To the OP: Your opportunistic attitude is the main problem with the housing crisis. You have an attitude of entitlement, which when explored, is silly and selfish.

OK, you actually think that DECLINING home prices are the reason you can't buy that big house for your growing family.

And you really think that if your small home increased in value, you would be able to sell it and buy that big house for your growing family.

Am I the only person to see the irony here?

If you had equity in the small house you paid $150K, say it is worth $200K, you could put down $50K on that big house, right? The same big house you see listed for $150 today. The opportinity is available to someone with some cash and good credit.

But what did the big houses cost when you paid $150K for yours? $300K; out of your price range. And what would the big houses be worth, if yours had appreciated rather than declined? More like $400K. You'd never be able to afford it.

Think about it the other way: the big houses are only about $100K out of reach. Years ago, they were $250K out of reach. You do not have a personal hardship. You have things pretty good. But you want to walk away from your current house, have the debt forgiven, and then buy a bigger house with borrowed money. Who are you accountable to? You are financially illiterate.

Opportunities are not entitlements. Everyone on the planet needs to get this fact straight.

An opportunity is not an entitlement.

Liri, could you be more specific? "... use the savings to invest in something else." Like...? Stocks? Mutual Funds? Gold? What "investments" are preferable, recession-proof & teflon coated?

I wasn't familiar with "...the idea that home ownership was the easiest, sure-fire, path to individual wealth." Again, maybe for real estate gurus, but common, ordinary folk? Wealth? Via real estate? Don't think that's what most average people dare to even dream.

I've learned from this thread that people are being bamboozled, following a herd, need to be part of a group, & are jumping on bandwagons! Yet, you conclude in your final paragraph that even so, people are not foolish or bad for doing all of the above. Well, thank goodness for small favors.

"We have no trouble making our mortgage payment..."

Save up some money for a down payment on that bigger home for your family. The big houses will stay affordable for another couple of years. Plenty of time to save up for a down payment.

Then rent out the house you have now, for a few hundred dollars less than your mortgage. Remember, you have no problem making the payment, so this is a good opportunity for someone in your position.

If you think this option is not within your means, then the bigger house isn't either. If you really have no problem paying your mortgage, you have enough income to prioritize certain expenses as necessity or luxury. Put the larger home on the "necessity" list and move some things over to the "luxury" column.

>use the savings to invest in something else." Like...? Stocks? Mutual Funds? Gold? What "investments" are preferable, recession-proof & teflon coated?

There is risk in any speculative investment, including real estate. However, historically over the long term there are many other forms of investment that average out to a higher return than real estate does when you look at long term averages. There is no guarantee on any of them that you won't lose your shirt on a a particular investment, either.

Out of 105 posts (I now make 106) - the OP only made 2 posts (#1 and #3). The OP is long gone, and this thread is no longer relative. Strange how some of these posts go on and on (and on and on). Time to put it out of its misery?

I think it's interesting. Everyone pointing fingers. Kind of like our politicians.

I'm sorry, but I don't think that people should have known. And I'm not saying that because I'm upside-down. I bought my house for cash. I made a killing on the one I sold in 2006. But you know what? It was LUCK. I had no idea the market was going to crash and I'm not stupid like some of the comments are trying to make people sound because they lost all their equity. Maybe it would make sense to know you could expect the market to start going down again. Yeah. But to know that it was going to crash like that? Com'on.

Stinky-Gardener,

I see it was your comment that started me on my long ramble about building equity. It is exactly your belief that paying rent money is throwing it away and just padding a landlord's wallet vs. the pervasive, but incorrect, concept of "building equity" by homeownership that I was trying shine a spotlight on.

Both rent and mortgage payments should, in theory, be simply the appropriate and necessary cost of obtaining shelter. On one hand (renting) you are paying for the temporary use of another's shelter/property; on the other hand (a purchase money mortgage) you are paying for the temporary use of someone else's money to in order to purchase shelter/property for yourself. In the best of all worlds individuals would be able to choose which solution to the universal need for shelter best fit their circumstances at the time. Neither is a better or worse, or smarter or more foolish economic or personal choice.

But the real state industry has in the last 20 years or so endlessly promoted the notion that owning a house was the superior option. Their vested interest in this theory should be obvious. But it is no more corrupt than the dairy industry promoting milk, or the ocean-cruising industry promoting Caribean vacations.

However many people really bought in to this and began to see their home as not simply the place to hang their hats, but instead a vehicle on which to base their future economic security. No longer was the expectation that your house would give you physical shelter, but it had to also provide you with ever-increasing "equity", even if that equity was entirely on paper. This whole thing began to change how people saw their houses. If the nominal "value" of their houses increased, then they felt richer, believed themselves to be richer, and sadly, many people came to think that they were richer when all they really were building was an ever-increasing debt-load (repayable only in real dollars) backed by "equity" valued only in on-paper dollars. It shouldn't come as any surprise that eventually the need for real money to pay the debt on the paper money gains would eventually bring it all down.

