patrick.net

Once people get over the idea of a house being an investment, it's as easy to justify as buying a car. Many people buy cars every few years and accept the fact that their trade-in is worth thousands of dollars less than they paid. I once bought a three-year-old Saab for about half it's MSRP and by the time I sold it three years later, it had declined $30k from the original price! So if we accept that our mortgage payment is a fixed cost for many years and that at some point, we may have to sell at a minimal gain or even a loss, it's no big stretch to justify the purchase.

Of course, in purely economic terms, it may make more sense to rent for all the well known reasons. But the same can be said for buying a car. Some argue that car ownership is a waste of money and that we should take public transportation or that we should buy a used car and keep it until it dies, etc.. True, but if someone accepts they're going to lose money overall but it's worth the convenience or luxury or whatever, then all is good.

Basically, we are human and we don't live our lives by what is quantitatively best for us, but what makes us happy.

commonsense says

“…there is a certain security in owning which is also characteristic of a middle class.” How sad to me this all is to watch unfold.

The question is,...

who are you without "owning" a home? Are you the same person or not?

This thread is really about justifying attachment to things that are not real IMHO.

@Katy - that is *not* the question here. Are you the 'same person or not' if you gave up all *your* possessions? Or do you post here from a convent or monastery? What physical things are real? What is existential? Is it all a dream? Did you respond the topic?

SJ says

I am renting at least for a while. Even though the banks approved me for 800k mortgage in the bay area, I started a new job a few months ago and given how unstable companies are these days, it makes ZERO sense for me to buy until I have been at the job for at least 4-5 years.

I'm in my early 30's and have never managed to stay at any job for 4-5 years. In fact, I'm on job No. 7 since I moved here 11 years ago. Its a sign of the times and one that many in my age bracket have come to expect: Long term employment at any one company is more or less a has-been. This first and foremost is another reason I am very hesitant to buy in the Bay Area.

Arnold Layne says

@Katy - that is *not* the question here. Are you the ’same person or not’ if you gave up all *your* possessions? Or do you post here from a convent or monastery? What physical things are real? What is existential? Is it all a dream? Did you respond the topic?

OK wants and needs wants and needs. I'll let my little blurb stand. it was a nudge to think out of the box. A little Zen is needed in times like these IMHO. just trying to help really.

james.shafland says

Is there a prudent way of thinking about buying; buying and still enjoying one’s home even as one knows the market is dropping?

yes for some , no for others, mostly a big ???
It really depends IMO on personal level of wealth today, personal level of risk today, future goals, Location of purchase, what you think you want today, your dreams today. thing is this stuff changes from time to time,.. it doesn't stay the same for us over the years.

what did you want in high school? college? after your wedding?,.. after a divorce? once the kids leave?
we all just want to be happy really,..right?. but we define what makes us happy differently at different times of our lives.

I think we all forget this sometimes.

Number of things to look at. The economics of where you live. NY; NJ; Ohio??? Need more room? Rent? In NJ, before I left a 4 bedroom colonial in a good school district would probably run 4-5 thousand /month. Compare that with depreciation, maintenance, mortgage if you buy. Where do you find a 4 bedroom apt. with den and 2-1/2 baths and at what cost? I owned a home in NJ for 27 years. Paid 67 for it sold it for 435. During that time rents went from 7-8 hundred to the above and taxes went 4 fold. Now we have to gamble but we can't lump San Francisco with Morristown NJ. Eventually the cost of renting vs owning will equalize, depending on local and the need for space. In NJ today the same thing applies as it did when I bought. Would I buy back the same house I sold? NO. I am retired now but wouldn't anyway. Rising RE taxes would be one of the reasons. Until that insanity is settled no one should.

bubblesitter says

Special K says

We wanted to get our life going as we arnt getting any younger. Sure ideally you time the market and make out like a crook but you might be too old to appreciate it by then

Special K says

who cares I can afford it

Did your realtor told you that?
Special K says

Not putting my life on hold to time the market perfectly

You can rent the same house and not miss anything.
I think you are fine cuz you did yor math.

