Blah..blah..blah..

4) Your monthly mortgage payment should be comparable to what you would pay to rent a similar place. Unless you are absolutely certain that the place is going to steadily rise in value, there is no reason that owning a home should cost twice or three times as much as renting the same place.

Uhhh..have you ever heard about the tax advantages of owning a home??? That very simple math calculation is all you need to do to know that it is STUPID to make a statement like this.

As much as I hate to admit it,Buying a home may not be the most financially sound thing to do, unless you plan on staying there a long time. I’m a nomad so I have moved several times in the last 10 years, each time buying and selling, and you’re right it’s quite expensive with the commissions, closing cost, and all these other made up fees. I lost money on a few of the sells but for the most part I came out ahead. I think if I would have just rented a moderate place, I would hopefully have a lot more saved in the bank by now, with a house it’s hard to save with unexpected expenses popping up every month, not to mention property taxes.

For Kim:

This is from a Wall Street Journal article entitled “Your Home Isn’t the Nest Egg That You May Think It Is.”http://www.realestatejournal.com/buysell/tactics/20070313-crook.html

Quote:

Question: But I have to live somewhere! And I have to pay something for a place to live. Certainly it’s better to pay “deductible” mortgage interest than rent.

Answer: Buying a house with a long-term mortgage is just another form of renting.

Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house. Yes, the government picks up a portion of that with the tax deduction, but most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.

“I have to pay something” is a rationale that home buyers use for going deeply in debt and paying tens or hundreds of thousands of dollars in interest to buy a house that, they mistakenly believe, will make a big profit for them down the line.

For Kim:

This is from a Wall Street Journal article entitled “Your Home Isn’t the Nest Egg That You May Think It Is.” http://www.realestatejournal.com/buysell/tactics/20070313-crook.html

Quote:

Question: But I have to live somewhere! And I have to pay something for a place to live. Certainly it’s better to pay “deductible” mortgage interest than rent.

Answer: Buying a house with a long-term mortgage is just another form of renting.

Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house. Yes, the government picks up a portion of that with the tax deduction, but most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.

“I have to pay something” is a rationale that home buyers use for going deeply in debt and paying tens or hundreds of thousands of dollars in interest to buy a house that, they mistakenly believe, will make a big profit for them down the line.

Exactly, Tina. On the other hand, my sister in Philadelphia has owned her home for 12 years. She has a 15-year mortgage on the property and should have it paid off in plenty of time for retirement. Being mortgage-free in retirement is a great goal if you can manage it.

Nice post Cindy, a nice easy summary of what buying a house should be about.

And Tina–yes, there is a deduction but a) it is only on the interest component of your monthly payments, and b)you give up your standard deduction to take the mortgage deduction. Because of this, the money you get back on the interest payments is typically 20-25%.

Because interest payment get smaller as years go buy (more is dedicated to paying down principal), your tax savings decrease as well.

Furthermore, when you rent, you don’t have to pay maintenance, homeowners insurance, or pay extravagant fees for the privilege of moving (the broker fees).

Check out a rent v. buy comparison app to see the financial effects under different rent/buy scenarios. A good one is by the nytimes at

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=1&oref=slogin

Or if you’d like an excel sheet in order to make things more customizable, I made on for anyone to download at http://morganla.wordpress.com/2008/06/27/rent-v-buy-excel-sheet/

Finally, why is there a silhouette of Lincoln on this post? I’m not sure I get it.

I agree with the article. I sold my condo in the summer of 2004 and found a place to rent with the intention of buying a larger condo. As we know, looking back, the real estate market went crazy and I had brokers try to sell me their new mortgage products. Since I was an owner for many years who had a traditional mortgage, I knew something was not quite right with these products and declined to be suckered into them.

I’m still renting and until the housing market comes back down to reality, I’m not the least bit bothered about it. As a matter of fact, my rent is lower than my mortgage was and the money I’m saving I put into my 401(k), money market account and bonds. To me, right now, I’m in a win-win situation. If I’m wrong on this, please let me know but be constructve.

Timing was of essence when you John sold your property in 2004. Like you I also sold towards the end of 2003 not by choice but because I was going through a divorce. Like you I have held on by renting for nearly five years now but in 2005, desperately wanting to own an home I came close to purchasing an overprice property in Whittier offering the asking price of 510k. I’m very fortunate to have refused to acquiesce to the games people in the mortgage industry were indulging in those days. I declined to pay a cent over the asking price therefore a person that offered $500.00 over the asking price bought it. It appears that the person defaulted on that property and in May of this year, that property was sold through a short sale transaction for 202K. The loss, over 300 thousand dollars drop.