However, the strength of the illusion is still being felt; the OP started this thread because she/he is apparently taking umbrage that her $150K house (and its $150K-sized debt) has been revealed to be a $84K house (yet still with the $150K-sized debt). And she's looking for a way to stick someone else with a good share of the debt. Apparently it didn't occur to her to evaluate whether the $150K house and the $150K debt were well-matched. And to be fair, a great many people didn't do that either, possibly because they were led to believe it wouldn't matter because at the point when they had to pay the debt with real dollars, there would be some other shnook willing to pay even more real dollars for the same property. And on and on. But maybe the house was, is and will be for the foreseeable future a $84K property.

As for your question about what else to invest your money in: there's everything from gold to T-bills to choose from. I'm not recommending any particular one, just trying to caution you against confusing your house with your investment portfolio as the real estate industry propaganda machine has been so successful at doing.

You're not "building equity" in your house. You're just investing more of your own assets in it as your mortgage amortizes. It's providing you with physical shelter in the meantime. And, if you're lucky when you go to sell you will realize a gain to partly re-pay you for the use of your money, and for mowing the lawn all those years. If you expect your house to give you a guaranteed path to riches then you are either a speculator, or the victim of propaganda.

L.

Ragtop... I bet $1000 that the OP is still reading the responses

Well, Lirio, there's no doubt about it, you write very well, & clearly articulate the ideas & philosophy that you have come to hold dear.

As for the OP, her motivation to search for, & her notion that it should be possible & even desirable, to "unload her debt" somewhere else, seem to stem from things she has heard in the media. Maybe she is young, is easily influenced by all the news & information swirling around her, & needs guidance to help her get clarity about her true rights & responsibilities as a mortgage holder.

The idea that.."Apparently it didn't occur to her to evaluate whether the $150K house and the $150K debt were well-matched" is uncertain to me. Maybe at the time of purchase, she was well aware her value was at 150k or even higher. That may have changed very quickly after purchase.

Yes, when I buy I am "just investing" my assets. Exactly. When I rent I am "just spending" my assets. As you said, "...if you're lucky when you go to sell you will realize a gain to partly re-pay you.." Bingo! When I leave my landlord, is there any hope that I will be repaid any of my assets whatsoever? I do have to live somewhere, don't I? Why not choose the path that will allow for some repayment of my assets, however meager that repayment may be?

I do agree that it is unfortunate to view something as intimate & integral to our well-being as one's home, as merely an "investment." To do so is to miss out entirely on the depth and true richness of the experience.

Speaking of "richness," again, the idea of a home being a "path to riches" as I said earlier, "I wasn't familiar with." "...maybe for real estate gurus, but common, ordinary folk? Wealth? Via real estate? Don't think that's what most average people dare to even dream."

But you & I probably move in different sorts of circles, Lirio.

cas66ragtop, it isn't about the original poster anymore - and threads on most forums are like that! On the dog forum I post on, I laugh when the OP gets mad that a thread veers off into another direction.

On this forum, I find these discussions fascinating and educational. :-)

Stinky-Gardener,

I doubt we move in very different economic circles, unless you live in lofty ones, which I certainly do not. I am puzzled why you seem to somehow believe that I am well-off. I'm not, alas.

Perhaps we are hung up on my use of the word riches. I don't mean that in the literal sense, or even the metaphorical sense.

I am using it to describe the oft-repeated assertion that a person's homeownership is the largest, most central basis, of their personal net worth. Just today I was reading something that cited the drop in current housing values as the single largest factor in the enormous recent reduction in net worth experienced by the "middle class" (which these days is whatever you want to claim it is, apparently).

I am just trying to suggest that it would be better if in the realm of housing we expected our costs (whether paid in rent or mortgage) to be simply guided by our needs and desires for shelter, not as lever to build our "net worth".

In rent you are buying temporary (even if you live in the same place for a long time), no strings attached, shelter and you pay a certain premium for that because it is, as you correctly point out, not giving you any return on your money beyond shelter at the time. But it is also absolving you from the risks of your asset becoming devalued, for any of a number of reasons. Plus you don't have to worry and fuss over its maintenance, insurance, etc. Easy come, easy go. And there's (or at least there should be) no moral or financial penalty for renting.

Owning a home, however, comes with considerable on-going costs of ownership. Not the least of which is the opportunity cost of tying your money up in a highly illiquid asset. And the risk, though few would really have believed in it until recently, that your asset could substantially fall in value. But as we have seen, it can and does happen. Of course at the time of sale you are entitled to hope for a return to compensate you for all the time you have had your money invested in the asset. But there is no guarantee. For that reason it's financially more prudent to purchase shelter in home ownership at a level that's matched to your shelter needs alone, and not as an investment vehicle. That way if your house doesn't appreciate much, or even loses value, you still are not out of pocket because at the same time it has provided you with the shelter you needed anyway. Even if you can actually "afford" more expensive personal housing, because of the nature of it as a class of investment it might be wiser to live in a more modest house and invest any surplus cash you may have in something else. If only because if the investment turns sour, at least you've only have lost money, not your home as well.

