The two-year housing decline is worsening

[PlatyPius 5]

GaryC will come out a winner no matter what. If his mortgage payments are the same as his rent, he simply cannot lose.

Unless he buys in location where prices drop. Historically, the midwest has been very prone to this.

So what if they drop? He's not going to sell it now, and there is NO WAY IN HELL

his house will cost less 13 years from now.

I agree.

But life happens. Sometimes you have to sell early (for whatever reason).

Interestingly enough, the reasons that drive people to selling before they had planned... happen a lot more in the midwest than anywhere else. It's just generally speaking the most depressed part of the nation.

The Midwest *is* a "depressed" area, in that the majority of jobs are manufacturing-based, and those factories can close up at any time. It is also "depressed" in that the average income tends to be much lower than on the coasts.

However.... based on my own personal experience, house prices have remained pretty steady for the last 20 years - increasing maybe 2% per year. Gary isn't very far from me, really. I'm guessing that the housing market in his area is about the same as here. Steven's little comparison above has no relevance to us at ALL. A $400,000 house in this area would be a 5 bedroom 4 bath McMansion on 2 acres of land. For $80-$90k, which is Gary's range, he will be able to buy a very nice older home, or possibly a smaller brand new home. New construction here starts around $70,000 and goes up (in the reasonable range) to about $250,000. For property tax comparison, my house is valued at $65,000. My property taxes are about $1100/year. My house insurance is $191.00 every 3 months. I don't have a mortgage, of course, so I can't compare that. Typical around here is $400 - $1000/month for a mortgage. Rent is the same. A 3 bedroom house would rent for around $1000-$1200/month. Apartments start around $350/month.

Showing cost comparisons for California mean absolutely nothing to Gary, or most of the country for that matter. California is some odd creature that shares housing traits with NYC, Chicago, and most of the East Coast - ie: too damn expensive.

The real b!tch of all of this, though.... making Midwest wages (typically an average is $40-$60k/year) and paying Midwest rent/mortgage is fine and dandy. Buying anything else, however.... A ceiling light that costs $300 is no big deal to someone in the high-income areas. It's a fortune to the rest of us. Prices don't change based on where you live, unfortunately. Ergo, the Midwest looks even more depressed because we can't buy the same stuff as people in California, Massachusetts, etc.

We gots us some cheap houses, though! lol

[w¡n9Nµ7 §£@¥€r 123]

.... making Midwest wages (typically an average is $40-$60k/year) and paying Midwest rent/mortgage is fine and dandy. Buying anything else, however.... A ceiling light that costs $300 is no big deal to someone in the high-income areas. It's a fortune to the rest of us. Prices don't change based on where you live, unfortunately.

Interesting POV. Thanks.

I envy those prices, btw. I pay 6k a year in prop taxes for a condo 40 miles from NYC.

[Trompe le Monde 1,107]

House prices are declining in my old neighborhood (Detroit area). This will not effect people like my mother who bought 30 years ago, but will be a problem for the woman next door who bought only 2 years ago and needs to move. My mothers house has more than doubled in value since she bought it in 1976 - the same rate of return someone in my zipcode in Westside LA would have got in only 5 years.

Generally speaking, buying a house makes good financial sense and for the many reasons people have listed in this thread. However, the economics of buying a house are going to depend very much on your local market and your personal circumstances (are you going to be in the house long-term or not). A lot of people I know buy into the idea that housing is "always" a good investment and believe house prices will "always" go up and it's simply not the case.

[w¡n9Nµ7 §£@¥€r 123]

However, the economics of buying a house are going to depend very much on your local market and your personal circumstances (are you going to be in the house long-term or not). A lot of people I know buy into the idea that housing is "always" a good investment and believe house prices will "always" go up and it's simply not the case.

Exactly.

And buying in the NYC or LA metro areas, if you have a high degree of confidence that you'll be able to hold on for a while, makes a LOT more sense than buying in the depressed midwest.

Doubling your money in 30 years? That's a 2-3% annualized rate of return. That's barely inflation. You "make" nothing.

[one...two...tree 2,762]

House prices are declining in my old neighborhood (Detroit area). This will not effect people like my mother who bought 30 years ago, but will be a problem for the woman next door who bought only 2 years ago and needs to move. My mothers house has more than doubled in value since she bought it in 1976 - the same rate of return someone in my zipcode in Westside LA would have got in only 5 years.

Generally speaking, buying a house makes good financial sense and for the many reasons people have listed in this thread. However, the economics of buying a house are going to depend very much on your local market and your personal circumstances (are you going to be in the house long-term or not). A lot of people I know buy into the idea that housing is "always" a good investment and believe house prices will "always" go up and it's simply not the case.

Here's a good website on the Myths & Facts of Affordable Housing...particularly in California.

http://www.abag.ca.gov/services/finance/fa...usingmyths2.htm

Myth 1: High-density housing is affordable housing; affordable housing is high-density housing.

Fact

This myth expresses an essential truth: more units per acre mean lower land costs per unit, especially if local governments allow builders meaningful density bonuses. And smaller units cost less to build than larger ones. To encourage housing affordability, California cities do need to promote higher densities.

But we also know from experience and observation that not all high-density housing is affordable to low income families. San Francisco's Nob Hill and Telegraph Hill, Los Angeles' Wilshire Corridor and high-rises in downtown San Diego are all examples of upper-income areas where housing densities are quite high. Similarly, most Californians know that low-density neighborhoods often accommodate people of modest means. The residents of these neighborhoods often moved there shortly after the homes were built several decades ago-and before the huge escalation in California's home values that began in the early 1970s. With assistance, many families with limited incomes will continue to buy homes in these neighborhoods. Many other low-income house-holds will continue to rent single-family homes, because they offer more space.

