Historically, a person’s home WAS THIER FINANCIAL FREEDOM. Worst case scenario, you have no income but you have your home - a roof, safety and perhaps some land to farm perhaps = you where FREE to do as you please.

Hence, a person’s home = the American Dream.

Property taxes in states such as California are so high today that you can never “own” your home “FREE and CLEAR” - you need significant income just to pay the state government for the legal right to live in your own home. Combine this with local governments, community watch dogs, … and it is not longer possible achieve the American Dream simply by owning a home.

Hence, a person’s home is no longer equal to the American Dream.

I argue that you are simply chasing the same age-old American Dream but are smart enough to realize that it no longer lives within the life of a wageslave + homeslave.

The only way to achieve the American Dream today is to generate enough wage free income (dividends) to cover basic living expenses - a roof, safety, and perhaps some land to farm.

I’m optimistic that young people such as youself will help America find it’s way again through less government and a return to property rights.

Then working, saving, and buying a home will once again give all Americans (not just entreprenuers) … “to have the freedom to do what I want, when I want to do it, with no worries about my finances.”

More strikingly, I had to rent for 6 months last year at $2000/month for 1200 square feet with a lousy kitchen. I’d have paid $150 more a month for a decent one, believe me.

Anyway, what it comes down to IMO is when a bottom is perceived, people are going to buy. When interest rates shift down due to FNMA, people will buy, and if any other factor shifts this balance, I think we will see mini-rallies in the market. Santa Cruz just had one in February apparently due to the transient drop in interest rates a few weeks back.

The downside of owning at that point becomes fear of loss of principle, which is a very valid fear. Like you said in a later entry, it’s a great time to wait another 2 months, and maybe morre afterwards and then suddenly someone else lost the principle for you. Strange times ahead…

Your comment that “stocks CAN be worth 0$” seems to imply that the value of the stock market as a whole can be nothing. If this is what you’re implying then I’m going to have to disagree with you.

Individual companies can go bankrupt, which would drive the value of their stock to $0. But, if the value of the entire market were to actually be $0 then every company in the country would need to be be bankrupt. If this were the case you would not have a job to pay a mortgage with and you would lose your home. Or even if you had your home paid off it would be worthless because nobody would have a job and could therefore not secure a mortgage. The point is that if the stock market were actually worth $0 then your home would certainly not save you and would likely be the last thing on your mind.

Now if the stock market were selling for $0, but the companies were actually still in business then it would be free money. The current yield of the Wilshire 5000 is $292 billion. I would certainly risk $0 + trading fees to get $292 billion per year in return.

The overall stock market will never actually be worth $0. Its intrinsic value will increase in the long term in proportion to (1) real GDP growth and (2) inflation, as it always has.

::http://www.realtor.org/press_room/news_releases/2007/president_bush_signing_mortgage_forgiveness.html

Is this the moral hazard of the new century act?

Because when I read this, what it tells me is that quietly speaking, a house is an asset class (and not a place to live in). A place *to live in* wouldn’t have a bail out clause attached to it but a broad asset class would, for the safety of the investing population. Unfortunately, if pulling the exit hatch is as easy as turning in the keys without a subsequent IRS visit then I don’t see how this would protect an asset from major devaluation.

Well, it’s either rent or property taxes and where I live, in the northeast corridor, the typical rent for an apartment is about 30-40% of the condo fees plus property taxes for an equivalent unit and this doesn’t even include the base mortgage payment which is already 1.5 to 2.x times the rent.

All and all, for me, freedom is being able to take a job anywhere in the country (or world, since places like S’pore, Toronto, and Hong Kong have a lot of US ex-pats working there) and being able to pack up and move and only having to give up a month’s worth rent plus the security deposit to keep my “reference” standing with the property management company.

:Putting your trust in Wall Street is a fool’s game

Can’t agree more, which is why the non-sophisticated investor should stick with utilities/tobacco dividend yielding equities and AAA intl govt bonds like Norway/Oz.

Other so-called intermediate swing traders can game (time) the system using options, futures, and ETFs.

In many parts of the universe, owning a home is totally out of the question. Many homes are passed down from generation to generation, because there is only so much land to go around. Owning a home (or land) was only available to the very wealthy. In America, it was possible for a regular person to one day own their very own home.

Wall Street has managed to destroy this dream by their greed. Wall Street, also in 2000-2001 also managed to destroy the dot com explosion with their misguided venture (vulture) capitalists. Dot com start ups didn’t follow proven business practices. Dot coms thought they could buck the ’system’ and if they sold products below wholesale prices they would be rewarded with loyal customers. Obviously, it didn’t work out.

