Has “Investor Psychology” Turned Against Home Buying?

Here’s a comment that was left recently by a reader that is a good example of an outlook shared by many people who sat out the housing bubble and have been waiting for “the bottom” or something close to it:

Time Magazine: Home $weet Home | June 13, 2005Any top or bottom call needs to mention “investor” psychology since I believe psychology is the force driving prices above or below fundamental value. When the last few bulls give up real estate as an investment, and when the average person argues that renting is better than buying, we will be close to a bottom. We’re not quite there yet. You basically watch people and when almost everyone hates housing, you’re close to a bottom.

I mostly agree with this. Just like the infamous June 13, 2005 Time Magazine “Home $weet Home” cover was a strong indicator that we were (nationally) near the top, a good sign that we may be at or near the bottom would be a widespread sentiment that buying a home is a sucker’s game and renting is the way to go.

However, is it true that “we’re not quite there yet”? As evidence that maybe we are there, I offer the following recent articles in fairly major news sources around the country:

Reuters: New American Dream is renting to get rich

Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, “100 percent of the time it was better to rent, rather than own.”

That’s right: 100 percent.

So while home ownership may sound glamorous, you need a lot of money to make it work, without much guarantee of positive returns in a post-bubble era.

Bloomberg: Why Renters Rule U.S. Housing Market (part 2, part 3)

Bloomberg: Rent Sweet RentThe collapse in housing and the 33 percent plunge in house prices since 2006 are favoring renting over homeownership. This trend will dominate the housing market for the next four or five years, and put additional pressure on a weak economy.

Despite the collapse in prices, homeownership is still expensive relative to rentals, even as apartment rental rates rise and vacancies decline.

The consumer retrenchment and recession I foresee for this year will only add to the lack of affordability of owning houses and to the attractiveness of renting.

The Atlantic: The End of Ownership: Why Aren’t Young People Buying More Houses?

Between 1980 and 2000, the share of late-twenty-somethings owning homes had declined from 43% to 38%.

The decline in young home owners is a puzzling trend. Interest rates have steadily declined over the last 30 years. Mortgage lending has loosened. Women have ascended in the workplace and supplemented their spouse’s earnings. How in the face of all of these positive developments did home ownership among the young keep falling?
….
Maybe not. But if the last 30 years have taught us anything, it’s that planning for the future is an act of faith. Supply chains and software eat our jobs. Financial wizardry eats our savings. The cost of insuring against these risks — that is, both college and literal insurance — is rising. “It feels like anytime we hit around $20,000 something terrible or some unexpected thing happens,” Steve Kinney, a Brooklyn resident, told the New York Times last year. He’s part of a new renters society, and rental prices are rising now that housing prices aren’t.

The Atlantic ran a follow-up to their piece a few days later: ‘We Wish Like Hell We Had Never Bought': Voices from the Housing Crisis

On paper, at least, my wife and I are perfect home-owner candidates: Married, taxable income hovering around $100K, parents of 2 children, owners of 2 dogs. We both hold master’s degrees, she owns her own business, I work a unionized job. Our only debts are our mortgage, one car payment, and a loan from my father that carries no interest. Between that latter loan and an inheritance I received, we put down fully one-third of the cost on our 1,100 square-foot, three-bedroom home in San Jose, California.

And we wish like hell we had never bought.

We are tied to a place that is prohibitively expensive to live, requiring both of us to work instead of one parent staying home. Homes require constant upkeep and expense. Psychologically, young buyers like us fail to truly do the math on property taxes, homeowners insurance, flood insurance, earthquake insurance, plumbing, yardwork, general maintenance, drainage, so on and so forth. Young couples buy what we can afford, not what we will need: our home is too small now that we have added a second child.

So does the average person still think that buying a home is always the best decision, or has the tide of public opinion turned against buying? Personally, I think we have already swung just about 180º from the “Home $weet Home” era.

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

116 comments:

  1. 1
    Pegasus says:

    Ira: I see dead home buyers.
    Tim: In your dreams?
    [Ira shakes his head no]
    Tim: While you’re awake?
    [Ira nods]
    Tim: Dead home buyers like, in graves? In coffins?
    Ira: Sitting around like regular home buyers. They don’t see each other. They only see what they want to see. They don’t know they’re dead.
    Tim: How often do you see them?
    Ira: All the time. They’re everywhere.

    Rate this comment: Thumb up 0

  2. 2
    The Tim says:

    RE: Pegasus @ 1 – Not really sure if you’re trying to make a particular point here, but it seems like maybe you’re suggesting that I’m cherry-picking articles. I wonder if you would be kind enough to find me some articles not written by home salespeople suggesting that buying a home today is an awesome idea and a great investment.

    Rate this comment: Thumb up 0

  3. 3
    Kevin says:

    Even though mortgages are a great way to obtain a large loan at low interest, the risks of the object/instrument you’re investing in are incredibly high.

    Why spend $500,000 on a home that costs you money every year when you can spend $500,000 buying a high yield REIT such as NLY? At current prices you’d be able to buy ~30k shares and your dividend payments this year would be ~$73k.

    Rate this comment: Thumb up 0

  4. 4
    David Losh says:

    This is a great post, and set of articles. In 2008 while at the Vestus sales pitch I recognized a person who had been to the foreclosure auctions at least since 1984. We talked for a few minutes about the hype of foreclosure.

    There is no margins that make sense to tie up your money in buying for sale, or rent. It’s a lot of money to tie up with only a promise of a return. Real Estate just isn’t the investment it once was.

    Of course Vestus had a room full of clowns, the same clowns you see today at the auctions, but it is a suckers bet.

    The stock market has doubled since the collapse, and housing has lost 20% to 30%. Even with rental income that’s a big nut to cover. As more rentals come on the market, and as rents decline, the investment aspect of housing units will further decline.

    All in all, your contention that owning is a place to live, and have a stable housing expense is getting to be more true all the time. There again if your mortgage stays the same, and rents decline that might be another problem.

    Rate this comment: Thumb up 0

  5. 5

    By Kevin @ 3:

    Why spend $500,000 on a home that costs you money every year when you can spend $500,000 buying a high yield REIT such as NLY? At current prices you’d be able to buy ~30k shares and your dividend payments this year would be ~$73k.

    How are you balancing those investments to keep the investment the same? All cash for the house? I’m pretty sure $20,000 invested in a REIT isn’t going to get you $73k of annual dividends.

    Rate this comment: Thumb up 0

  6. 6
    Scotsman says:

    RE: Kevin @ 3

    Except hardly anyone has $500K in cash for the inverstment. Ever tried to get a mortgage on stock purchases? And one year’s returns do not a trend make. Plus, where’s the accounting for the housing expense you still have to take on?

    No chance with those returns that we might be headed for a bubble in REITs? If you get in now, will you get out at the right time?

    Rate this comment: Thumb up 0

  7. 7
    Scotsman says:

    I think the psychology has pretty much bottomed for the average buyer- the guy/gal who doesn’t read Seattle Bubble. No one in the media is suggesting housing is a great investment. Even real estate agents have stopped talking about it. The pitch now is stability and freedom to make it yours with maybe a little rent/own calculation thrown in.

    Looking down the road, trying to see around the bend- the bigger issue is the future of the national economy. At this point I’d be much, much more worried about whether I’ll have a job and a functioning government 8-10 years from now than whether my house will fall another 10% in value.

    And hey- we’ve all got to live somewhere while we wait to see what comes next.

    Rate this comment: Thumb up 0

  8. 8
    Scotsman says:

    Hey gold bugs! Here’s the CS index from the beginning expressed in the price of gold. Looks like a bottom, unless we’re about to go where no man has gone before:

    http://azizonomics.files.wordpress.com/2012/03/homes-1890.png

    Rate this comment: Thumb up 0

  9. 9
    Peter Witting says:

    From this psychological perspective, we aren’t quite there yet. When people are too embarassed to admit they bought a house, when the standard response is “wow, why did you do that” instead of “congratulations” – then we are at bottom on this scale.

    But getting closer, as I’m hearing far less of the default “yay I bought a house” cheerleading these days.

