@patrick why are you so fixated on this idea that buying a house is always bad? It makes no rational sense. A lot of this stuff is out of date anyway. What applied in 2008 doesn't necessarily apply in 2015. Many if not most housing markets (except CA) have returned to historical norms. I'm not advocating buying houses. Each person should look at what is best for them where they live not listen to some naysayer looking to sell his book that says everything about buying is bad.
The truth in your thesis targets a certain class only.
That would be people trying to buy more house than they can really afford.
Most of that reason is out of Prejudice, Elitism, Pride, and misguided self esteem.
I mean 90% of those bellyaching about RE affordability. Wouldn't be caught dead in a house they actually could afford.
We've lost our can do, make do spirit as Nation. Housing market or any market for that matter will never turn around as long as we continue this path of high roller lifestyle birth rights. I moved into a house "I" could afford, and not the house the RE said I could afford. 1/3 or even 30% on housing is too damn much. Most renters out there are even paying more. I don't agree with that. I was taught in School by a sweet old lady who was a cracker jack at household accounting, that you should never pay more than 25% of your income on housing.
I bought what I could afford. Eventually not if but when prices come down. And then if I think my neighborhood has become bellow my pay grade. Then I'll move up into a better house. Possibly cheaper than what I paid for this one. Keep this one and rent it out.
Your thesis is a sound argument for those willing to enslave them selves so they can live in an area that gets more expensive by the day.
But for anyone buying within their budget and a budget they are convinced they can maintain for 15 to 30 years, through up and down economic times, and that includes tax and insurance escrow. Then buying is 1,000,000,000,000,000,000 X's better than renting any day.
Especially in this day and age. I can guarantee you that every renter of a house in South Florida in the last 5 years, has had to put up with Realtors and potential buyers, parading through their homes all hours of the day. And broken crap that the landlord refuses to fix because he's selling the place. But that hasn't stopped him from raising the rent to keep up with other lemming landlords. Because the NAR keep releasing "Data" saying that rents are going up because of the housing shortage. Yes the same shortage we are experiencing right now where 2 out of 10 SF homes are boarded up because they have been foreclosed for over 7 years.
Yes this book came out right at the start of the BEST BUYING OPPORTUNITY for RE in our lifetimes.
Especially in bay area where patrick is mostly concerned with.
09,10,11 was a rare, never to be repeated period where houses cost far far less than today. And the banks with thier short sales did not care what price they got (if you could land one of those deals, there were lots of them)
I know in LA area 2 bedroom apartment style condos couuld be had for 130 to 200k and the same units are now 300 to 500k and rent for 2300+ per month.
Anyway no one knows the future but patrick is a perma bear - you gotta buy the dips people.
Patrick should have released this book in 2005, then another book in 2009 saying 'now is the time to buy re' then another book NOW saying 'now is time to sell re'.
That would have awsome.
These fuking bubbles are makeing me crazy. They are really all scams and frauds we actively participate in, so I guess i respect patrick for not knowingly investing in a ponzi fraud scheme, but we cant all rent, that society cant exist.
Patrick is providing his free opinion. Like any opinion we as individuals are responsible to make our own decisions. Obviously he sees a home as place to live not an investment vehicle. That is because he is not a speculator so do not expect him to tell you how to gamble on the housing market. Once housing begins its next downturn, he will be proven correct. Then people will blame him for not telling them to sell.
These figures are not accurate. I own a property in the Bay Area...it's not in the greatest area (Concord) but not too bad either. I currently rent it out. The rent is below market at $1200 per month and Zillow estimates the current value at $182K, which seems about right. That would equal 7.9% annual rental rate vs. cost to buy (($1200 x 12 mos.)/$182K). Am I missing something? Also...rates are not 6.5%...not even for super jumbo loans. And please show me a $1M house that you can rent for $2500.
Well in some sense they are...residential land, or land devoted to housing, constantly increases.
It increases when new housing is built on virgin land...like in new suburbs or as rural areas get connected up with roads and communications.
It also happens when in-fill or higher density occurs. For example, I look at a super expensive city like Seattle, and even if you were to take the cooridors like the major non-interstate highways that run through the city, and convert those from SFHs and open strip malls to low rise apartments and retail, you could easily put hundreds of thousands of people into housing they would like and enjoy and create more local retail shops for them to enjoy and work at. You could do this without cramming them into tiny apodments either.
Relative to the US market, it happens when productivity and life becomes better in other countries, reducing immigration.
It also happens as birth rates level or drop and fewer people in total need homes. At worst across the entire globe, we might see another 2 billion people added. But, at the same time, more of them will find opportunities where they live. And 2 billion is only a 28% increase...and of course not all of them individually will need SFHs. Now compare that to the last 30 or so years when population doubled and the US was still the only robust economy taking in loads of people.
One item I have noticed over my 20 years doing this.
1. Renters mostly rent because can't buy
2. Owners own a home because they have the capacity to own
Housing bubble of course, allowed non capacity debt into the system, which was horrid, hence why I always fight to ease lending standards
However, this cycle doesn't have this
Even in this cycle, those who could did and those who couldn't didn't
I don't believe anything has changed on that front but the real test will comes years 2020-2024 when demographic economic send more supply of college educated dual income Americans into the housing supply and when they have kids ... then you will if people reject housing debt in any meaningful fashion
It shouldn't have been shock to many that mortgage demand curve was weak in this cycle, you had so many variable factors going against it