Wow, Jose, that was a close call for you. Thanks for sharing.

John, for all the reasons outlined here, you should feel good about what you’re doing. Whether to buy or rent is a personal choice, and there are times and circumstances where renting is clearly the more prudent decision. Read the WSJ article posted in comment #4 above. It’s a realistic look at homeowning that everyone should read.

Trust me, I am not trying to get into a pissing match on someone’s blog. But let’s be clear. No one is confused about why you guys would post about the sad state of the real estate industry. I am, and I suspect others are, confused about why a blog for a company in the business of selling real estate would consistently post advice telling people, in essence, not to buy. Posts like these may be honest, but they are not helpful.

It is certainly not in every post, but a considerable about contains as subtext that buying real estate now is not a wise thing to do. When pressed (like now) we get lots of “buying real estate is highly personal” and “every situation is different” types of lines, but your last line exposes the bias: “And when market conditions change, and home-buying becomes a good deal for the masses again, this blog will tell you so.” The barely unspoken sentiment: buying now is a bad idea.

No one has ever accused anyone here of being less than honest. If we’re being honest, no one here asked for sales pitches. No one asked for that “Now’s a great time to buy!” garbage. Speaking for myself, I’ve never questioned whether or not Redfin supported what you guys do — it seemed a safe assumption that they did. These sorts of strawman justifications are completely unnecessary.

Now is undoubtedly not a great time to buy. But some people are going to buy, and part of being smart about it is coming to Redfin and seeking out information and advice. So while I’m sure everyone appreciates the information about real estate market conditions and happenings in the mortgage industry, a lot of the analysis you guys offer seems to come from a position that runs counter to the needs of Redfin’s potential customers. That is the disconnect. In my comment to the other blog entry, I was expressing surprise that Redfin is happy with the posts that clearly express the opinion — however intelligently derived — that buying a house now is simply not smart. Your defense is that you are just being honest, but honesty doesn’t automatically make it helpful.

Frankly, as one of those potential customers, I would appreciate more advice and analysis geared towards using the news, trends and events of the day to do what it is we are here to do and what Redfin is (I assume) here to facilitate, namely, the buying and selling of real estate, rather than effectively talking people out of it. I would appreciate less like Tim Hebb’s “Why I may never buy a house again” post. Again, honest but not helpful.

I’m certainly not trying to single Mr. Hebb out – I actually find most of his posts intelligent and packed with useful information. (A bigger turn off are the posts, such as offering listings near IndyMac Bank, purporting to be helpful but laced with Schadenfreude.) I understand that not every entry is negative. Not every entry screams “Don’t buy a house!” I’ve gotten a lot of useful, practical information from this blog.

But if I were to make a request, it would be that the bloggers make more of an effort to look beneath the surface of the bad news and try to offer more analysis designed to help people actually use the news and current conditions to make the smart buying and selling decisions. It happens, but not often enough, in my opinion. Being honest does not mean you cannot offer sound buying and selling advice. Being honest does not mean you have to remind me every other day that the sky is falling – we know it is.

Start with the assumption that people are here to buy and sell. Speak less to the people who are just sitting on the sidelines watching the carnage.

Speak more to the people who feel (rightly or wrongly — that’s not for you to determine) they have to get off the sidelines and into the game. Try to help us. Be honest, of course, but making us feel bad for wanting to buy now is counterproductive.

%$*# the investors and speculators. There are sites dedicated to them. Unless I’ve completely missed something, this ain’t one of those sites. I think it’s safe to assume that the people who are your main readers are here because they are looking for a primary residence and would like to be there for an extended time.

Of course, the blogosphere being what it is, you have no incentive to change a thing. But if as many people as you suggest are commenting on the same subject, perhaps the proper response would be to take a look at how you are doing things, rather than posting a stock defense and announcing your plans to simply point people there anytime they complain.

Once again, honest but not helpful.

RED

Red, thank you for your comment. I guess I’m still not clear what you’re seeking from the Redfin blog. Are there some posts that you considered particularly helpful that you can point to?

I don’t necessarily think our blog readers are here because they’re actively looking for a home; I think they’re here because they want to know what’s going on out there.

No one is trying to make anyone feel bad for buying a home. We are simply trying to help people be smart consumers.

I will say that one thing Redfin likes us bloggers to write about are “bang for the buck” homes that are a good deal for the neighborhood based on the square footage. In my neighborhoods (Beverly Hills, Hollywood, Westwood), I cannot in good conscience write posts about ANY homes being good deals, because they’re virtually all too expensive for most people. I think this is less the case in other places, such as the OC and the IE, but I even there I would be hesitant to label any home a good deal because many are predicting that prices may come down more. It’s a slippery slope.