    Rate this comment: Thumb up 0

  10. 11
    Scotsman says:

    RE: Jill Schlicke @ 10

    Does anybody believe anything Warren Buffet says these days? Is this the same Warren who says the rich should pay more taxes while he sues the IRS for $600M? The one who says oil pipelines are bad while he buys railroads? WB has moved on from “value investing” to political manipulation and lost all credibility in the process.

    The 14 year old? She bought half a house- her mom owns the rest- for $12K, now rented for $700/mo. Who wouldn’t buy that? There are some GEMS out there, but they’re outliers.

    http://boingboing.net/2012/03/09/14-y-o-florida-girl-buys-forec.html

    Or maybe we’ve passed the bottom in psychology and these are the first signs of a turn-around?

    Rate this comment: Thumb up 0

  11. 12
    Xizor says:

    Interest rates are at historic lows; prices down nationally and locally by 33%-45%; the job market is reviving; and inflation is about to raise its ugly head.. I have been a skeptic, but my view is that real estate is now a better investment than a bubbly stock market. I also own NLY stock, but you can’t leverage a mortgage REIT like tangible real estate for a 3.8% 30 year mortgage with 20% down, and NLY will decline as interest rates pick up and has certain other risks. I look at the sales figures for the last 60 days in some neighborhoods in north Seattle and every thing that is priced nearly correct and not a dump has sold, and mostly in a few days. The inventory is being cleaned out and prices are bound to increase — it is the law of supply and demand. So I say back up the truck; borrow as much as you can at a fixed rate; buy all you can at a decent prices; and wait for inflation to work its magic on the real estate market, which is what the Federal Reserve is trying to accomplish.

    Rate this comment: Thumb up 0

  12. 13
    bd says:

    By David Losh @ 4:

    The stock market has doubled since the collapse, and housing has lost 20% to 30%.

    It’s not like the stock market is going to double any time soon. It only doubled over the last four years because it collapsed in the panic that occurred when the banking system seized up.

    But if we are talking about investing in time machines, then, yeah, that’s a great investment.

    Rate this comment: Thumb up 0

  13. 14
    ChrisM says:

    RE: Scotsman @ 8 – It would be fascinating to see a similar chart for property taxes in gold!

    Rate this comment: Thumb up 0

  14. 15

    RE: Scotsman @ 11 – I’m not following on the oil pipeline/RR thing. What does one have to do with the other? Hoping to move more oil by rail?

    Rate this comment: Thumb up 0

  15. 16
    Scotsman says:

    RE: Kary L. Krismer @ 15

    Those seem to be the current choices unless I’ve missed something. The starship Enterprise’s transporters?

    Rate this comment: Thumb up 0

  16. 17

    Firstly, 1st Time Home Buyers Generally are Not Investors

    They’re the top percentage of household incomes left, that still don’t own a home…..when you talk $60K household incomes in Seattle still renting and still don’t own a home, the data isn’t available, but let me guess it [one guess is as good as another]…5% of the $60K+ household incomes are still renting and looking to buy.

    Now, let’s get to the investors [most are in the $60K+ household income bracket too I imagine], most of them already bought a house, many, decades ago. What data do they read to possibly get them to invest in a Seattle rental without losing money?

    They read this:

    “…Over 2 million loans are actively foreclosed (ether with a notice of default filed, scheduled for auction, or flat out owned by the bank as REOs). Another 4 million are delinquent bringing the total distressed inventory pipeline to over 6 million. This number sounds familiar because it really hasn’t moved in well over a year (like pretending the toilet magically unplugged itself if you simply choose not to flush it)….”

    http://www.doctorhousingbubble.com/shadow-inventory-2012-foreclosure-pipeline-no-payments-for-three-years-midtier-los-angeles-orange-country-real-estate/

    So what in Hades does psychology have to do with a FC market currently sitting nationally with 2 years of delinquent stock if you’re a clear headed/educated investor? And don’t give the lamebrain excuse that Seattle isn’t as bad as national averages, with our out-of-sight prices in comparison [to like a $150K avg home sales price nationally], we’re slamdunk FAR worse for investors to even consider.

    Rebuttle?

    Rate this comment: Thumb up 0

  17. 19
    ray pepper says:

    Lots of pent up demand on the “Gems” here in Washington/NV. I see it at the Trustee Sales and conventional sales here and in Nevada. All the great deals are gone FAST. Lots of liquidity out there scrambling…………..However, the BIG news is what underwater homeowners (who have not paid on their mortgage) are getting offered now to short sale……….

    15k with Chase just arrived via email from 3 investor/owners and appears they are “partnering” up with their tenants and letting em go…WOW, the REO’s will be MASSIVE in 2013 and BEYOND.

    Only in America………………..

    (I’ll send u some copies Tim if you desire for your readers…lemme know)

    Rate this comment: Thumb up 0

  18. 21
    robotslave says:

    @2

    Tim, I read @1 as Pegasus needling you a bit for what would seem to be a very obvious bit of potential psychological bias: your own. Having recently purchased a house, you’d be more likely to look for evidence that the market is nearing bottom.

    In a rational world, we’d expect the opposite: look for a bottom, then buy. This not being a rational world, we tend to do things the other way around as well.

    I’m sure that you, of all people, try to be aware of your own potential biases; it struck me as just a bit of good-natured ribbing, not a serious accusation of slanted outlook.

    Rate this comment: Thumb up 0

  19. 23
    Pegasus says:

    RE: Scotsman @ 20 – I guess I could have listed the recent Buffett real estate pump but it was too disgusting. I don’t know how much more real estate prices will fall. 2012 could be an up year. After all it’s an election year and Obama has many more promises to make to voters. I do know you still have lots of potential homes to enter the market of people wanting out, short sales and foreclosures and we still have an over-abundance of surplus housing that is slowly correcting itself. Years ago I projected that we would need to see sub 4 percent mortgage rates and we are finally there. If we maintain that or close to it for a few more years that will help real estate prices as the debt gets transferred onto the backs of others. That is a much better solution, banker-wise, than equity write-downs. All of this means nothing if the economy falls backwards. If unemployment ramps , we will see more distressed housing entering the market and that will create a watershed event. If that happens then housing prices will drop substantially because, after all, we need people able to buy them, don’t we? Hard to do that while being unemployed or underemployed and it is even harder to pay your mortgage if you have one. Even if we don’t fall backwards it is going to take years to heal those financial nightmares that many are in and to allow for their credit scores to improve.

    Rate this comment: Thumb up 0

  20. 24

    Just a couple of things:
    The Time article was published in June, 2005. That certainly indicated to me that we were at the top, but the top wasn’t here in Seattle for another two years, and I looked like an idiot telling people then that the real estate market was about to crash. Supposing you bought a house here in Seattle in June of ’05 and sold it two years later? You’d have done good. But like Barbie says ” Math is hard.”
    Timing ain’t easy either, and while we’re certainly near the bottom, it could still be another 18 months to 2 years, who knows?
    The other thing is: While the mainstream media is pretty down on home ownership right now, real estate agents are still whistling the same “buy now” tune, albeit with a few variations. They’re not saying ” Buy now or you’ll be priced out forever”, it’s more like ” The combination of historic low interest rates coupled with home prices that are at seven year lows make this a unique buying opportunity.” Or ” We’ve definitely hit bottom.” Why? Cause some real estate agent told me?

    Rate this comment: Thumb up 0

  21. 25
    StillRenting says:

    Lately the message I’ve been hearing from my acquaintances (regular folk, none in the real estate industry) has been more along the lines of “now is a great time to buy, interest rates are low, prices are low, etc.” Hardly anyone I know thinks “renting is a better idea than buying,” except for my parents who are still fairly pessimistic about where the economy will be in the next few years. I’m waiting to buy for a year or two, not because I’m trying to time the bottom of the market, but simply because now is not a good time for my family to make a big move.

    The Atlantic article about why young people aren’t buying is interesting. High student loan debt (which is a big problem and probably the next bubble that is going to burst) combined with high rates of unemployment and lower wages/salaries are all bigger factors in low ownership rates than perceptions of housing as an investment. As this current generation of young adults age, their overall wealth at any given stage of life will be lower than that of previous generations because they will be starting out lower. I suspect this will continue to affect their rates of home ownership as they move up the generational hierarchy.

