Is Home Ownership Essential to the American Dream?

[haha]

Fired,

Have you seen the following paper by Todd Henderson? "Corporate Heroin: A Defense of Perks, Executive Loans, and Conspicuous Consumption"

It was quite an eye-opener for me. Confirmed my feeling about not feeling bad for not being offered the company car.

-gauss

This is the same reason that while governments may preach all day about savings, what they really want is for everyone to be in hock and beholden to government for their daily bread. How many people who need government kickbacks of one kind or another would vote against the expansion of government?

Ha

 

[FIREd]

Fired,

Have you seen the following paper by Todd Henderson? "Corporate Heroin: A Defense of Perks, Executive Loans, and Conspicuous Consumption"

It was quite an eye-opener for me. Confirmed my feeling about not feeling bad for not being offered the company car.

-gauss

I had not seen this paper. Thanks for posting. Yep, it pretty much supports my own experience.

 

[ziggy29]

Interestingly, I have never worked for an employer who did not openly encourage homeownership as a way to keep employees servile and docile. The bigger the mortgage, the more you depend on that paycheck.

Employers don't like having employees who aren't desperate and hopelessly dependent on keeping their job. They don't have as much leverage to screw around employees who are FI and who can freely walk away when their BS bucket is full.

 

[ronocnikral]

When I was first hired by megacorp (which necessitated a relocation), they contracted with a 3rd party to drive me around town and show me various neighborhoods I might be interested in, they also had a detailed booklet with all sorts of info on the various suburbs, their school systems, etc., they showed me several month-to-month fully-furnished executive rentals, and the like. I think one benefit to using a company like this rather than counting on realtors to show you around...the relocation company had no dog in the fight as they were being paid by megacorp.

omni

Well...just got the offer. They are capping at $35k. Which barely covers realtor fees for selling my house. A mighty large pill to swallow indeed. Everything is negotiable, so I'll be trying to crank that up as well.

I'll have to convince DW to rent on the other side if we do this deal.

 

[Jgot]

Someone sent this to me a couple of years ago - I found it interesting.

First Person: Everything I Never Wanted to Know About Being a Homeowner
By Shauna Zamarripa | Yahoo! Contributor Network – Mon, Oct 31, 2011 2:30 PM EDT

Ah, the joys of home ownership. We get programmed that we are throwing our money away in renting. We don't get mortgage interest tax deductions. We don't get property tax deductions. In fact, according to some, we don't get much of anything. However, as a former real estate agent, and current homeowner, I can tell you what we do get: bills, and lots of them. There is a reason this is going to be my first and last house. More specifically, there are five reasons.

Full article here First Person: Everything I Never Wanted to Know About Being a Homeowner - Yahoo! Finance

 

[gauss]

I think the popular culture's view on home ownership as a "good investment" is distorted by the inherent leverage in the process.

-gauss

 

[comicbookgujy]

I'm 40 and still don't own a house. I tried to buy one last year.
Offering price was $395k. I bid $405k and was outbid at $430k...there were 30 plus offers. And this was a crappy looking house that needed about $30k to make it liveable. Now there's almost zero inventory.

I don't think I will own a house in my life here in CA.

The lack of inventory, the high cost compared to renting, and most of all...not knowing if my department will move to a different location or if I will get laid off makes not owning a house an easy decision.

 

[traineeinvestor]

Rent v own - the debate that never stops giving ....


We purchased when prices were low and with 30% down (the minimum deposit in HK) the P+I mortgage payments were less than the rent we would have paid on the same apartment. Eight years later, the total of the interest on the mortgage, rates, management fees and maintenance (including a sinking fund for longer term work) is less than a third of what we would have to pay to rent. The property has more than doubled in value (although I expect the market to fall from here) and we have had all the harder to measure benefits of home ownership as well. Buying was one of the best "investment" decisions we have made.

Of course, had we purchased a property at the top of a boom, experienced rising interest rates and had to sell to relocate, the experience may well have been the opposite. When it comes to real estate, it all depends on specifics.

 

[Mulligan]

I personally like the stability in payment it brings. My mortgage payment including all escrows is $695 a month. Renting an equivalent house would be around $900, and they are few in my area. Being single, I get over 11,000 in itemized deductions which is double what I can get by the standard deduction, as I wouldn't have enough to itemize without the property tax and interest. That being said, I am under no illusion that the only real winner from this will be my daughter when she sells it after I die and reaps the proceeds.

 

[GrayHare]

First Person: Everything I Never Wanted to Know About Being a Homeowner
By Shauna Zamarripa | Yahoo! Contributor Network – Mon, Oct 31, 2011 2:30 PM EDT

Wow, some horrible math skills on display there. In her final paragraph, the author compares the $19,320 *additional* cost of rental vs. the $70,000 total cost of home ownership (her numbers).

