Comments on Fire in the Bones [Biblical, Heterodox Christianity]: Jesus Christ on the Economic Crisis (An Interview)...

Thanks, David. Interesting article there.

J...

2009-01-03T04:37:00.000-08:00

Thanks, David. Interesting article there.

Jan, to (finally) get back to answering your question, I think you are still failing to take into consideration two things.

First, there is a difference between "cash flow" and income. A property owner who rents out a house can have negative cash flow [she pays the bank more than the rent she gets from the tenant] while stilling making income on the property [because part of the payment to the bank goes against principal, giving her equity on the house.] Think of it as the renter defraying a good chunk [but not all] the cost of buying the house.

Of course, property owners also make money on the increased value of their land, which is also a long-term rather than short term gain.

And this does not mean that property owners actually have negative OVER-ALL cash flow. Keep in mind that I am comparing the cost of buying a home today versus renting. That is not the same as comparing renting with the price paid for the home that is being rented.

What I mean by the above is that most houses being rented out today were bought much earlier, when the house cost less. So a house that would cost me 500,000 dollars to buy today may have only cost the land owner 200,000 dollars when it was bought 5 or 10 years ago. So clearly their mortgage is much less than my mortgage would be buying at today's prices.

Finally, keep in mind that even people who have no job and make their living entirely on the properties rented can have negative cash-flow on some properties as long as they have positive cash flow overall. So, say someone owns 5 homes, 3 of which were bought a long time ago and 2 were bought recently. The landowner can afford negative cash flow on the two newer ones [which probably cost more] because he is likely making significant positive cash-flow on the older ones [which were bought much more cheaply or have, perhaps, been paid off.]

As for the notion that we should allow rely on God to meet others' needs, it is exactly that type of rationalized selfishness the book of James attacks in full force.

David. You might be right. I have updated my blog ...

2009-01-01T13:37:00.000-08:00

David. You might be right. I have updated my blog post Credit Crunch in light of a BBC money programme episode that aired in November. It argued that might be better for people to rent than to buy after all. Check out the new links in my post.

I simply don't believe that landlords are losing a...

2008-12-01T09:08:00.000-08:00

I simply don't believe that landlords are losing any money at all by renting out their properties, unless they run into high, unforeseen maintenance costs. And when that happens, you can be sure that when the lease comes up for renewal, those extra costs will be passed on to the tenant.

Much has been said about having money to help others now and trusting God to provide for us. If your desire is to have money so that you can help others, what about trusting God to provide that? If we can ask God for money to pay for our own legitimate needs and expect that He will provide for us, how much more can we expect that He will provide for us when we are asking that we might give unselfishly to meet the needs of others?

I think you're working from a false premise here: ...

2008-12-01T00:33:00.000-08:00

I think you're working from a false premise here: "they have been duped into believing owning your own house is some sort of goal everyone should aspire to."

That doesn't explain the many other similar abuses of credit. These are the same people who have numerous maxed-out lines of credit and no means whatsoever of paying them back.

Unfortunately, the current processes of resolving these issues only encourage more abuse; by negotiating settlements with creditors for a few cents on the dollar, the debtor achieves savings on their purchases that make even the most ridiculous Black Friday sales pale in comparison, which is hardly a deterrent to doing it again as soon as they can.

Enter the mortgage; the only six-figure loan available to most people. Many of them knew right from the start that they would never be able to continue making payments once their introductory rate ended, but assumed they would be able to negotiate a settlement and keep the house for far less than its actual value, or sell it for its full value while paying far less.

Thus, home ownership is not the goal in such transactions, but merely a means of getting something for nothing, or at least something of great value for little effort. Greed, unchecked by the restraints of ethical commerce drives the system to problems like this. Government bailouts reward and encourage this bad behavior from both sides of the transaction, further speeding the decay of the market.

Unfortunately, this leaves those of us for whom the goal is simply avoiding the restrictions and uncertainties involved in renting - our current landlord is planning to sell all his rental properties about the same time the baby is due - by buying a home at a fair price and paying for it, rather than seeking ways to avoid paying, dealing with a lot of extra scrutiny and hassles to get the mortgage.

As to having faith that God will provide for your needs in the future, have you considered that He might have already done that by giving you the ability to do most of it for yourself? I far prefer to do as much as I can, and leave to Him the things that I cannot. He didn't give Noah a boat, or the Egyptians seven years' provisions, but rather warned them that they should provide for their futures through their own work.

Hey Joe,
I haven't talked to you in YEARS, welc...

2008-11-30T19:12:00.000-08:00

Hey Joe,
I haven't talked to you in YEARS, welcome to my blog.

I don't think the "Hey, you don't give every penny you earn to church" response is a particularly effective one to the general point that Christians should seek to live modestly to help others.

I think you're missing an important point of comme...

2008-11-29T06:45:00.000-08:00

I think you're missing an important point of commerce; buying a product, including a home, and particularly from an individual, helps the seller to a far greater extent than most buyers could afford to help through charity, while also providing benefit to the seller.
Case in point: my wife and I are in the process of buying our first home. The seller needs to get himself and his wife into either an assisted living facility or home health situation. What we could give them as charity, by any amount of tightening of our belts, (essentially the down payment) might get them a caregiver for a month or two, and we'd still be spending the winter in a poorly insulated rental with a baby on the way. As it stands, they can now reasonably expect to have care into their mid eighties, and we have a house with a manageable debt, and a lower monthly outlay, including insurance and property taxes, than would be common for a comparable rental in the area.
You speak of helping others now, and letting God handle the future, but I'm betting you have some less spiritual plan to pay next month's rent than dumping your entire net worth in the offering plate tomorrow and hoping God already has his check in the mail to the landlord for Monday. I can only give what I already have, and that was attained through my previous planning for the future.

