Another biased article to try make yourself feel better about renting. There are cycles to EVERYTHING Cindy. Stock Markets, real estate, and life. You look at ONE cycle and use this is generalize and extrapolate into the next 40 years! It’s tabloid reporting – not good journalism. You find something that supports your personal point of view. Yes, if that person was retiring RIGHT NOW, and they only had their house, they may be in big trouble. All financial planners would tell people in that age bracket not to do something like that. Most people who have been affected by the real estate downturn are not in their 70s. I hope you print this entry out, put it away, and then look at it in 15 years. You will see how silly you were.

Raul, the article I referenced was based on a report from the Center for Economic and Policy Research. Read the report, and read my post. Even taking the house out of the equation, too many people have not saved ANYTHING for retirement. And I’m not the one saying that people are going to work past retirement age; the economists are. As I said, read the report.

The people who benefit from their home being part of their nest egg are those that bought it years ago and have built a ton of equity. Those people will be able to sell and perhaps pay cash for small retirement home, or even take out a reverse mortgage and live off the income. But, as the report says, too many people mortgaged themselves to the hilt in hopes of obtaining a huge windfall from home appreciation. They gambled — and lost.

As the article said, people of previous generations had their homes paid off by the time they hit retirement. That’s not the case here. People in their 50s and 60s with too much debt and a big mortgage — that’s not the way you want to enter retirement.

I did read the report and it is peppered with “may” and “some people”. There will always be irresponsible people in any scenario. It’s almost as if you take pleasure in judging others. How is that relevant to a blog you are paid to write about real estate? It appears you treat it like it is your personal soap box to lecture that houses are not good investments. What about people that used their equity to start a business and are making a good living? What about people who used their equity to buy Apple at $77.00/share and enjoyed a rate of return of $150%? What about people who used some of their equity to purchase another property and now enjoy time at the beach instead of paying $500 per night for a hotel ROOM less than 500 square feet? I bought a house in 2005 and yes the market is down but what do I care, I love my house and don’t plan to sell anytime soon. The stock market is also down about 17% on average; are people who invested in the market also stupid? There are cycles. My son is 22 years old and I am happy that the market is adjusting. He will be able to purchase a property soon because it is going to be affordable again for young couples and familes.

Cindy: Dean Baker at CEPR is an unabashed socialist who argues in extensively published writings that intellectual property and patent law is welfare for the rich (or talented?) Then puts copyright notices all over his writings.

This “institution” is another anti-establishment beneficiary of second and third generation (meaning they didn’t work for it, a.k.a. inheritance) rich liberal largess. And you have been suckered.

Cindy, Wise up, stop complaining and get to work instead of “cutting and pasting” your angst.

FACTS: The American public as put away $7 trillion in home equity (ALL PAID OFF AT A CURRENT 47% LTV ratio) that has been accrued on an original 10 to 20% deposit on the house buy. CEPR and Wall St reports deceitfully omit cash-on-cash returns because it shows – on numbers that do not lie – that after inflation (of which housing prices automatically accommodate) a house buy out perform equities 5 to 10:1.

This reminds me of the question? How do you annoy a liberal? Get a real education, work hard, make money and live well!

Best Andrew Waite.Personal Real Estate Investor Magazine

Cindy,

I’m really hoping I’m in the silent majority here, but I can’t believe some of these responses to your posts. Granted, these are real estate investors and agents who have a vested interest in keeping everyone investing in housing and only in housing, but I applaud your posting(s – including previous ones), especially given that you work for a housing site. A lot of people do invest way too much of their money in housing. Personally, I am still a renter (I’m sure this will get me flames by Raul and Andrew, who seems to need to plug his crappy magazine in every response). I am not going to always be a renter, but I am a renter for now, because I’ve done the cost-benefit and it just doesnt make sense to buy in the current market. When it does make economic sense to buy (for me, it will probably come before rent and mortgage prices equate, because I do think there is some extra value to owning a home), I will. But for now, I’m renting and investing the rest, so I will have my down payment and a cushion beyond that.

But really, I just wanted to post to support you as one of the quiet (no longer silent) majority.

- Brad

Thank you for your support, Brad. I really appreciate it after today’s posts! I’m with you. I don’t know why people think I’m so anti-homeowning when I’ve owned six homes. Like you, I will probably own again when the time is right; there are nice things about being a homeowner that are emotional and intangible. I don’t love renting, but it’s the right thing to do right now, for us.

Owning six homes is something a flipper would do.

Andrew, although posting an ad hominem attack is much easier than constructing a real argument, the effect tends to be to destroy your own credibility rather than the person or group that you are attacking.

You seem to bring cash on cash returns up a lot. Leverage has the same effect of magnifying outcomes on the downside that it does on the upside. I am sure that many of your readers are experiencing the “magic” of leverage as we speak.

HTH

Thats right Ron! Let’s take these comment threads back for people who want to use them to have a discussion rather than for people like Andrew who are just trying to shill…

Alicia, I owned six homes CONSECUTIVELY, over a 25-year period. Not a flipper.

I do think that is a flipper. A little over 4 years PER house? The commission alone is 6%. Just to recoup your original money a house would have to appreciate 6%? You sound like a person that you critize; a person who wants to use their house to make money. If your life is that unstable then renting certainly a better option for you.

Alicia, thank you for making my point for me. The length of time people live in their homes makes real estate a lousy deal for many. Americans on average move every five years. (Here’s a link: http://transcripts.cnn.com/TRANSCRIPTS/0108/05/sun.10.html. That’s different from our parents and grandparents, who tended to stay put and in the same job for their entire adult lives. For them, a home purchase makes sense. That’s why buying is often a bad deal for the average person, who moves every five years or so.

So by your definition, we are a nation of flippers, and we should all rent.

Maybe this corresponds with the high percentage of people who are in credit card debt. People who rent STATISTICALLY (yes, I know your credit score is 850 and you have billions in an account) are deep in credit card debt. People I know who are not stuggling financially right now are people who are not transients. They tend to buy a house, raise a family, which anchors them to a community. Once children are in school moving really becomes unattractive.

Alicia, please show us the report or story that says that renters are STATISTICALLY deeper in credit-card debt than homeowners. I frankly think it’s much more likely that homeowners have more debt, because they have more access to credit, and they tap their home equity for consumer purchases.

Cindy, your last paragraph pretty much sums up the approach to personal finance that my wife and I have taken over the years. We got married at age 26 and had probably $1,000 between us. We went without a car for the next 6 years (riding the bus and subway), spent frugally and put money into our mutual funds whenever we could. We bought out first house at age 36 for $247,500 (the year was 1997, at the bottom of the last real estate cycle). We have remodeled our kitchen and a bathroom, paying cash each time from money we saved. We drive 10 year old cars that we bought used. Our friends who drive new, leased cars and live in big houses which they thought would never stop appreciating in value are financially vulnerable. As for us, we have 700K in equity in our home, 500K in savings and no debts. We did not get here by flipping houses, by playing the lottery or pulling down high salaries. We did it by “living within our means, saving money and investing it wisely, and using debt conservatively if at all.” It’s as simple as that.

Christopher, thanks for sharing your story. I’m sure you could speak at length about the peace of mind you have because of your sacrifices and discipline. That is worth more than any BMW or other fancy “thing” you could acquire. Bravo! Congratulations.

I think what really helped me early on was a subscription to Money magazine. I learned about how a 401(k) could grow over time and about the importance of consistent savings starting at an early age. I also came from a frugal family, so that probably helped, too. Being in debt always made me very anxious.