 100% of the minimum wage (actually, I think our minimum wage has gone up. Might be 70% by now). Average house costs over half the average wage (could be 75%, could be 90%. Again, I'd have to check. Long time since I ran the numbers). Mortgage distress used to be when the mortgage was over 33% of your wage. So we got heaps of room in which to say, "Prices still need to come down". Fuck'em. Don't buy if the mortgage is over 20% of your wage, or for more than 20 years. And beware all the other bullshit they try and pull on you (fees ... )
2. In my country, most home loans are variable interest rate. Think back to when you were young. What did the oldies used to say about signing blank cheques? Why does everyone ignore this advice on their most expensive purchase? Basically "Because the herd will save me. We trample everything in our path". Better make sure you're in the middle of that herd. The crocodiles still get the fringes and the stragglers.
3. Yeah, yeah, flexibility - you don't know how long you'll be in town, or how long your job will last. You can always sell a house, or rent it out to someone else but the devil is in the details. Do it right, you laugh. Do it wrong, you cry. Is it even possible to do it right? You need to find out.
4. Capital gains. "Everything is doubling in size every hour. I pulled out my ruler so that I could prove it, but my ruler had doubled in size too!" I could've bought a better house for an extra $20k. 7 years later, the same transaction costs an extra $200k. Winning? Yeah, still ~$200k better than not buying anything at all until 7 years later, but I can save $180k worth of my own labour by not trading up. Gee, what to do? What to do? And yes, my income ain't reliable so this decision ain't too hard for me.
The winners were the retirees who downsized in 2006 / 2007.
5. Rent is cheaper - until inflation does its job, as I mentioned above. Look, you gotta be on a huge income before the advantages of renting really come online. Figures I have seen in my town:
Old, TINY eggcarton but in good location:
Mortgage = $480 per week.
Rent = $300 per week.
That shit is of absolutely no comfort or value to the worker on $600 per week.
Old, big house in good location:
Mortgage = $1600 per week.
Rent = $400 per week.
Hang on a minute, how the fuck is that even possible??? Maybe the Landlord paid off the house a long time ago and the rent money is just pocket money to him.
Again, the worker on $600 per week ain't getting any wiggle room out of this, but if you're making $3000 per week then everything starts looking good. Why would you buy at $1600 per week when you can rent at $400 per week? Chuck that extra $1200 into an investment, before you know it the investment will be paying the rent for you. (He, he, assuming there are any cash-flow positive investments to be found these days!) Otherwise just spend that extra $1200 on having fun. Or put the money away until you can afford to buy a house with cash. The interest savings is your return on investment and on a 25 year loan that could easily be 100% (err, I haven't run those calcs through modern low interest rates, so results could be significantly less. Maybe I'll look at that later today.)
So for poor people, renting is cheaper but still almost impossible, buying is even less possible but potentially better once inflation puts your mortgage repayments below the current cost of rent. By that time you have probably lost your youth - all that time and labour simply shovelled into your or someone else's mortgage.
For rich people, renting is a no-brainer. Use the savings so you can pay cash later. Errr, assuming you can save faster than house prices increase. Time to dig out the mortgage and compound interest calculators ...
PT's Conclusion:
The trouble with not buying a house is that you still have to live somewhere. The average yob has two choices:
Buy a house, go bankrupt, bank repossesses house, Blackstone et al buy it cheap in behind-closed-doors transactions.
Rent because it is marginally cheaper, until Blackstone et al own all the rental stock and then they'll jack the rent even higher.
And that is why I said yesterday that the truth is that YOUR LAND IS BEING STOLEN FROM YOU!!! The pricing is just a smoke screen. Unaffordable? Maybe I can just work harder? No! Stolen. Maybe you can work harder, but then the prices go even higher. Stolen.
The only true hope is don't buy, don't rent, buy a tent. As long as you are buying or renting, you are feeding the beast that is stealing your land from you. You work hard. The beast gets your land and then rents it back to you. Sucks to be young. Sucks to desire any more possessions than what you can fit in a backpack.
Look after the homeless. One day soon, you too may be one of them. The homeless are the only true opposition to the beast that is stealing your land. Forget all the bullshit "If only I work harder or smarter then I can be saved". You lose your life one day at a time, as you swap all your labour for a roof over your head. The medicine is too harsh, even before we consider social implications. But it is the only answer.
Brilliant writing from a fellow aussie (no doubt!). Unfortuntely my like only counts as 1.
But I herewith transfer any likes of my post to you for future double potential.
humans are the only creatures on earth who pay to live here. And we're the smartest, right?
The major flaw with PT's obersvations:
"4. Eventually inflation eats the mortgage repayments..."
Incorrect. You are assuming "traditional" inflation where wages rise along with prices, a phenomenon that has not appeared in my lifetime anyway.
It actually works against you because prices on everything else rise, while your mort payment (if fixed rate) stays the same along with your income.
Yes, if your wages fall, your mortgage remains the same. Instant underwater action. It will be a deflationary storm before the end all printfest hits. Bank on it (or don't).
N2OJoe: "...but lets get real here - they were lucky enough to get in BEFORE the boom."
