We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Our Recent Essays Behind the Front Page
Thursday, January 5. 2012
Walmart’s Ancestor - A new book chronicles the rise and fall of A&P.
Walter Williams: I love greed:
The Great Golden State Business Exodus
In the UK, the dole pays out close to the UK median working wage
Their politics sanctions - or encourages - dependency and lack of dignity
Advisory group recommends withholding billions for high-speed rail
Always seemed to me that a mortgage is just renting from a bank, while you assume all the risk and all of the costs
Obama defies lawmakers with recess appointments to NLRB
But if Bush did this...
White House: When Congress Won’t Cooperate, Obama Will Take ‘Small, Medium and Large’ Executive Actions
But if Bush tried that...
Children of the Corn: The Renewable Fuels Disaster
Probe reveals feds pressuring agents to rush immigrant visas – even if fraud is feared
New forms of Terrorism in Turkey
More cool links at Hit & Run
Tracked: Jan 05, 07:29
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Noting your link about UK benefits being equal to or greater than the median income - how does this compare to the US?
Someone I know worked as a home nurse in a major northeast city. In her travels she came across matriarchal establishments of great grandma, grandma, mom, daughter, daugher's baby. Collectively, they received a couple of disability checks, housing assistance, medicaid, food stamps, heating assistance, WIC, and in some cases, a direct welfare payment which one can still get for a limited number of years. Probably other income too that I don't know about.
It is no wonder that alot of these people have no incentive to work. Are there any studies that document the value of these combined benefits and compare them to the median wage in the US?
Mortgage is more like a "rent-to-own" arrangement. Part of the payment is rent, and part is a premium converted to equity. Two major issues are (1) is the house equity worth more than the return on investment one would get by investing the 'rent premium' that goes to equity, and (2) is the illiquidity and subsequent loss in mobility too heavy a burden to carry in a fast paced economy with lots of creative destruction going on disrupting industries and labor markets.
Fair questions in todays environment.
The premium investment seems an open question. Yes, declining housing prices have destroyed a lot of equity. But the stock market isn't exactly an unmanipulated investment environment these days. It all seems a crap shoot.
Even people approaching retirement age find being saddled with home ownership a burden in planning their retirements. The only time home ownership seems economically viable is if there is great job stability and one is raising a family and needs some community stability/support such as good schools.
Just as the average American no longer can count on a single employer for their working lifetimes, they can no longer count on living in a single spot for most of their adult lives. Employment mobility and housing mobility are highly intertwined.
Bird Dog: The Great Golden State Business Exodus
Myth? Do you have data to back up the contention? All you cited was an polemic.
"Most job gains are due to the births and expansions of locally owned businesses; most job losses are due to the contractions and deaths of locally owned businesses. Businesses headquartered outside a county contribute much less to local employment fluctuations. The homegrown shares of job gains and losses are even higher in smaller cities and towns and in rural areas. Among the non-metropolitan counties in California, 79% of job gains and 74% of job losses are homegrown. Thus, although luring businesses from elsewhere or convincing them to open or expand locally is a common economic development strategy, and preventing businesses from leaving the state is a political refrain, most job gains and losses are homegrown."
— Public Policy Institute of California 2010.
I heard the author of the A&P book on NPR several weeks ago and picked it up. Reading "The Big Roads" now, and will move to that shortly. Looks intriguing. The funny part is the author seems opposed to big businesses, but admits that A&P (and, by default, WalMart) have provided huge benefits to the American consumer by standardizing the shopping experience to the point that most shoppers have a relatively good idea about exactly what they are going to get - something that was a dicey proposition before the arrival of the large stores.
Regarding home ownership, I purchased my first home when I was very young (a condo in the NYC area). Best investment I ever made. When I married and started a family, I began to rent it out. The mortgage is more than covered by the rent, today.
As a friend of mine, a lawyer who does closings, says "home ownership is not for everyone. In fact, it's not right for about 40% of the people I've seen buying." Her point is that it's a commitment many people don't understand.
I've run the figures many times, and home ownership is a much better investment than renting and investing the difference in most economic environments. Few people have the discipline to invest the difference (which is really the key to make a rental a better "investment"), and even if they do, renting only beats ownership on short, early, timeframes in the mortgage cycle.
