Obama HUD choice reflects homeownership myths

First and foremost, contrary to President-elect Barack Obama and his Housing and Urban Development Secretary-designee Shaun Donovan, not everybody in America should own a home.

"He understands that we need to move past the stale arguments that say low-income Americans shouldn't even try to own a home or that our mortgage crisis is due solely to a few greedy lenders," Obama said of Donovan.

"He knows that we can put the dream of owning a home within reach for more families, so long as we're making loans in the right way, and so long as those who buy a home are prepared for the responsibilities of homeownership."

Unfortunately, people within the lower middle class who can't manage their finances become the targets of predatory home lenders, while those in the rich with the same lack of financial acumen get bailed out by parents, trust funds or the government.

Well, with the rich, we need to stop bailout option No. 3 and tighten tax loopholes against option No. 2. With the less well-off, we need to drop the myths of home ownership.

After all, those myths have been foisted upon us by the National Association of Realtors.

The truth is that if you invest -- even cautiously -- the money you save by renting, you'll come out even. And, if you invest cautiously, you'll have less stress.

Beyond that, renting is more environmentally friendly.

More environmentally friendly yet would be to eliminate the tax deduction for home mortgage interest payments. That would stop McMansion building right in its tracks.

Blow through Realtor smoke-blowing on homebuying

If a new car salesman tried to sell you a high-dollar vehicle with the closer line, “And, you’ve got equity,” you’d laugh in his effing face.

Well, why don’t you do the same when a Realtor tells you that as part of trying to sell you a new house?

You should. Read the five myths about renting, with their realities:

• Renting is just throwing money away.
Not if you invest the money you’re saving by not buying.

• There are tax benefits to owning.
Only if you make enough money that your mortgage interest deduction (remember, it’s just interest that counts), plus other itemizable deductions, is more than your standard deduction would be if you didn’t itemize.

• It doesn’t cost any more to buy.
Wrong. You have property taxes every year. You have maintenance. You have an average of 11 percent in commissions and closing costs. You have insurance payments.

• Buyers have assets, renters don’t.
Well, yes, depreciating assets. And, the mythical equity of homeowners disappears after 10 years in, or so. Many homeowners then (going beyond the linked story), try to chase sunken costs and build up equity with remodeling projects.

• Houses are a good investment.
Not. Read the point immediately above.

Here’s the reality on that last point:

The reality is that housing is not an investment. It’s shelter. That is all housing has ever been. Self-serving organizations like the National Association of Realtors like to tell people that buying a home is a good way to build long-term wealth, but this statement couldn't be further from the truth.

Although home prices can go up (and down), the rate of appreciation on housing does not surpass inflation levels over the long-term. Between 1890 and 2004, the real return on housing was a pathetic 0.4 percent per year over the last 100 years, according to Robert Shiller, a housing expert and Yale economist.

This blog post brought to you courtesy of the National Association of Realtors, Alan Greenspan, the Federal Reserve, and various other liars and idiots.