Rising U.S. Homeownership Brings Woes - Study

[dArKeR]

By Mark Felsenthal

WASHINGTON (Reuters) - A rise in U.S. urban minority homeownership has been accompanied by an even greater surge in the number of people straining to pay for their homes, the Fannie Mae Foundation said on Wednesday.

"Hundreds of thousands of urban minorities are struggling to sustain homeownership," the study said.

Homeowners stretching to pay for their homes are at greater risk of foreclosure and of spoiling their chances of borrowing in the future, according to the study, "A Tale of Two Cities: Growing Affordability Problems Amidst Rising Homeownership for Urban Minorities."

The study, by Fannie Mae Foundation researcher Patrick Simmons, comes as Democrats criticize Bush administration housing policies, saying they have emphasized homeownership gains while letting rental subsidy programs wither. Administration officials cite minority homeownership gains over the past four years as a central accomplishment of recent housing policies.

http://story.news.yahoo.com/news?tmpl=story&cid=1896&ncid=1896&e=1&u=/nm/20040623/us_nm/financial_homeownership_dc

[army12]

1. I may not be a minority

but boy am I struggling to keep my home!

[happynewyear]

2. welcome to the DU army12!

:hi: and welcome to the DU army12! :D

I too am a fairly new homeowner and I believe renting was a lot easier on many levels.

Now the house needs a roof! I wonder what the hell that will cost?

[army12]

7. I am thinking about

renting rooms

[happynewyear]

12. I haven't ruled that option out myself

I have 2 bedrooms, one of which is "extra" (I guess). The house is very small, but if it comes down to it, I'll rent out the extra room and even the garage if necessary.

I suppose being a homeowner is great, IF you can afford it!

:dem: :kick:

[tlcandie]

81. Better check to make sure it is allowed through your mortgage holder! eom

[Sunny_Sunshine]

21. I can tell you.

Mine is $24,000!! OK so it's more than just the roof, that includes new soffets and gutters, fixing a chimney, power-cleaning and one coat of paint on the whole house, there may be something else I'm forgetting. The house is also three stories so we get to pay more because of that. I think the roof alone is $12,000 (I had budgeted $7,000 for this and went into shock with the first quote). We ended up getting a low interest loan. Just signed the papers last week. Home ownership is so much fun.

[hackwriter]

23. Have you gotten a few bids?

That sounds awfully high. My house is a cape cod but the back is 3 stories up and I just got an estimate for $3250 for the roof with 3-tab shingles. For architectural shingles it's add another $450; for gutters another $450. And I live in northern NJ, one of the most expensive areas in the country. Try getting at least one more estimate.

[Sunny_Sunshine]

26. Got three bids

The roof has to be removed and redone. You can only add shingles so many layers and our roof is a layer or two beyond that. The house is about 100 years old and I'm not sure it's ever had a new roof. I live in Kansas City, MO, not an overly expensive place to live (with low wages to compensate).

[Beaker]

48. you're generally allowed three layers before a complete tear-down

our roof is about 18 years old, first layer, so we've got a ways to go before we'd have to face that.

[True_Blue]

90. So am I

I was laid off 2 years ago, and now I'm making about half as much as I use to.

BTW...Welcome to DU!:hi:

[Ripley]

3. And yet I read in my Sunday "home" section of the paper..

That the National Realtor's Association (or whateve it's called) is petitioning the government to raise the debt limit for first time home buyers!

Yep, let's get those suckers to sign on the dotted line whether they can afford to or not. Who cares what happens to them later?

[Zenaholic]

14. It's not the bank's fault

If you are smart enough to sign on the dotted line, then surely you can be smart enough to figure out what you can afford (not what the bank tells you)?

[AP]

15. I disagree. The banks should do due diligence on their customers. They

don't because they expect Fannie Mae (or some othe Federal grace) to bail them out if they get into trouble.

The tax payers insure lenders for their risk, so they make riskier loans to people who'll get in trouble.

People are constantly told the greatest return comes with the greatest risk, so they buy the most expensive house the bank will let them borrow against. The expect that the bank is doing due dilligence. But the bank isn't.

It's like the credit card companies. They know the feds will give them really helpful bankruptcy laws if they get into too much trouble, so they give everyone more credit than they should have.

[F.Gordon]

22. Yes it is

All the bank wants to do is sell money.

I'm assuming that you must be a real estate attorney? You have a distinct advantage over most people, because most don't have a fucking clue what they are signing.

I recall many many moons ago sitting at a closing explaining what certain documents were to the customers attorney so they could explain it to their client. They didn't even understand most of it.

Be thankful that you are "smarter" than most people.....oh, and welcome to DU.

[dArKeR]

24. I think you're completely wrong. I also believe Bush could never in a

million years comprehend 'buying a home' to the 'finance interest' on his credit cards. Bush has his lawyers handle everything and I'm sure they've given up decades ago trying to explain to him. They just tell him 'do this do that' just as his Handlers do today.

I'd bet you you 90% of Americans don't understand the details in buying a home. I saw they trust the Load Officers advice and directions no matter what it is.

[DavidFL]

37. And there are predatory lenders who don't want customers to understand

By deliberately misleading, or even outright lying to, them on items such as closing costs, the interest rate of the loan, whether the rate is fixed or variable, the terms of the mortgage, etc. And these are not some no-name banks and lenders either; there are huge financial companies like CitiGroup and Household Finance that participate in predatory activity. And it's not condescending to say that most people buying a home do not fully understand what they are getting into, or what the papers they're signing say, because a mortgage is probably the most sophisticated financial transaction an individual can make. Predatory lenders and servicers exploit this ignorance on the part of consumers to set them up for failure and foreclosure.

Yes, there needs to an effort on the consumer side to educate people about what taking out a mortgage means. But at the same time, legislative policy on this subject by both parties needs to change and senators and representatives at both the Federal and state levels need to start remembering who they represent, because the drive for political contributions have ensured that legislation is weighted in the favor of consumer finance companies, not consumers.

[AP]

44. I agree with everything except the characterization that people are being

set up for foreclosure.

They're not being set up for foreclosure. They're being set up for wage-slavery. They're being set up to tread water financially -- to always be a little bit in debt, so that you take fewer chances with your life, and so that you always accept a little less and so that you're always tied to certain economic relationships which guarantee someone else's profitability and your indebtedness.