Renting is not the same as owning. I built my theater room and put in my desired lightning/screen config and speakers in the walls/ceilings. I set my entire house up with automation controllable from a phone APP and remote. I removed all carpeting and put in my favorite color hardwood and tile to keep the house hygienic and clean. I redid the backyard and started the fruit orchard I always wanted and am working on setting up the landscape like I want it. I am still in the process of building my dream garage tool/workshop for my hobbies.

You can't do any of these things with a rental and you're dreaming if you think that you would likely find a rental equipped the way you want that also happens to be in the area/school district you want to live in. There will always be pros and cons to everything. Renting is most definitely not a panacea to housing freedom.

It's important to analyze your finances and make sure your payment is something you can afford. With today's interest rates houses are as cheap as they have been in recent history in inflation adjusted monthly payments. Because interest rates are still at a historically unheard of 4.5% house prices are still inflated over long term trends (people can afford a much higher priced house on the same monthly payment). But map out what the monthly payments are adjusted for inflation vs historical monthly payments for a similar home in the past 30 years. In my case I'm paying the same per month as my neighbors did in the 1980's except that I'm paying in 2011 dollars not 1980's dollars.

Case in point:

2011 - House is $450,000 - ($90,000) 20% down = $360,000 loan

Mortgage payment is $1824 @ 4.5% (my interest rate was less but lets use current rate) in obviously 2011 Dollars.

Plenty of my neighbors bought in the mid 80's. They all paid between 170,000 and 190,000 for a similar house (I know this cause I can see the historical data online). Rates in 1985 were 13% but nearly all the 80's were over 10% and at times over 18%.

So take $170,000 - $34000 (20% down) = $136,000 loan.

You should note that $34,000 in 1985 dollars is $72,000 in 2011 dollars so the down payment is not hugely different.

$136,000 @ 13% = $1504 (except this is 1985 dollars) which is the same as $3158 in 2011 dollars so my monthly payment is nearly half what my neighbors was in 1985 in inflation corrected terms.

Let's take it further. For him to have the same monthly payment in 1985 he would have had to pay $869 in 1985. This translates to a $78,500 mortgage which translates to a $98,000 house in 1985 except these houses sold for nearly double that in 1985.

In the mid 90's when houses were super cheap houses in the neighborhood sold for around $250,000. Mortgage rates at the time were around 8%.

$250,000 - $50,000 (20% down payment) = $200,000 which works out to $1467 at an 8% rate. $1467 in 1995 dollars is $2175 in in 2011 dollars.

So monthly payment wise my house is the cheapest it has been within my life time. Whatever book value is at any given time is of little concern to me unless I have to suddenly sell it. But nothing in life is without risk, certainly nothing that is worth doing.

I think clearly the math shows now is a great time to buy a house monthly payment wise and if anything I am extremely hedged against inflation. If the dollar collapses my mortgage will practically evaporate and I'll have a practically free place to live (although at such a time we'll all have a lot more to worry about than mortgages and house prices). Remember what Patrick has been saying this whole time. Your house is only worth what it will rent for. If my payment is similar or less than what it costs to rent then it is worth what I pay for it. On the one hand I have the liability of owning and riding out house price drops on the other I have a hedge against housing cost inflation for the rest of my life. If I absolutely had to move or got crushed financially and couldn't afford the mortgage I could always rent out the house and live with my family until I got back on my feet. Nothing is a sure thing NOTHING (except death and taxes).

BTW for the Record when the stock market crashed in 08-09 and the Dow was in the 6000's I also thought the market was still on the drop and was going to 4000 or less. By staying on the sidelines I missed one of the biggest bull runs in history. When Sirius/XM looked like they were going BK for sure and shares were 5 cents I thought shoot I should buy a few thousand shares just in case. Guess what that stock is $2.00. The bad thing about staying on the sidelines is you never actually get to play the game.

