The National Housing Survey and the real estate bear market

By Felix Salmon
April 6, 2010
National Housing Survey; I'd recommend downloading the full 117-page presentation here. It confirms what I've been hearing anecdotally: that people still believe in housing as an investment, and that the enormous nationwide housing crash has done much less to alter Americans' attitude towards homeownership than we might have hoped.

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There’s a huge amount of information in Fannie Mae’s National Housing Survey; I’d recommend downloading the full 117-page presentation here. It confirms what I’ve been hearing anecdotally: that people still believe in housing as an investment, and that the enormous nationwide housing crash has done much less to alter Americans’ attitude towards homeownership than we might have hoped.

For instance, check out the huge majority of all segments of the population which believes that a high rate of homeownership is important to the economy; more than half of Americans believe it’s “very important”.

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This is horribly misguided, and it’s particularly depressing that even 77% of renters share in the mass delusion. Homeownership is, if anything, a drag on the economy, since it funnels resources into unproductive overconsumption, and helps to impede labor mobility. There is absolutely no reason to believe that countries with high levels of homeownership, like the U.S., have better economies than those with low levels of homeownership, like Germany.

The survey just gets more depressing from there. Americans think now is a good time to buy a house, largely because they think it’s always a good time to buy a house. And they reckon — even now — that house prices are going up, or will at least stay stable.

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I think what we’re seeing here is a mindset utterly conditioned by the massive, decades-long bull market in housing. Never mind that that bull market has come to an end; the syllogism is simple. House prices always go up; housing is a bargain right now because prices have ticked downwards; therefore now must be a great time to buy.

I see this mindset in New Yorkers who genuinely believe that $1 million is not a lot of money to pay for a 2-bedroom apartment, even when it comes with thousands of dollars a month in maintenance costs on top of that. Of course they never would have believed such a thing 10 years ago, but the anchoring effect of the housing bubble is astonishing to behold.

Just in the past week, two of the most financially literate people I know have told me in voices filled with regret that, after looking at a lot of apartments for sale, they finally just went ahead and rented somewhere new instead.

Of course I told them that they were doing exactly the right thing, but I know that they didn’t believe me.

Both of them understand the mechanics of the mortgage market, and are clearly capable of understanding that if you can make lots of money by buying a house when interest rates are high and falling, then you must be able to lose lots of money by buying a house when interest rates are low and rising, as they are right now. Both of them understand that there’s only one buyer of new mortgages in the U.S. right now, and that without such artificial government support, prices would be a lot lower than they are. Both of them understand that if it costs a lot more to buy than to rent, that’s a good sign we’re still in something of a bubble. Neither of them would be remotely surprised by this graph.

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And yet. The psychological reasons for buying a home are so strong — the nesting instinct, the idea that you’re not at the mercy of a landlord, the feeling that paying rent is “throwing money away” in a way that paying mortgage interest or monthly maintenance fees is not — that people simply delude themselves into believing that homeownership in general is (a) an investment, when it isn’t; is (b) a good investment, when it isn’t; and is (c) a good idea even now, when rents are cheap and the downside in the housing market is huge.

It’s worth noting, in this context, that the top two reasons to buy a home are that “it means having a good place to raise children and provide them with a good education”; and “you have a physical structure where you and your family feel safe”. Reading between the lines here, I think that what we’re seeing is the effect of rental ghettoes, and the fact that neighborhoods with high levels of homeownership tend to be safer, and have better schools, than neighborhoods which are mostly owned by landlords. That’s a negative aspect of homeownership, in the grand scheme of things, but it’s clearly here to stay: no one’s anticipating a more sensible world where it’s commonplace to be able to rent a house in a good school district.

And so we reach the point at which more than 60% of Americans say that if they were to move they would buy rather than rent; and where more than 60% of the people who will rent still say that they intend to buy at some point in the future. Indeed, more than 50% of renters say they’re going to buy a place in the next three years.

