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 Post subject: To rent or to own? That is the question.
PostPosted: Tue Mar 24, 2009 7:48 pm 
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i thought this might be an interesting topic. what about owning a home is inherently better than renting one? and i'm not talking about the political benefits for politicians who make home ownership easier; i'm talking about for the individual and/or family. a good article to get it started. excerpts below.

http://www.boston.com/bostonglobe/ideas ... ?page=full

Quote:
...A growing chorus of economists and housing experts say that [the mindset that says ownership > renting] needs fundamental reform. Owning a home is not right for everyone, they say: In some ways it's overrated, and it can even have harmful effects for individuals and society. It is now glaringly clear that buying a home is a financial risk, not the surefire investment it is often perceived to be. Widespread homeownership may also have a negative impact on the economy, because, among other reasons, displaced workers can't easily relocate to new jobs. And some of the alleged rewards of homeownership, such as greater self-esteem, health, and civic engagement, have been called into question by research. The government, critics argue, should focus on ensuring high-quality, affordable housing rather than promoting homeownership for its own sake.


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According to this view, renting offers many advantages, and should be considered a viable long-term option for people of all ages and socioeconomic levels. Renters enjoy flexibility and freedom from the responsibilities of maintenance. Given the often overlooked costs and risks of homeownership, renting is in many cases a wise financial choice. And the experience of a place like Switzerland - a well-functioning country with only about a 35 percent homeownership rate - suggests that rental housing per se does not unmoor society.

i rent. i've never NOT rented. i enjoy the peace of mind that comes with knowing that problems with my place are someone else's, and that it gets fixed on their dime. i invest the difference b/w what i pay in rent and what i would pay on a mortgage and come out ahead. but i'm also not married and don't have children. i'll probably be returning to grad school in a year or two and don't want the headache that selling a home brings. i don't have strong feelings about this one way or the other, but for me, renting is the best way to go.

i dunno. just thought it might be an interesting topic.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Tue Mar 24, 2009 8:10 pm 
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good topic...I have owned 2 homes so far...first one for only 2 years and sold within the first week ( read 2003 )..just purchased a condo here in december and am actually saving about $300 against what we were paying for rent...anyway, I see the pros and cons on both sides but given the choice I would rather own..


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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Tue Mar 24, 2009 8:12 pm 
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own.


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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Tue Mar 24, 2009 8:50 pm 
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thodoks wrote:
but i'm also not married


I'm 30 years old, and have been renting since I was 19. I've lived in the same apartment since July of 2005. Rent hasn't gone up since I moved in. It's always been a sweet deal, as the landlord is my ex-roommate and one of my best friends.

Anyway, my [now] fiance moved in with me November 2006. She's always wanted a house. I do too, but I've never had the urgency she seems to have. We're getting married in 3 months, and the plan is to buy towards the end of summer. I'm kind of torn. I do want to own a home, and realize that now is a very good time for some buyers (we [she] have enough for a good down payment, and both of us have excellent credit and a good combined income), but I'm REALLY hesitant to leave this comfortable renters lifestyle. I mean, I literally worry about nothing right now. Even if one of us were to lose our job, the rent is so cheap that we could get by indefinately. With both of us working, we can do whatever the hell we want (like follow PJ around the Northeast :P ).

But, the place is small. We've outgrown it. Our dog has no yard. It isn't "ours". And aside from the shaky job security that everyone has right now, there really isn't any reason not to take advantage of these low rates and prices.

Ugh. Decisions.....

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Tue Mar 24, 2009 8:51 pm 
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I like the stability that comes with owning. I have a kid who has never had to move and he's 15. One of the advantages of buying is you have a pretty fixed housing expense with only maintenance variable, if you take a locked in martgage. Housing as a percentage of income goes down annually, allowing for more frivolous spending.

But I can definitely see the flip side. Freedom to move easily, quickly and cheaply if you rent. Having a larger nest egg if you are saving any mortgage - rent differential.


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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Tue Mar 24, 2009 9:13 pm 
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Depends on your situation. I own a home, and can see both sides of the fence, in that it is a headache dealing with a roommate who doesn't clean up after himself, but at the same time, right now I'm pulling in $500/month extra (and maybe another $250/month soon), which basically chops my mortgage payment in half (plus a few grand back in taxes from the gov't). I like it for my situation, but if I had a family and was then unable to rent out rooms, it might be more a question of how much the mortgage payment costs compared to the rental price of a similar house.