The proper comparison (again, her numbers) is: $19,320 + $70,000 = $89,320 for renting vs. $70,000 for owning. GIGO.

 

[Onward]

I thought I owned my house, but in fact it owned me. It's renting from here on out.

 

[Independent]

Buy vs. Rent?

If I plan to stay in one place for a long time, I should buy.
If I value mobility, I should rent.

If I want to protect myself against rising prices, I should buy.
If I want to protect myself against falling prices, I should rent.

The percent of Americans who fall into each of the categories above will vary over time.

The only other thing I know is that gov't shouldn't put its thumb on the scale and try to push people one way other.

 

[samclem]

We hate moving so much that we'd never consider renting now. And, DW loves to improve the landscaping--it's just a lot more fun working on a house when you know the landlord won't use the improvements as a rationale for raising the rent.

 

[donheff]

Wow, some horrible math skills on display there. In her final paragraph, the author compares the $19,320 *additional* cost of rental vs. the $70,000 total cost of home ownership (her numbers).

The proper comparison (again, her numbers) is: $19,320 + $70,000 = $89,320 for renting vs. $70,000 for owning. GIGO.

I was going to go back and add the numbers but skimmed through and saw your post first. That was my reaction as well. And this was over 7 years of home ownership. If that same person stayed in the house for thirty years, and refinanced midway to reduce the payment while keeping the deductions high, and invested the difference he or she could pay of the house with the saving and be siting on a valuable asset. The danger with ownership is getting stuck. The numbers are generally pretty decent if you don't.

 

[ls99]

Renting from the bank, ie. mortgage payments were never a part of any dream.

Having a a house paid off up front, while could be argued as not a great finacial decision, is in fact the best thing IMHO. Now the only rent payments are to the stae/county an schoolboard.

Plus having a camp on 14 acres, paid off as well up front, life is good. Playtime.

I was born at home in a house my father built from leftover bricks hauled home from various worksites, It was over a celler wher they lived while it got built. At three rooms +outhouse was a good home. No plumbing, hauled water from a community water tap up the dirt road. Even with solid concrete floors thoroughout, it felt like a palace compared to many of the apartment hovels my schoolmates lived in.

Left it all behind when arrived itn the USA. Here, I lived in a few apartments, hated it. Had houses for the most part since I was 23. Thogh lived out of a duffle bag for much of 20 years, its was nice to have my own place to hang a hat in when got home. Often had house sitters take car of the place while away for many months at a time.

 

[eytonxav]

I think one of the big factors that is impacting home ownership today, is that many younger workers in their late 20s/early 30s are still emcumbered with substantial college debt making it difficult for them to obtain and carry a mortgage. Also, jobs, post big recession, are not paying what they used to, so these factors seem to me to be negatively impacting the american dream.

Having lived in several apartments when I was in my 20s, including 2 condos, I would never want to go back to that vs a home, but we all must do what we have to do to get by.

 

[marko]

Interestingly, I have never worked for an employer who did not openly encourage homeownership as a way to keep employees servile and docile. The bigger the mortgage, the more you depend on that paycheck.

'servile and docile'? Do you really believe employers consciously and deliberately work that angle? Just asking, not challenging.

 

[ziggy29]

'servile and docile'? Do you really believe employers consciously and deliberately work that angle? Just asking, not challenging.

I would just say that I suspect all else being equal, they would rather have an employee who is more desperate to get (and keep) the job. You can more easily make them work longer hours, slash their pay and benefits, make them accept lousy working conditions -- and their "BS bucket" is a lot larger.

(Obviously this has its limits -- employers don't usually want folks who are so desperate or on the edge of bankruptcy that they feel they need to resort to stealing from the company, taking bribes and that sort of thing. But short of that? Financial dependence leads to a greater sense of "indentured servitude" than being an employee who is FI.)

 

[antmary]

We own our home free and clear. It is such a nice feeling. We designed and built it ourselves with energy-efficiency in mind - on 10 acres in an oak forest. It is 1300 sq. ft., one story, and we will be able to age in place. The electric bill is, at the most $60.00 per month. The quiet and beauty is priceless to me; I like to make art and write, and I experience a wealth of inspiration. Of course, that is just us...to each his own.

 

[gauss]

'servile and docile'? Do you really believe employers consciously and deliberately work that angle? Just asking, not challenging.

I have seen cases were loyalty to management is valued over competence. But, then again, this Megacorp ran out of cash-flow.

-gauss

 

[W2R]

Just as an aside, MY American dream has never included having to move around the country all the time. (I am capitalizing MY, to emphasize that I can only speak for myself.) I have never had a genuine desire to spend my life packing and unpacking, having utilities unhooked and hooked up to the new place, making insurance claims on all the broken stuff, and all the other hassles of moving. I have moved 28 times, mostly with no choice about it, so I know whereof I speak.

