Renters should get a big check from the Gub'ment

when I was ready to buy my first house, I made a spreadsheet that detailed every expense, property taxes, every tax deduction, etc., and calculated both what I could afford and when the breakeven point would be if I rented vs. owned (with various assumptions, like that I could only sell the house for exactly what I paid for it, paying a certain percentage of the value of the house each year in upkeep, difference in utilities, etc). With my set of assumptions--and what was the going rental rate for my apartment plus how I thought it would increase over the years, I calculated that the breakeven point was roughly 4.8 years, IIRC. In other words, if I expected to live somewhere longer than that, it was worth buying.

There are a lot of unknowns, though.

 

You can, just not more than you can afford.

 

I don't think you understand. People can't sell their homes. They know that they can't afford their homes any more, want to sell them, and CAN'T. I bought a house last year, in (obviously) a falling market, and I faced a lot of sellers who were just overpriced, because they wouldn't be able to pay off the bank. It will affect everyone.

 

and I'm saying that it wasn't in the contract. They were misled. There have been many examples of such behavior. If they were caught, there would be restitution--if they have any money left.

 

A home is not a liquid asset. It is an investment, investments can go up and can go down. They are not guaranteed to be able to be sold at what the seller thinks is a fair price. They are dictated by the market, and right now the market is terrible and people are underwater and can't pay because they never could have afforded the house in the first place.

 

Again, Caveat Emptor. Lots of people are taken by slick talking salespersons, from Cutco knives to homeopathic products. Once they sign on the line, they are assumed to have read the conditions of the contract.

 

There are very few of those.

 

I suppose. But they should know that it is an investment. A home is an investment...that's what everyone knows and is told when they are buying a home versus renting. Remember, "renting is just throwing your money away", while when buying a home you are INVESTING in equity.

So these investors should be liable for their losses, not the government nor the american taxpayer.

 

I don't disagree with you; my own opinion is that they every salesman or bank teller that wanted a $600,000 house can go fuck themselves . . . but then you hear about the fraud that induced many to purchase above their means in the first place. That's where the problem is.

 

anecdotal evidence suggests otherwise.

 

But what about actual data? What percentage of the 1% who have defaulted on their mortgage were "defrauded"?

 

Fraud came from multiple angles. From realtors who pushed people into investing in "hot neighborhoods" to mortgage brokers that looked the other way to homeowners who lied on their applications about the income they had.

Problem is multi-facted, only way to catch people is to screw over those that were involved in the process and that is to let the system fix itself.

 

The bottom line is that no one ever promised that you'd make money on your house. Owning vs. renting offers all kinds of advantages that can't be expressed in dollars and cents. As long as you can afford your mortgage and you're unwilling to take the loss, the prudent move is to stay in your house until the market comes back up to meet you.

 

It's called "fraud in the inducement." Victims are entitled to damages . . . but again, the perpetrators are gone.

 

I am a homeowner -- just bought my first home about a year ago. Or was it 2 years -- jeez time flies. Anyway -- I could have gone with an interest only, or ARM, and perhaps qualified for more, but I was responsible and selected a good fixed rate loan that was affordable. If you renters get a gub'ment check, can I get in on that too?

 

You are absolutely right, and that's why you should be skeptical whenever someone says that they "took a loss" on the sale of their home. If they bought their home for $500,000 and sold it three years later for $450,000, did they lose $50,000 (as they'll claim)? That would ignore tax deductions for mortgage interest (and on the other side, property taxes, but that is deductable as well), any tax benefits from taking out a second mortgage or home equity loan and using it to buy a car or pay off a student loan, and, more to the point, the inherent value of just having a place to live (i.e., the avoided cost of renting an apartment). It also probably ignores transaction costs, which can be pretty high. The whole calculation is very complicated, if you want it to be accurate.

 

does it really matter? does the number of people who have been defrauded affect whether they should be helped by the government? Leave out, for the moment, people who have knowingly purchased homes outside their means, or knowing what their 3/1 ARM would eventually do.