5 myths about home ownership

[patb]

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/13/AR2009111302214.html

The washington post broke ranks and told the truth.

Watch this columnist become a pariah in the RIC.

[jpinpb]

I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.

[jpinpb]

I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.

[jpinpb]

I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.

[jpinpb]

I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.

[jpinpb]

I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.

[jpinpb]

Ok. This doesn’t make much sense to me, considering what’s happening:

“4. It’s safe to buy a house with a very low down payment.

Because the Federal Housing Administration insures mortgages backed by down payments as low as 3.5 percent, you might think that buying a house with a low down payment is relatively safe. But in the case of a 3.5 percent down payment, a borrower winds up carrying $96.50 of mortgage debt for every $3.50 of home equity. And the less equity you have in your home, the greater the chance that a fall in prices will leave you owing more than the house is worth, a condition often described as being “upside down” or “underwater.” In this example, housing prices only need to fall by 4 percent to leave a buyer underwater.”

This is almost like zero down, which means no skin. Many that are upside-down now are not paying and/or walking and/or both. Apparently this is now an acceptable option.

[jpinpb]

Ok. This doesn’t make much sense to me, considering what’s happening:

“4. It’s safe to buy a house with a very low down payment.

Because the Federal Housing Administration insures mortgages backed by down payments as low as 3.5 percent, you might think that buying a house with a low down payment is relatively safe. But in the case of a 3.5 percent down payment, a borrower winds up carrying $96.50 of mortgage debt for every $3.50 of home equity. And the less equity you have in your home, the greater the chance that a fall in prices will leave you owing more than the house is worth, a condition often described as being “upside down” or “underwater.” In this example, housing prices only need to fall by 4 percent to leave a buyer underwater.”

This is almost like zero down, which means no skin. Many that are upside-down now are not paying and/or walking and/or both. Apparently this is now an acceptable option.

[jpinpb]

Ok. This doesn’t make much sense to me, considering what’s happening:

“4. It’s safe to buy a house with a very low down payment.

Because the Federal Housing Administration insures mortgages backed by down payments as low as 3.5 percent, you might think that buying a house with a low down payment is relatively safe. But in the case of a 3.5 percent down payment, a borrower winds up carrying $96.50 of mortgage debt for every $3.50 of home equity. And the less equity you have in your home, the greater the chance that a fall in prices will leave you owing more than the house is worth, a condition often described as being “upside down” or “underwater.” In this example, housing prices only need to fall by 4 percent to leave a buyer underwater.”

This is almost like zero down, which means no skin. Many that are upside-down now are not paying and/or walking and/or both. Apparently this is now an acceptable option.

[jpinpb]

Ok. This doesn’t make much sense to me, considering what’s happening:

“4. It’s safe to buy a house with a very low down payment.

Because the Federal Housing Administration insures mortgages backed by down payments as low as 3.5 percent, you might think that buying a house with a low down payment is relatively safe. But in the case of a 3.5 percent down payment, a borrower winds up carrying $96.50 of mortgage debt for every $3.50 of home equity. And the less equity you have in your home, the greater the chance that a fall in prices will leave you owing more than the house is worth, a condition often described as being “upside down” or “underwater.” In this example, housing prices only need to fall by 4 percent to leave a buyer underwater.”

This is almost like zero down, which means no skin. Many that are upside-down now are not paying and/or walking and/or both. Apparently this is now an acceptable option.

[jpinpb]

Ok. This doesn’t make much sense to me, considering what’s happening:

“4. It’s safe to buy a house with a very low down payment.

Because the Federal Housing Administration insures mortgages backed by down payments as low as 3.5 percent, you might think that buying a house with a low down payment is relatively safe. But in the case of a 3.5 percent down payment, a borrower winds up carrying $96.50 of mortgage debt for every $3.50 of home equity. And the less equity you have in your home, the greater the chance that a fall in prices will leave you owing more than the house is worth, a condition often described as being “upside down” or “underwater.” In this example, housing prices only need to fall by 4 percent to leave a buyer underwater.”

This is almost like zero down, which means no skin. Many that are upside-down now are not paying and/or walking and/or both. Apparently this is now an acceptable option.

[UCGal]

[quote=jpinpb]I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.[/quote]

I think it depends on WHERE you bought. California does not follow more typical real estate market flows.

I have a friend who bought a house in suburban Philly. He held it for 14 years. He wanted to move to center city to be closer to the “action”… and had to bring $8k to the table when he sold. The house was maintained… but hadn’t appreciated – and transaction costs and a low down payment left him unable to cover transaction costs. Not all area’s in the country bubbled. And if they did, it was at a much lower rate. Coastal CA experienced the extremes of the housing bubble.

