patrick.net

Edvard,

If you are renting a nice 4 bedroom home with a big backyard in a good neighborhood where equivalent homes are going for $700k... Then your landlord is a very benevolent man, your father or a moron!

When i moved to los angeles in 2002... My first 550 sq ft 1 bedroom apt rental in Burbank was $1100 a month. The fact that you found a $700k 4 bedroom home at around the same time to rent without a single rent increase even during the bubble years... Well you basically won the lottery... 99% of the population couldnt get the sweetheart deal you got, its a fairy tale for the majority of renters.

this sounds like a fallacy, a fallacy of false dichotomy.

There are more than 2 choices here. People have their options, housing preferences don't make everyone happy or sad. Some of us might not care much about these issues, and we are capable of being more than just happy or sad like some bipolar chick.

Happiness to me is being free, not being tied down to debt, mortgage, place or a job. We live very comfortably, and somehow do not seem to care for NAR propaganda about how our happiness must be attached to certain commercial goods or huge debt.

EMan says

housing preferences don’t make everyone happy or sad.

That's cultural. In USA happiness and sadness is tied to home, in the psyche on common mass.

Happiness is a state of mind and can not be qualified or quantified by mere possessions.

I own my home but to explain why would be an exercise in futility.

Does owning my home make me happy? Let’s just say that my dog greeting me when I come home makes me happy; it’s only for a moment but one that is frequently reborn.

I can’t say that about my house.

If you're happy and you know it...clap your hands!

Happy 4th of July everybody!!

@masayako

Great post. I too rented for about 3 years in a "nice neighborhood with good schools" (or something like that). We REALLY liked the area and the rental but we never knew if we might have to move out (we had a year to year). We also had a very basic kitchen, basic bathrooms, etc.

We bought an REO two months ago and pay about $200 more a month than our rent in the SAME neighborhood.

There are two sides to the "residential fence". There's the Bears on Patrick.net and the Realtor Bulls. I'd say both our wrong. Take Patrick's rental calculator for example. 0% rental inflation? About a half percent deflation on a home forever?

Do people really think that 20 years from now homes will be worth less than they are today? Our economy is hinged on inflation!!

I really don't care if the our home decreases because it's IT'S A PLACE TO LIVE FIRST and an investment second.

kronicade says

Do people really think that 20 years from now homes will be worth less than they are today? Our economy is hinged on inflation!!

it's not 100% chance of inflation. 0% chance of deflation. the odds are somewhere in between.

historically, houses roughly track inflation.
there are in fact 20 years period where housing markets have deflated; just not in the united states. don't be one of those people that say it can't happen because it's never happened before (eg prices --never-- fall in the US). those people are short sighted.

so yes, there's a greater than 0% chance houses will be worth less (after adjusting for inflation) in 20 years.

@Hysteresis

You are correct, anything is possible. I'm hoping that "somewhere in the middle" means there will be SOME inflation in the next 20 years. And I'm not necessarily talking housing inflation.

Right now houses are essentially worth what there were 11 years ago but I would bet that things will change in the next 9 years.

Maybe not, but at least I'll be almost paid off with my mortgage.

:o)

Hi kronicade,
I am happy for you. You are making a right decision for you and your family. A home is more than just 4 walls and a roof. It's a place you build memories with. As long as price is make sense compare to rent, you should be fine. Will the price drop more? Maybe, maybe not. It becomes less important compare to other priorities in life. Also, if the price is dropped low enough, I will buy another property for investment purpose.

kronicade says

decreases

kronicade says

@masayako
Great post. I too rented for about 3 years in a “nice neighborhood with good schools” (or something like that). We REALLY liked the area and the rental but we never knew if we might have to move out (we had a year to year). We also had a very basic kitchen, basic bathrooms, etc.
We bought an REO two months ago and pay about $200 more a month than our rent in the SAME neighborhood.
There are two sides to the “residential fence”. There’s the Bears on Patrick.net and the Realtor Bulls. I’d say both our wrong. Take Patrick’s rental calculator for example. 0% rental inflation? About a half percent deflation on a home forever?
Do people really think that 20 years from now homes will be worth less than they are today? Our economy is hinged on inflation!!
I really don’t care if the our home decreases because it’s IT’S A PLACE TO LIVE FIRST and an investment second.

masayako2456 says

Hi kronicade,
I am happy for you. You are making a right decision for you and your family. A home is more than just 4 walls and a roof. It’s a place you build memories with. As long as price is make sense compare to rent, you should be fine. Will the price drop more? Maybe, maybe not. It becomes less important compare to other priorities in life. Also, if the price is dropped low enough, I will buy another property for investment purpose.

