« previous   housing   next »

2 years since we bought


By SubOink   Follow   Thu, 20 Dec 2012, 4:00am PST   12,427 views   100 comments   Watch (1)   Share   Quote   Permalink   Like (5)   Dislike (1)  

I posted this same thing last year around this time.

http://patrick.net/?p=1174499

Once again, 2 years ago the doom and gloomers were telling me that I made the biggest mistake buying and that houses will crash ridiculous amounts from here. (1975 prices coming soon)

The truth is...I was happy with our mortgage when we initially bought because it was around what we used to pay in rent for a much smaller house. Then we refied...and now we refied again - what can I say? It seems like one of the few best moves I have made. Our "old" house we used to rent is still rented out to another sucker to what we used to pay for years. The best feeling knowing...our payment is frozen for 30y. It will never go up.

The doom and gloom has still not happened. Prices are higher now (which was reflected in both our appraisals in both refi's).

Let's take a moment and admit - you guys were wrong.

Well...I'll be back next year with the same message - and so the years go on...

Keep up the doom and gloom - if you do it long enough, you'll be right again! Good luck!!

Merry Xmas!

« First     « Previous     Comments 61-100 of 100     Last »

dublin hillz   befriend   ignore   Fri, 21 Dec 2012, 3:10am PST   Share   Quote   Like   Dislike     Comment 61

Hysteresis says

dublin hillz says



...


your analysis is missing --ALL-- of the large costs associated with financing a house.


use patrick's calculator or nytimes rent/buy calculator for more accurate numbers.

If one believes that historical averages are likely to repeat themselves in the long term, then the principal part of the mortgage payment should be considered forced savings and should not be counted as a "cost." It is more of a cash flow issue so the pertinent question is "am I confident that I can make the required payments." Which means that the biggest threat to making payments is a life altering negative event such as job loss, etc and the good idea is to have substantial liquid savings if that were to occur so that the situation can be handled adequately and without stress. Also, I am a big believer in mortgage prepayments which in bay area can easily save you hundreds of thousands of dollars over the life of the loan and factor heavily into buy vs rent equation.

dublin hillz   befriend   ignore   Fri, 21 Dec 2012, 3:13am PST   Share   Quote   Like   Dislike     Comment 62

While it is certainly possible that someone can rent under market (pay equivalent of property tax + maintenance or property tax + HOA) it is very unlikely to have such a benevolent landlord who does not care to make any profit. At very least, they will want to make some profit if they lease the place out. But you guys have to admit, this situation cannot apply to rental martket as a whole. There are too many renters to even fathom to fit into this scenario. Vast majority of renters live in apartment complexes where rent increases are a direct and a realistic threat year in and year out.

Goran_K   befriend   ignore   Fri, 21 Dec 2012, 3:27am PST   Share   Quote   Like   Dislike     Comment 63

dublin hillz says

While it is certainly possible that someone can rent under market (pay equivalent of property tax + maintenance or property tax + HOA) it is very unlikely to have such a benevolent landlord who does not care to make any profit. At very least, they will want to make some profit if they lease the place out. But you guys have to admit, this situation cannot apply to rental martket as a whole. There are too many renters to even fathom to fit into this scenario. Vast majority of renters live in apartment complexes where rent increases are a direct and a realistic threat year in and year out.

It is possible. I'm sort of in the same situation. The home I'm in is in a gated community in Irvine, and a similar model sold in the high 800s this year. The HOA is nearly $300, and the effective tax rate with MR is 1.5%.

My rent: $2400 a month. This is my 3rd year of not having a single rent increase.

You property owning barons can do the math yourself. I'm pretty sure I'm saving a lot of money by not buying this house. :)

errc   befriend   ignore   Fri, 21 Dec 2012, 3:29am PST   Share   Quote   Like   Dislike     Comment 64

When I read peoples posts on these matters, it seems like many forget that, if not for the taxpayer stepping in and plugging the chazm in the ole dam, everything housing AND financial would have been wiped all the way out.

Using OPM other peoples money is right, lol!

