159 replies to this topic

[pinko]

America’s Ten Sickest Housing Markets

Posted: August 3, 2011 at 4:35 am

For three years, the real estate market has been going in one direction — primarily down. Some areas, however, have begun to recover. Recent S&P/Case-Shiller data show that among the top 20 housing markets in the U.S., 18 had very modest improvements in sales prices during May. Others, like Washington and Boston, have began to at least stabilize from a year ago.

•Read America’s Ten Sickest Housing Markets


Read more: America’s Ten Sickest Housing Markets - 24/7 Wall St. http://247wallst.com.../#ixzz1U4xi88AN

[Bonam]

Err... any thoughts or opinions on the article? Or just posting it?

Housing market looks more than healthy where I'm at. I'm just hoping to be able to buy something in the next year or two before prices skyrocket again.

[August1991]

Err... any thoughts or opinions on the article? Or just posting it?

Good point. We have a rule that posters should make comments on articles and not simply paste a link.

Anyway.

If someone can afford a down payment, has the time to research properties and plans to stay at least five years or so, then buying a house/condo makes good investment sense. Both Canada and the US offer in effect a tax advantage since the imputed rental benefit is not taxed and any capital gain on a principal residence is not taxed either. In the US, this advantage is further increased through mortgage deduction on taxable income. No other investment offers such tax advantages.

Finally, we have a well organized real estate finance market (despite what you read in the papers) when compared to every other jurisdiction on the planet.

OTOH, much of the US has just recently gone through a housing bubble so while there are some good deals availabale, people are gun shy to buy.

[Charles Anthony]

Guys,
Please report it next time.

[ZenOps]

Report what?

I would say slight liability in some areas and massive liability in others.



http://www.fdic.gov/...d/banklist.html

When a house is foreclosed, and the bank also refuses (or cannot) pay taxes - it usually a sign that a house is barely worth much more than the taxable liability each year.

Yes, historically there have been many times that houses and large properties have sold for $1. Dates all the way back to potato famines and the like - where landowners would simply give away land to remove themselves from the tax burden.

Edited by ZenOps, 04 August 2011 - 01:23 PM.

[Oleg Bach]

Makes you wonder with all the foreclosures in America - that the states might just be a huge feudal kingdom and the master kicks out the useless surfs who do not pay full tribute.

[The_Squid]

Buying a house is the wisest investment one could make, despite the ups and downs of the housing market.

However, like any investment, you have to do it in a wise manner.

[Bonam]

Buying a house which is to be a primary residence is almost always a wise decision. Even if the value of the house depreciates substantially, you are still saving money, except in very extreme cases. What people seem to forget when discussing the value of buying a house is that, if you didn't buy the house, you would instead be living in a rented residence.

Let's say I have the option of buying a house or continuing to rent an apartment at $1000 / month. If I buy the house and live in it for 10 years, that is $120,000 in rent payments I didn't have to make, which instead went to paying off my mortgage. So even if the value of the house drops by $120,000 in the meantime, I still break even. (The example is obviously for illustration only, the numbers change somewhat if you include the effect of mortgage interest rates, etc).

[kimmy]

Buying a house which is to be a primary residence is almost always a wise decision. Even if the value of the house depreciates substantially, you are still saving money, except in very extreme cases. What people seem to forget when discussing the value of buying a house is that, if you didn't buy the house, you would instead be living in a rented residence.

Let's say I have the option of buying a house or continuing to rent an apartment at $1000 / month. If I buy the house and live in it for 10 years, that is $120,000 in rent payments I didn't have to make, which instead went to paying off my mortgage. So even if the value of the house drops by $120,000 in the meantime, I still break even. (The example is obviously for illustration only, the numbers change somewhat if you include the effect of mortgage interest rates, etc).

What people often forget is that money that is spent paying real-estate fees, taxes, and interest is just as lost as money that is spent on rent.


A $200,000 home is going to cost you about $380,000 over the course of a 25 year mortgage, so you better have more than an $80,000 home to show for it by the time it's paid off.

(for comparison sake, a $1000 rent over 25 years works out to $300,000 and costs $260 less per month, even if you disregard taxes, strata fees, maintenance costs, etc.) Now, if you invest that $260 per month, how much do you have after 25 years? If you put it into something that gets 4% interest, you've got $134,000. $134,000 cash beats an $80,000 house...


-k

[Remiel]

It really depends on how you want to live and run your life as well. If you might want to move around a lot, it might be worthwhile to rent. If you are like me, and feel like you would go nuts living somewhere that you can never let loose, then a house is practically the only way to go long term. Renting means not having to worry so much about whether you can move. Owning means not having to worry about others telling you what you can and cannot do (at least relatively speaking).

[Bonam]

What people often forget is that money that is spent paying real-estate fees, taxes, and interest is just as lost as money that is spent on rent.


A $200,000 home is going to cost you about $380,000 over the course of a 25 year mortgage, so you better have more than an $80,000 home to show for it by the time it's paid off.

(for comparison sake, a $1000 rent over 25 years works out to $300,000 and costs $260 less per month, even if you disregard taxes, strata fees, maintenance costs, etc.) Now, if you invest that $260 per month, how much do you have after 25 years? If you put it into something that gets 4% interest, you've got $134,000. $134,000 cash beats an $80,000 house...

