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Mabon

Do Renters Die Poor?

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Going back to Mabon's original question - will renters die poor - what it probably boils down to (IMHO_ even more than (luck in) timing of purchase is FAMILY BUDGETING. Now as you look around the population of the UK, tell me that the everage renter would (overall) be putting more funds aside than the average homeowner with a repayment mortgage. Of course you can tell me that some of those with homes might be using them as an ATM machine but overall I would bet on the buyers. As previously mentioned GEI is not representative of the average UK population!

 

+ I have heard it mentioned elsewhere (some LSE politician on a lecture podcast) that encouraging home ownership was an undercover way for the Gov to encourage the "poor" to provide for their old age.

If the house price slide materialises, we will see the reverse:

 

Falling home prices will serve to wipe out much of the wealth of the home-owning middle class.

 

If it happens in the UK - and it has already happened in the US - it will spawn middle class anger - ala the Tea Party movement:

 

+ Some folks who should be angry with themselves, for speculating recklessly on homes they could not afford, are angry with the government for allowing that to happen.

 

+ Others, who have been squeezed by the loss of jobs overseas have joined them in proptests

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If the house price slide materialises, we will see the reverse:

Falling home prices will serve to wipe out much of the wealth of the home-owning middle class.

 

If it happens in the UK - and it has already happened in the US - it will spawn middle class anger - ala the Tea Party movement:

 

+ Some folks who should be angry with themselves, for speculating recklessly on homes they could not afford, are angry with the government for allowing that to happen.

 

+ Others, who have been squeezed by the loss of jobs overseas have joined them in proptests

 

Maybe its just part of natures course, to rebalance "wealth" between young and old ! There are a number of ways to accomplish and house prices are but one.

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A distinction needs to be drawn here between currency and money to resolve the conundrum of "money" both increasing and decreasing in value:

 

You can earn more of a specific currency while at the same time that currency is decreasing in value against stronger currencies.

 

There is a relativity involved here; if I earned more pounds, yet at the same time pounds depreciated against dollars, then though it may seem I am getting ahead [in terms of pounds]... I am actually standing still in terms of dollars.

 

Moreover, if I earned more pounds, yet at the same time pounds depreciated even more against gold, then I would be going backwards in terms of gold.

 

I understand what you are saying. All currencies have relative strength compared to each other.

 

In terms of 'hard' 'assets' you may be currently right. If 'money' is strengthening in value relative to houses, which in a lot of places it is.

 

I'm never sure about your faith in the US Dollar, but hey, you may have a point?

 

One thing though. Gold is not money - YET.

 

I understand Money as something you can spend, save or invest. A medium of exchange and a promise of the future.

 

The minute I can go into Tesco's and trade a Sov for the contents of Aisle C, that's when Gold will be money.

 

Until then I'll deal primarily in pounds sterling, as that is the currency in the UK.

 

Housing, which has been discussed as both a monetary and real asset on this thread, would be put in the upper tiers if a monetary asset. Following the drive to liquidity, Brit housing depreciates against the pound, which in trun depreciates against the dollar, which in turn depreciates against gold. The "investor" who sat in pounds would still do relatively well against housing [lower prioces] but if he wanted to maximize his opportunites, other stronger currencies would be better to sit in.

 

Always seems like a hell of a faff that one. Suddenly I have to indulge in currency arbitrage and jump around like a game of frogger. I'd rather just allocate my capital to produce high yields. Seems much simpler.

 

*I know I know. The currency I get my yields in could be falling in relative value compared to other currencies etc. This is the chance you take having ANY of your financial wealth in any currency though - even Gold.

 

I'm convinced, and for practical reasons [minus the baggage], that gold should be the measure of monetary value now.

 

Hmmm it should but it's not yet. Silver's probably got more chance of becoming an official medium of exchange again. Gold's perceived value is just too big at the moment to think of it as anything other than insurance/ store of wealth.

 

Just my opinion though.

