|
Korean Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Teachers from Around the World!"
|
| View previous topic :: View next topic |
| Author |
Message |
mises
Joined: 05 Nov 2007
Location: retired
|
 Posted: Sun Feb 21, 2010 6:32 am Post subject: |
 |
|
I don't doubt that there are situations in which buying a house makes financial sense. Even in the US. Though not in Orlando or other bubble areas:
| Quote: |
| Orlando-area home prices plunge 14% in January. |
http://articles.orlandosentinel.com/2010-02-19/business/os-orlando-home-sales-022010-20100219_1_home-price-median-core-orlando-market
I pay less in rent than my landlord pays in property taxes, condo fees and included utilities (by 15$/month). That is before any mortgage.
The question of buying isn't if you can afford the payment. The question is if renting or buying is better for wealth creation over the life of the loan. If I "bought" my condo my monthly payments would push my total housing expense much higher (how high depends on the down payment, interest rate, life of the loan etc). My estimation is that it would double my housing expense. The difference goes right into my savings and investments.
As such, the question is if 1) the appreciation on the house, after costs or 2) the appreciation of savings/investments (the difference between renting and buying) after costs will be greater after the 30 or whatever time frame of the loan. Shall I reference Japan here?
For some people buying makes sense if they do not have the will to save the difference. The house acts as a forced savings plan (a very expensive one). I have no such problems. Also, for buying to make sense you have to be committed to staying in one city for a long while, as transactions costs will eat up any gains if you're moving every few years, as I will be.
So I rent and pocket the difference. Though, the condo I live in has halved in value over the past 2.5 years. The rent has decreased around 600$ as well. If prices fell another 50%, which they very well could, it would make sense to buy if one had a very large downpayment.
This has nothing to do with the Mises Institute. |
|
| Back to top |
|
 |
asylum seeker
Joined: 22 Jul 2007
Location: On your computer screen.
|
| Posted: Sun Feb 21, 2010 6:47 am Post subject: Re: The $555,000 Student-Loan Burden |
|
|
| visitorq wrote: |
| asylum seeker wrote: |
| visitorq wrote: |
| asylum seeker wrote: |
| ontheway wrote: |
Government debt and government loan programs lead stupid people into making stupid decisions that destroy their lives.
Government must be prohibited from borrowing and lending.
Remember the wise words of the bard: Neither borrower nor lender be.
|
Private banks and credit cards with exorbitant interest rates also "lead stupid people into making stupid decisions that destroy their lives".
Should they also be prohibited from borrowing and lending? |
Not if they're using their own money (which the government never does). The government collects taxes. It is not a bank. |
So the argument is that there's nothing wrong with 'lead(ing) stupid people into making stupid decisions that destroy their lives' as long as it's done with private money rather than public money. If this woman had racked up huge amounts of debt with private banks that would have been fine. Thanks for clearing that up.
I guess in the unregulated libertarian utopia you and ontheway wish for, banks would be free to obfuscate and inveigle stupid people into taking on unaffordable debt at huge interest rates to their hearts' content. As long as the gummint doesn't get involved that's just dandy. |
Lastly, fraud is illegal. It is the government's job to enforce laws against private lenders to prevent unlawful activities. Currently, the government is doing pretty much the exact opposite, working with the banks to loot the public. |
I'm not happy with the way governments have bailed out big banks, I totally agree with you on this issue. However, I did have a problem with the way the OP was worded which did blame government for 'lead(ing) stupid people into making stupid decisions that destroy their lives' without acknowledging the role of private banks at all as though it is government and government alone that is guilty of this. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Sun Feb 21, 2010 6:48 am Post subject: |
|
|
| The student loan industry in the United States is a government screw up. |
|
| Back to top |
|
|
visitorq
Joined: 11 Jan 2008
|
| Posted: Sun Feb 21, 2010 7:00 am Post subject: Re: The $555,000 Student-Loan Burden |
|
|
| asylum seeker wrote: |
| I'm not happy with the way governments have bailed out big banks, I totally agree with you on this issue. However, I did have a problem with the way the OP was worded which did blame government for 'lead(ing) stupid people into making stupid decisions that destroy their lives' without acknowledging the role of private banks at all as though it is government and government alone that is guilty of this. |
Point taken, but I don't see why that would make you want to "defend" the government. The banks are totally rotten and corrupt. So is the government. They work very much together (using the Federal Reserve system to achieve their ends, primarily).