Special K says

I set my entire house up with automation controllable from a phone APP and remote. I removed all carpeting and put in my favorite color hardwood and tile to keep the house hygienic and clean. I redid the backyard and started the fruit orchard I always wanted and am working on setting up the landscape like I want it.

For all three of these things, I have friends who rent who did one or more of these things. They figured out how to apportion things with the landlord for the latter two items. For the former (which works on iPad as well), they just plan to switch the hardware back to the original hardware when they move out. It's like repainting your walls back to the original color when you move out.

The point is that those cosmetic items for most people aren't really sufficient reason to make the largest purchase of their life.

People have various reasons to buy houses, whether simply as a residence, as "investment" (which most people say, but don't understand), and as consumption. Usually it's a combination of these things, and multiple factors go into the decision. Referring to something as silly as light switches is just trying to appeal to emotion.

Also, it's harder to compare a 13% interest scenario to a 4% interest scenario than your making it. Most people consider monthly payment, and so do banks in debt-to-income ratios, and asset prices adjust to compensate for affordability to some extent (although the exact effect is unclear). For example, your neighbors had a huge advantage to refinancing and had a low principal amount to pay down, whereas you will never refinance and you have a much higher principal amount to pay down.

Anyway, I don't know what neighborhood you live in and whether your data and calculations are accurate because I haven't checked them, but as far as I can tell, the rent vs. buy calculation isn't quite there for mine.

this is exactly what I could not figure out, thanks for this.

corntrollio says

Also, it’s harder to compare a 13% interest scenario to a 4% interest scenario than your making it. Most people consider monthly payment, and so do banks in debt-to-income ratios, and asset prices adjust to compensate for affordability to some extent (although the exact effect is unclear). For example, your neighbors had a huge advantage to refinancing and had a low principal amount to pay down, whereas you will never refinance and you have a much higher principal amount to pay down.

Well I would look at historical values and run the calculations. This is a house in socal so the numbers might not work as well in other locations. Sure my neighbors got to refinance into lower rates but guess what they had to wait 10+ years to get into the 7% range and nearly 20 years to get into the 5% range? By then they are paying much less interest on their loan (payments are mostly principle) and they'll have the house paid off soon. You know what an amortization curve looks like. You pay nearly all interest the first 5 years and mostly interest for quite a while after that towards the end you are paying huge chunks of principle and little interest. When you refinance you now extended your debt obligation another 5-10-15-20+ years and are back to paying all interest again and back on the ugly size of the amortization curve. People that refinanced did that to tap into the home equity ATM machine and not for smart financial reasons (unless the home was a recent purchase and made financial sense to do it.) My neighbors who bought in the 80's would have been far better off paying the tail end of their 13% loan which is mostly principle being paid back in severely devalued dollars by then anyway and they would have no mortgage at all in a few years.

Oh so I'm going to pull all the speakers from the wall and patch holes? Rewire 30+ switches and outlets? Rewire thermostats? Unbolt equipment from the garage walls and foundation and patch them? All because my landlord decided to sell the house, move himself or his family in, or worse got foreclosed? Also not too many landlords want to contribute or finance anything more than the bare minimum to keep a house rentable and livable let alone fund expensive upgrades that are easily trashed by bad tenants. You would be a financially unwise landlord if you did. Clearly you are living in fantasy land if you think most land lords would let you do any of that stuff unless you paid it all out of pocket (which would be incredibly dumb to do as a tenant).

Special K says

You would be a financially unwise landlord if you did. Clearly you are living in fantasy land if you think most land lords would let you do any of that stuff unless you paid it all out of pocket (which would be incredibly dumb to do as a tenant).

Good landlords understand when they have good tenants. If those good tenants want to improve the property and split the cost with the landlord, the landlord would be stupid not to do it. No labor out of his pocket. Some of the stuff you're talking about is relatively trivial to do when you move out -- you just have a personal preference not to do it when you move out. Maybe you've only had crappy landlords or otherwise have a bad experience, or maybe the only place you ever rented was a shitty apartment in college, but there are such things as good landlords, and most of them recognize good tenants.