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If the house price slide materialises, we will see the reverse:

 

Falling home prices will serve to wipe out much of the wealth of the home-owning middle class.

 

If it happens in the UK - and it has already happened in the US - it will spawn middle class anger - ala the Tea Party movement:

 

+ Some folks who should be angry with themselves, for speculating recklessly on homes they could not afford, are angry with the government for allowing that to happen.

 

+ Others, who have been squeezed by the loss of jobs overseas have joined them in proptests

 

Represents an amazing opportunity though, for those who were savvy enough to not get involved in bubblenomics (finally).

 

Maybe, finally houses will return to some kind of rational, historical 'norm' in most places.

 

Whilst falling house prices mean bad news for a lot of folks who see their houses as 'their greatest asset' and severely over-paid for them, economically speaking falling house prices are excellent news for the country in general.

 

Less income spent on having to pay for a house is some kind of liberation from the ridiculous game of housing roulette the UK and others have been playing for 10 plus years.

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15k House - Going for Auction - Wonder if it will make it's asking price?

 

In New Holland/ Barrow-upon-Humber (Noth Lincolnshire/ Humberside).

 

http://www.zoopla.co.uk/for-sale/details/1...2047d81538556e4

 

I wonder what future communities like these have?

 

Notice it has 2 railway stations (on the same line) nearby.

 

Surrounded by very fertile farmland.

 

Biggest employers around there would probably be at Immingham (Power Stations?, Chemical Plants?, Oil Refinery? I think), and Grimsby (Fish Fingers?).

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Maybe its just part of natures course, to rebalance "wealth" between young and old !

There are a number of ways to accomplish and house prices are but one.

Indeed.

It will serve that purpose, and balance does need to be restored from time-to-time,

and you could say that is one important function of a Depression.

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15k House - Going for Auction - Wonder if it will make it's asking price?

I wonder what future communities like these have?

 

Notice it has 2 railway stations (on the same line) nearby.

Surrounded by very fertile farmland.

Biggest employers around there would probably be at Immingham (Power Stations?, Chemical Plants?, Oil Refinery? I think),

and Grimsby (Fish Fingers?).

Sounds interesting.

Amongst other advantages, it gives you a chance to live near, and rub shoulders with, the Fish-finger-king.

Perhaps even the good Captain Birdseye him-very-self. Does he still wear a cod-piece?

 

fishfingers.jpg

 

I like the idea of farmland near rail connections. Think of useful things to grow there, and what folks at the end

of the rail will crave, when Sterling buys little in the way of foreign goods

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15k House - Going for Auction - Wonder if it will make it's asking price?

 

In New Holland/ Barrow-upon-Humber (Noth Lincolnshire/ Humberside).

 

http://www.zoopla.co.uk/for-sale/details/1...2047d81538556e4

 

I wonder what future communities like these have?

 

Notice it has 2 railway stations (on the same line) nearby.

 

Surrounded by very fertile farmland.

 

Biggest employers around there would probably be at Immingham (Power Stations?, Chemical Plants?, Oil Refinery? I think), and Grimsby (Fish Fingers?).

IMO you need to look at average prices (65k), subtract the cost of refurb. (40k), factor in the areas potential (or lack of save for the stations), consider rents if you don't intend to live there (rightho) and minus the sale price. All things considered I would be inclined to run away a d into the nearest gold dealers with my currency.

It might be surrounded bt verdant pastureland but it ain't no farmhouse. Without local knowledge you might be buying a scaffold on which to hang yourself.

Also factor in those juicy falling property values scheduled to begin 2 years ago but on ice till 2011-12.

my verdict: avoid like the plague. ( next door nicely boarded up too.) I wonder what the schools are like? Hull though has a nice ferry to Holland.

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Strewth!

Yet despite Japan's troubles you'd be hard pushed to find a place as socially deprived as many in the UK.

 

Good Luck. :lol:

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IMO you need to look at average prices (65k), subtract the cost of refurb. (40k), factor in the areas potential (or lack of save for the stations), consider rents if you don't intend to live there (rightho) and minus the sale price. All things considered I would be inclined to run away a d into the nearest gold dealers with my currency.