Yeah N2OJoe, you got me there. Guess my age must be showing. No relief without wage increases. With any luck the no wage increases will lead to no rent increases but I doubt it. My guess is gummint contributes to "poor people who cannot afford the rent" and then the rent increases beyond what anyone can afford. The new rent increases will be used to justify even more property price increases ... See how much "help" for the poor simply becomes subsidies to the rich?
campavan...postoffice box...gym membership - for showers, exercise, fun & recreation (see campavan)
Thanks. Yeah, often thought of 24 hour gym for access to toilets and showers ... then live under a bridge. Shhhhh. Only a matter of time before they jack up the prices and we see Tent-And-Gym-Membership Backed Securities ...
Addition to "Reasons not to buy a house #1 - 'And beware all the other bullshit they try and pull on you (fees ... )'": I was being VERY generous when I said "fees" because I was in a hurry. The gummint will "help" poor people to buy a house by chipping in a few bucks of their "own" (taxpayers) and then the gummint will own a share and take that share of profits when you sell. Long time since I read about that scam so probably time I got re-aquainted with the latest details. Bottom line is: gummint helping no-one. Gummint pushing prices up by adding more money to the system, guaranteeing houses unaffordable to the poorest and unaffordable to those a bit richer than poor. Gummint ends up owning more ... just like I said before: Your Land is being Stolen from you. Being rich won't save you. Being rich just means you pay too much for everything and then you get eaten last.
Re "You pay 100% interest over the life of the loan" :
For a 25 year loan at 7% compound interest, total interest payments over that 25 years = 107% of your Principal (amount borrowed)
25 years, 6%, interest -> 90%
25 years, 5%, -> 73%
25 years, 4%, -> 57%
25 years, 3%, -> 41 %
While I'm still here, lets try varying the repayment time frame:
First at 7%:
25 years -> 107% of Principal = total interest paid over life of loan
30 years -> 133%
40 years -> 190%
Now try 4%:
25 years -> 57%
30 years -> 70%
40 years -> 98%
"At 5% appreciation per year, a $100k house today will be worth $412k in 30 years. Even a more modest 3% appreciation would result in better than a double."
And housing prices NEVER fall, EVER!!
I owned a condo in CT that was worth $165,000 in 1993. Soon the price begn to fall and I was $30,000 upside down in my mortgage. A messy divorce and bankruptcy later, it was worth $88,000. The bank finally found a woman to buy it for $69,000. It took over a decade to regain the $165,000 value. Real estate is a rollercoaster ride in these times. Owning for the long haul is fine for those who have a fully-functioning crystal ball. For the rest of us, we buy the ticket and take the ride.
My house in a nice area of Dallas sold for $275K in 1985. I bought it for $189K in 1996. It went nowhere in value (maybe 10%) until last year. The apprasial district thinks my house is worth $400K, and considering what other houses recently sold for, maybe so. What I get to enjoy is $800/month of taxes and insurance even after I pay off my mortgage.
>> $800/month of taxes and insurance
I was doing that in the city. I got fed up with everything and bailed out to the country. Closed the business and sold everything. After a bit of bouncing and scheming I've got a nice place on five acres in a very nice area of rolling horse country hills just outside of a medium sized town. $800 a year in taxes and I self insure. A couple of times I've had second thoughts of should I have bailed out so soon but now I'm happy as fuck and living life my way.
$800 a month in taxes and insurance, thats fukin unbelievable and thats coming from someone who lives in London
No wonder i hear so many americans angry at their government, makes sense now
If you can get enough together then buy a modest sailboat and live on it and cruise the world. I did that for 20yrs and pursued an underpaid career at the same time working in different countries. What a great experience. Life is great and you are beholden to no one and you learn how to live off the land anywhere in the world. Because of my odd habit I was a saver and it has been a great advantage. That little blue sail you see in my picture is a Bugis Schooner in Indonesia close to you where cargo vessels still SAIL interisland. You are as free as you want to be.
I think that free and easy sailing lifestyle is gone the way of the dodo bird. You are lucky you did it while it was there. I did the same pretty much. I did't sail the world but I did live on my sailboat and earned my living sailing. Unless you have big bucks, it's just not there anymore.
Still doing it part time only cause I have a daughter in college. Went to socialist paradise last year where Hemingway used to fish. If you're single it's paradise but the gov are a bunch of leeches
I've got a friend, single, who still lives on his boat and wants to go to that socialist paradise in the worst way. Any advice you can give him? If you know the in's and outs of going there I'm sure he's love to be educated. Me, I'm a happy hobby farmer now.
Watch "All is Lost".
Mintcoin is a cash flow positive investment.
Excellent! You buy a house to keep your ass warm and dry, snakes and mosquitos from biting you. Nothing else matters. The problem is not the Fed and government policies, it's the bulk of Americans being greedy ass mofos who are too stupid to know how to keep dry and warm and prefer to gamble with their shelter and that of others. The Fed and govt policies do not MAKE you do anything unless you're an idiot. Gee uh, mr. banker, you're saying you will let me live in that $600K mcMansion and my income is only $50K/yr? I'll take it! wahoo! effin' morons.
