Comments on: 3 Reasons Not to Buy a Home http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/ A premiere personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Sun, 08 Nov 2009 07:50:42 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: » Weekly Blog Roundup, Quick Edition on Consumerism Commentary: A Personal Finance Blog http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-116800 » Weekly Blog Roundup, Quick Edition on Consumerism Commentary: A Personal Finance Blog Fri, 06 Jul 2007 17:32:36 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-116800 [...] yes. But life isn’t always about the numbers, I suppose. See my recent posts on this topic: 3 Reasons Not to Buy a Home, Renting Makes You Richer, New York Times Says It’s Better to Rent Than to Buy, The Cost of [...] [...] yes. But life isn’t always about the numbers, I suppose. See my recent posts on this topic: 3 Reasons Not to Buy a Home, Renting Makes You Richer, New York Times Says It’s Better to Rent Than to Buy, The Cost of [...]

]]> By: Voiceofreason http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-114457 Voiceofreason Thu, 14 Jun 2007 18:36:58 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-114457 Don't forget that owning and buiding equity and writing your taxes for 7 years thus lowering your taxable income is a very effective wealth building strategy. Don’t forget that owning and buiding equity and writing your taxes for 7 years thus lowering your taxable income is a very effective wealth building strategy.

]]> By: Stingy Student http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-101125 Stingy Student Mon, 21 May 2007 00:09:29 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-101125 Great post, I recently decided to rent instead of buy, and I feel a lot more justified in my decision now. Great post, I recently decided to rent instead of buy, and I feel a lot more justified in my decision now.

]]> By: cami http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99885 cami Fri, 18 May 2007 13:32:44 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99885 Great post Flexo. I think another thing to consider in relation to reason #1, is how long could it take to sell your home. For example, if your area has months of inventory available, you might have to put it on the market well before you actually want to move, or you might end up needing to deal with it after you've already left the area. I've known people who've worried about selling so they put their house on the market, it sold fast, and then they had to rent for their last few months in town. It was a bit of a hassle, plus the cost of the intermediate move. Great post Flexo. I think another thing to consider in relation to reason #1, is how long could it take to sell your home. For example, if your area has months of inventory available, you might have to put it on the market well before you actually want to move, or you might end up needing to deal with it after you’ve already left the area. I’ve known people who’ve worried about selling so they put their house on the market, it sold fast, and then they had to rent for their last few months in town. It was a bit of a hassle, plus the cost of the intermediate move.

]]> By: Free Money Finance http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99801 Free Money Finance Fri, 18 May 2007 10:20:18 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99801 Star Money Articles for the Week of May 14... Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Five Cent Nickel details the importance of buying flood insurance. Blueprint for Financial Prosperity doesn't want to be rich. Consumerism Commentary gives thr... Star Money Articles for the Week of May 14…

Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Five Cent Nickel details the importance of buying flood insurance. Blueprint for Financial Prosperity doesn’t want to be rich. Consumerism Commentary gives thr…

]]> By: Weekend Reading - May 18, 2007 - Million Dollar Journey http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99783 Weekend Reading - May 18, 2007 - Million Dollar Journey Fri, 18 May 2007 09:44:39 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99783 [...] Consumerism Commentary goes against the grain and gives 3 Reasons Not to Buy a Home. [...] [...] Consumerism Commentary goes against the grain and gives 3 Reasons Not to Buy a Home. [...]

]]> By: AllFinancialMatters » Blog Archive » JLP’s Weekly Roundup http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99737 AllFinancialMatters » Blog Archive » JLP’s Weekly Roundup Fri, 18 May 2007 05:34:39 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99737 [...] 3 Reasons Not to Buy a Home [...] [...] 3 Reasons Not to Buy a Home [...]

]]> By: moom http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99669 moom Thu, 17 May 2007 22:17:41 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99669 The more I read online about people and real estate the less I want to do it ;) Snork Maiden is even less enthusiastic than I am. Owning a house would be a psychological negative for me. I can't see the financial advantages. The more I read online about people and real estate the less I want to do it ;) Snork Maiden is even less enthusiastic than I am. Owning a house would be a psychological negative for me. I can’t see the financial advantages.

