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#1 of 117 Old 04-10-2007, 10:19 PM - Thread Starter
 
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http://www.nytimes.com/2007/04/11/re...=1&oref=slogin

I'd love to hear thoughts about this argument.
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#2 of 117 Old 04-10-2007, 10:35 PM
 
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That may be true, right now. However we bought at the top of the boom in our area in 2000. Now even with taxes and upkeep our costs are less than renting. We also have the tax deduction of the interest we pay. Plus we will someday own our home outright and not have to pay anything other than upkeep and taxes. If we rented, we could only count on our rent increasing over time and being guaranteed that we'd never be able to stop paying. If you move a lot, it might be true that renting is better. But we've been here 7 years now and our only plan is to pay off our home in 8 more years. We don't plan to move.

I think the article is a little misleading when it talks about people paying property tax in addition to their mortgage. Just about everyone pays their taxes and homeowners insurance as a part of their payment. It seems like they are trying to make it sound like you pay your payment, plus taxes, etc.
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#3 of 117 Old 04-10-2007, 10:41 PM
 
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Seems like they're just trying to point out that home ownership isn't for everyone, which I believe is true. I think it's wise for lots, but unpractical for many, due to credit history, current financial situations, temporary living situation, etc.

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#4 of 117 Old 04-10-2007, 10:50 PM
 
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Interesting. I'm in the process of buying right now. I wonder about this all the time. The home we're buying is moderately priced at $145K, actually low for this area but we're buying from our landlords who lived in it until they bought their new house. They got it as a foreclosure and we're getting a better deal for this house through them than we would if we bought another house by traditional means. That's really the only reason we're going ahead with buying, that - and this area seems to be doing alright with regard to real estate. But the whole real estate issue going on right now freaks me out enough to reconsider.
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#5 of 117 Old 04-10-2007, 10:58 PM
 
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We're making an offer on a house tomorrow. We have a toddler and a baby on the way, and we're ready to settle down in our own house. We know the market may fall in the next few years, but we still feel that it's a good time for our family to buy a house, as long as we can get one at a good price for our budget.

As a child I lived in a series of rental apartments and houses until we bought a house when I was 8. It really felt to me that our quality of life went way up when we had our own house. We fixed it up and made it ours and were happy there.
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#6 of 117 Old 04-10-2007, 11:05 PM
 
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Seemed pretty reasonable to me. It seems they are saying RIGHT NOW, if prices are falling it might not be a great idea to buy.

You need to plan on staying in a home over 5 years to "guarantee" a proffit on it. Is this news to anyone?

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Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter. The same is true in Phoenix, Las Vegas, the New York region, Northern California and South Florida. In the Boston and Washington areas, the break-even point is about 4 percent.
Long term (historically) that doesn't seem unreasonable.

 

 

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#7 of 117 Old 04-10-2007, 11:26 PM
 
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that makes me feel better. I think I need to quit reading these threads/articles/etc. I know that this is the right time for us, we've waited a long time and we're stable. Finally.
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#8 of 117 Old 04-10-2007, 11:28 PM
 
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I agree w/ the article, and I would go further and say rent if you aren't planning to stay there 10 years. I think the idea of home ownership is an emotional one and some sort of rite of passage signaling you're a family, or an adult, or whatever. Home ownership IS more expensive than renting--property taxes or course but the neverending repairs and maintenance add up as well.

I'm glad we're homeowners but I can't fool myself that it's really saving us any money at this point.
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#9 of 117 Old 04-10-2007, 11:40 PM
 
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If I could go back and do it again, I would rent instead of buy. BUT that is only because we bought at age 19, less than a year after we graduated high school. We were both in school full time and working out butts off for this house. Things are better now, but a lot of debt was taken in in the past few years in repairs and fixing the house up. I do think we will get a great profit off of it when we do go to sell it in a couple more years. I am all for buying, but you have to be in a good situation to buy. Renting is more ideal if you aren't set financially.
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#10 of 117 Old 04-11-2007, 01:09 AM
 
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The way DH and I see finances, all that matters is how you spend it, now how much you have when you die.

