Should Americans abandon the dream of home ownership?

Bearfootfarm · #21 10/11/11, 10:47 PM

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Quick Google search indicated 40 million Americans move each year

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Census Bureau stats from the 90's gave a rate of about 1 in 6 Americans moving each year

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The theory goes that most Americans move every few years anyway,

Thank you for proving me correct, since neither "40 million" nor "1 in 6" equates to "most"

poppy · #22 10/11/11, 11:07 PM

There is a small segment of the population that moves frequently and they skew the numbers. Some folks aren't happy unless they are moving it seems. The vast majority stay put for decades. I check houses for real estate agencies and some of them come up for sale every 2 or 3 years like clockwork but for every one of them I can point to a hundred that have had the same owner as long as I can remember.

willow_girl · #23 10/12/11, 12:19 AM

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The very idea that home ownership can't be had by anyone is absurd and frankly repugnant to my ears.

For the record, I wasn't questioning whether it is possible to buy a home, but whether it is wise.

For instance, I sold my parents' aforementioned home (after they had passed away) in 2002 for $113,000. According to Zillow, its value today is $54,100. (I believe it has fallen by $15,000 in just the past year.) I think a good argument could be made that the young couple who bought it (and were so excited to be moving into their first home, *sob*) would have been better off renting. But perhaps because of my very conservative, traditional upbringing, something in me quails at the notion that we're better off as a nation of renters.

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But then so is the pablum that is spewed forth daily from the WH and then flows downhill via MSM (Mainly Sewer Manure). I'm willing to bet that those commentators that you're citing, are in that same group that regurgitates whatever the socialist regime tells them to and then trys to dress it up with a pink bow.

I think I mentioned before that this idea was proposed by Glenn Beck in his book "Arguing with Idiots." I think Beck would be surprised to hear himself described as a socialist, but, well, call it as you see it, I guess!

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Turns out the bank calculated the mortgage we could "afford" based on our gross income which would have taken up half of our monthly income and left us mortgage poor.

I have had a similar experience in that once I applied to put a mortgage on my house in order to buy a piece of undeveloped land that wouldn't qualify for a conventional mortgage. Unfortunately, I was unable to come to terms with owner on the price. When I called the bank to tell them the deal was off, the loan officer encouraged me to go through with it anyway. Being naive, I suppose, I said, "What for? I just told you I'm not buying the land." He went on to suggest that I might take that $100,000 and have a nice vacation, buy some new furniture, whatever I wanted. I was stunned by the idea that anyone would mortgage a home they owned free and clear for frivolities! But I'm sure there are people out there who would, and did. Yikes!

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I wish I had the cash to buy up some properties now as investments, houses are on sale.

I'm gnashing my teeth at the idea that I live in one of the few places in the U.S. where housing values didn't decline much and, in fact, have increased modestly the past few years. Thus no cheap investment properties for me! When I look at what homes are selling for back in Michigan (my home state) I go, "GAHHHHH!"

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One in six is a long way from 'most'. That is a small minority.

If you read my original post, you'll see that I was summarizing Glenn Beck's theory, which was that in the fluctuating job market, it makes more sense for people to rent, so they can be ready to cut and run when business and industry go elsewhere (as they so often do). I believe Beck argued that equity actually can be a liability if it keeps you 'stuck' in a locale to which jobs are not likely to return.

Again, I can see some objective truth in this, but it makes me uncomfortable. I was raised under a different set of values, one that saw home ownership as a worthy aim. My parents lectured me that a home was the one thing that it was OK to borrow money to buy (although even then, you were expected to double up on the payments and pay off the mortgage in half the time). Your weekends and spare time were to be spent keeping the home in tip-top condition (everyone wanted to have the greenest lawn on the block!) and your reward was to see it appreciate nicely over the years.

I suppose that sounds very quaint nowadays. Hmmm.

Anyway, thanks to everyone who responded. It was interesting to hear your thoughts on the subject.

Bearfootfarm · #24 10/12/11, 03:31 AM

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I think a good argument could be made that the young couple who bought it (and were so excited to be moving into their first home, *sob*) would have been better off renting

It doesn't matter what it's "worth" unless they want to sell it.

If they were renting, they would have nothing at all, whereas now they OWN a home

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If you read my original post,

We couldn't have quoted it if we hadn't read it

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your reward was to see it appreciate nicely over the years.

Your reward is having a place to live where you don't have to ask a landlord's permission for everything..
Not everyone treats it as an "investment" on which they expect a profit

willow_girl · #25 10/12/11, 08:28 AM

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It doesn't matter what it's "worth" unless they want to sell it.

If they were renting, they would have nothing at all, whereas now they OWN a home

It's possible they found a way to pay off the mortgage in the last 9 years, but since they bought it through a zero-down government financing program, I'd think it's probably more likely that they currently owe about $100,000 on a home worth $54,000.