Last edited by visitorq on Sun Feb 21, 2010 7:00 am; edited 1 time in total |
|
| Back to top |
|
|
asylum seeker
Joined: 22 Jul 2007
Location: On your computer screen.
|
| Posted: Sun Feb 21, 2010 7:00 am Post subject: |
|
|
| mises wrote: |
| The student loan industry in the United States is a government screw up. |
But student loans are not the only area where stupid people are being led into destroying their lives. Private banks have some pretty despicable tactics to persuade people to take on way too much debt and I think it's disingenuous to talk as though this is just a 'government' thing. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Sun Feb 21, 2010 7:04 am Post subject: |
|
|
You're not going to find a defense of banks from me.
The largest player is SLM Corporation, which issues government backed debt to students. The students have little legal means of ridding themselves of debt they can't repay. SLM is a sister of Fannie/Freddie and has exactly the same impact on the student loan market as F/F did on the housing market. It is a huge, horrible distortion that enriches an elite at the expense of everybody else. SLM is apparently private, but a TBTF. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
| Posted: Sun Feb 21, 2010 8:01 am Post subject: |
|
|
Sure, why blame the government:
You get a car loan, a credit card loan or most any other kind of loan, and you can go bankrupt and get out of the loan. Your debts are wiped clean. You can start life over with a mostly clean slate. Sure, you can't get credit again as easliy, but hey, you shouldn't. You have proven that you are not good with your finances.
Because of the possibility of bankruptcy, lenders have been historically reluctant to lend money to students. No credit history, no track record, little or no income, no assets - it's quite risky to fund an education for a kid or young adult, since they can graduate and be legally insolvent on paper and default.
So, along comes your wonderful fascist-socialist government. They will help you. They changed the rules so you can almost never legally default on your student loans, put subsidies in place for the lenders, and pretend that this is a wonderful new program for the students.
Dumping billions of dollars through grants and bad loans into the system drives up the cost of higher education (which also drives up the cost of private and public education from K - 12). Now, everyone has to pay more. Before, it was fairly easy for a family to pay the way for kids to go to college or for a student to work his or her way through or a combination of the two. But thanks to the flood of government dollars, the costs are driven up by a drunken subsidized demand, far beyond the free market price. Everyone loses.
Students flock to the fleecing. The much higher cost means everyone pays more. Taxpayers pay for part of the cost that wouldn't have existed at all without the government interference. Parents pay more, requiring more work time and reducing potential investment and retirement savings. Students who try to work and save can't make it -even when working harder and longer hours in jobs that used to cover an entire 4 year degree. (Of course, massive inflation due to fiat money also comes into play here. The Fed and abandonment of the gold standard is part of every financial disaster story.)
But hey, you can borrow it all. You get locked in and raped for life on a loan that would have never been needed if the government hadn't driven up the cost. It's a full circle, complete fascist-socialist cluster f-ing of the entire country.
But not everyone is a loser. The banks and other lenders have a new and now fairly safe revenue source - the program was really for them after all - the students get intoxicated on the "free" money and get gang raped by the universities and lenders while the government holds them down for the screwing.
And all the while, the fascist-socialist politicians and their brain-dead supporters who arranged for this gang rape of the parents, students and taxpayers brag about what they've done to help, putting the blame on others for the evil deads that the politicians themselves instigated. |
|
| Back to top |
|
|
pkang0202
Joined: 09 Mar 2007
|
| Posted: Sun Feb 21, 2010 8:37 am Post subject: |
|
|
I blame the parents. Put your children through school.
Financial Aid should be for the poor, NOT the middle class family with 3 cars and a swimming pool. |
|
| Back to top |
|
|
blade
Joined: 30 Jun 2007
|
| Posted: Sun Feb 21, 2010 6:14 pm Post subject: |
|
|
| mises wrote: |
I don't doubt that there are situations in which buying a house makes financial sense. Even in the US. Though not in Orlando or other bubble areas:
| Quote: |
| Orlando-area home prices plunge 14% in January. |
http://articles.orlandosentinel.com/2010-02-19/business/os-orlando-home-sales-022010-20100219_1_home-price-median-core-orlando-market
I pay less in rent than my landlord pays in property taxes, condo fees and included utilities (by 15$/month). That is before any mortgage.
