Rent Vs. Buy: Myths That Ruined the Housing Market

[El Pinko]

http://efinancedirectory.com/articles/Rent_vs_Buy_Myths_That_Ruined_the_Housing_Market.html

Rent Vs. Buy Myths That Ruined the Housing Market
Published Feb 06, 2008 | RSS Feed | Text Size
Potential buyers bought into all sorts of rent vs. buy myths to justify buying houses that they could not afford during the boom. Now that the U.S. housing market is in shambles, people are starting to realize that renting may not be a dirty word after all.

Myth #1: Renting is Like Throwing Your Money Away
Buyers throw their money away for the first five years they own a home, because they simply give money to the bank for the privilege of borrowing money. Renters, on the other hand, pay for one thing every month: shelter. They don't pay interest to the bank, property taxes or maintenance fees. They pay rent.

Smart renters also take the money they save by renting and invest it somewhere else. Since the average renter saves hundreds of dollars every month, they can afford to invest in stocks, bonds and other vehicles that have a better rate of return.

Myth #2: There are Tax Benefits to Owning
Contrary to popular belief, buyers do not get back the mortgage interest they paid throughout the year at tax time. Mortgage interest can only be deducted from taxable income. This essentially means that buyers pay a dollar just to save 30 cents.


(clink link for full article)

[mkultra]

1. disagree

I own rental property and have bought many houses.

The monthly savings i incure when i buy is about 20% over rent. It builds equity, builds credit, and allows me to reap the rewards of any housing value increases. If i don't like maintenance, i can but a home warranty for $35 a month and still save money over renting.


Anyone who rents pays exactly what the owner pays plus more and the get nothing in return. The only people who dont benifit from owning are those with bad credit or those who pay to much for their house.

[papau]

12. true - else Rent Vs. Buy Myth #2 is that landlords are better off with low rents than w/ holding out

for higher rents.

If one side of the equation changes I expected the other to do so also - so that rather than apartment buildings have a half dozen units available at any one time, or less, we will have them with a dozen or more, along with a spike upward in the homeless and government slum buildings.

Long term upward price change in line with inflation for home ownership is still the conventional wisdom - and I think it is correct.

[Kashka-Kat]

14. It depends on where you live and what exactly is going on

in your housing market. I have a 2 flat I live in and rent out the downstairs - I'm taking a loss on it... not too badly, I get a nice hefty tax refund ea. year because of it - but still, because everything is so overpriced & has been for awhile the people who make the profits are investor types who can pay cash - theres been over the past 5-10 yrs in our town the phenomenon of east coast investors buying up properties in the popular neighborhoods of our desireable little midwestern city - because they can no longer afford the New York prices. The normal mortgage holding local person is at a disadvantage in this market.

If I hadn't have wanted a house for other reasons (control over my environment, the fun and challenge of historic renovation, etc.) I wouldve been better off putting my money elsewhere. I couldve kept renting (still very affordable rents esp in the less trendy areas) and just put ~$500+ ea. month into savings or oher investments instead of extensive repairs /renovation , utilities, etc.

(The above picture is changing, I should note - the prices are going down. Which means that my modest increase in equity will probably be even more "modest" as time goes on - oh well!!!!!!!!!!)

[conspirator]

50. If you have to borrow money to buy then you are renting money from the bank

and renting money is more expensive than renting property. Plus, if you want to move you are tied to the house until you can sell it

[Greyhound]

55. Bingo.

A basic rule of finance under a central banking model, yet alway ignored or downplayed by the popular culture.

[mdmc]

63. now i get it

[Lorien]

54. Yep. Plus, over ten years the price of my former rentals now exceeds the

monthly cost of my mortgage-plus I have 800 additional square feet, a yard, and a two car garage now. Because I work out of my home I get extra tax deductions for my work space. My home has also increased in value from $155,000 to $460,000 in ten years time (I live in one of the few areas that is still appreciating in value). Since I owe less than $100k, I would turn a fair profit if I sold today. I could never say the same as a renter.

[mkultra]

2. on taxes

Myth #2: There are Tax Benefits to Owning
Contrary to popular belief, buyers do not get back the mortgage interest they paid throughout the year at tax time. Mortgage interest can only be deducted from taxable income. This essentially means that buyers pay a dollar just to save 30 cents.



This argument only hodl water until you consider that the same money spent buy a renter returns ZERO percent for every dollar.

[ProfessorGAC]

3. Sorry, Can't Buy All Of This

I know this is a hot button issue for you, and understandably so. (I've read your other posts.)