Furthermore, you can't have real political power unless you have real economic power, and indebtedness keeps you from getting the economic power that would lead to democratic power.

[Ripley]

46. Good point.

Folks aren't "working for the weekend" anymore. They're working their asses off to make all their payments. The more they work, the less time they have for their family, much less time to search out the real news.

No one wants to rock the boat in this climate, for fear of not finding an equal paying job/benefits elsewhere.

My spouse works for a corp making tons of profits in the luxury auto market, yet the last 3 years he hasn't even gotten a "cost of living"
increase.

I never had a problem spending money I don't have, but I know a lot of Americans do...and predatory practices by Realtors, Banks and creditors are setting up thousands of Americans for a Hell we will all have to pay for in one way or another.

[AP]

49. "No longer working for the weekend..." Excellent characterization.

I'm going to stary using that. I wish I could pay you a royalty!

Yes, if you don't have the money to make choices and you don't have the discretionary income to spend the way you chose to (rather than they way you have to), you have less cultural and political power.

It's not just that you can't donate money to politicians, which some people might think of as the measure of middle class political power. It's that you can't really do much of anything. You're right -- you can't educate yourself. And then you're decreasing powers are actually going to increasing someone else's power.

You're a wageslave and you're indebt to banks so that you can lower your employer's wage costs, and increase your banks profits, which keeps increasing their power, which they then wield against you.

The banks impoverish the rest of the globe holding down wages so so you have to compete with labor at rates that are 1/5th yours. Your employer donates money to Republicans.

It's just so much bullshit.

We have got to get economic power back down to the people before we can have any kind of democracy.

[Laughing Mirror]

60. Am I reading you correctly?

When did "the people" ever have economic power in this democracy? Not in my lifetime. Not in my parents' or my grandparents' life time. When?

[AP]

61. Every year the New Deal was in place up to about 1973, the middle class

grew in numbers and in average wealth.

From 1973 to 93, the corporations took back all that wealth. Clinton increased wages and empolyment, and Bush took that all back for the corporations again.

I don't know what satisfies you in terms of absolute terms, but it's beyond doubt that Democracy improved as the middle class gets wealthier, and declines when they lose power.

If Clinton hadn't built up democracy, Bush wouldn't have had to get the assist from the Supreme Court for his velvet coup in 2000. But, had Clinton done a better job maybe Bush wouldn't have been able to take the presidency at all.

[tlcandie]

83. I will never forget the first time I truly realised what being in debt

meant! I was watching an older movie about a family from the hills of Kentucky (or somewhere similar) and the husband lost his job. He ended up going to 'THE CITY' to get work while the family stayed behind.

Soon they followed him and gave up all they knew (country living with chickens, garden, etc.) to live in a more or less, one room shack and bought a refrigerator on credit! Anyway, it was a GREAT movie about exchanging freedom for debt and city life! It was an eye opener for me! They ended up loosing their child (and almost their souls) who was ran over by a train when playing by the railroad tracks. :cry:

If someone can remember the name of it...it was a superb movie!!!

[Tansy_Gold]

85. "The Dollmaker"

with Jane Fonda

[tlcandie]

87. YES!!! Thank you Tansy_Gold!!! eom

[Tansy_Gold]

88. I should also know who wrote the book/story, but I can't

remember off the top of my head.

What struck me about the film version -- I've never read the original -- was that the Fonda character had a massive piece of cherry wood which she was waiting to discover what it wanted her to carve it into. (sorry for the fractured syntax -- hope you get my drift). As I watched it, I *sensed* that she was trying to see a christ-like face in this hunk of wood, but she never did. I took it to mean that there was no christ, no sweet jesus that she so fervently believed in. Finally, when the family no longer had any money and everything had gone wrong, she took an axe to the block of cherry.

For whatever it's worth, every time I think of the photo of that little Iraqi girl in her grandfather's arms, I also think of the little girl in "The Dollmaker," the little girl who was deaf and no one knew or would acknowledge it, the little girl who had an imaginary friend because she had no real ones. . . . .

we are indeed such a cruel species.

EDITED TO ADD -- The author is Harriet Arnow. The film was made-for-tv and apparently has never been released in theatres.

[shrike]

93. In the book, she was indeed looking to carve Christ in the cherry wood

But wanted to wait until she "knew" exactly what he looked like: she wanted to see him in the wood. Then, in the book, as she is under more and more pressure by her husband and family to make money, she gives up on this dream and splits up the wood so she can carve cheap toys that are easy to sell.

So it was an artistic/commercial metaphor as well as a religious one.

[DavidFL]

69. Respectfully, I disagree

In the context of "conventional" mortgages, and your statement could just as well apply to any other consumer debt instrument like student loans and credit cards, etc., I do not deny that these keep consumers as wage slaves working to pay the bills. However, I have personally worked, and advised, on the defense side of foreclosure cases brought by several predatory lenders and servicers against their customers and currently provide support to a nationwide class action suit against a certain mortgage servicer and there is a clear, documented pattern in every case in which the goal of this scam is foreclosure. Not too long ago, CBS News did an investigative piece on a certain mortgage servicer in which I had the opportunity to speak to the piece's producer about cases I have worked on. Most people I have discussed this with sometimes do not want to believe it at first, that something like this could happen in this country because they think we have laws which prevent this sort of thing. And while that is true, most of what predatory lenders and servicers do is actually criminal, the law is only good if it is enforced and in too many cases it's not. Moreover, when I have shown people the papers and evidence filed with the court on the cases I have worked on, and similar, systematic behavior on the part of other predatory lenders and servicers, they realize there can be no other explanation. It sort of harkens back to the Gilded Age's corporate exploitation of the poor.

In any event, it starts by the lender exploiting the borrower's ignorance of how a mortgage works, which often snares the customer into a high-interest first or second mortgage loan, which the lender knows full well the borrower will eventually run into trouble making payments on. These lenders usually target minorities, poor whites, low-income neighborhoods, those with poor credit histories, etc. so that when the borrower complains, they're wrongly dismissed as "deadbeats" or having gotten in over their head. The loan's servicer, which is often the lender itself, then shakes down the borrower for as much money as can be squeezed out of them through fluctuating monthly payments, which are never even close to what the promissory note says, bogus fees and charges for services that were never performed or were unnecessary. The classic is a late fee caused by the servicer sitting on a borrower's timely payment until after the due date.

