Homeownership no longer the American dream?
Though housing prices have dropped to new lows, folks aren't sure a home is a solid investment anymore.
But people aren't buying. The economy and the tightened lending market have all but removed the possibility of homeownership for some. But there's another interesting sentiment developing: More and more people just don't want to buy anymore.
The percentage of people who think of a home as a safe investment has dropped to just 64%, Bloomberg reports. That's the lowest ever reported in the national housing survey from Fannie Mae, and down from 83% in 2003.
So many people have turned away from homebuying, in fact, that we may be seeing a culture shift. Maybe the house with a white picket fence is no longer part of the American dream.
Well-known investor James Altucher lists several reasons owning a home is a bad idea in a recent blog post. Housing prices historically haven't risen enough to merit that huge down payment, he said. Homeowners also must deal with closing costs, pricey maintenance, property taxes and the fact that most of their life savings is tied up in one investment.
"I'm never going to buy a home again," Altucher writes. "And sit there in the middle of the night thinking, 'Why the hell did I do this to myself again?'"
Other renters feel the same way. "The magnitude of the housing crash caused permanent changes in the way some people view homeownership," one finance professor told Bloomberg. "Even as the economy improves, there are some who will never buy a home, because their confidence in real estate is gone."
You can almost see this conflict playing out in the stock price of homebuilders such as Toll Brothers (TOL). Check out the one-year price chart to the left. Investors don't know what to think of this sector. The three-year chart is even more telling.
Economists tell Bloomberg that the economic crisis destroyed the notion of a house as a risk-free investment. It was just a standard assumption that whatever house you bought would increase in value. No one expected to be underwater on their mortgage or in foreclosure.
But at the end of last year, a shockingly high 11 million homes in the U.S. were worth less than what owners owed on their mortgages, Bloomberg reports.
And in March, the percentage of Americans who plan to buy a home in the next six months fell by 23%. Certainly that share will recover as the economy improves. But it will be very interesting to see the long-term chart of this sentiment. Are we becoming a nation of renters?
What really makes Real Estate investing a bad idea is the Real Estate Taxes...
Think of it as an investment whereby the government takes 2-4% EVERY YEAR, even though you didn't get any money.
The problem started when they no longer required 20% down. The government made it worse by encouraging speculation, by making the first $500,000 in profits tax free. Never mind the mortgage interest deduction or other programs to encourage speculation. Freddie and Fannie made the problem much worse by encouraging the bankers to make risky loans and sell them.
They drove the prices up to artificial government induced levels. And of course the crash came... Real Estate still has a way to go on the down side.
Real Estate actually makes for a poor investment considering all the costs...
Homes are for people to become part of a neighborhood a community. For the pride that comes with owning your own place. To raise a family, to grow old in. They should not be used as pawns for the game of real estate investment.
The market will not stay this way forever. Right now it is very difficult to get a loan. How the heck can people save for that down payment when they are just lucky enough to keep their jobs. Eventually the economy will be back on top again. It is just the waiting game.
So let me get this straight, when house prices were going through the roof Americans took out mortgages they couldn't afford. Now that prices are more affordable no one wants to buy a house.
And on the flip side when houses were expensive banks created the most ridiculous mortgages and gave them to any livng being without even checking if the borrower could pay back the loan and now that houses are affordable banks won't give loans.
Things changed when speculators got into the game to make fast money by flipping houses, when lendors quit caring whether the people who borrowed money to buy a home were even remotely qualified, when appraisers set values too high just to satisfy their clients, and when realtors knowingly sold homes to people who couldn't afford them. The bubble had to burst, and when it did, millions of innocent people were affected.
Housing will eventually come back, but it will be many years before people buy homes thinking they will make a quick buck.
"Houses are dirt cheap right now. In fact, homes are more affordable than at any time since the National Association of Realtors began measuring the data back in 1970 ..."
I wonder what this is based? If homes increased 200 - 300% during the boom and have fallen around 30-50%, and income has increased (if any) single digits, things don't add up.
"It was just a standard assumption that whatever house you bought would increase in value."
Perhaps the "assumed" increases have been sucked out and still caught in the numbers that don't match above.
All this sounds like hype ... how the bubble got created. Until homes fall and match affordability of income, all the hype won't change anything.
For people that doesn't want to purchase real estate any more I think your making a big mistake, I recently purchased at approximately 80 to 85 dollars a square foot, forecloses, HUD, yes its a buyers market and its a renters market, I can now get renters to pay more for a home than a monthly mortgage payment giving me the opportunity for you to pay on my investment and at the end of the year the cash cow, its a huge tax rite off for me to rent my real estate.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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