But, i would suggest that the actual facts and figures over the long haul would contradict myths 1, 3, and 4.

Obviously, i agree with Myths 2 & 5. Buying a home for a tax deduction is just stupid. And buying one (that you actually live in) and considering it as some sort of investment instrument is silly. Even if, over the long term, you do better than a low risk bond, that's still not a good reason to buy a house. The maintenance costs evaporate any difference.

But, all in all, there are myths used to get people to buy more than they really need or really can afford. But, i don't think these apply to people who stay within their means.
The Professor

[Buzz Clik]

5. Myth 3 has me mythtified.

If you are renting a home, you are likely paying more to rent the home than you would be paying to buy that same home. One must assume that whoever is renting to you is making a profit; you are paying your landlord more to rent than he/she is paying to own that house. There will be exceptions, but Myth 3 is dubious.

[Gormy Cuss]

48. Two ways that Myth # 3 is true.

First, if you are a long time renter (more than 2-3 years) from a small scale owner, it's often the case that the landlord would prefer to keep a trustworthy and reliable renter than maximize profit. Smaller scale owners who have held the property for years may have lower costs than professional development companies too.

Two, if there is an imbalance in the local market, say a glut of rental properties or the local economy is weak, the prices for rentals may be held low. When there is both an excess supply of rentals and high demand for ownership properties, the cost of renting may be less than the costs associated with buying even a small condo. The other market factor that may translate to cheaper rental costs is in a market where the owner can't make a profit on sale today, can't afford to take a loss and is holding on to the property with an eye to selling when values increase in a year or two. That owner may in fact be happy with a break-even deal.

[mkultra]

7. i disagree

All landlords build in maintenance costs plus profit into the rent.

[ProfessorGAC]

24. A Low Risk Bond Is STILL A Better Investment

While you're right, i wasn't saying that the maintenance costs were a wash. I said maintenance costs were a wash vs. deductive savings. Since the gov't doesn't pay interest, a long term bond is still a better investment.

I think we're really agreeing here. I must have not been clear enough, because i wasn't really supporting any of the myths. I just said there is some truth to those two. The others i hardly accept at all.
The Professor

[El Pinko]

13. It's an issue of interest - wouldn't say hot button.

But from 2003 to 2006 I lived in SF and watched as friends and acquaintances bought homes they could not afford at the peak of the boom (Others simply left the area due to the unaffordability of housing.) - all of them told me I was "throwing money away on rent" and that I would be "priced out forever" if I didn't buy. Boy am I glad I didn't.

I'm not against home ownership by any stretch, but I am against the dogma that buying a home is always the wisest investment.

I also think there are many housing markets that are still drasitcally overinflated, with a lot of people still in denial.



As for the list of myths - I don't endorse or condemn them - they're an opinion that I posted a link to...

[DadOf2LittleAngels]

37. Well there is the problem

"But from 2003 to 2006 I lived in SF and watched as friends and acquaintances bought homes they could not afford"

Any time you buy *anything* you cant afford youre in for trouble. What if they signed a two year rental lease they could not afford?

[Buzz Clik]

4. Truth: If you spend more than you earn, you'll be in financial trouble soon.

If you cannot afford to buy, then don't.

[ihavenobias]

28. Well, that applies to the VAST majority of Americans!

Without massive loans, just how many people CAN *really* afford to buy? I'm not disagreeing with you, just pointing out the sad reality.

Loans and credit cards have really helped mask the poor/stagnating wages over the last 30 or so years for most Americans. In fact, if we didn't have easy access to loans and credit, there's a good chance most Americans would've woken up much sooner and realized they were being screwed!

www.nytimes.com/2008/01/19/opinion/19herbert.html?_r=1&em&ex=1200891600&en=e84c9fb476b7ff29&ei=5087%0A&oref=slogin

[Greyhound]

56. The whole American economy would collapse, and with it the world's,

if the American consumer stopped living beyond their means. Seriously, it could not sustain.

The rest of it is that the rest of the world knows this and sees it coming, thus the continued (so far) propping it up. The super rich are bailing, the corporations are moving or being hollowed out, the rats are deserting.

[TooBigaTent]

6. A lot of truth to the myth-busting, except that in many circumstances, it is

actually cheaper (per month) to buy something. Rents have gone out-of-sight and IF you can get into a home, the monthly outlays can be less than renting.

Personal experience - current mortgage payment of $585 (for large twin) compared to rents of $1,000 or more for a two-bedroom apartment.

[El Pinko]

10. Mortgage payments on starter homes in the SF Bay area are $2500 and up...

I suppose you could get a horrible 1 BR condo for less, but are condos a good investment? Mortgage plus all the fees?