For the most part, of course, low-density neighborhoods offer more expensive housing than high-density areas. Detached homes cost much more to by than apartments and condominiums. Among new units, the difference is even more striking; new high-density units are much more likely to be affordable than new single-family units.

Density is not always enough, however, to ensure affordability. Local governments must intervene with programs and additional concessions if they wish to ensure that new high-density units are also affordable. For a list of resources on affordable housing techniques, see "Resources: Making housing more affordable," at the end of this report.

[w¡n9Nµ7 §£@¥€r 123]

Affordable housing attracts people who can't get in to nice communities on the weight of their own merit. It's nothing more than a means of diluting the hard work of hard working people who build and create a nice & desirable community.

If the ghetto fabulous homeboys of Plainfield wanna move to Westfield, let them work their way up like everyone else.

[Fandango 1,439]

Sorry Lisa, you're wrong...

A Real-World Example

The absolute arrogance to post a 'real-world' example when I deal with this every day @ work

Let's put it this way....are landlords in business to be in the hole each month? Methinks not

Obviously one cannot generalize and cover every location in the country. Obviously some areas are different. I've already said that. Scroll back

[Fandango 1,439]

Doubling your money in 30 years? That's a 2-3% annualized rate of return. That's barely inflation. You "make" nothing.

But what you're missing is that if you were to invest that money elsewhere to make a better rate of return, you'd STILL have to pay for housing...and THAT money is flushed down the toilet if you rent. It's -100% ROR for renters.

[w¡n9Nµ7 §£@¥€r 123]

Doubling your money in 30 years? That's a 2-3% annualized rate of return. That's barely inflation. You "make" nothing.

But what you're missing is that if you were to invest that money elsewhere to make a better rate of return, you'd STILL have to pay for housing...and THAT money is flushed down the toilet if you rent. It's -100% ROR for renters.

Unless you live with mommy and daddy!

[one...two...tree 2,762]

Affordable housing attracts people who can't get in to nice communities on the weight of their own merit. It's nothing more than a means of diluting the hard work of hard working people who build and create a nice & desirable community.

If the ghetto fabulous homeboys of Plainfield wanna move to Westfield, let them work their way up like everyone else.

That leads to some form of segregation.

[Dan J 277]

Doubling your money in 30 years? That's a 2-3% annualized rate of return. That's barely inflation. You "make" nothing.

But what you're missing is that if you were to invest that money elsewhere to make a better rate of return, you'd STILL have to pay for housing...and THAT money is flushed down the toilet if you rent. It's -100% ROR for renters.

Its the same for most buyers if you sell your home for 5 years. But worse in most cases.

Buying is not always better, especially if you don't plan to be in one place for a long time. After paying mostly interest for 5 years, plus commissions and fees involved in buying and selling along with getting a mortgage, plus insurance and maintenance. Your looking at spending more for a house.

[Fandango 1,439]

Doubling your money in 30 years? That's a 2-3% annualized rate of return. That's barely inflation. You "make" nothing.

But what you're missing is that if you were to invest that money elsewhere to make a better rate of return, you'd STILL have to pay for housing...and THAT money is flushed down the toilet if you rent. It's -100% ROR for renters.

Unless you live with mommy and daddy!

LOL considering a move, Gdawg?

[Trompe le Monde 1,107]

I do think "affordable housing" should be available to essential workers - nurses, police, teachers, etc. I think it's outrageous that my neighbor who does what few of us would be willing to do - teach in LA County schools - is forever consigned to lining some landlord's pockets because on $60k he can't afford anywhere within a 1 hour commute from school.

[Artegal 1]

I dunno about those of you saying that owning a home is a bad idea--maybe its not such a great investment--but then is the Stock Market any better? Lets not forget about the tax savings--I really appreciate the tax write-off for my home mortgage. Also the feeling of this dwelling being mine! I can paint it I can put holes in the walls, I can do pretty much anything to it within reason without violating a rental aggreement. Also think of the equity you build and how you can use that equity to get a line of credit that is a tax deduction in order to buy a new car, go on a vacation, pay a debt, or educational expenses.

I rented for 5 years--I have now owned a house for 4 and a half years--sure I am paying about 400 dollars more for my house than I was paying in Rent. And I am responsible for the maintenance and upkeep--however, in a few years if I decide to move I might at least break even, and alternatively I could decide to continue owing my home and rent it to someone else.

But buying a home is not for everyone--if you do not like to crawl on the roof, go into the basement, climb up in the attic, know nothing about anything mechanical or home improvement--or hate to mow the lawn--then probably owning a home is not a good idea for you.

As far as using real estate to make money--that is not for a person just buying a family home--the real investment opportunity is to get a lot of cash and buyout some of the overbuilt areas where home builders and contractors are bankrupt or on the verge and desperate--buy the lot, flip them and sell them or rent them to others.

Edited September 13, 2007 by Artegal

[Fandango 1,439]

I do think "affordable housing" should be available to essential workers - nurses, police, teachers, etc. I think it's outrageous that my neighbor who does what few of us would be willing to do - teach in LA County schools - is forever consigned to lining some landlord's pockets because on $60k he can't afford anywhere within a 1 hour commute from school.

I just heard of a new loan program (well, I dunno how new it is) called 'Florida Heroes' or some such with really great rates and terms & it's available to police, fire, city workers, teachers, nurses, etc.

I thought it was a cool idea! Hopefully it's nationwide!