AJC.com > Opinion > Opinion Talk > Archives > 2008 > June > 24 > Entry
DEL.ICIO.USHome ownership: Who needs it?
The Atlanta Journal-Constitution
New York Times columnist Paul Krugman questions whether home ownership is still worth it.
“In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here’s the thing: There are some real disadvantages to homeownership,” he writes. “First of all, there’s the financial risk. Although it’s rarely put it this way, borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake. “This isn’t a hypothetical worry. From 2005 through 2007 alone — that is, at the peak of the housing bubble — more than 22 million Americans bought either new or existing houses. Now that the bubble has burst, many of those homebuyers have lost heavily on their investment. At this point there are probably around 10 million households with negative home equity — that is, with mortgages that exceed the value of their houses. “Owning a home also ties workers down. Even in the best of times, the costs and hassle of selling one home and buying another — one estimate put the average cost of a house move at more than $60,000 — tend to make workers reluctant to go where the jobs are.” Is Krugman right: Do you regret owning a home? Would you advise your children to buy a home now?
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By AH
June 24, 2008 10:36 AM | Link to this
Owning property is never a bad idea if you can afford it. If you overextend then of course you end up with the problems mentioned above. Always secure your finances first and be debt free before you even consider buying property. And never rush the purchase.
By NCLB
June 24, 2008 10:40 AM | Link to this
It doesn’t take a professor of economics to see that people are losing value in their homes during this housing slump.
Of course, Paul is part of the liberal elite that doesn’t worry about educating their children in the public schools over here with us non-homeowners. Why does Paul, and the AJC, leave out the biggest disadvantage of non-homeownership?
What’s your child’s education worth? What about mine??
By Vince Neil
June 24, 2008 11:18 AM | Link to this
For pete’s sake it is a cycle..and likely a short one. Libs are constantly looking at the world in zero sum terms! I am sure the buggy whip salesmen found another job!!!!!!!!!
By Ghost
June 24, 2008 11:47 AM | Link to this
I don’t regret owning a home, but he does make a good point about it tying workers down.
Companies used to be able to offer to buy your house if you relocate with them and then can’t sell it in a reasonable time.
I’m sure those offers are all but gone for everyone except for the most senior positions in a company.
But, history has shown, over the long run, homeownership increase, rather than decreases, your wealth.
By Andrew
June 24, 2008 12:05 PM | Link to this
at least I’m one in 10 million
By yankee
June 24, 2008 12:22 PM | Link to this
When you rent you are guaranteed to lose 100% of your investment.
By Gael
June 24, 2008 12:54 PM | Link to this
Yankee, since when did anyone consider renting as some sort of “…investment.”? Actually I sold my home not too long ago and what a heady feeling of no more pouring money into mortagage, insurance, maintenance of home and yardwork! I now rent a town house where the yard is taken care of, water, utilities are so much lower. I come out w/extra bucks in my pocket and really, I dnn’t mind giving my monthly rental money to my landlord for my ease of mind and stress.
By Jody
June 24, 2008 1:06 PM | Link to this
I was relatively debt free when I bought my house, with only a car payment and student loan payment as long term debt. At the time I bought the house, I thought I was doing a good thing. Fast foward two years and there are some days that I would give up home ownership in a heartbeat to get rid of the stresses and extra expenses. Long gone are the days when you could pay for your house for less than you were paying in rent for an apartment. And unexpected repairs can be a killer, as some of my friends who purchased older homes have learned. Even with an extended home warranty, anyone can find themselves in the hole, depleting their savings account, if too many repairs mount up at the same time.
By Fix-It
June 24, 2008 1:29 PM | Link to this
If you put 20% down on a house it is very unlikely that you would EVER lose money on it. But no money down and 110% loans were and are a bad idea.
By Anthony
June 24, 2008 1:42 PM | Link to this
I bought a condo,if I could of done it again I would of stayed a renter. The heatpump went that was $1800 thank you. Condo costs go up every year because people don’t pay.Also if I did’nt own I would of moved out GA possibly for more business opportunity. Now the housing market is dead and close to the 25 percent of condos in the community I live are in foreclosure or getting there. The value of my condo is dropping nice and steady.Thank god I got a fixed. I lived in manhattan, most were renters.Their identity was not tied to owning a piece of property.
By CJ
June 24, 2008 1:42 PM | Link to this
If you can only afford a home using a ARM mortgage, you shouldn’t buy a home.
Excluding the house, if you shop payments rather than principal balance for cars, electronics, etc., then you shouldn’t buy a home. Example: “I pay $300 a month for my car and it’ll be paid off in 6 months, but for only $350 a month I can get the car of my dreams.” BAD IDEA! Don’t sign yourself up for another 6 years of payments on a depreciating object!