Special K says

People that refinanced did that to tap into the home equity ATM machine and not for smart financial reasons (unless the home was a recent purchase and made financial sense to do it.)

Not everybody. Some people were smart and refinanced from 30-year fixed at 13% to 20-year fixed at a much lower rate after 10 years. There's no rule that says you have to take out another 30-year loan. Just because there are dumb people doesn't negate my point -- which is that it's harder to compare a 13% interest market to a 4% interest market than you're making it. The latter has record government subsidies, for one thing, and yet people still aren't buying in record numbers.

corntrollio says

Not everybody. Some people were smart and refinanced from 30-year fixed at 13% to 20-year fixed at a much lower rate after 10 years. There’s no rule that says you have to take out another 30-year loan. Just because there are dumb people doesn’t negate my point — which is that it’s harder to compare a 13% interest market to a 4% interest market than you’re making it. The latter has record government subsidies, for one thing, and yet people still aren’t buying in record numbers.

Lets use your example. My neighbor who bought his house in 1985 had an initial principle balance of $136,000 and a 13% 30 year note. 15-years later it is now 2000 and he sees rates are 7.5% for 15 year fixed and does a REFI into a 15 year fixed rate being careful not to extend his debt obligation. His principle balance at that point is $118,688 (yes depressing isn't it after 15 years of payments). Now his payment is $1100. Yes he is saving $400 a month (25 percent) now which is great but not huge considering he halved his interest rate and many future buyers are unlikely to refinance into such drastic market differences.

Special K says

many future buyers are unlikely to refinance into such drastic market differences.

In fact none ever will if their rate is what it is now, unless they are cashing out.

Special K says

His principle balance at that point is $118,688 (yes depressing isn’t it after 15 years of payments). Now his payment is $1100. Yes he is saving $400 a month (25 percent) now which is great but not huge considering he halved his interest rate

Saving 25% is not huge? It's probably less than the margin some people were riding on when they got crappy sub-subprime loans during teh boom.

Now what was the question? Buying in these horrid times. Horrid for some but not others. The ecomomy doesn't have to be bad or good for a house to decline or rise in value but no one wants to lose several hundred thousand dollars either. How was one to know the future price of homes? I live in Az. NJ expatriot. Markets are different. I paid $300 for my present chateau (new) which rose to $500 when the market was blowing off. Now the value is back to what I paid. My neighbors bought theirs and paid about 100 more. Unfortunately the home buying business is getting like the stock market. There have been short sales and foreclosures here. Some just leveraged out too far and are underwater 100-300. ( This is a retirement community.) Do you blame them for walking away? Don't want the risk? Don't buy! All depends on your $$$$ and the tolerance for pain. Remember some homes lost 50-60% of there value and wil never come back. Want that? We can talk now. We have seen the decline. Will it get better or worse? Not if the economy keeps tanking. Supply and demand will prevail. Got money?

Pardon me for jumping in. 25% is nothing these days. 35% would be more the norm.. I am looking at anywhere from 45 percent off. To 65% off. 65% is high. But thats just me. You have to adjust for newer builds and areas.

That 65% target is worth taking your time to get. Dosen't always happen. But it can be done. 45% is more realistic without having to try to hard. For whats considered some really nice stuff.

Let me note there about a thousand variables in the above factor. Thats what you get to know over 20 years of dealing with home investing.