There are signs of cognitive disconnect — there have to be. For instance, despite considering homeownership to be a safe and good investment, Americans often feel that they’re sacrificing financially in order to achieve it:

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The safe-investment chart is particularly crazy: buying a home is considered just as safe as putting money into a savings account — and significantly safer than buying government bonds, despite the fact that it’s the single most leveraged investment that most people will ever make.

It’s not impossible to construct a world view which somehow makes all this consistent, but it’s pretty difficult. You have to have great faith in the power of a mortgage to force savings; you have to be very worried about inflation; and you have to believe that homes are a wonderful inflation hedge. And I don’t believe for a minute that most Americans actually have all those beliefs; they just act as though they have all those beliefs. In fact, I know that they don’t: 73% of Americans believe that it’s best to pay off one’s mortgage as soon as you can.

The most fascinating chart in the whole deck, for me, is this one, which comes just after a chart showing that more than 80% of Americans, and even more than 80% of Americans who are underwater on their mortgages, think it’s not OK to stop paying your mortgage.

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How can it be that Americans have such a strong opinion about paying their mortgage, but then in such large numbers think that the main reason to do so is just their credit score? It seems extremely odd to me.

My feeling, after going through the survey, is that we’re in for a housing bear market which will last many years, just as the housing bull market did. There will be substantial demand for houses for the foreseeable future, and that — along with government support — is going to prevent further sharp lurches downwards. But ultimately economic fundamentals have to prevail. It’s just going to take a while.

42 comments

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Good point about the contradiction between the focus on credit scores and paying off your mortgage. I believe that over the last decade your average financial journalist has focused so much on the importance of the FICO score that it has become a game in and of itself, completely divorced from its purpose. You need to have a FICO score as high as possible because the highest score wins.

Posted by Curmudgeon | Report as abusive

According to almost any and every economic argument I can come up with, owning in NYC is exceptionally over valued relative to renting.

Still, I keep thinking there must be something going on in the market that keeps prices at these levels that is just beyond my comprehension. Why, despite reduced rents, the absence of jumbo financing, job losses in financial services and publishing, higher expected mortgage rates, a plethora of high-price see-through buildings in desirable neighborhoods, etc, etc, etc, aren’t prices falling?!

On top of this, I find it astounding that a household income in the top 3% nationally and enough money rotting away in the bank to make a substantial down payment leaves us priced out of apartments that are comparable in size to what we currently rent.

This is why I completely sympathize with the ambivalence of your friends.

Posted by framed | Report as abusive

With all those demographic breakdowns, I’d be interested to see the bars for “economist”.

Buying an apartment still leaves you exposed enough to a condo association or the like that I don’t entirely get “the idea that you’re not at the mercy of a landlord” if you buy an apartment. I suppose it’s less onerous in general, but a good landlord is going to be better than a bad condo association.

A situation of high levels of rental housing in good school districts with education funded by property taxes might be politically unstable. The adverse selection play — move in when the kids turn 5, move out when they go to college — becomes bigger.

Finally, I still don’t understand your use of the term “investment” in a way that could possibly exclude housing. I expect it’s a semantic thing, though (as I kind of indicate in my phrasing); you’re using the term “investment” in a very different way from how I do.

Posted by dWj | Report as abusive

It seems every historic valuation metric says that homes are still about 20% overvalued at this point. So I was not surprised to find this article finding they are 22% overvalued. While my fiancee and I certainly want to buy a home right now. We’re putting it off for a couple years at least for this reason.

The market mindset right now simply seems to be “price have fallen a lot, so it must be a good time to buy.” It reminds me a lot of the justification for buying tech stocks in early 2001.

Posted by tmteague | Report as abusive

I am not a tax expert but isn’t there a big difference between paying 10k in rent a year versus 10k in mortgage? That would tilt the balance toward buying rather than renting.

Posted by Reader123456 | Report as abusive

Let’s distill this by putting aside the issues raised by mortgages. Supposing you have the ability to pay cash for a house. Is it still preferable to rent? I would say usually no!

