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Tech investor tells home buyers not to bother buying

With rent becoming the new black and the stigma of renting disappearing, is the idea of homeownership in danger when famed technologists tell entrepreneurs not to buy a home under any circumstance?

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“Why entrepreneurs should NOT buy a home”

James Altucher is the Managing Director of Formula Capital, has written half a dozen books on investing, is a well known investor, programmer and entrepreneur, and eccentric by many accounts. Altucher is highly regarded in the industry, particularly in the startup world, so when he guest posts an article on TechCrunch.com called “Why entrepreneurs should NOT buy a home,” ears perk up.

Recently, Altucher wrote, “when you sell your startup — everyone wants to buy a house with the proceeds. Don’t. It’s just part of the American mythology. You know the myth: the white picket fence, the yard, the pool, the walls that you can paint, the keeping up with the Jones family. Just don’t. You’ll go broke.”

Altucher lists six financial reasons entrepreneurs should not buy a home (cash lost to down payment, closing costs, maintenance costs, taxes, you’re trapped, and it’s an ugly way to invest), and eight personal reasons not to buy a home (trapped (again), walls are irrelevant, rent stability, psychology, time, freedom, stress, and cash is king).

The primary advice is that remaining liquid and investing in your business or other startups is a more intelligent investment. Readers noted in the comments that the article was out of place on TechCrunch, but it is more fascinating to note that Altucher is not at all alone in the crusade against homeownership as a bad investment, particularly within the tech/startup world – many wealthy investors and startup founders have opted out of owning a home for their own reasons.

Renting is the new black

For years, AGBeat has told you that renting is the new black and that the stigma around renting is being shed (and quickly, we would add), paired with a large Millennial generation that does not dream of the white picket fence, housing has some challenges ahead, as do real estate professionals and peripheral services.

While Altucher is speaking to entrepreneurs of all ages, many reading are in the Millennial generation which has been bred to be entrepreneurial and care less about bowing down to the corporate ladder lifestyle, mansion, spouse and 2.5 children, and more about flexibility and passion in a career that more and more often, they build themselves from scratch.

Additionally, Altucher is also speaking to hundreds of thousands of hopefuls that don’t quite have their winning startup built yet, but will remember his advice as they weigh their options in years to come whether they get funded or not. Think of it as a ripple effect leading to the group accepting his advice as golden, then advising their own personal circle of friends that even entrepreneurs aren’t buying homes, and think about who the most prolific bloggers are – geeks. Uh oh.

The game is changing and it’s no longer Realtors versus data accuracy, Realtor associations versus tech startups that rate agents, or consumers versus Realtor commissions, no, the very idea of homeownership is changing at a rapid clip, making the dozens of tiny fights going on under the radar nearly irrelevant in comparison.

Could this advice destroy homeownership?

The National Association of Realtors (NAR) and other lobbies are fighting hard to promote the value of homeownership and invest a tremendous amount of money into the efforts, but with regarded voices like Altucher and others telling future millionaires (and hopefuls and their friends) to rent, the idea of homeownership is not necessarily in danger, but real estate professionals better get acquainted with their real value proposition, and quickly (hint: it isn’t the MLS and it isn’t data, it’s neighborhood expertise and cut-throat negotiation skills).

Lani is the Chief Operating Officer at The American Genius and sister news outlet, The Real Daily, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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18 Comments

18 Comments

  1. Drew Meyers

    March 25, 2012 at 10:24 pm

    I’m with James on this one. I’d much rather invest my money in growing my own business than invest it in buying a house. I have much more control, and confidence, over growing my own business than I do in the housing market makes considerable gains in the next 5-10 years.

  2. Matt Thomson

    March 26, 2012 at 1:05 am

    Sounds to me like a huge opportunity. Somebody has to own the homes that all these smart people are going to rent. I think this is an awesome opportunity for unwise investors like myself to keep buying more homes that others will rent. As more people rent, rentals will decrease, and supply and demand would indicate that rent prices will rise.
    Time to start buying!

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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