But -to your point. My dad bought the house I live in now in 1966 for under $30k. For years it stayed well under $100k. Then CA took off and when we bought it in 2003 – we paid the market price of $600k. Same house, but in the 37 years it had appreciated 2000%.

But not all markets did that. My husband bought a semi-detached house in Philly in the early 80’s for under $10k. (It was a HUD repo and gutted.) He invested about $15k into the house, then another 10k into buying the adjacent lot and building an attached garage. When he sold it in 2001 it sold for $65k. – not quite double in 20 years. Same house in CA would have gone up 4-5 times.

[UCGal]

[quote=jpinpb]I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.[/quote]

I think it depends on WHERE you bought. California does not follow more typical real estate market flows.

I have a friend who bought a house in suburban Philly. He held it for 14 years. He wanted to move to center city to be closer to the “action”… and had to bring $8k to the table when he sold. The house was maintained… but hadn’t appreciated – and transaction costs and a low down payment left him unable to cover transaction costs. Not all area’s in the country bubbled. And if they did, it was at a much lower rate. Coastal CA experienced the extremes of the housing bubble.

But -to your point. My dad bought the house I live in now in 1966 for under $30k. For years it stayed well under $100k. Then CA took off and when we bought it in 2003 – we paid the market price of $600k. Same house, but in the 37 years it had appreciated 2000%.

But not all markets did that. My husband bought a semi-detached house in Philly in the early 80’s for under $10k. (It was a HUD repo and gutted.) He invested about $15k into the house, then another 10k into buying the adjacent lot and building an attached garage. When he sold it in 2001 it sold for $65k. – not quite double in 20 years. Same house in CA would have gone up 4-5 times.

[UCGal]

[quote=jpinpb]I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.[/quote]

I think it depends on WHERE you bought. California does not follow more typical real estate market flows.

I have a friend who bought a house in suburban Philly. He held it for 14 years. He wanted to move to center city to be closer to the “action”… and had to bring $8k to the table when he sold. The house was maintained… but hadn’t appreciated – and transaction costs and a low down payment left him unable to cover transaction costs. Not all area’s in the country bubbled. And if they did, it was at a much lower rate. Coastal CA experienced the extremes of the housing bubble.

But -to your point. My dad bought the house I live in now in 1966 for under $30k. For years it stayed well under $100k. Then CA took off and when we bought it in 2003 – we paid the market price of $600k. Same house, but in the 37 years it had appreciated 2000%.

But not all markets did that. My husband bought a semi-detached house in Philly in the early 80’s for under $10k. (It was a HUD repo and gutted.) He invested about $15k into the house, then another 10k into buying the adjacent lot and building an attached garage. When he sold it in 2001 it sold for $65k. – not quite double in 20 years. Same house in CA would have gone up 4-5 times.

[UCGal]

[quote=jpinpb]I take issue w/this statement:

“1. Housing is a great long-term investment.

Historically, the value of owner-occupied homes has risen at a fairly low rate, one that pales in comparison with the performance of stocks and bonds. Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year.”

We’ve probably had 2 little bubbles and one big one in that time period and if you sold at peak and bought low, you probably made more than 1 percent. Even if you didn’t sell during the smaller bubbles and sold in 2005/2006, you did fine. Long term doesn’t have to mean your entire life, but holding 30 years in this scenario would have given you some nice gains.[/quote]

I think it depends on WHERE you bought. California does not follow more typical real estate market flows.

I have a friend who bought a house in suburban Philly. He held it for 14 years. He wanted to move to center city to be closer to the “action”… and had to bring $8k to the table when he sold. The house was maintained… but hadn’t appreciated – and transaction costs and a low down payment left him unable to cover transaction costs. Not all area’s in the country bubbled. And if they did, it was at a much lower rate. Coastal CA experienced the extremes of the housing bubble.

But -to your point. My dad bought the house I live in now in 1966 for under $30k. For years it stayed well under $100k. Then CA took off and when we bought it in 2003 – we paid the market price of $600k. Same house, but in the 37 years it had appreciated 2000%.

But not all markets did that. My husband bought a semi-detached house in Philly in the early 80’s for under $10k. (It was a HUD repo and gutted.) He invested about $15k into the house, then another 10k into buying the adjacent lot and building an attached garage. When he sold it in 2001 it sold for $65k. – not quite double in 20 years. Same house in CA would have gone up 4-5 times.

[Author]

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