The road to socialism

iVillage Member
Registered: 04-04-2008
The road to socialism
424
Wed, 02-18-2009 - 10:40pm

It's true that Mr. Obama is taking us down the road to socialism.

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iVillage Member
Registered: 02-19-2009
Sun, 02-22-2009 - 11:25am

You anticipated a 50% drop in home values over the course of two years?


iVillage Member
Registered: 04-09-2007
Sun, 02-22-2009 - 2:19pm

We didn't buy an overpriced home. We knew it would crash. But we didn't foresee everyone rushing to put their money in commodities and creating a global food and transportation crisis.

Greenspan, Bernanke, Paulson, and Bush were all apparently taken by surprise. I don't know that people should be automatically pegged as irresponsible just because they listened to the feds "softening of the housing market" "isolated to a small percentage of the subprime market".

There was recently an article about how our foreign credit is drying up, but not because of our spending plan, but because for so long the testimony by the fed was that we were doing well, when in fact, they weren't paying to attention to many of the factors, like increased leverage/under-capitalization of financial assests and junk bonds being sold as AAA securities. Our foreign creditors want to know that WE know what's going on. Phil Gramm may not want stronger oversight, but China and Japan certainly want to know that we have a basis for saying things are fine.

Those were the people who should have seen this coming. Everyone else who saw it coming probably bailed out of the game of "financial hot potato" in time to lose nothing, or very little. But, again, their opinions werent enough to save Detroit, Wall Street, FL, CA, NV, AZ, or 600k jobs a week.

iVillage Member
Registered: 11-14-2008
Sun, 02-22-2009 - 2:29pm
I had a feeling that home prices were going to go down, but not before we needed to move into a new home in 2007.
iVillage Member
Registered: 12-08-2008
Sun, 02-22-2009 - 3:53pm

The prices are high because speculators are trying to hang-on to their properties and have to charge higher than market prices in order to "cash flow" or come even close. This is terrific for investors who didn't overpay and who purchased only properties they could cash flow on from the get-go...like me.

We wanted a beach house ourselves but it just didn't make sense--carrying costs were too high and it wouldn't cash flow. There will always be a market for moderately priced single family homes that are well maintained and affordable. But market or not it won't work if you pay too much for them to begin with.

iVillage Member
Registered: 12-08-2008
Sun, 02-22-2009 - 4:01pm

That's a prime example of someone who overpaid for their house.

Rule of thumb: Don't buy a house that you can rent for less.

If you can't cover the carrying costs of the house by renting it--you really are foolish to buy it.

I'm in the process of buying a house now because I can afford to. I could not rent this one for what it would cost me to finance it. I am going into the house knowing that I could lose but I can afford it. I am willing to take this chance because I have the funds to take the chance with. Never ever would I have done the same thing if I didn't have the funds to take a chance with.

I can understand why others do so though because it's not their money they're losing so the only thing they really have to lose is someone else's money and a good credit score. They're probably smarter than me because they've chosen to gamble with someone else's money but I would bet I sleep better at night.

iVillage Member
Registered: 11-14-2008
Sun, 02-22-2009 - 4:05pm

iVillage Member
Registered: 12-08-2008
Sun, 02-22-2009 - 4:12pm

Nobody NEEDS to buy a house. In fact in many cases it's very impractical.

I bought my first house because it would cash flow. I was living in Germany at the time and purchased a small affordable single family home in Florida. Put 20% down on it in 1986. It cash flowed from day 1 when the monthly rent was $395.00. I get $895.00 a month for it now. The plan at the time was for it to pay for my future kid's college expenses.

But in any case nobody has to live in New York City. In fact unless you really are rich it's a surefire way to never get ahead. I remember a job offer once whereby the choice given to us was Washington DC or Tampa Florida. Now the DC job paid $10,000 a year more but it was a no-brainer. The cost of living, not to mention extra taxes would have quickly consumed that extra 10K.

I will never live in a state where I have state income tax to pay--not unless it's so small as to not really matter but so far I have not found a state where it would make sense to do so. Whoever thinks low taxes don't encourage growth aren't realistic.

iVillage Member
Registered: 11-14-2008
Sun, 02-22-2009 - 4:20pm

Nobody NEEDS to buy a house. In fact in many cases it's very impractical.


Not so.

iVillage Member
Registered: 12-08-2008
Sun, 02-22-2009 - 4:38pm

It makes no sense to buy a house if you're not going to stay at least 10 years. The average length of ownership before selling is 3 years. (or that's what it used to be when people could actually sell!).

Typically rents don't drop significantly.

Example: I bought a house in 2003 for $70,000. This was a small two bedroom/1 bath. I financed it--putting 20% down of course. The carrying costs of owning this home is $550 a month. The first year it was rented monthly for $625.00. This was a lower rent than the average in the area. At the market's peak I could have sold the house for $135,000 but didn't buy it with selling in mind.

Never would I have paid $135,000 for this house but some people did (others like it). You could not get the rent out of the house if you paid that much for it.

It rents today for $700 month and is still considered a bargain for our area. Of course the value of the home is now about $110,000. So have I lost anything because it's worth less now than at its peak? No. It's paying for itself and giving me an extra $150 a month in income. It will never rent for less than its carrying costs of $550 a month even though you could say it's lost $25,000 in value over the past couple of years.

If you pay too much going in you run the risk of losing.

Now fast forward--I purchased another home in 2006 for 78K. The lot it was on is worth 50K but the home is lucky to be worth 5K (it's a 1963 mobile home although we fixed it up nicely). We knew going in the value was not in the home but being a 2 bedroom/2 bath it would still rent for between $600-$700 a month (we get $650). I probably could not sell it for more than 55K if I could find someone to buy it (you can't get financing for old single wide MHs even when they are on their own land. Now how did I know the land would maintain its value? Our county has little land that's not developed so it tends to hold its value and the former MHs that were around it were thrown out and brand new homes were built around it. It's funny to see this old MH in a residential neighborhood with 300-400K homes all around it.

But still--if I had to sell it today I'd lose money. But since I make about a 7% return on my investment it has earned me about $10,000 over my 2 years owing it making my potential loss really only about 13K. But you see if I wasn't 100% sure that I wouldn't need the money I spent to buy it anytime soon--I never would have bought it.

I couldn't sleep at night if I had all my net worth tied up in a home.

But there are several lots owned by builders who financed them and who now have no way to pay for them because nobody's paying to have a house built there.

Really--you don't own it until it's paid for. I know the definition of ownership has been debated here before with many who disagreed with me but I don't know how you can claim to own something you've not paid for.

iVillage Member
Registered: 12-08-2008
Sun, 02-22-2009 - 4:42pm
Then one might need to look elsewhere. Sounds like you're confusing need with want. You may not be able to find exactly what you want but it's very unlikely you wouldn't be able to find something somewhere to rent that would work. The problem is more often than not people don't want to give up their wants. I.E., I don't want to move to another state--not that they can't.

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