Why? If you rent, the rent you pay is probably substantially higher than interest you would earn by stashing the house price in bonds, at least in most places.

In fact the risk free ‘return’ (i.e. saved rent) by buying looks even better when you consider that the risk of owning a home free-and-clear is less even than the risk of owning treasuries. With free-and-clear homeownership, the risk of losing most of your principal is almost nil and you have inflation protection too. With treasuries inflation can cause significant and potentially near complete loss of principal.

Posted by DanHess | Report as abusive

In addition, there are many policy tilts towards renting. Deductible mortgage interest (and property taxes)and weak tenant rights. Part of the own it yourself is as a tenant you have limited rights. I rent a nice house in a good neighborhood. However, the only reason I do is because my landlords can’t sell the house at the price they want. One day they will (or maybe not), but then I’m stuck and we have to move. Even in places like SF with stronger tenant rights, I know several people evicted from their house for the landlord to move in. I totally agree it doesn’t make financial sense, but it is hard to overcome all the policy and societal structures (not to mention your point on schools and safety).

Posted by renter | Report as abusive

Very often, in NYC, it simply makes purely financial sense to buy. Let’s consider the following hypothetical (and slightly simplified) case: you are buying a one bedroom condo in a new construction for $500k with $350k mortgage. That’s roughly $1900 a month, plus, say, $600 maintenance and tax (new construction often means tax abatement). From that $1900, on average over the 30 years, only $900 is the interest, while the rest goes to the principal and even assuming the price of the condo stays the same, you end up paying about $1600 a month of “pure expenses”, so to speak. Renting a comparable one bedroom would cost around $2000 month and 100% of it is a “pure expense”. On top of that add the fact that the mortgage interest is tax deductible and you it becomes clear that it is simply cheaper to own. Of course, the downpayment money you could invest in stocks etc., but that’s a risk and it is compensated by the assumption that the price of your condo will stay the same over the mortgage period.

Posted by MosesT | Report as abusive

@Reader123456, that’s not your choice. Your choice is between paying 10k in rent a year and investing 5k versus paying 20k in mortgage, taking a 5k tax deduction and investing nothing.

@DanHess, the answer always depends on price. At current prices in most markets, you are better off renting and investing your cash. At some prices, you would be better off buying for cash, or most likely, taking a mortgage and the attendant government subsidies.

@renter, you want to replace the word ‘towards’ with ‘against’. The government subsidies are really, really generous. Preposterously. The idea that ‘welfare queens’ get opprobrium while mortgage-interest queens don’t.. well, nobody ever said we humans made a lick of sense.

Posted by wcw | Report as abusive

@MosesT, I think your figures are wrong. I don’t know NYC, but in SF my $2200/mo apartment would sell for $700k minimum. Roughing out the costs: opportunity cost on $140k dp, -$600/mo (CA munis are really cheap right now). Interest and taxes only (no principal) on $560k at 5%, -$2,800/mo. HoA probably -$400/mo. Deductibility of interest, +$1,200/mo. Loss of standard deduction, -$950/mo. Net cost to own: $3,500 a month of “pure expenses” (since principal payments are excluded).

$2,200 a month rent is a pretty good deal by comparison.

Posted by wcw | Report as abusive

Buying out right for cash is an opportunity cost.

Do you think real estate will go up more in the next 10 years compared to stocks, bonds, or other investments?

Bonds will go down in price because you can only fight inflation so long before interest rates start rising significantly driving down the price of the bonds issued at lower rates of interest.

Stocks, are most likely over priced significantly because of the cheap money banks are getting. They are due to topple. Cheap money created this mess so thinking cheap money will get us out of this mess sounds a little crazy. There will be some serious suffering.

Other investments, with every depression there are opportunities, tremendous opportunities. There are investments you can make today that will make you very comfortable in the future. Which ones? That’s the secret. Do your homework.

Putting all your eggs in one basket. Is that smart?

Did you forget the that you only rent land from the government? You never own it. If you miss paying your real estate tax of $20k one year you can loose you million dollar house.

Is that a good investment?