 

Hmm. If you want a place to live, your gold can't make you a home - just be traded for one. Of course you can hold gold and then trade in the future for a house.

 

The 'cost' will probably be less. As in it will cost you less gold to buy a house than it will sterling (or other currency).

 

It might be surrounded bt verdant pastureland but it ain't no farmhouse. Without local knowledge you might be buying a scaffold on which to hang yourself.

 

Lol. I would never intend on buying this or a house like it. Just asking if it'll make it's auction price?

 

If not then I wonder what it would go for?

 

Clearly you would only buy in a place like that, if you were a local and wanted to stay there.

 

If I was a local, I would offer 8k for the house and the same for the one next door. Knock em into one and enjoying living in the area I wished to continue to.

 

If the house is structurally sound, then the average refurb (pretty much everything) can be done for 10k (for the 2 houses probably about 18k) - unless you were looking for gold taps. For that price you make it into a good home.

 

Most of these places are habitable as is though. That would have to be sussed out on appraisal. I've viewed pre-auction property and have been really surprised at the quality and structural stability of them.

 

I've also seen property that was just a no-no at any price.

 

Also factor in those juicy falling property values scheduled to begin 2 years ago but on ice till 2011-12.

my verdict: avoid like the plague. (next door nicely boarded up too.) I wonder what the schools are like?

 

If my sterling is 'devaluing' now. Then it'll be worth less in comparison to a house in 2 years time. Swings and Roundabouts.

 

If a currency is going to be losing value, then it's purchasing power is eroding. So even though a house may be xx amount cheaper, the currency has lost some of it's buying power.

 

Like I say in this thread:

 

If you are a local and want to stay in places such as this and you are working, then at what point does it become obvious that buying a home is better option than renting one?

 

Particularly when you may be paying 2.5 - 4k rent to occupy the same house.

 

I'm not sure how much further a 15k asking price house can fall - zero of course if no-one wants it.

 

If that is the case then a lot of communities will contract, or cease to exist.

 

Hull though has a nice ferry to Holland.

 

Hull also has some powerhouse industries. So does nearby Nottingham, Immingham and Grimsby.

 

What's the point of these English folk going to Holland, when they can live in New Holland for cheap??

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Like I say in this thread:

 

If you are a local and want to stay in places such as this and you are working, then at what point does it become obvious that buying a home is better option than renting one?

 

Particularly when you may be paying 2.5 - 4k rent to occupy the same house.

 

I'm not sure how much further a 15k asking price house can fall - zero of course if no-one wants it.

 

 

Interesting - if you are a hard working family man(or lady) you would want to buy at these prices even if only to use as a stepping stone.

 

So what sort of tenant would someone buying to let end up with?

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Interesting - if you are a hard working family man(or lady) you would want to buy at these prices even if only to use as a stepping stone.

 

So what sort of tenant would someone buying to let end up with?

 

There in lies the rub.

 

'Do Renters Die Poor'?

 

We've alluded to the notion that renting for the vast majority of people who do it (not Gei'sters) is as much a mindset as anything.

 

If you were working and saw houses in your locale this cheap, why would you not buy one to live in?

 

Instead of paying say 2.5 to 4k per year to rent one?

 

Is it an impoverished mindset then? A 'love of money is the root of all evil' type schema?

 

Other than the strategics of STR and wait in PM's til houses are a one ounce deal - as a lot of GEi'sters are doing, what other reasons would you have?

 

Assuming that you are working. Living in the local community. And plan to stay.

 

Is it that you are just too poor to buy a house for 25k? (Approx 2.4 times average minimum wage salary).

 

What about at 20k? 15k?

 

What about at 10k, 5k? Still too poor?

 

Maybe you will spend your life trying to 'get a camel through the eye of a needle'?

 

 

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Is it an impoverished mindset then? A 'love of money is the root of all evil' type schema?