It's hard to imagine anyone who was not aware of the extensive, wall-to-wall assertions about the ever-rising home values, and the home-ownership basis to building personal financial security (wealth?) that was so commplace just a few years ago. That was the accepted conventional wisdom. It was used to justify the financially "smart person" self-image of lots of people who are now stuck in underwater hell. Because they believed it without examination and acted on the principle that they could always use ever-rising home values to pay off one mortgage with another. I often saw it repeated over on the Kitchen Forum vis a vis kitchen renos and second mortgages to pay for same.

As you say about the OP, perhaps people put too much credence in what was swirling around in the culture, media, and general conversation about real estate. It seemed for a while that it was all everyone was talking about. From late-night TV-hucksters with get-rich with no money down info-mercials to dinner party chit-chat, it was wall-to-wall house prices and mortgage and reno blather.

It wasn't morally wrong (how can you knock the simple, human desire for a home), it wasn't foolish (it was earnestly promoted by everything from the government to the financial press), it wasn't even really greedy (in the sense of being aware of snatching more than your fair share).

It was, alas, just not true.

I keep going on about this because I really hope that the lessons from this terrible crisis will be burned deeply into our collective conventional wisdom and we can avoid repeating it (again). I am the child of Depression-Era parents who weaned me on tales of the dangers of over-indebtedness for housing and the risks of loss by foreclosure. That outlook helped me stay clear of the (potent) lure of the recent housing boom. We chose our house for its match to our needs, not to the size of what we could theoretically "afford". And it was a priority, though often a stretch, to retire the mortgage early. That has left our housing equity unscathed in the real sense, though depressed because we have suffered the same paper losses as everyone else. But at least we don't owe somebody money for those losses. That would be a nightmare to me.

Stinky- I can't recall where you are in all this: owning, looking, selling. Where ever that is I wish you success in your goal.

L

I've been fortunate to look at and treat my homes as an investment/commodity when buying and selling over the last 25 years and live mortgage free today because of it.

Hi Lirio...thanks for elaborating. You do write beautifully! Even the notions your put forth that I find disagreeable, you express so eloquently, you make them palatable, perhaps even a pleasure, to consider! Reading your "essays" remind me of being riveted by a person with a British accent on an infomercial selling scrubby things I thought I had no interest in whatsoever. The elegance of the presentation lures me in & makes me think scrubby things are indeed, something I really need! Lirio, did you have any idea that you possessed such a gift?

No lofty circle circulation going on this side of cyberspace! Why did I think otherwise about you? Well, I assumed this must be your place!

Here is a link that might be useful: Lirio's digs

Lireo,you said, "Just today I was reading something that cited the drop in current housing values as the single largest factor in the enormous recent reduction in net worth experienced by the "middle class" That's because the middle class doesn't have the money to invest in gold, stocks, etc. ALL investments depreciated. Like I said before, no one could predict this. Maybe we could guess that values would start to start to go down again someday. But no one could predict a crash like this. If we could, millions of people wouldn't be upside down in their mortgages. Just like the stocks. What are stockholders advised to do? Sit tight. Just like homeowners should do if they can. The average buyer did not buy a home to try to make money on it. Maybe they shouldn't have overextended themselves but that's a different story.

Owning is much more sensible than renting in most cases. Landlords make money doing it! Your rent increases every year but your mortgage stays the same. Not to mention the quality of life. You write well but you haven't persuaded me.

"You write well but you haven't persuaded me." LOL, LitH, I wouldn't go so far as to say tha Lirio has "persuaded" me either, but I had to give credit where it was due! Talent is talent. Furthermore, I can admire Lirio's passion & conviction without agreeing with all the arguments that were so poetically stated. We can find someone likable without agreeing with them.

People believe what they believe. I know what I believe. It is interesting to learn more about how others view the situation. This thread has certainly introduced me to different viewpoints!

>Landlords make money doing it!

As opposed to mortgage lenders, who do it strictly as a charitable enterprise?

Like I said before, no one could predict this. Maybe we could guess that values would start to start to go down again someday. But no one could predict a crash like this. If we could, millions of people wouldn't be upside down in their mortgages.

You are wrong. There were plenty of people during the time of the housing bubble, both economists and "average citizens," that were writing that a crash of epic proportions was inevitable. Not the mainstream media, of course, because they were shilling for the real estate industry, but if one cared to go beyond the mainstream media there were dire predictions galore. Reading the warnings of economists like Robert Shiller at Yale, and blogs like The Housing Bubble Blog, Patrick.net, Of Two Minds, and Global Economic Trend Analysis-- to name just a few of the many cautionary blogs out there throughout this madness-- are what kept me sane during the bubble, and confirmed my instincts to sit tight and not buy despite my friends and neighbors' incessant chatter about the ever rising value of their homes and their pity for me in being a lowly renter.

The fact that millions of people are upside down in their mortgages today does not mean that "no one could predict" that people assuming ever-increasing amounts of debt that was way out of proportion to their incomes would end up badly. Of course this was predictable. The real issue is that no one wanted to believe it.