There are a lot of people renting out their homes to renters for $1700 because that's the market rent, but their payment on the property is $3000 and up.


Obviously not a sustainable situation...

[DadOf2LittleAngels]

38. Condons can be a good investment

Fees cover things like Building insurance, and common area utilities, (our covers internet as well).

The up side is when we have to repave our driveway the association pays for it, when siding or roofing has to be changed the association pays..

Your numbers are not for a sustainable situation but generally the first year or so you own a rental youre going to lose money because of capital improvements. After that if you bought at a reasonable price a rise in the rental market will start to cover the mortgage (and thus cover your equity every month)...

[El Pinko]

44. There is no such thing as "reasonable price" in SF Bay area at present.

This one just sold after being marked down from $469K



In the unspectacular peninsula community of Redwood City


Here's a nice one - 660 Sq Ft in Palo Alto for almost $800K





Here's a 560 Sq ft. cutie in San Jose, only $499K!





But it is fun to watch them drop like rocks before they are auctioned off, like this one in Daly City:







(Images from burbed.com)

[DadOf2LittleAngels]

51. San Fransicso is *not* the nation as a whole...

That seems to be the point you're missing or, at best, ignoring.

[El Pinko]

52. I Live in El Paso now, which is very cheap, and I understand that...

...but SF, LA, San Diego, (actually, most of California) NYC, S. Florida, DC Metro etc. - all massive bubble areas - so represent a very large part of the US population - at least 50 million people or more are living in this sort of housing environment, so please don't just pooh-pooh it as though it has nothing to do with anyone.

[NuttyFluffers]

57. sweet jesus! under 1/2 a mil for 3K sq ft in Redwood City? what a bargain!

damn, damn, damn! and me with no liquidity at the moment! i haven't seen numbers like those on the peninsula since over 10 years ago! but i'll have to see the actual neighborhoods.

oh wait... i'm used to a lifetime of these Bay Area prices. i guess that perspective changes things. all i can hope for is that these prices hold for at least a mere handful of years here. but my faith in that happening is very, very low.

[MadHound]

8. Sorry, but you're wrong, especially on Point 1

Having rented and owned, trust me, I would rather own. You are indeed tossing your money away when you rent. Indeed, in most places the rental price for a house is much higher than a mortgage payment would be. In addition, you are making an investment that will pay off over time. And depending on how you structure your mortgage payments, you can pay off that principle, even during the first five years. A handy rule of thumb for home buyers is to pay ten percent more than your required payment each month. That extra amount goes to paying down your principle, and will turn a thirty year note into a twenty year note.

Unless you live in a wild housing market area, buying always makes more investment since than renting. You're monthly shelter payment for buying is much less than a rental payment, and you can use that extra money to either re-invest into your house via home improvements(which add value to your house), or you can take that extra money and use it in market investments.

As far as the tax issue goes, for most people it is a wash. They generally take that mortgage interest savings and use it for property taxes.

Sure, in these days of a housing bust, many places have wild housing markets where buying doesn't make sense right now. But for many other locations buying a house still makes much more sense than renting. And sooner or later, even in areas that are hardest hit buying the housing crisis, this too will pass and once again buying a house will again be the sensible thing to do.

A bit more:

Myth 3 is foolish, if you play your cards right. Closing costs are generally split between the buyer and the seller. And in most cases, if you are willing to do a little leg work and hire a professional home inspector, you can do without a real estate agent. I have used a real estate agent one time, and it was a nightmare, whereas I've bought two homes and sold two homes all by myself with no problems. Real estate agents are essentially security blankets and conveniences. Other than that, they're worthless.

Myth 4, yes, housing prices are falling in some areas. However in many other areas the market is still steady as are values. And the housing market, over time will recover. Sure, you won't be making a money as a house flipper, but if you're like the vast majority of homeowners, long term residents of the house, you will make money.

[LiberalFighter]

16. What are the costs of moving each time under the rental plan?

And the aggravation?

How often do renters move vs buyers?

[Historic NY]

9. The big problem is people who had champagne tastes and....

beer pockets. In my area rent is as high and a mort age and in some cases higher as there are more condos that apt. houses. Many people who start out to buy a house want to have it all right now and will not settle for a starter or fixer-er-upper. Some buyers are totally clueless on just what it takes to keep up a house, taxes, repairs, improvements, etc. A renter has all these things usually and they just shell out the cash to the owner. The 3-4 bdr. average house rents here from 1500-2500 per month, an 2-3 bdr.apartment rents for 1200 up, unless you more to the ghetto and they aren't cheap either 800+ with section 8.