I definitely agree with those original quotes, in that it shouldn't be seen as something that's necessary for wealth accumulation. I mean, if it weren't for the favorable tax benefits and rental income, there's no way I'd be owning right now. And I totally disagree with the popular notion that houses are an investment. They're a place to live. Buying an investment property is, in my book, a stupid thing to do unless it's actually your business, and you actually know what you're doing.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 1:28 am 
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I've read several of these own vs. rent articles recently, although I never got the desire to post one of them here.

I guess what I've liked about owning so far is having the freedom to do whatever the hell you want with where you live (well, at least on the interior...). Kris and SD are right when they say that ownership is clearly not for everybody (as the latest debacle showed us), and that it's clearly more of a purchase than an investment. However, I can't really bag on anyone who wants it and is able to do so within their means. I understand the desire.


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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 3:10 am 
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I actually do both, being as the missus and I are expats. We bought our house in Australia in 1999 for what is in today's prices, a pittance. Our house is now worth over twice what we paid for it, and we have very little left on our mortgage, which has no early exit fees.

Because we live in Ireland, our house in Oz is rented and is basically paying for itself. However, we rent in Ireland. And while renting is a pain sometimes (like being limited in what you can do with a place), it has advantages. The housing boom had already hit Ireland when we moved here, and we didn't know how long we were going to stay for. Now we've been here 8 years, and the arse has dropped out of the property market here, next year might be a good time to buy. This'll depend on the April 7 budget though: it's rumoured property taxes are going to skyrocket to increase funds to the exchequer.

In short, it's always complicated. But to grossly simplify it: it's a bit like the stockmarket in a way: buy when the price is down, and sell when it's up. (And it's a myth that property prices don't fall-they have now!)

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 5:22 am 
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Thanks for posting this. One of the key arguments that me and my ex had was about the future. I tried to convince her that I was happy to rent a home after marriage, but she wanted the house right away. I, not being very financially secure, didn't see that happening any time soon. Really, it's good to see someone besides me questioning ownership. I hope she comes across this article, but i'll be damned if I am going to be the one to e-mail it to her. I may post it on my facebook though. :haha:


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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 1:15 pm 
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owning is better if you can handle it, but there are a lot of worse things than renting.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 6:42 pm 
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windedsailor wrote:
owning is better if you can handle it, but there are a lot of worse things than renting.

Sharehousing with a bunch of flatmates who fight between themselves with the passive-aggressive notes on the fridge thing.

Forfuckssake, just talk, you cunts.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 7:07 pm 
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When my wife and I were looking to buy we sat down and ran the numbers. It ended up that we'd save about $100 on month to month costs but would end up spending more on other things related to owning a new home. (deck, fence, garage, etc.) We decided to buy because we needed a place to live and wanted the freedom to make it our own. As it turns out we bought at a great time, right before the huge housing boom in our city. Our house doubled in value within 2 years.

I too am against the popular notion that buying a house is an investment. They should be looked at as a purchase of a place to live. I've heard so many times that it would just keep going up and up. I have friends that weren't as lucky as we were and bought in near the top. Their houses are now worth less than their mortgage and it's like a giant anchor for them.

I love owning my place though. Having a place of our own for our family has been great. I've done a lot of work to it over the years to make it a better, more comfortable place for us to live which just wouldn't have happened had we been renting. The equity build up that we were lucky enough to get into is just an added bonus that we were lucky to catch.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Wed Mar 25, 2009 8:44 pm 
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I thought this poster made a great point...

" The economist Peter Schiff (who predicted the mortgage meltdown) does not own the homes he lives in. At 1% return he considers it a bad investment. On average, a 30 yr mortgage on 200k home, plus maintenance, insurance, taxes, will end up costing over a million dollars. For that same 2k a month mortgage, you could rent for 1k a month and save/invest the other 1k, and at the end of those 30 years you'd have over 3 million dollars that you could then buy a high quality 1 million dollar house with, (and have 2 million dollars leftover to reinvest, save, or spend to your hearts desire ) instead of having thrown away a million dollars for a 200k house and help to make some banker rich. "

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 12:05 am 
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I own, and I enjoy disparaging all the trashy "renters" on my block.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 6:33 am 
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washing machine wrote:
Thanks for posting this. One of the key arguments that me and my ex had was about the future. I tried to convince her that I was happy to rent a home after marriage, but she wanted the house right away. I, not being very financially secure, didn't see that happening any time soon. Really, it's good to see someone besides me questioning ownership. I hope she comes across this article, but i'll be damned if I am going to be the one to e-mail it to her. I may post it on my facebook though. :haha:

