Let me just say that if you took a poll of 100 people who put all of their money into buying a house in the early 2000s, and 100 people who rented - the renters would have a higher net worth and far less stress. Buying is not always a good idea, especially when you tack on 6% agent fees on both sides of the transaction, property taxes, maintenance, insurance and 30 years of paying interest on a loan.”
nnears on May 20, 2013 at 17:53:08
“Agreed...but it took me owning, selling and buying again to realize all of this. Owning a home is no picnic and only worth it if you have the means to support it fully. (Thankfully, I had plenty of equity when I sold my 1st house)”
“The people being crowded out are largely trying to FHA their way into the housing market with a 3-5% down payment. The very first example in the story mentions the couple's lack of a down payment. Borrowing 95% of the home's value is extremely risky.”
Dad2three on May 20, 2013 at 20:42:23
“It worked for many years, until Bush took the regulators off the beat...”
“If you don't have 20% for a down payment, along with at least 6 months of living expenses saved up in an emergency fund, you are not ready to purchase a home. Sure, you can get a loan, but you'll be on thin ice.
Nothing wrong with renting for a while while you build up your cash position.”
ItsGood2Think on May 20, 2013 at 17:07:10
“I understand your point but doing the math that would mean that the average homebuyer would have to have about $45K on hand. Maybe a few might achieve that by their mid-40's which would basically kill every industry associated with housing. Hence the background for the whole sub-prime mess in American (and just about every other advanced country). It is definitely a rock and a hard place....sub-prime loans that will bubble burst in a handful of years or kill the housing market. So you can understand the shift to "renting" because few have the $45K but many can make the monthly payment. So you are looking at the new norm...rent apartment during your 20s...may shift to rent a house in your 30-40s. Nice strategy by the Hedge Fund Managers and Banks but only if they get cooperation from the Hedge Fund Managers and Banks that own the apartments. But from what I see these owners are raising rental rates on apartments so that they basically equal the costs associated with a house..no money left over. Not a pretty picture... Hedge Fund Managers and Banks will become the universal slum lord throughout the country. The only possible solution that I can see will start with breaking up the banks and restricting Hedge Funds from dealing in residential real estate.”
yakmeat on May 20, 2013 at 16:45:53
“And if you've got student loans, that while could be about 20 years or so.”
Souris9 on May 20, 2013 at 16:44:08
“What does that have to do with anything addressed in this article?”
“You're very much in the debt trap. According to this post you borrowed 97% of your home's value. You'll be underwater on the slightest correction in prices.”
chill6334 on May 21, 2013 at 10:03:30
“No, actually I'm not. While the banks "approved" me for a $500,000 house, I purchased one for $145,000. I fully intend to have it paid off in around 7 years.
All of which is beside the point. "Underwater" only means something if I intended the house as an investment, to later sell. I'm planning on keeping it until I die. Thus, if the price is corrected down (and there is very little room for that), I say "Yahoo! My property taxes are going down!"”
“It's really not. It is very well-intentioned, but artificially low rates (see early 2000s housing market) have the unintended effect of inflating the underlying asset. Here's how it works: Borrower sees a low rate - becomes less price-sensitive - colleges notice this, and raise prices.
This article points out the alarming fact that principal loan balances for under-25 Americans has doubled in 10 years. This has very little to do with rates, and everything to do with cost.”
“Some people strategically keep debt because it carries a low interest rate and they'd rather put extra money into a higher-yielding investment.
A friend of mine and I got the same graduate degree from the same college, but his rate was several points lower because he was enrolled at a better time for borrowers.”
qaan on Feb 12, 2013 at 13:54:12
“That is a sound strategy but only if your investments have higher yields, and looking at the last ten years there were many people who would have rued that choice.”
roopsag on Feb 12, 2013 at 13:44:04
“They are taking on more risk than they need. You are less protected under student loans than other forms of borrowing. Further, higher yielding investments tend to also be the riskier ones so it is double risk.”