If you live paycheck to paycheck, you shouldn’t buy a home.
If you can’t understand the terminology or terms associated with a mortgage offered to you, then you shouldn’t buy a home.
By JJ
June 24, 2008 2:10 PM | Link to this
I think NOW is the best time to buy, as long as you can afford it. It is definately a Buyer’s market right now. There are three homes on my street for sale, and have been for sale since Christmas. Two of them have come down considerably in their price.
Go to a mortgage broker, and find out how much you can afford to spend on a house. Figure how much you will need to put down, in order to keep your monthly payments where you can afford them. Don’t take a second or third mortgage, that’s where you get upside down. I have a friend who bought a $190,000 home, immediately took out a second mortgage for $30,000, and now owes $220,000 for a home that she cannot sale. The homes in her neighborhood are running at $175-180,000. There is no way she wins. She can’t sell and get another, because she owes more than the house is worth. This is why so many people are walking away from their homes, and letting the back take it back. Stupid, stupid, stupid…….
I have toyed with the idea of selling my 3/2 home in the burbs. However, the thought of going back into an apartment drives me crazy. However, it has it’s advantages. I would love a community pool, no yardwork, and be able to call “maintence” when something goes bad, instead of ME having to buy it. I have put a lot of money in to my existing home. I would like to sell it in three to four years. Hopefully the market will turn around by then. I have a ton of equity to be pulled and put down on my next residence.
I will soon be an empty-nester, and would really like to downsize.
By The good side
June 24, 2008 2:26 PM | Link to this
All those who own a home must have patience! The market will turn around in 3 to 5 years. We must be willing work for something to expect some gains. Remember with-out deductions once your salary increases a home deduction will keep money in your pocket.
A lot of people made bad decisions becaseu they did not want to do the old fashion way.
Buy a house you can afford and moved up every 7 years instead they wanted what they could not afford.
Now they are ready to ruin their credit because of bad judgement.
By Eric
June 24, 2008 2:34 PM | Link to this
Owning a home is definitely not worth it in terms of time or money! Your income must cover all of the unexpected and expensive repairs and other upkeep. In terms of time a house eats up of your life, it seemed as if I was working at a job I hated just to keep up the house. Weekends were tied up at Home Depot and cutting the lawn. Add to this the ridiculous demands and legalities of the neighborhood homeowner association, and so the American dream has become a nightmare. It is unfortunate that there can’t be other arrangements than throwing your money away in rent either. Surely there is some “certificate” of participation that would give renters a fair share of tax relief, given they aren’t getting any investment like homeowners. Why do we as a society put ourselves through this? Why does living require an either/or buy or rent situation?
By MamaS
June 24, 2008 2:37 PM | Link to this
If I rent and lose my job, I lose my apartment. If I own a house and lose my job, I still have a roof over my head. If I rent and my children and grandchildren need a place to stay, I can’t take them in because of the occupancy limits. If I own a house and my family needs shelter, I can set up cots in the garage if I want to! If I rent, when I die my stuff gets moved out on the street. If I own a house, when I die I have something to leave my family.
By parentof4
June 24, 2008 2:58 PM | Link to this
Here is a novel concept: Buy a home like your grandparents and greatgrandparents did. STRAIGHT OUT. In the old days, people would save up and just put cash down on the home. Home prices stayed relatively level. After the advantageous mortgages, people no longer had to save therefore they bought more than they needed or could afford. If you buy your home correctly, when something breaks…you have the money to fix it. We as Americans need to get out of the mindset that we need to finance EVERYTHING and start OWNING what we have.
By Mitch
June 24, 2008 3:22 PM | Link to this
I think it depends on your personality. For me buying a home feels like I’m trapped in one area. I like feeling of being able to move to another part of the country anytime I want but now it would take a lot of planning (and money) to move. On the other hand it’s nice not having to worry about turning up the volume once in a while and having a yard for the dogs.
By Land Owner
June 24, 2008 3:52 PM | Link to this
Renters are losers. So is Krugman, an unrepentant socialist. Consider his ‘logic’ at your own risk.
By Is buying a newspaper worth it?
June 24, 2008 4:01 PM | Link to this
Geeze, first they tell you to lease a car, now this. When you rent or lease you have NOTHING to show for the money you’ve spent! OWNERSHIP, EQUITY, ROOTS!
By JeepersCreepers
June 24, 2008 4:10 PM | Link to this
Is this a liberal bias to have something others can not? I know liberals think the government should provide homes for your. I had someone to ask me how much would they get for their home. I told them I know her husband worked hard to pay it off for her. She wanted to sell it and go live in government housing. I was floored! I have to admit the liberals have won some over. Of course she never votes! Thank God!
