patrick.net

errc says

A real horse trader, can find a deal in any market.

Bu not everyone is a horse trader. So you should be set then why so mad?

errc says

Well, maybe id listen to what the crowd is crowing so I can make sure to be on the opposite side of the crowded trade.

Exactly - and the opposite side in 2011 was BUYING :)

With respect to revision to the mean crap,

You can buy it or sell it, but you must understand the logic behind it.

First, that graph is benchmarked to the magical year 1980. Who is to say 1980 is all magical and revert back to that year. Why not 1989?

Secondly, revert to the mean theory naturally means there are no transformative changes, which is impossible. An easy one is mortgage interest which was around 13 percent in 1980 vs. 4.25 today. There are plenty of transformative changes favorable and unfavorable. If you rely on revision to mean, you are living in the movie pleasantville, not reality.

SubOink says

errc says

A real horse trader, can find a deal in any market.

Bu not everyone is a horse trader. So you should be set then why so mad?

I'm not mad. Its just super fucking crass to be here gloating about gains in house prices, when, as mick rossum pointed out, come at such high costs. Even tho. I own I root for housing costs to go down, because I understand that higher housing costs make us all poorer

Call it Crazy says

Strategist says

Thomas says.....

there is nothing wrong with Shillers conclusion.

Strategist.....

Except for the fact he has never been right.

So, does that mean Shiller's wrong AGAIN???

Case-Shiller: Home prices up, but boom fading

The home-price index covering 10 major U.S. cities increased 13.6% in the year ended in October, according to the S&P/Case-Shiller home-price report. The 20-city price index also increased 13.6%, close to the 13.7% advance expected by economists.

http://www.marketwatch.com/story/case-shiller-home-prices-up-but-boom-fading-2013-12-31?dist=lcountdown

His conclusions of a fading boom are incorrect.
Remember, Schiller is a brilliant professor, but can they make money with their forecasts? There is a saying about professors..."if you are so smart, why aren't you rich"? It seems they know everything about everything, except, how to make money.
I doubt if his money ever came from his bad forecasts.

thomaswong.1986 says

SubOink says

so what should a house that cost $50k 1970 be sold for now in your book?

plus inflation....

as was the case for LA and SFBA...

what you bought in 1975 or 1980 was same plus inflation by 1995...

@thomas - I'm with you that I think prices are way too high, but I'm also realistic that the inflation benchmark in all these housing graphs is likely understated given how our beloved gov't (most recently under Clinton I believe) has been changing their methods for calculating inflation, which is interesting because house prices start really breaking away during that era (late 90s). Coincidence? Maybe that green line should be sloped up quite a bit higher.

SubOink says

errc says

Well, maybe id listen to what the crowd is crowing so I can make sure to be on the opposite side of the crowded trade.

Exactly - and the opposite side in 2011 was BUYING :)

Right on! You would think that people would have been thrilled when prices fell 2008-2011 and would have pulled the trigger like they would have on many other things that are used for consumption. Instead, they got greedy and thought that prices would fall further and not only that but they betrayed their incorrect view that primary residence is more about investment than consumption.

debyne says

Coincidence? Maybe that green line should be sloped up quite a bit higher.

I think that's an excellent point.

SubOink.

Thanks for the update. We need to see the world for what it is, not for what we want it to be. This is what drove me to buy last year. I found a good house at a fair price that met my needs / wants, and was within my budget.

But it was after YEARS of looking and MONHTS of hard fought negotiation. Deals are out there - but with cash buyers / investors having an implicit edge, they are getting harder and harder to come by.

So I'm not going to gloat, and I'm not going to say that rising house prices are a good thing simply because I own now. At the end of it all we need to be on balance. Prices seem to have caught up to where they would have been had been no bubble, only inflation - but wages haven't risen in real terms.

FWIW I expect that to change over the next decade and we should (finally see real meaningful wage growth on the go forward basis).

SubOink says

debyne says

Coincidence? Maybe that green line should be sloped up quite a bit higher.

I think that's an excellent point.

Even an impotent squirrel busts a nut once in a while. :)

dublin hillz says

Instead, they got greedy and thought that prices would fall further

yep!

Thank God you decided to stop following the completely wrong predictions of the doom and gloomers in here. Most are probably broke haters who cant stand seeing other people making wise financial decisions anyways while their 40+ Loser asses are still living at their parent's house. High 5 SubOink. I did the same thing. I bought in March of 2012. If you have the time read my posts. I was completely on from the start. I bought for $43.5k and now my place has been assessed, in the medium to high range, at $130k+. Thank you Jesus and God bless all of you. Also. HAPPY NEW YEAR! weeeeeeeeeeeeeeeeee

postbubblesucess says

completely wrong predictions of the doom and gloomers in here.

