Comments on: Going Nowhere Fast

By: mr-potter

mr-potter — Tue, 21 Oct 2008 16:58:20 +0000

Another fact overlooked:

Owning a home in a booming market also causes home-owners to get stuck (in my experience at least).

We used to live in Edinburgh, UK where for most of the last 10 years the housing market was booming. Our house tripled in value in 7 years. Unfortunately, every other house tripled in value – or more for the more desirable locations. When we got to the point where the house could no longer hold the family and all the stuff that comes with kids, we started looking at moving. We quickly saw that we could not afford to move because the income required to support a mortgage that would get us a bigger house was way more than what I earned. Our solution was to move to the US, but the other folks who I knew in the same position either made do with what they had or moved out of town. Out of town meant to the far reaches of the commuter belt – which meant they spent hours a day in traffic.

So, while a cold market may be bad, a hot market may also be bad for other reasons.

By: Jim H

Jim H — Tue, 21 Oct 2008 13:51:30 +0000

As a real estate investor and landlord, I approve of your renting-for-life message. Carry on….

By: Michael Wells

Michael Wells — Mon, 20 Oct 2008 22:01:38 +0000

Building on Fred’s comment, Jane Jacobs said in “Death & Life” that a strong neighborhood has a mix of stable residents for continuity and newcomers for new ideas. All old timers and you get stagnation, all short timers and you don’t have any commitment to the neighborhood. Like Fred’s, my in-city Portland neighborhood has a good mix of long time residents and new families with lots of young kids with a slow turnover in probably the same 5-10% range.

There’s may be some ideal macro-mix of home ownership and renting, but on a micro level it differs a lot for individuals.

For a 65 year old who’s paid off a mortgage in a vital city they want to stay in, ownership is good.

For an unemployed working class person who owns in a declining city with a bad job market, owning a home can be a burden as Gyurko says.

For a young creative class couple in a city with opportunities, it can go either way. A house is a strong investment, and a good mortgage gives them safe leverage they probably couldn’t get in any other investment. Or renting may give extra cash to put into long term investments, and the flexibility to move to greener pastures.

By: Fred

Fred — Mon, 20 Oct 2008 18:13:49 +0000

Humans are more that factors of production to be moved around to meet the needs of the economy. Home ownership, while admittedly reducing the mobility of the labor force, adds to the stability of and quality of life in neighborhoods. My in city Seattle neighborhood probably has a turnover rate of 5% to 10% a year including three or four houses that are rentals. This level of change allows newcomers to be absorbed into an ongoing community.

By: Elizabeth M

Elizabeth M — Mon, 20 Oct 2008 16:55:40 +0000

Financially speaking, home ownership may not be a good thing for some people. But after spending more than 10 years sharing walls and ceilings and floors with people through rentals and condo ownership, the peace of mind that I have recently gained from owning my own single family home is well worth it for me. Things backfire on people when they try to capture that elusive American Dream without thinking it through or examining their budget or imagining all worst-case scenarios.

That being said, it’s pretty tough to predict when things are going to go sour – the way I see it, people who choose to play the real estate game must make the most of the hand they were dealt. Besides, where do people live if they aren’t homeowners? Are they doomed to be renters forever? What a sad thought that is… Flexibility has its merits, but if flexibility were the biggest consideration no one would get pets or have children either. Everything you add to your life creates one more facet to be considered.

By: Shawn Petriw

Shawn Petriw — Mon, 20 Oct 2008 15:42:23 +0000

I’d really like to see a full-blown study (another book?) on the impact of home ownership on the economy. The assumption, part of that utopian “American Dream” is that home ownership is a good thing. Perhaps that’s not really the case, both from a personal finance perspective as well as the larger economy.

Old myths die hard, don’t they.