Indeed, but it equals a $134,000 house, a house which has depreciated by $66,000 (according to your numbers) from its original purchase price of $200,000. As I stated, my numbers were a quick illustration, and would change if interest was included. So congrats on including the interest and providing a more accurate example The point remains that once you take into account rental costs if you don't buy a house, buying a house will save you money in the long run even if it depreciates somewhat in value.

To add further to that point, it should be noted that buying a house gives you various tax advantages (especially in the US), gives you access to low interest home equity lines of credit should you need them. And, when it comes to fees, rental isn't a free ride either, as you might be required to pay renter's insurance and other fees as well. Furthermore, while a house might depreciate in value in the short term, it is historically unprecedented for it to depreciate over the 25 year timespan of your example.

Edited by Bonam, 04 August 2011 - 06:59 PM.

[Bonam]

It really depends on how you want to live and run your life as well. If you might want to move around a lot, it might be worthwhile to rent. If you are like me, and feel like you would go nuts living somewhere that you can never let loose, then a house is practically the only way to go long term. Renting means not having to worry so much about whether you can move. Owning means not having to worry about others telling you what you can and cannot do (at least relatively speaking).

True. At the same time, owning a house also means you gotta do a lot more maintenance, mowing the lawn, etc. There are certainly lifestyle pros and cons. Renting an apartment can more directly be compared to owning a condo (rather than a house), in which case many of the restrictions are still there.

[kimmy]

Indeed, but it equals a $134,000 house, a house which has depreciated by $66,000 (according to your numbers) from its original purchase price of $200,000. As I stated, my numbers were a quick illustration, and would change if interest was included. So congrats on including the interest and providing a more accurate example The point remains that once you take into account rental costs if you don't buy a house, buying a house will save you money in the long run even if it depreciates somewhat in value.

To add further to that point, it should be noted that buying a house gives you various tax advantages (especially in the US), gives you access to low interest home equity lines of credit should you need them. And, when it comes to fees, rental isn't a free ride either, as you might be required to pay renter's insurance and other fees as well. Furthermore, while a house might depreciate in value in the short term, it is historically unprecedented for it to depreciate over the 25 year timespan of your example.

I always hear people say "renting is just throwing money away", but they don't seem to realize that roughly 40% of your mortgage payment isn't going into equity.

I think the example I provided illustrates that paying off a 25 year mortgage doesn't put you that far ahead of renting and putting the difference into a long-term investment. Even if the house doesn't depreciate.

And I think I really understated the case, because when you factor in property taxes, home insurance, maintenance costs, strata fees, renovations, and all the other costs home-owners have that renters don't, the difference between that $200,000 home and a $1000/month rental is a lot more than the $260/month figure I used.

Ultimately I'm still considering buying a home, but I'm holding off. First off because I'm not sure my present situation is permanent. If I move or decide to go to school, I'd wish I hadn't bought. And secondly because I'm skeptical of current housing prices in the city I live in. The market doesn't seem sustainable.


-k

[Bonam]

I always hear people say "renting is just throwing money away", but they don't seem to realize that roughly 40% of your mortgage payment isn't going into equity.

That really depends on a lot of factors, such as the interest rate, the length of the mortgage, and the down payment. I plan to buy a residence in about two years by which time I should have about $100k saved up, and properties in the neighborhood I'm looking at go for 250k-300k. I'd probably only get a 5-7 year mortgage, or maybe forgo that completely and just use my credit line (way simpler to deal with just clicking a button online even if the interest rate is like 0.5% higher than I could get on a mortgage, avoids closing fees and junk like that too). Anyway, in that case, less than 10% of the total that I spend would be going into interest (at present interest rates).

I think the example I provided illustrates that paying off a 25 year mortgage doesn't put you that far ahead of renting and putting the difference into a long-term investment. Even if the house doesn't depreciate.

And I think I really understated the case, because when you factor in property taxes, home insurance, maintenance costs, strata fees, renovations, and all the other costs home-owners have that renters don't, the difference between that $200,000 home and a $1000/month rental is a lot more than the $260/month figure I used.

To be fair, the $1000 rental vs $200k home is kind of arbitrary to begin with. To make it a realistic comparison, the two residences would have to be comparable in quality, square footage, neighborhood, etc. The price of renting vs buying a comparable residence varies significantly from neighborhood to neighborhood. In some, you could get an apartment equivalent to a $300k condo for like $700-800 a month, in others, you'd be hard pressed to rent one for $1200-1500, or even to find one at all.

Ultimately I'm still considering buying a home, but I'm holding off. First off because I'm not sure my present situation is permanent. If I move or decide to go to school, I'd wish I hadn't bought. And secondly because I'm skeptical of current housing prices in the city I live in. The market doesn't seem sustainable.

True, if housing prices seem unrealistically inflated in a given area, that is certainly a reason not to buy there. Vancouver, for example, seems a bubble ripe for bursting if the Asian investment in the housing market there ever stops.

[ZenOps]

Rent? What is that?

Maybe one might still have to pay rent in Canada, but not in the US.

http://www.usatoday....ng-longer_n.htm

It takes over 900 days for the banks to foreclose in New York nowadays. Which means that many people who were forced or decided to foreclose and stop all payments are still technically living at their residences until they are forced out. No mortgage payment, no rent, no tax - for nearly three years.

No need to pay rent. Just squat an abandoned foreclosure, or pay the whole $16 and yearly tax for three years and go for full ownership.

Edited by ZenOps, 04 August 2011 - 09:23 PM.