The question of buying isn't if you can afford the payment. The question is if renting or buying is better for wealth creation over the life of the loan. If I "bought" my condo my monthly payments would push my total housing expense much higher (how high depends on the down payment, interest rate, life of the loan etc). My estimation is that it would double my housing expense. The difference goes right into my savings and investments.
As such, the question is if 1) the appreciation on the house, after costs or 2) the appreciation of savings/investments (the difference between renting and buying) after costs will be greater after the 30 or whatever time frame of the loan. Shall I reference Japan here?
For some people buying makes sense if they do not have the will to save the difference. The house acts as a forced savings plan (a very expensive one). I have no such problems. Also, for buying to make sense you have to be committed to staying in one city for a long while, as transactions costs will eat up any gains if you're moving every few years, as I will be.
So I rent and pocket the difference. Though, the condo I live in has halved in value over the past 2.5 years. The rent has decreased around 600$ as well. If prices fell another 50%, which they very well could, it would make sense to buy if one had a very large downpayment.
This has nothing to do with the Mises Institute. |
I believe that the decision to rent or buy often comes down to security of tenure. How long can I stay in apartment before my landlord decides to evict me. In France, Germany, Austria etc people generally are able to rent unfurnished properties for three years or longer and then at the end of the three years landlords must give the renter six months notice before they must move out while the renter only needs to give one months notice to quit. Also landlords can't just throw somebody out onto the street in the middle of winter without a very good reason. |
|
| Back to top |
|
|
The Happy Warrior
Joined: 10 Feb 2010
|
| Posted: Sun Feb 21, 2010 9:53 pm Post subject: |
|
|
| mises wrote: |
| The student loan industry in the United States is a government screw up. |
I refuse to believe that until you create a proper thread on it with an article supporting your position and everything! |
|
| Back to top |
|
|
blade
Joined: 30 Jun 2007
|
| Posted: Sun Feb 21, 2010 11:29 pm Post subject: |
|
|
| The Happy Warrior wrote: |
| mises wrote: |
| The student loan industry in the United States is a government screw up. |
I refuse to believe that until you create a proper thread on it with an article supporting your position and everything! |
Allow me.
| Quote: |
http://www.highereducation.org/crosstalk/ct0598/voices0598-hauptman.shtml
At the very least, however, the tremendous growth in the availability of federal loans has facilitated the ability of both public and private colleges to raise their tuitions at twice the rate of inflation for nearly two decades without experiencing decreases in enrollment or other clear signs of consumer resistance. In particular, it seems evident that private colleges could not have stabilized their share of total enrollments over the past two decades without the tremendous expansion in federal loan availability. |
|
|
| Back to top |
|
|
jaykimf
Joined: 24 Apr 2004
|
| Posted: Mon Feb 22, 2010 8:24 am Post subject: |
|
|
| mises wrote: |
I don't doubt that there are situations in which buying a house makes financial sense. Even in the US. Though not in Orlando or other bubble areas:
| Quote: |
| Orlando-area home prices plunge 14% in January. |
http://articles.orlandosentinel.com/2010-02-19/business/os-orlando-home-sales-022010-20100219_1_home-price-median-core-orlando-market
I pay less in rent than my landlord pays in property taxes, condo fees and included utilities (by 15$/month). That is before any mortgage.
The question of buying isn't if you can afford the payment. The question is if renting or buying is better for wealth creation over the life of the loan. If I "bought" my condo my monthly payments would push my total housing expense much higher (how high depends on the down payment, interest rate, life of the loan etc). My estimation is that it would double my housing expense. The difference goes right into my savings and investments.
As such, the question is if 1) the appreciation on the house, after costs or 2) the appreciation of savings/investments (the difference between renting and buying) after costs will be greater after the 30 or whatever time frame of the loan. Shall I reference Japan here?
For some people buying makes sense if they do not have the will to save the difference. The house acts as a forced savings plan (a very expensive one). I have no such problems. Also, for buying to make sense you have to be committed to staying in one city for a long while, as transactions costs will eat up any gains if you're moving every few years, as I will be.
