Americans Shun Cheapest Homes in 40 Years as Owning Loses Appeal

[marmar]

(Bloomberg) Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.

In the end, she decided it wasn’t worth it.

“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”

The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership. At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent. ............(more)

The complete piece is at: http://www.bloomberg.com/news/2011-04-19/americans-shun-most-affordable-homes-in-generation-as-owning-loses-appeal.html

[MannyGoldstein]

1. It's not cheap at all - the figures are screwy

Ask most anyone who purchased a house in the 1970s, and they'll tell you that they paid one or two times a single yearly salary for it. Today, is many times more than that.

More cooked numbers.

[muriel_volestrangler]

4. They're claiming it's because interest rates are low

Recent numbers, and their formula, are here: http://www.realtor.org/research/research/housinginx

But they don't go back before 2008 - you have to email them for earlier figures.

[lumberjack_jeff]

11. Interest rates do matter.

I paid $47,500 for my first house in 1985. The interest rate was an excellent 11.18%. IIRC that was $550/month. If you triple the price, at today's interest rates the payment is about the same.

[notesdev]

6. Yep

historical average is ~ 3.1x yearly salary. We hit over 10x at the height of the bubble, so when prices are a third of what they were then we'll be back in somewhat normal-price territory.

[liberal N proud]

2. I will not buy anything I can't pay for in 15 years

Most house prices today require 30 years to pay at even a decent salary. Too many people are worried about their jobs and having the stain of foreclosure on their credit record.

[Davis_X_Machina]

3. You'll just have to sell it when you move...

...and you'll have to move when and where your job goes.

Eventually all 300 million of us will live in one apartment complex, a spec-built, non-code-compliant, sheet-rock Shangri-La on the outskirts of Dothan, Alabama, enjoying the low-tax, low-service, low-regulation, low-education, high-high-profit, $11.65-an-hour-and-no-bennies part-time new American dream

[L. Coyote]

5. "owning loses appeal" code for "there are no loans available for non-elites"

People didn't buy homes in the middle of the last depression either!
But they did not publish this sort of delusional tripe for a rationale.

[RC]

7. The very real possibility of a bogus title doesn't help things.

[msongs]

8. banks are refusing to sell repos at market rates = lots of buyers who cannot buy nt

[WatsonT]

9. Good. The idea that everyone should own a home is a horrendous notion

if you have the money and time to invest yes it can be a sound investment.

Otherwise it's an anchor you can't easily remove that prevents you from moving away and finding better employment.

[Coyote_Bandit]

10. Aside from obtaining financing

there are some real problems with buying a home.

Property taxes and homeowner's insurance are becoming prohibitvely expensive. About 10 years ago I bought a small old home that needed some work. Paid cash for it. In the last decade I have paid 30% of the purchase price of the home just in homeowner's insurance and property taxes. That's crazy.

I have made necessary repairs to the home. The house has held its market value - but it has not appreciated. To date, those repairs have cost less than a decade of financing a mortgage on the same house - or paying rent for even a small apartment. But I have done all of my yardwork and all the repairs and maintenance I could do myself. Maintenance and repairs can be very expensive.

If you want a small home you likely are going to have to have it custom built and that carries extra expense. Personally, I do not want a large house. I don't want to insure it. I don't want to pay property taxes on it. I don't want to have to heat and cool it. I don't want to have to clean and maintain and furnish it. I don't want a postage stamp size yard or a house located 8 feet from the nieghbor's house. In 50 years the size of the average house has doubled.
In 1960, the average square footage of a single family home was 1,200 square feet.
In 1970, the average square footage of a single family home was 1,500 square feet.
In 1980, the average square footage of a single family home was 1,595 square feet.
In 1990, the average square footage of a single family home was 1,905 square feet.
In 2000, the average square footage of a single family home was 2,265 square feet.
In 2001, the average square footage of a single family home was 2,330 square feet.

If you want a home that is energy efficient with energy saving features then you likely are going to have to have it custom built.