The reason home ownership is considered a 'good thing' by many is that you used to buy a home and live in it for 40-50 years or pass it on to your offspring. Over time, the equity accrues to the first generation, but the largest benefit typically accrued to the second.
Another reason ownership is a good idea (if you know what you're getting into) is that you have to rent from an owner. While owning may seem like 'renting from a bank', the reality is that renting goes on forever, whereas the bank payments end eventually (and quicker if you make early payments like I do).
Meanwhile, while you pay the rent, your landlord pockets the difference. So, as an owner, they are seeing a very nice benefit (where I smarter, I'd have bought more condos in the 1980's and lived off the rent!).
There are benefits to renting and owning. It all depends on your age, location, income, job stability, and financial wherewithal. When I saw my rental payments potentially doubling, I chose to purchase, and it took 10 years before my mortgage payments matched the rents I would have had to pay. That was an easy calculation.
I'm curious about the birth/death calculation. It plays a very large role in the statistics we see from the government each month.
At Zerohedge and ShadowStats, they have openly questioned the methodology utilized to determine birth/death. There is an assumption that the government is using outdated models to determine this. It wouldn't surprise me at all.
The main issue I see with housing over that past 10 years is the lack of honesty in discussing pros/cons of ownership and who it is best suited for and who it is not. Instead it has been a blind push for EVERYONE possible to take on the burdens of home ownership to great detriment.
Perhaps true if today's world is here to stay.
But suppose the next 35 years overall are like the last 35.
Thiity-five years ago, at age 45, and after having seen all of the world I wanted to see as a military pilot, I had a solid 2600 sq. ft. home and two-story garage built on a sloping half-acre, which I developed into a low maintenance mini-park over time. I paid 20% down, and paid off a 30-year mortgage in 12 years.
I am now 80, living in a solid, low maintenance home with plenty of puttering space, which at an active 80 is an absolute necessity. I also have my own mini-park for strolling, admiring the plantings, and whatever outdoor puttering I choose to do. I haven't paid rent or made a house payment for 23 years. With continued good health, I hope to be my own master for another 20 years.
The point being: If you plan to stay put, buy the right home on credit, pay off the loan quickly, and live out your life expectancy in that home, I believe (without trying to do the math) you will come out way ahead financially, and probably will be a lot happier in your old age.
If home ownership is such a bad deal who would own the homes for others to rent?
Very true. However, now I see plenty of push to rent, w/o an honest discussion of the drawbacks there. Off the top of my head:
Poor landlords (who don't make the expensive repairs you need)
Steadily rising rents (which as others have mentioned, may not take long to outpace your mortgage payment)
Need to move b/c of landlord decisions
What was once an obvious decision is certainly very challenging these days. We struggled with it, and decided to buy (moved in 3 years ago today as a matter of fact) despite the fact that we didn't expect to be here for a long time.
Soooo...who is to blame here--the liberals in Seattle who won't confront a Mexican/American coach, or the Republican farmers who won't . . . when we set core values aside for politically correct numbers games we all suffer. Watch it and weep:
Property tax is a rent to never own situation. It turns the principle of private property on its head.
My wife and I have lived in our current home, which we own, for 35 years now. During that time, the market value of our home has increased by an order of magnitude. The downturn in the real estate market elsewhere in the country has not affected us in the least. If we were to put our house on the market today, it would be sold by tomorrow because of its beautiful location, not to mention its pristine condition. We have also been very lucky never to have faced any major repair issues. So, for us, we've made a good investment.
In the past we've also owned a rental property as a real estate investment. The idea was to diversify and not have all of our assets in the stock market. Unfortunately, changes in the Internal Revenue Code, which did away with certain tax benefits from investing in real estate, plus an increasingly restrictive local landlord-tenant code, which actually made it more difficult for us to be conscientious landlords, prompted us to rethink that strategy. In the end, both the tax changes and the local regulations, which were intended to protect renters from abuse by unscrupulous landlords, drove us away from the market. Both changes ultimately hurt renters, I think, by lowering the supply of properties that were available to renters and thus driving up rents.