At the risk of sounding sexist, the fact that you were discussing marriage, even hypothetically, has an arguable effect on women of making them want to 'nest', for want of a better word. You were talking marriage, she was seeing your own home with 2.3 kids and an SUV. I'd nearly guarantee it.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 1:33 pm 
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thodoks wrote:
i thought this might be an interesting topic. what about owning a home is inherently better than renting one? and i'm not talking about the political benefits for politicians who make home ownership easier; i'm talking about for the individual and/or family. a good article to get it started. excerpts below.

http://www.boston.com/bostonglobe/ideas ... ?page=full

Quote:
...A growing chorus of economists and housing experts say that [the mindset that says ownership > renting] needs fundamental reform. Owning a home is not right for everyone, they say: In some ways it's overrated, and it can even have harmful effects for individuals and society. It is now glaringly clear that buying a home is a financial risk, not the surefire investment it is often perceived to be. Widespread homeownership may also have a negative impact on the economy, because, among other reasons, displaced workers can't easily relocate to new jobs. And some of the alleged rewards of homeownership, such as greater self-esteem, health, and civic engagement, have been called into question by research. The government, critics argue, should focus on ensuring high-quality, affordable housing rather than promoting homeownership for its own sake.


Quote:
According to this view, renting offers many advantages, and should be considered a viable long-term option for people of all ages and socioeconomic levels. Renters enjoy flexibility and freedom from the responsibilities of maintenance. Given the often overlooked costs and risks of homeownership, renting is in many cases a wise financial choice. And the experience of a place like Switzerland - a well-functioning country with only about a 35 percent homeownership rate - suggests that rental housing per se does not unmoor society.

i rent. i've never NOT rented. i enjoy the peace of mind that comes with knowing that problems with my place are someone else's, and that it gets fixed on their dime. i invest the difference b/w what i pay in rent and what i would pay on a mortgage and come out ahead. but i'm also not married and don't have children. i'll probably be returning to grad school in a year or two and don't want the headache that selling a home brings. i don't have strong feelings about this one way or the other, but for me, renting is the best way to go.

i dunno. just thought it might be an interesting topic.


Interesting. I'm returning to grad school in the fall (Phd) and will have the opportunity to buy since real estate is quite cheap there. Do you not recommend it since I can afford it, have a good down payment, and will be there for at least a few year. I'll be buying (at about) the bottom of the market, so I should get a pretty good deal, no?


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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 1:48 pm 
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jimmac24 wrote:
I thought this poster made a great point...

" The economist Peter Schiff (who predicted the mortgage meltdown) does not own the homes he lives in. At 1% return he considers it a bad investment. On average, a 30 yr mortgage on 200k home, plus maintenance, insurance, taxes, will end up costing over a million dollars. For that same 2k a month mortgage, you could rent for 1k a month and save/invest the other 1k, and at the end of those 30 years you'd have over 3 million dollars that you could then buy a high quality 1 million dollar house with, (and have 2 million dollars leftover to reinvest, save, or spend to your hearts desire ) instead of having thrown away a million dollars for a 200k house and help to make some banker rich. "

Good logic, but no way does a 1k rental have the same features as a 200k condo. At that point, it's up the buyer which they prefer to have: a big place to call their own, or have enough money in their pockets to lead a life with minimal financial worries.

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 2:46 pm 
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I was reading the economist last night and came across this article. Interesting take on home-ownership and labor mobility.

Quote:
Labour mobility
The road not taken

Mar 19th 2009 | WASHINGTON, DC
From The Economist print edition

Americans used to move to where the jobs were. But now home-ownership and health insurance freeze many of them to the spot


NEELY WHITES bought a former crack house in New Orleans and fixed it up. It was looking really nice when Hurricane Katrina struck. In the storm’s aftermath the neighbourhood where she lived turned even rougher than before. Weary of drive-by shootings, Ms Whites moved to Long Beach, Mississippi, and bought a house there in September 2006.

It was not the best timing. The property market promptly crashed. After fleeing a city that was literally under water, Ms Whites is now stuck in a home that is figuratively so. She would like to move closer to her new job as a financial consultant, cutting the daily commute from an hour each way to something less onerous. But she cannot sell her home. A nearly identical one on her street has been on the market for ages at $125,000 and found no takers. Ms Whites’s mortgage is over $160,000. To make matters worse, she is in the middle of a divorce. Not being able to sell the house prolongs that painful process.

