The Housing Trap


By Patrick   Follow   Tue, 18 Sep 2012, 3:53pm   67,184 views   267 comments
In Menlo Park CA 94025   Watch (1)   Share   Quote   Permalink   Like (14)   Dislike  

http://www.amazon.com/Housing-Trap-Buyers-Captured-Yourself/dp/1479156213/?tag=patricknet-20

It's $12.50 so that if you buy two (makes a great gift!) then you don't have to pay any shipping charges.

Here is the table of contents:

Trapped! 8
  Can't Sell 9
  Can't Pay Off Mortgage 10
  Must Keep Obeying Boss 10
The Conspirators 12
  Your Agent 12
  Your Mortgage Broker 18
  Your Bank 18
  Fannie And Freddie 19
  The Federal Reserve 20
  Newspapers 21
  The NAR 23
  Congress 24
  The President of The United States 25
  Current Owners 25
  Your Boss 26
  Your Parents 27
  Your Wife's Parents 27
  Your Wife 27
Fallacies and Fantasies 30
  Appreciation 30
  Building Equity 32
  Renters Throw Money Away 34
  Tax Deduction 37
  Real Estate Is Local 39
  So Little Supply 40
  So Many Buyers 40
  Foreigners 41
  House Prices Don't Fall To Zero 41
  Supply And Demand 42
  Land Shortage 44
  Fundamentals Don't Matter 44
  Commissions Don't Matter 45
  Agents Don't Care What You Pay 46
  My Neighborhood Is Different 46
  You Have To Live Somewhere 47
  Rentals Not Available 48
  Rentals All Suck 48
  Owners Can Remodel 49
  But The Newspapers Say... 50
  But The Appraiser Said... 51
  Home Sweet Home 52
  Status 53
  Affordability Is Good Now 53
  Owning Limits Your Monthly Payment 54
  People Buy On Emotion 55
  Baby Needs House 55
  I Just Want It 56
Scams and Dirty Tricks 58
  RealtorsĀ® Claiming They re "Free" 58
  Claiming That You Need An Agent 60
  Showing You The Ugly Dogs First 61
  Underpricing 62
  Missing Price 64
  Missing Address 64
  Renting Property Without Permission 65
  Straw Buyers 65
  Faking Comps 66
  Faking The Dimensions 67
  Faking The Sale 67
  Erasing Price History And Relisting 68
  Faking Higher Offers 69
  Hiding Your Low Offer 69
  Taking Bribe To Hide Your Offer 70
  Hiding Offer To Get Double Commission 70
  Hiding Offer To Get Seller To Take Loss 71
  Photoshop 71
  Advertising Agent Instead Of House 71
  Kickbacks 72
  Bribes 72
  A Trick Of Your Own 73
What Should You Do? 75
  Be Paranoid 75
  Never Sign Any Agent Agreement 75
  Never Reveal Your Price Limit 77
  Hire Your Own Independent Inspector 78
  Favor FSBOs 78
  Do Not Rush 80
  Do Not Overpay 81
  Deliver Offer To Seller Personally 83
  Pay Cash 84
  Long Term Lease 85
  Walk Away 85
  If You're A RealtorĀ® 87
Calculating Fair Price 88
  Two Kinds Of Rent 89
  Borrowing Does Not Help 91
  Downpayment Doesn't Help Much 91
  Conventional Mortgage 92
  Deduction Doesn't Help Most People 93
  Appreciation Is Uncertain 95
  Taxability Of Gains 96
  What About Leverage? 97
  What About Inflation? 98
  Rules Of Thumb 99
  Anything else? 101
Long-Term Solutions 102
  Call Housing Inflation What It Is 102
  Help Correct Reporters 103
  No Public Guarantees For Private Debt 104
  No Mortgage Interest Deduction 105
  Public Bids On Housing 107
  Legally Binding Offers To Sell 108
  Eliminate Comps As Meaningless 108
  No Empty Houses 109
  Publicly Financed Elections 110
  End Proposition 13 In California 111
  The Georgist Land Value Tax 112
  Spread The Word 113

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  1. toothfairy


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    228   11:33am Fri 2 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    You'd buy even if it continued to be a far better deal to rent the same thing?

    well I wouldn't buy that house.. I'd probably buy something cheaper. Using those same numbers I'd probably try to save 200k and look for a 500k house. With the tax deduction the payments would be about $1300 per month. Just counting the interest your monthly payments are about $875 per month.