I think you're getting closer here.... with the mindset thing

 

The simple fact is, most hard-working people don't think of houses as a form of investment. Most don't even think in terms of investment. That doesn't mean to say they don't save. Their instincts may prove to be right in the end... and the investor - intellectually dominated by monetarism, where money is assumed to depreciate, and hence the will to invest - may be proven to be wrong.

 

 

Crikey, imagine if everyone thought of houses as money machines.... just a sec, isn't that what happened in our "post-developed" economies.....

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I think you're getting closer here.... with the mindset thing

 

The simple fact is, most hard-working people don't think of houses as a form of investment. Most don't even think in terms of investment. That doesn't mean to say they don't save. Their instincts may prove to be right in the end... and the investor - intellectually dominated by monetarism, where money is assumed to depreciate, and hence the will to invest - may be proven to be wrong.

What about local variations in "mindset"?

For example: Europeans, and Germans in particular, are likely to feel less "urgency to own".

 

And the "urgency to own" is fading fast in the USA*, after years of price falls.

 

I think you need to look at how price changes help to "anchor" these attitudes, and also to change them.

== ==

 

* an interesting tidbit in today's WSJ:

"US govt backing for many pricey home mortgages is set to expire at the end of the year" - above $417,000 limit.

(At present, in CA borrowers can buy a $750k home with just a 3.5% down payment, with a FHA backed loan.)

"Home prices would 'drop precipitously' because it would be 'impossible to finance homes in most parts of Los Angeles and certain other major cities.'"

 

2011 could be very negative for the US housing market, further eroding the "urgency to buy."

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Yn wir, mae'n hawddach i gamel fyned trwy lygad nodwy nag i ddyn cyfoethog fyned i'r nefoedd.

 

I'll raise you...

 

En lavarout a ran deoc'h c'hoazh, aesoc'h eo d'ur c'hañval tremen dre graoenn un nadoz eget d'un den pinvidik mont e-barzh rouantelezh Doue.

 

Later today I'll explain why I bought a house at the peak of the market instead of constantly renting an even bigger house for less money. Too drunk now.

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I'll raise you...

 

En lavarout a ran deoc'h c'hoazh, aesoc'h eo d'ur c'hañval tremen dre graoenn un nadoz eget d'un den pinvidik mont e-barzh rouantelezh Doue.

 

Later today I'll explain why I bought a house at the peak of the market instead of constantly renting an even bigger house for less money. Too drunk now.

Ah, that explains it then.

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What about local variations in "mindset"?

For example: Europeans, and Germans in particular, are likely to feel less "urgency to own".

 

And the "urgency to own" is fading fast in the USA*, after years of price falls.

 

I think you need to look at how price changes help to "anchor" these attitudes, and also to change them.

Sure, mindset is a cultural thing.... whether a sub-culture... or a national characteristic.

 

It looks like the "retail" investor mindset percolated down through near all "strata" of society in the anglosphere countries. Is that what they meant by the "trickle-down" effect? :lol: ....except it ended up impoverishing people rather than the opposite.

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Yn wir, mae'n hawddach i gamel fyned trwy lygad nodwy nag i ddyn cyfoethog fyned i'r nefoedd.

 

Diolch i'r nefoedd bod y sefyllfa honno wedi newid!!

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What about local variations in "mindset"?

For example: Europeans, and Germans in particular, are likely to feel less "urgency to own".

 

Isn't that because of what was stated in post # 1 about countries like Germany having much more stringent protection of tenant's rights?

 

If you feel secure as a tenant, you'll surely see renting as a good long term bet, because it would have the same entitlements and security as 'ownership'?

 

And the "urgency to own" is fading fast in the USA*, after years of price falls.

 

Ironically when housing is going from average cheap to really cheap in the States, that's when homeownership is becoming either financially out of most folks reach, or repugnant (when houses get hated and cheap and nobody wants them).

 

* an interesting tidbit in today's WSJ:

 

"US govt backing for many pricey home mortgages is set to expire at the end of the year" - above $417,000 limit.

