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By Kevin M
 If you’ve spent much time on this site, you know that I’ve taken aim at the assumption that homeownership is good for everyone. It’s not that I think owning a home is bad, but more that I don’t think it’s right for everyone. In addition, I think that the advancement of- and unquestioned belief in- universal homeownership was one of the root causes of the real estate and mortgage meltdown.
Today I’d like to zero in on homeownership as it relates to retirees, and by extension, to retirement planning. I’m going to risk committing a heresy to make the case that many would be better off renting in retirement.
Why might some retirees be better off renting?
Continue reading Are Retirees Better Off Renting than Owning a Home? →
By Kevin M
 Housing prices are lower than they have been in years. Mortgage rates are near all time lows. Housing stats are starting to pick up. The bottom on the housing market is in. Joe Smith around the corner sold his house in three days, and he had four offers (or was it four days with three offers?). Time to buy—and buy quickly! Prices will never be this low—rates will never be this low—the real estate agent said so. Buy, buy, buy!
We’re starting to hear this kind of buzz. If you’re looking to buy a home are you starting to feel the pressure to make your move during this rare “window of opportunity”? Well, ignore the hype. The window will likely be open for a good while, so realize that time is your friend and play it for all it’s worth.
For one thing, housing sales continue to be weak. The statistical improvement we’re seeing in most markets is mostly upward bumps off a very low bottom.
More important, the profile of the typical buyer is deeply impaired. Three factors are combining that will keep a lid on the size of the potential buyer market for home for the next several years.
Continue reading Why Time is Your Friend When Buying a House →
By Kevin M
By all accounts, 2010 was a terrible year in the housing market. How terrible? An article this week on Yahoo! Finance sums it all up in the headline: New-home sales in 2010 fall to lowest level in 47 years.
That’s almost half a century and longer than most Americans have been alive. But even that doesn’t quite capture the gravity of the situation. Apparently records tracking new home sales only go back to 1963! Or put another way, 2010 new home sales were the lowest on record! In reality, no one really has any idea how far back we’d have to look to find sales figures that low.
Another article on the same subject, released last week from Bloomberg gives some telling statistics: 1.28 million new homes were sold in 2005 (peak) versus 321,000 sold in 2010—that’s a 75% reduction in the number of new homes sold in a space of five years. In addition, we’ve experienced a 30% drop in house prices since the price peak in July of 2006.
Continue reading 2010 Was the Worst Year in Housing Ever—So Is Now the Time to Buy? →
By Jennifer Barry
A couple of weeks ago, Kevin wrote Has the Time Come Again to Invest in Real Estate? and made the case for and against investing in this area, making some excellent points. However, I think the majority of people who jump into real estate right now will be kicking themselves in a few years when their investment continues to lose value.
Kevin is right that prices have dropped a lot since the peak – down more than 50% in some cases. Unfortunately, this doesn’t make housing cheap or even affordable.
Americans are spending too much on housing still. For over two decades, the ratio between the median home price and median household income was 2.8. Based on the latest government figures, the ratio is 4.3. The situation is getting worse as income is falling faster than prices, as unemployment remains stubbornly high.
Continue reading Housing: To Buy Or Not To Buy? →
By Kevin M
The investment universe seems to be as confusing now as it’s been at any time in recent memory. While it seems that opportunities exist—they always do—the risks have never been greater. So what are the choices, and how do we play them?
The Stock Market
The stock market is hovering around Dow 11,000—is it a good place to be? Many of the experts are saying that the economic recovery is just getting started, and now is an excellent time to be in the market. Profits are growing and the market is following a textbook post recession path to higher levels, maybe higher than we’ve ever seen in the past.
But voices in the woods—including regular OOYR contributor Rob Bennett—are advocating caution. Valuations remain high by historic standards and the economic backdrop is much more convoluted than it has been in past recoveries.
Continue reading Where Are You Investing Your Money Right Now? →
By Kevin M
Real estate has been the favorite whipping boy of the investment community for the past few years—heck, and most of the media too—but is it time to rethink that position? I’m not talking about the decision to buy a house as a primary residence—that’s a deeply personal decision based on your unique circumstances. No, I’m talking about real estate for investment.
A lot of people are nervous about real estate right now, and you can hardly blame them. Given the wild ride the housing market has been on for at least the past three years, this is hardly a time for unbridled optimism. Yet investing in real estate is probably a better bet than it’s been in decades.