    Rate this comment: Thumb up 0

  22. 26
    Pegasus says:

    RE: softwarengineer @ 17 – We already shafted a large supply of first-time home buyers with the tax credit three card monte game we played on them. If anything, since most first-timers are not financially in the best of shape due to limited savings, college debts and career paths, they are most likely to become first-time short sellers or foreclosurees if the economy softens and they lose their jobs.

    Rate this comment: Thumb up 0

  23. 27
    jws says:

    RE: Xizor @ 12

    Great comment. Completely agree 100% about real estate looking attractive vs. other investments now (considering the stock market has almost regained all that it lost 5 years ago). And you bring up an important point about the possibility of high inflation. Many people don’t realize that owning a home has a huge advantage (vs. renting) in times of high inflation. Taking into consideration how many trillions have been pumped in by the Fed, I would not be surprised to see above-average to high inflation 5+ years from now.

    Borrow @ 4% and lock in a low mortgage payment that will stay the same for 30 years regardless of how high inflation is? Yes please, thank you very much.

    Rate this comment: Thumb up 0

  24. 28
    The Tim says:

    RE: Colonel Sanders @ 22 – That is the most delightfully bizarre comment I’ve seen on here in a while. Bravo, sir.

    Rate this comment: Thumb up 0

  25. 29

    RE: The Tim @ 28
    Aha! So Obama is a socialist, and The Tim is a communist! That makes perfect sense. And The Illuminati, the Masons, and The Trilateral Commission are also no doubt manipulating any data we read anyway, so you just can’t believe anything or anybody anymore ( except me).

    Rate this comment: Thumb up 0

  26. 30
    David Losh says:

    RE: bd @ 13

    Investment means where you would put your money for a return. Housing units, or Real Estate is tapped out.

    If you own a business it makes sense to buy a place to operate that business rather than rent. If you own a home it makes sense to pay it off.

    Beyond that there are millions of other opportunities today.

    Rate this comment: Thumb up 0

  27. 31
    Pegasus says:

    RE: jws @ 27 – What happens in five years and you need to sell, your mortgage most likely has a “due on sale” clause and interest rates are at 10 percent because the FED wants to “fight inflation” before it becomes a problem? Do you think that might be a problem especially since it will cost you about 10 percent of the value to sell it? Don’t forget that house prices today still sit far above historical inflation adjusted prices and the FED is more worried about deflation right now. What happens if we actually do deflate in spite of the FED trying to ward off deflation?

    Rate this comment: Thumb up 0

  28. 32
    Pegasus says:

    RE: Colonel Sanders @ 22 – And I thought I was bad……Comrade, you need to seek professional help immediately and no, no matter what you say, I am not one of your highly paid army of disinformation idiots attacking you on your command. Or am I? Hmmmmm. I am so confused.

    Rate this comment: Thumb up 0

  29. 33
    David Losh says:

    RE: ray pepper @ 19

    Oh, I’ll go ahead and take this head on, because this is another comical comment.

    What people think is that they will rent from a land lord. They won’t, they don’t need to, and you point that out in every other comment you make. The only liquidity an investor has at foreclosure is to lease to own to the next sucker who will agree to the terms.

    You then say that once that “buyer” walks away that is all free money to the investment group. Well it’s not free because you still have to service the debt until you find the next person.

    Millions of land lords are in the same position. Millions of land lords have Real Estate portfolios that need renters. Well, renters can lease purchase, or buy, or take over some one else’s mortgage by a blind escrow, or partner with others to pay off a mortgage, and have actual home ownership.

    No one has to play the land lord game today where they gift a land lord money. There is a housing glut that is adding more housing units by the day. People will own housing units, it’s just not an investment.

    Rate this comment: Thumb up 0

  30. 34
    jws says:

    RE: Pegasus @ 31

    I’m assuming a buyer will not need to sell in 5 years. If someone may be forced to sell in 5 years they should not be buying a house at all. Your scenario is a problem, yes, but if you’re in it for the long haul, it could be a great time to buy.

    And I agree, deflation is a possibility just as inflation is. But as I indicated before, the Fed has pumped in trillions and I think the risk of inflation outweighs deflation (of course, I understand that one could easily argue either scenario).

    Rate this comment: Thumb up 0

  31. 35
    HappyRenter says:

    Personally, I don’t think that we have swung 180 degrees. I think that people have become more aware that home ownership can be burdensome. Unfortunately, this has come at the expense of some couples who bought because of the general belief that you should buy the most expensive house that you can afford. Hopefully, other people will learn from the experience of others and make the correct calculations before buying.

    Unfortunately, we live in a capitalistic driven society, where people easily get megalomaniacs ;) At least, it’s my feeling.

    Rate this comment: Thumb up 0

  32. 36
    Pegasus says:

    RE: jws @ 34 – My point really is due to market conditions and all of the economic uncertainty maybe it still isn’t a great time to buy? I know uncertainty creates bargains but historically housing is still not a bargain. Prices are just cheaper than a few years ago. Besides even with the best of intentions how many ever end up owning the same house for thirty years, or twenty or ten years? Very few. I think the average hold in normal markets is about 6-8 years. Life is a funny thing, even with the best of plans things change. People lose jobs, get ill, get divorced, etc and those curves in the road ahead make it impossible to plan that far ahead.

    Rate this comment: Thumb up 0

  33. 37
    The Tim says:

    By robotslave @ 21:

    Having recently purchased a house, you’d be more likely to look for evidence that the market is nearing bottom.

    I’ve stated this over and over both well before I bought and since buying, but I’ll say it again for the benefit of those that somehow missed it: I don’t personally care about “buying at the bottom.” Seriously. I bought a house because I found a home that I wanted to live in for a long time that I could afford and I felt was reasonably priced. I have zero interest in turning a profit from my home. I’m going to pay the mortgage off as quickly as I can and enjoy living debt-free and housing-payment-free.

    Where the market goes from here isn’t really something I care about as it relates to my own purchase.

    Rate this comment: Thumb up 0

  34. 38
    ChrisM says:

    RE: Ira Sacharoff @ 29

    https://www.youtube.com/watch?v=OcHNYenN7OY

    Plots are everywhere…

    Rate this comment: Thumb up 0

  35. 39
    ARDELL says:

    RE: Pegasus @ 31

    FHA mortgages have assumable rates. The best strategy for “I may have to sell when interest rates are double to 3 times higher than now” is to buy using an FHA minimum down. The buyer of your home would still have to qualify for the mortgage, but they would be able to assume your 3.75% to 4% rate. If your neighbors’ homes for sale are not assumable, and the buyer has to pay 10% while yours offers a low assumable rate, it would give you an edge and possibly a value boost as well.

    The trend is toward 20% down, but the better hedge against needing to sell when mortgage rates are much higher is an FHA minimum down.

    Rate this comment: Thumb up 0

  36. 40
    Chris says:

    Great article Tim. Here’s an analysis done by the Khan Acadamy (featured on 60 Minutes last night). Some other interesting Econ lessons in there. He favors renting, at least in the Bay Area.

    http://www.khanacademy.org/#humanities—other/finance/core-finance/v/renting-vs–buying-a-home

    Rate this comment: Thumb up 0

  37. 41

    RE: ARDELL @ 39 – Rhonda helped me run some numbers back in 2010 on where a buyer would be if they put 20% down on an FHA loan, as opposed to a conventional, the point being the FHA would be assumable.

    http://blog.seattlepi.com/realestate/2010/06/02/should-a-buyer-with-20-down-get-an-fha-loan/

    Note–5% back then seemed low!

    Rate this comment: Thumb up 0

  38. 42
    Macro Investor says:

    Hey bulls, hate to rain on your party but there’s 3 glaring problems.

    1. Most people are only at the denial stage. You’re all saying “I’m a long term investor”.

    http://www.mississauga4sale.com/Market-Emotions-Cycle.htm

    2 – Capitulation is when nobody likes real estate. Not when a decent, well priced house has multiple bidders. Get serious some time.

    3 – The shadow inventory is still 3x MLS lisings. Look at foreclosure radar for a few zip codes.

    Jump right in if you’re that bullish. It’s your financial future to ruin, not mine. The more people blow their down payments early, the more bargains I’ll have when it’s really time.

    Rate this comment: Thumb up 0

  39. 43
    Hugh Dominic says:

    By David Losh @ 30:

    Investment means where you would put your money for a return.