Owning vs buying, in NY state one can deduct the interest paid on the mortgage and deduct state & local taxes when they file their income tax. I own and have owned and I have equity in my house which I can use to invest or borrow against, you can't do that if you rent. Its like buying or leasing a car. I find unless you in business, can't afford to own a new car then maybe leasing is best. In the end you throw money down the hole and end up with nothing in the end. Some people would rather pay to play then pay to own.

[dmallind]

11. What tosh!

There are numerous issues with this crap.

Buyers do not pay real estate commissions and houses sell at market value whether the seller has a realtor or no, so there is no differential in what a buyer pays.

Unless you are buying a run down shack in Detroit's poorest neighborhood the mortgage interest and property taxes will almost certainly move you into itemized deductions. Pay a dollar to save 30c? Only valid if you compare that yo a renter paying a dollar to save a damn sight less.

The idea that renters are not paying for mortgage interest, property taxes and maintenance is obviously ludicrous and would make us posit a landlord who is paying these things out of the goodness of his heart and not including those costs in the rent payment. The renter however does not control them and cannot deduct taxes.

Closing costs at 5%? Which idiot would sign up for that? I have never paid more than half that. Most of the upfront costs are escrows for taxes etc which are paid by both renters and owners (and are dedcutible for the latter only).

Houses depreciating? Only those bought in the last few years and much more regional than the article says. I'm selling right now in an appreciating market and buying right now in a stable one. Not everywhere is CA or FL beachfront. If you bought a house more than a handful of years ago it's nigh certain to have appreciated considerably. Even this outright mess of lies and slanted propaganda says only 50% and only in the last 5 years' worth of buyers are "estimated" to not have equity.

Renting IS, in every market I have seen (I suspect there could be exceptions like rent controlled NYC apartments) more expensive than buying. Price home rentals in your local paper. Look at the payment it would take to buy the equivalent house. Which is higher? Here and everywhere I've lived rental will be higher - landlords are not charities after all.

A real return of 0.4% per year (note this included over a century) sounds pathetic unless you know what real return means. That means in adjusted dollars the housing market has stayed ahead of inflation for over a century. Buy a house and sell it later and over that time period you'll have more spending power than you had to begin with and you'll have had exactly the same shelter as a renter but much more control over it and far better tax benefits.


Now let's talk about other things than hard dollars. Want a dog, a yard you can plant veggies or flowers in, or even just a private yard? Want to choose your own decor and fixtures? Want to be able to secure favorable financing for any other loan? Renting will make all those things much tougher.

Renting is fine for people who want to live in multi-unit apartment complexes either because they can't afford a single family home or because they choose to do so for environmental reasons or downtown living etc, but for anyone who wants and can afford a single family home it is a fool's game where you will pay more for less control and no long term benefit.

[Lex]

19. Yes, renters are buying the house for the Landlord.

They are paying taxes (without the tax deduction benefit) and insurance and maintenance--they pay it in their rent payment. Then the Landlord gets the benefit of the equity in the house over time, and the deduction for real estate taxes and insurance and other deductions landlords can take.

[ihavenobias]

21. I have to disagree that renting is always more expensive

obviously that's a very broad statement, but in Chicago and San Diego (two places I have lived in or have investigated) it's generally untrue IME.

San Diego especially illustrates that's INSANELY expensive to own compared to renting (again, I'm sure it depends but I'm speaking generally).

While some may take issue with these "myths", the author left out some other important factors. For example, convenience and mobility. I know someone said maintenance would cost an additional $35 but I have to say, I've never heard of such a thing. Changing light bulbs maybe, but burst or leaking pipes and any other number of things that can (and often do) go wrong in a building or house...how can that not (potentially) be very expensive, even with insurance (which is expensive in and of itself)?

And obviously, there are other non-financial benefits to renting (less general responsibility, ability to move somewhere else relatively quickly if need be, etc.).

[dmallind]

25. Exceptions no doubt exist - but missed a few things.

Remember we should compare renting and buying similar places. You can't buy very many houses that involve sharing hallways and doors, and having as little square footage as small apartments, so looking for the cheapest place to rent and the cheapest place to buy would be misleading. It's much more likely that renting and buying an equivalent house would be a fair comparison and again while I'm sure, as I said initially, excpetions exist, I don't think they're all that common nor have I personally ever come across that in seven states I've called home. San Diego may work as it saw massive and in fact almost unprecedented increase in home costs, so people who bought in, say, 1980 can take out a home equity loan for a second home in a cheaper city and then rent out their old place to more than cover both loans with a tidy profit and be cheaper than buying. But that's not all that likely in areas that did not see truly exaggerated bubbles driven by IT bubble money. Even the places I've lived in where homes doubled in 5 years or so would not be like that.