Jez! There is a reason people run the numbers, perform financial analysis, and look at trends and have a understanding when things are way off from the norm can expect a correction... Its not about "Doom and Gloom".

As such not all markets have corrected as they should. They are still pending. Its no wonder some come back here to "Feel Good" about their purchase knowing there is still downside risk.

Had you priced it at 1996 plus inflation, you wouldnt be so worried as much. Your downside risk would be far far less, near zero.

postbubblesucess says

I bought for $43.5k

lol I think I have that much in my wallet.

Clearly the bubble in your area was on a VASTLY different scale than most of the posters here.

thomaswong.1986 says

Its no wonder some come back here to "Feel Good" about their purchase knowing there is still downside risk.

You still don't understand that its not about price but monthly payment. I have no downside at all because my low monthly payment is locked in.

If I was renting I would be very nervous thinking...when is my rent going up again and can I afford it? (And rent for my house would be $1000 more a month to begin with...)

postbubblesucess says

I bought for $43.5k and now my place has been assessed, in the medium to high range, at $130k+.

Is this a joke? What 1bdr in Tirana has to do with houses in SF Bay Area?

SubOink says

You still don't understand that its not about price but monthly payment. I have no downside at all because my low monthly payment is locked in.

Comical... do you not price all your other purchases and compare, bargin and say no, another place, i saw it cheaper.. of course you do. Financing a purchase has no bearing on prices and therefore inflating prices ... you been duped !

Just like in 1989 to early 90s prices also fell as interest rates fell...
what happened, so payments as a measure were not a factor.

"not about price but monthly payment" that was ..2000 to 2008.. and currently is the same talk Realtors keep blowing...

thomaswong.1986 says

Comical... do you not price all your other purchases and compare, bargin and say no, another place, i saw it cheaper.. of course you do

Everybody HAS to live somewhere - no way around it

so when shopping around you compare what it costs to rent a place to what it costs to buy a place.

Exaggerated Example to make a point: lets say they had a 1000 year mortgage which would drop my payment to $50/month vs $3500/month rent - would you not take that over renting it???

Let's say it together one more time: It's about monthly cost!!

(not sure what you don't understand, it seems you have been duped...wasting money on rent while hoping prices come down...how has shopping around for a better deal work out for you? - you will never pull the trigger in your life)

SubOink says

Everybody HAS to live somewhere - no way around it

so when shopping around you compare what it costs to rent a place to what it costs to buy a place.

sure, but even rents go down. there is no escaping ... you have to look at price trends. it would be foolish to think a perm jump in prices will not correct downwards. ever since 1945 home prices adjusted for inflation have been flat ....

no, you dont have to hold your home like some Casino / ATM !

Call it Crazy says

I think I heard that before... let's see..... 2007 or 2008....

Probably here at Pat.net. That was the best argument against buying in 2007 or 2008. The buy/rent ratio was WAY out of whack, especially in CA. If you analyzed based on monthly payment, you would NEVER have bought in 2007

Call it Crazy says

SubOink says

Let's say it together one more time: It's about monthly cost!!

I think I heard that before... let's see..... 2007 or 2008....

Except that in many cases the monthly costs were still well above renting. The rationalization was the principle part of the payment was just a type of forced savings. Which it would have been except the crash caused such "savings" to sublimate like frost on a warming spring of 2009 morning.

That and Buy Now or be Priced out Forever!

Call it Crazy says

SubOink says

Let's say it together one more time: It's about monthly cost!!

I think I heard that before... let's see..... 2007 or 2008....

and even further back in 2002 to 2005... as prices doubled in a few years.

Call it Crazy says

SubOink says

Let's say it together one more time: It's about monthly cost!!

I think I heard that before... let's see..... 2007 or 2008....

Thats a moot point because what was true then was not true 5 years later. Things change. Sorry. You have to re evaluate things.

2007: I rented for half what the mortgage would have been - made no sense to buy

2011: I bought for the same costs as renting, made sense to me to buy

2012: Due to refinance my mortgage dropped $350 ish/month at the same time rents have gone up = buying has paid off to be much cheaper than renting - ok, that was lucky. Who knew?

2013: rents have shot up even further and now I am $700-1000 below rent for owning.

time flys - things change - don't get stuck in your way of thinking - be objective

SubOink says

Exaggerated Example to make a point: lets say they had a 1000 year mortgage which would drop my payment to $50/month vs $3500/month rent - would you not take that over renting it???