<<YOUR LAND IS BEING STOLEN FROM YOU!!!>>
BUt that's the crux ....... it was never 'your' land in the first place..... in the first instance the land was deemed to be owned by guys with guns ....... didn't mean they honestly 'owned' it.
My fiance and I are closing on a $335,000 house in a very desirable neighborhood on Tuesday. We have a combinned household income of +$150,000 a year and are putting down $65,000 as a down payment. We probably could have afforded more, but we felt it wasn't worth the added expense. Taxes are ~$2800/year and the neighborhood has been highly desirable for the past decade. We COULD have purchased a $130,000 house in a worse neighborhood, but those houses honestly are owned by retirees and Mexicans. We'd really like for our kids to be able to mingle with other children without having to first be fluent in a 2nd language or have to worry about joining a gang.
There are so many different variables that are considered when purchasing a house, its almost insane to count them all. Schools? Area? Taxes? Commuting distance? Resale value? The list goes on. Would I rather RENT the same house for $400/month vs. my projected mortgage payment of $1750? (including taxes and homeowner's insurance) Absolutely! Best of luck renting a decent house at such a low price. At $400 a month you live with the junkies & sodomites.
You talk about the homeless and how they are free. Free to...what? Drink booz, be in constant search of public restrooms & be molested by police and social/case workers? Fuck that. I'd rather have something that I can grow food & catch fish on. The taxes on the property may be written off against our income which makes it easier...along with the interest from the 4% rate we have on our mortgage.
The gold & mines I've invested in over the past 5 years has done shit for my bottom line. Of course the phyzz I have is still here, but good luck keeping that shit safe living out of a tent or Ryder truck. Got a newborn? I'm sure the baby would prefer a 4-person, 3-season tent over a nursery. At the end of the day you need to do what you feel is right for your own circumstances and not worry about the external bullshit.
You pretty much nailed it. Kids change everything. I still moved my family out of the city though. We bought an acreage two hours south. I live in a van three or four days a week and work the rest from home. Kids go to school and all their other activities with rancher and farm kids. Class size went from 40 to 22 in my oldest child's grade 2 class. Our happiness and quality of life feels like it has doubled.
I have been renting the house I live in for almost fifteen years. My neighbour bought a home a few doors down that is almost identical to the one I rent. With a substantial down payment and ~3% mortgage she is paying about 50% more than me.
I am not sure that is worth it even though she will own the house in about twenty years.
In Soviet America, house owns you!
Or at least in the lifetime of the federal reserve. And even if you do buy one (not taking out a mortgage, but paying cash for one), you still dont own the houe. You have to pay the bankers property tax.
You nailed it. Also, as long as they have control over money printing press, they can create booms at busts at will, that includes housing...
A house is a lead weight wrapped round your ankle. Hard to relocate for a job or family. Also, forget about re-selling; the transaction costs and hassles eat you alive. I won't get into the imminent collapse, soaring property taxes, maintenance costs, and on and on.
Viel Gluck!
It takes 15 years to build equity in a new home. Do you really think that in the next 15 years there won't be a crash that throws you out of work and out of your house in this time?
So 2016 then. Not too bad a wait.
Date please. I need to run up a lot of credit that will be forgiven during the debt jubilee.
Exactly:
"But about that day or hour no one knows, not even the angels in heaven, nor the Son, but only the Father." - Matthew 24:36
NO! Unless you buy a foreclosure or get a great deal at an auction. The best buy is silver! Hands down. And the great thing is everyone can afford to buy some. Take $20 down to the coin store and walk out with som real money. Simple as that. A great way to get someone started with silver: www.etsy.com/shop/ScentSavers
At some point gold may be a better buy, but not when the gold/silver ratio is around 1:75. Historically it is around 1:16-20.
The problem with silver is that it is a highly valued industrial metal. It is used extensively in high tech and military applications. They have suppressed the market price of silver to keep it relatively inexpensive for these applications.
The advantage of silver is that it is real money with no counter party risk if you own the phsyical, and it's price has been hazardously mispriced by the future's markets where banks and bullion banks can issue naked short positions in the future's market. Also, there is more gold in bullion form than silver.
I agree with your assessment, it will return to historical ratio with gold when it enters permanent backwardation, but it won't be the payoff in terms of paper currency people expect as paper money is going to disappear along with the world's hundreds of trillions of unpayable debt. Or, we are returning to a barter economy modified by computer applications. In barter economies hard currencies have always ruled.
How do they supress the price of silver and who is doing it?
You must have missed this
http://www.zerohedge.com/news/2015-07-04/why-did-citigroups-precious-met...
my dad lost his shirt on silver during the Hunt brothers scheme in the 80's. More recently, silver peaked at $48 and now it's under $15. I don't own silver as an investment to make money, I own it because it is money.
Exactly! There will be a day when the dollars in your wallet and the electronic digits in your acounts are worth absolutely nothing. Could be a year. Could be 100 years. But it WILL happen. Every fiat/paper currency eventually rerturns to its real value....0.