Does your home value go up more than what you pay in tax annually?

Does your home go up more than what you pay in interest on you loan, if you have one?

Does your home go up more then what you spend in maintenance annually or improvements?

Add it up and you are most likely negative.

Think for yourself. It may hurt but you will be amazed at what the news tells you and what is really happening.

Cheers!

Posted by UglyTruth | Report as abusive

Despite complex financial formulas or arguments for mobility of labor, people understand that you can either pay your own mortgage payment, or make the payment for the landlord as a renter.

At the end of the day, it is better to be a lender and not a debtor. It is a basic master-slave relationship. This attitude carries over into home ownership.

Posted by runsoncoffee | Report as abusive

What the author does not mention is that credit scores have evolved over the last 20 years into a weapon that can be used against you in so many ways. A bad credit score can adversely affect your ability to get a job. A bad credit score forces your interest rates higher on car loans, credit cards, and other unsecured debt. A bad credit score means that you will pay higher insurance premiums. The impact of a bad credit score matters more to people than the ethical or legal implications of walking away from a mortgage.

Posted by LargeRobear | Report as abusive

I think we’re all missing the point Felix is making. If we look at a home as a vehicle for capital appreciation, we can make financial comparisons and tradeoffs, but that attitude is what got us into trouble over the last several years (“If I put $1000 down on a $500K house, when it appreciates to $600K I’ve made a 10,000 percent profit. Leverage is wonderful!”).

A home remains fundamentally a place to live. We choose that based on non-economic factors. If at the end of our residence there, we come out with some extra money, that is a bonus, not a constitutional right.

Posted by Curmudgeon | Report as abusive

Great article Felix

Posted by yr2009 | Report as abusive

Who is the “underwater” demographic?

Posted by LilyRam22 | Report as abusive

Your analysis doesn’t properly take into account the effect of local zoning laws, which were not widely adopted till after the early 1900’s and really only became widespread after world war II when the affordability of the automobile increased substantially and thus home affordability via access to a massive supply of cheap land. Comparing prices pre-WW2 to those of post-WW2 is not an accurate representation since the regulatory landscape shifted from powerful central cities to a decentralized one where local municipalities empowered homeowners with huge amounts of regulatory power over their own homes in their own neighborhoods. So while it is true that housing represents a disproportionate amount of the average US household’s net worth and is also non-diversified , it is very low risk (in a geographic sense) because of the power homeowners have over local governments to stop development that may have a negative impact on their homes value.

This is why the last 2 generations of americans have always viewed home ownership as safe, because homeowners via local government have much more control over regulation that effects the value of their home. 80% debt on a piece of property is therefore not a significant amount of leverage when you consider the power of homeowners to maintain their property values via the existing, decentralized regulatory structure.

This is why home prices were relatively non-volatile since post-WW2 till recently when the invention of pooled mortgage securities created a new market of investments, which drove huge demand, which in turn dropped underwriting standards that have been in place since post-wwII, etc and so forth.

Your conclusion that housing is in for a bear market are therefore incorrect. The “economic fundamentals “ you cite are taking place within a massive & decentralized, local regulatory framework that isnt going away any time soon. Combined with shifting demographics, particularily from mexican immigration, demand for housing will continue to be strong for the med-long term.

Posted by common_sense | Report as abusive

Great article…

I agree that WE have been conditioned to believe that homeownership is for everyone… and, it is a sign of ‘success,’ esp for those that judge ‘success’ by material wealth. The home is the master of material wealth.

What Felix may have missed is the psychological and practical motive. Most folks take care of the things they own with much different passion and consideration. And, there is some sense of fulfillment and joy in living and coming home to the house that you built.