1000yr mortgage would not drop your payment to $50/month unless the interest rate is 0% and the town cuts property tax to about 1/10 of where it is :-)

The key is comparing interest payment+property tax + insurance + water bill + repair bills to rent . . . then see if the initial payments can be justified for the cash flow difference, with some forward projection.

Reality says

The key is comparing interest payment+property tax + insurance + water bill + repair bills to rent . . . then see if the initial payments can be justified for the cash flow difference, with some forward projection.

Minus principal portion of mortgage - tax savings, etc.

Really just use NYT or Pat.net's calculator. No need to reinvent the wheel....

Call it Crazy says

Right, kitchens and bathrooms never need to be redone and home owners never replace fixtures... Wow, you must REALLY be a shitty Slumlord (and home owner)!!!

If you are right about all those hidden costs then how come that EVERY single house I rented in the last 12 years was in the shittiest condition in terms of anything new. Everything was always in the 1970 or 1950 condition. Never ANY updates. If you want updates you gotta pay $5k in most neighborhoods I like to live in. in the $2k-2.5k you get nothing good.
So if you can rent and live with a 1970 kitchen, you can buy a house and live in a 1970 kitchen until you got the dough to do a kitchen customized to how you like it. Something you can't find in a rental because rentals are a business - nobody is going to do something extra nice unless you are talking big $ in rent.

Call it Crazy says

It's not just the mortgage payment, what if you had to sell now because of a job loss? By the time you pay all the costs and pay off your new mortgage, will you have anything left??

Huh? If I loose my job I still have to live somewhere don't I? If I cannot find a house cheaper than my current situation than how is renting better. It would be MORE money a month unless I wanna sit on the street with my kids or sleep in a tent on the beach.
But if I wanted to move or get out of my situation I sell the house. Give the bank back what I owe (which is a little more than half of what I'd get) and walk away with a huge wad of cash. What is the problem exactly?

Call it Crazy says

I guess YOU can live in a 1970 kitchen that you own. Personally, I would never subject my wife and family to a 40+ year old worn out kitchen in our own house, but that's just me.....

part of the reason why I always wanted to own is exactly that...so that I can rip shit out and replace with something I personally love. Can't do that in a rental and can't find that in a rental in the price range of $2-2.5k. Period! (this goes for LA)

New Renter says

Now if you can rent that dump for 1/2 the costs of owning then hell yes, rent! If you've hit parity and you plan on staying in the area for several years then you're better off buying.

Amen!

New Renter says

Appliances, HVAC, flooring, roofs, fixtures, minor wiring, all very fixable by a homeowner and rolls nicely into the resale value of the property. Even counter tops and cabinetry isn't so bad IF the basic design is good. Don't let these dissuade you from purchasing.

well said

and to add on - the worst place you can buy is a "flipper" house. They are always updated in the cheapest possible way. Tiles in bathroom right on top of a moldy drywall...hey it won't show for a year. So you are paying for what looks like a $150k in upgrades but really was $20k in upgrades. Fixer is the way to do it. Take the first 2 months before you move in a gut everything you don't like and customize it to your liking and bring it up to 2013 standards.
Over the last 3 years I have slowly worked my way thru the house and ripped of the 1/2inch drywall...replaced and/or added the latest and greatest insulation and closed with 3/4inch drywall and replaced windows. Result: Barely need the heat, barely need the A/C. It's amazing! Also...much much quieter all around and we live in a super quiet neighborhood to begin with...once again..I did not HAVE to do that. I chose to do it. It didn't cost much, did it all myself over weekends. If I was a landlord I would never do that because you don't get to charge more rent because you claim that the place is insulated on steroids.

My wife and I have very particular taste..very much into super modern clean line design. Only option to get it was to own and put in ourselves. Cannot find a rental, maybe an apartment but no single family house. And it makes sense...if I was an investor I certainly wouldn't care about making an apartment a designer place only for the renters to destroy it. So laminate flooring, cheap stuff all around - voila - lets get paid.

Call it Crazy says

So when many people compare a rent to mortgage payment, they don't calculate all dollars spent on the "ripping out of shit and replacing".

I agree BUT you can only include things that you MUST do.

Everything else is optional, you don't have to do it.

Did I HAVE to buy the most expensive tiles imported from italy? No. So you can't really include that in some calculator that compares rent to owning.

When we rented we constantly went out to restaurants and went on lavish trips to make up for feeling shitty in the house we "housed" in. Can we include that into the calculator then?

