When I was a young man, the thought of owning my home was a lofty dream that I could only hope to attain. After all, purchasing a home required a financial discipline that only the most responsible money managers could achieve.
And it also required SAVING money. There was no way around it, so it was universally understood that scrimping and saving for a down payment was part and parcel of home ownership.
In my case, it took seven years to set aside enough cash for the 20% down payment that would allow me to really have a vested interest in my piece of America. And you can bet that the sacrifices that contributed to my savings accounts translated into determination to not only own a home, but to hang on to it for dear life.
But at some point in our history, it was decided that home buying should be easy and readily available. Buyers with no cash in savings were lured into expensive homes in which they held no equity. In truth, it was more of a glorified lease than an “investment” because nothing was actually invested.
And the simple fact of the matter is that more houses were built than there were COMPETENT buyers and the downward price spiral commenced.
And most solutions for the nightmare of today involve repeating the mistakes of the past and diminishing the financial responsibilities of the purchaser.
It’s time to get back to basics. There should be incentives to SAVE money. How about this; instead of paying buyers to purchase homes why not eliminate the income tax on interest on savings?
Or at least the make the first $8000 worth of tax on interest income a tax credit. We have been punishing thrift and rewarding extravagance for far too long!
And it’s time to set the ship back on course.
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Richard, this is one of today's problems. Everyone feels entitled to things and possessions without doing the required work or actions to actually deserve these.
Richard...at what point did the American dream become a nightmare? when Bill Clinton deregulated the banking industry.....if you had a name and pulse, you could buy a home.....it went down hill from there....everyone should not and cannot be a homeowner.....there are certain requirements and that's how it should remain.
Richard, You are exactly right as far as savings. We have to spend less, save more and invest the money to become more productive. Removing the tax on savings and investments would be a huge step in the right direction. But of course, everyone knows that interest is "unearned" income and it would be unfair to workers who actually earn income. That would be the political problem in getting something like that done.
"Or at least the make the first $8000 worth of tax on interest income a tax credit. We have been punishing thrift and rewarding extravagance for far too long!"
What a wonderful idea.
I was never and am not now in favor of the tax credit for buying a home. It favors groups of Americans over others and that's just plain wrong.
Did I make sure that buyers we helped by homes benefit from the tax credit with information. Of course. I haven't lost my mind and couldn't change the program anyway.
I don't believe that it redounds to the benefit of the economy to pull the rug out of financing opportunities in a down economy. The damage perpetrated by the financial industry opportunists will take years, decades to cure and unless and until the home buying market is again viable, I don't believe our economy will recover, and indeed continue to decline.
So, waiting for everyone to have some mystical 20% down would IMO delay the recovery for decades longer, about the time it takes to save 20%.
In a perfect world, you are absolutely right. In the real world, I'm not so sure.
Besides, I know many who put that mystical 20% down and watched it evaporate into the pockets of the Wall Street MBSs. There's no comfort in that.
"Make the first $8000 worth of tax on interest income a tax credit." What a great idea Richard! If you started a petition, I'll bet you could get enough people to sign on to make that become law.
Great post Richard. I agree people need skin in the game and home ownership isn't for everyone. There are many ways to increase savings but keeping people in debt helps keep them under control. As usual Barbara hits the nail on the head, look back at the Clinton years and you will find the roots of our current troubles.
Richard, you should run for office! Oh wait, nevermind, LOL.
That is a great idea, wow!
Richard, really great post. This is so true many of our younger generations in general feel "entitled" rather then work hard for what they want. keeping it simple works, just start saving and be disciplined with how you spend.
Richard, no money down loans has made it too easy for someone to own a home. It also makes it easy for someone to walk away because there is no invested interest in the property. When we bought our first home, we had to have money down and the bank wouldn' even allow my wife's income to qualify for the loan. Things have really changed.
Unfortunately, BOYS & GIRLS, you are going to have to look a little further back than Clinton to determine the downfall of the American economy & way of life.
This is not a R or a D issue, our government is a reflection of our society...fat, lazy, oblivious, & lacking on all levels of compassion & responsibility.
Just like taxing the Rich. Most work very hard and employee a lot of people. Congress is making America the land of the lazy. No wonder why people from other countries come here. It's easy pickings when you are used to working hard every day of your life!
Besides doing a good job outlining the sudden sense of "entitlement" that many people seem to have, I like your idea about the Savings Tax Credit or even Deduction, Richard. The amount can vary.
I like this idea for more than saving to buy a home. Actually, the economy runs better when money circulates through it. This happens through consumer or business spending, but this is only possible through
This last one is most overlooked, because most people don't realize that investing provides money for another business to use, meaning SPEND.
You might have provided an even better solution than you orginally realized, Richard. From my perspective...GREAT JOB!
Besides doing a good job outlining the sudden sense of "entitlement" that many people seem to have, I like your idea about the Savings Tax Credit or even Deduction, Richard. The amount can vary.
I like this idea for more than saving to buy a home. Actually, the economy runs better when money circulates through it. This happens through consumer or business spending, but this is only possible through
This last one is most overlooked, because most people don't realize that investing provides money for another business to use, meaning SPEND.
You might have provided an even better solution than you orginally realized, Richard. From my perspective...GREAT JOB!
Richard: I could not agree with you more. Buying a home shouldn't be like leasing a car, which it what it feels ilke lately. There should be saving and planning. It's a big accomplishment to buy a home.
Not everyone should own a home. Or have a child. Or marry. We are not all alike, so how could we all be capable of saving and taking care of a house, raising a child or managing a relationship?
Richard, My sentiments exactly. Why do we not elect people with common sense and knowledge of good business (and family) practices?
I agree... and what frustrates me is finding ourselves in an economy that wants (needs) to run at a growth rate that's unsustainable. If I save money for a down payment, that money is worth less everyday yet the prices (have fallen) but not to a level my paycheck can manage.
I bought my last home in 1996. Even in this down market it would sell for three times what I paid for it. Yet, my income hasn't tripled...
Maybe I'll buy a lotto ticket! Good post, but you got my blood pressure up! ;0)
Richard, I agree with Andrea that you should run for office. I would send money to your campaign. That would be an investment!
This ship is headed to the rocks that it will shatter on if we don't learn to control ourselves.
"But at some point in our history, it was decided that home buying should be easy..."
IMO, few things that are easy are worth doing, or long lasting.
Good post Richard!
Richard i think you answered your own question in your blog. I assumed my first house by saving 10 or 15% of the purchase amount. I don't remember the exact amount any more.
Interesting perspective Richard. Too bad that the idiots on the Hill decided to entertain the thought that everyone should own a home. Their lack of foresight got us into the quagmire that we are currently in...
I've got to agree with Barbara Todaro! To promote home ownership we relaxed the rules, and truth be told, not everyone should own a home.
That is a great idea about the tax credit Richard! Now, go to Washington and knock their socks off! :)
I totally agree with you and what we need to do is get in touch with the college graduates.
An attorney and I are working on a presentation to aim towards the new graduates, explaining to them what they should be doing with their new salaries and one of it, is taking a portion of it and saving it for their dream home.
Good morning Richard,
Common sense..I totally agree with you..not everyone should own a home..it's worth the wait and valued when you save and make it happen. The "American Dream" highly sought after but now expected....the thought or idea of earning it has disappeared!