Todd
May 17, 2008, 02:55 AM
I think that article is a stretch at best. Real Estate has appreciated better nationally than the stock market, so that argument is completely flawed.
the average return of investment on a house is ZERO!
I don't have a clue where the writer gets off making that kind of assertion. I have over 100k of equity (even in the current market) and almost everyone I know is in a similar position. Even if you buy a home, live in it for 2-3 years, and then sell it for the same price - you break even. You just lived in a home for that long for free - as opposed to paying a landlord several tens of thousands of dollars with nothing to show for it. The fact is real estate appreciates - unlike a car which loses value when you drive off the lot.
The people who bought at the peak of the housing market may be upside down, but the same could be said for those who buy stocks at the peak of a market. The biggest difference is that buying a home is investing someone elses money. I don't know anywhere you can get a $200,000 loan to buy stocks and play the market, but you get loan for a house and be practically guaranteed to have a big payoff over the long haul. And when you consider the taxes and interest are tax deductible, you have another huge advantage to renting.
I think his argument that a mortgage payment is so much higher than rent is flawed as well. Aside from the tax benefits that level the field considerably, there is also the cost of rent down the road to consider. The last time I lived in an apartment I was paying $400/month in rent. I thought my house payment of $600/month was high. When I sold that house to move into a new one, I was shocked to have to pay nearly $1000/month for short term rent until my house was finished. If I don't refi, my house payment will be the same in 20 years, even 28 years down the road (and I'll be almost fully paid off on a home that will be worth way more than when I bought it). If you rent, however, how much will you be paying 20 years from now?
I could go on, but I don't think that writer makes a very strong case for renting if you look at all the facts.
Maybe, just maybe, it's an okay time to buy a home if you have perfect credit, a huge lump of cash (I'm talking 10k+) to put down, and are willing to jump through all kinds of hurdles to get a loan...but that's just ridiculous.
There are a lot of FHA loans available right now that are extremely easy to qualify for and have incredibly low rates. Trying to convince people that it's not worth it to apply for a loan?!? That's an act of desperation on the part of someone who knows that his product is far inferior right now.
The only benefits to renting are amenities - and you will pay a very hefty price tag for them and have nothing to show when you move. Although, I suppose if I owned a rental property, I would try to put a positive spin on renting as well. I just don't think I could make the kind of outright bogus statements that guy made.
Todd Smith
www.homebargainsaz.com (http://www.homebargainsaz.com)
the average return of investment on a house is ZERO!
I don't have a clue where the writer gets off making that kind of assertion. I have over 100k of equity (even in the current market) and almost everyone I know is in a similar position. Even if you buy a home, live in it for 2-3 years, and then sell it for the same price - you break even. You just lived in a home for that long for free - as opposed to paying a landlord several tens of thousands of dollars with nothing to show for it. The fact is real estate appreciates - unlike a car which loses value when you drive off the lot.
The people who bought at the peak of the housing market may be upside down, but the same could be said for those who buy stocks at the peak of a market. The biggest difference is that buying a home is investing someone elses money. I don't know anywhere you can get a $200,000 loan to buy stocks and play the market, but you get loan for a house and be practically guaranteed to have a big payoff over the long haul. And when you consider the taxes and interest are tax deductible, you have another huge advantage to renting.
I think his argument that a mortgage payment is so much higher than rent is flawed as well. Aside from the tax benefits that level the field considerably, there is also the cost of rent down the road to consider. The last time I lived in an apartment I was paying $400/month in rent. I thought my house payment of $600/month was high. When I sold that house to move into a new one, I was shocked to have to pay nearly $1000/month for short term rent until my house was finished. If I don't refi, my house payment will be the same in 20 years, even 28 years down the road (and I'll be almost fully paid off on a home that will be worth way more than when I bought it). If you rent, however, how much will you be paying 20 years from now?
I could go on, but I don't think that writer makes a very strong case for renting if you look at all the facts.
Maybe, just maybe, it's an okay time to buy a home if you have perfect credit, a huge lump of cash (I'm talking 10k+) to put down, and are willing to jump through all kinds of hurdles to get a loan...but that's just ridiculous.
There are a lot of FHA loans available right now that are extremely easy to qualify for and have incredibly low rates. Trying to convince people that it's not worth it to apply for a loan?!? That's an act of desperation on the part of someone who knows that his product is far inferior right now.
The only benefits to renting are amenities - and you will pay a very hefty price tag for them and have nothing to show when you move. Although, I suppose if I owned a rental property, I would try to put a positive spin on renting as well. I just don't think I could make the kind of outright bogus statements that guy made.
Todd Smith
www.homebargainsaz.com (http://www.homebargainsaz.com)
