Why aren't people buying houses? I was listening to a little news radio this morning(I know, it's a departure from my usual dose of Colin Cowherd, but I digress), and there was some so-called economics "expert" that was going on and on about the housing crisis and how he thought it was definately over, but just could not understand how there were almost 100,000 foreclosures on houses last month. He also just couldn't figure out why people weren't out buying houses when the interest rate is at as low as it has ever been(4.4%). Now I'll point out that the housing market is the capital reason for our economy tanking(and it hasn't hit bottom yet I don't care what the hairdo behind the desk on the news says), but I'll save that for a later date. For now, sadly, I'll point out some reasons why I shouldn't buy a house in this market.
Depending where you live in the U.S., the average house ranges from $150,000-$250,000. So using a mean of $200,000 and 5% loan, that brings out your mortgage to just under $1,100 a month. Add in required insurances another $150 a month. Add in taxes roughly $100 a month(lowballing). Add in maintenence costs and upkeep(A/C breaks down, its ALL you) MINIMUM another $250. Just using those base figures in hand(I'm not even counting ESCROW, closing costs, lawyers, or my personal favorite, HOAs,etc.), that brings your tally up to $1,600 a month on a basic 30 year plan. For those of you keeping score at home, and all expenses are fixed(which we all know will only go up), I'm paying $576,000 on a $200,000 house with $376,000 that has zero equity. Am I truly getting your money's worth?
Now if I take that same house/condo and just rent, I eliminate ALL those costs save rent, which replaces my mortgage to even say $800 a month in comparable rent for roughly the same space. It brings my thrown away money after 30 years to $288,000. That, and I have no headaches. Now aside from the theoretical appreciation a home gives that was the one single clear sound investment that everyone before us did to ensure a stable future, is there another reason to take such a risk?
Now of coarse, I'm using some VERY general figures, but when I did my budget for buying a house, this is what I came up with. I'm also basing these generalizations on an economy that has changed so drastically in the last fifteen years that we have amazingly de-valued every peice of property from the Atlantic to Pacific coasts in less than two decades. I just don't think people, or the banks, have accepted or admitted to it yet. Never mind, despite what these contradictory economists say, we haven't seen the bottom yet.