I’m just responding to the scenario monstro laid out. And the way she wrote gave no mention if the person knew they would lose their job or if the business was shaky or anything. Just that a person with $15,000 uses it to put a down payment on their house and then six months later they’re laid off.
Ideally, a prospective homeowner would put down 20%, but the 10-15% put down by monstro’s hypothetical buyer is very common as well. For the scenario as presented, buying the house is not a bad idea in any way and only becomes a bad idea if you know the future. No amount of backpedaling or accusing me of hating the poor will change that.
Would you advise someone who’s been fired twice in the last year and works in an industry that’s taken hits over the past decade to buy a house? What about the couple who’s been in marriage counseling for the past year and can’t go five minutes without getting into a fight? Would you tell these people, “Go ahead. Buy a house! Who knows what the future holds!” Or would you tell them, “Hey now. Are you sure about this?”
Very few people expect the worse to happen. But the worse can and does happen. You seem to think that a person has to face foreclosure before they know they made a bad decision. But most people who face foreclosure had a number of clues available to them before they even signed the dotted line. They were either clueless about them or they chose to ignore them because “zombie invasion lolz!!!”
Owning is better than renting for people who have stable incomes and who buy property in good neighborhoods (according to this source, one reason there’s a high foreclosure rate with FHA loans is because lot of FHA loan recipients buy in neighborhoods with negative equity), located in places where the price-to-rent ratio is low. It is not better for those who don’t meet these criteria.
Spice Weasel, I think the Great Recession scared me a bunch too. I remember how everyone lectured me on critical it is I buy a home RIGHT NOW…just a few months before the bubble popped and the massive lay-offs happened. If I had listened to all that “helpful” advice back then, I would have been screwed big time. I would have been tied to a location I hated, doing work that I hated, without the income I would have needed. And if I’d lost my house, those same people advising me would have then had every right to lecture me on the ills of “keeping up with the Jones’s”, “following the crowd”, and “listening to bad advice”.
I say there’s no shame in valuing a sense of security over “winning”. Peace of mind is priceless.
Why does it matter what was in the hypothetical? You made the ludicrous statement that owning is ALWAYS better than renting. I painted you a picture to show you how this isn’t true, and instead of saying “ah, I see now”, you’re complaining because the hypothetical didn’t include a crystal ball.
Someone above mentioned it’s important to know whether homes in the neighborhood are riding or falling in value before buying. How can you find this out? Is there a website that shows price histories at the neighborhood scale?
Do you think factoring in job stability when deciding whether to buy a home is the same as worrying about earthquakes and zombie invasions? If the answer is yes, then your frustration is probably the result of you not understanding probability, risk, and a bunch of other things.
If the answer is no, then I don’t know what you’re arguing with me about.
Either come up with some cites or examples to explain whatever it is you’re arguing for or sit down somewhere. I think I have done a good job communicating. Your frustrations are completely self-imposed.
Some of the houses in the neighborhood of the house I’m looking at (including the house I’m looking it) suddenly dropped precipitously in value just over the last year. Others are even or steadily rising. No idea what that means.
We had this exact rent vs own discussion when we moved. It turned out to be easier to buy rather than rent because of the market. But here is what we were looking at:
Rent at best $1400/mo in the city we wanted to live in.
Buy $1600/month about 25 mi from where we want to be.
Interest is less than $800 per month so assuming no increase in equity we are paying ourselves at least $800 every month. Let’s say repairs are $200 or heck even $300 per month EVERY MONTH viz. $3600 per year we still are ahead by $300 every month we are not renting.
My take is that we are saving money or at absolute worst (remember the 25 extra miles) breaking even to pay for an investment.
Financial disacuity would claim we are spending $200/mo extra plus costs ownership.
I bought my house when I was 25 in 1978. (I don’t care if you do the math:) ) I was single at the time and everyone told me I would have a hard time getting a mortgage. When I applied, the bank wanted to loan me more than I asked for. The loan officer asked me why I wasn’t buying a house for $45,000 and I said, “Because I want this one for $35,200”. I paid it off on March 19, 2003. We are debt free except for taxes, utilities, insurance and everyday living expenses. My husband is retiring next week from the railroad and we are financially secure. There are two rentals across the street from us that are going for $800 to $900 a month. I never paid that much in house payments. Life is good.
Excellent point. I don’t want to hijack the thread with politics, but the talk of “Food Deserts” that afflict the poor in the US should be met with skepticism in my estimation.