  2. SubOink


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    229   8:13pm Fri 2 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Patrick says

    Assuming that one will own for 20 or 30 years is probably the most common fallacy out there.

    The median ownership length in America is only 6 years. You may think you're different, but statistically, you're not.

    That't the line mortgage brokers and real estate agents tell you when they try to push you into a 5/1 or 7/1 arm loan...total BS.

    The truth is - I don't know ANYBODY that has owned and moved within 6 years and I know a lot of people. My entire neighborhood consists of people that have lived here their whole life. My old neighborhood where we rented for a long time (woodland hills) was the same way and I am sure there are more. All my close friends that own houses own and live in them for more than 15 years.

    Not a fallacy, its a reality.

    Also, if you buy at the right price...you can move if you want to. You don't need to sell the house just because you move. Rent the house and move.

  3. SubOink


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    230   8:32pm Fri 2 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    You'd buy even if it continued to be a far better deal to rent the same thing?

    Most people are willing to pay more to own than rent because they prefer the lifestyle. It's the only way to have a house that (over time) is completely personalized. Remodel to your liking, restructure to your liking.

  4. Patrick


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    231   8:36pm Fri 2 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    SubOink says

    Remodel to your liking, restructure to your liking.

    Maybe inside, if you get planning permission and all. Outside, much harder to get permission.

    And who says landlords won't allow improvements? They love improvements.

    SubOink says

    if you buy at the right price...

    Yes, that's my whole point and only point really. So you agree.

    SubOink says

    I don't know ANYBODY that has owned and moved within 6 years

    And nonetheless it's a fact that the median ownership length is 6 years. Look it up.

  5. toothfairy


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    232   9:02pm Fri 2 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    Maybe inside, if you get planning permission and all. Outside, much harder to get permission.
    And who says landlords won't allow improvements? They love improvements.

    Actually landlords dont love improvements unless it's done the way THEY want it.
    I'm in the process of converting my house into a duplex so I can leave one half open for when I want to stay there and rent the other half.
    Good luck getting your landlord to agree to that!
    And no I'm not getting anyone's permission to do this. If the city says something I'll pay the fines.

    SubOink says

    The truth is - I don't know ANYBODY that has owned and moved within 6 years

    actually most of the homes I've bought I've lived there for 6 years or less but only because I bought a new house and transferred my equity into the new one . As long as you don't increase your debt you're still on the same 30 year cycle.

  6. Patrick


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    233   9:04pm Fri 2 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    SFace says

    would you really want to upgrade the kitchen or bathroom knowing you are leasing the place?

    People do, especially in expensive markets. It's fairly standard with high-end rentals in NYC.

  7. Patrick


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    234   9:23pm Fri 2 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    SFace says

    An established neighborhood like Menlo Park, especially for SFH, median ownership is likely around 20 years.

    No, pretty sure it's nowhere near 20 years. Houses turn over here constantly. Just drive around and you see for sale signs all the time. I certainly see them.

    In fact, I usually get a kick out of biking around and noting all the houses I've seen the inside of when they were for sale. There are only a very few people I know of who've been in the neighborhood longer than I have (13 years now).

  8. SubOink


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    235   11:10pm Fri 2 Nov 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Patrick says

    than I have (13 years now)

    You yourself prove me right. Haven't moved in 13 years...

    I rest my case.

  9. Patrick


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    236   7:12am Sat 3 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    I rent though.

  10. toothfairy


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    237   7:45am Sat 3 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Buying a house is a tricky thing most people go through a few before they finally settle down.

  11. taxee


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    238   5:35am Thu 8 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike  

    Cut expenses while you are working. Save half your income. Buy with cash when you retire. Use a lifetime of learning to make the biggest purchase of your life.

  12. bubblesitter


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    239   8:15am Thu 8 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    taxee says

    Cut expenses while you are working. Save half your income. Buy with cash when you retire. Use a lifetime of learning to make the biggest purchase of your life.

    But then you will miss the lifetime experience of speculating!

  13. taxee


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    240   10:10am Thu 8 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bubblesitter says

    But then you will miss the lifetime experience of speculating!