(At present, in CA borrowers can buy a $750k home with just a 3.5% down payment, with a FHA backed loan.)

"Home prices would 'drop precipitously' because it would be 'impossible to finance homes in most parts of Los Angeles and certain other major cities.'"

 

2011 could be very negative for the US housing market, further eroding the "urgency to buy."

 

:blink:

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If you were working and saw houses in your locale this cheap, why would you not buy one to live in?

 

Instead of paying say 2.5 to 4k per year to rent one?

People on low incomes can get their rent paid/subsidised by the government. I don't know the details but one of my more workshy friends has had his rent paid by benefits for low income workers for years. Can low income workers get similar benefits payments on a mortgage longterm? I really know almost nothing about the benefits system, but this may be a factor.

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People on low incomes can get their rent paid/subsidised by the government. I don't know the details but one of my more workshy friends has had his rent paid by benefits for low income workers for years. Can low income workers get similar benefits payments on a mortgage longterm? I really know almost nothing about the benefits system, but this may be a factor.

 

It's hardly nothing. As soon as you start working more than a few hours per week. You lose the vast majority of your housing benefit.

 

Therefore as far as I know, most folks are either 'on benefits' or 'off benefits'. There's not much of a transition space.

 

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If you were working and saw houses in your locale this cheap, why would you not buy one to live in?

 

Instead of paying say 2.5 to 4k per year to rent one?

Sure. Why not?

 

That goes back to my old idea, of years ago:

Look at the after-tax cost of Owning, and compare it with the after-tax cost of Renting.

 

When it is cheaper to Own, that's when you buy.

 

Problem is: in many countries, ZIRP (near zero savings rates) are distorting the calculations.

And you have to ask: what is the sustainable level of mortgage rates?

If you buy, and then rates shoot up, you can get hammered.

 

In deflationary times, you can also get a fall in rates, which makes the calculation even more complex.

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Sure. Why not?

 

That goes back to my old idea, of years ago:

Look at the after-tax cost of Owning, and compare it with the after-tax cost of Renting.

 

When it is cheaper to Own, that's when you buy.

 

This has always been obvious to me. I have no idea if it is obvious to others though.

 

Like any trade, if it's cheaper to buy a houise in your locale, than it is to rent one, then best you buy, if you plan on staying.

 

When rent outprices buy price, rent becomes what your Auntie will euphemistically call 'dead money'.

 

Problem is: in many countries, ZIRP (near zero savings rates) are distorting the calculations.

And you have to ask: what is the sustainable level of mortgage rates?

If you buy, and then rates shoot up, you can get hammered.

 

In deflationary times, you can also get a fall in rates, which makes the calculation even more complex.

When houses are going for 25, 20, 15k I'd just buy it for cash, even if I borrowed off family and paid it back xx amount per month.

 

This is what my Dad did when he bought his first house. Mortgages (late 1960s) were really hard to get.

 

The bank would ask for such things as collateral, hefty deposit, check if you were a 'good risk' and if you were 'upstanding'. And even if you were, they would still be reluctant to lend, so in my Mam and Dad's case they just borrowed from family and paid it off.

 

That way, if they ever couldn't pay, the house stays in the family. They could always give over the deeds to my uncle (who lent them the money) and then rent the house back until they were ready to buy it again.

 

This seems a peculiarly Welsh thing and is tied to the 'non-conformist' movement amongst the Welsh people. In that you 'look after your own so that they may look after you'. (?).

 

With the example a few posts ago of the 15k house in Barrow on Humber (north Lincolnshire, England, UK), the house price is about 1.4 times minimum wage (1.4 times the lowest full-time single possible wage).

 

Even if you bought it on a mortgage and paid the full 15k (probably get it for less).

 

Say got a 20k mortgage and put 5k into refurb etc. Rates would have to rise to above 10% before buying the house was less economical than renting it (all things equal and considered).

 

Like I say, at what point does a renter think 'why don't I just buy a house?'.

 

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