]]> By: Some Food For Money Thoughts http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99652 Some Food For Money Thoughts Thu, 17 May 2007 21:18:00 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-99652 [...] 3 Reasons Not to Buy a Home by Flexo @ Consumerism Commentary. Flexo lists some financial reasons against buying a home. Now, I am all for saving money, and getting the most of it. But, personally, buying a home will NOT be a financial investment for us. It has to do with some kind of a personal satisfaction - I am not able to put my finger on the exact reason - but something along that lines. When I will be in the market for a home, the only financial question I want to ask myself is “Can I afford this home - with the mortgage and all - for the next 30 years”. If I can afford it - I will buy it, irrespective of whether it turns out to be more expensive than renting. I will have a whole post on this very soon. [...] [...] 3 Reasons Not to Buy a Home by Flexo @ Consumerism Commentary. Flexo lists some financial reasons against buying a home. Now, I am all for saving money, and getting the most of it. But, personally, buying a home will NOT be a financial investment for us. It has to do with some kind of a personal satisfaction – I am not able to put my finger on the exact reason – but something along that lines. When I will be in the market for a home, the only financial question I want to ask myself is “Can I afford this home – with the mortgage and all – for the next 30 years”. If I can afford it – I will buy it, irrespective of whether it turns out to be more expensive than renting. I will have a whole post on this very soon. [...]

]]> By: Blain Reinkensmeyer http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98902 Blain Reinkensmeyer Wed, 16 May 2007 17:06:10 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98902 * I plan to stay put for at least three years. * I can swing all the costs involved. * I want to be a homeowner. I think those three points summarize the commitment best. If you aren't ready, than don't do it! * I plan to stay put for at least three years.
* I can swing all the costs involved.
* I want to be a homeowner.

I think those three points summarize the commitment best. If you aren’t ready, than don’t do it!

]]> By: Debt Blitzkrieg » Blog Archive » DB on Mortgages http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98211 Debt Blitzkrieg » Blog Archive » DB on Mortgages Tue, 15 May 2007 23:45:40 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98211 [...] 3 Reasons Not to Buy a Home [...] [...] 3 Reasons Not to Buy a Home [...]

]]> By: Lee http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98182 Lee Tue, 15 May 2007 22:40:44 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98182 Just because interest-only mortgages aren't any better than renting (as far as building equity) doesn't mean that renting isn't throwing away money. If you're buying something to live in as an investment, then it's not necessarily a good investment. But if you're buying something to live in to have somewhere that is yours to live in, then it makes sense ... unless you move frequently, of course. None of these articles take into account anything subjective like decortaing and renovating and the like. I agree with Chris on those points. They also don't consider that while you're not responsible to pay for maintenance in renting, you're also at the mercy of your landlord to get it done. I've had more than one landlord that didn't get things done or did them half-assed to save money. I'd rather live in my own "investment" than someone else's. Just because interest-only mortgages aren’t any better than renting (as far as building equity) doesn’t mean that renting isn’t throwing away money.

If you’re buying something to live in as an investment, then it’s not necessarily a good investment. But if you’re buying something to live in to have somewhere that is yours to live in, then it makes sense … unless you move frequently, of course.

None of these articles take into account anything subjective like decortaing and renovating and the like. I agree with Chris on those points.

They also don’t consider that while you’re not responsible to pay for maintenance in renting, you’re also at the mercy of your landlord to get it done. I’ve had more than one landlord that didn’t get things done or did them half-assed to save money.

I’d rather live in my own “investment” than someone else’s.

]]> By: scriber http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98172 scriber Tue, 15 May 2007 22:31:13 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98172 There are several reason to not purchase a House. It is call quality of life. It is the same reason for selling your house and consolidating your debts ... The #1 cause of death and illness in the G-7 Countries is Stress ... and too much debt load spells stress and purchasing a house is a major stress factor. It changes your life and reduces your Cash Flow .. ie the amount of liquid funds you have in your pocket ... is a house worth the stress ... There are several reason to not purchase a House. It is call quality of life.

It is the same reason for selling your house and consolidating your debts … The #1 cause of death and illness in the G-7 Countries is Stress … and too much debt load spells stress and purchasing a house is a major stress factor.

It changes your life and reduces your Cash Flow .. ie the amount of liquid funds you have in your pocket … is a house worth the stress …

]]> By: dong http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98082 dong Tue, 15 May 2007 17:59:15 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98082 Buy when you feel right about it. Don't get talked into it one way another. I think the points the article makes are good. Being able to answer yes those questions is critical. Investing in real estate is whole another issue than buying a home. Buy when you feel right about it. Don’t get talked into it one way another. I think the points the article makes are good. Being able to answer yes those questions is critical.

