From: asylvain@felix.filenet.com (The Chipmunk)
Newsgroups: misc.invest.real-estate
Subject: Re: Long-Winded Discussion About Inflated Hom
Date: 20 Jul 92 19:31:19 GMT
            <l63lp2INN17r@jethro.Corp.Sun.COM>
            <THUNDT.92Jul15170142@jaguar.shearson.com>
Reply-To: asylvain@fritz.filenet.com (The Chipmunk)
Organization: Foundation for the Increased Wealth of Chipmunks

Written in article <THUNDT.92Jul15170142@jaguar.shearson.com>
 by thundt@jaguar.shearson.com (Thomas M. Hundt):

:>	 I believe that the current high cost of residential housing (in 
:> California) can not be sustained.  Consider a 'typical' 2-income family, 
:
:> [...] the family is *significantly* better off renting than buying, even 
:
:| Give me a break Rick, where would you be now if you had bought
:| say two houses in San Francisco in 1972.  You would have a bundle
:
: If you can afford to buy, then I believe you are much better off doing
: so.  Rationale: Paying $1000/mo to a landlord (with no chance of
: getting any back) vs. paying $1000/mo to a bank (with a good chance of
: getting a chunk of it back), I'll take the chance.

Don't over-simplify the equation.  If you can afford to buy, but your
rent would be cheaper, then it may be better to rent.

One of the bennies in buying is that part of your payment goes into
equity.  When you sell, you get that equity back in a lump sum. This 
assumes that the value of the property will go up by a certain amount.

If the value does NOT go up by a certain amount, you might be better off
renting, then taking the difference and investing it in a CD or something
(not that those are paying very well these days!)  Investing in real
estate is like investing in a CD with an unknown interest rate.  It has
historically been very good, but there's no guarantee.

The point is this: "better to buy than to rent" is no longer always
true.  Each individual investor must look at the situation and make his
or her own determination.  As with any other investment, a certain
amount of analysis and "crystal ball gazing" is necessary.

: Anyway, one reason prices can only drop so fast is that a seller is
: required (I believe by Federal law, correct me if I'm wrong) to pay
: off his entire mortgage before title to the property can transfer to a
: new owner.

He may be required to do so, but he might not necessarily do it with the
BUYER's money!  Plus, if necessary, he can always just walk away and let
the bank foreclose.  It's not a nice scenario, but it's an available
last resort.

There is a reason that real estate prices do not fall quickly.  So long
as all other factors remain equal, a family typically chooses to simply
NOT MOVE if they can't get _at_least_ what they paid for the house.

So, they opt to sit in the house, which may be too small, or too far away
from work, or in a neighborhood that's getting too rough, and just plain 
suffer.  Unless the situation becomes VERY bad, they'll sit it out until
the market upswings, rather than take a loss.

What's happening nowadays, is thanks to the recession, LOTS of people
are finding the situation has become VERY bad.  It's hard to pay a
mortgage when you're unemployed.

-- 
The Chipmunk.
Opinions are mine, batteries not included, void where prohibited.
Any excuse will serve a tyrant.
    -- Aesop
Newsgroups: misc.invest.real-estate