    Youth is a kick even without spending a lot. Go for the surest thing and maybe have a dignified old age.

  14. PockyClipsNow


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    241   4:58pm Thu 8 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    SubOink says

    Remodel to your liking, restructure to your liking.

    Maybe inside, if you get planning permission and all. Outside, much harder to get permission.

    And who says landlords won't allow improvements? They love improvements.

    SubOink says

    if you buy at the right price...

    Yes, that's my whole point and only point really. So you agree.

    SubOink says

    I don't know ANYBODY that has owned and moved within 6 years

    And nonetheless it's a fact that the median ownership length is 6 years. Look it up.

    Flippers have skewed the owership average a lot. They shouldnt count a less than one year of owning but they do.

  15. zesta


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    242   5:39pm Thu 8 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    There are only a very few people I know of who've been in the neighborhood longer than I have (13 years now).

    I'd love to see a rough rent/buy calc for over the 13 years that shows you have been better off renting vs buying for those 13 years.

    Not saying it's not possible, especially with a great rental deal, but hard for me to fathom without seeing the numbers.

  16. The Professor


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    243   6:11pm Thu 8 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike  

    PockyClipsNow says

    Flippers have skewed the owership average a lot.

    What a great description of having a mortgage, "owership".

  17. Biff Baxter


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    244   6:14pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    I saw Patrick's ad for his book today. I hope he sells a lot of them. I only wish he provided more details about what is in the book.

    Biff

  18. The Professor


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    245   6:48pm Tue 20 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Biff Baxter says

    I saw Patrick's ad for his book today. I hope he sells a lot of them. I only wish he provided more details about what is in the book.

    Biff

    Buy one and find out. Buy two and get free shipping!

  19. BayArea


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    246   6:06pm Mon 3 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    SFace says

    My SFH in Hercules, probably 1-2, lol.

    @SFace so true. My folks own a home in neighboring Pinole, and the turnover we've witnessed in this neighborhood has been alarming... Neighborhood was built in 1990 and is in the ballpark of less than 10% of original owners remaining. That makes for a neighborhood where you don't want to meet your neighbors since they are sure to bail in no time.

    Patrick, how many copies you up to?

    Test: @BayArea

  20. FunTime


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    247   10:18am Tue 4 Dec 2012   Share   Quote   Permalink   Like (3)   Dislike  

    Bought it and my wife immediately picked it up and started reading. Surprising since she loathes another rant from me inspired by patrick.net.

  21. Patrick


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    248   10:37am Tue 4 Dec 2012   Share   Quote   Permalink   Like (2)   Dislike  

    BayArea says

    Patrick, how many copies you up to?

    472 sold now.

  22. BayArea


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    249   3:43pm Tue 4 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Awesome, climbing steadily looks like.

  23. bubblesitter


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    250   9:38am Wed 5 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Now, who are those bulls that posted negative reviews?

  24. BayArea


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    251   10:17am Wed 5 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick, just left you my own 5-star Amazon review.

    bubblesitter says

    Now, who are those bulls that posted negative reviews?

    One is someone that took offense to the wife section. I knew this would get some flack but I can't argue with Patrick on this one. Perhaps version II should go a touch more PC and note "spouse" instead as was already covered.

    The other is someone that's simply overly critical.

    But I do wonder, Patrick, was it still cheaper for you to rent where you are then to have bought the same thing in 2009-2011 when the Case-Shiller index in Nor CA dropped to below 125 (2002 pricing levels)?

  25. Patrick


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    252   5:50pm Wed 5 Dec 2012   Share   Quote   Permalink   Like (2)   Dislike  

    BayArea says

    But I do wonder, Patrick, was it still cheaper for you to rent where you are then to have bought the same thing in 2009-2011 when the Case-Shiller index in Nor CA dropped to below 125 (2002 pricing levels)?

    Yes! It is still far cheaper to rent where I am (94025), though the difference had declined a little.

    It's still nuts here. Kind of like NYC. People pay amounts way beyond the fundamental value of a house or apartment just to impress their friends.

  26. BayArea


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    253   6:18pm Wed 5 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Interesting!

    I do think that the number of homeowners that know how to value a property and compare cost to own vs rent is staggeringly low if I had to guess.