Pa. Friends just bought a resale. Damn if I know why. Claimed they didn't want to miss it. yuk yuk. Wanted change? 4000 sq ft. of useless Space for 2 retired people but very impressive. Impulse buy. Asking price 715. Been on the market for 256 days. Taxes will probably run 12-14 thousand. Don't even ask about utilities. I estimate $500/mth for AC. They will be under water 42,900 as soon as they move in. Realtors Comm. ( If they sell and want to recover it later) The house has several site problems on 1/2 acre that I see. They don't. Kept my mouth shut. Don't know the details of the sale but I bet they paid full price. Present house fully paid worth about 425 less commission if they can sell it quickly. Doubt that! The way I would buy it. String the realtor along. Go see other house. Sit tight and add up all the pros/cons. go back and see it again. Walk away again. Keep that up. Bring an "inspector" to see the house. If you can't live without it offer $500. Go see other houses. This one IS a pig. No bedrooms down stairs!!! Wait for a counter offer. Wait some more. Let the buyer and realtor work out a deal. If you really lose it you are no worse than you were before. I paid 1-1/2 % comm on my last sell. Realtors were the pushers in the sub-prime mortgage and DC sucked up to them. Thousands of unqualified FHA buyers paid 6% comm to realtors . FHA guaranteed the mortgage inc. the comm. They got rich. You and your children will pay for the foreclosures for decades. Think they will refund commissions which they knew were obtained fraudulently? FHA is still offering 3% down payments to 'qualified buyers'. FDIC hasn't got the money to pay off depositors when banks go bust. Congress will print $$$ to prevent a panic.YOU will pay for that too. Troops give up their lives to keep the PONZI scheme, realtors happy, Congress in office and causalities will return to a country that is bankrupt. Yeah VOTE.

I've been looking around for a home in San Diego for quite a while now but changed my mind recently after realizing how unsettling not just the whole housing market but the whole economy still is.

Some say the economy has started to stabilize and it is just the housing market that is lacking behind. I love to believe that and would go ahead and buy one if that is indeed the case. But, I'm not too sure about that any more. I think things could very well and very quickly change from bad to worse for all we know.

David Rosenberg, chief economist at Gluskin Sheff & Associates, says there is a 99% chance of another recession by 2012. Speaking on Bloomberg Television's "In the Loop," he also discusses fiscal policy and banking regulation. (Source: Bloomberg)

SEE THE VIDEO HERE: http://www.bloomberg.com/video/70808782/

http://globaleconomicanalysis.blogspot.com/2011/06/rosenberg-says-99-chance-of-another.html

Selected Quotes

Bloomberg: How Certain are you that we may be headed for a recession.

Rosenberg: I think that by 2012, I would give it a 99% chance. I say that because as an economist, you have to be part historian. When you have a manufacturing inventory cycle recession, they are usually separated 5 years apart. But when you have a balance sheet recession, credit contraction, asset deflation (for example residential real estate), the downturn tends to be separated every 2 to 2.5 years. ... Economists call this a soft patch. It's not like this is a soft patch. Basically, when all the stimulus is gone, you get to see what the emperor looks like disrobed. It's not a pretty picture.

No Double Dip

Rosenberg goes on to say it's a second recession, not a "double dip" and more stimulus is coming once the "Fed sees the white eyes of the economy".

Given that there is no incentive in Congress for more stimulus (nor should there be), Bernanke will have a tougher time, this time, unless there is a significant drop in oil and food prices.

Special K says

You can’t do any of these things with a rental and you’re dreaming if you think that you would likely find a rental equipped the way you want that also happens to be in the area/school district you want to live in. There will always be pros and cons to everything. Renting is most definitely not a panacea to housing freedom.

Is that all you've got? I can make changes around the house? I could make a con's list on housing that would go on forever, but I don't want to depress you.

It's common for people with houses try to defend housing, and try to get everyone to jump aboard the housing train. However, you should try this speech next year when housing prices have fallen another 5% and fed/state governments have some plan to not go completely bankrupt.

StoutFiles says

I could make a con’s list on housing that would go on forever, but I don’t want to depress you.

Besides immobility and responsibility for maintenance, what are the other cons that amount to something significant? Let's assume you are in an area where rents and PITI are approximately the same.