Mobility is part of the American dream. In “The Grapes of Wrath”, when Tom Joad’s farm in Oklahoma was repossessed he packed up his family in a sputtering truck and set off for California. Things didn’t work out so well for John Steinbeck’s hero. But throughout history, Americans have dealt with economic shocks by picking themselves up and moving on. Their mobility underpins America’s flexible, dynamic labour market. Now it faces two threats.

One is the housing bust. House prices have collapsed by 27% since their peak in 2006. By December last year a fifth of homeowners with mortgages owed more than their homes were worth. Such people are only half as likely to move as those whose homes are above water, estimate Joseph Gyourko and Fernando Ferreira of the Wharton School of business.

Some cannot sell their homes at all. Others could, but don’t want to take a big loss on an investment they thought was safe as houses. Either way, they are stuck. If a good job comes up in another town, they cannot take it. This effect is partly offset by the impact of foreclosures. Last month alone 291,000 homes received a foreclosure notice. The newly evicted are not merely free but obliged to move. This is unfortunate, but although jobs are in short supply nearly everywhere, being mobile at least increases the odds of finding one.

A decade ago Andrew Oswald of the University of Warwick in Britain argued that excessive home-ownership kills jobs. He observed that, in Europe, nations with high rates of home-ownership, such as Spain, had much higher unemployment rates than those where more people rented, such as Switzerland. He found this effect was stronger than tax rates or employment law.

If there are few homes to rent, he argued, jobless youngsters living with their parents find it harder to move out and get work. Immobile workers become stuck in jobs for which they are ill-suited, which is inefficient: it raises prices, reduces incomes and makes some jobs uneconomic. Areas with high home-ownership often have a strong “not-in-my-backyard” ethos, with residents objecting to new development. Homeowners commute farther than renters, which causes congestion and makes getting to work more time-consuming and costly for everyone. Mr Oswald urged governments to stop subsidising home-ownership. Few listened.

America subsidises more than most. Owner-occupiers typically pay no tax on capital gains and can deduct mortgage interest from their income-tax bills. Fannie Mae and Freddie Mac, two government-backed mortgage firms, have squandered a fortune promoting home-ownership among the uncreditworthy.

The other threat to mobility is health insurance. A company can buy health insurance for its employees with pre-tax dollars; an individual can buy it only with after-tax dollars. So although soaring premiums are prompting many firms to drop or restrict coverage, most Americans still get their health insurance from their jobs.

This makes it hard for anyone with a sick child to quit and start a new firm. It also makes it harder to switch jobs, despite a law helping employees to stay in company plans for 18 months after they leave. Scott Adams of the University of Wisconsin-Milwaukee found that married men with no alternative source of insurance were 22% less likely to switch jobs than those who, for example, could get covered by their wife’s employer.

Tying health care to a job can tie people to jobs they hate. Gerry Stover, who now runs a doctors’ group in West Virginia, recalls a time when his wife was pregnant and he couldn’t get health insurance at a private firm. He became a prison guard. As a public employee, his family was covered. But the job was neither pleasant nor a good use of his talents. “You have a radio and you’re put in a room with 70 criminals and told: ‘If they get you round the neck, press the [panic] button’,” he says. Some people even get stuck in bad marriages because they need their spouse’s health insurance. As Alain Enthoven of Stanford University puts it, this gives new meaning to the word “wedlock”.

The recession seems to have slowed internal migration. Only 11.9% of Americans moved house between 2007 and 2008—the most sluggish pace since records began in the 1940s. But not everyone has been immobilised. The postal service helps employees move by buying their homes and selling them at a loss. A postmaster in South Carolina recently sold his pad to his employer for $1.2m. “No wonder stamps cost so much,” grumbles a blogger.


http://www.economist.com/world/unitedst ... d=13331109

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 4:51 pm 
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So what happens to home prices when hyper-inflation hits?

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 Post subject: Re: To rent or to own? That is the question.
PostPosted: Thu Mar 26, 2009 5:05 pm 
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aprilfifth wrote:
So what happens to home prices when hyper-inflation hits?


I tend to think home prices will lag behind a little bit. I'm thinking commodities, basic materials, etc. skyrocket while home prices gradually increase (possibly at a rate below CPI). But this is really just a wild guess on my part.

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