Saturday, January 5, 2008

Time for new friends

From the "ASK THE REAL ESTATE EXPERT" column on Yahoo Finance:

"I am a 48-year-old divorced female. I have been renting a home for the past 10 years. My friends keep telling me that renting is 'throwing your money away,' but if I buy, my monthly housing costs will probably double. I wonder if, at my age, I would not be better off putting the difference into a retirement account?"
I'm not sure who the bigger fool is here. The writer or her friends. Her friends are financial simpletons brainwashed by the NAR and MSM that you must buy a house no matter what. The writer however knows better. Otherwise she wouldn't be writing in for advice. So why the hell is she listening to the bonehead friends of hers?

So what is the advice for the so-called expert?
Rent versus buy is a perennial issue -- and a very complicated one.
No actually it's not too complicated at all. Quite simple really. If it costs more to rent that your mortgage/taxes/insurance/maintenance/repairs, then you buy. If it costs more to buy, then you rent. You can do the math in about 5 minutes using Excel.

The so-called expert continues
The decision is not properly made by looking at monthly costs -- there would be few homeowners around if that is all they looked at. Homeowners build equity, which is part of their wealth -- in many cases the major part. The equity can be extracted later in life by selling the house or by taking out a reverse mortgage. Or they can leave it in their estate for others to enjoy, if that is their inclination.
Ahem, Mr. Expert, homeowners do not build shit when prices are plummeting as they are now. For every $100 this woman would build in equity she would lose $1000 of equity as the value of her house would decrease. Not that a mortgage broker would ever say anything about that. Nope, in the world of mortgage broker land as well as realtor land, real estate only goes up and now is always a great time to buy. Why bother with monthly costs or price to income ratios or any of those pesky details? It is amazing to me that a year and a half into the housing crash people still believe these liars and ask them for advice.

And how about this twisted logic from the expert?
The calculator approach, however, has serious limitations. One is that an owned house and a rented apartment are not comparable in terms of amenities, location, responsibilities, and even associated lifestyle. Trying to place a dollar value on these is very difficult.
Hey asshole, did you actually read the letter? She is renting a HOUSE, not an apartment. And I would assume the house she is considering would be in the same location, have the same amenities and at 48 I can't see her changing her "lifestyle" radically. Why in the world would you bring this argument up? You would get an F in any intro to logic class. In case you haven't been made aware, there are literally millions of HOUSES available for rent today. How do I know? Well I rent one myself for a fraction of the cost of ownership. Imagine that!!

And finally the so-called expert leaves us with this gem:
The fact is that most homeowners make the decision to become a homeowner with their gut rather than their mind. Indeed, the decision often resembles the selection of a spouse more than the selection of a financial investment. We have all heard the statement, "I fell in love with that house."
OK you sold me. I will ignore whether or not I can afford it. I will ignore whether or not it is a good investment. I will ignore whether or not I will lose money on the deal. From now on when I see a house I fall in love with I will rush to my local mortgage broker and sign on the dotted line.

Shame on Yahoo for allowing this guy to give advice as an "expert". The only expertise he has is swindling people out of their hard earned money. The answer for about 90% of people when asking should I buy a house today should be a simple, "only if you feel like losing money". Oh well, can't help those who don't want to be helped.


Anonymous said...

typical REIC bullshit

Anonymous said...

To be fair the guy did say she should keep renting, but for the wrong reason.