By JeepersCreepers
June 24, 2008 4:11 PM | Link to this
Is this a liberal bias to have something others can not? I know liberals think the government should provide homes for you. I had someone to ask me how much would they get for their home. I told them I know her husband worked hard to pay it off for her. She wanted to sell it and go live in government housing. I was floored! I have to admit the liberals have won some over. Of course she never votes! Thank God!
By mike
June 24, 2008 4:13 PM | Link to this
Hmmm… I bought a house 10 years ago because I thought I wanted to be a homeowner and because it was the “sensible” thing to do. After 4 years of repairs and paying a lawn guy (because the last thing i wanted to do was mow my lawn after a 50 hour work week), I got rid of it. It was one of the best decisions I ever made. My rent is 300 dollars a month less than the mortgage, my utilities are 100 less and I don’t pay 50 bucks a week to a guy to half-a* mow the lawn. I’m coming out about 600 bucks a month ahead which I have been investing for 6 years. To heck with wealth tied to land… I’m liquid and I can leave town for a better opportunity when I want. In about 6 weeks to be exact… :-)
By Syd
June 24, 2008 4:30 PM | Link to this
I bought my 3/2.5 in 1994 for $125,000. I could sell it for about $250,000 right now. I owe about $85,000 on it and will have it paid off in about 9 years when I’m 50. I’ll take being 50 and mortgage free and owning a home anyday.
By Mowers are us
June 24, 2008 4:44 PM | Link to this
Hey Mike, The lawn care results seems like LOW STANDARDS, you should have kept the home and fired the mower!
By Bryan
June 24, 2008 4:46 PM | Link to this
“Surely there is some “certificate” of participation that would give renters a fair share of tax relief, given they aren’t getting any investment like homeowners. Why do we as a society put ourselves through this? Why does living require an either/or buy or rent situation?”
Because responsibility leads to reward Eric. Tax relief goes to those that pay the taxes. And ‘we as a society’ don’t ‘put ourselves through this’, you only choose not to. Live with it.
By Snarky
June 24, 2008 5:02 PM | Link to this
1.) Just like stocks, it’s only a loss of investment if you sell at a less than your purchase price. Many homeowners intend to stay in their homes for a long time. This temporary reduction in housing prices doesn’t really hurt them at all.
2.) $60K for a move? Average? Obviously you chose the most whacked out statistic you could find for that figure. I’ve moved a 3k sqft home of furniture and belongings several times and haven’t come near that figure - in total.
By CJKatl
June 24, 2008 7:18 PM | Link to this
There are many reasons to own a home, but if your investment plan is predicated upon your home’s value increasing, something is wrong with your plan.
The idea is to purchase a home you can afford, and let inflation and your increasing salary over time make the payments seem like less and less an effort. Towards the end of the 30-year mortgage, your payment is a slight part of your budget.
Today, so many people think the way to become rich is to purchase a home you can barely afford, then sell it in a couple years at a huge profit. While that may have worked for a couple years, it isn’t the norm and cannot be counted on.
Look at the older people you know. Which ones were prepared for retirement? Which had money troubles in later years. None of the better off purchased an expensive home after the age of 45 with a 30-year mortgage, I guarantee.
Renting makes sense for many people in the short term, but as a long term plan, it’s a loser. Rent will increase over the years, whereas you home payment will remain flat, save for insurance and taxes, if escrowed. Even with those factored, home ownership becomes the better plan a few years into your owning the home. But if your plan is to only stay put for a few years, renting will usually win.
By iknowitall
June 24, 2008 7:53 PM | Link to this
Pros and cons either way you go. It all depends on personal preferences and circumstances.
If you were truly ready to buy a house, maintenance would not have been a surprise. Did you look into it first or buy just because everyone else was?
If one more person tells me they’re just lookin’ for their fair share, I’m gonna scream.
By anthony
June 24, 2008 8:31 PM | Link to this
why do people have scream the word liberal all the time? come up with something more intelligent.
By John
June 24, 2008 10:22 PM | Link to this
Can we PLEASE get a paper that is not so tilted so far to the left that we feel that we are reading Pravda??
What does the AJC want to do? Herd all of us into tiny apartments, sharing with two or three families???
CHRIST!!!
By John
June 24, 2008 10:26 PM | Link to this
Anthony: We would come up with something more intelligent if liberals themselves come up with something intelligent.
By Eve
June 24, 2008 11:28 PM | Link to this
Elite (also spelled Élite) is taken originally from the Latin, eligere, “to elect”. In sociology as in general usage, the élite is a relatively small dominant group within a large society, which enjoys a privileged status envied by individuals of lower social status.
So I take it you conservatives are a bunch of jealous mouth breathing yahoos. I mean why else would you hate the elite?