    Not true. All real estate is an investment, irregardless of why you bought it. Because its an estate. It’s a Real. Estate. Dirt. Passed on to your heirs as the universal medium of wealth. Hopscotch whitey pumpkin.

    /wait, which one am I?
    //Oh yeah, the smart one.
    ///Please disregard the above message.

    Rate this comment: Thumb up 0

  40. 44
    nwbackpacker says:

    +1 to Tim’s comment: “I bought a house because I found a home that I wanted to live in for a long time that I could afford and I felt was reasonably priced”

    My fiance & I have been looking at houses in Seattle for 3 years since moving here from Portland and I think in most cases (not ours) it’s more about the moment in life than some 100% rational financial decision.

    We are regularly frustrated/disappointed when we go out and look at houses ranging from $300K to $380K in this city. We love the region/culture but even for a couple that makes $130K, we feel like ‘poor folk’, LOL. Are we being to conservative? Possibly, but we rent a house in Green Lake for $1,400 a month so I feel any potential house has to ‘beat’ the current house at minimum, especially with a ~$2,400 monthly payment (only $20K saved).

    We just want a 6/10 condition house in a good school district, ~45 min (or less) commute via mass transit, at least 1300sf, 3br that isn’t a total grandma house. Is this too much to ask? (Shoreline maybe?)

    I am flummoxed as to how so many people spend such a high portion of their income on housing. Or does everyone make giant piles of Microsoft/Amazon money in this town? Obviously nationally/locally it’s shifting towards the ‘haves vs have nots’…

    Added to this is my Seattle Bubble fueled paranoia which includes demographic shifts (which will continue to put downward pressure on prices), geopolitical shifts (national debt, instability) along with instability in financial markets.

    In any event, this blog is fantastic/therapeutic and “serves as a beacon of light in the fog of current housing news/information” ©

    /rant

    Rate this comment: Thumb up 0

  41. 45
    Macro Investor says:

    By The Tim @ 37:

    By robotslave @ 21:
    Having recently purchased a house, you’d be more likely to look for evidence that the market is nearing bottom.

    I’ve stated this over and over both well before I bought and since buying, but I’ll say it again for the benefit of those that somehow missed it: I don’t personally care about “buying at the bottom.” Seriously. I bought a house because I found a home that I wanted to live in for a long time that I could afford and I felt was reasonably priced. I have zero interest in turning a profit from my home. I’m going to pay the mortgage off as quickly as I can and enjoy living debt-free and housing-payment-free.

    Where the market goes from here isn’t really something I care about as it relates to my own purchase.

    Pass a polygraph and swear on a stack of Korans and I might believe you. You are like everyone else. You say that, but inside you are hoping and praying for capital gains. You wouldn’t be normal if you didn’t.

    Rate this comment: Thumb up 0

  42. 46
    The Tim says:

    By Macro Investor @ 45:

    …inside you are hoping and praying for capital gains. You wouldn’t be normal if you didn’t.

    I wouldn’t be normal if I started a blog and spent 5+ years making spreadsheets about the housing market before I bought a home.

    Rate this comment: Thumb up 0

  43. 47
    Peter Witting says:

    RE: nwbackpacker @ 44 – Wait, what is a “total grandma house”? It’s a great description of something, but I just can’t conjure up a mental picture.

    Rate this comment: Thumb up 0

  44. 48
    FenceSitter says:

    RE: Peter Witting @ 47

    How about this one? We saw it at an open house and it was even more grandmotherly inside – lace doilies and all.

    http://www.redfin.com/WA/Seattle/8056-11th-Ave-NE-98115/home/108914

    (sorry – forgot link)

    Rate this comment: Thumb up 0

  45. 50
    nwbackpacker says:

    By Peter Witting @ 47:

    RE: nwbackpacker @ 44 – Wait, what is a “total grandma house”? It’s a great description of something, but I just can’t conjure up a mental picture.

    Rightly or wrongly, I’ll assume this is a serious question.

    By ‘grandma house’ I don’t mean simply old (prefer 20’s-50’s era), but outdated/retrofitted in the worst possible ways: pink/green bath/toilet, knob & tube wiring, 30+ y/o appliances, wood paneling, awkward rooms/spaces, windows in disrepair, decaying wallpaper, bad insulation, uneven floors, oil heating, there are many other items we’ve all seen…cumulatively it represents a giant, soul destroying project I just don’t want to have any part in.

    And I actually ENJOY DIY projects believe it or not.

    Rate this comment: Thumb up 0

  46. 51
    WannaBuy2012 says:

    Some of the comment contributors on here seem to be quite different from the friends in my social circles. There are quite a lot of us out there who do not measure our happiness or success by how much money we make per year or even the appreciation rates of our property.

    Like most hard working folk with a modest income, I would hate to lose a bundle of money in my home by bad luck or through a bubble crash. I really don’t like the feeling of wasting money. I would have cried if I had bought a home in 2007. Extreme cases aside, there are certain reasonable expenses I am willing to pay to pursue my interests and create the things I enjoy most in life. I expect that renting would be the best way for us to save money over the next few years. However, renting would not satisfy the needs and interests of my family quite as much during that time. I am quite happy to spend a reasonable part of my hard earned income on things that enrich and entertain the lives of our family over the next few years.

    Making money out of our home is not a top priority, though I wouldn’t mind. Making an insanely beautiful garden weekend after weekend and watching grow for over a decade is a top priority. Having a good neighborhood near friends and relatives and other kids who my kids get to know for much of their childhood is a top priority. Being able to decide when it is the right time to move my family to another home is a top priority.

    That said, I do understand the penny pinchers and arguments for renting. You are smart. You are technically right. And you will save more for later, for kids college, or for retirement or whatever. I salute you. It’s just that some of us have different values and interests. Lots of people are going to want to buy homes pretty much no matter what happens for the foreseeable future. Go ahead, call us dreamers. It’s been a pretty good dream for most of us (who did not buy in the bubble or get stupid with refinancing).

    Rate this comment: Thumb up 0

  47. 52
    Scotsman says:

    RE: Colonel Sanders @ 49

    What the hell- I’m ordering another 1000 rounds of 9mm and a couple cases of 12 gauge shells. If you think housing decisions are tough, try visiting the self defense sites and sorting through the bias about what caliber is best or what to have in your shotgun shells. Of course, I think I’ve got the perfect combination. ;-)

    Rate this comment: Thumb up 0

  48. 53
    Scotsman says:

    RE: WannaBuy2012 @ 51

    Amen! I think you nail it. Some here can’t get it through their heads that a home is more than an investment. But here’s the kicker: Even if you buy now and lose a third of its’ value in the end you still win and get a return when the house is paid for and you’re living rent (but not tax) free. It’s just not what it might have been- but possibly better than expected. Plus the house is never going to be worth zero, at least in a world with some form of order and government, and it will always provide the shelter you need.

    Is it the absolute bottom, the best time to buy property solely as an investment? Probably not. But it is a great time to buy a home if you can find something you like and expect to be staying around for a while. If you spend your whole life waiting for externalities to be perfect, with perfect certainty and continuity before acting you’ll never do anything except watch the years fly by.

    Rate this comment: Thumb up 0

  49. 54
    Jonness says:

    By Scotsman @ 6:

    RE: Except hardly anyone has $500K in cash for the inverstment.

    OTOH, there is a lot of money out there looking for a return. I know numerous people with $500K or more in their self-managed retirement accounts. Sure, many people can’t identify with the dilemma, but holding large sums of cash or bonds is hurting a whole lot of people right now.

    No chance with those returns that we might be headed for a bubble in REITs? If you get in now, will you get out at the right time?

    It’s dicey, but as long as rates remain low, the returns should remain high. Then again, aapl has been a far better investment. Personally, I tend to like big innovative companies with lots of cash on hand. But I tend to buy them when everybody is fearful. You can get a much better price that way. I’m the first to admit, I have a very difficult time buying in when everybody is bullish. It scares the dickens out of me. I think my brain is wired backwards or something, but it works out well for investing.

    BTW, I recommend people stay diversified. It’s seriously risky to put all your eggs in one basket, be it cash, bonds, REIT’s, a particular stock or commodity, or leveraging your life savings into a great big fancy house.