Consider the following:
Continue reading Has the Time Come Again to Invest in Real Estate? →
By Kevin M
Are you really getting a deal on a home because you can get it for less than it would have cost three or four years ago?
Maybe. And maybe not.
In most markets, house prices have come down 20, 25, 30% or even more from their 2006-2007 peaks, and that’s caused many to believe they’re getting a deal by buying now. After all, they’re able to buy a home at discount compared to what they’d have gotten if they’d bought at the peak.
At some level, this reasoning is sound. After all, a lower price translates to a lower down payment and a lower monthly payment. And by waiting, you managed to miss the equity plunge that landed so many homeowners in deep trouble and even foreclosure. So far so good.
But is it really a deal?
Just because you’re paying less doesn’t mean a home is a deal
Continue reading How to Get a Real Deal on Your Next Home →
By Kevin M
Despite hints and statistics showing a somewhat improved housing market, now is not the time to merely assume that the market is teeming with good deals and that a return to the real estate price spiral will soon cover any mistakes made in the purchase. The market remains sluggish in most areas, and if it remains this way for several more years, getting the best deal is more important than ever.
The most important moment in the ownership of a home is the purchase. A good deal at purchase can reap big rewards in the future—especially if prices don’t rise appreciably in the near future. You only have one shot at making a good deal, so make it the best you can.
But how do you get the best deal on a home in this market? The same ways you would in any type of market.
Continue reading 8 Ways to Buy Your House For Less →
By Kevin M
There are strategies we need to put in place that will help lead us where we want to be in life, but just as important is problem avoidance.
When making our plans, we can project working in a certain career, earning a certain income, investing and having X amount of money by age Y, living in a certain size home, and even planning out a career for our children. But few of us ever give serious practical consideration to the things we don’t want to do!
Two or three major mistakes can derail the most well intended plans so it’s best to play devils advocate from time to time and seriously consider the question “what can go wrong here?” It should be done with the same level of intensity that we give to the plans that we hope will move us forward.
Below is a list of ten financial mistakes I’ve culled over the years from my experience in public accounting, from working in the mortgage business and from a few dives into an empty pool I’ve taken on my own road of life.
Continue reading Ten Financial Mistakes You Can’t Afford to Make →
By Kevin M
One of the most compelling reasons for owning a home is the heavily touted tax benefit owing to deductions for mortgage interest and property taxes. Real estate agents will play this benefit for all it’s worth in extolling the idea of homeownership for all.
However for three reasons, this benefit is not what it used to be: a generous standard deduction, low mortgage rates and low marginal tax rates.
The tax benefit of homeownership became an entrenched concept back in the 1970s and early 1980s and at that time it had overwhelming merit. Mortgage rates were in double digits most of the time, marginal tax rates ran as high as 70% and standard deductions were down in the low thousands. Owning a home made major sense even for moderate income earners and was an article of faith in the higher income brackets.
None of that is true today, yet the tax savings pitch remains. Standard deductions can exceed $11,000, interest rates are down around 5% and marginal tax rates cap out at 38% (but are substantially lower for the vast majority of households). Yet the notion of major tax savings remains almost unchallenged.
Continue reading Tax Benefits of Homeownership – Three Reasons Its Over-rated →
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General: Any information in regard to money, credit, personal finance, or in regard to any other monetary topic, provided or shared on OutOfYourRut.com is presented for information and entertainment purposes only and does not constitute financial advice. It is intended to provide general information only and does not constitute personal financial advice in regard to your specific circumstances...MORE-->
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Ten Financial Mistakes You Can’t Afford to Make
By Kevin M
There are strategies we need to put in place that will help lead us where we want to be in life, but just as important is problem avoidance.
When making our plans, we can project working in a certain career, earning a certain income, investing and having X amount of money by age Y, living in a certain size home, and even planning out a career for our children. But few of us ever give serious practical consideration to the things we don’t want to do!
Two or three major mistakes can derail the most well intended plans so it’s best to play devils advocate from time to time and seriously consider the question “what can go wrong here?” It should be done with the same level of intensity that we give to the plans that we hope will move us forward.
Below is a list of ten financial mistakes I’ve culled over the years from my experience in public accounting, from working in the mortgage business and from a few dives into an empty pool I’ve taken on my own road of life.
Continue reading Ten Financial Mistakes You Can’t Afford to Make →