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We couldn't have quoted it if we hadn't read it

Apparently not very carefully, as you misunderstood, but whatever!

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Your reward is having a place to live where you don't have to ask a landlord's permission for everything..

I'm not sure the folks who are 40 percent underwater (but will trash their credit if they default) will find that to be much consolation, but ...

It is stunning to see property values fall so far, so fast. When I inherited the house in 1999, it appraised for $149,000 ... meaning it's lost about 2/3 of its value over the last 11 years.

Looking at pictures of the neighborhood now, it does not appear the homes there are being kept up the way they used to be (and it's no wonder). When I see pictures of former Detroit neighborhoods, where only a house or two is left standing among burned-out shells and vacant lots, I wonder if that's how the neighborhood I grew up in will look in another 20 years.

Beeman · #26 10/12/11, 08:32 AM

I think the American Dream of home ownership took a sidetrack when it became the your home is a money making investment that doubles in value every 5 years plan. It became a suckers game just like every get rich quick scheme. Don't get me wrong, many people did make money but like every scheme you have to get in and get out before it collapses and many did. Housing prices are just seeking their real level, not the level of what it's worth based on how much could be borrowed against it. The other sidetrack was it's not good unless it's too big. The dream became you have to have the biggest and best or it's not worth owning. Not working out too well in the high energy costs and higher taxes world we live in today. Those that saved, bought sensibly and within their real budget have no problems, the dreamers are another story.

sticky_burr · #27 10/12/11, 08:57 AM

they need to abandon the we want or deserve it all. dealing with a SMALL house or one with a god forbid out dated kitchen..something that they could actually afford

zant · #28 10/12/11, 10:14 AM

When we sold our last home and moved back South(Thank God)-we could have been really stupid and bought an overpriced house with payments..but we bought our home/land CASH-a small home 1200sqft for 2 people..land for animals/to grow on,low taxes..neighbors a mile away.We did'nt and have never bought a home for "investment"-really dumb idea.Rebuilt exterior last year and made improvements-all CASH...Buy what you can afford-not an overpriced showcase to fool other idiots how "successful" you are..it's like buying new vehicles on payments-really dumb.

SteveD(TX) · #29 10/12/11, 10:19 AM

It's still the American dream. People just need to be smart about it, and do NOT buy a house if you plan to move or sell it in the next few years.

SteveD(TX) · #30 10/12/11, 10:23 AM

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Originally Posted by zong

Historically, people made a down payment of 30 to 50% of the cost of a house. That way, they were motivated to keep up payments.
A home is not an investment. Its a place to live.

A home is still an investment, AND a place to live. But in today's world, it must be a SMART investment. Our home equity is a significant part of our net worth. If we'd been renting for the last 20 years, our equity would be zero.

Bret · #31 10/12/11, 11:59 AM

Let go of no dream.

Start making payments to self right away. Watch for your time. Along the way, you will learn what to look for.

Txrider · #32 10/12/11, 12:10 PM

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Originally Posted by willow_girl

For generations, the idea of owning a home was a key component of the American Dream. I believe this desire stretches back ever further in time, probably all the way to Europe, where to be a landowner -- to be "landed" -- was to be one of the gentry, not a mere peasant.

The neighborhood I grew up in was new, built just a decade before my birth in the post-WWII suburban housing boom, but it enjoyed a high degree of stability. Most of the homes were owned, not rented, and it was rather rare for families to come and go. Most people stayed for decades. I can go back to the old neighborhood now and run into elderly people who were parents when I was growing up. Many of my classmates seem to have settled down within a mile or two of where they were raised.

Sadly, though, home values in that neighborhood have dropped by 30-40 percent in the past decade, and I suspect many people there are underwater on their mortgages. The old idea that you bought a house and watched it gradually appreciate in value seems to have been turned on its head.

In the wake of the housing crisis, some commentators have broached the idea that perhaps we ought to scrap the idea of home ownership as part of the American Dream. I believe Glenn Beck brought up the subject in "Arguing with Idiots." The theory goes that most Americans move every few years anyway, as they scramble around trying to find and keep work, so why even bother putting down roots?

This new vision of America seems to be of a place where corporations can set up shop temporarily in the area most willing to give them tax breaks or grants, and count on a steady supply of rootless migrants willing to hunker down wherever work is, for however long it lasts.

I'm not sure the resulting community would be an improvement upon the one I grew up in, though. What do you think?

I dunno, I bought my current house in 2006, top of the housing boom, it's worth basically just what I paid 5 years ago, but it's worth $80k more than it was in 1999.. about double the value in value in 13 years time.

My parents bought a house in 1981, it's now worth triple what they paid.

The problem with the housing boom was folks started expecting the value of the house to go up significantly in 1-5 years, which has never been realistic.

As for jobs, I have moved twice to a new area of Texas in my adult life. I will move once again and that'll be it.

Hollowdweller · #33 10/12/11, 12:25 PM

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Should Americans abandon the dream of home ownership??