The pros of house buying all are predicated on your ability to pay the thing off, whatever happens. Some guys talk above about the joys of making changes to their places that make it much more fun to live in. It better, since if you are spending too much dough to own the house, you won't be spending time anywhere else either.
It's not a bad deal if you are financially able, I just see so many around me that can't handle it and are really on the edge of flipping out.
Sometimes I see them and they ask how things are going, (they don't care, so I don't elaborate much). They'll say "how's the stock market doing?" I say "I don't know, check with me in 20 years." Then, I wonder what they'll have to spend for their retirement in 20 years. Reverse mortgage probably is their only hope.

This argument has been made repeatedly on this site- renting versus owning and the pros and cons that come with each. Everyone's situation is going to be different and the factors involved are numerous- such as individual financial situations, the cost of housing per region or area, and so forth. It boils down to the landlord and mortgage. My landlord lets us do pretty much what we want and our rent is about 1/3rd the cost of buying in our area. Still others we know overpay for their rent and can do nothing to their homes. Some homeowners have strict HOA rules and might as well be renters as a result. Some homeowners- especially in non-bubble states- pay less than people who rent. Some renters-like us- pay a lot less than the cost of a mortgage.

It all depends. Neither side is " Right".

ArtimusMaxtor says

Pardon me for jumping in. 25% is nothing these days.

I'm not talking about on the sale price. I'm talking about when you refinance, your payment goes down by 25%.

ch_tah says

Besides immobility and responsibility for maintenance, what are the other cons that amount to something significant? Let’s assume you are in an area where rents and PITI are approximately the same.

Destruction to house.
Loss of job.
Property tax.
Continuing economic decline.

I wouldn't downplay mobility or maintenance, they're reason enough to deter a purchase.

StoutFiles says

Destruction to house.
Loss of job.
Property tax.
Continuing economic decline.

I wouldn’t downplay mobility or maintenance, they’re reason enough to deter a purchase.

Wouldn't "destruction to house" fall under maintenance or the second I of PITI?
Loss of job can occur to renters unless renting somehow provides you with a ring of protection that I didn't know about.
Property Tax is the T in PITI.
Continuing economic decline will occur regardless if you have a house or not and the decline doesn't matter unless you lose your job (already stated) or your house loses value. Lost house value is certainly possible, but would seem somewhat unlikely once rents and prices are comparable.

ch_tah says

Wouldn’t “destruction to house” fall under maintenance or the second I of PITI? Property Tax is the T in PITI.

Then you're encompassing everything into those two things. That's fine. So basically you're saying"What other things are there other than these two horrible, life-destroying things?"

If someone told you about Hell would you say "Well, other than burning forever in a lake of fire, what other bad things are there?"

ch_tah says

Loss of job can occur to renters unless renting somehow provides you with a ring of protection that I didn’t know about.

I'm month-to-month after only a year, and the buyout clause for the year wasn't much at all if I had to do that. There's no such thing as a ring of protection in either option, but I do have a ring of no liability. The ring of protection would be my parents house, although I'd never do that unless in dire straits.

ch_tah says

Continuing economic decline will occur regardless if you have a house or not

Really? Then why buy a house now? Why not just let prices continue to fall and save up for a bigger down payment?

This is all moot though, I'll buy a house someday. However, with the instability of the economy and no sign of the housing market getting better, it makes zero sense to buy anything.

StoutFiles says

Then you’re encompassing everything into those two things. That’s fine. So basically you’re saying”What other things are there other than these two horrible, life-destroying things?”

I didn't realize immobility (more correctly, more difficult mobility) and maintenance were "horrible, life-destroying things." If that's your take on them, then I agree, buying a house is a terrible idea.
StoutFiles says

ch_tah says

Continuing economic decline will occur regardless if you have a house or not

Really? Then why buy a house now? Why not just let prices continue to fall and save up for a bigger down payment?

I didn't realize that my purchase of a house affected the state of our economy so much. I thought the economy would do what it will regardless of where I live. Prices may fall; they may not.