Investing in real estate is whole another issue than buying a home.

]]> By: Brad http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98059 Brad Tue, 15 May 2007 17:07:32 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98059 With a 6% realtor commission and 5% appreciation over 3 years, you're still up about 8.8% (1.05^3 * 0.94=1.088) in the value of the house minus the cost to sell. That's about 2.8% annualized and that gain is on the value of the house, not the amount you have invested. These numbers will certainly vary based on all kinds of unknowns. I don't want you to think I'm arguing that house jumping is extremely profitable-- only that in a market that goes up, even barely above inflation, leverage makes a big difference in the financial outcome. It cannot be ignored. It's just a pet peeve of mine when I see the argument that buying isn't so great because residential real estate only appreciates 1-2% over inflation. It completely ignores a HUGE part of the equation. With a 6% realtor commission and 5% appreciation over 3 years, you’re still up about 8.8% (1.05^3 * 0.94=1.088) in the value of the house minus the cost to sell. That’s about 2.8% annualized and that gain is on the value of the house, not the amount you have invested.

These numbers will certainly vary based on all kinds of unknowns. I don’t want you to think I’m arguing that house jumping is extremely profitable– only that in a market that goes up, even barely above inflation, leverage makes a big difference in the financial outcome. It cannot be ignored.

It’s just a pet peeve of mine when I see the argument that buying isn’t so great because residential real estate only appreciates 1-2% over inflation. It completely ignores a HUGE part of the equation.

]]> By: KMC http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98018 KMC Tue, 15 May 2007 15:08:49 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98018 Ironically, the housing bubble has made it more attractive than ever to rent. More people who were marginally able to buy a home did so and stopped renting. That keeps the price of rents low. Ironically, the housing bubble has made it more attractive than ever to rent. More people who were marginally able to buy a home did so and stopped renting. That keeps the price of rents low.

]]> By: Flexo http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98013 Flexo Tue, 15 May 2007 14:54:59 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-98013 Let's not forget about the 6% commission you'll pay if you use a broker to sell your house. With a short time horizon of three years, you could end up with a significant loss after inflation. Let’s not forget about the 6% commission you’ll pay if you use a broker to sell your house. With a short time horizon of three years, you could end up with a significant loss after inflation.

]]> By: Brad http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97997 Brad Tue, 15 May 2007 14:26:52 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97997 Never underestimate how important leverage is when considering buying a home. If there isn't a very large difference in your area between the monthly rent and a monthly mortgage payment, the small(ish) additional cost each month buy you into a very large investment. Even if appreciation only equaled inflation you can make money at a significant rate early in the mortgage. If renting is substantially cheaper then this may not apply. You're paying a lot extra for the investment and your leverage isn't so great anymore. Where I live there is very little cost difference between rent and mortgage payments . . . so consequently it's a no-brainer to buy a home, even if it's relatively short term (2 years at least to avoid taxes at the sale). Never underestimate how important leverage is when considering buying a home. If there isn’t a very large difference in your area between the monthly rent and a monthly mortgage payment, the small(ish) additional cost each month buy you into a very large investment. Even if appreciation only equaled inflation you can make money at a significant rate early in the mortgage.

If renting is substantially cheaper then this may not apply. You’re paying a lot extra for the investment and your leverage isn’t so great anymore. Where I live there is very little cost difference between rent and mortgage payments . . . so consequently it’s a no-brainer to buy a home, even if it’s relatively short term (2 years at least to avoid taxes at the sale).

]]> By: Kevin Gunn http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97960 Kevin Gunn Tue, 15 May 2007 13:12:05 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97960 I think the article is pretty spot-on, especially her 3 suggestions. The really critical one in terms of how much financial sense buying a house makes is the first one: how long you plan to stay. Closing costs, taxes, moving expenses and the high percentage of your payments that is devoted to interest in the early years devours most if not all of the financial benefits of owning for the first few years. 3 years is the barest minimum. 5 is better. Longer is great. Also, if you choose to buy, pick the appropriate mortgage for your needs. For the overwhelming majority of finance-minded people I think the 15-year fixed is the ONLY mortgage to choose (I have some mortgage analysis up on my site if you're interested). If you have to get a 30-year mortgage to make your payments you are trying to buy more house than you can afford -- look elsewhere. 30-year mortgages are financially deadly. Good luck making your choice! I think the article is pretty spot-on, especially her 3 suggestions. The really critical one in terms of how much financial sense buying a house makes is the first one: how long you plan to stay.