The mobility argument has some merit in some cases but only if you don't have a twelve or six month lease with quit penalties as is not exactly unusual, and only if you are trying to sell a house above market value. I bought a house two weeks ago that was on teh market for about that long, and I'm closing in three more weeks. For that seller then we are looking at seven total weeks to clear cash and be gone. I've done better myself in the past. If sellers try to sell their house for above market value, then theirs is the fault for any huge delays in mobility. A house at the right price will move even in this market.

And remember saying you don't see extra fees for maintenance and repairs on rent prices is like saying you don't pay for a sleeve when you buy a suit. It's part of the price. Any sane landlord knows what he pays for upkeep, and any sane landlord isn't going to give that away because he's a nice guy.

[ihavenobias]

34. Those are good points!

I would only point out that in the case of "things can and do go wrong", if something awful happens with say, the plumbing, the renter's rent will not increase. He/she might lose their security deposit if they're to blame, but generally they aren't so they won't.

On the other hand the owner's expenses may well increase dramatically (albeit temporarily), and she/she has to foot that entire bill. Even with insurance (assuming he/she has or thinks they can afford insurance) the costs could be quite high.

Again, IMO the only reasonable conclusion here is that there are pros and cons and no single right answer. It depends on what's right for the individual in question, and the only reason I debate this issue is because (as I wrote in another post) conventional wisdom is that it's ALWAYS better to buy which is simply not true.

[readmoreoften]

61. My parents paid $80K for a house that's now worth $250,000

Their 15 year mortgage was something like $400 a month and the house is paid off. Would they be better still paying rent and not having a $250K asset. Uh, no.

If you're not in an train wreck bubble zone, or NYC or San Fran, and you're ready to buy it's silly to rent.

[JeanGrey]

62. Agreed. Renting is throwing away money, period.

We paid for a house in 20 years. First house, 39,000, sold for 78,000. Second house, 85,000, sold for 184,000. Third house: $139,900 PAID FOR. Approximate taxes per year: $1600.00. Insurance: $700.00. Can I rent for that?

Not to mention is has a 1500 square foot basement that we finished and our sons have lived with us on and off during their lives (breakups, etc) plus my Mom. And we have yard, an extra garage, things we would never have if we were renting.

Now we live on disability and SS. Thank god we have a paid for home.

[PRETZEL]

15. Too many variables to really dispel or validate these myths, imho

First off, a home is indeed an investment, especially for younger couples. If they can stay in the house and make payments without having to refinance again and again for whatever reason, they end up with a tangible asset. It's not throwing money away.

Second, buyers cannot only deduct mortgage interest, but also real estate taxes. I don't know of any homeowner who doesn't itemize deductions. When you do that, there are other taxes paid in addition to mortgage interest (and this percentage is much greater in the beginning part of the loan) that one can now more easily claim. But in any event, having taxable income of $.70 is still better than having taxable income of $1.

Right now I'm glad I lost the house. The biggest thing about homeownership is at what point does the house become a financial burden and you're past breakeven as to costs/income. My old house was costing me more money than it was worth to keep it up. At 48 (49 in 2 weeks) I'm glad I don't have to worry about the upkeep on a house. I'll gladly do minor maintenance where we're renting.

[Lex]

17. I'm happy with my equity increase of nearly $100K on my house.

since I bought it 10 years ago. The market in this neighborhood has been solid, not wildly increasing.

Wouldn't have it if I didn't buy, as opposed to renting. Nowhere else could I have gotten that return on the money invested.

Your mileage may vary.

That tax deduction on the mortgage interest at tax time makes a big difference in what I owe the IRS each year, no doubt.

[penguin7]

18. There should not be a tax benefit for owning

The tax benefit raises the price of real estate making housing more expensive for those that do not own. Further, clearly the tax benefit contributed to the present bubble in real estate which is not at all good for the country. Lastly the tax benefit gives far more to the wealthy than the less wealthy further skewing wealth disparity in the country.

And if you lose your job you lose the tax benefit screwing you even more for losing your job.

[El Pinko]

26. Prop 13 in California should be repealed, but the deduction for mortgage interest is forever.

I think that's a sacred cow...

[penguin7]

29. You are probably right, Ingrained stupidity like so much of the USA.

[El Pinko]

31. I'm not really opinionate on the matter. If and when I buy, that will probably change...

Saying people are stupid for wanting to deduct mortgage interest is a bit harsh, IMO.