So your list of cons of owning that can go on forever consists of:
1) lack of mobility
2) responsibility of maintenance
3) potential loss of value

For some reason, I thought it would be longer.

we have the chance to buy a home in Marin County, CA

i sold my last home in 2004 and have been following Patrick.net for a long time, thanks, Patrick!

anyway the house is gorgeous and a much higher standard of living. since i am partially homebound this makes a big difference, i can live a better life. entertain, have gatherings, etc.

who knows what is going to happen? i am still kind of scared.

so... here is some of my current musings:

i think with interest rates near zero the cost of alternative capital returns is almost zero unless willing to buy stocks which to me are just as risky as a house.

we can pay cash for the house if we wish.

so the risk is having so much equity tied up in case of earthquake, nuclear bomb, etc.

on the other hand, rents around here are exorbitant. like, $4500 for a 4 bedroom. we need that space, as we both need offices and separate bedrooms.

and yes we could move to Oklahoma but all our friends live here.

sigh... not an easy choice, it helps that it's a short sale, so 20% under market.
we can still say no to the deal with no cost.

predictions:
the banks own this country. so even if there is a lot of excess inventory it will be dribbled out.

rates will stay low for some time, don't believe the Fed!

inflation will rule the day, long term. look over the last 80 years since the Fed began printing $.

one day it will cost $10k to rent here per month for that reason.

if US people don't buy than foreigners will like in London. That's one reason cities like Vancouver and SF don't go down as much as the burbs.

ok my ten cents. have enjoyed all the comments!

"Buy When There's Blood In The Streets"

Now is probably when the most people is more fearfull. Probably the best time to buy then. We will know for sure when was the best time to buy when is already too late.

I welcome all the "renting is better" as I'm becoming a landlord. I'll let you rent my property, and for sure I'll do it for a profit. Today "renting is better" is yesterday "buy today because tomorrow will be more expensive" and a decade ago internet stocks. That is another “follow the herd” actitude.

ch_tah says

So your list of cons of owning that can go on forever consists of:
1) lack of mobility
2) responsibility of maintenance
3) potential loss of value

For some reason, I thought it would be longer.

You're making me simplify everything into those three groups. I could break each down into their individual issues...so for mobility we could have bad neighbors, loss of job, bad school district, noise problems, pollution, water shortages, etc. When you group everything into three extremely broad terms it makes for a short list, albeit an important one.

As you already own a house, there's no point in arguing though as you'll defend the decision to death and ignore all reason like every home owner. Oh well.

"The issue I raise is how does someone live well as the economy crumbles? Remaining flexible, renting, is smart if one is young or unsure of one’s employment, or unsure of what one actually needs and wants, however there is a certain security in owning which is also characteristic of a middle class."

I disagree. I grew up in suburbs that were pretty typical post ww 2. Street lights, wide streets, a center with shops, movie theater, hospital supermarket etc. And yet when a neighbor moved the big scandal was that they were..*gasp* renting the house..as if such a thing was impossible. And yet they could move and everyone else was trapped as an owner.

Higher home ownership rates have correlations with higher unemployment
http://www.slate.com/id/2161834/

Why is Detroit held back? Well when it was "stable" what did autoworkers do? They bought houses and mortgages.Now because the economy wasn't diversified and the fact that there wasn't as much aggregate demand (at least for unions) they were stuck.More importantly home ownership has largely been equated with "settling down" and this comes with marriage and having children which also makes it much harder to move.

Boston has one of the most stable housing markets in the country. The bubble didn't pop here..why? Well we have a population that has a fair percentage of students. If you can't get a dorm you get an apartment and rent. No student in their right mind would get a mortgage.

The USA largely succeeded with its labor force not just because it is efficient but because it is highly flexible. Heck look at the military. Soldiers live on base. You probably aren't going to see a large amount of active duty soldiers getting a mortgage as it wouldn't make sense. We can think as the labor market as constantly being on active duty.