Perhaps I should get a discount on my rent for taking such great care of the place I live in… painting/ decorating/ maintenance/ fixtures/ etc

Posted by JeffBarden | Report as abusive

This is no shock at all. 25% real unemployment isn’t going away

Posted by Storyburn_com | Report as abusive

Well written article. The analysis of rent vs. own is more dynamic than presented. Yes, as interest rates rise, cost of ownership rises and therefore home prices fall (all else being equal). However the cost to landlords also rise and there is upward pressure on rents (again all else being equal). So the decision – which is typically not a short-term one – needs to be considered not just on where home prices are vs. historical norms but based on a reasonable forecast of the total relative costs (including the potential for rent increases). Once all of that forecasting is done, the last ingredient most people underestimate is the difficulty of projecting just how long they will actually live in that same place. Most tend to do their projections assuming they’ll stay in the same house for 10-30 years when in fact few of us ever actually do.

Posted by ododog | Report as abusive

Who cares!!! My boyfriend thinks the same with me. He- is eight years older than me, lol. We met online at an age gap dating site- AGEROMANCE . co m—a nice and free place for Younger- Women and Older Men, or Older Women and Younger Men, to interact with each other. Maybe you wanna check out or- tell your friends.

Posted by kylele345 | Report as abusive

Good Article Felix, nicely done.

Posted by jimigenius | Report as abusive

The National Mortgage Bankers Association had no qualms about defaulting on their mortgage on the building they formerly owned in Washington DC.

They could afford they payment but the property was no longer worth what they recently paid for it.

They justified their action simply as a “business decision”.

Posted by breezinthru | Report as abusive

As a Real Estate Broker and a Austin Apartment Locator , I happen to live in one of the few sities in the US, Austin Texas, where the housing never did pop as it did in other parts of the country. So I dont think the question is simply does buying a home make sense, that question can be answered differently depending on many external factors. In the Austin area, it is my opinion that IF you are going to stay put for at lease 7 years, the time has never been better to buy. Interest rates are near a low we havent seen in years, our job growth has begin to show progress again, and the apartment rental market appears to have moved towards stabilization.

Posted by MichaelRay765 | Report as abusive

When it comes to buy or rent there are more things to count besides price and sqf, location, school and so on.
You might want to take into consideration the distance to work, the tax advantages, the quality of life; I will expand on this one:
When it comes to quality of life I am very picky about things I own starting with my appliances and ending with home entertainment.
Renting might not offer you the right of both, first because I don’t know of any landlord who would install high tech appliances when changing the tenant and second because in a rental you can’t have a high tech surround system with in wall speakers and wires behind the walls, not to speak about the noise you’re not supposed to create in an apartment.
Changing bath room tiles to a color/quality scheme of your choice and the list might go on and on. Quality of life is not only something you feel while driving your fancy car, but also having a place to live, modeled to your taste and expectations. Again, this is what you get for your buck. If instead you need a roof over your head and you don’t care much about how and where, well then you’re good to go with a rental but think every time you buy something which is not a must, that exactly that thingy is what you get for the difference in price and life quality you have to give up every day because you don’t make the jump into ownership.
Have a great day to all of you!

Posted by Robert31 | Report as abusive

It appears to me this Fannie Mae survey is based on contrived, hence contradictory, attitude-oriented data and therefore not deserving of quite as much thought as you’ve put into analyzing it. The thing reeks of Stockholm market syndrome enshrouded in free market clothing.

People, even homeless ones, *like* the idea of owning a home, no matter what. That much is true. People have a subconscious desire to somehow reconcile homespun fantasy of real-estate ownership representing personal completeness even with the reality of it all literally tearing them apart.

When chances of attaining freehold before the onset of decrepitude get impaired by forces beyond a people’s control, forces more venal than the common person is comfortable considering, the illusion of owning a home may glimmer long after the statistical likelihood of achieving, unscathed, that objective has left the building. Hope springs eternal, etc.

So it appears to those lending ear to Fannie Mae there may be light and a white picket fence at the end of the housing tunnel, despite smart money certitude – to which Fannie Mae will be last on the block to own up to – that the whole shebang, tunnel and all, is well on its way to hell in a handbasket.

Posted by HBC | Report as abusive

I agree entirely with this story. The American people have a hugely distorted sense of the value of owning a home. I actually developed and test marketed a product that was designed to tell people when the rational or “best time” to buy was.