Interesting views on Silver and how it relates to Gold in a FreeGold world.
http://fofoa.blogspot.com/2015/06/silver-dollar.html
Thanks. Still having trouble fathoming it.
Wouldn't being a highly sought after industrial metal increase its value (in a free market)? The manipulation cannot go on forever. But I agree diversification would be wise to get you to the day when free markets prevail.
We haven't had a free market since 1913 but you know that.
Yup. But the game can't go on forever. I just might see the day when markets make sense. If not, my beneficiaries will acquire my wealth and not my debt.
I just now realized worth more dead, than I am alive.
"I just now realized worth more dead, than I am alive."
Anyone with half a brain that has read Zero Hedge can say the same thing. The trick is to keep your' gold/silver purchases low level and quiet.
What purchases ?
>> the game can't go on forever.
Possibly not. But it doesn't have to to make a big difference in your life. All it has to do is go on longer than you.
You touched on a few valid points but the idea that there is more gold bullion than silver is a myth. There is a lot of silver out there in private hands...at least in North America.
During the "great melt" of 1978-1980 people were having their flatware and old coins and jewellery melted while others were buying. Just as there were line ups to sell to buyers, refiners were going 24/7 to produce product to meet demand. Much of the silver bought then is still in private hands. The folks who hold it are on in years and looking to exit with dignity.
This privately held silver is difficult to quantify so pundits ignore it cause they can't create charts. I can say that in the Spring of 2011, the refiner I deal with was refusing to buy 1000 oz bars as they had a glut of them. They told me that was the casr for all North American refineries. The market shorts knew this and had no fear about going it naked because the metal to cover was available from refiners inventories.
I got very lucky in that it was by accident I heard of the refineries inventories. I was able to wholesale most of my larger bars the very weekend before the price was attacked. We had many sellers bringing in silver back then when the could exchange a 100 oz bar for three oz of gold. The shop was hugely overweight in silver inventory then.
There still remains a very large amount of silver out there in strong but stale hands. Those who have it sell or trade for gold when price rises. The shop never has a problem getting metal as the price rises. The issue is getting it when the price falls and the buyers step up to the plate.
BTW .... I know several people personally who have a ton of silver or more. Some of them bought it through my shop. I don't know anyone who has a ton of gold.....at least personally.
"The problem with silver is that it is a highly valued industrial metal."
The problem with silver is industrialization itself.
In the pre-industrial past, the price ratio of gold to silver roughly followed the ratio of its occurrence in the earth.
in the industrial era, the amount of silver mined is relative to the amount of copper, lead and zinc being mined, since silver is a secondary product of mining those minerals. Gold is also a secondary product, but not to the same degree as silver.
Therefore the historic gold/silver ratio no longer applies.
the thirty year mortgage is a relic of the age of "permanent employment"
go back a hundred or so years-mortgages were a far more realistic 7-10yr
anybody with the wherewithal to afford a mortgage and a home is gonna have a big red zero target on their back for property taxes, property insurance etc.
Ownership of anything at all shortly will find the state at your door to collect-one hand held out, the other with a gun
Doctors are going to start finding out you really can't buy a house anymore because the only defense they have against these HMOs and the new business models whereby doctors no longer set up their own practices but instead sign an employment agreement is to BE MOBILE and be ready to pack up and leave on a moment's notice. The best deal a doctor will get is the inital 1st year or two salary, and from there, well let's say the HMO/Hospital /CEO starts to recoup the invetsment.
Once the naive Dr buys a house, the HMO has got you, and starts ratcheting down your salary. Of course as a doctor, you have the mindset of the good life and have just bought a huge overpriced house, which you can't sell.
The doctors only defense against oragnized medicine: be prepared to move on a moment's notice. Rent only, preferrably month to month. I know ER docs who get contracts forked over to them that allow for the employer to terminate them without cause without even 2 weeks notice. Hell, it takes 3 months to get liscensed ( if you have a clean record.)
Funny you say that. My former neighbor worked for an HMO and they love signing up a doc with deep debt [med school loans, mortgage, cars, etc], lots of kids, and a huge house. They say behind the docs back, "he'll never be able to move and we can work him to death."
I bet those hospital-employed docs find them in a similar situation; they get locked in then screwed little by little--more call, more clinics, more patients, etc. Medicine is not what it used to be...not all that great anymore docs tell me.
30 years? How about 50? They have those you know :) Half a century for a home or 2.5 generations, better make sure it's built well.
real estate and property taxes have both separated from wages, in some areas dramatically...
property taxes coupled with eminent domain are the government's way of saying, "you don't own shit, citizen"... sad but true
Here's a list of states & the property tax for each;
http://wallethub.com/edu/states-with-the-highest-and-lowest-property-tax...
Wages? That would imply that people are working. Many americans are receiving monthly checks from the government.
Well if you really want to see a seperation of Home prices to wages you must visit Sunny Melbourne (which is freezing today) or Sydney Australia.....
It will blow your mind. This palace in the inner west of Melbourne gives you an idea - Sold for $412,000US
http://www.realestate.com.au/property-duplex+semi+detached-vic-footscray-119825987
Yeah, but.... Gilmore College For Girls is only a stone's throw away. That must be worth something!