Dishonest individuals in the mortgage industry that kept telling their clients “Now is the time to buy” are responsible for the current situation in real estate. Had I followed my real estate agent’s advice which was then “Now is the time to buy” I would have lost a substantial amount of my hard earned dollars. You see, unlike most of the speculators that are allegedly loosing the homes that they purchased in 2004/2005 with 110% financing interest only loans, I was going to put a down payment. Those speculators manipulated the system ultimately causing property value to triple with in a year. How can one be optimistic when properties are still ridiculously priced?

Two factors to consider in buying real estate in the current market is only buy if you can afford it and put down a decent down payment. It was option ARM’s, no doc loans or stated loans, no money down, dishonest brokers, failure to read the small print on the loan documents and greed that accounts for today’s overpriced homes. As an aside, should the tax payers finance buyers who bought when they should not have? If so, then renters should be bailed out when they get behind on rent.

Finally, what is happening with today’s turmoil is perhaps a good thing in that it allows prices to come down to a point so more and more people can buy.

I think Red said what many people felt. Ms. Allen uses this forum as her personal soap box to preach her personal opinions. How did she ever get this gig? Is she related to someone at Redfin??? Her relentless screaming to RENT is just as slippery as those who kept saying BUY! BUY! BUY! And, her ulterior motive seems obvious. Drive the prices down so she can buy a cheap property for herself. Only SHE knows when it is a good time to buy..and “this blog will tell others when” Are you kidding me?? I hope Redfin finds a new person to type an entry that is actually meaningful and provides insight. Ms. Chan does a great job as other bloggers here.

Cindy-

First and foremost, I’m not asking anyone to say anything they don’t believe. If you don’t see any homes as good deals, don’t worry about that.

Of course, I could be wrong about why people read this blog; perhaps most aren’t actively seeking to buy, sure. But I’d be surprised to hear that a majority of readers are just people keeping up on current events. But, hey, if you feel you know who your audience is, who am I to tell you different?

As far as examples of posts I feel were helpful, here are some recent entries:

“Sound Advice for Sellers”
Obviously. I’m not a seller, but it does exactly what I was talking about — take the current news and conditions and offer advice on what to do about it.

“Does Style Have Value?”
Talks about how to focus on what is important in a property so you can make a smart buying choice.

“The Chill is On”
Might just be above and beyond the call of duty. Fabulous, even though most of it represented bad news.

Beyond those, posts about listings in certain neighborhoods, which area is up or down, that sort of thing, that stuff is great. It just depends on whether you are interested in those particular areas.

Anyone’s personal experience buying or selling is always interesting, even though everyone’s experience is different.

Any of the posts relaying current news, good or bad, are most welcome. I’m just turned off by the Schadenfreude. You know, there’s a certain glee that comes across in some posts about foreclosures going up, banks having trouble and the like.

So, that’s what I’m looking for when I come here. I fully understand that others could be looking for something else.

RED

The Lincoln picture alludes to “honest Abe”, I believe.

I like this blog, Cindy. Don’t change a thing. I’m 100% positive that RedFin is making future clients by allowing all of you the freedom to write about reality in your market as opposed to the standard realtor “buy buy buy buy NOW!” pitch on other sites.

Thanks for the vote of confidence, Patrick! I really appreciate it. And thanks for answering vm’s question about Honest Abe.

Red, thank you for responding and giving us some feedback. I understand what you are saying about glee. I don’t feel gleeful at all about this market, but if it’s coming across that I do, I will try to watch that. I’m glad you find some of the posts on the blog helpful, and I’ll keep that in mind for future posts. And thank you for reading the blog.

I would love for some buyers to come on and tell their stories. I’ve been wanting to go to open houses and interview some; maybe one of these days I’ll get around to that.

If you have specific suggestions on topics you’d like us to post on, or tips or leads, please let us know. We will pursue them.

Cindy I like Patrick understand that what you have written is mostly a message in which you delineate in essence that honesty should be the beset policy. Unfortunately for some people honesty is not necessarily the best policy when it deals with real estate, “Lets close the sale at all cost in order to make a commission”. We all now that these days due to the lack of sales it’s very difficult for people in that industry to financially survive. By the way, I am looking to buy a house and Redfin has been a wonderful tool. It has kept me up to date with information enhancing my knowledge and understanding of the unscrupulous schemes that were orchestrated by individuals in that field. In retrospect some of the transactions in recent years in the mortgage and real estate industry clearly lacked Honesty.
For those interested in current status of the mortgage industry and the stock market refer to Mortgagenewsdaily. com