home ownership?

[Balefont]

I just like the idea of being able to do virtually what ever I want whenever I want to a house without having to get permission from a landlord.

[TerraPrime]

Not to mention, in many (most?) cites, the cost to rent is the same as your entire monthly bill (mortgage, interest, tax, insurance) for equivalently sized places. In Madison, for example, we were paying $890 for a 3-bd-2bath condo (no garage), whereas when we rented after we sold the condo, we were paying $750/month for 2bd-2bath w/underground parking. The rental place has no basement, no central A/C, and a lot less square footage, too. The situation is same where I live now. For the amount I pay in my total monthly mortgage package, I could maybe rent an apartment that's 2/3 the size. So even if you kick in regular house maintenance cost, I think it's still even compared to renting.

[The Iceman of the North]

No it isn't. The total borrowing cost of a $150,000 mortgage @ 5.0% over 360 months is about $300,000. The bank is making double their investment off you. Not counting, taxes, insurance, and maintenance. Those are terrible numbers to invest under, what's you're return? After 30 years and $300,000 (more like $450K when you include ins/tax/maint) you end up with a house worth...$200,000? Maybe $250,000?

Is a doubling of investment over 30 years really a good investment for the bank? But I'm curious about the rest of your calculation. If you look at say the US housing market over the past century, what is the average markup of a home over 30 years, just 67% as in your example?

In Norway less than 80% of the households own their own home, and despite the prices dropping by 14% from 2007 to 2008 (which they regained in 2009), the average markup over the past 30 years are more than 650%.

ETA: Thus if you borrowed $150,000 to buy a home, ending up paying maybe $450,000, you'll end up with more than half a million dollars extra.

[IheartTesla]

The balance on my car loan and my CC debt together are less than my bank balance. I wouldn't like to be in a situation where my net worth is less than what I owe to bloodsucking banks as mortgage. In that respect, I'm a little wary of this whole owning a house business, when I can't even be sure its an investment for the future.

Unfortunately there is no crystal ball that can predict what the market will look like 20 years in the future. My advice to myself then is to purchase a house at (Retirement age - Length of mortage) so one has a house to live in after stopping working.

[Filippa Eilhart]

how is paying bloodsucking landlords better than paying bloodsucking banks?

[Tormund Ukrainesbane]

http://www.thepeoplehistory.com/1980.html

Average cost of a new house in 1980 was $68,700

Adjust for inflation and that cost is $179,382 in 2010. The average home price in 2010 was $166,100. So while the average home would have gained a theoretical 259% in value, it would have actually lost 8% in inflation-adjusted worth.

[Zoë Sumra]

Or ya, know, it's something they have intimate experience with because they do it every day, and are doing it even as they type this (although my conference call with Fannie isn't til tomorrow and Freddie isn't 'til the day after). My company has hardly written a loan in the last 5 years that wasn't sold to Fannie/Freddie before the ink was even dry. I can assure you the same is true for the other large banks as well. Think on this. We knew Fannie/Freddie would buy them. Where was our risk? It was non-existent. Fannie/Freddie in their turn knew that the Feds would cover their losses, should they get any ($160 billion and counting!).

This maybe explains the US housing bubble, but we had one too, and we've no equivalent of Fannie/Freddie.

[IheartTesla]

how is paying bloodsucking landlords better than paying bloodsucking banks?

I can afford an entire year's rent on my current salary and bank balance. I am not overextended beyond my capabilities. Capeesh?

[Lord of Oop North]

I just like the idea of being able to do virtually what ever I want whenever I want to a house without having to get permission from a landlord.

I generally do whatever I want to it anyway. :)

[Shryke]

Or ya, know, it's something they have intimate experience with because they do it every day, and are doing it even as they type this (although my conference call with Fannie isn't til tomorrow and Freddie isn't 'til the day after). My company has hardly written a loan in the last 5 years that wasn't sold to Fannie/Freddie before the ink was even dry. I can assure you the same is true for the other large banks as well. Think on this. We knew Fannie/Freddie would buy them. Where was our risk? It was non-existent. Fannie/Freddie in their turn knew that the Feds would cover their losses, should they get any ($160 billion and counting!).

Hmm, Tormund Anecdote vs Data. Yeah, that's a tough call...

If Fannie and Freddie were buying all these shitty loans .... why are the loans they own so much better?

Or is the reality that, yes, they were buying loans, but they weren't buying shitty ones?

No it isn't. The total borrowing cost of a $150,000 mortgage @ 5.0% over 360 months is about $300,000. The bank is making double their investment off you. Not counting, taxes, insurance, and maintenance. Those are terrible numbers to invest under, what's you're return? After 30 years and $300,000 (more like $450K when you include ins/tax/maint) you end up with a house worth...$200,000? Maybe $250,000?

Yes but you can live in your investment. It's also an investment that, assuming you don't lower your lending standards, most people are likely to pay off. It's shelter and it forces you to build equity.

[DJDonegal]

And that's the key isn't it? After paying for a mortgage for 30 years, I have a house to show for it.

If I rent for 30 years I have... nothing.