If the borrower tries to escape from under the thumb of the lender or servicer, either through selling the home or refinancing, the lender will contrive the conditions necessary for it to foreclose on the borrower. No lie. One of the clients I worked with had made timely payments every month, which were properly recorded by the servicer. But when she tried to refinance, the servicer inexplicably reversed her last three payments, claiming they were never made, and within 2 weeks of her applying to refinance, it filed a foreclosure suit against her. In essence, the servicer stole several thousand dollars from her and then tried to take her home from her by lying to the court that she was 90+ days past due. Fortunately, the servicer's case was dismissed because she kept her canceled checks and the paperwork she received from the servicer and was able to prove she was not behind on her mortgage payments. Moreover, this same client was foreclosed on again when she moved and put the house up for sale. But this time, the servicer got nasty and filed its case under the name of major bank, which never had anything to do with her loan, and one day even went so far as to come onto her property and change the locks on the house.

However, most people are not as lucky as this client and this is a serious problem I have with the legal system because if she had not contacted the right people to help her, many lawyers would have told her to file for bankruptcy and most judges would have granted the servicer's claims without even questioning them, because too many lawyers and judges still operate under the assumption that whatever a lender claims about a delinquent borrower is true and that's simply not the case all the time. The lawyers representing the servicer are a different story entirely and that's a discussion for another time.

Anyway, what happens after foreclosure is where predatory lenders and servicers make their money. The lender can take a tax write off on a defaulted loan. I have seen cases where the lender sends an undercover employee to the court auction to purchase the property it foreclosed on for pennies on the dollar, which it then resells at fair market value, making a profit off the difference. Sometimes predatory lenders use a property in "property flipping" scams, they pursue the borrower for a deficiency judgment, the list goes on and on.

[AP]

72. I actually suspected that was the case.

I just wonder if this is how people at the margins are treated, or if this treatment reaches far up into the middle class.

Have you noticed a pattern?

Is there a line they draw where they won't rip off certain people?

I presume they think if you're inclined to get a lawyer, they won't try that.

I have a theory that democracy occurse at the point at which a critical mass of citizens in a society save up enough money so that they could hire a lawyer to protect their interestis in the average-costing civil action.

[mountainvue]

77. Horsehockey.

The banks want the interest on the loan. They don't want the property. In fact, in most cases they will do everything to avoid it.

[NewYorkerfromMass]

92. In most cases that is true. The banks just want the money.

But as DavidFL makes clear in post 69 above, there are many who will attempt to use the system for criminal ends.

[mountainvue]

94. I don't think it's "many"

I think there are crooks in the busines just like any other business. I don't think they're the majority.

[mountainvue]

76. Closing costs

are fully disclosed on the HUD 1 at closing. If they are wrong, the borrower shouldn't sign. Most states and lenders have laws an policies against predatory lending. I will tell you the most frequent case of predatory lending I see when I'm out driving around: Payday loans. These places are everywhere. they should be stopped or at least more strictly regulated.

[Ripley]

82. Payday loans...loan sharks...what's the dif?

I saw those on every corner when I lived in Atlanta....everyone knows what is happening. Regulation? Are you crazy? That would interfere with free enterprise.

*sarcasm*

[sendero]

35. Bingo...

... I knew that this was happening (selling homes to people who are not in a financial condition to sustain ownership) but I didn't know why until I read an article posted on DU a couple days ago.

Seems that Fannie Mae and Freddie Mac have facilitated a market for home mortgage paper that has sent the mortgage industry into overdrive. Why? Because in the old days the real mortagor demanded proof of a sound deal, but Fannie Mae does not. The mortgage companies are making the loans, selling the paper - they are clear. When the loans foreclose, it will start a ripple effect through the housing industry not unlike the S&L crisis of the 80s.

Coming soon, to a city near you.

[BiggJawn]

4. "The American Dream of Home Ownership"....

What a fucking rip-off. I got sucked into one of those "first-time homeowner" programs. After 2 years, I was in a house that I owed 68 kilobucks for, but was worth only about 40 thousand, even though the bank appraisal was for 93 kilobux.

Then I relocated and tried to sell it. after another 2 years of spending $1,200 a month for shelter (one of which I wasn't using) I fianlly lost the place. Now I rent, and I don't mind "throwing away" $425 a month, because you know what? My mortgage was almost 700 fucking dollars every month, and I got SHIT to show for THAT, too.

Plus it'll be easier for my daughter to pay the damages from having to remodel the place after I've lain dead in the bathroom for 5 weeks than it would be for her to unload a house with the same problem (Psychic Faults is what I think they call it).

To me, "Equity" is the name of an Actor's Union.

[cliss]

28. BJ, I'm sorry that happened to you.

I have this very sneaking suspicion that this is the government's way of keeping people trapped. Given the desperate situation in Washington, and the fact that the individual homeowner has saved their asses time and time again, it's no wonder they want to push their "saving grace" out to every last breathing person in this country.

I agree that when you add it all up, home ownership is no bargain. There's no guarantee you'll make money. Especially not over the short term. Maybe after 20 or 30 years of paying on the mortgage. But there are so many expenses, that it may not be worth it.

Especially if it's a rising market. Houses tend to be overpriced.

[BiggJawn]

32. Yeah, I wasn't "into" Real Estate to make money...

I just bought into that bullshit about "building equity" and making "investments" and believed them when they told me I was an idiot for paying RENT when I could be making MORTGAGE payments...

The place was a "Fixer-upper" that I bought as a foreclosed property for less than 40 kilobucks. I put almost 30 kilobucks worth of work into it with plumbing and electrical and roof and all that good shit, and we moved in and I quickly found that after making the payments and utilities every month, there wasn't a whole lot left for paint and wallpaper and pretty new furniture. I did manage to cover the hideous OD green paint in all the rooms with basic white, and me and my kid spent weeks cleaning and polishing (and waxing)the Oak floors. Those floors looked NICE!

I'll never make that mistake again. I pay $425 a month for rent, and my water heater blew up in March. I not only didn't have to pay for it, I didn't have to fuck with tearing the old one out and putting the new one in, either. and I don't have to cut the grass. If it leaks, I call the landlord. if it won't heat or cool, I call the landlord.

When others are spending their weekends doing "DIY" projects and fucking with flooded basements and mildewed carpets and the like, i'm training my Bonsai, tending my flowwerbed and houseplants or fish tank, or taking a 30-mile bike ride. Never had the time OR money to do that kind of stuff when i was "enjoying the advantages of Home Ownership"...