Uh... but Writersblock, the dynamics between landlord & tenant are exponentially more exploitative.

Using "other people's money" is the key to making money in rental housing. Rarely do landlords pay for a rental property entirely with their own money. Tenants buy it for them.

Mortgages allow landlords to buy more properties with less of their own money. More importantly, for tax purposes, landlords deduct the interest payments made on the mortgage, along with other operating expenses, from the income they receive from the property. The tax system encourages landlords to take out mortgages since the "cost" of the mortgage (the interest paid to the bank) is deducted from taxable income.

Landlords can depreciate their properties over time to reduce their taxes. Every year landlords can deduct a percentage of the purchase price of the rental building (not the land) from the total income they received on that property. This is a "paper" deduction that does not correspond to any actual expenditure on the property. It assumes that the building "wears out" over time and steadily loses value.

The landlord might be able to depreciate 4% of the purchase price of the house in a single year. This would indicate a "loss" on the house even though the landlord actually made a profit.

Landlords owning multiple properties do not want to show a paper profit (or gain) on each of their properties together. The more paper profits landlords show, the more income taxes they must pay. Many small-time landlords can deduct losses on real estate directly from non-real estate income such as wages and salaries.

Larger landlords try to offset profits that they show on some of their properties with losses shown on others. Although large, wealthy landlords can't deduct real estate losses from their non-real estate income, they can deduct their real estate losses from real estate gains. This allows them to avoid paying taxes.

In addition, landlords' mortgage payments are not simply a "cost" for them. They are buying the property over a number of years with the rent tenants pay to them. If the landlord has managed to maintain a positive cash flow in the meantime, then this is just icing on the cake. Once the landlord owns the building outright, she can sell it and pocket the cash or continue to rent it out without having to make mortgage payments.

Tenants pay and landlords collect.

Sas, your warm, fuzzy compassion seemed to fade fast..."Of course this was predictable. The real issue is that no one wanted to believe it." How many times are you going to say that? At least you are consistent. As I said, people believe what they believe & you are like a dog with a bone on this point.

How you can presume to get into peoples' heads & know what they know & even when they first learned it, gives you talent well beyond Lirio's writing ability!

The hubris here is beyond belief!

Sas, your warm, fuzzy compassion seemed to fade fast..."Of course this was predictable. The real issue is that no one wanted to believe it." How many times are you going to say that? At least you are consistent. As I said, people believe what they believe & you are like a dog with a bone on this point.

Stinky-gardener, you seem as fixed in your opinion as I am in mine, as you keep coming back with the same points over and over as well. I was responding to someone else's point that "no one could have predicted," and I was pointing out examples where other people did, in fact, predict... I get it that you don't agree with me, but I'd prefer that you follow your own advice and refrain from "getting into my head" and making a judgment about my compassion or lack thereof.

Just because landlords make money off of tenants doesn't necessarily mean that renting is a bad proposition for a tenant. If being a landlord was a charitable endeavor, there would be no rentals. I'll give you an example of how renting ended up being good for me. During the housing boom when everyone was buying, I was renting. Because there were many buyers and few tenants in my area, my rent was extraordinarily cheap-- less than half of what my mortgage payments would have been if I bought a similar home. So I took that differential (plus the amount I was saving from not paying maintenance, insurance, etc.) and put it in the bank. And when home prices dropped, I had a huge down payment for the home I bought in 2010. But I'm sure I could never convince you that renting is ever beneficial, could I? I think all of the people who are now being foreclosed upon (and yes, I do feel compassion for them) have ended up "throwing their money away" in a way much worse than any tenant. At least the tenants are still in their homes.

Point well-taken, Sas. Yes, I believe what I believe, & express it repeatedly too, but also stated in an earlier post:

"While I agree that there are some instances where it is not preferable to buy, & much wiser to rent,...Every situation is different, weighing the pros & cons thoughtfully is required. There is no one right course of action across the board...especially not these days."

I have no doubt that your particular situation is one of those instances! I AM convinced that renting can be beneficial. I sense however, that you refuse to make a space for exceptions, & simply insist upon lumping all buyers during a certain time frame into one not-so- admirable group.

Forgive me, but it doesn't transmit much compassion when you refuse to entertain any motive other than "You just didn't WANT to know!"

I hate labels, & don't mean to brand you Sas, as "uncompassionate." People are too complex, & are never just one thing. Surely, you are empathetic & understanding in many ways. It is clear that you are a very smart person, & I haven't doubted for a second that you have made the savviest investment in your own situation.

But a rainbow of possibilites also exist for why people bought when you didn't think it was wise to do so! That's all I am asking you to consider. But really I understand if perhaps you can't, because you have the bias you have based on lots of compelling academic data.

It is impressive that you are so well-read. You have been " Reading the warnings of economists like Robert Shiller at Yale, and blogs like The Housing Bubble Blog, Patrick.net, Of Two Minds, and Global Economic Trend Analysis.." You are obviously very erudite & well-informed.