    Rate this comment: Thumb up 0

  50. 56
    Jonness says:

    By Scotsman @ 53:

    If you spend your whole life waiting for externalities to be perfect, with perfect certainty and continuity before acting you’ll never do anything except watch the years fly by.

    How does renting a house from the bank and slowly paying it off keep the years from flying by? It seems to me, living frugally and putting money in the bank does just as good a job with slowing time. But truth be told, neither strategy works very well. Either way, our caskets are on the horizon and rapidly approaching.

    Rate this comment: Thumb up 0

  51. 57
    Colonel Sanders says:

    By Scotsman @ 52:

    RE: Colonel Sanders @ 49

    What the hell- I’m ordering another 1000 rounds of 9mm and a couple cases of 12 gauge shells. If you think housing decisions are tough, try visiting the self defense sites and sorting through the bias about what caliber is best or what to have in your shotgun shells. Of course, I think I’ve got the perfect combination. ;-)

    Are you the resident fear-mongerer who serves the purpose of making all preparation look nuts? I’ve met your twin brothers and sisters on numerous other forums. And I’ve met their ancestral sock puppets, which outnumber the regular forum users in many cases.

    Manipulation is the festering boil on the ass of Satan. You choose the road, you reach the given destination.

    Rate this comment: Thumb up 0

  52. 58
  53. 59

    By Macro Investor @ 45:

    By The Tim @ 37:
    By robotslave @ 21:
    Having recently purchased a house, you’d be more likely to look for evidence that the market is nearing bottom.

    I’ve stated this over and over both well before I bought and since buying, but I’ll say it again for the benefit of those that somehow missed it: I don’t personally care about “buying at the bottom.” Seriously. I bought a house because I found a home that I wanted to live in for a long time that I could afford and I felt was reasonably priced. I have zero interest in turning a profit from my home. I’m going to pay the mortgage off as quickly as I can and enjoy living debt-free and housing-payment-free.

    Where the market goes from here isn’t really something I care about as it relates to my own purchase.

    Pass a polygraph and swear on a stack of Korans and I might believe you. You are like everyone else. You say that, but inside you are hoping and praying for capital gains. You wouldn’t be normal if you didn’t.

    Tim is clearly young enough that he comes within the rule that I used to mention 20 years ago. It doesn’t matter if your house goes up in price, because you still need to live somewhere. The appreciation in houses only matters if you own more than one.

    The exceptions to that rule are people downsizing, and people moving outside the area (if they’re moving to a cheaper area).

    Rate this comment: Thumb up 0

  54. 60

    By Scotsman @ 52:

    RE: Colonel Sanders @ 49

    What the hell- I’m ordering another 1000 rounds of 9mm and a couple cases of 12 gauge shells. If you think housing decisions are tough, try visiting the self defense sites and sorting through the bias about what caliber is best or what to have in your shotgun shells. Of course, I think I’ve got the perfect combination. ;-)

    I’d ask you about the shot gun shells, but if you think 9mm is the optimal round, rather obviously your opinion is worthless.

    Is that what the self-defense sites are like? ;-) :-D

    Rate this comment: Thumb up 0

  55. 61

    By Scotsman @ 53:

    Even if you buy now and lose a third of its’ value in the end you still win and get a return when the house is paid for and you’re living rent (but not tax) free.

    You can sort of live tax free.

    Let’s say you have a $400,000 house that would rent for $2,000 a month and has $6,000 a year in taxes. Once the house is paid off it is effectively earning you $24,000 a year in rental income, but that income is not taxed. At a tax rate of 20%, which is rather low since that would include social security, you would basically break even on taxes. If you were renting it would take you $30,000 of earned income to pay the $24,000 in rent, so what you’re paying in real estate tax you’re effectively saving in income and social security taxes. (In actual fact, you’d likely be saving or spending that $6,000 elsewhere.)

    Rate this comment: Thumb up 0

  56. 62
    Pegasus says:

    RE: Kary L. Krismer @ 59 – The Scotsman is part of the Colonel’s “army of disinformation idiots attacking” him upon the Colonel’s command. I wonder if the pay is good and he has a good benefit package? Are they recruiting now?

    Rate this comment: Thumb up 0

  57. 63
    David Losh says:

    RE: Hugh Dominic @ 43

    My comments have to do with this particular post. It’s a good point that we are in an unusual time when buying property isn’t a good, or great investment. It doesn’t mean that you can’t buy well.

    I think about if I would tell my kids to invest in property. Of course I would. I tell them to start young, and average over a life time, because Real Estate is a life time investment, it’s generational.

    You have a problem whitey, but you don’t have a point.

    Rate this comment: Thumb up 0

  58. 64
    Peter Witting says:

    RE: FenceSitter @ 48 – Little Red Riding Hood better watch out!

    Rate this comment: Thumb up 0

  59. 65
    Peter Witting says:

    RE: nwbackpacker @ 50 – Thank you, it was a serious question. In many ways, an unrestored grandma house is better than one that has bad 70’s updating ~ but I see your point, it means buying a project.

    Rate this comment: Thumb up 0

  60. 66
    David Losh says:

    RE: Scotsman @ 52

    We all know that when the police went to 40 caliber that those would be the rounds to own for that time when the government outlaws amunition.

    Not kidding, but I think your point went over the head of the Colonel.

    Rate this comment: Thumb up 0

  61. 67

    RE: Kary L. Krismer @ 61

    Yes Kary

    And for all of you doom predictors of high interest rates [BTW, I was one of you before I knew what I was doing] soon, ya better wear tin hats; when the zombie low interest rates likely go on like in Japan, decade after decade, with real estate price depreciation, decade after decade, etc, etc….

    Soooooo….getting out from under that 4-6% fixed loan is like Kary said, its not just 4-6% of gross pay, its 4-6% of net pay [you know the money pile left your automatic mortgage payment is debitted/subtracted from]. Same goes for rent, its from your net pay. This means the 4-6% is actually theoretically a higher % chunk, if enlarged by gross pay, like 5-8%, depending on your tax rate. While your paid off debt free home has no rent/mortgage to rationalize as a good decision anyway….

    Rate this comment: Thumb up 0

  62. 68
    eastsidecoug says:

    I can sympathize with the younger first time home buyer hesitation from the Atlantic article. In general recent grads are twixters. They’re saddled with student loan debt, get their first taste of credit card debt, and the last thing they want is to be anchored down…especially in a down economy. Pre bubble, you didn’t have to worry about selling your house. Owning a home was never an anchor for mobility, because you can just put it on the market and it will sell. In 06′ I bought a condo, lived in it for 9 months, and then sold it because I didn’t like what I was seeing in the housing market. Thank goodness I did. Best decision I ever made, and I still made 10% profit on the sale. But now, buying a home is a 10 year anchor and most home buyers realize this. Until we see YOY 3% inflation applied to housing for a few years, it’s scary buying a home when you can’t really predict where you’ll be 5 years from now. It seems like in today’s job market, you need to be able to be mobile, and many young people feel this way.

    Rate this comment: Thumb up 0

  63. 69
    Colonel Sanders says:

    By Ira Sacharoff @ 29:

    RE: The Tim @ 28
    Aha! So Obama is a socialist, and The Tim is a communist! That makes perfect sense. And The Illuminati, the Masons, and The Trilateral Commission are also no doubt manipulating any data we read anyway, so you just can’t believe anything or anybody anymore ( except me).

    Aha! Ridicule! Alinsky tactic #27. Hard to defend against, but easy to identify.

    Rather than socialist or communist, perhaps focus on the word “COMMUNITARIAN” since it’s the political party that the central bankers behind the United Nations are quietly promoting in the background as the eventual “solution” to a capitalist system they ensured would no longer continue to work.

    Rather than ridicule, try self-education. Perhaps even read Niki Raapana’s deep investigative work (as a journalist) covering the COMMUNITARIAN party and who is backing it, and why.

    Watch Niki at –
    http://www.youtube.com/watch?v=bPW5rC-chDU

    Read Niki at –
    http://nikiraapana.blogspot.com/

    Ridicule results in Truth, ultimately. Alinsky forgot to mention that part. Ooops!

