I think this article has it right when it comes to home ownership and renting. There is nothing wrong with renting if you simply cannot afford to buy a home:




http://finance.yahoo.com/blogs/the-excha......238.html

There is nothing wrong with home ownership if you have the income to pay the property taxes, maintenance and repairs on the home and have a good, long term, reliable income as well. However, there is also nothing wrong with renting either if you don't and in many cases, you are probably better renting rather than attempting to own something you simply cannot afford.

I have this argument with someone at work concerning cars. The discussion went something like this;

HIM: Why don't you have a car?

ME: I can't afford it.

HIM: You can go to Disneyworld, you can get a car!

ME: Yes. I can GET a car. What I can't do is continue to pay for Registration, Insurance, Gas, Oil, Maintenance. Having a car is more than just buying a car.

HIM: You could afford it.

At which point I walked away because it was becoming a circular argument.

Although I have some quibbles with sentences here and there, I agree -- good article.

The most important thing the article gets correct, IMO, is:


In the culture of yesteryear, where one gets a job in their teens or early 20's, then retires forty or fifty years later, home ownership is a no brainer. In today's culture, one can expect to switch companies a few times, and possibly even switch fields once or twice. In the last decade or two, that meant someone should be prepared to move a lot.

But I wonder to what degree that's still true. One trend that (I think?) I'm seeing is the rise of the telecommuter. My wife and I have both been working from home for about 5 years. (I'm a lawyer, she's in educational publishing.) More and more of our colleagues and clients have been doing the same. And it makes sense for everyone: on the labor side, it's more convenient and opens you up to more opportunities; on the employer side it's cheaper and broadens your talent pool. As technology continues to make it easier and easier to telecommute, and as the business stigma (a la Marissa Mayer) fades away, I think there will be more telecommuters.

If that is indeed the future, then home ownership starts to make sense again. Assuming, of course, one can afford it. (And that's another nice thing about telecommuting: one doesn't have to decide between a three hour commute or living in an overpriced shoebox downtown.)

Anyways, the whole telecommuting thing notwithstanding, there's another issue I'm kind of struggling to understand. SOMEONE has to own the homes and apartments that people rent. That can set up some interesting (and possibly troubling) scenarios.

Take the greater Boston real estate market for example. In some sense, it's the anti-Vegas/Phoenix/Miami: it weathered the storm in 2008-10 reasonably well. Although there certainly was depreciation and foreclosures, it wasn't anywhere near wholesale carnage. Property values took maybe a 5-10% hit in most cases. (To be sure, since property is already super expensive in Boston, 5-10% can be pretty significant amounts.) But financing all but dried up as banks tightened screws on a national level, which meant the pool of buyers shrank dramatically, which probably contributed to the price decrease.

Meanwhile, interest rates fell to record lows and rents continued to increase steadily, perhaps because the local economy was still relatively strong. So there was an arbitrage opportunity: if you were lucky enough to get your foot in the door, getting a rental property was a huge boon. Even if the property itself never appreciated, there was still a huge spread between the mortgage and the rent (not to mention tax breaks).

That's where we are now, and I'm still trying to understand the endgame. Fast forward, say, 30 years. In one possible scenario, the real estate market equilibrates: interest rates rise, property values normalize, banks adopt relatively responsible lending standards (?), etc. It will become hard to own a home.

There will be a relatively small percentage of people who own a home, but many or most of them own more than one. Then there will be a relatively large percentage of people who rent. That's especially true since most homes are monetized assets, so the incentive to sell might be even less than before.

Does that mean there's going to be a new, "land owner" class? To what extend would land owners collectively have market power to artificially control rents or real estate prices? What does that mean for upward mobility, in a broader sense (not just crossing into the land owner class)?

Lots of hand-wringing over here. I guess we'll see...

How much do you think that would all cost per year, around where you live? Just being curious.

For the record, I have never owned a car even though I have had my driver's license for something like 40+ years. (The cost has never really been a factor in my not owning a car.) I have probably not driven a car in 30+ years.

Not certain now. Pretty sure it's more than I can afford each and every month and/or quarter.
I haven't have a car in over 20 years myself.