Jan,
It depends on what you mean by "cheaper."<...

2008-11-27T08:28:00.000-08:00

Jan,
It depends on what you mean by "cheaper."

My point is that Christians should not be worried about how they are doing "in the long run."

Instead, they should be looking at how they can meet others' needs today, and have faith that God will provide for their needs in the future.

A Christian who can rent for less (per month) than a mortgage should do so, as it allows them to give more to others.

My point has been that, in general, renting is much cheaper than owning (on a per-month, out-of-pocket basis, not on a long-run investment basis), and thus renting allows us to meet others' needs better today.

This ties into the financial crises in that it was due in large part to people taking out mortgages they could not sustain (often given by predatory lenders) because they have been duped into believing owning your own house is some sort of goal everyone should aspire to.

David, I really feel that the points you have made...

2008-11-27T05:34:00.000-08:00

David, I really feel that the points you have made have strengthened my own point that owning is cheaper than renting. Equity is just one more reason why homeowners will do better financially than renters in the long run.

Jan,

You are not taking into consideration ...

2008-11-26T10:13:00.000-08:00

Jan,

You are not taking into consideration that real estate goes up in value and that the land owner is getting something extra in the bargain: equity in their house.

Consider the house I am living in now. It is worth about 400,000 [now]. Everyone here splits a rent that is 1600 or so per month. That means the land owner gets only 19,200 in rent per year. That would barely cover the interest on the loan needed to buy the house.

How does the landlord make money? Because he didn't buy it for 400,000...he bought it for much less earlier, which means not only has he made money for the house going up in value BUT he can charge more rent for it now that housing costs have gone up.

But land lords can still make money even if housing costs go up even if they pay more than the rent. The reason is that part of what they are paying goes into equity on the house. A renter pays money and it is gone *poof*. An owner pays money and part of it goes toward buying the actual house]

So it costs less per month to rent, but buying makes the better long term investment.

But Christians should not be looking for long term investments. We should be looking for how to help others now.

I don't think this premise stands up under scrutin...

2008-11-26T05:26:00.000-08:00

I don't think this premise stands up under scrutiny. As a rule, it cannot possibly cost more to own a home than to rent a home.

First, the owner of a rental property has the expense of the maintenance of the property.

Second, the owner of a rental property will pay more in property tax than the owner of a regular residential property.

Third, if in spite of all this it costs more to own than to rent, why would anyone ever own a home for the purpose of renting it? All landlords would lose money by renting out their properties. Landlords are able to make money because owning is cheaper than renting. They don't rent to people out of the goodness out of their hearts.

The basic principles of economics should make it u...

2008-10-03T16:34:00.000-07:00

The basic principles of economics should make it unlikely that buying is cheaper than renting once cost of ownership [and economies of scale] are considered.

I would have to pay more than 3 times what I pay in rent to acquire a house...and that is on a 30 year note. On a more realistic 20 year note, it would be 4 times as much.

In any community where it is cheaper to buy than rent, one expects people to simply buy property on credit and flip them as rentals, pocketing equity.

I am interested where you live? As in my experienc...

2008-10-02T15:15:00.000-07:00

I am interested where you live? As in my experience it has always been a cheaper option to buy than to rent since I entered the property market in the 90s by buying a tiny flat in Birmingham. It certainly was still the case when we moved into our inner city terrace. I understand that this is generally true throughout the UK.

Ensuring that repayments are manageable is important to avoid getting into debt. I would not see a secured loan such as a mortgage as a debt in itself although there is a risk of going into negative equity that should not be ignored. Nevertheless I would generally advise people to buy rather than to rent if they are able.

Hi David,
Thanks for your comment.

I bel...

2008-10-02T13:15:00.000-07:00

Hi David,
Thanks for your comment.

I believe you are in a rare situation. I believe for most people, mortgages cost significantly more [for the same space, location, etc.] than renting does.

Even in those cases where repaying a mortgage is cheaper than renting, there is still the issue that a mortgage is a physical commitment and a debt to another man. Neither of these is explicitly wrong, but (all things being equal) they should both be avoided.

In your case, it seems, "all things" are not "equal." In that case you have to weigh the entanglements of a mortgage against the financial exposure you would see were you to sell. I believe it is perfectly reasonable to say that the mortgage is worth having as it allows you to more easily minister to others.

There is also the point that the decision to buy a house is separate from the decision to sell one. Just as Paul's advice to those who are divorced is different from those who remarried thereafter.

My biggest criticism is the reason behind the purchase...once the purchase is made the reason is no longer of importance. Even if you bought it for the "wrong" reason [which, of course, I'm not saying you personally did!], that does not mean you should sell it...unless there is a good reason.

I think if you prayerfully approach the Lord in all things, God would make clear to you if such a major change were to your ultimate good.

Blessings,
David

It would cost us a lot to rent somewhere for me an...

2008-10-02T09:55:00.000-07:00

It would cost us a lot to rent somewhere for me and my family to live. Fortunately a several years we bought a house and got a mortgage. The mortgage repayments are still less than what I would have to pay for rent. I could possibly sell it if I saved the money and used it to pay rent for a little while. But I don't think this is wise use of that money. Am I missing something?

Render unto Caesar the things which are Caesar’s, ...

2008-10-02T05:42:00.000-07:00

Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s.

I'm not convinced that the desire to own a home, b...

2008-10-01T12:38:00.000-07:00

I'm not convinced that the desire to own a home, by itself, is a problem. Some other thoughts here.