I think it depends.

I think that "the man" had basically turned home ownership into a racket up till the financial collapse.

Now that prices are falling it may once again make sense unless wages fall even further.

Let me explain:

I always considered home ownership a protection against bad times. When we bought our place back in the 80's when we bought it we specifically bought a place that if my wife or I lost our job we could still make the payments on 1 of our salaries. We got a place with free natural gas and had a water well, and a place we could garden and hunt and raise animals.

We financed it for 15 years, and since we bought a place we could pay for with 1 salary we paid more per month than we strictly had to.

By the time we were 40 it was paid off. If we got laid off or something we could still live here on a min wage job.

Now lets look at today. The very same place we bought at the current starting salaries of the jobs we had when we bought our place would be unable to be paid for on one of those salaries. The cost of the house and land has gone up way more than the cost of the salary. Interest rates are way lower yes, but the actual cost is higher.

What I see with the whole housing issue especially before the collapse was "The Man" had figured out a new way to screw the working classes.

When somebody rents a house they rent it. Generally speaking the actual owner is responsible for maintainence, insurance, taxes.

However they figured out that by taking the people who rent, selling them a house at a jacked up price, but making the terms such that they are paying for the house forever (30 year mortgage etc) they can essentially keep the poor sucker paying "rent" for half their lives(or more) but all the maintainence, taxes, insurance are on the buyer. What a scam!

Additionally they built the houses much larger and more expensive and by pushing the loan out so far to keep monthly expense lower they could actually get the people to buy something bigger than they should have.

With prices falling now it may make sense to buy some smaller house at a bargain and then pay it off quick.

But in my opinion buying a big house for big bucks stretched out over 30 years you are getting screwed.

mnn2501 · #34 10/12/11, 01:21 PM

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Originally Posted by Bearfootfarm

I don't believe that at all

Change that to; many city dwellers working for others move every couple years.
I've been in 5 homes in the last 11 years, 2 rentals and 3 as owner.

Yvonne's hubby · #35 10/12/11, 03:09 PM

I hope people will keep the home ownership thing going a bit longer... I have two right now that I really would like to sell!

sticky_burr · #36 10/12/11, 03:51 PM

the myth of home ownership always makes me chuckle. how many people actually OWN thier home outright completely paid for? especially the upscale homes right now they are lucky if they only owe the bank what the equity is

Cornhusker · #37 10/12/11, 04:24 PM

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Originally Posted by sticky_burr

the myth of home ownership always makes me chuckle. how many people actually OWN thier home outright completely paid for? especially the upscale homes right now they are lucky if they only owe the bank what the equity is

Even if you "own" it outright, you still have to pay rent to the county every year.

Hollowdweller · #38 10/13/11, 09:48 AM

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Originally Posted by sticky_burr

the myth of home ownership always makes me chuckle. how many people actually OWN thier home outright completely paid for?

My house is paid for. 2 of our 3 cars are paid for. I can actually think right now of 10 of my friends whose houses are paid for. None are mansions though.

Yvonne's hubby · #39 10/13/11, 10:41 AM

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Originally Posted by Cornhusker

Even if you "own" it outright, you still have to pay rent to the county every year.

Well, you have to pay that whether its paid for or not... and you still pay it when you rent. there just seems no way to avoid taxes entirely.

Jenn · #40 10/14/11, 04:18 AM

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Originally Posted by emdeengee

No I don't think that the dream should be abandoned but I do think that people need to look upon it in a different way. We are all in a rush to own and yet historically most preceding generations only owned latter in life. I think that a solid retirement plan includes owning a mortgage free home. I also think that we need to be more realistic in the size of house and/or land that we should be aiming for. The old rules about saving for a big downpayment did delay home purchasing but it also guaranteed that you were serious and financially stable enough to buy and commit to long term payments. Smalll downpayments or no downpayments meant that a lot of people could get into the market but was it the right time? were they finanically stable enough or settled enough as to their jobs to actually be buying. Banks have become notorious in the way that they "trick" people into buying houses they really cannot afford. 35% of you net income for housing costs (mortgage, condo fees, insurance, taxes) and 2 1/2 times your yearly gross income as to the price of your house is what most economists recommend. When we were purchasing we were preapproved by the bank for $60 more than I knew we could afford and stay within the 35% range. Turns out the bank calculated the mortgage we could "afford" based on our gross income which would have taken up half of our monthly income and left us mortgage poor.

The other issue not covered is that even under the 35% you then have to work until after the mortgage is paid off. Most of us here are trying to stop 'working' for anyone but ourselves ASAP so the smaller the mortgage we need to pay from our homestead income or pay off quicker whenever possible, the sooner we get where we want to be. 35% of the income I want to live off of ASAP, ie DH's military pension and 1/40th of our savings per year, is a lot smaller home than the ones they try to show me whenever we move somewhere.