patrick.net

APOCALYPSEFUCK is Shostakovich says

If you can't pay cash, you should not buy, person to person, no brokers involved. They can suck dick at truck stops like real professionals.

Oh fuck yeah that's the entire scam they WANT your cash. Credit few have today but some have available cash and they will pull any ploy to grab it.

bmwman91 says

Media outlets all over are publishing things along these lines because it is a new and exciting change from the last few years. New and exciting makes them money.

Oh yes the simpleminded buy any kind of loud, bright bullshite. They should add on FREE, EASY, ENGAGING, LIKE US ON FACEBOOK, FOLLOW US ON TWITTER, SAVE, SALE, PROMO CODE.

All the keywords that drive in the suckers like moths to a flame.

If your mortgage deduction is greater than your standard deduction, that means you paid too much for your house.

It was scary to learn that my landlord had listed the house without warning me. I had 4 kids and an elderly mother, and all their pets. So-so income due to having gotten a late start on my career), only so-so credit, no savings (see: 4 kids), and it was just awful. But then, last year, I had to short-sell my house due to a 2010 layoff (I kept paying as long as I could, but eventually I had to just do the math). So that felt awful too. Overall I'd rather own because it takes longer to be forced out and you can do more things wiithout asking somebody's permission. I think it all depends on where you are and what you need.

Interesting article. It stated that it takes an average of about about 8.8 years to break even in the San Francisco Bay Area, but over 14 years for Menlo Park.

@Patrick, I'm curious. Have you run a comparable rent vs. buy analysis for your own situation? Had you bought in 1998 or 1999, when would your break even year be? 2012-2013? My guess would be sooner than that because of this last RE cycle as well as the steady decline in interest rate.

If an individual bought a property today, I guess they would break even by 2026. The real question is where will interest rate be by then? We are living in an exciting period of history. :)

Darrell In Phoenix says

barbaraG says

you can do more things wiithout asking somebody's permission

Like paint the walls any color you want?

Or remodel the kitchen or bathrooms. Sorry, it wasn't your house. Scratch those off the list.

Darrell In Phoenix says

barbaraG says

you can do more things wiithout asking somebody's permission

Like paint the walls any color you want?

We do that anyway. Our landlord is coolz. We even change light fixtures and hardware to represent our more tasteful decorating scheme. Change it back when we move out.

Darrell In Phoenix says

E-man says

Or remodel the kitchen or bathrooms.

Why go to that expense when it's the landlord problem?

Our landlord did exactly this when we moved in. Medium grade cabinets/appliances, high grade granite counter and glass tile. The bathroom was redone in 1930's period-perfect materials.

We looked at houses here in LA a couple months ago. With taxes, insurance, HOA, it was going to run us $1800 more/month and our rent hasn't increased in 4 years now. Just going to keep socking that money away and let the "investors" and "rich foreigners" keep buying up these $1mill crap shacks.

E-man says

Patrick, I'm curious. Have you run a comparable rent vs. buy analysis for your own situation? Had you bought in 1998 or 1999, when would your break even year be? 2012-2013?

Sure, I run it all the time and the answer is never.

I would never break even by owning. Renting is by far the better deal, because my rent is low compared to the likely sale price of the house.

My rent is about equal the cost of property tax and maintenance, so owning would gain me nothing but the risk of losing equity and the loss of alternative investment income -- not to mention the loss of my freedom to work on this site full time.

Even if I had bought in 1998 or 1999, it still would have been a very bad deal, because I did better in the stock market than I would have done with the house.

My rent is about equal the cost of property tax and maintenance

I'm stunned. Are you comparing average rentals to average houses in your area?

How does your landlord make any money?

You're definitely getting a good deal by renting.

E-man says

Or remodel the kitchen or bathrooms. Sorry, it wasn't your house. Scratch those off the list.

Or just rent an apartment that has a kitchen and bathroom you like as-is.