But remember, that sets you apart from the "average Joe or Josephine!" LoveintheHouse, I'd be willing to wager, & certainly I, do not keep such materials on our nightstands! Recognize that your not-so-typical reading habits have shaped your opinions!

It also sounds like you have been insulted & criticized by people IRL regarding your choice. I am sorry to hear that has happened.

Anyway...What's Irene doing up your way? We're getting tons of rain here in VA Beach, & some wind, but not TOO bad so far. Stay safe.

Yes, I see what you're saying stinky-gardener, but you overlook one of the advantages of renting: if the landlord says that next year the rent is going up and you think it's too much, you just move. I can't think of any situation in which rents have proportionately followed the up run in purchase prices in recent years.

The idea that rent goes up every year is also not quite right--the last two places I rented, for 8 and 6 years respectively, my rent went up once each place, and that was, as it happened, when I told the landlord I thought I should pay a bit more (to help offset their increased costs as the owners of the units I rented--insurance and HOA sure do go up, even when the mortgage payment doesn't, as did their non-homesteaded taxes during the frenzy).

Oh, forgot to say, stay safe, stinky-gardener. I hope the storm proves to be no more than a nuisance for you.

Thanks, WB...hope you stay safe too, wherever you are!

The wind & rain have intensified significantly since I last posted. It's this wild & wooly & yet we're just feeling the effects of the storm from NC! Irene won't actually be here until 7:00 this evening.

I still have electricity though! Yay! (Knock on wood!)

Thanks for your good wishes. Keeping my fingers crossed for all of you in the NE!

Oh, I'm in FL, so we did our worrying about this one last week. :)

At least it's not as strong as they feared it would be, so that's one good thing. I hope you don't lose electricity for any extended period.

Yes, stay safe everyone. Opinions are opinions but ultimately, it's nothing personal. If we can keep our electricity I will consider it a major victory.

Sas95, well said!

Stinky-Gardener,

Your link absolutely floored me! The idea that that's my house is hysterically funny. Is that why you think I travel in wealthy circles? I can see why you thought that, but alas, my old farm is in northern NY (north of Albany along the VT border), not Maryland. It's a shabby, early-mid 19th c vernacular, Greek Revival-ish, farmhouse (not a Belle Epoque Mansion) which I often write about here on GW (see my many posts on the subject). Heck, my house is so primitive it isn't even fully electrified, and is only heated with the modern equivalent of pot-bellied stoves, rather than having any central heat.

I chose the word liriodendron as a user name because it is one of my favorite trees (tulip poplar, aka Liriodendron tulipfera. And because the word amuses me.

It never occurred to me to Google it and see who or what else might be attached to it.

Looking at the link, your assumuption that I might not know how ordinary people live, while incorrect, now makes sense to me.

Thank you for your kind words about my writing.

Berniek: I would like to have the self-possession to consider using my (successive) homes as investment vehicles. But it would completely unnerve me to think of selling the farm. I expect to live here for the rest of my life. As it happens there's a cemetery on the property, so I plan on being here afterward, as well.

Liriodendron (which is just a funny word, chosen on a whim.)

This was an interesting thread, and while I realize that the enthusiasm for it will probably die soon, I feel compelled to pitch in the "rent" vs "buy" debate, because that was an issue my entire Naval career as I moved back and forth from MD to CA again and again.
There were situations where we thought we "had" to buy. Did we have the option of renting? Sure, if we lived in a ghetto sleeping with a firearm by our sides. Or lived in our van. Or commuted two hours each way to work and left the kids on their own, hoping that social services didn't find out. Not to mention giving away our pets. Let's just say that buying is sometimes the only reasonable option in some parts of the country.
Other places, we were relieved we could find a rental that suited us. Fortunately the housing allowance made it possible because they tended to be the high-end areas where long, long commutes were the only other option.
And this meant of course, that we ended being long-distance landlords after we moved away. Consider that we had one tenant for 13 years and we only raised the rent once, at his suggestion, because he was great and wanted him to stay. One house that we "had" to buy in 2001, and therefore turn around and rent out, the tenants we found were soooooo relieved to find our rental because they didn't want to buy (in 2005, good move) and there just aren't rentals in that area, which is exactly why we ended up buying in the first place. We were lucky to sell at a profit in 2008, but only because people were starting not to be able to get mortgages for the mega-mansions that were going up all around us. Buyers were complaining that our walk-out basement wasn't finished, because apparently the 4 bedrooms, 2 1/2 baths, living room, family room, kitchen nook, dining room, laundry room, and office/den weren't enough for a normal family. But that's another thread!

Liriodendron, thanks for sharing more details about your interesting life! I recall seeing you over on Home Dec, but never saw pics of your farmhouse. It sounds beautiful. Your real digs sound far more charming & desirable to me than the mansion that might have been yours! How are you? Saw that Southern Vermont was hit hard, as were areas of NY state. Hope Jane & Sas are fine too.

C9pilot, I'm sure being in the Navy offered you the chance to see quite an array of housing scenarios. Thanks for sharing your perspective.