StoutFiles says

You’re making me simplify everything into those three groups. I could break each down into their individual issues…so for mobility we could have bad neighbors, loss of job, bad school district, noise problems, pollution, water shortages, etc. When you group everything into three extremely broad terms it makes for a short list, albeit an important one.

All of the sub-issues you presented are just as possible if not more so for renters.
StoutFiles says

As you already own a house, there’s no point in arguing though as you’ll defend the decision to death and ignore all reason like every home owner. Oh well.

As you are a renter, there's no point in arguing since you defend your position to death and make absurd claims like a list of cons that goes on "forever." I think my position is pretty reasonable. Owning a home definitely has some drawbacks - no doubt - but the list is pretty short. Even in these horrid economic times, for some, purchasing makes sense.

I think renting, not buying, is best. House is just for shelter. There is no need to buy one to get a shelter. Beside being cheaper financially, you keep lsess stuff, less waste.

Whichever makes you happier is the right choice. For me, in the last couple of years, renting make me happy. Now, I own a house. It makes financial sense to me; numbers make sense and that makes me happy. I don't live in BA. Lucky me.

After waiting on the sidelines the past many years (I liquidated all my USA real estate holdings before the crash and saw this mess coming)... I'm dipping my feet back into the USA real estate "waters".

Yeah, I could wait another year or so and most definitely get a lower price but I agree with the others you have to evaluate your personal situation. I look at buying a home as a place to live in vs. an investment.

I already own multiple rental properties and on those I consider them "investments" but I don't consider the place where I'll live to necessarily be an investment. I look at it as the home where my family will live.

I went ahead and pulled the trigger as I've had 2 kids in 3 years and I don't want to hassle around with moving them in different rental properties. I am buying for the long term (probably 10 - 15 years) until the kids get out of school.

We found the perfect house for us. Prices in San Diego have gone down a good clip from the bubble. I'm sure they will go down all throughout 2011 and probably much of 2012 as well. However, I'm ok buying knowing prices will head down because I'm buying to live in and I don't want to jump around to rentals and also buying for the long-term.

Also, we've been looking in San Diego the past year and really there surprisingly isn't a lot of good inventory on the market. Lots of junk but it's really tough to find quality and "move in ready" renovated 5 bedroom houses in the best school district areas for $1 million in what I consider good areas. Lots of junk in areas like 4S Ranch which I didn't like.... but we didn't see many homes we liked with 5 bedrooms that we liked the style on. I would have thought there would be more on the market but inventory is tight.

I negotiated a 15% discount from comparable recent comps with a cash offer. The home isn't a distressed property although I negotiated as if it were. I simply explained to the sellers that million dollar homes like this weren't going to fare well after the jumbo mortgage loan limits are reduced and if they wanted to sell, this was the deal to take with no worries about lenders rejecting at the 11th hour.

I also negotiated a quick closing a few weeks after they accepted. The great thing is they are doing a leaseback for a few months. I'm not in any hurry as I'm not moving for a few months to the area and they are leasing it back at $6,000 a month.

So, I think you have to look at each individual situation. It does make sense for many people. I know in our case it does.

Also, I've done a LOT of investments over the years. And just as it's impossible to always catch the absolute top when selling.... it's almost impossible to catch the absolute bottoms as well.

While I don't say it's a "great time to buy" like the NAR always spits out... I think it's an decent time IF you are buying to live in and you are buying for the long term and you can easily afford the payments or paying cash.

Buy when blood is running in the streets.
When interest rates skyrocket due to hyperinflation, the would have, could have, should have crowd will be watching late night infomercials wondering how they missed another golden opportunity

LasVegasREO says

missed another golden opportunity

Really? golden opportunity, huh? Keep hoarding them and sell it when people start begging you to sell one of them.

The dollar is pegged with the chinese yuan as well as the fact that oil is priced in it. So if the dollar goes up in value so does the yuan which means that chinese goods cost more overseas and other countries cost less in China...so this is doubtful given the pressures.

So I doubt that interest rates are going to go up anytime soon. If anything we have a general deflation because housing is one basis that cost the most