    Rate this comment: Thumb up 0

  64. 70
    ella says:

    But see this study…. “Americans More Confident in Housing Recovery” http://www.bloomberg.com/news/2012-03-13/americans-grow-more-confident-in-housing-recovery-survey-shows.html

    Rate this comment: Thumb up 0

  65. 71
    bill wald says:

    Two observations. First, a house is only the place where you live and prior to this bubble never was a way to get rich. Yes, if a person lives 30 years in a house he owns in Seattle he will still probably be able to sell out and move to Montana or North Dakota with a big chunk of cash. How many want to do that? Big cities are the perfect place for most old people.

    Second, location, location, location. Buying is generally the only way to get into a good neighborhood for raising kids. Young people don’t want to buy because they don’t want to marry and raise a family. Young people don’t understand the long term advantage of good neighbors.

    Rate this comment: Thumb up 0

  66. 72

    By Peter Witting @ 65:

    RE: nwbackpacker @ 50 – Thank you, it was a serious question. In many ways, an unrestored grandma house is better than one that has bad 70’s updating ~ but I see your point, it means buying a project.

    Often they kept up the house rather well, it’s just that the interior is way way way out of date.

    What’s sad is when you can tell they did keep up the house well, but then got too old (or too limited of resources) to continue to maintain the house in the way they had over the prior decades they owned it.

    Rate this comment: Thumb up 0

  67. 73

    RE: softwarengineer @ 67 – One other tax benefit of paying off the mortgage. You still get the 10k+ standard deduction, but you’re getting that tax break without spending all of the money (although in my example you would be spending 6k on real estate taxes, which would ordinarily go against the 10k).

    Rate this comment: Thumb up 0

  68. 74

    RE: Kary L. Krismer @ 73

    The Big Benefit

    Man does your savings account grow much faster when you no longer pay rent or mortgage. You also mentioned having cash for home repairs/updates….my roof is due in a few years [maybe sooner], facing retirement or pre-retirement years without an early retirement income [paid off mortgage] makes doing work on your home or buying replacement cars a more likely monthly payment debt burden, versus paid in full with saved cash. If you buy a new car or pay off your home mortgage with cash, your home/car insurance goes down too, my PEMCO policies did anyway, substantially too.

    Rate this comment: Thumb up 0

  69. 75
    ray pepper says:

    RE: softwarengineer @ 67

    so many links/reasons to NOT pay off your mortgage that I don’t have the time to begin preaching but heres just one quick link..CNBC/Bloomberg have many more: http://lenpenzo.com/blog/id1131-12-good-reasons-why-you-should-and-should-not-pay-off-your-mortgage-early.html

    http://www.youtube.com/watch?v=FobKgvEXhNo&feature=related

    Rate this comment: Thumb up 0

  70. 76

    RE: ray pepper @ 75 – About the only one of those that would make sense for someone in the position we’re talking about is employer matching on retirement accounts.

    Most of the rest are sort of duh, and you could think of many more. For example: You haven’t eaten for five days, and are hungry.

    Rate this comment: Thumb up 0

  71. 77
    Scotsman says:

    RE: David Losh @ 66

    Yup, I think a lot goes over the head of the Colon, er Colonel. So far, kind of a one trick pony- no pink.

    In the caliber debates the bottom line seems to be that nothing short of a shotgun can be relied on to stop an agressor. Next step down is a well placed shot, and lighter 9 mm loads have the potential to be more accurate. Even James Bond chose potential accuracy over raw power, and he was the best, right? ;-)

    Rate this comment: Thumb up 0

  72. 78
    ray pepper says:

    RE: Kary L. Krismer @ 76

    Kary, I never advise anyone to pay off their mortgage and have not closely followed this thread. Can you summarize when you or maybe software engineer would advise people to pay off their mortgage early? (in what type of scenario…because other then “it helps people sleep better at night”) …I cannot recommend ANYONE paying off their mortgage in a deteriorating asset environment where liquidity is essential and can be VERY profitable…But, I’d like to hear a few examples..Also with the assumption the tax incentives of a mortgage deduction remain the same as they are now….Not to mention so many other reasons and benefits of carrying a mortgage …for exp and critically important..asset protection..http://www.reiclub.com/realestateblog/what-is-asset-protection/

    Rate this comment: Thumb up 0

  73. 79
    homeowner says:

    It’s not only unemployment and lower wages that leave people less able to pay for housing–it’s medical costs that go up double digits each year. Our insurance costs are killing us…and the out of pockets are as well. I don’t think this economy or housing will ever recover unless health costs are addressed. From a recent WA post article:

    “In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978. If we had the per-person costs of any of those countries, America’s deficits would vanish. Workers would have much more money in their pockets. Our economy would grow more quickly, as our exports would be more competitive.”

    http://www.washingtonpost.com/business/high-health-care-costs-its-all-in-the-pricing/2012/02/28/gIQAtbhimR_story.html

    Rate this comment: Thumb up 0

  74. 80
    Scotsman says:

    RE: ray pepper @ 78

    Debt is risk. Mortgage payments are almost always the largest drain on monthly income and fund a critical need- shelter. By paying off your mortgage you eliminate the risk of losing everything when your income stream is interrupted, which it will be at some point in life.

    Debt only makes sense when it generates a return greater than the interest cost associated with it, for example when purchasing a rental or other income generating purchase. Otherwise, all it does is allow you to purchase today, at greater cost, what you could more easily and cheaply purchase tomorrow. And as the greater cost consumes future income it limits what you can purchase tomorrow. But with two generations of consumers now immersed in the concept of “gotta have it now” nobody really believes this.

    Rate this comment: Thumb up 0

  75. 82
    billybeer says:

    Regarding the article from the Atlantic on young buyers from 1980-2000, there are some serious demographic issues we will be facing for several decades:

    1. Couples are getting married later in life and in most major cities it isn’t possible for a single person to own a house (condo, perhaps).
    2. Disposable income has held flat for the majority of Americans yet health care and college tuition have increased at ~9% annually for the last decade.
    3. The current “young” generation of potential home buyers have an astronomically high debt load compared to past generations. I know multiple people in their mid-late twenties with $50-100K in student loan debt. Many are just coming to terms with the fact that it has to be payed back. Not to mention that the bankruptcy laws have changed and it’s nearly impossible to discharge student loan debt….

    So in short, the younger generation has excessive debt, less disposable income and must fight rising prices. These issues alone could explain their lack of buying, rather than a sign that the bottom is in.

    Rate this comment: Thumb up 0

  76. 83
    Ray pepper says:

    RE: For Real @ 81 – nice post! Btw there will be no “bottom” until they all get repriced at current market value. Until then we slide sideways for many years to come with many bumps along the way!

    Rate this comment: Thumb up 0

  77. 84

    RE: Colonel Sanders @ 69
    Most people have no idea who Saul Alinsky was, but just accept that being called an ” Alinsky radical” is a very bad thing. Alinsky fought for better working conditions for workers in the 1930’s, and for things like libraries and community centers in ghetto areas. His tactics were unsual.
    “After organizing FIGHT (an acronym for Freedom, Independence [subsequently Integration], God, Honor, Today) in Rochester, New York,Alinsky once threatened to stage a “fart in” to disrupt the sensibilities of the city’s establishment at a Rochester Philharmonic concert. FIGHT members were to consume large quantities of baked beans after which, according to author Nicholas von Hoffman, “FIGHT’s increasingly gaseous music-loving members would hie themselves to the concert hall where they would sit expelling gaseous vapors with such noisy velocity as to compete with the woodwinds.”
    How could you not like a guy like that?

    Rate this comment: Thumb up 0

  78. 85
    Dorothea says:

    RE: Scotsman @ 77 – Oh, absolutely, shotguns are THE standard for home defense. I stick to 12 gauge so I only need one size shell for all of them.

    I also like a small revolver – having had several semi-autos, I am more confident that I will be able to quickly and safely handle my .38 over a 9mm or 0.40 in a pressure situation.

    Rate this comment: Thumb up 0

  79. 86
    Rumpole says:

    RE: Ira Sacharoff @ 84 – Yes, but how does a “fart in” tie back to the UN’s plan to eliminate private property rights? And to the Obama birth certificate conspiracy? Don’t tell me they aren’t related somehow.

