Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.
In the end, she decided it wasn’t worth it.
“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”
The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership….
Long term I find this very encouraging. People need to start living within their means and the government and society need to stop pressuring people to “keep up with the Jones.” Most Americans probably should not own their own home because they can’t afford it. Buying a home generally involves taking on a substantial amount of debt and few are able to save the cash to put down a healthy down payment (I suggest at least 50% of the purchase price) with a fixed rate 15 year mortgage.
Homes are also frequently money pits for the owners who have to cover repairs and maintenance as well as insurance and property taxes. Renting by contrast gives one much more freedom with reduced expenses (usually just rent + utilities). Unless I hit the lottery or come into a really substantial amount of money unexpectedly, I doubt that I will ever own my own home. And this does not particularly bother me.
So who will own all the homes that people are renting? Or are you suggesting a lot more apartment living?
Both. Real estate prices will continue to fall until people decide they are cheap enough to buy. Prices have obviously been grossly inflated for decades, in part because of the artificial support of government programs promoting home ownership on the part of people who couldn’t afford them.
The free market left to its own devices will sort it out, though I fear that for many of today’s homeowners the experience will prove painful.
If the government gets rid of the mortgage interest deduction, as the Obama administration and Democrats are proposing, prices are going to fall a lot further as a whole new set of people go into foreclosure or simply abandon their properties.
My neighbour was forced into foreclosure when he couldn’t sell his house for as much as he still owed on it. He was quite capable of absorbing the loss and was prepared to do so. The bank didn’t give him the option. Is that Obama’s fault?
That depends, Jim. For big, pricey homes, yeah. But for modest homes when you have a good interest rate and you’re not carrying a big loan then not so much. For me, the standard deduction was always higher than what I’d get if I itemized with the mortgage interest deduction. With these low interest rates and low selling prices, that may be the case for many people.
It would be nice if we’d return to the days when your home was for shelter and stability, not something to make money on, sell for “bigger and better,” and try to impress others. I and most everyone I knew growing up were raised in a 2-3 bedroom bungalow or ranch-style home. None of us felt deprived or underprivileged. The only folks who had big homes needed them because they had a lot of kids. Three or four people occupying over 3,000 sq. ft. was unheard of back then unless you were wealthy or inherited the family home.
I think it’s a function of where you live. Where I live, you’re going to look at shelling out a minimum of $500-600,000 to get a basic no-frills three bedroom house on a 5000 square foot lot. Watching House Hunters on TV, I know in certain parts of the country you can buy mansions on an acre of land for $300,000, a house that would here cost several million dollars, and with an acre of land, five to ten million. The impact here will be devastating.
My property tax on our house went up 57% this year, while the estimated value declined by 37%. One more year like that and the bank and town can figure out what they want to do with this empty house…I’ll be in another state.
Homeowners will begin to look seriously at things like prop taxes, sales taxes and other issues before comitting to a mortgage. Illinois, California, NJ, Mass, New York are all going to lose a ton of residents in the next 10 years. The last census confirmed that those who are able will leave. Rahm the rat will have fewer folks to punish. Too bad.
Who knew any local government would raise property taxes 57% in a single year? Who would have guessed that a government would be so irresponsible and so wildly guilty of malfeasance that they would do such a thing? I bought my house under market and it was MUCH less than what we were being told we could afford…what we were being told we SHOULD be buying. The taxes when we bought the house were literally half of what we payed the year before last. They doubled during the housing bubble due to the government’s assessment of unrealized capital gains for a house we weren’t selling, then dropped slightly in 2009 due to the plummeting of that same guesstimated “value”…only to rise 57% this past year! I am now paying triple the tax on this house compared to when we bought it just 10 years ago. Not only that, I am paying state income tax on the money I am using to pay this insane property tax and NONE of my charitable giving is exempt from state income tax and I also pay income tax on all the sales tax money. What can I say? 40 years of democrat rule in this state have wrought grief, poverty, business flight, and growing government.
I’m not kidding…if they raise taxes again next year, like they did this past year, they will have successfully taxed me out of my home. My wife and I, and our 3 kids will have to relocate to a rental property somewhere…and you know what? I work close enough to the border of another state that I will seriously look at moving out of state entirely so that these leeches cannot get anything more than some income tax. I may even seriously consider transferring to another part of the country to escape this insanity that has New England in its teeth.