We found a perfect house, and we just closed on it yesterday. It was at the upper end of our price range, and we bought just as the housing market 'crashed.' Some would say it's not the best time financially to buy, but we don't care. We intend to stay in this house for the rest of our lives (we'll see what happens, but that is the plan), and are thrilled to have a place that we can make into our own.

We're using our money to make ourselves happy, and that's all that matters to us.

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#11 of 117 Old 04-11-2007, 01:46 AM
 
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I think the article provides a lot to think about. I really dislike the way owning a home is the "American dream". It's not for everyone. And people need to think LONG and HARD about whether they can truly afford it. We bought a house 2 years ago for not much more than we were paying in rent. But when the heat pump went out last year we were in MAJOR trouble. We just paid it off. We couldn't afford it and we shouldn't have bought.

We're looking at moving in the next year or so to another state and we're hoping to not owe money when we sell. The value has gone up of course but it will barely be enough to cover closing costs and realtors fees. I wish someone had told us all of this before we bought.

We did plan on staying here 5+ years before we moved. But our church shut down and DH needs a new job. It just didn't work out.

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#12 of 117 Old 04-11-2007, 02:38 AM
 
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Right now, we pay less in a monthly mortgage payment than we'd pay in rent. We also live in a better area than we could afford to rent in. If we were to sell our house right now, we'd make about $15,000, which is what we've paid as mortgage payments for the past two years. So, theoretically, we could have lived here for free for the past two years.

To me, that seems like a good deal.
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#13 of 117 Old 04-11-2007, 10:53 AM
 
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you have unexpected rent increases and you have no equity because you rent and when something needs replacing you can't pick out the replacement like a low flow toilet or VOC free paint or cork flooring. You might be evicted if your landlord sells! You have no control; you sign a lease and have to follow the rules. You may or may not get your deposit(s) back and each new rental requires one. If you want to move you have to hope for a place that accepts animals if you have them and hope you get accepted.

With owning you do have taxes (deductible) and you do have to fix things yourself or pay to get them fixed but you can do it your way in your own time frame. Eventually you'll own your house. Your payment stays the same if you get a fixed rate mortgage. You build equity and can borrow against it or when you sell you will have a hefty downpayment on your next house.

I've lived in my house for 7 years. Our house has at least doubled in value. In my area however we can't afford to move because houses are too expensive now. I don't want to sell my hosue for a reasonable price and not be able to buy for for a reasonable price. Rents are higher than my mortgage in my area if you can find a place to rent as there is a shortage.
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#14 of 117 Old 04-11-2007, 12:32 PM
 
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We've lived in our house for five years. So far it has risen in value by more than all my mortgage + tax payments added together! I know that's part of the bubble rise - and it won't stay like that. But like a PP said, so far, we've lived here for 'free'. I too could not afford to live in rent a place to live the size of our house in this area. I agree that buying isn't for everyone, but we love our house and we love owning. There's a feeling of stability.

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#15 of 117 Old 04-11-2007, 12:36 PM
 
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Not trying to lash out at anyone really, but it drives me crazy when people say one of the main differences between home ownership and renting is taxes... EITHER WAY you are paying the taxes, it is just itemized when you do a mortgage instead of just encapsulated in the blanket "Rent". When renting you are still paying it, you just do not get to deduct it.

We have looked at the price of renting something exactly like what we have, and it is the same as our mortgage or more. When we rented, an identical unit came up for sale and our mortgage + taxes would have been quite a bit less than rent.

Sure when we lived in a crappy apartment in a crappy part of town, our rent was 1/2 as much as our big nice house in the country, but yeah we were paying taxes either way, we just get credit for it now.

I know it's awful, but for us a house is like a manditory savings account. And we are spenders... Even if we are only paying a few hundred bucks into principle every month, that is a few hundred less that we will flush down the toilet in the long run. We are building an asset without putting forth any real effort, you have to live somewhere, why not somewhere that forces you to save.
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#16 of 117 Old 04-11-2007, 12:37 PM
 
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For me, it's all about assets. Owning gives you an asset. Renting is just a liability.
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#17 of 117 Old 04-11-2007, 12:49 PM
 
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My dh and I are on our fourth house. If you stick to good school districts and make reasonable repairs and improvements to your home and land, you will make money when you sell.