High five

dublin hillz   befriend   ignore   Fri, 21 Dec 2012, 3:40am PST   Share   Quote   Like   Dislike     Comment 65

Goran_K says

My rent: $2400 a month. This is my 3rd year of not having a single rent increase.

$2400 is definitely more than just property tax+HOA. This amount likely comprises Interest + Property Tax+ HOA.

Goran_K   befriend   ignore   Fri, 21 Dec 2012, 3:52am PST   Share   Quote   Like   Dislike     Comment 66

dublin hillz says

$2400 is definitely more than just property tax+HOA. This amount likely comprises Interest + Property Tax+ HOA.

It's close.

Rent amount per year: $28,880

Tax: $875,000 * 0.015 = $13,125
HOA: $280 * 12 = $3,360
3.6% jumbo (or about $700 month over 360 payments): $8,800

HOA/Tax/Interest = $25,285

We're talking about $300 a month profit, and that's assuming everything is paid off! (this house was built in 2001!) If it's not, then all bets are off.

Don't forget maintenance (my water heater was replaced in September), and any "special assessments".

Mr Happygoluckofus   befriend   ignore   Fri, 21 Dec 2012, 4:04am PST   Share   Quote   Like   Dislike (1)     Comment 67

All I know is I'm here for a while, and I am saving money from what I was paying in rent. Plus my taxes keep going down.
Last night my wife and I were discussing how on Zillow and Trulia they are saying our house is valued back to where it was when we bought. While the county appraisers office has it 40K lower. In any event I'm still not upside down, as I'm not selling, my payments are fixed for the next 30 years so it's a non issue.

My Wife asked if our house went upto 300K and we sold it for that, that means that 150K profit would be ours? I said yeah, but by then, where in the hell would we go. If our house would be worth 300K that would mean an even better house would cost 400-500K and up of course.
This isn't a board game, we're staying where we are.
I could see a scenario where we buy a new house and rent this one out as two units, someday. But this is not some investment vehicle with hopes of flipping into bigger a exposure. This is easy, that is not.

Goran_K   befriend   ignore   Fri, 21 Dec 2012, 4:05am PST   Share   Quote   Like   Dislike     Comment 68

That's a good attitude to have. As a place to live, I think it's all a personal choice.

As an investment, I think $875,000 homes are horrible.

SubOink   befriend   ignore   Fri, 21 Dec 2012, 4:06am PST   Share   Quote   Like   Dislike     Comment 69

RentingForHalfTheCost says

I agree, more like $3500/mth savings.

I am not sure how I would save 3500/month by renting? Since the refi I am saving more money monthly than when we were renting. Something like 350 a month more than when we rented.

Please lay down your math of how you are saving $3500 a month?? Living with the parents for free would be the only option but who wants to live with the parents for 10 years??

Patrick says

I have just one question for you all:

Is it cheaper to rent or to own the house you bought over the median holding period of 6 years? Remember that half of all buyers own for even less than 6 years.

Thats a non sense assumption I think. I know way more people that have been in their houses for more than 10 years. Most of our neighbors (except the renters) have been here for more than 10-20 years or even longer.

I think if you have a job that calls for constant moving then...don't buy. I personally work from home and can live pretty much anywhere as long as within a 1hr drive to the city where I have an occasional meeting. So, I am not moving anytime soon, if ever. Will only change around / update the house around over time...and completely mold it to my taste and liking. Been looking forward to that my whole life. We so much hated rentals, always in bad shape and never a landlord that doesn't want to just update in the cheapest possible way...need a new floor...how's that linoleum working out for ya guys? - argh!
It's such a crappy life quality and we used to travel a lot and spend a lot more money outside of the house because we hated being home. So in essence, we saved way less in those times than just comparing rents to mortgage.

To each is own.

But even in your assumption of 6 years patrick. I could move if I wanted to because as of right now, I could rent the house out for $500 more a month than what we pay. So if I wanted to move to Florida, I rent out this house and move...just like anybody else.

dodgerfanjohn says

All of the above feature a commute of at least an hour to the westside or DTLA and as such peaked lower, and crashed harder than closer in areas

Who says you need to commute to the West Side??
TO for example has its own job infrastructure.