Oh, and I have more furniture and nice stuff on the walls now that i couldn't afford when i owned a house....

[Pretty_in_CodePink]

45. It sounds like you have a nice life

Yours is a great perspective to owning. Save for your retirement in another way and enjoy yourself now.

I own a home now. But have also found many advantages in renting. Loved being able to call the Maintainence Man to fix stuff while I went out to the pool. I miss the pool.

[BiggJawn]

54. Retirement?

What retirement? :-)
I make so little that I'll have to work until the day I die.
But I don't think I'd been in any better shape if I had hung on to that money pit. I wouldn't have had the "mortgage burning party" until I was 70, after all.....

Some people do OK with home ownership. I'm just being the "poster child" for what happens when a working stiff gets sucked into that "low-income first-time home-owner" hoopla. It's a racket, and I got burned to a crisp. Oh well, another 6 years or so and the bancruptcy "falls off" the back of the TRW report...

[SoCalDem]

39. I would kill for a $700 mortgage.. Ours is $1,375.04 a month

and we also need a new roof.. Ours will "only" cost us 5K..and the A/C repair is "only" going to cost us $950.00 next week..

I am about ready to just buy a manufactured home and pay space rent somewhere.. Our house is worth a lot more than we owe, but I refuse to get sucked into the vortex of the refi-take money out scams..

and our yard is SHIT..so there's a ton on money waiting to be spent too :(

but then our son's house payment is $2600.00 a month..(SanFrancisco area), so I guess we can't complain too much :)

[BiggJawn]

58. Yes, but did you sign up for $1375 on an income of $35,000?

What's your household income? 50 kilobucks? 75 kilobucks? 100 kilobucks?

My gross income was $35,000. I had a dependent child that I didn't get very much support from her mother (the prosecuter didn't want to help me bcause I was a man) and my mortgage was $700 a month.

Now, if I was making $70,000 a year, and had a $1400 payment, I'd still be in the same boat. so, that's why I asked you about your income. If you're bringing around 70 kilobucks into the household, you're in the same situation I was in.

[SoCalDem]

75. Our income when we bought it was about $30 K higher than now

(I do not work anymore).. and it's a real pain in the wallet, but my husband is 61, and maybe when he's eligible for SS, we'll sell it and buy something cheaper.. It's too big for us anyway(4 BR)...but then we have all this J U N K...:P

[Avalon Sparks]

79. Just FYI...

70K a year and a 1300 house payment.

Here's my budget. I have about 900 dollars left a month to pay for new furniture, clothes, a trip or emergency car repair, or to put in savings. It is the utilities that kill me. When I think what I could immediately cut out of the budget if I had to it's only $300.00 - my bills for utilites, car payment/insurance and a $6000 student loan come to $1036.00.

Mortgage $1,300.00
Phone $52.00
Water $90.00
Cable & Internet $140.00
Gym $60.00
Netflix $22.00
AOL $15.00
EA Games $3.00
Toll Tag $60.00
Gas $39.00
Car Paymt $292.00
Student Loan $310.00
Car Insurance $105.00
Electric $200.00
Total: $2,688.00


Spending $ $200.00 a week
After Bills $900.00 a month

[BiggJawn]

91. That's what I found at $700/$35,000.

There just wasn't a LOT of money left at the end of the month. In fact, there was a lot of MONTH left at the end of the MONEY!

I didn't have cable, but in the winter, $250 heating bills were the norm that first winter, so I went on the "budget" plan and payed $120 a month year round....

[Xithras]

71. Mines $1,785

Gotta love California :eyes:

[nolabels]

73. Sell it, get out before it's too late !!! (Just kidding :-) )

I do think the markets in for big correction real quick though.

Hey SoCalDem, I got a couple acres out back if your looking for a place with cheap space rent :D (Probably just 5 to 10 miles away)

My Mortgage is just $665.oo a month before impounds, we could split it and live like Arnie and the Gypsy's with our smoke tents out back.



http://www.soskan.co.uk/Gallery/Camp_Life__Photos/camp_life__photos.html

[SoCalDem]

74. We can't afford to sell.. That's the pisser

Rents are sky high too and we have all these kitties :)

I tell my friends that the only way Ill ever get out of this house (I hate it) will be feet first in a body bag :P

[mountainvue]

78. Manufactured housing

is about the worst investment you can make. Don't do it.

[nolabels]

84. "Manufactured housing" is not an investment,

It's a way to loose money. Thank heavens property value increases, otherwise I wouldn't be able to take a secound out on the tents.



http://www.flint.lib.mi.us/fpl/resources/buick/100ann/pages/OAKPARKTENTVILLAGE2_jpg.htm

[amazona]

53. that stinks and I'm sorry

I have to admit I got significant help when I bought my home from the federal government -- they put a new roof on the house, did the first termite treatment, and paid all closing costs. It seems like there were other goodies I can't remember right now. We've come out way, way ahead financially by owning -- but I will acknowledge that we had to look at a LOT of properties. Many properties were being offered at a price where, if you did the needed repairs, you would still be way in the hole. We even looked at some of the $1 homes and realized we couldn't afford to take them because of the renovation costs. In fact, that whole neighborhood ended up being knocked down because it was beyond help. So you're right, you have to look before you leap, because some of the "deals" are real money pits.

[bleedingheart]

80. There are loads of people with "money" who have house problems too

it is just portrayed in the papers as a minority, poor or lower middle class problem....

There are many people in 300K houses who are struggling because they got suckered into buying a home on the very limit of their credit...and that is dangerous.

[Timefortruth]

5. It is a trap, people think that if they can afford a certain rent

then they can afford the same mortgage payment. But it is nowhere close to the truth, homes take maintenance and the more "affordable" the home the more maintenance it requires.

I wish I rented.

[jay-3d]

6. I'm renting but

I'm 33. i just think at this age I need to settle down in a house. I can't find anything reasonable under about 130k. Man thats allot of cash. advice?

[Ilsa]

10. Save the difference between what you

pay in rent and what a mortgage payment would cost don't forget taxes and insurance). Then save an extra couple of hundred of month for all the shit that gets broken, etc. That might give you a taste of what your disposable income will be like.

