Posted: 23 Mar 2011 09:30 PM PDT
The deflating housing bubble has done little to curb American's enthusiasm for owning real estate. However, the collapse has provided people sound reasons for not buying a house.
Irvine Home Address ... 8 WHITECLOUD Irvine, CA 92614
The need for shelter is basic as is the desire for community. In the United States, this translates into a desire to take on a very large mortgage to buy real estate. These basic human emotions drive much of the activity in real estate markets.
Most people buy because it is the right time for them. Their career, age, family circumstances all come together to push people toward ownership at different times. Some are fortunate and buy at the bottom of the real estate cycle. Some are not so fortunate and buy at the peak.
The most damaging aspect of our current system is the price volatility. It capriciously rewards some and destroys others. Home price volatility creates a culture of Ponzi borrowing and dependency. The goal of government policy should be price stability, but lately it seems their goal is price maximization.
Seven Reasons We're Buying and Four Reasons We're Not
By Julia Edwards and Edmund L. Andrews
That is a great way to look at the situation. Most people want to buy and own. Those who look rationally at the costs often chose to rent, not because it's the most emotionally pleasing choice, but because it's the most financially sound decision. Those who chose to rent recognize that being house poor is its own form of unhappiness that so takes away from the joy of ownership as to make it undesirable.
That is a surprisingly low number. Nationally, only about a third of home owning taxpayers take the home mortgage interest deduction, but the proportion in Irvine will be much higher. For high wage earners borrowing upwards of a million dollars, the tax deduction is very motivating.
I suspect this number is so low because people are unaware of their true motivations. So much of our behavior is subconscious, and the familiarity of house and home provides a psychological anchoring to real estate that runs very deep.
This is another area where Irvine is a special subset of buyers. Many people chose master planned communities like Irvine because they want neighborhood involvement. The number may only represent 6% of America, but it is much higher among readers of this blog.
Our society has become so mobile that people have come to recognize the impermanence of all living arrangements. We no longer buy family homes and stay there through our passing.
Personally, I plan to acquire several investment homes to pass on to my son. I guess I am one of the 9 percent.
The question is a bit vague and misleading. All the terms are up for interpretation: What is good? What is long-term? And what is investment? I believe a good long-term investment is an income property with an 8% cap rate in today's market. Some believe a good long-term investment is a speculative flip in the North Korea towers. Over the very long term, real estate values rise in nominal dollars along with inflation. Is that good?
The reason people want to own the home is to obtain appreciation. This nonsense about paying down a mortgage is not what people really think. No California Ponzi believes they have to reduce the balance of their mortgage. Mortgages are made to get larger.
realtors like to spin this as "throwing money away on rent." Of course, they ignore the fact that they are throwing away much more money renting the bank's money, but the tax deduction makes it all okay, right?
People have come to equate ownership with stability. Unfortunately, our concept of ownership has been perverted into money rentership. Ownership with a huge mortgage is tenuous compared to renting. Capricious landlords evicting good tenants are much less common than robo-signing lenders evicting delinquent borrowers.
The timeless and the new
The reasons listed above are timeless. No matter when an article like this is written, the above reasons will be on it, and they will be just as compelling to buyers. The new are the reasons not to buy. These are a direct response to the collapsing housing bubble.
Five years ago, nobody cared about debt levels.
Five years ago, everyone assumed you would simply sell your house for a huge profit if you needed to move.
Five years ago, with exception of a few of us crazy bloggers, very few people believed prices could go down.
The last reason is why house prices still need to come down. Despite the low interest rates, the cost of ownership is still too high in many markets.
What's it like to be immobile?
Today's featured property is an example of reasons number 3 above. People who buy now, or who bought since 2009, are facing the problem of a flat or declining market. When prices don't go up, people have to pay the sales commissions out of their down payment. That was their money rather than the market's. When free money from the appreciation fairies doesn't materialize, owners generally price their properties to accomplish three things:
Hence, we see properties priced just over breakeven like today's.
I want every buyer looking today and over the next two or three years to be forewarned that they could find themselves in this situation. And reinforcing risk #2 -- dropping prices -- it could even be worse.
Imagine this is your house. What would you do?
Irvine Home Address ... 8 WHITECLOUD Irvine, CA 92614
Posted: 23 Mar 2011 09:00 AM PDT
We've got a new Exclusive Access Property. It is a 2bd/1.25ba 1,000 square foot condo (single level, first floor entry, 1 car attached garage) in Mission Viejo priced at $249,900. If you are considering purchasing this to rent it out, the seller is interested in leasing the home back for a year. This home is not yet on MLS but will be in 7 days.
If you want to learn more about this property, please contact us:
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