    Rate this comment: Thumb up 0

  80. 87
    eastsidecoug says:

    Aren’t we also missing the whole financials here for home buyers? Many buyers out there simply couldn’t buy a house if they wanted to, unless they get a FHA loan and get stiffed with PMI and prepaids. It’s not that I necessarily believe prices in Seattle are too high (well they’re still high, but there’s many economic factors for this). If anything, I think the data shows we’re trending behind inflation over the past 12 years. Where prices stabilize to quiescent states is still up for grabs. If the median income earner threw down 20% down on the median home price, they’ll more or less be paying less than the equivalent rent and would be reasonably comfortable with the debt. The problem I see people simply do not have 20% down and have totally forgotten how to save money to have 20% down payment. The great recession helped reset people’s financial priorities, but there’s a vast swath of Seattle residents who simply aren’t going to have 20% saved up for a down payment for a while. Low supply of ready willing and able buyers and a miserly supply of good homes further push prices down. I think another factor is more sellers are giving up on the idea selling their homes at such losses and putting them up for rent instead to try and make something out of nothing. You can’t blame a seller that do this. Who want’s to take in the shorts in this market? If I had to transfer my job down to Mountain View, CA next month, there’s no way in hell I’d sell my home. I’d rent it out at a slight loss and grin and bear it. There is a low bar where sellers simply cannot afford to yield, and we all know a home is only worth what someone will pay for it, but also what the owner is willing to accept.

    Rate this comment: Thumb up 0

  81. 88
    Scrawny Kayaker says:

    To play off Kary’s last post: Colon Sanders sounds like s/he/it hasn’t eaten in five days, but subsists on a diet of Red Bull and Mt. Dew.

    Rate this comment: Thumb up 0

  82. 89
    Scrawny Kayaker says:

    @85 Maybe if you live alone. Even bird shot can make a real mess of anyone in the next room:

    http://www.youtube.com/watch?v=CSOWpy5OKSc

    Shot doesn’t spread out enough to make aiming any easier than a single projectile, unless you live in a small aircraft hanger. What is the point?

    Rate this comment: Thumb up 0

  83. 90
    Pegasus says:

    RE: Scrawny Kayaker @ 88 – Me thinks that Komrade Sanders is mixing Red Bull with Wódka.

    Rate this comment: Thumb up 0

  84. 91
    Scrawny Kayaker says:

    RE: Pegasus @ 90

    You win!

    Rate this comment: Thumb up 0

  85. 92
    One Eyed Man says:

    RE: Pegasus @ 90

    I pretty sure its burbon and Koch-a-Kola.

    Rate this comment: Thumb up 0

  86. 93
    Pegasus says:

    RE: One Eyed Man @ 92 – Is that a petroleum based Kola?

    http://thinkprogress.org/report/koch-oil-speculation/

    Rate this comment: Thumb up 0

  87. 94
    indigo says:

    From the quoted Atlantic article: “The decline in young home owners is a puzzling trend. Interest rates have steadily declined over the last 30 years. Mortgage lending has loosened.”

    Really?! How are they defining “loosened”? Was that article really written in Feb. 2012, or is it a semi-reworked piece from 2006? It’s possible to find quotes claiming just about anything, but they don’t always mean much.

    And, RE: nwbackpacker @ 44 – You say you’re a couple that makes $130K with only $1,400/mo. in rent, but has only saved $20K, and you’re “flummoxed as to how so many people spend such a high portion of their income on housing”? I’m stunned that you’re only paying 12.9% of gross income on housing and yet you’ve only been able to save $20K. I’m a single guy earning about half your combined salaries, paying $100/mo. more in rent, but I’ve been able to save several multiples of $20K in just a few years of careful saving. It’s just a matter of priorities; you don’t sound like a candidate for a home purchase — and you must have some pretty expensive hobbies! :o)

    Rate this comment: Thumb up 0

  88. 95
    whee says:

    Most DINKs don’t live on one income and save the second. They live on both incomes and save a few hundred a month averaged out over the whole year, if they do save (outside of forced-saving via 401ks/iras/etc).

    Rate this comment: Thumb up 0

  89. 96
    nwbackpacker says:

    By eastsidecoug @ 87:

    The problem I see people simply do not have 20% down and have totally forgotten how to save money to have 20% down payment. The great recession helped reset people’s financial priorities, but there’s a vast swath of Seattle residents who simply aren’t going to have 20% saved up for a down payment for a while.

    So true. It would take us a while to get to 20% down ($70K in savings) on a $350K house; we’re only a third of the way there. I wonder what percentage of people pay 20% down or more in Seattle…90%? Lower?

    Rate this comment: Thumb up 0

  90. 97

    By ray pepper @ 78:

    Kary, I never advise anyone to pay off their mortgage and have not closely followed this thread. Can you summarize when you or maybe software engineer would advise people to pay off their mortgage early? (in what type of scenario…because other then “it helps people sleep better at night”) …I cannot recommend ANYONE paying off their mortgage in a deteriorating asset environment where liquidity is essential and can be VERY profitable..

    First, I don’t offer advise on when to pay off a mortgage early. If someone asks I’ll mention some basic strategies on how to do that.

    Second, the declining value of the asset has little or nothing to do with it.

    Third, as to your link there are legitimate ways that you can tie up assets, and some of them actually work without getting you in trouble. There are actually lawyers that specialize in that sort of thing. I would never trust the advice of a non-attorney on such subjects, because whether or not they work is dependent on both state and federal law, particularly bankruptcy law.

    Rate this comment: Thumb up 0

  91. 98

    By homeowner @ 79:

    It’s not only unemployment and lower wages that leave people less able to pay for housing–it’s medical costs that go up double digits each year. Our insurance costs are killing us…and the out of pockets are as well. I don’t think this economy or housing will ever recover unless health costs are addressed.

    It’s going to get worse. Read the health care thread here. Obamacare will be like throwing gasoline on the fire when it comes to health care expenses.

    Rate this comment: Thumb up 0

  92. 99

    By Scotsman @ 80:

    RE: ray pepper @ 78 – Debt is risk. Mortgage payments are almost always the largest drain on monthly income and fund a critical need- shelter. By paying off your mortgage you eliminate the risk of losing everything when your income stream is interrupted, which it will be at some point in life.

    It’s not quite that simple. Not having a mortgage will allow you to go longer without cash flow, but if you end up with a judgment against you, having a mortgage might prevent the property from being executed upon.

    Rate this comment: Thumb up 0

  93. 100
    The Tim says:

    By nwbackpacker @ 96:

    I wonder what percentage of people pay 20% down or more in Seattle…90%? Lower?

    So far in 2012, in King County that would be a surprisingly high 68% of buyers. In Seattle proper, it’s slightly higher at 69%. Just 5% of buyers are putting zero down lately in King County.

    The low was in 2006, when just 47% of King County buyers put down 20% or more (49% in Seattle), and 23% of buyers put zero down.

    Rate this comment: Thumb up 0

  94. 101
    HFNY says:

    Renting is great until the landlord decides to increase your rent 10% and you either have to suck it up or move. Moving has it’s own costs and there’s no guarantee that the landlord won’t raise rents after another year as well.

    Basically, there is hard and fast rule in terms of home ownership and/or renting. I rented various places for 10 years after college and then bought a house last fall that had been sitting on the market for two years and had gone into contract and fell out of contract once already but that has been my particular situation over the last decade.

    For renting, my advice would be to expect your rents to increase at the minimum, 5% a year for the next two years, perhaps even 10% if you live close to downtown Seattle. Landlords aren’t in the business of altruism, know that supply is tight until early 2014, and want to take advantage of a lack of units, at least until a flood of supply hits the market in a couple of years. If your rent is $1400 a month for a 1 bedroom, can you handle it going up to $1540 at the time of renewal and then up to $1620 after another year?

    For home buying, I’d say don’t buy more of a house than you need. It’s rather obvious but some people fall for a house pumped up on interior square footage and then kick themselves in the summer time when their yard is 50 square feet but their house is 3,500 sq ft. I also consider a Freddie Mac/Fannie Mae backed mortgage as an inflation hedge. I hate that the Fed Government 3,000 away is involved in the housing market, but I also hate that the Fed has electronically been creating money out of thin air to monetize the debt. If you borrow $300,000 now, inflation will make the burden of paying it back easier. A month $2,200 mortgage payment will remain constant but your salary or earnings with inflate along with general inflation (not at the exact same time since wages are “sticky” and take time to be negotiated upwards to compensate for general inflation).

