I read an interesting article in the newspaper today entitled "First rung on property ladder gets harder to reach". The article was very extensive so this is only a couple of brief thoughts on it. The first person cited in the article was a man working overseas in Baghdad for a security corporation so that he can save enough money to buy a home back in the states. "For most of us, it's hard to imagine risking our lives in a war zone to afford the American Dream. Yet many first time home buyers are resorting to unusual extremes - though mainly non-life-threatening to scrape together money for a down payment and qualify for a loan." What was even scarier to me was the couple who bought a one bedroom, one bath condo in San Fransisco. I realize that it's one of the most expensive places to buy a home so although I gulped at the price and shook my head, I tried not to spit my water all over the computer screen when I read they paid $714,000! That wasn't the scariest part, it was how they financed it.



Thats where I did require help picking my jaw up off the floor. I know I err on the side of being too cautious but I actually think it's more life-threatening to wipe out your retirement, have no savings what-so-ever and buy a $714.000 condo, than take a job in Iraq!

Couldn't they just rent? Home prices went up way to quickly and it seems liike they would have been better off renting for 5 years than paying only interest. Its about the same without the risk the market will collapse (which in my opinion we have yet to get anywhere near the worst of the housing market problem)

I think it speaks to the power of norms and traditions in our society. Many people feel it's a "requirement" somehow to own your own home, as if you're not a whole person unless you do. It's like having a big wedding, going to your prom, etc., it's a sort of rite of passage that many people feel is an essential part of life. Sad.

imho thats a horrible decision...that 36 K would have had so much time to grow.

and IO loan in the midst of a housing crash?

I hope they do a follow-up in a few years when this couple are upside-down on their mortgage and can't make the payments because of the adjustable IO loan. This was just a horrible, horrible decision and whoever their broker is should be shot.

Wow. Pretty ridiculous. Not only is it a rite of passage, but people have been taught to believe that owning a home is an unequivocally good investment, never thinking of the opportunity cost associated with giving up all those things they need to pay the higher bills (like their WHOLE RETIREMENT in this case).

My girlfriend's mom has encouraged her to move back home (she just finished a master's) and get a good job so she can save up a ton of money for a down payment on a house. Like that's priority number 1. Not finding a job she likes (rather than a well-paying one geographically close to home) or living where she wants (my mojo would be RUINED if she moved home, haha), but, no, you gotta buy a house!

If only my post had come out early enough for Rey and his wife to have read it!

Housing prices aren't as bad as that around me but they are pretty bad compared to average salaries. People just entering the workforce can not afford to buy a home nowadays. It's not even an awesome place to live, it just got swept into the housing bubble.

I also want to know what kind of jobs people have that live in the communities of mansions I see popping up all over. We figure people are just overextended?

Owning is important to us. We hated renting. 6 months renting an apartment and 6 months renting a townhome had us househunting ASAP.

I personally like renting. My mom has been after me to buy a house for years because that's what her generation does, but it's just not for me. I move once every 3-4 years so buying just doesn't make sense. And by move I mean *really* move. Like from Southern IN to Phoenix to Switzerland to DC to Portland - all in the space of less than 10 years. My long-term plan involves the purchase of property but that's long-term. Who knows what will happen between now and then.

I guess what bothers me is that a lot of people don't have the option to decide if they want to rent or buy. When the prices skyrocketed, that choice was taken away from them.

The choice to buy smart was taken away from them. The still have the choice to buy stupid - like the people in the article. There is nothing wrong with renting if that's what makes sense financially.

I like the way you put that pf101 That could apply to a few other things too.

I chose to pay-off our house and it was right for many different reasons including that I don't plan on moving and that was the intention from the very beginning. We've put 11 years of extensive landscaping into it, it's where we wanted to raise our children, we have extended family close by, the community is a joy to be a part of, the schools are very good even if I had to move the girls to a special school that deals with disabled children, the area is beautiful. It's in a desirable/stable place in the state where the value continues to rise. We bought our home for 89k in 1991 and in 2004 it was worth 475k.(we did do some remodeling through-out the years) Guess I should look into getting it appraised on today's market. I put $215.00 a month aside for home owners insurance and property tax and that covers both bills at the end of the year. And yes most of all, the peace of mind and security it brings me was/is worth it. I guess the couple in the USA today article could argue that they too put a lot of thought into buying the condo and that it was the right decision for them. Maybe right dosen't always amount to the best or smartest decision or perhaps as pf101 said, the right choice could be taken from us but we still have the choice to buy stupid or invest stupid. I know this, I wouldn't have paid off the house if it meant dipping into our retirement or wiping out my savings.

The accountant and IRA expert in the USA today article said:



I agree with all of the above! I also feel for people who are trying to buy a home for all the right reasons but can't afford to buy in the area they would like. My s-i-l is trying to buy in our area and it's probably not going to happen. Actually she could do it but it would stretch her financial situation to the breaking point much like the couple in the article. She put an offer down on a condo in a city close by and later withdrew it. When she looked at the house she admitted that she got stars in her eyes but when she sat on the idea for a day she realized that the stars would eventually fade and the reality of the large mortgage payment would sink in and she'd be miserable. Her brother keeps pushing and telling her it's worth the risk but then again he's not the one making her mortgage payment.

I see this as another symptom of the instant-gratification society in which we live and the commercial structures that have sprung up around it that further enable this way of thinking. There don't appear to be enough people saying, "No, you (I) can't have that right now."

I agree. We, as a society, aren't generally good at waiting. I'm guilty of it myself, just not to this extreme. Eventually it'll implode. It's already started and it won't stop any time soon.

Good discussion and answers here! One thing I'd like to verify with you guys is how profits from a home sale are handled. For instance, if you sell your house and make a profit how are you taxed if you just keep the profit and don't buy another house for a time? Say I'm going to move to a new state and instead of buying in an unfamiliar place I want to rent for a year or two until I figure out where I want to buy. And for simplicity's sake, just assume we're talking about a single primary residence. (No millionaire vacation homes! )