    For many, buying is just something you do as a inexplicable progression in ones life (or ones mind at least).

    And to be fair when I bought in 2007, I had no clue on the topic of valuation and cost to buy vs rent.

  27. Bellingham Bill


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    254   6:24pm Wed 5 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    just to impress their friends

    and be *with* their friends. Location, location, location.

    I wouldn't mind getting a doomstead over the hill from you in the San Lorenzo valley, but who the hell will come and see me???

  28. bg


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    255   11:44pm Wed 5 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    bubblesitter says

    Now, who are those bulls that posted negative reviews?

    There is only one. What do they know anyway. I teach classes of 40-100 people. I don't get too worried when one person gives me a scathing review.

  29. Patrick


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    256   8:16am Thu 6 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Bellingham Bill says

    I wouldn't mind getting a doomstead

    ROFL! I like the term "doomstead". Never head it before but I know exactly what you mean. A place to wait out the coming cannibal anarchy.

  30. bubblesitter


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    257   8:50am Thu 6 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    Bellingham Bill says

    I wouldn't mind getting a doomstead

    ROFL! I like the term "doomstead". Never head it before but I know exactly what you mean. A place to wait out the coming cannibal anarchy.

    AF would be the right person to add some flavor here. :)

  31. SoftShell


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    258   8:24pm Wed 20 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    how about getting it digitally on the Nook??

  32. Patrick


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    259   8:26pm Wed 20 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    I like paper really. It sticks around much better than bits do.

    Remember when Amazon was revoking books from people's Kindles without their permission? That kind of shit just can't be done with paper.

  33. SoftShell


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    260   8:30pm Wed 20 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    True...but I'm all set up for the Nook!
    Nook HD+....Nook reader on the galaxy s3....both home and work computers...can get at all books/mags anytime anywhere...the convenience factor is overwhelming...
    I'll give you $ 12.50 and you email me the original manuscript!! I gotta have it in 'bits'!
    Patrick says

    I like paper really. It sticks around much better than bits do.

    Remember when Amazon was revoking books from people's Kindles without their permission? That kind of shit just can't be done with paper.

  34. SoftShell


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    261   8:31pm Wed 20 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    well, i can probably download the kindle reader for everything and get it there...

  35. Patrick


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    262   8:31pm Wed 20 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    I'll mail you a paper copy. Email me where to send it.

  36. SoftShell


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    263   8:47pm Wed 20 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    Thanks for the offer...but i've ordered the digital copy...
    Your frontpage advertisement finally wore me down!!

  37. New Renter


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    264   9:14pm Wed 20 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    It's $12.50 so that if you buy two (makes a great gift!) then you don't have to pay any shipping charges.

    Buy one as a gift for Iwog and the other for Roberto

  38. JodyChunder


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    265   9:49pm Wed 20 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    No matter which side of the fence you're one, it's an excellent reference, and gets the juices flowing. I bought one a few months back and have shared it with a couple of people. I need to buy another one for my son, who's about to strap himself to a millstone.

  39. SoftShell


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    266   7:09am Thu 21 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    They won't read it voluntarily....
    but this blog software can be upgraded to track and append paragragh after paragraph of the book in a linear fashion every time they post....Forced assimilation!!

    New Renter says

    Patrick says

    It's $12.50 so that if you buy two (makes a great gift!) then you don't have to pay any shipping charges.

    Buy one as a gift for Iwog and the other for Roberto

  40. Alex Rademacher


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    267   8:48pm Tue 14 May 2013   Share   Quote   Permalink   Like   Dislike  

    It all comes down to is it cheaper to rent or is it cheaper to buy ..

    if you can Rent the home you'd love to live in for less than you would pay to buy it. why would you buy it? and vice versa.

    for me the home i really wanted to live in was cheaper to buy, so i did. Using the Rent vs buy calculator came back with 17% more value to buy.

    one thing that confuses me is that the rent vs buy calculator on this site ignores equity built up (or i'm just not seeing it)

    also for me.. i just couldn't find a house with a full acre to rent. i could find houses with small back yards and 3 car garages , that were less than a stone throws from the neighbors. and i ended up buying a house with a 2 car (i have 4 vehicles + a trailer) but with a full acre parking is rather easy. :D

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