I created this because I’d advised a number of friends over the years to not buy (during the bubble) – I went back and did a “what if” and found I’d saved them, collectively, over $2,000,000.

I think the product idea was great – instead of getting a house appraisal, which is essentially based on what the most recent fools (if you subscribe to the greater fool theory) paid, why not get a housing “forecast” base on fundamentals like employment, income, rents, so you can buy at the best time.

This seems like it would be very valuable – where I live – in Newport Beach, CA – prices are dropping (some months) by $60,000. So, waiting, and buying at the right time is the difference between buying in Costa Mesa – a pretty good city close by – with pretty good schools, etc., or Newport – with great schools, etc. In other words – buying at the right time it’s a life changing choice.

Unfortunately, I found (like you did in writing this story) that the general public – and even people educated in finance (MBA’s etc.) were totally clueless about the financial consequences of home ownership. I think this comes from years of constant advertising.

FYI, here are the value propositions I tested:

http://www.houseforecasts.com/beta/

http://www.houseforecasts.com/

Posted by forecasts | Report as abusive

This is so wrong! The best time to buy for anyone is to buy when you need to and when you can afford it, no matter how the market looks like, period.
It’s like life could stop because it’s expensive. With each month you pay rent, you maximize your loss and as a fact you help your landlord pay off his investment.
Back to the quality of your life; what is the price for that one? The “right” time to buy according to some voices is when the market reaches the bottom, but you will know that only when it’s going up again. On the other hand you all forget to put into accounting the fact that you USE your house no matter how it stays on the market and if you can afford it today, you probably plan to keep it for quite a while. Well… That while you keep your house, if it would be to rent instead to own shows how much you lost.
This topic can go on and on… Why buy a new car because next day it’s no longer worth what you paid for and why buy a fancy car and not a average one and it comes to how much are you willing to pay for high standards in life. It’s not about surviving, but about living. It’s like having the choice for good food vs, junk food, good vs bad everything.

Posted by Robert31 | Report as abusive

I think it’s interesting how people most likely not in anything close to the typical American’s situation pontificate about whether or not someone like me has a “distorted” view of home ownership. The vast majority of us do not live in New York, and likely think paying a million dollars for a two bedroom apartment is as insane today as it was ten years ago.

Does it occur to you that the vast majority of regular folks out here look at homeownership as a stability factor for their families, rather than an investment first? You may say that neighborhoods that have high homeownership rates “shouldn’t” be the most stable, but they are.

I can go about improving my property exactly the way I want to, within some very non burdensome local laws. There is no association or landlord telling me what to do. The bank that owns an ever decreasing portion of the equity in my home does not care if I rip the entire back wall off my house and improve it with a layout that is exactly what I want it to be.

A big part of the reason we still “cling” to homewonership is that it is deeply rooted in the American work ethic, and we know (the statistics will out, depsite whether you think they are misguided) that homeownership stabilizes neighborhoods because people care significantly more about places they own.

Posted by Jeff.Baldwin | Report as abusive

so i built my own small well insulated house with cash and the taxes are 400$ a year going to 0$ in 4 yrs when i am 65. i heat with a wood stove (fun,real warm,pretty looking thru glass door)….electricity never been over $60 a month running the AC in summer(florida)

this money invested in the DOW would be worth 15% less now,adjusted for inflation, and i haven’t paid 1$ in rent or interest or principle in 15 yrs.

and i am stupid, huh?