Also, if I am staying in the same community for decades, renting an apartment is not in MY American dream because one can only stay in an apartment at the whim of the landlord. If he decides to convert the apartment into condos, for example, the renters have to leave or buy. Or, if he decides to double the rent, one either has to move or pay up.

Even if I own my own home, MY American dream is to pay it off. I don't like mortgage companies. I don't want to be told I must hassle with the insurance company to overinsure my home because of how much is still owed, or endure the multitude of other hassles I have had in sharing ownership with them.

So yes, MY American dream (mine only) has included owning my own, paid off home. This is part of the "emotional benefits" of paying off one's home, that people refer to sometimes.

Sometimes I can hardly believe that I am living MY American dream! Just yesterday I was talking to Frank about that. We are so lucky to live in this country, where dreams really can come true.

 

[ERhoosier]

......Having lived in several apartments when I was in my 20s,,, I would never want to go back to that vs a home...

Interestingly I was just thinking back to buying my 1st home back in my 20's. At the time DW & I lived in a very nice appt complex with pools, tennis courts, etc. But I HAD to have a house. It was a new place & I spent almost all my free time on it (detailing, landscaping, etc.). When we were transferred after 4 yrs (no "cadillac" employer support) we were sweating bullets to get it sold. We rented at the next location. Bought a house in our present spot, but now looking at big upkeep expenses (new furnace & AC past 2 yrs, bath & kitchen need remodel/updates, plus typical stuff like tree & plumbing work, etc.). We're in a stable area and could prob sell for well more than we paid, BUT doubt we would be better off vs renting & investing the difference over the yrs. Very personal decision with no clear right or wrong answer in most areas of the country.

 

[brewer12345]

I think that the longer you stay in one place, the more reasonable owning is as a financial proposition. Other than that, this is a lifestyle decision more than anything.

 

[imoldernu]

A snip from a prior post that argues for ownership:

Current medicaid law allows for payment of nursing home expenses under certain conditions. If you understand those conditions, you could save hundreds of thousands of dollars for yourself, your spouse, or your estate... (your kids).

Here are the things you should know about:

Current nursing home costs average from $75,000 to $90,000/yr. A friend on Long Island is currently paying over $135,000/yr. for just basic care.

The state (medicaid) does not automatically pay for this.

You should understand "exclusions".

Know that the "look back period" is now 5 years.

...........................................
As long as a married couple have assets, if one spouse should have to go into a nursing home, the couple's assets will be used to pay for the medical care until the assets go below a certain level, at which time, the state medicaid program will pay for the nursing home care. The asset level varies by state.
............................................

Here's an example that happened to friend, that points up the importance of planning ahead. Bob retired with his wife May, to Florida from Maine. He sold his Maine house for $280,000 and planned to use this as his nest egg during his retirement. He bought a mobile home..(downsized)for $35,000. Shortly after retiring, May began a long slide into Alzheimers, and after three years has to go into a nursing home. (at the time $65,000/yr.) She lived there for 5 years before passing away. Because Bob and May had assets from the sale of their house, medicaid would not pay, and The nest egg was gone.
..............................................
Now, here's what happens....
1. In counting assets, Bob is allowed certain exclusions. In General, the exclusions in his case, were... His house @ $35,000, His car $20,000, Cash (then, $40,000) and some smaller amounts like burial plot and non cash life insurance.
2. The logical thing to have done would be to give away the money in the nest egg, so the state wouldn't take it. That's where the lookback comes in. If he had given away the money to his kids, the state would not have taken the money... but... to prevent this from happening, the state will "look back" five years and deny medicaid payment,if this 'gift" transaction had taken place.

As it happened, May died, an Bob had nothing but his Social Security left to live on.

Post #34 from here:
http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html

 

[haha]

I think that the longer you stay in one place, the more reasonable owning is as a financial proposition. Other than that, this is a lifestyle decision more than anything.

I agree, and that is how I decided to buy- because I am not going anywhere, and because I guess that both rents and purchase prices will increase where I am. I am not at all interested in capital gain from the place, just in price protection. But speaking as one who has been a homeowner and also a renter for a fair number of years of each, there are more non-monetary costs to owning than we often figure. Some of these like grass, painting, etc. can be hired out, but overall I believe it is usually cheaper to get these services as part of a rental fee than going and finding them oneself. It is certainly a lot less effort, and less time wasted on things that to some of us don't often qualify as fun. I bill my pleasure account $1000 for one visit to Home Depot, surely a branch of Purgatory.

My former wife and I felt that we needed house and yard to raise kids, but I see lots of families growing in the townhouses to one side of me, and in the apartments down the street. No yards don't seem to be a problem, there are parks all over easily walked to, and fewer families today will let their young kids play out in the yard alone anyway, due to crime concerns. Parents are likely very close to their work, and some of the women seem to be home all day so there must be some cash freed up this way. I thought when the kids got a little older they would likely leave, but I have not noticed that yet.

Ha