My rent is about equal the cost of property tax and maintenance

If your rent is that low, why would you even think about moving? How far below market is it?

freak80 says

I'm stunned. Are you comparing average rentals to average houses in your area?
How does your landlord make any money?
You're definitely getting a good deal by renting.

This has been my experience in San Francisco too. It's just way cheaper to rent. Plain and simple. Doesn't even take a lot of calculations, though I've done plenty.

The part of this discussion that is often missing is the budget aspect. If you budget(I know, who really does that crazy stuff!) to keep your housing costs below 25% of your net income, then a lot of the discussion on this thread is irrelevant.

JG1 says

Having been a frequent watcher of COPS, one thing I noticed is that if you got rid of renters, there would be about 95% less crime. The cops were always going to visit apartment buildings and trailer parks. On the rare occasion they went to visit SFHs, it was often oddball stuff like an alligator in the yard.

Funniest post on pat.net EVER. (disclaimer:I've not read them all, but there's some really funny writers here.)

This thread has wrinkles.

Well, yeah, paint the walls the colors I want. Also the plant stuff in the garden. Not just annuals either. Have a bunch of pets.

Darrell In Phoenix says

Lose a few hundred thousand dollars so you can paint the walls.

You dare doubt the decisions of millions of people?!

Buster says

robynfrog says

Rin says

For any bull market, if one gets in early enough, then it tends to work out. Thus, to get into the Cali or NE corridor bubble cities, that time was 2002 or earlier.

Yes, 2002 or earlier would have been nice. But we didn't have the money at that time.

What I'm saying is that we JUST bought a house, as in November of 2011.

Per Case Shiller, prices now are comparable to ~2002-2003 prices. You probably purchased at the new bottom but of course we will not know for sure as the view from the rear view mirror is still too close. In any case, you will do just fine, that is if you plan to stay there for awhile which I assume to be the case.

Nope, you can and most likely take a hair cut. Sorry. The question in a few years when you lose the equity you dumped into the pile of wood and nails, is do you walk away or keep paying into a depreciating asset. Good luck

Darrell In Phoenix says

barbaraG says

Well, yeah, paint the walls the colors I want. Also the plant stuff in the garden. Not just annuals either. Have a bunch of pets.

Lose a few hundred thousand dollars so you can paint the walls.

What a wonderful idea!

Yah, but they can save some money by doing it themselves. Your not factoring that savings into the "few hundred thousand dollar" loss. If you are going to present math, then do it correct.

RentingForHalfTheCost says

If you are going to present math, then do it correct.

Good point! Based on many papers stapled to telephone poles in my neighborhood, I'd estimate you could save $40/wall minus the cost of materials!

Note: When you "save" "minus" you pay.

freak80 says

My rent is about equal the cost of property tax and maintenance

I'm stunned. Are you comparing average rentals to average houses in your area?

How does your landlord make any money?

You're definitely getting a good deal by renting.

I have had the same experience as Patrick so far in SF, not quite a deal like his, but I always was able to find nice places for reasonable rent (for SF standards) whereas I have also toured a significant amount of open houses and never came across anything reasonable.

E-man says

Or remodel the kitchen or bathrooms.

I think this is just vanity for the most part. 9 out of 10 remodels look terrible and even laughable to me.

freak80 says

How does your landlord make any money?

I see two completely different types of owners out there living as landlords in my experience.

1) They bought many years ago, so have very low property tax. They also have a mortgage that has been refi'd to death, so the monthly is very low. They can rent for what todays property taxes and maintenance would be and still be profitable. Considering their purchase price they are pulling in a handsome 10% ROI on renting.

2) They bought into the hype and are not really making any money renting now. They would love to rent for more but there are many people in the 1) camp that they compete against for good tenants. They tried going higher a few years ago and the damage caused by the 20 something Facebook/Google/Instagram/etc. nerd coders with their Wii fitness and D&D parties destroyed their profits in one night.

