Affordable at one point in time
Once upon a time Shaw, and I'm talking my end, was affordable. You could by a 2 bedroom tiny closet shoe box for the low $100K range. Then nothing was promised except a 10 minute walk to the metro. The neighborhood was worse than what it is like now, and was even worse before I arrived nearly 5 years ago. So some of the old timers tell me.So don't assume those of us who are "new" bought at the height of the market. If I had to buy my house at what it would go for now, I couldn't afford it. Actually, if I go by the DC tax assement values, I think I stopped being able to afford my house 3 years ago.
People told me I should have bought 5 years ago. Well that statement never helps anyone, particularly due to the lack of working time machines. But 5 years ago, there was this window, this time when a semidetached 2 level home on NJ Ave went for $99K. There was this other house, also on NJ with a garage that could (and later was) have been converted into a mother-in-law apartment going for about $89K. Then there was this small house on 5th Street that was $79K. About 4 years ago, as an estate sale, a small stucco frame house (the white one) on 6th was up for sale at sixty-some odd thousand.
Absent a fleet of time machines, this is useless info. As I write this I think of my best friend who is just now thinking that he should buy property. And 5 years ago I did encourage hime to buy, but no, he wanted certain things in his life to happen. Now, those things still haven't happened and the market is beyond him. I really wish he'd bought 5 years ago.
posted by Mari @ 12.10.05
15 Comments:
I believe there is some famous quote along the lines of studies have shown that the best time to buy anything is last year. I can walk down the street and find neighbors who bought a couple of years ahead of me and payed half what I paid places twice as big, but then I talk to people who just moved in and paid more than twice what I paid. You just have to hunker down and be glad you bought when you did, but I think we all have those friends who seem to have missed the boat.
Owning a house just means renting it from the bank instead of renting it from an individual person.
Well, last year isn't always the best time. I am thinking of a friend who bought a house on Florida Avenue at exactly the wrong time in the 80s.I think it was about 10 years before he could consider selling it, because it took that long for the value to get back up to enough to cover what he owed on the mortgage. Things don't go up forever, people.
"renting it from the bank instead of renting it from an individual person"
Leaving aside the benefits of accrued owner's equity, the right to sell, and tax-deductible interest payments, of course.
~BL's inner CFP
so true.
i guess we all have friends that we tried to get to buy ( rent from the bank.. whatever...)
"when X, y and Z happens, i'll buy". yep. sad.
"renting it from the bank instead of renting it from an individual person"
Except one day the homeowner can pay off the loan and live rent-free.
I'm in the same boat. I bought in 2001, the day before 9/11 happened. My house has gone up in value 100% in the five years since. I met someone in the city and now we're talking about raising a family and cohabitating. But housing is so expensive anywhere in the region, that the primary objective of the cohabitation isn't romantic. It's to amass enough money for a down payment!!!
Dear anon, SA, & t-shirt lady,
I've owned since 1998. Not sure if you own, but check out what you're actually paying for. Most of it is profit for the bank (certainly over 80% of the mortgage). Only a miniscule amount actually goes to paying for the actual house. If you stop paying for the bank's profit, they'll evict you---just like a rental landlord.
Then, in like 30 friggin' years, when you're old and grey and on your last leg, you may actually have it paid off.
I agree there are a few more benefits to owning---in the long run---than renting, but when you add all the pain-in-the-ass repairs and shit, there are a lot more immediate drawbacks to owning than renting.
I know this from 6 years of experience. People are obsessed with owning when they shouldn't be. Live for the present. You may die tomorrow and you can't take a house to the grave.
Cheers,
LB
Lonnie,
FYI I'm a bit of a prude when it comes to language on the blog (see the comment policy). And since I'm responding to your comment I guess it would be silly to delete it now...
but anyway...
Yes a good portion of the mortgage payment goes to the bank but it's like the minimum payment on a credit card. For a while I was paying a good $100- $300 over the minimum payment which knocked off some of the principle. So if I really really wanted to I could pay the blasted thing off in 15 years by just paying double the minimum. But I'd rather spend the money on food and eating out.
The renting vs owning arguement depends on the person making the arguement. Personally, I'd rather own, even with the 2nd mortgage, I'm paying less than someone renting (not counting the tax deduction). Also in the case of the friend who bought and the one trying to buy.. there comes a time in a man's life when he gets to a certain age (around 40), when he is getting too old for the group house or doesn't want to rent a room in someone's basement for the next 20 years. He'd rather be the landlord.
Sorry, Mari,
No more cursey curserton for me on your blog. I respect your rules.
My personal experience with owning makes me overly negative. For me, the past six years of owning a house have meant only money loss and stress. People keep telling me that I'll make a killing when I sell it. But with all things, if it sounds too good to be true, it probably is. I'm not holding my breath.
Cheers,
LB
lonnie,
i own. and pay less than if i rented. i bought because the place i was renting got sold and i got kicked out. i paid rent on time, at the same place for years. sure the bank could kick me out, but only if i dont pay. thats not true when you rent. to me, the benefits arent overated.
if you are, as you say, overly negative about owning, what keeps you from selling?
I rent, and I pay FAR less than I would pay in mortgage, taxes, etc. Yes, I should have bought 5 years ago, but alas, I didn't. Now, I rent for $1750/mo what would cost me at least $2750/mo in mortgage. Even pricing in the tax savings, buying is not better for me now.
If you could fire up that time machine though...
The tax benefits to home ownership are huge. The fact that each owner of the house/condo can make $250,000 (so $500,000 for a couple) tax-free when the property is sold - anything above is at capital gains rates. So you have the current interest, property tax & DC income tax write-offs now and then the potential for a huge tax-free profit later. In addition to the security of knowing that you won't be kicked out (unless you don't pay the bank). Especially in a "transitioning" area like TC - buying is a way better deal than renting.
Christine
Careful when you buy people- I'm doing my MBA here in Canada and word is that the North American housing market is finally screeching to a grinding halt. Everything goes on the Elliot Wave cycle- five waves up, 3 waves down, and believe me you are on the tip of the five waves up. The 3 waves down this time can be potentially catastrophic. Sell now!
The madness cannot go on forever...
Please initial your post. Next anon posting gets deleted.
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