Thanks, c9pilot, that's very interesting and I can totally see what you're saying. Just curious, though--don't you get any help with this from the Navy? With buying and selling, I mean? Is it just the allowance?

stinky-gardener, glad you're okay.

Liriodendron, I saw the videos of Margaretville. I sure hope you're not having that kind of flooding where you are.

"....if the landlord says that next year the rent is going up and you think it's too much, you just move."

At a cost of $4,000-$6,000 per move, I would not be moving much (moved 6 miles in 2008).
When I was in the service, I did not receive any financial government help in selling my home, only reimbursement for travel and household goods. I retired in the mid 80's after 20 years.

It's changed slightly now because base housing has been privatized, but families basically have the choice (sometimes, if available) of living in base housing for "free" (some places have unreasonably long waiting lists or other issues; each base is different; also some people are required by position to live on base). Or, you live on the economy and get a housing allowance based on location. A few really high areas also have a COLA. It is your option to rent or buy based on what you can find.
The military pays for move and every rank has a different pound allowance. Also pays travel expenses for your family and a few days of temporary lodging at your departing or arriving station if there is a delay for housing.
Honestly, few enlisted folks can afford to buy except in the lowest cost areas. Knowing that you'll be moving in a couple of years and may not return to that duty station is a factor. we bought where our careers at the time would have lead us back to that base, but it turned out that career changes kept us from ever going back to any of the homes we bought.
Another helpful benefit is that military is entitled to take a week of house hunting leave that is not charged to your leave account. They won't pay for the travel, but if you can work out something, you can go check out the area before you move to really get the lay of the land and see what your options are. A lot of times you're moving somewhere that you know nothing about and you've just got to see it. (There are a few areas here that I have to advise buyers that they've got to see in person before they get too sold on the online listing, but that's another thread)
I was chatting once with a young enlisted gal who had orders to report to my station in a few months in the SF Bay area, and she was telling me about this great rental she found in Richmond...ummmm...NOT. I forbid her from moving there (lawful order?) because at the time, it had the highest homicide rate in the country! The rentals there were so bad that we had to use command funds to rent apartments for the junior enlisted because the allowance wasn't enough.
Hope I haven't rambled too long, just an idea of how the military housing works.

Thanks very much, c9pilot. Very interesting.

I can't help but chime in here because of my amazement that so many half and non-truths still exist regarding the reasons behind the housing crisis that was the root cause of the global economic downfall.

First and foremost, please be aware that a good portion of the nonperforming mortgages were issued by mortgage lenders who maintained no skin in the game. And, the bigger the mortgage, and/or the more onerous the lending terms, the more money they made off of those mortgages when sold off to the finance sector. Hence, HUGE motivation to originate as many as possible, even if it meant changing incomes, assets, salaries etc AFTER the borrowers filled out the application. In addition, many of the mortgage brokers employed anybody who could fog a mirror to "sell" mortgages...many who were indeed x-cons. The recent pervasive robo-signing demonstrates just how crooked and unsupervised the system remains.

Second, the feds never "forced" the banks to do ANYTHING...more like the other way around with millions upon millions of PAC contributions that bought the banks and investment banks all the deregulation that led to this debacle.
The Community Reinvestment Act contains no language that I have been able to find that supports that urban legend and no one whom I know who parrots this fallacy has been able to provide any documentation as back up.

Third, for every person who blames the greedy home buyer, where is the blame for the greedy finance sector? The home buyer was told that the home would appreciate so much that they could soon refinance into better terms due to the almost daily increase in equity or sell at a big profit. Why wouldn’t they believe the lender when all around them homes were appreciating every single day?

Why no scorn for the banks that as a whole would not hire Appraisers who would not appraise to the offered price?

If the Appraiser did not play the game, he/she would get no more business from the lenders, so they had to play, or close up shop.

The Appraisers had a petition before Congress for YEARS asking them to enact legislation to eliminate the banks ability to do this, but it fell on deaf Congressional ears....probably because they were too well padded with bank PAC money.

And…better question, if anyone believes the buyers “should have known”, then Wall Street HAD to have known as they wrote the play book. So why that is routinely ignored?

They leveraged EVERY mortgage a minimum 40 to 1 and more. They then bundled them into worthless securities called Credit Default Swaps. Also called “synthetic” (apparently their own private joke) and sold them as gold.

When the home buying slacked off, they "created" new investment instruments that appeared to be mortgage backed, but were actually backed by nothing at all and proceeded to knowingly and intentionally deceive "investors" to the contrary. They also subsidized the ratings agencies to back them up, with false ratings.

These are Harvard/Wharton/Yale MBA's, who make millions per year on these scams, yet all too many people can still only focus on the loser in the equation, aka the home buyer...and blame the home buyer for not seeing the future. Meanwhile, the buyer has lost their home, most assuredly by now their job and their health benefits their retirement, and has bleak prospects for recovery.
On the other hand, the architects of this debacle enjoy the millions upon millions that they made, and the banks continue to borrow money from the Fed at almost 0% interest, on the taxpayer’s dime.