Darrell In Phoenix says

barbaraG says

Well, yeah, paint the walls the colors I want. Also the plant stuff in the garden. Not just annuals either. Have a bunch of pets.

Lose a few hundred thousand dollars so you can paint the walls.

What a wonderful idea!

In 2006 maybe... Wake up Darrell its almost 2013...7 years after the bubble started bursting with 40-50% price cuts the norm and monthly payments cut in half on top of that due to low interest rates.

And guess what... Rents are just as high or higher than 2006... The only way you are going to lose hundreds of thousands on a house is if you bid hundreds of thousands over the appraisal.

freak80 says

E-man says

Or remodel the kitchen or bathrooms. Sorry, it wasn't your house. Scratch those off the list.

Or just rent an apartment that has a kitchen and bathroom you like as-is.

It was supposed to be a joke, but it doesn't come across very well in writing. :)

E-man says

It was supposed to be a joke, but it doesn't come across very well in writing. :)

Sorry...Poe's Law.

BoomAndBustCycle says

The only way you are going to lose hundreds of thousands on a house is if you bid hundreds of thousands over the appraisal.

Wishful thinking at best. What sells for 800K today can easily, and I mean easily be worth 600K tomorrow. These prices are not sticky by any means, we all learned that in the first adjustment. This is not over by any means. We haven't even fixed the core issues yet and have no plan in place. The current supposed plan is to print more money and cross your fingers. Good luck with that.

Darrell In Phoenix says

"Appraisal"?? lolol

Yeah, many years ago, before Patrick.net I called the bank and said 'But, but, the appraisal was ..." The woman burst out laughing and said appraisals are good for one day.

RentingForHalfTheCost says

BoomAndBustCycle says

The only way you are going to lose hundreds of thousands on a house is if you bid hundreds of thousands over the appraisal.

Wishful thinking at best. What sells for 800K today can easily, and I mean easily be worth 600K tomorrow. These prices are not sticky by any means, we all learned that in the first adjustment. This is not over by any means. We haven't even fixed the core issues yet and have no plan in place. The current supposed plan is to print more money and cross your fingers. Good luck with that.

Well most people buying a $800k today are in the top 5% of earners... The ones with good jobs that arent going away... So there may be a harder bottom there than many think. Also every year that passes land value increases with inflation... Its been almost 7 years now since 2006.. Thats 7 years of 1-3% inflation of land... Or 7-21% increase in value... Its been countered by steep drops in bubble value... But eventually inflation is going to put a bottom in... And its close.

BoomAndBustCycle says

Well most people buying a $800k today are in the top 5% of earners... The ones with good jobs that arent going away...

God, I wish what you said there was the truth. 3.5% of 800K is only 28K. You don't need to be a 5% earner to put yourself into the hole for 96.5% of a crap piece of house. I see it all over the BA. People buying as much house as they can afford.

Also, thinking that good jobs will always be there is just more wishful thinking. Things could get really bad before better. Just my take. I hope it doesn't but that Debt, Deficit issue will eventually push us back into a recession. Many times over.

BoomAndBustCycle says

Thats 7 years of 1-3% inflation of land... Or 7-21% increase in value...

Didn't happen. Land and housing has gone down in this 7 years. Inflation makes the matter worse, not better. Pick any diversified equity/bond position and you just kicked the crap out of any housing comparison. Not by a bit, by a lot!

BoomAndBustCycle says

But eventually inflation is going to put a bottom in... And its close.

I doubt that. Inflation is only good in putting a bottom into necessary items such as food and energy and very basic shelter, a 'nice' house in a 'nice' area is does not fall into that category. But if the population continues to become poorer on average (i.e. wages/employment not increasing with inflation), then you will see massive deflation in everything eventually, or hyper-inflation which would be far worse than deflation.

Sure, I run it all the time and the answer is never.

