> > But the purely financial aspect of home ownership just doesn't
>> stack up ...
>
>Don't tell that to the majority of households in the US :-)
If you think Americans are fanatical about home ownership, you haven't seen Australians. As I mentioned, the legal position of renters in this country is unimaginable to civilised Europeans and even Americans would probably be shocked. Tenants are usually on short fixed term tenancies, 6 months, 12 months. At the end of which they can be evicted without reasons needed. There are no such things as protected tenancies, landlords can increase the rent to whatever the market will bear whenever the lease is renewed.
Tenants are essentially second class citizens in terms of housing security. These conditions explain the attachment to home ownership, but the dream of capital gains incites it to an unhealthy obsessive fetish. People go completely mad with like gold rush fever and every so often it becomes a mass hysteria to snatch up anything, at any price.
>
>> without the capital gains that of course you can't actually
>> realise without sacrificing ownership.
>
>Bill, do you read the papers at all? The big innovation of the last
>decade or so in the US ("home equity") has been exactly the ability to
>tap the equity in your house. It is, if you like, a reverse
>down-payment. The fact that you *can* realize the appreciation of your
>house without moving is one (but only one) of the reasons that things
>have gotten so frothy and out of control.
You can borrow against your theoretical gain, I'm aware of this. Maybe I'm old-fashioned, but borrowing money and paying interest on it doesn't seem quite the same as actually realising a profit in cold hard cash that you can re-invest and EARN interest on. In fact it seems exactly the opposite. But of course I'm old-fashioned about money.
> I expect this is a
>game-changer, and once things die down and correct, we'll be left with a
>much more sophisticated home buyer. Hell, 10 years ago it was "big
>news" that you could stop paying Private Mortgage Insurance (typically
>required anytime you have less than 20% down) once your "skin in the
>game" was above 20% whether from principal payments OR appreciation.
>
>I see this as a positive: until recently, all the power and control of
>the asset that you call "home" was contained in the bank. Today it's a
>much more even proposition. With great power comes great
>responsibility, and some people aren't up to it (and others are
>unscrupulously sold something they oughtn't) but on balance I think that
>the scales have tipped in the other direction for once.
Its good news for the minority who have financial sense. For the rest it is like installing a poker machine in the living room of a compulsive gambler.
> > Just look at the figures.
>
>Please see my earlier figures instead, since yours are incorrect. It's
>simple math to do, but you have to actually do it and not just make
>numbers up on a napkin.
You don't explain why mine are incorrect, you just baldly assert it. I can actually explain the flaw in your logic. You said:
>If you finance the whole thing (good luck in this
>environment), the interest is more like $35,700/yr giving you an $14.5k
>tax break (on $43,200 deduction) or a net of $2400/mo.
>
>There's lots of things in here that I don't account for: maintenance,
>for one. But: buying in the Bay Area is still competitive with rents.
>
>If you can rent a $600k house for $600/mo, you're way ahead of the
>crowd.
Its not $600 a month. The interest on the whole sum is, according to your own statement, $35,700. That's near enough to $3,000 a month. But I'll grant you there may be some tax refund (in your country) depending on your actual income and what other deductions you might already have. Then there's municipal rates and services, which the owner pays separately but are included in a tenant's rent. And maintenance, which is ignored at your peril. If you don't maintain a house, it will depreciate accordingly. If the house you rent depreciates, you can simply rent another one, but if you own it you will have to catch up all those expenses before you sell it, or simply to keep the weather out.
So it isn't $600, that's fantasy. You aren't including the interest that you could have earned on your down payment if you'd stuck it in an interest bearing deposit in your calculation for one thing. You are ignoring municipal rates and services. You are ignoring maintenance and you are even ignoring home insurance.
And you can't explain why my figures are "wrong", except to baldly assert it.
> > As for the notion that if the landlord's costs go up he can simply
>> put the rent up to recoup the losses, well only if he was charging
>> below what the market would bear to begin with.
>
>Except in regulated markets, if a rental become non-economic, Something
>Must Be Done. Usually it's an even split between selling it and letting
>it degrade.
This is a bit cryptic for me. I wasn't talking about regulated markets, I was talking about a free market. Are you one of these people who fantasise that a free market permits a seller to charge anything they like irrespective of what the buyer is able or prepared to pay? Dream on.
Yeah, the landlord either sells or lets the house deteriorate (which is a way of ignoring his losses and pretending they aren't happening.) What's your point?
Bill Bartlett Bracknell Tas