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The Rise of Renting in the U.S

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Re: The Rise of Renting in the U.S

#41

Post by themagician »

chishaku wrote: post #13

Why are mortgage debtors referred to as home owners? Edit: I was being a bit facetious. With liar loans, no down payment mortgages, deferred interest, "prices only go up," etc, it's been too easy to sell home "ownership" to people without their requisite understanding of the risks involved and the constantly changing market realities. I'm all for personal responsibility but the use of language is powerful.

Because in the US we like to sell people on the idea of "ownership", when the reality is that the bank retains all the real value.

Only a fraction of so-called "homeowners" actually own more than 50% of their home. Most homeowners just rent from the bank. Many will rent from the bank for life.

The way homeownership is sold in the US is nothing more than a way to get people to give up hundreds of thousands of dollars to the banks under the illusion that they are building wealth or equity. And when they finally sell their home 20 years after they bought it for twice the price, they don't even consider that after inflation and mortgage interest they basically broke even.

Re: The Rise of Renting in the U.S

#42

Post by turar »

derekp7 wrote: post #21
rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

That tax deduction does get smaller every year (as the interest/principal balance changes). The biggest issue I found with owning is that the equity doesn't build up fast enough at the beginning (with a 30-year mortgage), so if you sell after 10 years the costs pile up to the point that you have almost no net proceeds (5% commission, survey/title/transfer tax/inspections, plus prorated property taxes). A 200K propert…

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

Re: The Rise of Renting in the U.S

#44

Post by maxerickson »

pc86 wrote: post #29
derekp7 wrote: post #21

Earlier quoted context omitted.

That tax deduction does get smaller every year (as the interest/principal balance changes). The biggest issue I found with owning is that the equity doesn't build up fast enough at the beginning (with a 30-year mortgage), so if you sell after 10 years the costs pile up to the point that you have almost no net proceeds (5% commission, survey/title/transfer tax/inspections, plus prorated property taxes). A 200K propert…

Actually the best thing to do is just to have a lot of money. Problem solved! Your scenario assumes a location (or person) with: - Desirable housing in the $60-100K+ range - Employment sufficient to generate high paying positions - The will to sock away a large part of your income for close to a decade, just to have a paid-off home (which is not a big enough benefits to be a means unto its own) 20% down at a minimum…

This makes me wonder if 30 year mortgages even end up making housing more affordable.

(I guess it would be a prisoners dilemma situation, where individuals benefit by taking them out but the overall situation is made worse)

Re: The Rise of Renting in the U.S

#45

Post by nostrademons »

ianferrel wrote: post #35
thrownaway2424 wrote: post #8

Earlier quoted context omitted.

The tax deduction is baked into the price.

The average tax deduction is baked into the price. Your personal tax deduction depends on your income.

The price is usually dependent upon your income. McMansions are usually marketed to different types of couples than older duplexes and ranch houses, or new townhomes and condos. The tax deduction (based on your tax bracket) is baked into the market prices for each of these market segments.

Re: The Rise of Renting in the U.S

#47

Post by agentgt »

My wife and I bought a 2-family (we live in the other unit) a couple of years ago and so many people told us how it was a bad idea. People said we would have horrible tenets and that finding renters would be hard and that selling rental property is a nightmare.

Eight years later and I can tell you it was one of the smarter investments I have made. Had wonderful tenets. And after some refi magic the house is not far from being paid off.

Re: The Rise of Renting in the U.S

#48

Post by bluedino »

I'd have to save up almost a years pre-tax salary to buy a home. Well, one that I would want.

I could save up half a years pre-tax salary and buy my not-ideal house. Nice/modern home, good location/schools, or large size. It seems like you can only pick 2 without spending a ton of $.

Until then, I rent.

Re: The Rise of Renting in the U.S

#49

Post by Finnucane »

brianwawok wrote: post #15
rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

Not having your rent increase or being told to move, as are being able to make your home exactly what you need. My home has a 15x15' home gym with all kinds of upgrades I like.. finding a ready made house with my exact ideal gym? Low odds....

We bought a house in a 'tech hub' (Cambridge) during the crash--it was a little scary at the time, but worked out well for us. Our current costs are about half the going rents in the area. Prices have gone up so much in the last few years we probably couldn't afford our neighborhood now. But deciding to buy or rent (assuming you have a reasonable choice) often involves a lot of personal factors beyond the purely financial--you have to weigh your own priorities and likely needs over time.

Re: The Rise of Renting in the U.S

#50

Post by dragonwriter »

rayiner wrote: post #30
thrownaway2424 wrote: post #8

Earlier quoted context omitted.

The tax deduction is baked into the price.

Maybe, maybe not: http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in... . This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment. So at least at first, you'd lose more to the elimination of the deduction than you wou…

> This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment.

You're assuming that the average impact on home prices is the same as the impact on prices of homes bought by people irrespective of income. People of different incomes tend to buy different kinds of homes (or the same kinds of homes in different locations), so one would expect that removing (or adding) a subsidy that is income sensitive would have differential impacts on the homes typically bought by different income levels, not consistent impacts across all homes.

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