As for renting, I can't see doing that with kids. It seems non-permanent somehow to me, as if you don't want to put down roots. Also, I don't know what it's like in many areas of the country but I lived in Atlanta, Ga and now I live in Portland, Or. The very best public schools in both of these cities have very few apartments in their school districts.
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#18 of 117 Old 04-11-2007, 12:54 PM
 
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In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime.
That has been my experience too

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It found that even though rents have recently jumped, the costs that come with buying a home — mortgage payments, property taxes, fees to real estate agents — remain a lot higher than the costs of renting. So buyers in many places are basically betting that home prices will rise smartly in the near future.
That is true in most cases, most of the time. This isn't anything new.
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#19 of 117 Old 04-11-2007, 12:54 PM
 
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This is something I struggle with. Our mortgage seems awfully high especially when we have NO money and are stretched so tight, but I have to keep reminding myself that it is better in the long run even though there are tons of things that need to be fixed around here and we have no money to do that. All a matter of perspective. I have to keep telling myself this is for the long term even as I look at my ruined basement knowing it can't be fixed anytime soon. Yuck. I know it'll happen some day though.. and like others have said, in our area at least, rent is just as high if not higher.
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#20 of 117 Old 04-11-2007, 12:55 PM
 
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For me, it's all about assets. Owning gives you an asset. Renting is just a liability.
Renting is an expense, not stictly a liability. You can get out of it if you need to/want to move.

Owning can be an asset, but only if people have actual equity in thier homes. With all the 110% loans, negative amortization loans and the declining prices, many people are upside down on thier homes. In thier case their house is a libility. The asset is not your home, it is your equity, which thanks to bad lending and overuse of HELOC, many homeowners have *none*. Also, if people get a mortgages they can not afford they could end up losing all the funds put into the house and the house- good ol' foreclosure and it is going to be a huge number of people in the coming years. Owning does give the very real expense of interest and larger than renting liabilities if you want to sell but can not.

That said, I think buying is great and we are doing it ourselves but we are doing it with a fixed rate mortgage and a sizable downpayment and with a reasonable cushion for the repairs etc. Before we had those resources, I was very happy with renting. We also are confident we will be there for at least 5-7 years. Many people buy, just to buy, for emotional reasons before they can really afford to buy.

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#21 of 117 Old 04-11-2007, 01:03 PM
 
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If you get a 15 year mortgage, at an interest rate of 10% or less, and your payment (including taxes and insurance) is no more than 28% of your gross income, you will be better off owning than renting all day long.

The problem is that the real estate bubble has been largely fueled by weird mortgages- ARMs, interest only, no down payment, etc. An interest only mortgage is the rough equivalent to renting, except you can end up upside down. Yay. I truly think there is a special circle of hell for predatory lenders.

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#22 of 117 Old 04-11-2007, 01:04 PM
 
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Originally Posted by philomom View Post
My dh and I are on our fourth house. If you stick to good school districts and make reasonable repairs and improvements to your home and land, you will make money when you sell.

As for renting, I can't see doing that with kids. It seems non-permanent somehow to me, as if you don't want to put down roots. Also, I don't know what it's like in many areas of the country but I lived in Atlanta, Ga and now I live in Portland, Or. The very best public schools in both of these cities have very few apartments in their school districts.
I agree. We are going to try to buy this summer. I have moved over 20 times in my 23 years. I have 3 kids. I just want to own a house so that we don't have to move everytime our landlords screw us over. Family and stability are huge issues with me from my family's history. Owning a house, to me, is like finally being stable.

I hate renting with a passion.

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#23 of 117 Old 04-11-2007, 02:28 PM
 
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I think the article is a little misleading when it talks about people paying property tax in addition to their mortgage. Just about everyone pays their taxes and homeowners insurance as a part of their payment. It seems like they are trying to make it sound like you pay your payment, plus taxes, etc.
That may be true where you live, but I have found it to be the exception out here. Most people here seem to pay them separately. If you don't have your 10 or 20% down, sure, you're forced to have impound accounts, but very few people I have worked with opt to have them voluntarily.