Owning a home is nice if there are several of you to share it, like a family, but i think it is a waste of your money if you like living alone. Also, consider buying land somewhere for investment later if you really are nervous about having a spot to call your own. I'm trying to talk my brother into buying land near a lake where he can put a cabin or prefab home on later.

We own our home, have a mortgage, and we don't get any tax savings from it. We had to take the standard deduction for our 2003 tax return.

Also, my dad recently visited our former home town, a small town in south TX. He said the place is filling up with trailers because people can't afford the traditional brick home anymore.

[Roaming]

20. Home owning is beneficial if you shop carefully, even if you're single

"Owning a home is nice if there are several of you to share it, like a family, but i think it is a waste of your money if you like living alone."

I think if the right real estate is purchased--a home in a good area (or even a compromise, like a condominium) is a very good investment for single people. Most real estate appreciates, AND you can deduct the interest and taxes from your tax return--a big plus for singles who are often at a tax disadvantage. Just my 2 cents.

[Ilsa]

33. Excellent point -- there were almost no condos

when I was in the market as a single woman, and people I knew who had them lost money on them. But it was a tough market all the way around, but condo owners got hit pretty hard where I lived. Alot of people I knew decided real estate wasn't always worth it as an investment, but a lifestyle choice. I tend to think of real estate as a lifestyle choice.

Location location, location will probably drive the investment.

Thanks for setting me straight!

[AP]

18. Wait for the crash, or move somewhere with reasonable home prices.

[loftycity]

19. See post #13

Don't buy. No, No, No...
If you have to stretch to buy. even just a little tiny bit. You'll go nuts..trust me..roofs..yards..equipment..tools .
Home Depot,Lowe's, Home Depot, Lowe's, Home Depot, Lowe's, Home Depot...will become your mantra for the rest of your life...
But, If you like people in orange aprons..you might be happy.

[Frodo]

9. Another issue

is the tax deduction. Middle income (and up) homeowners save enough on tax deductions (and other deductible expenses that they missed when taking the standard deduction - like charitable giving), that their "true" mortgage expense is much lower than the monthly amount. The "net of taxes" payment on our first home was lower than the rent we paid on a condo less than half the size (in the same town).

But the lower down the income ladder you fall the less benefit you get from this. There are plenty of people who get effectively no savings from their mortgage payment at all.

Obviously the "benefit" of potential equity increases can be substnatial. But people don't realize that the reason they can make so much money is that the investment is highly leveraged. If the house goes up 10% in value you might have DOUBLED your investment. BUT leveraged investments work the other way too... you can lose your shirt on it.

[BiggJawn]

34. I was one of those people.

I got more back on taxes by taking the Standard Deduction than I did trying to deduct my mortgage interest.

And I lost my shirt AND my briefs.

[DemonFighterLives]

8. Same thing Reagan did

During the early 80's with dishing out tons of money and then the FMHA moved in and took tons of farms away. Bunch of damn thieves.
As long as shrub and the gang are getting rich who cares.
Ownership is expensive especially with the property taxes going through the roof and insurance. All because of the fed cutting off the states and 9/11 which they lihopped.
I'm so mad, you can't get away from them anymore. They have their dirty fingers in everything and will tell you the opposite to your face.

[F.Gordon]

25. Exactly

De-Regulation. S&L's. Corporations buying up public open space for pennies on the dollar because local government couldn't afford to keep it anymore. The good ole days.

I know of one bank back then that was actually run by the Mob. What does that tell you? It was a very "lucrative" business back then.....

[DemonFighterLives]

38. Lucrative indeed

It was hard to know what was happening. For instance, a fellow needed 60 to 80 thousand to build a new barn. The FMHA would encourage them to go all the way and get them 300,000. Totally sunk the guy when the milk prices went down. I was hoping to farm after getting out of the service, but my father told me that there wasn't enough to feed all the mouths. I called it a federal land grab and it was a virtual depression down on the farm. Many lost their farms and their way of life.

[Cronus Protagonist]

11. I can't afford my rent - owning a home is beyond possibility

It must be nice to be one of the rich people who can afford to own real estate, but it's unattainable for most of us.

ANYBODY BUT BUSH

Click here for "ANYBODY BUT BUSH", and other fair and balanced yet stunning buttons, magnets and stickers

[DoNotRefill]

30. MOVE.

Go someplace where the land values are reasonable.

I live in a 4,000+ sq ft. house on almost 2 acres of land. We bought it 2 years ago for under 70K. Sure, it needs about 25K in work, but it's ours. Our mortgage is under $700 a month, and it's got enough room for all of our future expansions.

[toopers]

31. Actually, I think most of the population lives in a dwelling that they own

This would indicate that most people can afford to own a home.

[Journeyman]

13. A man's home is his hassle.

n/t

[JM]

16. Our county has the highest

foreclosure rate it has ever seen. Thanks to the Bush* Administration, our seniors now have a tradeoff between paying for meds or having a roof over their heads.

JM

[Lydia Leftcoast]

17. One of my Portland friends kept urging me to buy a house or condo

citing the "tax advantages." I did the math, and since I'm self-employed, I can already deduct things that employed people can't, and besides, I have no desire for a yard, so if I ever buy, it will be a condo. Then you're stuck with association fees, which wipe out any tax advantages.

Well, my friend the homeowner lost her job and had to sell her house, after putting $15,000 into repairs and improvements. You know what her equity was at the time of the sale? $18,000.

I recently heard a lecture in which the speaker said that the home mortgage deduction was not worth having. In essence, he said, you're paying the bank (in simplified terms) a dollar of principal and interest so that you won't have to give the government pennies. His advice was to pay your mortgage off as fast as possible (for a lower total price, since the interest charges are less) and not to bother buying a house unless you've gotten rid of your other indebtedness first.

Besides, to pay in mortgage, taxes, utilities, and association fees the equivalent of what I'm paying in rent and utilities now for a two-bedroom apartment, I'd have to move to a studio condo in the outer suburbs. No thanks!

ON EDIT: A few weeks ago, the New York Times carried a story about working class New York City residents who had been lured to buy "affordable" houses in the Poconos. Yes, the Poconos. This required a two-hour commute each way, and some of them were in danger of losing these houses after job losses.

I'll never understand the willingness of some people to drive two hours each way to work just so they can own a house (common in California and other expensive regions) that is probably bigger than they need and that they have no time to enjoy anyway.