Look at traffic in the morning. The 101 going towards TO is PACKED, bumper to bumper. It seems like a lot of people from LA are traveling that way. puzzles me but thats a fact. Every morning. The side going towards LA is empty.

RentingForHalfTheCost   befriend   ignore   Fri, 21 Dec 2012, 4:36am PST   Share   Quote   Like   Dislike     Comment 70

iwog says

This is complete bullshit. Show me one single stock that has paid 12% after tax income in dividends over the last 10 years. (you claim an entire portfolio) Selling covered calls has a 25% failure rate. That is a statistical fact and the premise that you could have done so for 10 years without some big losses is ridiculous.

RentingForHalfTheCost says

Over 900K savings to rent this place for 10 yrs verses owning.

You say your landlord wants you out after two years and you have the nerve to claim this is a rational estimate over 10 years?

To the first, I don't need to make you believe anything about me and my covered call success. Live your own life. I am just stating facts here and have shared even the stocks I have used over the years in earlier posts. Your insults where you call me a liar, show how you are disarmed sometimes. ;)

To the second, now you are just misquoting me. The landlord does not in any way want me out. I suspect I can live here for many years. She actually wants me to buy her house. I have always had a great relationship with my landlords. If I ask to stay another 2 yrs when the lease it up, I am pretty sure it'll work. I could ask the next time I have her over for a dinner party. :)

iwog   befriend   ignore   Fri, 21 Dec 2012, 5:00am PST   Share   Quote   Like   Dislike (1)     Comment 71

Null post. You really didn't answer a single one of my points in any way. Nor did you address what anyone else said. Again.....I simply don't believe your off the cuff numbers. You refuse to provide specifics or support, and even if everything you say is true your example is so beyond the norm that the vast majority of renters can't even touch it. Therefore why even put forth the assertion?

RentingForHalfTheCost   befriend   ignore   Fri, 21 Dec 2012, 5:24am PST   Share   Quote   Like   Dislike     Comment 72

iwog says

Null post. You really didn't answer a single one of my points in any way. Nor did you address what anyone else said. Again.....I simply don't believe your off the cuff numbers. You refuse to provide specifics or support, and even if everything you say is true your example is so beyond the norm that the vast majority of renters can't even touch it. Therefore why even put forth the assertion?

Here is some light reading for you then. I employ a strategy like BXY (out of the money covered calls). Just doing it against the SP500 nets you over 10% annual since 1990. My approach is more specific to only high dividend paying stocks. These are where I get the 15-20% returns annually. Like I said though, YMMV and believe what you want. Aside from showing my my trading statements for the last 15 years, not much I can do. I do know I have enough to buy a house outright now, one that I would still have 15 years left to pay down. I don't think this approach is for everyone, but it definitely worked and still works for me.

http://seekingalpha.com/article/596391-covered-call-portfolios-a-look-at-historical-performance

Mr Happygoluckofus   befriend   ignore   Fri, 21 Dec 2012, 5:28am PST   Share   Quote   Like   Dislike     Comment 73

On the flip side of the coin.
I really wish like hell, all of the rent I payed on the same house for 11 years, went to my current mortgage.

That's $158,000 I'll never see again. In fact, it's $2K shy of what I paid for my house, that I'm paying a mortgage on.

$1200 a month
X12
X11 = $158K

$432K will be what I end up paying on my house if I take 30 years to pay it off. That's only a 160K loan. But it's the same I would pay for rent, provided my rent never went up due to inflation in that 30 year period.
Never happen.

Plus there's a bonus, I will actually end up with a house I own out right free and clear in 30 years or less. That would also never happen as a renter, renting the same house for 30 years.

SubOink   befriend   ignore   Fri, 21 Dec 2012, 5:48am PST   Share   Quote   Like   Dislike     Comment 74

CaptainShuddup says

On the flip side of the coin.
I really wish like hell, all of the rent I payed on the same house for 11 years, went to my current mortgage.

YES.