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Originally Posted by newbymom05 View Post
Home ownership IS more expensive than renting--property taxes or course but the neverending repairs and maintenance add up as well.
I think this is really dependent on a lot of things. Even with all the cosmetic work that this house "needs", the actual necessities (plumbing, electric, roof, etc.) don't add up to that much if you take care of it. To rent in our area, we would be paying easily twice our mortgage payments for half the space, and still have to be responsible to some landlord.

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Originally Posted by mommyddeville View Post
Right now, we pay less in a monthly mortgage payment than we'd pay in rent. We also live in a better area than we could afford to rent in. If we were to sell our house right now, we'd make about $15,000, which is what we've paid as mortgage payments for the past two years. So, theoretically, we could have lived here for free for the past two years.
We're the same way. The rentals in our neighborhood are in bad shape, have lousy landlords, and rents are inflated. Outside of our neighborhood, there are few places here I would be willing to live that don't cost even more.

If we were to sell right now we would walk away with enough to buy a house in most any other part of the country. In the long run, that means it's all paid off.

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Originally Posted by kijip View Post
Owning can be an asset, but only if people have actual equity in thier homes. With all the 110% loans, negative amortization loans and the declining prices, many people are upside down on thier homes. In thier case their house is a libility. The asset is not your home, it is your equity, which thanks to bad lending and overuse of HELOC, many homeowners have *none*.
Unfortunately, this is the side effect of the mortgage lenders pushing loans to people who can't afford them, as well as people not doing their research (or believing the research if they do do it) before they buy. Working in real estate I saw this all too often. Heck, I tried to talk my parents out of a bad deal, but they didn't want to believe I knew anything about it (after almost 10 years in the business : ). Now, they're regretting not believing me. This is also one of the main reasons the mortgage lenders are now in trouble, both filing bankruptcy and with the feds investigating mortgage lending.

We just did our taxes last weekend. With what we made last year, if we were renting, we would have owed the IRS a big chunk of change. Because we own, and can deduct both mortgage interest and property taxes, we wound up with a nice refund. That makes a huge difference in our finances, but is one of the main reasons we choose to own. Sure, we couldn't afford to buy now. The market is in the toilet, prices skyrocketed and so did interest rates. But we bought for the long-term. If we ever sell this place, it will be to move elsewhere, another city, another state maybe. If I'm lucky, a large piece of land in the middle of nowhere. In the end, that makes the hassles of homeownership worth it.

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#24 of 117 Old 04-11-2007, 03:03 PM
 
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If you get a 15 year mortgage, at an interest rate of 10% or less, and your payment (including taxes and insurance) is no more than 28% of your gross income, you will be better off owning than renting all day long.

The problem is that the real estate bubble has been largely fueled by weird mortgages- ARMs, interest only, no down payment, etc. An interest only mortgage is the rough equivalent to renting, except you can end up upside down. Yay. I truly think there is a special circle of hell for predatory lenders.
Precisely and all together right.
DH & I recently brought a house (almost a year ago now), and it freaked me OUT with how many (who I thought were smart, with-it people) suggested that we get a ARM with a super low teaser rate - and then just refi when the rates started to rise on the loan. I thought that was about the dumbest thing I heard for two reasons- 1) Interest rates are at one of their lowest rates in FOREVER - why wouldn't you want to lock that in? 2) What if we CAN'T refi? What if the housing market tanks? What if interest rates rise higher than the low rates now?
There were too many loose ends for us to gamble on being able keep up with the payments - no matter HOW low they were to start with. And since we plan on staying in our house til they carry us out - getting a loan that would change in 3/5/7 years was - well, not wise.

Also - the reason they may exclude taxes when talking about it, is because the actual LOAN payment that is advertised normally does NOT take taxes/insurance into account. The amount that you see advertised for most loans is the P/I - principal and interest. Your actual mortgage payment is usually PITI - principal/interest/taxes/insurance - this, unless you ask, you might not find out til closing.
Our loan payment in 630. Our mortgage payment is 940 - and we live in the highest taxed area in our region - which is one of the lowest taxed places in the country - so I KNOW the jump is even bigger in other places.