[sendero]

36. The speaker ...

.... was right. I never cease to be amazed at people who relish an interest "write off" as though that makes paying the interest a no brainer.

First off, you're only going to actually save about 30 cents on the dollar in the best of circumstances.

Secondly, unless you have a huge amount of interest or other deductibles from Schedule A, you will barely get past the Standard Deduction (which is indexed and is pretty high right now) and you will get almost no tax benefit.

Buy a house because you need a house, not because you think its a big tax shelter - it isn't.

[DemonFighterLives]

40. Just wanted to comment on the write off thing

The house I was looking for in 95 was to be in the 50 thousand range. I found a fixer upper liste at 49 and offered them 36. Well I was able to save enough to buy it outright. Many told me I was foolish to lose all the write offs. I looked at it like you either pay it to Uncle Sam or the Banker Man. By buying it outright, I avoided closing costs and all the interest, like around 10,000$ in my pocket right away. A house usually cost 3x the purchase price after 30 years or thereabouts.
This little diamond in the rough has sprouted 2 new bathrooms all done myself, and if real estate holds it's value will be worth over 200,000$ by the time I sell it.

[shrike]

42. My house is paid for, too

Thanks to an inheritance from sweet old dad. Makes life so much easier. Our wants and needs are pretty simple, so we live a low-cost existence. Plus, I'm self-employed and get all kinds of write-offs, anyway. I lived in apartments for years, so I prefer living in a house. But I'm married to the handiest man alive, and he does all the repairs himself. If anything ever happens to him, I'll probably have to sell this place and find a rental house.

[shrike]

43. P.S. I have pets

Very difficult to find a rental in this area that allows pets, even cats. I've had my cat for almost 12 years now, and I had a heck of a time find a rental (in Michigan) that would take her as well. Had to settle for a real dump. Now that I'm in my own home, I have two cats and a dog.

[Dover]

27. Some people with enough liquidity, are lining up to buy foreclosed homes.

They are a good deal if you have the money to buy, and I see that market only increasing in the near future. Just pay attention to the property tax that the home would require.

But generally, you get more home for the buck. Unfortunately it is due to someone else's misfortune.

[hightime]

29. The only thing that works on an old house.....is the owner.

[NNN0LHI]

41. Tell me about it. I have some major renovations going on right now

It is always something going wrong. I think when I get it fixed up I am going to consider selling this place and start looking into condos.

Don

[MadHound]

47. Despite the many naysayers here,

Buying your own house is one of the better investments you can make, IF YOU ARE SMART ABOUT IT! I can't emphasize that enough, do your homework, know what you can afford, and stick to that price. A few pointers(from one who is now on his second(hopefully final) house).

Figure out what you can afford: A house payment should take up no more than 1/4-1/3 of your net income. Use an amoritization table to figure out what you price range you can afford, and stick to it.

Have an independent appraiser come in: Banks are in the business of making money, and will fudge appraisal numbers in order to put through a loan. Spring for the money to hire an independent appraiser. Have the appraisal cover what needs to be fixed, pest damage, water damage, foundation etc.

Make a ten year plan. Most first time home owners buy a smaller house and then graduate to a larger, more expensive house in ten years. Plan for saving money, major repairs that will be needed, etc.
Also allow for time hanging onto the first house due to market fluctuations, you might have to stay in the first house until interest rates go down, or the housing market rebounds, etc.

Check out various agencies for grants or low interest loan programs. I bought my first house with the assistance of an Urban Community Block Grant(paid half of my down payment). Granted, you might not like the neighborhood restrictions, but if you can get along with them, and you qualify, it is a fine way of getting started in a house.

Always go for a thirty year mortage, even if you only plan on living there five years. It lowers your payments, and is easier to handle if the unexpected happens, ie you are injured, or can't work, etc. However, make it a steadfast rule to include an extra 10% with every payment, and have that extra money go towards your mortage's principle. IE, if you are making a $300.00 payment, include at least an additional thirty dollar payment every month, and check the box on your payment slip stating that it goes towards the principle. This will knock at least ten years off the life of your mortage, and it looks good to lenders when you go to borrow for your next house.

Do not fool around with floating interest rates, or balloon payments or other such schemes. You can be hoisted on your own petard with these financial schemes, and wind up without a house. Stick with a fixed rate mortage, and if interest rates come down, analyze you cost benefit ration between money saved off of interest and refinancing fees, and if looks good, refinance.

Always, always escrow in your house insurance fees and property taxes. Paying a small monthly amount is better than coming up at the end of the year trying to find money to pay big bills during Christmas season.

If you don't know how to do any home repairs, take some classes. Several of the big box chain stores offer classes, as do local Adult Education and community colleges. You don't have to become a licensed electrician or plumber, but it is handy to have some of these skills when you need them. Besides, you will find that most construction skills, including roofing, are fairly easy to master. Yes, a house will cut into your free time by DIY, but the rewards when you sell the house are well worth it. Then you can do that custom tile work in the bathroom and not have to pay big bucks for it.

If you are only planning to stay in the house for ten years or less, keep resale in mind when you do remodeling. You make think magenta splatter paint looks real cool, but the rest of us think it sucks and it will make your house harder to sell. Once you get into a place that you will live in for longer than twenty years, go nuts! Your kids can then worry about unloading their parents' crazy day-glo house, not you.

Don't bite off more than you can chew. If you are going to become a first time homeowner, go easy. Buy a house than is adequate for your space needs, and stays within your budget. If you are looking at a fixer upper, make sure that you have either the money or the expertise and time to devote to fixing it up. Make sure the yard is small enough for you to handle, and that if you are buying a big yard, you have the equipment to handle it. Mowing a three acre yard by hand sucks and you will be miserable.

Budget, budget budget! I can't emphasize that enough. Check out ammoritization tables to figure out what your payments will be, along with insurance, property taxes and bills. Most utility companies will give you the last years bills on a house if you ask them. Also, include in your budget a minimum of $1000.00 for emergencies(water heater blowing up, etc.), and pay into that fund ten percent of your house payment every month. Thus, you will have a nest egg to draw upon when something goes wrong.

Taxes. You now get to join that large mass of people who save every bill they get. Sometimes, especially in the lower income brackets, a straight deduction on your taxes will save you money. However, sooner or later it will be cheaper for you to itemize and deduct your interest payments on your house. This means you should say all receipts pertaining to home remodeling and repair, as these are deductable too. I know it's a pain, but it's worth it. My wife and I were finally able to do this this year(we bought our new place last Oct.) We recieved a good chunk of change from both the Federal and State government, first time we were able to itemize and deduct interest payments.