BTW…I am still not “upsidedown” on the estimated value of my house, despite 3 years of a declining estimated value. Like I said, we were prudent and purchase this house under market value and before the bubble. If we were actually able to sell the house in this slumping economy, we would be just a little ahead of the break even point. But if the taxes rise again next year like they did this year, we will suffer a loss…but we will not pay 10% of the estimated value of our house each year for the priveledge of living in it. In addition to paying the mortgage on the property right now, we are virtually paying rent to the town (in the form of outrageous taxation)to live in our own home. We were seriously looking at having our mortgage paid off within the next 5 years, but I won’t do that if they keep raising taxes. I’ll walk away from this house and this state. I refuse to be their cash cow tax slave.
S&T (#10 and #11), after spending two years in the US (and three years in the early 90s in upstate NY), I will be returning to Canada in June. I own a house in a province where the average price of a house is $600K and my property tax is about three times what my current landlords are paying. I can’t deduct any mortgage interest and I can’t lock in an interest rate for more than five years. My overall tax burden will be much higher than that borne by my current neighbourse, and gas prices are nearing $5 gal US. I’m still glad to be going back – and I doubt I’ll hear many complaints from my neighbours and co-workers back in Canada. Although there was a brief leveling off period, the price of houses in Canada have increased over the past 3-4 years. The home ownership rate is also higher in Canada than in the US. I doubt that average salaries in relation to the cost of living are that much different in both countries.
I’m not saying you don’t have some legitmate complaints. I am saying that the forces at work are likely several orders of magnitude more complex than you are suggesting and that there are no simple solutions that will quickly fix everything. There are parts of the American psyche that I think I’ve started to understand. The continual scapegoating I see on this forum, however, is beyond the powers of my limited comprehension.
Despite all of our faults in Canada – and we have many – the level of finger pointing is much lower; and there is more willingness to work together for the common good (I guess that reflects the lesser value we place on “rugged individualism”). This is a big part of why I’m looking forward to returning – even though I’ll have considerably less disposable income. I believe that quality of life has to look at more than just the dollar. Now I’ll get off my soapbox.
RE: “The continual scapegoating I see on this forum, however, is beyond the powers of my limited comprehension.”
Yeh — but political constitutional conservatives here in the US comprehend quite simply and easily what needs to be done.
No worries — only 18 more months. Woo hoo!!!!!
I knew that would bring you out of the woodwork, Sarah. I’ll be smiling in 18 months if it’s boo hoo instead of woo hoo. ; > )
Sarah, I should have mentioned that I can give a most hearty “woo hoo!!!!!” to American fiscal conservatives as well. Their sterling efforts in Glendale AZ may result in an NHL franchise returning to Canada.
WOW, Jim! LOL, I forget that we’re quite lucky here in Texas where you can buy a very nice home for $150K or less! Goodness, my brand new 3 bedroom, 2 bath in great neighborhood cost me just $58K 16 years ago. We don’t have huge price fluctuations.
TT2–Way things are going, one day my wife and I might be moving to your neighborhood or someone equivalent. We both grew up here, but it’s getting to the point where we literally can’t afford to live here any more, or rather, if we keep on living here, we will never be able to afford to retire. We’re being taxed into oblivion, all the while while government keeps on cutting off more and more services and continuing to behave in imprudent ways. The latest deal with the public unions, which was just announced, gives them 62 paid days off day a year (which they claim was a cost-cutting concession). That’s nearly one third of the year not having to work because of vacation and paid holidays.
I don’t know how much longer the private sector can take it any more. Unfortunately, the public unions have a lock on our government.
RE: “I’ll be smiling in 18 months if it’s boo hoo instead of woo hoo.”
Yes — I know that you’re rather obsessed about US political conservatives, WarrenS. These things are pretty important to even Canadian collectivists, apparently, even those with understandably limited comprehension.
I’ll counter your emotional involvement with my own complete indifference about your Canadian elections. You can elect all the central planning collectivists your little heart desires.
Hopefully you will also reach the point where you can show “complete indifference” to my comments.
RE: “Hopefully you will also reach the point where you can show “complete indifference†to my comments.”
Now why would I want to deprive myself of some occasional small instants of amusement, where I find the time and interest on a given day? Granted, you have a bit of competition with some of the other libs who comment on this blog, so I do the best I can to give equal time to all. And admit it — you love the little blood pressure spikes of reading political conservatives or you wouldn’t be over here.
With your intense interest in the world beyond the US borders, you probably didn’t hear that Sun TV (already affectionately known as Foxy News North – for its political slant and the attire of its female broadcasters) started broadcasting in Canada last Monday. I’m sure it will help get people like me sorted out – or maybe they’ll go bankrupt in their first year. Actually, it’s another reason for me to continue my 21-year history of not having a TV in the house.
Given your regular harping on SFIF about staying on topic, did you have anything to say related to the original story – or do you just like to follow me about?
Boo hoo (#14). : > )