If anyone was/is short sighted, it is those who still refuse to recognize these realities, as that makes the economy ripe for it to happen all over again. Fool me once shame on you; fool me twice, shame on me.

Think about it. The last time the Dow was this high, we had less than 3% unemployment. The Dow does NOT reflect economic health. It merely reflects the economic health of those who are wealthy enough to invest in the market on a regular basis.

That said, I agree entirely with Jane NY. I also agree with much of what liriodendron and gmp3 have said....but their facts are not entirely accurate.

Please visit the following link for an education on the realities. In addition, watch "Inside Job", narrated by Matt Damon, a documentary about the financial crisis which is a winner of numerous awards. It is extremely well done, and very easy to understand. It clearly explains exactly what led to this crisis bit by bit and how none of it could have happened without the fed being complicit in what amounts to legalizing fraud for the finance sector. It includes interviews with many of the key players.
IMO, no one should be permitted to vote in the next election without watching this movie first.

As one critic said, “If you are not enraged at the end, you were not paying attention".

People need to come to grips with the fact that the ONLY way this will not happen again is if they take the time to educate themselves on the facts, as opposed to buying into the spin that the finance sector and the “investors” want the public to believe.

People need to base their analysis and/or opinions on the facts of exactly how the finance sector created this never ending mess, yet continue to enjoy the spoils while the global economy is on the brink of crashing around them.

Last but not least, realize that commercial property owners often have financing deals that allow them to walk away from properties without penalty aka non-recourse loans.

"Non-Recourse Debt
What Does It Mean?
What Does Non-Recourse Debt Mean?
A type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan."

Again, a double standard. Why no criticizing of the commercial property owners who have done just that, but a private home owner who wants to do the same is derided?

Here is a link that might be useful: Sold Out: How Wall Street and Washington Betrayed America

logic, interesting post. I am thankful that our Canadian rules are/were so much more stringent.

P.S. When pasting from another software into the Message box, GardenWeb's conversion of some punctuation makes it a bit distracting. Is it possible to correct this in Preview? Or is it just my computer?

Why no criticizing of the commercial property owners who have done just that, but a private home owner who wants to do the same is derided?

Well, I expect mostly because that's not what we're talking about here. I have much less sympathy for them, but if we get talking about every possible kind of financial malfeasance going on right now..... Ditto for all the insider trading in foreclosures that keeps them off the open market where consumers might benefit, but both of these are other issues.

Writersblock, can you tell us about that--"insider trading in foreclosures," etc. What do you mean?

I've lived in dozens of rentals throughout my life and a few owned homes. I never made out as well as I have in the owned homes in any way--financially or emotionally. Even now in this bad economy.

Ottawa, the weird symbols do not show in the preview. As you can see, this is a vey outdated forum format, which accounts for the problem.

Writersblock, the point is that the system is clearly slanted toward making certain the home buyer gets left holding the bag while corporate entities can walk from their financial responsibilities with zero penalty. It goes directly to the OP's question.

There should not be two sets of rules where those who are wealthy enough can buy special consideration and privileges that allows them to walk away without penalty, while those who can't buy those privileges are left with zero recourse.

The bottom line is that "every possible malfeasance" has been and
continues to be enabled by the Feds, as they have allowed the fox to not only guard the hen house but run it as well....and it is THE root cause of
the economic crisis. It is therefore relevant in every respect to any financial dilemma that one may face, especially the OP's position.

Logic, since you mention facts that are not entirely accurate, these statements of yours qualify:

"They leveraged EVERY mortgage a minimum 40 to 1 and more. They then bundled them into worthless securities called Credit Default Swaps. Also called “synthetic” (apparently their own private joke) and sold them as gold."

Charles Ferguson didn't even describe it like that in his clearly biased movie.

Writersblock, can you tell us about that--"insider trading in foreclosures," etc. What do you mean?

Oh, it seems to be happening here a lot. Owner owes, let's say 200K on a property that would currently have a market value of 125K, can't make the payments due to hardship or whatever, tries to do short sale, no dice. Bank takes it, sells to someone who works in the bank for 20K, then bank attempts to go after original owner for the balance.

There's all kinds of jiggery-pokery going on with foreclosures around here. I've seen Homepath properties that supposedly were only available to owner-occupants sell for 50 cents on the dollar of the asking price, then get resold as a flip in three months time, too, without anyone ever living, renovating, or doing anything to the property. The foreclosure that goes on the market for a half a day only, just to satisfy the rule about public offering when they've already got an investment group locked in, etc.

For all the huge number of REO properties around here, very few actually make it to the open market so that individual consumers can derive any benefit from them. It's a double pity, because not only does it make it very hard for regular folks to buy them, but it also makes it impossible to sell any property at a reasonable price, since it promulgates the idea that if you wait long enough you might luck out and get something at a fire sale price. Who wants to take a chance on spending 70 or 80K for something someone else might get for 35k?

jmc01, when stating that a point is incorrect, the best bet is to explain what you understand to have happened...and how it differs from what I described. Otherwise..what is the point of saying anything?