Didn't you hear the news! Footscrazy is back in vogue.
The only place to be!
No wonder I'm addicted to drink!!
The only place to be!
No wonder I'm addicted to drink!!
This is why: https://www.youtube.com/watch?v=zmujttc0oJc
NO WAY YOU BUY NOW! Rigged ! Hunker-down and WAIT til foreign cash is gone and Leveraged Banksters dump their SHIT-SHACKS
No, to answer the question.
The way it used to be done was you saved your money by living with your folks until you had a down payment for a 4 family house and lived in one of the apartments.
Back then then the income form the 3 apartments paid the mortgage and bills, so you lived rent free.
You would then save that money and eventually buy a single home, with the rent from the 4th apartment susbsidizing your home.
Buying the single family home first was considered financial suicide
Sounds great if you have parents to mouch off of and 3 suckers to pay your rent. Still done these days by the lucky minority who find themselves in that situation.
cardboard boxes are free.
Coffin with a roof is even better. And once you die, you are all set but the hole in the ground !!!
No.
It's safer to own than rent when the owner decides to strategic default. So buy those houses at zero down. Enjoy.
After renting a house and never being late on a rent payment, the owner defaulted. I only found out when a guy showed up with foreclosure papers, which gave me a couple of months to move out.
So I rented another house for about three years, when the owner decided to sell the house! According to the lease terms I was given two months to move out.
Now I'm renting a third house basically because I haven't decided where in the Pacific Northwest I want to live, but at least this third house is out in the middle of nowhere and far away from all large cities, so it's a good place to ride out the storm I see coming. Hopefully by next spring the shit will have hit the fan and I'll be able to pay cash (or mostly cash) for a house by selling some of my silver. I hope.
hahahaaaa! SILVER BE LOWER!
Luckily for me I could pay cash in full for my house.
Sucker.
Now you're stuck with maintenance, property taxes, school taxes, sewer, water, etc.
You played right into TPTB hands.
Unless you built off-grid.
I dont' know. I paid cash for my place. 1,800 sq ft, pole barn, five acres, orchard grows more fruit than I can eat. Ditto garden. Excellent water. Total nut, including property taxes and electric, about $325 a month. And that's letting the battle axe control the thermostat to keep her inner polar bear happy. Until something changes it's hard to beat the grid. One can buy right and control expenses. When you rent others make the choices for you and the property tax man has you more by the balls.
You were EXTREMELY more prudent than most buyers!
I dont buy into the renting way of thinking. I guess I see myself pissing money away which could of been used to stack phyz or buy more property. Hey I may be wrong but I see renting having few pros and many cons. Always willing to learn.
There are no perfect choices.
One "owns" their conventional home. (Plus taxes & maintenance) = $$$$
Another "owns" their off the grid home. (Plus taxes & maintenance) = $$
One "rents" their conventional home. (Plus taxes & maintenance) = $$
Another makes their home wherever they may roam. = https://www.youtube.com/watch?v=Qq9PxuAsiR4
Infinite shades of gray therein.
@greatbeard - Very nice set up, bravo.
But on behalf of Mrs. Greatbeard, I protest to the battle axe label lol. In fact, I would love to chat with her and find out how she got control of the inside temps at your place. Cog won't let me near the thermostat when he is home.
I guess the words "battle" and "axe" didn't give you some idea as to how she rules the nest?
What is the approximate lattitude and longitude of your 5 acres and relative independence in the sun?
You seem to have beat the system much better than most.
Well done!
I recently came back from working in West Virginia. A co-worker there was driving me around and pointed out numerous places with very old falling down barns/buildings on the property. He told me that the locals would not remove them as the County would consider it an improvement and increase the taxes.
>> County would consider it an improvement and increase the taxes.
Taxes were consideration number 1 when I bought. First thing I do is buy distressed, physically, properties. In my state tax value is determined primarily by purchase price and then held in check by limited increases for owner/residents. Then I do all renovations myself, what's possible. If you use a contractor the value of your place is increased by the tax assessor. I completely gutted this place inside and out. I put $40,000 back in materials. But it went from what was being sold as a tear down (mobile) to a very nice place with all new fixtures, appliances, flooring, exterior siding with vapor barrior, metal roof with radiant barrier, new well system, etc, etc, etc. The day after I finished my exterior siding the building assessor pulls up to let me know he was going to have to increase my assessment due to improvements. Although I was gracious and fully understood he had to do what he had to do, as it was his job, I also asked him to go easy on me as I was just a poor old and broke feller trying to make a go of it out here in the sticks. He ended up jacking up my assessemnt by a couple of thousand which changed my tax rate by less than $100. I was good with that. Everything I do I take into considerationt he tax implications. My next door neighbor pays $4,850 a year, I pay $800. Same view (exceptional), same services. He's a hot shot businessman, I'm an old dude that grows and cans fruits and vegetables, enjoys playing with my dogs, ride my motorycycle around the countryside and hiking. I'm sure neither of us would change places with the other.