So I rent and pocket the difference. Though, the condo I live in has halved in value over the past 2.5 years. The rent has decreased around 600$ as well. If prices fell another 50%, which they very well could, it would make sense to buy if one had a very large downpayment.
This has nothing to do with the Mises Institute. |
Wasn't it the mises institute that was predicting 15 years of depression and deflation? If it wasn't them, than I stand corrected. Such a scenario however, definitely would be relevant to the decision of whether to buy or rent. Prolonged deflation would tip the scales in favor of renting, while a return of even modest inflation would favor buying. |
|
| Back to top |
|
|
jaykimf
Joined: 24 Apr 2004
|
| Posted: Mon Feb 22, 2010 9:15 am Post subject: |
|
|
| Fox wrote: |
3) The difference between your rental costs and purchasing costs are $424 a month. Over 29 years, that equates to $147,552. Could you possibly invest that money in such way that it ends up earning you enough over 29 years to be of greater value than the home you're puchasing after that time, especially in light of the fact that after #1 and #2 are taken into account, the actual figure will probably be noticably higher than $147,552?
If you think the quality of life you gain is worth the extra cost, that's good. I'm just wondering if you factored these cost differences into your decision. |
For about 30% more in cost we're getting a house that is more than 100% bigger. Of course I really should be comparing to the cost of renting a house, not an apartment. That would be a bit of guess though since it's hard to find a comparable--a new house similar to ours in an older neighborhood similar to ours. My wild guess would be 1500 to rent give or take a hundred.
More importantly, your $147552 figure assumes there will be no increase in rent over 30 years. Do you think that is likely? Try recalculating assuming a 2- 3% average annual rate of rent increase. Furthermore, what happens after 30 years? Continue to pay increasing rent for the rest of my life or live rent free for the rest of my life and then leave the house to my kids. O f course saving something on rent and investing is an alternative that should be considered. I did that for many years and now I am over weighted in the stock market . Time to diversify a little with real estate. What's the investment alternative? A savings account paying 1.5%? Gold? No thanks. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Tue Feb 23, 2010 6:14 am Post subject: |
|
|
| Quote: |
| Wasn't it the mises institute that was predicting 15 years of depression and deflation? |
They're arguing amongst themselves about inflation/deflation.
The cost of your house is double what you paid, just from the loan. Then add in upkeep, property taxes, insurance and similar. Also the opportunity cost of the 'double'. You could have invested the difference.
What state are you in? Let's get specific. If you're in Wyoming or Oklahoma the numbers are much different from California etc.
And what makes you think America will be different from Japan? The Japanese credit/housing market blew up in 1989 and house prices are still way down from the 89 top. You shrug off the return on savings accounts while assuming your house will earn more. That is a very weak assumption. |
|
| Back to top |
|
|
jaykimf
Joined: 24 Apr 2004
|
| Posted: Tue Feb 23, 2010 9:39 am Post subject: |
|
|
| mises wrote: |
| Quote: |
| Wasn't it the mises institute that was predicting 15 years of depression and deflation? |
They're arguing amongst themselves about inflation/deflation.
The cost of your house is double what you paid, just from the loan. Then add in upkeep, property taxes, insurance and similar. Also the opportunity cost of the 'double'. You could have invested the difference.
What state are you in? Let's get specific. If you're in Wyoming or Oklahoma the numbers are much different from California etc.
And what makes you think America will be different from Japan? The Japanese credit/housing market blew up in 1989 and house prices are still way down from the 89 top. You shrug off the return on savings accounts while assuming your house will earn more. That is a very weak assumption. |
I really don't assume the house will earn anything--in real dollar terms. I do expect that within 5-10 years the monthly cost of renting will exceed my buying costs. As that approaches my monthly savings available to invest will gradually decrease, disappear and then reverse. I could be wrong and it might take 15-20 years but it will happen. (I'm confident enough to bet my money on it) Anyway, as I'm sure you know, the viability of the rent and invest the difference option depends largely on the spread between buying and renting (the amount available to invest) and the rate of return that can be earned on that investment. In our case the spread is relatively small to begin with and the investment options are limited. As I said, I want to diversify away from the stock market. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