It wasn't that long ago that we could deduct the interest on a car loan too.

(thanks a lot, Ronnie!)

[gollygee]

20. It probably largely depends on where you live

Here, you can buy a decent house for $150k. Rent here is lower than a lot of places but not AS low as it could be because this is a college town so there are a lot of renters. Where I live, I think buying makes more sense than renting. BUT personally I think it makes sense to save up enough money to have a large enough down payment that you don't have to pay mortgage insurance.

[dmallind]

22. Last point is a good one

Unfortunately even in moderate housing markets it's a challenge for most non-wealthy first time buyers to come up with the 20% needed to avoid PMI. In your case that would be $30K plus closing costs you'd have to have - not a trivial sum to save. Once you've bought a time or two it's obviously easier to use equity for this.

Fortunately PMI on starter homes isn't a huge amount, but it is wasted money for sure.

[ihavenobias]

23. IMO a lot of owners are (understandably) defensive about these issues

I'm currently with someone who I plan to marry (and who owns a condo) so I'm not biased either way. I think the only honest way to look at this is that there are pros and cons.

With that said, I *do* think that homeowners tend to get defensive about this issue, as I said *before* the housing bust (you know, when people just assumed that it was ALWAYS better to buy and that the value would ALWAYS continue to increase).

No one wants to worry and think they made the wrong decision, and hey, some of you are lucky and things are going great. The condo I'm in right now hasn't been effected negatively (knock on wood) so I realize it's not *all* doom and gloom. But again, I think (some) people aren't trying to view this issue objectively.

[dmallind]

27. No it's just frustration at idiocy

oft repeated.

I'm fine with people saying it makes sense to rent based on upfront costs and market specifics, or even personal preference. But when they come up with total crap about not paying for property taxes etc just because they don't see that as a discrete line item on their rent, and saying buyers pay realtor's fees and other outright garbage, it's just like when people say Hillary is really a Republican in disguise or Bill Clinton caused and increase in poverty. I'm not a HRC voter and I'm not much of a poverty advocate, but the sheer stupidity anmd mendacity has to be addressed.

[ihavenobias]

33. I gotta be honest, I'm not buying it

(pun intended) :)

But seriously, even the nature of the comment speaks to what I mean! As someone who doesn't care either way and is weighing all future options, it's OBVIOUS there is defensiveness on the part of most (or at least many) owners, again, understandably. Some because their experience directly contradicts the article in question, but sometimes it's just due to their *perception and expectations* of their own home and situation.

But come on, I hope you aren't trying to argue that most stories favor renting over owning? All I've ever heard my whole life from EVERYONE is what a waste of money it is to rent. I've heard this message repeated what must have been hundreds of times, by friends, family, strangers and people on TV, Radio, Newspapers and the Internet.

Overall that may well be because they're generally correct, but have you considered that it also might *partly* be due to the fact that the message is rarely questioned because, well, just about everyone is repeating it (and therefore has come to believe it, often no matter the context)? Once something is considered to be "conventional wisdome" it takes a LOT of time and a LOT of new information to change it even slightly.

[dmallind]

35. Oft repeated on DU specifically

Where the spirit is reliably anti-anything that reflects material success.

And no feel free to dig into my posts - I am very very consistent in repudiating bullshit that can't be backed by objective fact, regardless of the subject or my personal experience/preference - even to the point of attacking silly claims about the risks of smoking, when I have never smoked and can't stand the practice personally. I am doubtless wrong some of the time, but I am much more concerned with using facts and reason than proving my "side" right. Had the article not containes such ridiculous lies and misdirection, and kept to real differences between the two options I would have had no reason to comment.

Ironically I am, right now albeit admittedly very temporarily, a renter.

[ihavenobias]

40. I guess I haven't been here long enough to know what you mean

but I'll take your word for it.

As for cigarettes, I found it very interesting that the former surgeon general said the Bush Administration stifled his efforts to testify on the latest information on second hand smoke. After all, what/who are they trying to protect? Sort of like when they edit reports to remove references to global warming...

[Johonny]

30. great stuff

I've been trying to hammer in to my GF that buying a house isn't an investment.

[High Plains]

32. Bubbles rents a shed.

That's the bug-eyed guy in the OP. He's from the Canadian series "Trailer Park Boys."

[DadOf2LittleAngels]

36. I disagree and here is why.

in 2005 I bought my 1k sqft home for 130,000 lets my mortgage payment is 760 a month, my taxes are 90 a month, and my association fees are 150 a month total of about 1000 per month.