Ms. Cog, someone else was gratious enough to answer your question. The reality is I live very cheap. Two things I'll freely spend mony on, good food (not restaurants, just quality food cooked at home) and air conditioning. Our all electric home runs anywhere from $150 to $250 per month. It's one of those simple pleasures I bestow on us. I live in Florida and until I met the significant other I didn't even use air, home or auto. If the price of energy changes significantly I'll adjust my decadent lifystyle accordingly.
I pay a $1000 in property taxes. That's per year.
The only utility I pay is electricity, as I use a well and septic.
All told I pay around $200 a month for taxes and insurance. Tell me something, can you rent a 4,000 square foot house on 5 acres for $200 per month? Didn't think so.
Good for you- but you are the exception, rather than the rule.
I have a similar situation.
The point is that there a majority of the population that are math-addled suckers that don't compare rent vs all the hidden costs of buying. Most would be better off renting.
In reality- anyone who is required to pay taxes on their home doesn't own it- all it takes is a few missed payments, and da gubmint will seize it and sell it for back taxes.
I am not an expert, but real estate shoiuld fall in price very quickly if we see another collapse. This will be due to no liquidity in the marketplace. Banks won't have the money to lend on real estate.
I'm an expert. Unless this is somehow different it will fall slowly. Always up quickily, but down slowly. Or some times just no transaction data for a long time. Like the Coyote over the cliff.
From cardboard box to McMansion, the 'RESCUE' MRAP will stop @ them all!
Like me wendigo but i'm still paying rates to live in my own house.
Then you are not looking poor enough. Wish that was not true but it works. You got the McMansion in the burbs you will get ass raped. Had a buddy teach me a phrase to call city folk: concrete babies.
At 5% appreciation per year, a $100k house today will be worth $412k in 30 years...
I think you have that backwards. At a 5% apr a $412k house today will be worth $100k in 30 years...
Or maybe: At 5% APR, that $100,000 mortgage will have cost you $412,000 at the end of 30 years.
Buy a house and you own the rights to use it as long as you pay the real owners (property tax). The same can be said for renting too I suppose.
Buy a house and look forward to King O moving in some racially diverse "free" housing next door to you. Watch your house depreciate in value.
Rent a flat and watch King O move in some racially diverse "free" housing next to you. Then you pack up your shit and move to another place.
"Then you pack up your shit and move to another place."
THIS is the reason I currently prefer to rent. Can gtfo in 1 month or less without needing to sell. There is just something very attractive to me about not being 'stuck' at this point in the shitshow...
I do recognize the attraction to having one's own place and to develop the land, buildings and spirit thereon. This would be my choice in a world that was not mad.
My situation exactly.
Clear, honest article with straightforward analysis and language. Excellent. DEBT SUCKS.
A home in the USSA (and many places) is like a boulder tied to the ankles.
Make no mistake about what is coming: much higher property taxes. From the perspective of the predators-that-be, why not?
#1: Easy to collect (the mortgage company does it for them).
#2: Impossible to walk away from (lose your investment).
They got you right where they want you (not mobile).
And government debts at all levels are outta control, so you know it's gonna happen, and get worse and worse and worse.
-----
The possible flip-side, however, is the hyperinflation that may well come after the collapse (which is imminent). If you can wait for that, and they don't change the law to rip everyone off (make mortgage payments "inflation adjusted"), it could work out okay in the long run. Assuming you can survive the collapse (keep your income and keep making payments). Remember, likely the deflation and loss-of-income will come first, and knock many out of this plan. Of course this only works for those who buy with a small down payment (which is most people).
But... since prices are vastly too high now, much better to wait for the collapse if you just must own.
Where I live the prop taxes are tied to a rolling average and the govt is not allowed to raise by a certain % per year, I believe 1%. Any change has to be made by elected officials. I'm not sure my prop taxes will skyrocket but on the other hand I've heard of some areas of the US deep south where yearly taxes are only a few hundred $$ per year (about 1/20 what I pay).
"only" a few hundred a year? The fact you yanks are happy paying a tax - any tax - to keep your so called private property astounds me. So much for "Land of the free".. land of the slaves.
So please share with us where you live and how much taxes are. I lived for several years in the Cayman Islands which has no property or income tax but you can be sure that the gov there gets their cut at some point in the process of living.
>> are happy paying a tax - any tax -
Within reason I'm ok paying taxes. I pay $800 a year in property along with the various other taxes one must. Good sheriff's department, nicely maintained roads, good EMS, fire protection, solid waste and recycling, etc. I don't have, and never have had, kids, but I don't mind chipping in for an educated populace. I'll take moderate taxes over an anything goes wild west shit hole.
Moderation in all things.
Local property taxes cover the public school funding, fire dept, etc.
Which means the predators-that-be can and will raise them whenever they wish. So-called "elected officials" are just as corrupt as the rest of them.
"Reason 3 - Asset Appreciation. At 5% appreciation per year, a $100k house today will be worth $412k in 30 years. Even a more modest 3% appreciation would result in better than a double."
Maybe in certain neighborhoods of Manhattan, West LA, or SF but in depressed cities like Detroit, Cleveland, or Baltimore, the value of your housing asset will probably decline.