Posted by boatman | Report as abusive

I am really surprised by the way some people, I would rather call irresponsible, deal with such an important subject like housing.
First of all the question of renting vs owning and the idea of even making money by renting and investing in something different out there makes me laugh. You might ask why; well, because first you have to cover your living expenses no matter if it’s a rental or a purchase and you can only invest the left over funds you have on monthly bases. That might be well less than the same funds added to your living costs. What I’m saying here is that by not including the living costs in the invested funds, the amount you’re dealing with is considerable lower.
Besides that you would only have a gain if your investment would be going north at all times but life tells us this is not the case. While making some improvements on your own house might increase the value on paper with a higher rate than any other investment and no matter how the housing market looks like, you can only do those if you own.
It’s ridiculous to rent and believe you live at high standards while telling yourself any time you go out that this is what you would have to give up if you buy a house.
When you’re young you might not think this way, but after years pass by and you still rent and all your friends have their own home, think back to the nice times you spent in all those fancy restaurants and try to figure out that investment in your own belly.
My advice is to buy what you can afford, don’t over evaluate your position and only rent if you don’t qualify for a house of your own and remember that in your own house you live by your own rules.
This only covers the investment side of the story, about quality of life you would have to read my previous posts.

Posted by Robert31 | Report as abusive

The real estate market seems to be picking back up. Austin was ranked number 1 for bouncing back the quickest. Austin Apartment Locator

Posted by Apartments258 | Report as abusive

>>I think what we’re seeing here is a mindset utterly conditioned by the massive, decades-long bull market in housing.>>>

No, what we are seeing is a mindset utterly conditioned by decades of government subsidies of home ownership…

Posted by usabda | Report as abusive

I don’t live in NYC and I’m not in the market for a million-dollar anything, but then neither are most of the people in the survey.

In most places, at most times, it has been possible to buy a home with a 20% down payment for an initial cash flow that is at worst 25% greater than the cost of renting a similar property. Pay that mortgage for 30 years and you own the property free and clear, and can live rent-free in retirement (or cash in your equity and move to Florida). Run the numbers and you will find that this is the rough equivalent of an investment plan that returns 4% above inflation after tax.

Now consider the investing savvy of your typical household. Doesn’t that return look pretty good? You might be able to beat that in the stock market — but not without substantial risk. Owning your home is as low-risk as you can get, as long as the cash flow is not substantially worse than what you would be paying in rent anyways. Make the payments for 30 years and you will have a low-cost place to live in retirement. Guaranteed.

Of course it all comes down to price. It wouldn’t surprise me if the NYC market were still insane, as many markets have been for the last six or seven years, but it is likely that most of the people surveyed did not bother to carefully price their market before responding. Most places, most times, owning your home is a sensible and low-risk savings plan.

Posted by TFF | Report as abusive

The idea that you “own” a home when you take out a mortgage is the source of all this psychological misunderstanding.

The idea of “owning” something has been, and will always be, appealing to people, and rightly so — it implies that the thing is yours to do with what you will, and no one can ever take it away from you. That’s pretty appealing when you’re talking about a basic human need, shelter, that you need and always will.

The problem with “owning a home” via a mortgage is that it’s not really ownership in the sense most people think of ownership psychologically. People with mortgages are still renters, it’s just they rent the money to buy the house instead of the house itself. The their financed house is hardly secure.

If the discussion here were about owning a house in cash vs. all the other options, people’s opinions wouldn’t be so misguided. It’s the trickery of calling a mortgage “owning a home” that’s the source of all this misconception.

Posted by davejones | Report as abusive

There are two fundamental distinctions between owning a mortgaged home and renting. First, the cost for a fixed-rate mortgage will never increase. This offers a level of cost-certainty that renters do not enjoy. Second, a mortgage is for 30 years. Renting is forever.

Paying cash for a house is a terrific idea (and reduces your financial risk), except for the slight problem that most people need to save for decades to accumulate that kind of capital. And it makes more sense to take a mortgage (as long as you can afford it) than to hope your investment returns will make up for the profit your landlord is making.

Buy when you need the house, and when you can afford it without risk. If you can’t come up with a 20% downpayment, or if your ownership costs are greater than what you would be comfortable paying in rent, then you probably are taking on more risk than you ought.

Posted by TFF | Report as abusive

Your experience renting must be very different than ours.

