From a recent article in the New York Times, January 4, 2008.
I live in coastal Southern California where prices have been insane for a long times (5 years). Only 15% of the folks who work here can afford to buy here (we get “paid” in sunshine dollars). Luckily my husband and I have owned our homes for long periods of time. We got burned many years ago in the midwest when we were just starting out, and made a decision to own any home for at least ten years after that. Hard for me to say what prices will do here in the short term. In the long haul (10 years), they’ll go up as this region attracts the wealthy from all over the world. Sad for our kiddies; they’ll have to move elsewhere or settle for a condo.Many of us will be happy to see the “flippers” (who drive up home prices for the rest of us) get enlightened in this shakeout.
– Posted by Leslie in San Diego
The point is you need a place to live. So BUY long-term into a safe, stable community that YOU CAN AFFORD. Then build a home with your family and friends and contribute as a productive citizen. If you rent for long periods of time your only making your landlords wealthier. You are missing out on the opportunity to create and pass on wealth to YOUR loved ones instead of the heirs or shareholders of your landlords.
Posted by Eric
Well, first of all, no one ever really “owns” a property until it is paid off, homeowners are really just renting in a sense from a bank or other entity with a few extra rights over over the property. Also, one is technically buying land of which a house is only an “improvement.” (unless you buy a condo obviously.) Really what we are discussing with this issue are different sets of rights and responsibilities with respect to property and not “owning” vs. “renting” per se.
I was a “renter” for 10 years before buying a house. Renting was stressful and at times downright maddening. Property management frequently changes hands, rents suddenly go up without any meaningful explanation, and landlord/slumlord is a minor distinction. Also, self-paid improvements to one’s apartment are hardly ever compensated by landlords. The reality for the vast number of renters in this country (not just urban professionals and upper-middle class NYC renters) is a crowded, increasingly expensive and exploitative misery.
There is more than economics at issue here, as a home is where you live your life, where you cook, eat, entertain friends, raise children (perhaps) and build memories. Where you live today could be the last place you ever live! Renting certainly serves a purpose for short-term horizons, sudden life changes, moving to a new job, etc. But, when one buys a home one also invests in a community of sorts-you seem to take things like schools, school boards, local politicians and public parks more seriously and you interact with neighbors, mail delivery persons, repair people and others in a different (note not “better”) way. We can’t forget the social implications of “owning” a property either-the labels “owner” and “renter” have a social meaning that bears investigation / discussion.
It is easy to look at this issue (renting vs. owning) in very simplistic, reductionistic, individualistic economic terms but I would like to see more discussion / reporting on the “qualitative” aspects of renting vs. owning and more on the range of other options available such as communal ownership of property.
– Posted by Joseph Powell
I think one factor commonly ignored in this discussion is that renters rarely if ever save the economic difference between renting and buying. Home buying, while expensive and sometimes not suggested by the basic economics – is forced savings – and savings that would not occur otherwise. Over the long term, while painful, I think most of these buyers are better off financially. And, no, I am not a real estate agent!
My take on homebuying is based on the intangible benefits of homeownership: the long term investment in yourself and your family, and the financial benefits (beyond tax deductions) derived from the homeownership experience.
I grew up in an apartment building in Queens. As a young man I rented. I hated it. I was determined to someday own a home. I taught myself about real estate back when there was no internet, no first time buyer programs, and the MLS was a telephone-book sized list without photographs.
I remember being laughed out of a real estate office by the broker. Then, I found my way into the mortgage business quite by accident during the recession of the late 80’s. Five years later, I bought my first home in that same neighborhood and had the last laugh.
I would never say Landlords are evil, or assume that fellow tenants are self-centered, noisy, dirty, and insensitive to their neighbors’ quality of life, but I’ve lived in rental apartments. They’re numbers on a page-as indicated in the NYTimes.com article-comparing costs/benefits of renting vs. buying, and there is reality.
If you determine that your quality of life will improve-and I think by extension, so will your financial life, in the long run-when you own a home, then it’s the right thing to do.
If you happen to have great neighbors and responsible landlords, if the cost benefits are more favorable, and you can discipline yourself to actually invest that money you’re saving by renting, then that’s the right thing to do, too.
For my part, I’ve never advocated the ridiculous notion that buying a home is an investment in the short term sense indicated in the article, and promoted by the NAR economists.
I’ve always looked to owning a home as something you do for the long term: at least 7-10 years (which used to be the average for American families until this ridiculous “boom” market came along). That’s why I’ve always advised my clients to get 30yr fixed rate mortgages, not 15’s, not ARM’s, and certainly not those other insane mortgage products that are now wreaking such havoc among American homeowners.
If you want a “piece of the rock,” something to call your own, something that will improve your quality of life and enhance your financial one, then homeownership IS a wonderful undertaking at any time during any kind of market.
– Posted by tcurranmortgage