All it takes is a starter pack of 'urban youth', plus some time. . .
There's a new subdivision being built in my area by Lennar Homes. I checked their website yesterday to see what the prices look like and found out that today was their big Grand Opening. To celebrate the occassion and entice people to walk through their model homes, they were offering free hot dogs, chips, and drinks from a local food truck, free ice cream from a local business (a great big scoop of delicious ice cream on a waffle cone) and a chance to win fabulous prizes, so I loaded up the family truckster and we went down to check it out. We walked through the McMansions (starting at $375,000), listened to all the silly Mericans ooh and aah over the amount of debt they are about to go into, feasted on about $40 worth of free grub, and then my son won a $50 Best Buy gift card.
Winning.
Meat your story was just a hair short of stellar, you should have left a huge turd in the model homes bathroom.
Oh, trust me, I wanted to Dave but they don't let people use the bathrooms (outhouses next to the sales office instead). I should've flicked a couple of boogers on the stainless steel appliances, though. Maybe I'll go back tomorrow.
should have left them an upper decker
Great idea! Dammit!!! I'm definitely going back tomorrow morning after I drink some really strong coffee.
I'll be buying some shiny stuff and more lead soon, if it matters, ill be sure I'm aiming the lead at the trespassers.
As you said "take a deep breath before you hit "save"".
I LMFAO at this!
Eyes still wet with tears of laughter after reading the Urban Dictionary definition of upper decker.
Because I am a lifelong lover of 4th grade humour, I loved learning this term!
Make that two with tears.
upper decker The act of defecating in the upper tank of the toilet. When the next poor unsuspecting person flushes the toilet they get a bowl of beef stew. the upper decker is a weapon of terror and should only be used on people who deserve it.Who doesn't want to move into a neighborhood where the residents were lured into debt by hot dogs. Vertical construction costs by those national builders are around $50/SF or they were 10 years ago in the mid-atlantic. They look like the american dream outside but maintenance will likely be high down the road.
Also, the farms that they have paved over to put these up dont have the infrastructure, roads/schools in place in many cases. I can easily see people moving in and a month later thinking what have I done.
This article is well timed. I and my wife, are coveting more space than our 1,500 SF 1960 split level (read functionally screwy) house provides for the 5 of us.
Lured into debt by hot dogs...
Perspicacious and highly amusing.
But, they were Chicago-style all beef Veinnas!
Back before the bubble burst in 2007/2008 I was working in Idaho for BMC West, delivering building supplies to all the new subdivisions that were going up around Boise. I remember my co-worker telling me he would never buy one of those houses as they build them so fast there were bould to be all kinds of problems with them years down the road.
You're living the dream, man.
Next time put up a few flyers at the local walmart. If a few hundred bros and ho's show up for the free food, you could have yourself quite a photo opp. Just helping market the new houses.
You got screwed. I took a condo tour at disney world and got 2 free nights of hotels plus 2 free tickets to any theme park. Just had to be rude and bug out at the time limit.
On a serious note, the realtors are a bunch of fucking assholes practicing deception by omission. The properties are right on the boundary line of the school district. On my side of the street, there are neighborhood schools within blocks of my house. The people that buy these new houses will have to drive their kids 20 minutes away to some of the shittiest schools in the city, replete with "diversity". So, I made it a point to let people know that the houses in my neighborhood are only 10 years old, are 20% cheaper, with better schools and no commute.
There was a Simpsons where the realtors signs lead through several turns through multiple nice neighborhoods right into the shitty neighborhood where the house is for sale. I tried to find the clip. Here's Cookie Kwan anyway.
https://search.yahoo.com/yhs/search?p=simpsons+real+estate+clip&ei=UTF-8...
Depends...
1. deflation with mortgage bad.
2.hyperinflation - house will be worth trillions... pay off your mortage with one ouce of gold...
To answer the question I ask another:
Where?
We talk about where, then let's ask the question again if you should buy a house.
I went MANY years without buying a house. The old rule that you should be able to collect rents that are 1% of the purchase price just never seemed to apply so I figured it was all over priced. Besides I NEVER wanted debt. It always seemed like slavery to me despite my father saying, "Son use other peoples' money". So I never bought and always had cash so when 2008 rolled around I literally spent ONE YEAR of savings to buy a house cash in S FL in a nice area. Now I have a homestaed exemption and pay $600 a year in taxes so it all worked out pretty damn sweet not following the herd. The flip side is that it may all go to shit in the next crash but at least I have a place with low overhead in a rural area with chickens and tropical fruits and no winters to deal with.
Stay out of cities and towns.
You're buying pension obligations.
you will pay a pension for some .gov useless eater regardless of where you live. The government is the perfect virus.
It's all a matter of percentages.
I pay 270 a year on 40 acres and a 2200 sq ft house.
For that vast sum, I get my roads graded far more regularly than others get their potholes fixed, the mail delivered, the kids off to school on the bus, plus a fire department, mobile library service, and EMTs.
Seems like a pretty fair deal to me.
Heck yeah you do.
I'm guessing, but you're in rural Texas with an ag exemption....