Units around me were renting for 900$ a month (so Im spending 100 more a month)

--
#2

For the first five years my mortgage payment is about 650$ in interest (30% of which is 195 a month I get back in taxes) already I am + 95 dollars a month.

Now its 2008 and rents have risen to 950 a month around my my mortgage payments have not increased so I am not +145$ per month. Also I am looking to sell and move back to NY right now Im looking at selling between 145 and 155K, lets split the difference at 150.. That means I will walk out of here with about 10K dollars after I subtract the real estate fees and money Ill spend getting the place ready for sale.

--
#4

"At best, buyers have depreciating assets. Home prices are falling in nearly every area of the country. An estimated 50 percent of the buyers whose loans were originated after 2002 now owe more than their homes are worth."

The best time to buy something is when it has taken a beating and still has a little further to fall. You dont buy a house to live in for two year you buy a home to live in for 5 plus (yes yes I know im breaking my own rule). The worst time to buy is when the prices are high!

--
#5 A house can be a good invenstment but its a *long term* investment..

...

Buying is not the only way to go but for many people its far better than renting, stay away from ARM's buy something that will only be at most 30% of your net income, and plan to be there awhile..

[Warpy]

39. This article is spot on

Home ownership doesn't make sense in a lot of instances, which is why I laughed the condo conversion people out of my apartment in Boston when they tried to sell the deal to me.

However, if you're in a market that didn't see a price bubble in housing but is seeing fast rising rent, then ownership can be a good hedge against rising rent. Even if you lose that down payment and get into a negative equity situation for a while, if that monthly PITI is less than rent, you're way ahead of the game. Remember, home mortgage interest rates are still low enough to make it a good deal and that you will eventually begin to build equity. The tax deduction is 30 cents on the dollar you pay, but that 30 cents is better than bupkus.

That's why I bought 11 years ago, as a hedge against rents. I was right, and my mortgage payment was less than rent in less than two years.

The best advice is to know your market. If you're in most of California or in a few western cities or Florida, RENT.

[ordinaryaveragegirl]

41. Know your area, and get a fair price...

That goes for renting or buying. It depends on your area, and your situation. I'm in Wichita, KS, and we rented when we first moved here - it was almost $900 a month for a 2bd/2ba, 1150 sf apartment, including the detached 1 car garage and the pet fees for our cats. In the same part of town, you can get a decent, fairly new house for anywhere from $700-900 a month, including insurance, usually a 3/2/2, about 1500 sf. Usually, there is an HOA fee of anywhere from $80-100 a month, too. It's much cheaper to buy here, and it's one of the few truly stable markets in the country right now.

[ihavenobias]

42. Progressive in Kansas?

Ouch, and I thought I had it rough in a conservative suburb outside of Chicago!

How's Sam Brownback doing? :)

[ordinaryaveragegirl]

64. Brownback is retiring next year...

And Sebelius is rumored to be running for his seat. She'd have a good chance of winning. :)

He has a 50% approval rating. Higher than Chimp, for sure, but I think a lot of people see his rhetoric and that, and see him out stumping for McCain. That hasn't gone over too well.

[SemiCharmedQuark]

43. What a steaming pile. I pay rent and I feel like I'm getting duped every month

Our lease basically squashes all rights we would have. My lease says that as long as the landlord attempts to notify me, she is allowed to come in at any time. I am not allowed to have anything on my patio, I am not even allowed to have a welcome mat!

If I had the money for a down payment on a house, and could get a good rate, I would flat out do it. I pay more every month for rent than every homeowner I know. On top of the rent, I also pay fifteen dollars per pet per month, parking fees, sewage, trash, water, and of course utilities.

Who wrote this article?

[El Pinko]

45. Someone who lives in a bubble area.

A lot of what they say in the article is spot on for bubble areas like LA, SF, DC metro, S. Florida and a few others.

There are other areas where buying is a better idea...


By the way, I think it's important to point out that the article says these are "myths that ruined the housing market", and in that sense, the article is correct.

These myths are taken as always true by a great many people.

They are not ALWAYS true - in the bubble areas, they certainly were not, and people in those areas continuing to believe those myths and that housing would go up at 15% per year forever DID ruin the housing market.


That's not to say that there is no truth in them in any market, just that they were not applicable in the bubble markets from 2002-2009 (assuming that the price correction in those areas will continue until at least then)

[SemiCharmedQuark]

46. That's true.

In Chicago, renting is pretty much the only option for city living. Unless you are super wealthy.