By NewRenter
June 25, 2008 1:20 AM | Link to this
My daughter starts middle school in the fall. We were not happy with East Cobb Middle, but couldn’t afford anything in the Dickerson district, so we left the 4/2 house for a small apartment in that district. I am amazed at how much money we are saving each month! The stress reduction is also great! Something goes wrong? Call Maintainence! Reduced electric, gas, water bills! Didn’t get cable. I don’t watch TV and daughter doesn’t need to either. I can’t say what we will choose to do in three years, but right now this is working for us.
By Renter
June 25, 2008 1:28 AM | Link to this
This is for the poster “Land Owner”… I rent and am NOT A LOSER! I am only 27. My partner and I have moved cross-country 3 times since 2004 (after ungrad education) to pursue granduate studies and better job opportunities.
My partner now has the job of his dreams and I own my own business. We will more than likely have to move again within a year so my partner can take another promotion.
I think I would be a LOSER if I bought a home and instantly put it on the market to sell everytime we move. We save tons of money renting and would be idiots to buy a home every time we move (we lived in St Louis for only 3 months…try buying and selling a home in that time and not lose your a**).
Plus, I would rather travel the world and enjoy my life than just own a piece of property to show off to everyone. Calling renters LOSERS is very elitist, prejudice, and Republican. I feel that I am smarter by not buying until I know I will be somewhere long enough to make that a good decision.
Yes, we “liberals” can make as good of financial decisions as our “WASP” Republican counterparts…and we enjoy our lives more in the process. Just thought another viewpoint would be appreciated on this blog.
Good luck everyone!
By Renter
June 25, 2008 1:35 AM | Link to this
To “John”
The AJC is the most conservative newspaper I have ever read (that says something living most of my life in Iowa, as well as North Carolina). I was SHOCKED when I subscribed that a large city could have such a center/right leaning newspaper as the main/only option. Maybe you should expand your horizons and try reading a NON-Conservative paper to compare.
Also, a good conservative should’ve use the lord’s name in vane…CHRIST!
By Renter
June 25, 2008 1:42 AM | Link to this
Brian…..
You don’t think landlords include their property taxes and other expenses in our rent???? But I’m sure you think that a good business would just cover that for us, right? Get real…they charge us every dime they pay for taxes and probably tack some extra on top for profit…so we pay MORE than our fair share. Do some research.
By John
June 25, 2008 5:37 AM | Link to this
To “Renter”
For your information, I read tons of other publications online and with the exception of the New York Times, the AJC is very, very leftist in the editorial board.
Mike Wooten is the “token” conservative who gets a bone thrown to now and then with his “Thinking Right” columns. Cynthia Tucker is a self-avowed Socialist and Jay Bookman is almost a Marxist.
As far as using the Lord’s name in vain, my bad. I get frustrated to have seen my hometown newspaper become the public relations arm on MOVEON.org.
By Copyleft
June 25, 2008 8:47 AM | Link to this
In Japan, home ownership is so outrageously expensive that most upcoming business professionals don’t even treat it as a worthwhile career goal. Permanent renting is the norm for urban life.
And yet, I doubt anyone would sneer at Japanese business executives as “losers” or “idiots.” Cost/benefit comparisons DO matter, and in many cases, the costs do outweigh the benefits.
By Eric
June 25, 2008 10:35 AM | Link to this
Because responsibility leads to reward Eric. Tax relief goes to those that pay the taxes. And ‘we as a society’ don’t ‘put ourselves through this’, you only choose not to. Live with it.
Thanks for the homily, Bryan. The problem is that our tax laws are structured for financial reward (or survival?) rather than leisure (in worthwhile pursuits, rather than entertainment). Consider how much income and time people spend just to keep a roof over their head over a lifetime, only to die and that investment disappears in paying off final health care bills, etc. I was trying to envision a new way of life rather than accepting the current muck-state of things.
By vesta
June 25, 2008 10:36 AM | Link to this
I bought my first house when I was 23. I have lived in it ever since. We are a family of 4 with a smallish (1200 sq ft.) home on an acre lot. The trick is buying within your budget. The amount the bank said we qualified for was outrageous! I had already figured up my budget, including taxes, insurance, and monthly repairs, and I KNEW what my price range was. (There are great tools and resources on the internet.)Seven years later I have never made a late payment, I’ve replaced appliances, a/c unit, and added small upgrades. We refinanced 5 years ago and I will own my home outright by the time I am 40! I have never regretted buying my home nor do I feel the need to move all of the time. We still have positive equity (I hope that it stays that way!)
Does everyone need to buy a house? No, but it has worked for me. My house payment is less than rent on a three bedroom apartment in my area and I will have a nice down payment when we eventually move to something slightly larger. (Children grow and our once “good sized” house is shrinking for us.) If you move a lot for your job, travel extensively and don’t have time for upkeep then rent. It’s all about what you can afford and what works for your lifestyle.