In my case that is 10 years of renting places for around $2400.- = 288k! I never see again! Ouch!

Mark D   befriend   ignore   Fri, 21 Dec 2012, 5:48am PST   Share   Quote   Like   Dislike     Comment 75

RentingForHalfTheCost says

Aside from showing my my trading statements for the last 15 years, not much I can do.

lets see them! btw, deflation is very easy to fix (just ask Bernake HA HA HA) but inflation happens every year.

SubOink   befriend   ignore   Fri, 21 Dec 2012, 5:50am PST   Share   Quote   Like   Dislike     Comment 76

RentingForHalfTheCost says

Here is some light reading for you then. I employ a strategy like BXY

And what does that have to do with my post??

Good for you, you spend your days following the stock market. I rather be at the dentists office.

errc   befriend   ignore   Fri, 21 Dec 2012, 8:19am PST   Share   Quote   Like (2)   Dislike     Comment 77

SubOink says

CaptainShuddup says

On the flip side of the coin.

I really wish like hell, all of the rent I payed on the same house for 11 years, went to my current mortgage.

YES.

In my case that is 10 years of renting places for around $2400.- = 288k! I never see again! Ouch!

Well, as far as your mortgage payment goes, you'll never see your interest, taxes, or insurance portion of the payments again either, and the principal repayment would only be realized, if you sold the house. After paying 6% commish to a realtor and giving the buyer assistance. And at that point, you're back to homeless

SubOink   befriend   ignore   Fri, 21 Dec 2012, 8:28am PST   Share   Quote   Like   Dislike     Comment 78

errc says

Well, as far as your mortgage payment goes, you'll never see your interest, taxes, or insurance portion of the payments again either, and the principal repayment would only be realized, if you sold the house. After paying 6% commish to a realtor and giving the buyer assistance. And at that point, you're back to homeless

The interest portion (throw away portion) is a fraction of what my rent used to be. And it helps with taxes on top of it.

New Renter   befriend   ignore   Fri, 21 Dec 2012, 10:35am PST   Share   Quote   Like   Dislike     Comment 79

iwog says

RentingForHalfTheCost says

But you will be paying for 30 years. In 10 years of renting in the bay area many people can save enough to buy a house with cash. Just saying...

This is patently false. The homes that you claim you rent are upwards of a million dollars. Even someone who saves $1000 a month by renting, a ridiculous assertion in my opinion, is only going to save $120,000 in 10 years. You might just barely save enough for a 10% down on a house that has probably appreciated 2-4% a year for the entire period.

I dunno, my $2400/mo rent feels a lot less than my former ITI of $4400/mo for a slightly smaller and less well equipped house.

RentingForHalfTheCost   befriend   ignore   Sat, 22 Dec 2012, 12:01am PST   Share   Quote   Like (1)   Dislike     Comment 80

robertoaribas says

RentingForHalfTheCost says

Just doing it against the SP500 nets you over 10% annual since 1990. My approach is more specific to only high dividend paying stocks. These are where I get the 15-20% returns annually.

total bullcrap... so much in fact a shovel won't do, you need a bulldozer and a truck to handle this amount.

Believe what you want. Amazing, how people asked for the numbers, and then when presented they can't take it. All is left is to kill the messenger. Good luck to you guys/girls. Last time I share my details here, cause people are downright mean when it goes against their thinking. I'm extremely happy with my choices and they have done me well. Sounds like the OP is as well. Good for everyone. Others just seem mean around here. ;)

Goran_K   befriend   ignore   Sat, 22 Dec 2012, 12:21am PST   Share   Quote   Like   Dislike     Comment 81

robertoaribas says

total bullcrap... so much in fact a shovel won't do, you need a bulldozer and a truck to handle this amount.

Which part? The S&P 500 has 9.6% return rate since 1990. Bond index funds were around 6% since 1990. That's definitely not BS.

What was housings return over that time period?

Ironman   befriend   ignore   Sat, 22 Dec 2012, 12:23am PST   Share   Quote   Like   Dislike (2)     Comment 82

errc says

Well, as far as your mortgage payment goes, you'll never see your interest, taxes, or insurance portion of the payments again either, and the principal repayment would only be realized, if you sold the house.