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#25 of 117 Old 04-11-2007, 03:08 PM
 
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To quote Lex Luthor...

You can print money, manufacture diamonds and people are a dime a dozen, but they’ll always need land. It’s the one thing we’re not making any more of.
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#26 of 117 Old 04-11-2007, 03:23 PM
 
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It always seems so strange to me how people seem to become defensive around this argument. I don't judge anyone for renting, it's just not for me or my family.
I want to own a home so I don't have to answer to anyone when I feel like changing something about it. I also own a home to have a permanent place for my family to grow in. With renting (I am speaking of renting homes, not apartments/condos), you have a possibility of your home owner (landlord/lady) choosing to sell the home you're in. If it is a place you love, this can be very difficult. I could not live with that--I am a worrier.
As for taxes, many homeowners pay property taxes through an escrow (like a special savings) and never notice them at all. Then, when taxes come around, not only do you get a little something back for paying mortgage interest, your taxes are deductible, too.
We bought in 2000-2001. Our home value has actually almost tripled. We went for a lower interest rate and some cash about a year ago to help me stay at home, but we still have over 100,000 in equity. We pay less on our mortgage than most pay in rent for a smaller home in our area.
I guess it is a matter of timing. I would not be able to buy a home in the current market, nor would I even consider selling.
I believe it could also have to do with how you were raised. I had a friend who was determined to own a home since she was an army kid. She moved often, never had permanent friends. She bought a home on an ARM and it ended last year. Fortunately, she was able to refinance at a great rate. But, many can't. It's a scary market right now.

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#27 of 117 Old 04-11-2007, 03:24 PM
 
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Living in a rented house one get to live with junk as the landlords just don't want to spend $$$ to fix things.

Right now the house we rent the hot water tank is being replaced. The owners kinda though we should live the the leaky tank when they heard how much it would cost.

If the owners would put in a water softener is would save loads of money for them in appliance repair and replacement but they wont do it.

I prefer owning.

We have owned twice and each time made good money off the place when we sold it
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#28 of 117 Old 04-11-2007, 03:35 PM
 
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I think now is a terrific time to buy--hence the term "buyer's market." Prices are dropping fast, interest rates are still good, and there are a ton of desperate sellers out there.

Two years ago when the prices were inflated was not such a great time to buy, but people were doing it in droves and no one said, "Boo."

Of course, I'm all about real estate as an investment--buy when it's cheap, fix it up, sit on it, and sell when it's booming. And while the housing market has dipped at times, it still keeps going up. As shaggy daddy says, "They aren't building any new land."

I'd buy a fleet of houses right now if I had the bank.
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#29 of 117 Old 04-11-2007, 03:41 PM
 
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Well, for what it's worth, I'm in one of the places where it's better to be renting at the moment. Our landlord is taking a 1000 dollar loss every month on both the properties she rents out. She bought in 2005. The market tanked last summer, and it's not stabilized, yet. Our neighbors across the street took a 60k loss in the first six months they were here. So everyone out here freaked out. There are 9 houses for sale on my street, from people that thought they'd wait for the high point--and the glut means that they're driving prices even lower. Thing is, that even with the current correction, prices are still too high--property that went for 80k in 2001 is supposedly worth 330k, now. We're talking 230k for a double wide trailer on a zero lot. Only no one is buying. And, given gas prices, no one will. We're too far too commute anymore.

If you're in a place were prices didn't go crazy, then yeah, now might be a good time to buy. But... if you're in Cali, or Boston, or anywhere else where things simply with NUTSO, then waiting is actually a pretty good move.
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#30 of 117 Old 04-11-2007, 03:50 PM
 
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Originally Posted by glendora View Post
Well, for what it's worth, I'm in one of the places where it's better to be renting at the moment. Our landlord is taking a 1000 dollar loss every month on both the properties she rents out. She bought in 2005.
See, I still think she's doing OK b/c if she's only paying $1,000/mo for two houses, that's a pretty good deal. I wouldn't advise purchasing rental properties when the market is hot like she did--but I still think in the long run, she's gonna own two houses that she barely paid anything for.
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