That said, as far as Inside Job is concerned, regardless as to whether or not you believe it to be biased...the end result of near global economic collapse while the finance sector rolls in the spoils speaks for itself.

jmc01, I caught my error, typing Credit Default Swaps (CDS's) instead of Collateralized Debt Obligations (CDO's)

Investopedia explains Synthetic CDO

"Synthetic CDOs are a modern advance in structured finance that can offer extremely high yields to investors. However, investors can be on the hook for much more than their initial investments if several credit events occur in the reference portfolio."

That said, here is a bit of documentation that supports my statements in terms of leveraging, from Wall Street Watch, and easily verified:

"In 2004, the top cop on the Wall
Street beat in Washington the
Securities and Exchange Commission
now operating under the
radical deregulatory ideology of the
Bush Administration, authorized investment
banks to decide for themselves
how much money they were
required to set aside as rainy day reserves.
Some firms then entered into
$40 worth of speculative trading for
every $1 they held."

Logic, I caught another error. There are non-recourse mortgages for homeowners. This is mandated at the state level. CA is a non-recourse state and there are a few other states. BUT once you refinance or mess with that innitial mortgage it then becomes a recourse debt.

In the bubble run-up I would assume a large percentage refinanced and pulled out equity, so they not only lost their non-recourse status but also increased their debt.

chispa, thanks for the info; it seems that about 12 states or so have this provision, but conditions vary from state to state.

That established, it further serves to underscore my point about the double standard. Invariably, people rant and rave about those who walk away from their underwater homes, whether non-recourse or otherwise....but there are no rants about the commercial property owners who do the very same.
Also, although I have not yet researched the issue, my guess is that an individual homeowner will be subject to other repercussions...such as trashed credit, higher interest and auto insurance rates, and fewer job opportunities. Corporations on the other hand, just seem to move on, business as usual.
If anyone knows otherwise, please share what you know.

That said,it appears as if our society values and expects moral obligation only in individuals, but accepts, condones and even applauds zero moral obligation for corporations.

IMO, this general attitude of acceptance, and those who champion the practices of raping the overall economy for the benefit of a small segment of the population is one of the main reasons why we are in a financial crisis today.

Here is a link that might be useful: How Non-Recourse Loans Vary from State to State

Writersblock, if that's going on, that would explain a lot of things.

Writersblock,
Why would a bank sell a $125,000 property for $20,000; hence netting $105,000 less then if they would have sold it to the open market? Do you really think they are going to spend thousands of dollars on attorney's fees to go after the original owner for the $105,000, knowing darn well that the owner has no money. Come on, Man. Your silly accusations just do not make common nor financial sense.
If you feel left out of the foreclosure market, you need to come on over to Charlotte. I just closed a deal for my 22 year old client, who got a 3 bedroom, 2/0 bath, full brick home for $12,000. It needed only about $6000 of work. I wonder why the bank gangsters did not jump on this one?

Writersblock,

What you said sound like "urban legends".

Banks are tightly regulated after recent crash, they are being audited to death. Do you really believe they would allow any individual to dump bank owned assets "pennies on the dollar" through back door deals?

What would they gain from running the huge risk of getting sued by share holders, government agencies or competitors..etc.?

We all know that now banks are tightfisted in approving mortgages, how in the word, at the same time they would freely give away their assets?

".but there are no rants about the commercial property owners who do the very same. "

Commercial lending has always been higher risk and higher rates.

The banks sure seemed to like the profits.

One of the things any economy must have for long term stability is a way to dissolve insolvent business activities, without forcing the overall economy to take a hit.

We use bankruptcy in the US.

Small corporations (especially) pay higher rates for there commercial borrowing.
This is an acknowledgment of the higher risk, and the lowered chance of recovery if the business fails.

Larger corporations can go so far as to issue bonds.
These pay less since (theoretically until GM) bondholders are in front of stockholders to recover from a failed corporation.

The bonds thus have a lower rate than a loan, and less risk to investors than stock.

By messing around with the entire system the stability has NOT been increased.

I daresay you're right, ncrealestateguy and azmom, Still, it's an odd coincidence that of the five foreclosures in our complex, for example, three just happened to be sold for considerably less than appraised value to people who just happened to be employed by the lien holders, despite the fact that the one unit that did come on the open market sold for quite a bit more than appraised value in a bidding war.

You're right. I'm sure it often just happens that people who work for the bank just happen to buy these properties at very low prices and just happen to have gotten the paperwork to the HOA while the bank is still telling other would-be buyers that they can't give any information because the property isn't fully through the foreclosure process yet. It's got to be just a coincidence, I'm sure.

Another article about short sale and foreclosure fraud. Most of the fraud is being carried out by real estate agents. The banks are just as stupid on the way down as they were on the way up! I read a blog by a very straight forward & honest San Diego agent and he says that he sees 1-3 of these fraudulent transactions per day. Crime does pay!

Here is a link that might be useful: Short sale fraud