Same true today with Wall Street and their bundled mortgage offerings. Common sense and past housing practices proved that homeowners should be putting down 10 to 20% downpayments, getting 15 or 30 year conventional fixed rate mortgages and remain in the home for at least 5-10 years to see a return. A home was a place to simply live in. NOT a means to flip and make yourself a million bucks. No money down loans, interest only loans and giving bad financial advice to homeowners that they could either flip or refinance a home in 2-3 years was not a very smart or decent thing to do. Wall Street made their money (as they did in the dot com era) and mere mortals (such as ourselves) lost our money, our dreams and our hope.

Buying a home is just a place to live in. It is not supposed to be a revolving door of credit (tapping out equity). Greed both on the part of Wall Street and homeowners has destroyed what was once part of the so-called American dream. I find this to be very sad indeed.

Forgoing home ownership and renting in the guise of taking the money saved and investing it in Wall Street, with the very scum that has caused the stock market to collapse in 2001 and now 2007-8 is, in my opinion, insane. Every five years or so, Wall Street corrupts (think Savings & Loan, junk bonds, Enron to name a few). Sending your money to Wall Street is just fueling them with cash to fund the next disaster. I’d think twice before doing this.

When the housing dust settles and all the prices return back to normal (because the prices really did get out of control during the frenzy) it may be advisable to get back into the housing market BUT do it the conventional way ie: 10-20% down, 15-30 yr fixed rate mortgage, stay 6+ years and never, ever borrow out your equity. It’s still something to think about and decide if it is right for you.

Redefining the American dream as:
“My American dream is to have the freedom to do what I want, when I want to do it, with no worries about my finances.” As long as you still have to worry about paying rent, doesn’t make you very much free. Putting your trust in Wall Street is a fool’s game.

http://www.encyclopedia.com/doc/1G1-141482419.html)

The valuse of imputed income might not tip the scales entirely in favor of buying in every situation, but to exclude that value when running the numbers in not, then, comparing apples to apples.

The interest paid on a mortgage is for the use of the money; the house (property) is what secures the loan. The mortgage payments are paid as purchase money for the asset (the house).

Once you pay off the mortgage, you own the asset. The bank charges you nothing to live in the house and you can leave it vacant if you want and live somewhere else if you choose to do so: makes no difference to the bank (mortgage holder).

Let’s say, for example, that you want to buy some gold coins and you borrow the money to do so using the coins as collateral. That is an investment; you are betting that the gold will appreciate more than the cost of the loan.

You are borrowing the money to purchase the asset; in this case, gold. But you cannot live in gold, so there is no imputed income to be had in that arrangement.

The difference with borrowing the money to buy a house (the asset) is that you can live in it, and so you derive the benefit of imputed income equal to the cost of a like rental.

In fact, in Australia they are up in arms because the government is proposing to tax the value of the imputed income of mortgagees. Even on some US blogs in discussions on this debate, some posters argue that the benefit of free rent to mortgagees should be taxed!

To further illustrate the point, if I buy a house and rent it out (vice living in it myself), the government DOES tax that income! But, if I live in it and shift the benefit from rental income to imputed income, I avoid that tax entirely. It is, really, a very sweet deal that has real cash value.

RandyMan: Thank you for the response. And, yes, there are obviously people in real estate with their own agendas.

I have had days where I wonder why I am in the business, myself; like the day I saw a tenant loading all the interior doors (including kitchen cabinet doors) from the apartment he rented from me into his truck to use as firewood at the beach party.

So, there are some less than stellar landlords but, also, some tenants are wanting, as well. But I used to be a construction electrician and I still enjoy the physical nature of the work of maintaining a house and using my hands; even after twenty years behind desk.

But owning rental properties (IMO) is not best approached as a get rich quick scheme and not everyone is suited for the business. And if you invest in real estate you CAN lose money, just like you can lose money in the stock market or gold or collectibles.

And I am only diversified into investment real estate and, to that end, I usually only have one rental property at a time but I have had as many as three. There are some details on my latest project at my website. Then, I hold onto that single property until my equity approaches 60% or so then I sell, rinse, and repeat.

But I am not an advocate for the business; it is just that in discussing the rent vs buy issue, I think the numbers need to include imputed income to be accurate.

R/

Your style of thinking reminds of the traditional owner of the triple decker who rents out the largest units while keeping the smallest one for himself. And I agree, traditionally speaking, that that was the way of being a landlord and beautifying the neighborhood. I’d spent some time, as a kid, living in one of those multi-family homes and the landlord was one the sweetest old fellows around. The problem is that that’s not the reality of the housing market today. Outside of an apartment building with a decent management crew, many landlords are negligent and are intent on simply flipping the property.

@The Debt Whisperer: I have no idea what you are talking about. No bank “lets you live in the house for free.” They charge interest. Also, I had never heard of the term “imputed income”, so I searched for it, and its definition doesn’t seem to match what you are saying.

Your numbers are pretty confusing. I stick with what I wrote above. My out-of-pocket costs would be significantly higher to own, and like previous posters wrote, painting the walls a different color is not worth $1M+ to me.