Southern Colorado.
There are enough empty houses to give every homeless person six.
Sure buy a house, but make all mortgages rates a minimum 15%, watch the price drop 80% so that people pay CASH for them.
Not to mention you will be buying brand new sports stadiums in "major league" towns.
With 9 months to 1 1/2 years to go until TSHTF it only makes sense if you can save more money by buying than not. Myself I'd let somebody else take that risk at this time.
Debt free and in surplus while renting. I'll stick to that
I suppose it depends on what your vision of the future is and where you want to live.
I do think it's unwise to buy a house inside any urban or suburban area at this time.
But I see a lot of action happening out here in the toolies, particularly in very affordable fixer-upper type properties.
These people are looking to get out, not up, and are willing to live in a broken-down shack in order to have the land and all the opportunities for self-sufficiency, however imaginary, and immediate safety that such a move provides.
Out here, it's America.
In there, it's the United States.
That's what its all coming down to.
Well said...
Spot on Tara
I prefer the country living as well. I just cannot imagine paying 500 grand for a fixer upper and still cannot figure out how people buy them.
I would never buy a home in a large urban area either. HOA's now want a piece of the pie and want you to pay them as well. If I do not feel like mowing around my home this weekend I do not have some jerk in the neighborhood tagging my home. I can let if grow or better yet have the goats eat the lawn down! Fresh milk and meat!
If the SHTF ever really happens I feel for those in large urban areas as they are screwed. Large metropolitan areas have what, three days supply of food.
A home has always been a liability on the financial sheet, even when it is paid for. You must maintain it and pay taxes on it forever! I never considered it a revolving credit card like so many do today.
A huge problem is Americans want mini mansions when a good starter home is all that is needed. This way you can make improvements over time and save huge amounts of money. Of course you must be able to use your hands and learn some basic trades skills. Ack I mentioned a dirty word these days, doing the work yourself and using your brain and hands to repair and replace your own items.
+1000 Tara!
Homes used to not appreciate in value by much at all, until the NAR came around. All of a sudden a home became an investment that would pay off in spades. Remember all the ads proclaiming homes would double in value every ten years? A $250k home will be worth $1million in twenty years??? Oh I'm sure incomes will keep up with that. Maybe during hyperinflation.
A home you paid $100k for should never become a home worth $400k, PERIOD. Home appreciation is guaranteed stifling inflation.
What you are saying is what was affordable on a $35k salary is now only affordable on a $150k salary. That would be fine if what used to be a $35k job now paid $150k. However, a $35k job 30 years ago still pays $35k today if not less. Making it impossible to afford the home that used to be affordable.
The working class is being forced out of home ownership, or being punished under massive debt levels just tonlive in a modest dwelling. Because homes are unaffordable, people are being forced to rent. That fact is driving rents through the roof.
I live in what I consider a lower class town, but the average home price is $285k. I kid you not, a double wide pre-fab on a concrete slab goes for $185k. Fifteen years ago the average home price was $125k. There is NOTHING in the area that justifies the insanity of the real estate market.
I bought my house in 1998 for $75k, in 2005 we were getting mail offering us $375k in refinancing. I thught it was insane and threw most in the trash. Did have a lot of arguments with the wife over this program. Refused to do it. Watched the neighborhood get decimated by empty houses and renters.
Unbelievably, in 2009 two new houses were built on lots kitty-corner to me, one sat empty until last year, the other had a cycle of section 8 tenants that moved every two months or so (stabilized now it seems Since we're no longer getting our car riffled through and still have our car radios.)
In case of hyper inflation you are better off with your own paid house.
If we get Wwiii, then there are no buyers left.
No, real estate trends to zero in a hyperinflation. Consumables that are scarce are far more valuable, as is gold.
So then warehouses of toilet paper and boxes of Fiber One.
If you buy a house then you have to trust the government that it will honor private property rights. Since most of the constitution is rapidly disappearing the reality is private property rights may one day be entirely abolished leaving you with a house you can never sell only repossessed by the government when you die.
I have owned several homes over the years.
The first house I bought was a POS frame home for 16K just to live in while I worked on a long term enery project. I Iraded it at the end of the job for my partners half (4lbs) of 3 years worth to gold dredgings we did on weekends and time off.
I took that 8 lbs back home and put it in the bank safe deposit box (I know your not supposed to do that but it has a plus. That greedly lil jew eyed prick banker can ogle,and eyeball and feel it up while im not there. I have never had to fill out an app or wait for a board meeting to get a loan since. He just asks what i want and slides a check across the desk.
The one I live in now I built myself ( a metal frame brick shithouse)Me and the bank still own it and the taxes and insurance are at ripoff level
But my favorite house I ever had is a 8200sq 4 plex concrete style house I had built over several years as money allowed, broken into 4 1800 square foot units + a maids qtr. In Ocho Rios Jamacia W. I. The taxes on it are cheaper than my 1950sq ft here and it has been a cash cow. I keep 3 rented and have one for myself to stay in when I am down there. This my friends is the kind of "House" to own.
How do you keep the Jamaicans out of your flat while your away?