Now as home owners we don't do that as much but instead to nice things to the house.

Call it Crazy says

I get it, that's the fun of "ownership"!! But what I alluded to above, that also comes as a "cost" that normally you don't have as a tenant.

So in the end you just have to compare mortgage + prop tax - tax savings to rent paid.

If you save money on not replacing and ripping out shit you will spend it in different ways to make yourself feel better - lol - owning is a forced savings account anyways. Every month you save your principal portion. In our case...$20k ish so far.

I think that monthly cost is a factor, but price is too. You do not want to "over pay" for anything. But we must admit, that we all need some sort of roof over our head.

We rented in the SFBA for over 30 years because the prices were way too high for what you were getting and with down payment, etc., our salaries could not afford it. We also would base our monthly expenses on if one or both lost a job and living on unemployment; so needless to say, we lived in one-bedroom apartments but we also saved, etc.

So now we are retiring, purchased a home outside the SFBA and no worries of a landlord kicking us out at 85 years old...so I would say you need to base it on several factors.

One, is a realistic expense report/spreadsheet. Include a monthly maintenance amount for repairs, etc. Also include job loss, or pension/retirement monthly loss. Then include lifestyle, meaning what you are happy with; some cannot tolerate apartment living, etc.

And how long you plan to stay in the home. We will stay until we health-wise cannot, so we are hoping at least 25-30 years. Thus the house will pay for itself over that many years.

But we used the advise of the so-called "bears" and that is what kept us on the straight and narrow and lead to our early retirement....watch trends, bubbles, and history...that does not mean as a 'bear', which we are, that you do not buy. You just should be realistic and thoughtful and recognize a 'bubble' and 'overpriced' property and don't fall for it.

I am glad you are still very happy in your home. We are loving ours too!

Call it Crazy says

That's in the eye of the beholder... To most (as we mentioned above) it doesn't, but I'm not going to let my family live in what I feel are sub-standard conditions. But that's just me...

Appliances can be purchased and installed within a few weeks, HVAC not much longer. Materials can be identified while searching for the home, ordered during the escrow period and installed within days of moving in. There is no reason to let crappy appliances influence your purchase with the exception of price. If the seller is asking a price comparable to the same house all fixed up then don't buy it.

Call it Crazy says

I finally DID purchase a few months ago. I bought what was advertised as a "turn key" house, which went against my original plans, but I just wanted to get it all over with....

Even though it was turn key, I still put in almost $20K in upgrades and replaced certain items....

It may well have been turn key for most buyers. And you probably paid top dollar for it and will continue to do so in property tax on the purchase price. Better to buy a fixer at a lower basis.

Anyway why be such a snob? Is your family so delicate they can't endure a bit of non-ideal living for a few months?

SubOink says

nd to add on - the worst place you can buy is a "flipper" house. They are always updated in the cheapest possible way. Tiles in bathroom right on top of a moldy drywall...hey it won't show for a year. So you are paying for what looks like a $150k in upgrades but really was $20k in upgrades. Fixer is the way to do it. Take the first 2 months before you move in a gut everything you don't like and customize it to your liking and bring it up to 2013 standards.

Exactly. Buying a flipper is the worst of all possible situations. You pay top dollar, pay top dollar property tax and STILL have to fix the crap the flipper covered up. Buy a fixer, not a flip.

SubOink says

Over the last 3 years I have slowly worked my way thru the house and ripped of the 1/2inch drywall...replaced and/or added the latest and greatest insulation and closed with 3/4inch drywall and replaced windows. Result: Barely need the heat, barely need the A/C. It's amazing! Also...much much quieter all around and we live in a super quiet neighborhood to begin with...once again..I did not HAVE to do that. I chose to do it. It didn't cost much, did it all myself over weekends.

See, this is why I like Patnet. Tips on how to fix a fixer.

SubOink says

I certainly wouldn't care about making an apartment a designer place only for the renters to destroy it. So laminate flooring, cheap stuff all around - voila - lets get paid.

I would. I'd put in materials which while cheap could take the punishment of renters. In my experience most laminate is penny wise pound foolish. One standing pool of water (or urine) and its ruined. Instead I'd use ABS backed laminate or vinyl planking with tile in the kitchens and bathrooms. I'd also take every opportunity to fix hidden problems and prevent future ones (e.g. boracare + kilnz).

My goal for any property I am involved with as a renter or owner is to minimize costs AND my involvement in the place. This does not mean being a slumlord or a shitty renter, it means putting in stuff that lasts and taking care of it.

retire59 says

And how long you plan to stay in the home. We will stay until we health-wise cannot, so we are hoping at least 25-30 years. Thus the house will pay for itself over that many years.