    In sum, there should be no hard and fast rule about ownership vs. renting. No one has the same investment profile and same portfolio allocation so why should everyone rent now or everyone buy now? Basically, I find the blanket assertions about all of this rather silly.

    Rate this comment: Thumb up 0

  95. 102
    Lucas Roth says:

    I look at buying a single family home as the same thing as renting. It makes sense in some circumstances. There are definitely some foreclosures for sale whose all in costs (mortgage, PMI, insurance, taxes, etc.) would be comparable to renting but only after a rehab (done with a rehab loan of course) and only after clawing your way to the home past all the cash buyers out there.
    An entirely different category is buying a multi-family (2-4 unit) property. I just bought a triplex with my wife. Rehabbed two units already. We live in one and the renter in the other pays our mortgage and PMI. The other unit will be ready in a week or so and will definitely cover insurance, taxes, vacancy, maintenance, etc, etc and put 2-300 in our pocket every month.
    Is it a good time to buy? For me it is hell yeah. I’m scaping together for my next one.

    Rate this comment: Thumb up 0

  96. 103
    Pegasus says:

    Golly you sound just like a hedge fund from New York that is starting to buy rental homes from captured government entities at a steep discount to real value with little or no risk while the taxpayer picks up the tab. You sound just like an investment banker projecting cash flow increases of five to ten percent per year when the renters’ real wages who would pay that rent are declining. Go make your pitch in another city. Maybe one like Vegas where there are tons of gullible people.

    Rate this comment: Thumb up 0

  97. 104
    David Losh says:

    RE: bd @ 13

    The stock market isn’t the only option, and I didn’t say that it was. The post is about investor dollars. Where are investor dollars going to go?

    Rate this comment: Thumb up 0

  98. 105
    Jonness says:

    By Scotsman @ 53:

    Amen! I think you nail it. Some here can’t get it through their heads that a home is more than an investment.

    I disagree. 99% of people here fully understand buying a home is first and foremost a form of mental masturbation often practiced by those without anything else in their lives to look forward to or feel joy about. The other 1% are investors who have hot-looking girlfriends with good jobs.

    And 99% of those who bought into the “house is more than an investment” philosophy back in 2007 will tell you they are dead sick to their stomachs for having wrecked their financial futures.. The other 1% are liars.

    BTW, aapl hit a new record high today, up 3% from yesterday. It’s now at $568, and I’m rapidly approaching a double in less than a year. That will buy a whole lot of mental masturbation that won’t require 30 years of debt slavery to pay for.

    Moral of the story: Investing is a whole lot more than investments.

    Rate this comment: Thumb up 0

  99. 106
    whatsmyname says:

    RE: Jonness @ 105
    Money is great, but it is a means to an end. Without a bigger focus and a greater goal, all the money in the world won’t buy you out of the shallow end of the pool.

    Rate this comment: Thumb up 0

  100. 107
    Jonness says:

    BTW: In the above post, I’m not trying to be insulting to those who want to buy a house. I want to buy a house too. In fact, I’m currently in the market for the house. My point is, people get excited, and they start seeing backwards. The truth is, a truly good investment is a whole lot more than a house. So make sure your house is a truly good investment.

    Rate this comment: Thumb up 0

  101. 108
    Scotsman says:

    RE: Jonness @ 105

    Congrats on your investment!

    A guy I knew like to say that when your fridge is empty and the cupboard’s bare all you think about is food. But when you’re used to seeing both as full to overflowing pretty soon food never crosses your mind and you start looking around to see what else may be going on. Friends, family, your health, causes you believe in, there’s a whole world full of other adventures out there besides wondering if your home is an optimized investment. Bottom line, if you buy something you can truly afford it will never be anything but a pleasure. Not everyone is willing to live in a trailer in their bud’s back yard until all is perfect in the world. But to those who want to give it a try- go for it!

    Rate this comment: Thumb up 0

  102. 109
    Jonness says:

    By whatsmyname @ 6:

    RE: Jonness @ 105
    Money is great, but it is a means to an end. Without a bigger focus and a greater goal, all the money in the world won’t buy you out of the shallow end of the pool.

    I spent most of my life as a starving artist creating and inventing the future. You are preaching to the choir.

    However, I suggest you take a long look at your claim, and ask yourself, if money isn’t all that important, why would you lock yourself into 30 years of indentured servitude just to get your hands on more money than you are capable of earning from your day job?

    The truth is, in most cases, it requires a certain amount of money in order to achieve your greater goal. If that money is nothing more than debt financed by indentured servitude, say goodby to freedom and autonomy and say hello to your new life as a slave.

    Rate this comment: Thumb up 0

  103. 110
    whatsmyname says:

    RE: Jonness @ 109
    I didn’t say money is unimportant. I said money great; just not for its own sake.

    I am frankly unsure how 30 years of mortgage payments makes one more indentured than a lifetime of rental payments. I’ve been here a while. I like my home; I got to live how I wanted, and if it fit in with my plans, I could sell in this market and walk away with cash. What kind of slavery is that? Have I mentioned the people who lived for the future, and then forgot not to have a heart attack first?

    Rate this comment: Thumb up 0

  104. 111
    Jonness says:

    By Scotsman @ 8:

    Bottom line, if you buy something you can truly afford it will never be anything but a pleasure. Not everyone is willing to live in a trailer in their bud’s back yard until all is perfect in the world. But to those who want to give it a try- go for it!

    To each his own. I have my own trailer. Can I move it into your yard? BTW, I have tons of musical equipment that I’ll need to store in your basement. I promise not to practice after 10pm, and I will not play more than 12-hours-per-day.

    Give me the address, and I’ll swing by later. I’ll repay you by providing backstage passes to the main stage at the 2012 Seattle HempFest. Bring your own bong!

    http://www.shol.com/agita/pigs.htm

    Rate this comment: Thumb up 0

  105. 112
    HFNY says:

    For what it’s worth, I meant there is “no” hard and fast rule.

    Rate this comment: Thumb up 0

  106. 113
    Scotsman says:

    RE: Jonness @ 111

    Deal! But you’ve got to play for my summer lawn parties. ;-)

    Rate this comment: Thumb up 0

  107. 114
    Colonel Sanders says:

    By Scrawny Kayaker @ 88:

    To play off Kary’s last post: Colon Sanders sounds like s/he/it hasn’t eaten in five days, but subsists on a diet of Red Bull and Mt. Dew.

    Oh no, I did it again. I ignored your Alinksy ridicule strategy and posted more hard facts — what to do?? Maybe create more aliases and use more unethical, manipulative ridicule? Maybe call the Tavistock Institute for some guidance?

    For anyone wanting to understand the how and why of UN Agenda 21 and its war against private property rights, please check out this information:
    http://www.freedom.org/board/articles/lamb-906.html
    http://www.freedomadvocates.org/articles/private_property/

    Have a nice day!

    Rate this comment: Thumb up 0

  108. 115
    Jonness says:

    RE: whatsmyname @ 110

    It’s interesting how many people equate not owning a house to not being alive. And then a fair amount of others feel that the opposite is true, and as soon as you stamp that microchip into your forehead, you lose your soul.

    I’m not saying don’t buy a house. I’m saying, don’t be a slave to your debt payments. I own a modest home free and clear. It’s a nice way to live. If you spend your entire life making interest payments, you can never know what it’s like to be free from the burden. Since most people aren’t born rich, a good way to pay off the house early is to live frugally and save up a big down payment before buying it. Then buy within your means.

    Rate this comment: Thumb up 0

  109. 116
    whatsmyname says:

    RE: Jonness @ 115
    I’m impressed. In post 107 you want to buy a house. By post 115, you already own one free and clear.

    If paying interest bugs you, you are right not to do it. But you and I will pay something for shelter as long as we live because there is always taxes and maintenance. I don’t mind throwing in a little P&I as well. I’m hardly over-leveraged, and I’m sure there are plenty of bubble readers paying more in monthly rent. I did my frugal years, and I also did a large down payment, and I also don’t want to be caught with no choices, so I’m with you there. But we are both old enough to have known people who were consumed with building their net worth. I don’t want to die with a big bank account and a small experience account.

    Rate this comment: Thumb up 0

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please read the rules before posting a comment.