[DireStrike]

59. I'll tell you who wrote it

Somebody who thinks that everybody in the country has excess income to make "investments" with. Someone who has so much they can't even imagine that there are people that don't.

[Lydia Leftcoast]

47. I don't consider renting "throwing money away" any more than I consider

buying groceries to be "throwing money away."

I get shelter month-to-month. If my circumstances change (a job offer out of town, a committed relationship that leads to moving in with someone else, changes in my physical condition that make it impossible to climb stairs, the building deteriorates), I can leave on 30 days notice. When I moved from Portland to Minneapolis, I didn't have to wait till my house sold or carry two mortgages.

I could afford to buy IF I wanted to live in a condo in the middle of a former cornfield, but in my mind, that's not living, that's existing, not to mention being environmentally irresponsible.

I lucked out and got a spacious 2-BR apartment in a neighborhood that I could never afford to buy in. The houses around here sell for half a million. I pay $845 a month plus electricity, phone, and cable/Interent. For that, I get the perks of the neighborhood, including a pleasant little business district that contains most of the essentials, two lakes, and a bus line that runs to many of the places I go.

I've mentioned before that I came under tremendous pressure to buy, but it wasn't right for me. I have no desire for a yard. None. I'd like a balcony, but I'm fine without one. Condos sound good for that reason, until you look at the association fees.

Another point that no one has mentioned so far is that when people own a house, even if they can afford the payments, the thing constantly needs repairs. A new furnace here, a new roof there, energy-saving modifications in another place, and soon you're talking about real money. Oh, and then the city decides to repave your street, and zap, you're out another three-figure or four-figure sum. The temptation to remodel also becomes overwhelming.

You know what's REALLY throwing money away? Buying a large new car or SUV or minivan NEW.

[petronius]

49. The renting vs. buying arguments assume that a person would rent the same

house that he would buy - in that case, it seems that buying (if possible) would generally be the better option. But don't we need to keep in mind that most people who rent actually rent something smaller and cheaper than the house they ultimately plan to purchase? In that case, even though the products are different, renting could easily be the sound economic decision...

[ileus]

53. I'll never rent shit again....I loved getting woke up all the time.

By lousy fucking neighbors...we'd get one group kicked out and another bunch of bums would move in.
College kids = loud drunken music
divorced females = drunken x-husbands and yelling
quiet neighbors = dog shit on my door mat
new down stairs neighbos = drug dealers with constant traffic all night.


F a GD rental....

I've owned and sold 3vhomes now and have come out ahead everytime I've sold.
First home 21k
Second home 39k
Third home 52k
My new home I hope I don't have to sell, but I'd expect 60k if put it on the market.

[DireStrike]

58. Myth #1 LOL

"Myth #1: Renting is Like Throwing Your Money Away
Buyers throw their money away for the first five years they own a home, because they simply give money to the bank for the privilege of borrowing money. Renters, on the other hand, pay for one thing every month: shelter. They don't pay interest to the bank, property taxes or maintenance fees. They pay rent.

Smart renters also take the money they save by renting and invest it somewhere else. Since the average renter saves hundreds of dollars every month, they can afford to invest in stocks, bonds and other vehicles that have a better rate of return."



So throwing your money away forever to own nothing is better than paying 5 years worth of interest?! I'm sure they can just get GREAT returns on their INVESTMENTS with the EXTRA MONEY they get from renting. It's not like they NEED that money to buy other things. Food, for example.

I'm sure all the renters will be much better off with several hundred (or even thousand) dollars of stocks and bonds than with permanently owned shelter over their heads and relative financial security and independence.

[readmoreoften]

60. This article is just plain delusional. Do NOT take heed. Get REAL advice.

"For example, a buyer must pay closing costs (typically five percent of the loan amount) and real estate agent commission (typically six percent of the loan amount) before being called a homeowner."

Um...buyers almost NEVER pay the agent fee. Sellers pay the fee: particularly in this market.

1) My house is about $300 less a month than a comparable rental INCLUDING all my escrow. Plus, renters should get renter's insurance anyhow.
2) Homes in my city went up 10% this year.
3) I don't give a really fuck about tax credits, but SOME write off is better than none.

Yeah, it's stupid to buy a house if you're trying to flip it or move in 3 years. But if you're planning on staying in a home for a decade or more, you're batshit crazy if you rent (unless you're a senior with assets, that's a different story.)

Don't buy if you're in a bad area. If you're in a good area and planning to stay, it's a smarter investment than renting any day.

I love my home. Plus, in a pinch, I can RENT one of my four bedrooms.