We are renting again after having owned a house, sold it, and then moved. We can’t wait to buy another house. It is such a better deal for us. In this rental, which is very cheap, we can’t put up a fence to keep our children out of the street. We’re not allowed to paint the interior. We aren’t allowed to hire pest control to come and spray for bugs. We are allowed to have a cat because we pay extra money. It’s not OUR HOUSE.

We are currently in the process of buying our next home. It’s 700 sq. ft. bigger and will cost us the same amount as our rent. Only that will be mortgage, escrow, taxes, and HOA. For the same dollar amount every month. The first things we plan to do are remodel the bathrooms and change the windows. Which we can, because we’ll own it.

Renting is not the end of the world. But it definitely gets in your face every day that where you live is not really your place.

Posted by tamarah3 | Report as abusive

this whole thing is so simplistic
what about maintenence costs on house esp here in NE, with older stock, this is lot of money
here in newton MA, with $$ homes, a house, triple net as they say, doesn’t cost more then an apt, for what you get.
i have a yard that the kids love to run in, a great k5 school down the street, space to store grocerys bought cheap in bulk on sale, etc

has anyone noticed that population is going up ?
the most intelligent post is the person who noted tht surveys like this are stupid – someone calls you up when you are in arush getting dinner ready and you answer a unch of stupid questions, often from a person with a strong accent, hard to follow.
why is the psychological desire to own a home not a valid thing of value ?

Posted by ezra567 | Report as abusive

Investors wouldn’t buy homes and condos to rent if it were unprofitable to do so. In DC, investors are buying up inventory because with 20% down, almost any purchase nowadays is rent-able for decent profit. My home returns around 12% per anum — about half of that in cash, the other half in principle paid by others. This number will only grow each year, on average.

As far as homes still being overpriced — it’s true. But his argument that the market MUST capitulate is wrong. Here’s why –

The high number of underwater mortgages will buoy the market for years and years. Yes, many will continue to default, driving prices down, but most will not. These people who can’t afford to sell below a certain inflated price point apply upward pressure to the market. And fewer homes on the market as a result of 25% of mortgages being underwater decreases supply, redoubling this effect.

The foreclosure rate is at a historic high near 0.6%, but the 25% of borrowers who are underwater and making payments will keep the prices above historical averages for years to come, even if some potential buyers are priced out of the market as a result.

Welcome to a long flat market period, followed by a bull market. Buy now, before he starts charging. In DC, prices for single family homes are already trending upwards, year on year to the tune of about 5%.

Posted by FriendsRomans | Report as abusive

Yes, surveys continue to show that 86% of Americans believe that they are better off owning than renting. Home ownership reinforces family stability, responsibility, asset-building and self-esteem. Homeownership gives families a “stake” in a community, and thus, builds stronger communities. Homeowners live in a community four times longer than renters. Moreover, home ownership helps communities with public benefits such as increased tax revenues, greater private investment, and stronger and safer neighborhoods. Home ownership creates economic impacts for transaction-related jobs, sales taxes and property tax revenues. I guess this is why home ownership need not always bring about negative economic and social impacts to a country. Nevertheless, the market for apartment renting is on the rise; there are numerous companies set-up to offer conducive apartments in Barcelona, China and the united States especially.

Mathieu
http://www.cocoonbarcelona.com/

Posted by MathieuBCN | Report as abusive

When making investment, it is important to go to a company that has built a strong, continually evolving management, brokerage, and leasing organization which compliments its development and investment activities – one that has a good e-commerce system or EPOS system. They must have completed real estate projects with a reputation of experience, market knowledge and timely response, supported by a state-of-the-art reporting system.

Albert
http://www.sparkstone.co.uk

Posted by AlbertSparks | Report as abusive

This comprehensive guide is definitely worth a read to help clarify any doubts pertaining to the issue of homeownership. Some homeowners have a tendency to just follow others or the current trend. If their friends or relatives have invested on a property, then they would just follow suit without much prior research on the subject. That is why it is always important to seek advise from a credible estate agent who can provide credible information in regards to the ongoing property market and whether or not investing in a property at that moment of time would be worth the money.

Posted by JeremyOlm | Report as abusive