Don't try to keep up with the Jones, it will just drive you into debt and dispair. Your place is fine as it is, let those fools get parted from their money.

Make sure if you have any neighborhood associations that you have to follow or pay money into. These damn things are the curse of the devil, yet they are springing up all over. God knows why, but most Americans thing housing conformity is a good thing. Budget these fees in also, and decide if you can live with somebody else telling you what you can and cannot do on your own property.

Look at the property prices around you, and decide if you can afford to live there. I live in Missouri, and I know that the price I paid for my current house would be tripled(at least) on either coast. Prices in urban areas are ridiculous, and don't buy into them if you can't afford them. Instead, move and find a region that you can live with, both personally and financially.

Make the largest downpayment you can reasonably afford. Most normally a bank requires at least five percent of the selling price, but if you can afford it, spring for ten. It gives you all that much more cushion if you need to refinance in an emergency, and your payments are lower also. Also, stay away from places advertising no money down. Usually there is a catch in the fine print, one that could kill you later.

I know that lots of people have had bad experiences with buying a house, but if you plan for it, budget for it, and are smart about it, you to can have a place to call your own. And there is not much more satisfying than having your own house, not having to worry about landlords, not having to pay somebody else's mortage with nothing to show for it, not having to worry about the whims of a capricious landlord, and still and all, a solid long term investment, and one that is soul satisfying to boot.

[ender]

57. great post !

i agree, with one minor exception - if you have the willpower, self-escrow, you will at least earn the interest, as well as have a nice rainy day fund.

however, thats only if you have the willpower. the self-escrow is NOT a vacation fund, a car fund, or anything else.

you need to run the numbers when buying a house, ALL the numbers. assume a 3% annual ROI. assume a 30% tax deduction. add in your real estate taxes...

you will find, in short order, that it makes sense.

[amazona]

50. in my area renting more expensive than buying

I about fell on the floor when I learned what a neighbor down the block's house was renting for. People only think renting is cheaper if they rent a much smaller dwelling in a much worse neighborhood. Comparable properties, to buy ends up cheaper -- renters also have to cover the landlord's property tax and profit, buyers don't. However, we do have a significant homestead exclusion in Louisiana to keep owners of modest homes from being taxed out of their houses -- people with homes they live in valued less than $75,000 don't pay property tax while landlords do pay the tax on all homes.

To you other homeowners, I say, yes, it's tough, especially in the beginning when your income is low and it all seems overwhelming but it's well worth it if you can tough out the lean years.

[Cerridwen]

51. "If you want to control a man, give him a mortgage"

A friend of mine once said this to me. I believe it applies to women as well. :-)

[amazona]

55. but you have less freedom with renting -- a lot less

Renters' lives are managed down to what color they can paint their walls and whether or not they can keep pets and what kind of pet. We all know renters who spend half their lives concealing their cat or dog. Heck, they even tell you how or if you can hang pictures on the wall! And at least in the New Orleans area, landlords don't do any maintenance on their properties, so you end up at Lowes and Home Depot all the time anyway if you want a nice-looking place. And, of course, your rent bill comes around every month no matter what, while sooner or later, your house is paid off.

Worst of all, I have heard many stories -- even from landlords themselves -- of landlords keeping keys and going into people's apartments. How much freedom do you really have when some horny old creep can walk into your apartment while you're trying to relax on a Saturday morning? It may be illegal for landlords to do it, but they do it anyway and pretty much get away with it -- I never heard of any of them being prosecuted for it. At least the landlords I had used to knock first, but it's still creepy. If the rent is paid and they don't have a hammer in their hand, they should stay away in my humble view, but some of them are lonely old busybodies and who needs it. I had a couple of landlords who, I swear, went into the business so they would have a captive audience to talk your ear off.

Give me a mortgage rather than a landlord any day!

[Cerridwen]

56. Actually, it's a metaphor . . .

about making sure people have enough responsibilities to keep them occupied and diverted from what goes on in the world around them; while also ensuring they have no option of flexibility regarding their current status in life and/or location.

[Pretty_in_CodePink]

52. I've been wondering when we would start hearing about this

Homes are soooooo expensive!! Here in Orlando they are not even building homes under $150K. When I see the signs starting at $150K, I realize no one is really getting in for that. Most of the stuff I see and hear about going up is $200k+ with an amazing number of homes in the $500K+ market. There are thousands of homes and condos being built in a market of primarily low paying service and tourism jobs. The average income is about $42k, last I heard. In our downtown area there are thousands of urban condos going in. The downtown is really dreadful too until you go several blocks away. It's all in hopes that the young urbanites will buy. I just wonder How many people can there be to buy all this property?

Going hand in hand with building the expensive homes is building lots of apartment buildings. This is necessary since home ownership has gotten so far from the reach of so many. So families are cramming themselves into apartments.

I wish the local government did a better job of managing the growth. Not only for environmental, traffic and school concerns (which are poorly handled) but to evaluate the need for the development. Is it too socialist of an idea that the government or a special commission evaluate how appropriate a development is for an area? Consider issues such as average family income and number of similar developments already in place. Look at duplication and assess long term affects. The developers just put up the sites and leave. They don't deal with any long term consequences.

I have wished for awhile that they would consider some of these issues when approving retail sites. But that is just because I want a Whole Foods Store in my community where I have 9 supermarket locations of 2 chains within 4 miles of my house. All have pharmacies and in addition to that there are 7 or 8 drugstores.

[Laughing Mirror]

62. "How many people can there be to buy all this property?"

Exactly the same riddle I scratch my head and try to figure out myself. Where are these people? I certainly never meet them.

[tlcandie]

86. I live on the west coast of Florida in the fastest growing county atm..

From what I have heard, it's people from all the other places where rent is outrageous who are buying all these expensive homes.

I've heard many nightmares of people, say from California, who can buy a brand new luxury home here for what they are paying for a fixer upper in other places. The problem arises in that they want to live the same lifestyle as before, but end up not being able to pull it off more times than not. They keep the same debt and end up loosing the income and then go bust.

When we bought we bought WAY under our income! That includes car and home because we wanted to enjoy life and never have to worry about paying the mortage, etc.