Closing costs, taxes, moving expenses and the high percentage of your payments that is devoted to interest in the early years devours most if not all of the financial benefits of owning for the first few years. 3 years is the barest minimum. 5 is better. Longer is great.

Also, if you choose to buy, pick the appropriate mortgage for your needs. For the overwhelming majority of finance-minded people I think the 15-year fixed is the ONLY mortgage to choose (I have some mortgage analysis up on my site if you’re interested). If you have to get a 30-year mortgage to make your payments you are trying to buy more house than you can afford — look elsewhere. 30-year mortgages are financially deadly.

Good luck making your choice!

]]> By: Brion http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97732 Brion Tue, 15 May 2007 02:19:40 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97732 Agree with the comments about a home not being a pure investment. Owning a home has intangible benefits that do not purely translate into monetary value. If you're interested in timing and contrarian views, then you should be reading Harry Dent Jr and his economic forecasts. Agree with the comments about a home not being a pure investment. Owning a home has intangible benefits that do not purely translate into monetary value.

If you’re interested in timing and contrarian views, then you should be reading Harry Dent Jr and his economic forecasts.

]]> By: AA http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97698 AA Tue, 15 May 2007 00:01:09 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97698 We bought a house when we got married last year. We now own OUR home, my wife and I are very happy with the decision. In addition, we live in the midwest, the houses here are affordable. We bought a house when we got married last year. We now own OUR home, my wife and I are very happy with the decision. In addition, we live in the midwest, the houses here are affordable.

]]> By: Lazy Man and Money http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97694 Lazy Man and Money Mon, 14 May 2007 23:18:42 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97694 I think the biggest tax break is that you can sell it tax-free. A consistent 1% over inflation with enough 5-to-1 leverage is not half bad, either. I think the biggest tax break is that you can sell it tax-free. A consistent 1% over inflation with enough 5-to-1 leverage is not half bad, either.

]]> By: Jonathan http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97653 Jonathan Mon, 14 May 2007 21:08:23 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97653 Sound advice from Liz. Had I fully appreciated this, I might have bought a smaller house two years ago when I was in the market, and expose myself more to the stock market sooner. Jonathan Sound advice from Liz. Had I fully appreciated this, I might have bought a smaller house two years ago when I was in the market, and expose myself more to the stock market sooner.

Jonathan

]]> By: samerwriter http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97634 samerwriter Mon, 14 May 2007 20:45:31 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97634 I agree with all those points. Get ready for the inevitable onslaught of anecdotal "But I made 100% on my house in 4 years!" posts. There are a lot of lucky people that got rich by buying AMZN stock too, but it's important to realize that as with the stock market in the late 90s, housing just went through an extremely anomalous period. Returns from this period should not be expected to repeat. The tax deduction argument really bugs me. I see otherwise intelligent people parrot this fallacy. Many of them itemize *only because of their mortgage*. In other words, they don't get to deduct the full interest anyway. They only really get to deduct the portion of the interest that pushes them above the standard deduction. I agree with all those points. Get ready for the inevitable onslaught of anecdotal “But I made 100% on my house in 4 years!” posts.

There are a lot of lucky people that got rich by buying AMZN stock too, but it’s important to realize that as with the stock market in the late 90s, housing just went through an extremely anomalous period. Returns from this period should not be expected to repeat.

The tax deduction argument really bugs me. I see otherwise intelligent people parrot this fallacy. Many of them itemize *only because of their mortgage*. In other words, they don’t get to deduct the full interest anyway. They only really get to deduct the portion of the interest that pushes them above the standard deduction.

]]> By: Dy Phan http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97627 Dy Phan Mon, 14 May 2007 20:37:10 +0000 http://www.consumerismcommentary.com/2007/05/14/3-reasons-not-to-buy-a-home/#comment-97627 This is exactly what I'm trying to convince my wife. This is exactly what I’m trying to convince my wife.

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