Glad you found a property you love. On the note of your health adn home ownership I have a few ideas which may help you stay in your home longer:

An elderly friend of mine moved to a retirement community some years ago. I was impressed at how safety conscious the design of her new home was compared to the typical home. Little things like bull nosed wall corners and countertops, wider hallways, more natural lighting, easy to clean (and reach) cabinetry add up to make the home more enjoyable for those with limited mobility.

I was also shocked at how dangerous many wall ovens are! Almost all the ones I looked at have very sharp metal and glass edges on the doors at exactly the right level to cause a severe injury to the head of a kid running by or hip of an adult. They also have handles which can catch a sleeve or worse. After a LOT of looking around I settled on an LG oven. Electrolux was my second choice. I did see in HD the other day a GE model which also looked good.

Put in flooring which minimizes slipping yet is walker friendly. 18" tile with a bit of texture might work as would Berber or short pile carpet. IMO Laminate is a disaster waiting to happen.

Put in LOTS of skylights and sun tunnels. Use light colored paints with an eggshell or satin finish. Flat finishes are a PITA to keep clean.

SubOink's had an excellent example of how better insulation and drywall helps minimize noise and the utility bills. Follow it it you can.

Call it Crazy says

SubOink says

I agree BUT you can only include things that you MUST do.

Everything else is optional, you don't have to do it.

There's where you missed the point, just because it's "optional", it's still dollars spent that you wouldn't spend as a tenant. MUST or OPTIONAL, all those dollars have to me accounted for in a true cost comparison...

Call it Crazy says

Even though it was turn key, I still put in almost $20K in upgrades and replaced certain items....

Uh huh...

Call it Crazy says

There's where you missed the point, just because it's "optional", it's still
dollars spent that you wouldn't spend as a tenant. MUST or OPTIONAL, all those
dollars have to me accounted for in a true cost comparison...

So, if you are analyzing the cost of a rental w/garage vs. one w/o a garage, you would also include the cost of the new car you would buy if you had a garage?

Call it Crazy says

SubOink says

I agree BUT you can only include things that you MUST do.

Everything else is optional, you don't have to do it.

There's where you missed the point, just because it's "optional", it's still dollars spent that you wouldn't spend as a tenant. MUST or OPTIONAL, all those dollars have to me accounted for in a true cost comparison...

fair enough, so I would also add the dollars spent on going out and vacations while renting, right? After all, I don't do that now.

the hidden costs of renting a house in the 2-2.5k range in LA:

- $2k several times a year for a week of pampering in a Palm Springs

- $1k / month in restaurants because cooking at home sucks in a 1970 kitchen where all the appliances are rusty and old

- $5k once a year for a real nice trip. After all...our friends are owners and we show them how much nicer it is to rent. Freeeeedom!!!

- $800/month on that BMW that I am leasing to offset the vibe of...oh, he isn't doing so well, just renting...

:)

ok, I am being facetious but you get my point

tatupu70 says

Call it Crazy says

There's where you missed the point, just because it's "optional", it's still

dollars spent that you wouldn't spend as a tenant. MUST or OPTIONAL, all those

dollars have to me accounted for in a true cost comparison...

So, if you are analyzing the cost of a rental w/garage vs. one w/o a garage, you would also include the cost of the new car you would buy if you had a garage?

LOL!! Plus the costs of the chicks that you will whine and dine with that new car. - Remember...the house WITH garage has an infinite spending potential!

Stay away from homes with garages!! The hidden costs could kill you!!

:)

thomaswong.1986 says

sure, but even rents go down. there is no escaping ... you have to look at price trends.

Exactly. Unless an area is Detroited, RE should go up at the rate of inflation. The catch is what is the inflation rate? IMHO, inflation of a locality ~ rate of appreciation of RE because RE is the largest component (may even overwhelmed) of an inflation index. In other words, unless you think the economy in your area is in a permanent decline and people would be leaving, RE would appreciate in the long run. No need to market time the short term price fluctuation.

SubOink says

Over the last 3 years I have slowly worked my way thru the house and ripped of the 1/2inch drywall...replaced and/or added the latest and greatest insulation and closed with 3/4inch drywall and replaced windows. Result: Barely need the heat, barely need the A/C.

Thank for the info. How long would it take? How to check whether it is 1/2 or 3/4 inches without ripping? Also what kind of insulation to use. Did you change insulation at the roof and the crawl space?