BEWARE when buying according to your income...unless you have money to burn! :hi:

[shanti]

89. excellent advice!

i also live in california and the mortgage for my halfplex is only 600 a month, quite reasonable, and this was after i refinanced and cashed some money out. the money paid all my bills off and the rest of it will be shoveled back into it. i'm in the middle of remodeling my kitchen and bath (what fun :eyes:)

i remember the first six months after i moved in in 1996, i had SUCH buyer's remorse. i'm a single woman, and it was my first home. i made a lot of mistakes, but i will never give this place up now. it may be the only thing i can leave my four sons.

as far as tax write offs...i was lucky to get a mortgage credit certificate as a first time buyer. that really helps!

[skippysmom]

59. Not especially shocking

Prices are outrageous in so many places -- there's no way in hell some of these people can make the money they do and afford these houses. We make about 20K above the median income for our county and could reasonably afford only the smallest, cheapest house in the "worst" town in the county. (I put "worst in quotation marks because this is Cape Cod, and the "worst" town is still nicer than many towns in other areas.) So there must be a lot of overextended people out there.

We bought the house because rent in our area would be the same as our mortgage payment (about $1200 including taxes and insurance). We had the full 20% down payment which really helped. Plus we have cats and were tired of getting the runaround from landlords -- paying pet fees, getting looks when we said we had 3 cats, etc. So we bought. Thankfully the house is appreciating nicely and if we sold we'd get a nice little profit after only 18 months.

Self-escrowing is a good idea. You do make back the interest -- at least a little -- and save the escrow fees that some companies want to charge.

We do see a bit of a tax deduction -- however, as we pay less and less interest as the mortgage amortizes, and the standard deduction goes up -- that will likely disappear.

We also pay an extra $200/month toward principal. I really want to be mortgage free by 50 (I'm 32 now). Paying off your mortgage is one of the best ways to ensure that your retirement expenses are lower.

[Carolab]

63. If banks had a heart

Or even a brain, they'd restructure these loans rather than foreclosing. At least give people a chance to catch up or sell their homes themselves rather than just jump in and take over. They end up having to market these places and often they have to fix them up to do it. Why not let homeowners buy it back on a CD or borrow against the equity to make payments? It's just heartless and mainly stupid to just kick people out.

[Frodo]

64. The banker's reply

You think they don't???

We absolutely 100% do NOT want your house. I can't tell you how many board meetings I've sat in on where they go through the reports of how much has been lost on each of those homes (if we could sell them at all).

We are not IN the real estate business. We have whole departments of people who do nothing BUT try to work out plans for people to keep their homes (skipped payments. Interest only. Defering payments entirely, waiting for an owner sale.)

[Carolab]

65. Things must have changed then

since the bank seized my house in 1992, despite the fact that I was employed, despite the fact that I had made every payment. The issue was that a former boyfriend had used it for collateral (my fault for trusting the wrong guy) and I was paying "his" loan on "our" house. He took the money for use in his business and shorted the money we were to use for finishing the remodeling, then left me holding the bag paying on his debt. The bank would not refinance for me because I had declared bankruptcy in 1987. They could have refinanced me so I could pay him off and I would have kept my house. But no, they refused so I had to let it go. Jeeze, Louise, don't you think that's pretty heartless?

[Frodo]

66. A little "yes" a little "no".

Sounds like they should have found a way to help you. But I don't know all the particulars.

However, the ex boyfriend sounds like the one who really hosed you.


The idea that you owned a home five years after declaring bankruptcy sounds anything BUT "heartless".

So I'm not sure how to read it. One lesson (that it sounds like you've already learned) is not to put up your home as collateral on someone else's debts. Because in truth, that was YOUR debt (despite what it was used for) that you were unable to make payments on. You thought of it as "my" debt (the mortgage) and "his" debt (the other loan), but when you put up YOUR home as collateral you said "it's MY debt". If you had been making payments on that they couldn't have taken your house from you.


The real story here is the boyfriend who cost you your home... not the bank.

[Carolab]

67. I disagree because

I bought the house originally. I only put the boyfriend on the deed in order to borrow enough money to finance the rest of the reconstruction (into which I had already socked all of my money and spare time). It only needed about $15,000 more to finish it off. So he got a loan and we agreed finish he house, sell it and split the proceeds. The problem was that he used the money for other purposes (and cooked the books, being an accountant) and left me holding the bag. I had owned the house for FOUR years PRIOR to the bankruptcy, and had had to file bankruptcy because some unscrupulous "remodelors" that the CITY had recommended to me tried to sue me for a phoney work order after I kicked them out of my house after a week of really bad work. I had an independent contractor come and assess the value of what they had done versus what it would cost me to repair it and it was a negative figure. So they actually owed me, but the biased courtroom found in their favor nonetheless and awarded them a judgement. Shortly afterward, I lost my job because my company's local operations closed down so I declared bankruptcy but still owned the house. Enter the boyfriend. The bank knew the whole story and I had even hired an attorney to help me sort it out. The loan was a "private loan" and not a mortgage and the loan company were a bunch of sharks (Old Stone, in Florida). I continued to pay the debt for an entire year after the boyfriend left; I was merely looking for enough of a loan to pay him off and finish the house. It was appraised (in finished condition) for more than enough to do all of this. Then I could have taken him off my deed and continued to pay my own mortgage. But the bank refused. So I see it as the bank being a bunch of pricks.

[Beaker]

68. It's worked out great for us...

we bought our 2-flat on the far north side of chicago(over by Foster and Kedzie) in 1996 for 131,000. Two years later, they built a "college prep" magnet school a few blocks away. By it's 2nd year of operation, the school was the top public school in the city...and even tho' it's a 'magnet school'(can draw students from anywhere in the city), 33% of it's student body has to come from the surrounding neighborhood.
So- thanks in part to the school, and in part to my total(down to the studs, and i did ALL the work) remodel of the kitchen and bathroom in both units, we now have a property worth over $400,000- more than triple what we paid for it just 8 years ago.

We live in the lower unit, and rent the upper 1 bedroom apartment for $675- which includes heat and cooking gas, Satellite tv with ALL premium movie channels, and FREE use of the washer & dryer in the basement(the same ones we use). There are front and back decks, a dishwsher in the kitchen, and pets are ok(our tenant has a dog).

[shrike]

70. Need a tenant?

Just kidding, but wow! Where were you when I was renting?