Also remember to add in any money you spend to upgrade or replace fixtures, appliances, etc. that a landlord would normally pay for.

wave9x   befriend   ignore   Sat, 22 Dec 2012, 1:49am PST   Share   Quote   Like   Dislike     Comment 83

Patrick says

I have just one question for you all:

Is it cheaper to rent or to own the house you bought over the median holding period of 6 years? Remember that half of all buyers own for even less than 6 years.

The average tenure for owner-occupiers in California is 13.44 years, and over 11 years in Texas and Florida, according to this study - http://dss.ucsd.edu/~miwhite/wasi-white-final.pdf. Where is the 6 year figure coming from? The median and average couldn't be that different.

Bigsby   befriend   ignore   Sat, 22 Dec 2012, 2:05am PST   Share   Quote   Like   Dislike     Comment 84

Goran_K says

Which part? The S&P 500 has 9.6% return rate since 1990. Bond index funds were around 6% since 1990. That's definitely not BS.

What was housings return over that time period?

Depends when you sold (and bought). :D

iwog   befriend   ignore   Sat, 22 Dec 2012, 2:24am PST   Share   Quote   Like   Dislike (1)     Comment 85

RentingForHalfTheCost says

Believe what you want. Amazing, how people asked for the numbers, and then when presented they can't take it. All is left is to kill the messenger.

Oh BS. You didn't give any numbers, you just threw out a bunch of nonsense that can't be verified. All you had to do is name a few of these miracle dividend stocks. They are public and easy for anyone to check.

You couldn't even do that.

Part of my income is derived from writing naked options contracts. I have intimate knowledge of how the market works, what the best plays are, and how much money a person can reasonably expect from doing this. I also have a decent portfolio of high dividend stocks as well as managing a multimillion dollar trust fund that is full of stocks and bonds.

I'm calling you out.

woopee   befriend   ignore   Sat, 22 Dec 2012, 2:53am PST   Share   Quote   Like (4)   Dislike     Comment 86

After reading this site since the beginning and reading Patrick's book, I just joined this site thinking it was far more grounded in fact and realism but what I see is absurd. I am not staying.

Recent threads read to me like the type who troll forums planting seeds of why someone should do precisely what Patrick always warned against. I do not buy into a minute of it. To me this is just more illusion and BS, this blind push on here that was on here in 2004 and I find it now as I found it then, just plain sick.

Thanks to Patrick and this site then I stayed away from that kind of BS talk then and saved my behind by not purchasing a life debt on a dump, while plenty of others did and in the course of it went bankrupt.

I have to say many of you appear to me like nothing but a bunch of ignorant and arrogant amateurs to me trying to prove to your own minds you are hot shots by bragging how much you have or make dreaming of that never ending real estate rise that is largely in my view in your own minds to entice others to follow. I don't buy it. I've seen this all before and find it really sad.

If the bond market crashes as all predictions say is very near I pity many of you in real estate.

iwog   befriend   ignore   Sat, 22 Dec 2012, 3:02am PST   Share   Quote   Like   Dislike (1)     Comment 87

robertoaribas says

what brokerages, and what requirements are needed to right naked options? particularly puts? I want to write covered calls and naked puts.

I was working on a paper years ago, a time analysis of put and call pricing in changing beta environment, combining some results from black sholes and the put call parity law...

I'll be very frank about this. Here's how I obtained level 4 options trading rights on etrade:

1. Lie on the application form. Claim over 10 years of experience with options writing. The brokerage just wants to cover its ass in case you sue them for losing all your money.

2. Have lots of money. I found it necessary to keep about a quarter of a million dollars on account (it can be invested in stocks) to have enough wiggle room to write multiple naked options without margin calls.

3. Don't take large risks, especially at first. They will call you if you're a new naked trader and it looks like you're doing something stupid. A few years ago I was selling naked SLV calls with large physical reserves of silver but nothing that Etrade could verify. They got upset.

RentingForHalfTheCost