[Tormund Ukrainesbane]

And that's the key isn't it? After paying for a mortgage for 30 years, I have a house to show for it.

If I rent for 30 years I have... nothing.

Yes and if you pay on a car for 5 years you have a car. It's a purchase, but not an investment. Investments pay you more than your original input. It might be a wise purchase under various circumstances, just as a car might. But as an investment, if you poured the same amount of money into an interest bearing account over a similar time period, the return rate on house vs. account would be orders of magnitude.

Hmm, Tormund Anecdote vs Data. Yeah, that's a tough call...

If Fannie and Freddie were buying all these shitty loans .... why are the loans they own so much better?

Or is the reality that, yes, they were buying loans, but they weren't buying shitty ones?

#1 - they bought plenty of shitty loans. There's a reason they're suing the big banks for $200 billion

#2 - just because they didn't buy the shittiest of loans doesn't mean that they didn't create perverse incentives

Banks made money hand-over-fist off Freddie/Fannie. Banks were getting money on the cheap from the Fed. Because of the "culture of ownership" that Bush the lesser was touting, and government policy that enforced it, housing was a sure-fire investment, and banks kept offering more and more loans. A train starts rolling downhill and you blame the hill instead of the engineer.

[MinDonner]

Yes and if you pay on a car for 5 years you have a car. It's a purchase, but not an investment. Investments pay you more than your original input. It might be a wise purchase under various circumstances, just as a car might. But as an investment, if you poured the same amount of money into an interest bearing account over a similar time period, the return rate on house vs. account would be orders of magnitude.

That's a poor analogy. Firstly, cars depreciate like nothing else, unlike houses which (even if they don't appreciate) rarely lose much value over decades. Secondly, this is not "spare" money that you can save or spend at your discretion - everyone needs somewhere to live, so that money is going to be leaving your account in one form or another. Maybe I could try living on a park bench while saving my mortgage money in some high-interest bonds, but I don't think that would work too well.

Not that I'm saying that mortgages are necessarily better than renting, especially the interest-only mortgages that had a brief run over here before the crash. But sensible arguments only please!

[Seli]

how is paying bloodsucking landlords better than paying bloodsucking banks?

Both have advantages and disadvantages. Depends on how long you intend/expect to live somewhere, how stable your income is and how well you can cope with unexpected expenses (maintenance etc.).

[Tormund Ukrainesbane]

Not that I'm saying that mortgages are necessarily better than renting, especially the interest-only mortgages that had a brief run over here before the crash. But sensible arguments only please!

And I haven't been saying that they are worse. I'm merely arguing that as an investment houses are not a very good deal. As a place to live and make babies and start grease fires and wash your car and mow the grass they're hell on wheels. As an investment, they're just not that good.

[Shryke]

#1 - they bought plenty of shitty loans. There's a reason they're suing the big banks for $200 billion

#2 - just because they didn't buy the shittiest of loans doesn't mean that they didn't create perverse incentives

Banks made money hand-over-fist off Freddie/Fannie. Banks were getting money on the cheap from the Fed. Because of the "culture of ownership" that Bush the lesser was touting, and government policy that enforced it, housing was a sure-fire investment, and banks kept offering more and more loans. A train starts rolling downhill and you blame the hill instead of the engineer.

And yet their rate of delinquency isn't really that bad.

Banks making money hand over fist is the point of Fannie and Freddie. They are encouraging banks to give out mortgages by making it more profitable for them.

None of this forces banks to give out shitty loans. Fannie/Freddie wouldn't buy them anyway.

The financial sector created and sold each other shittastic loans to make big profits. Nobody made them do it. Fannie/Freddie didn't force anyone to do anything. Just like they hadn't for the decades preceding this bubble.

[felice]

And I haven't been saying that they are worse. I'm merely arguing that as an investment houses are not a very good deal.

Are they a worse investment than dividing the same money between renting (most of it) and some other investment (a little bit if you're lucky), though? Because having somewhere to live is pretty much non-optional for most people.

[Tyrellius]

I've just worked out how much money I've spent on rent ever since I moved out of shared living. £53 400. Fuck. That is depressing.

[Lany Freelove Cassandra]

:lol: this conversation rambled as much as I did in the OP

Obviously, I still have that "older" view of ownership and wealth being closely associated, while now it doesn't seem to be. Seem "investments" equals wealth, not physical land.

I never intended the house=investment argument either.

oh, and FLoW, I think I still agree with you about 1/4 of the time, and rarely find you offensive. It was just the way the wording of that comment hit me. :)

[Tormund Ukrainesbane]

Are they a worse investment than dividing the same money between renting (most of it) and some other investment (a little bit if you're lucky), though? Because having somewhere to live is pretty much non-optional for most people.

Depends on your personal wants and needs. Do you want to live wherever you live currently forever? Do you enjoy the freedom to pull up stakes whenever you want? How important to you is the ability to customize your home. How inconvenient to you is maintaining your property vs. someone else doing so? The intangibles are a real factor here.

Monetarily, if you save $100/mo renting and put that somewhere that it earns 5% per year, over the 30 year period you'll have $89,000. If it's $150/mo you'll have $130,000.