I would never break even by owning. Renting is by far the better deal, because my rent is low compared to the likely sale price of the house.

My rent is about equal the cost of property tax and maintenance, so owning would gain me nothing but the risk of losing equity and the loss of alternative investment income -- not to mention the loss of my freedom to work on this site full time.

Even if I had bought in 1998 or 1999, it still would have been a very bad deal, because I did better in the stock market than I would have done with the house.

Patrick, have you seen the NYT calculator? What do you think of their interpretation of Rent vs Buy?

David9 says

Darrell In Phoenix says

"Appraisal"?? lolol

Yeah, many years ago, before Patrick.net I called the bank and said 'But, but, the appraisal was ..." The woman burst out laughing and said appraisals are good for one day.

Also government has likely been turning a blind eye on inflated appraisals as they want to reap as much property tax as possible.

RentingForHalfTheCost says

Wishful thinking at best. What sells for 800K today can easily, and I mean easily be worth 600K tomorrow

There would be a serious risk of that if the rents did not increase as much as they did over the last 2+ years. However, given the fact that the rents increased at the level they didreflects the fact that people around here still got major dough - especially in the high tech field. Compounding the situation is that people in these fields get a lot of funny money via stock options and what not. Perhaps, they are not even "real americans" lol.

dublin hillz says

RentingForHalfTheCost says

Wishful thinking at best. What sells for 800K today can easily, and I mean easily be worth 600K tomorrow

There would be a serious risk of that if the rents did not increase as much as they did over the last 2+ years. However, given the fact that the rents increased at the level they didreflects the fact that people around here still got major dough - especially in the high tech field. Compounding the situation is that people in these fields get a lot of funny money via stock options and what not. Perhaps, they are not even "real americans" lol.

That is likely true and you can argue that it's worth how much somebody else is willing to pay. Sure there may be short term gains to be made if you really time it nicely, but the underlying issue is that stock options and similar assets are not guaranteed revenue stream like your employment salary, and even that isn't. The minute the rug is pulled under all those IPOs and the insiders sold and Wall St. has deemed this another tipping point after riding on ZIRP all these people will be left with nothing and the panic/downward spiral starts again. What you should really do when you get lucky with options is to take the money and stash/invest it (safely) for harder times and NOT buy the nicer house or buy at all just because you got a temporary cash infusion.

dublin hillz says

There would be a serious risk of that if the rents did not increase as much as they did over the last 2+ years.

Don't see much of a rent increase in the last 2 years. I am paying roughly the same for more than I was 2 years ago. Also, I have friends who rent condos and they get the benefit of seeing the salarys during the applications. Bottom line they tell me: Most of the people shopping are new workers from Asia, India, etc. in high tech. Their salarys are not high at all (40-60K) but they are willing to extend themselves to pay 1500-2000/mth or more for lodging. That doesn't seem healthy to me, and causes me more alarm than confidence.

RentalWatch says

RentingForHalfTheCost says

I am paying roughly the same for more

PRECISELY

Rental rates per square foot have been falling all along.

Only in SFHs.... Not apartments... Apt square footage has been rising or flat since summer of 2009.

Single family homes prices per square foot was dropping due to mcmansion foreclosures and short sales.

My rent is about equal the cost of property tax and maintenance, so owning would gain me nothing but the risk of losing equity and the loss of alternative investment income -- not to mention the loss of my freedom to work on this site full time.

SAME HERE

Read an learn about the 1926 rise and disaster in real estate.

http://www.library.hbs.edu/hc/crises/forgotten.html

"People traditionally have looked at the price-to-rent ratio," Zillow senior economist Svenja Gudell tells ABC News. "But that's not comparing apples and apples. Our calculation takes into account all costs, plus tax deductions and inflation. It would be very hard for the average consumer to crunch these numbers."

I'll bet they didn't include the selling costs...

Did anyone post a comment with link to Patrick's calculator?