I say with utter certainty that I believe Kronicade now feels entirely validated since he has a stamp of approval from an anonymous internet poster. Good job!

masayako2456 says

A home is more than just 4 walls and a roof. It’s a place you build memories with.

Are all japanese this bipolar and emotional or just you? House and home are two different things. If you are incapable of building memories while saving for the future than you really have to figure it out man.

I totally agree with Post .......I have been a sad renter from ever but after buying my first one , I'm really enjoying it. No words can express it.

"House and home are two different things"

I wish more people would understand that. Of course memories can be in a building but it is the people that create those memories not the building itself.

mdovell says

“House and home are two different things”

I wish more people would understand that. Of course memories can be in a building but it is the people that create those memories not the building itself.

Nobody argues that. But how may people do you know rent the same house for 10 years? I always wanted to but there was always something that came up. Landlord needed to sell, Landlord was a dick so we moved, landlord wanted to raise rent, etc...

So the memories you built in your own home are very different because one day your kids are old and inherit the house they grew up in. Quite different than looking back at the 15 rental houses you jumped around in, don't you think?

From my own experience, owning a home is a good thing as long as the price is right. Like Patrick said, it is a terrible time to buy an "expensive" house. He didn't say it's a bad idea to buy any house.

There are many negative feelings toward those who prefer to own even when our own numbers make sense. I think some people feel like this because the price in Bay Area is so high, houses are really unobtainable or "no longer make sense" to buy. They are angry or even despair deep down inside. The irony is: they really want to own one day, just not at this crazy price. There are many affordable houses outside Bay Area if you or your family are willing to relocate. Demand and supply. There are too many rich people in Silicon Valley, the competition is high. In order to maximize the items you can buy with the money you have, moving is not necessary a bad thing. I did.

I used to live in San Mateo. Price was way too high. Can I afford a house? Yes. Do I want to pay $750,000 for a 1600 sqfts house in an 'okay' neighborhood? Not really. I could rent or relocate. What did I do? I left. I am so happy I did. Life is too short to wait for the big drop. It may never come and we are certainly not getting younger. Life is now and I didn't want to postpone my happiness. Can't wait; don't want to wait. US of A is a big place and there are so many nice place and good scenery outside the bay area. I was so narrow minded when I was only thinking about the space between 101 and 280. There are bigger, better places out there to explore.

In Bay Area, I spent 10-12 hours working each day in a boring cubicle in a big hi tech company. Now, I worked 8 hrs and go biking for 2 everyday. We made a little less, just a little, but our quality of life has improved greatly. Not trying to tell everyone to buy, obsviouly. Why would I? I am trying to tell others to look outside the box, find your happiness, right the path for you and your family. At the same time, be nice and help one another. Life is also too short to live with people you hate. Surround with people you love and love them back, life will be so much better. :o). Enjoy your long weekend.

SubOink says

mdovell says

“House and home are two different things”
I wish more people would understand that. Of course memories can be in a building but it is the people that create those memories not the building itself.

Nobody argues that. But how may people do you know rent the same house for 10 years? I always wanted to but there was always something that came up. Landlord needed to sell, Landlord was a dick so we moved, landlord wanted to raise rent, etc…
So the memories you built in your own home are very different because one day your kids are old and inherit the house they grew up in. Quite different than looking back at the 15 rental houses you jumped around in, don’t you think?

masayako2456 says

owning a home is a good thing as long as the price is right

Agreed, as long as value of that home is not plummeting,otherwise bank is milking on the home owner.

cloud13 says

I totally agree with Post …….I have been a sad renter from ever but after buying my first one , I’m really enjoying it. No words can express it.

it's called attachment to an idea. IMHO

just don't let the banksters or anyone else mess with your grammar please. like,......renter , borrower or renting to own,.... VS , A Real Owner or,....I'm a Renter, or I'm a borrower of money and I will hopefully own later, or I really just bought this place , I'm a 100 percent owner. or I'm a half borrower with my partner.

which one is it really???

How many here are Real Owners? you hold a note and owe no one, or no company money for the right to call yourself an Owner.

Or do you prefer to mess with my English language to satisfy your ego.

I know I'm a renter. do you know what you are? hopefully not a debt slave?

no one says "when I grow up I want to be a debt slave."

WOW now that I think about it,... I've never heard anyone say

"I just want to be free" either,...hmmmm

Hey folks "I JUST WANT TO BE FREE!!!!"

- For the 1st house, I have a 30 years fixed mortgage at 4.5%. Paying it quite comfortably, because it's cheaper than rent for the same house). I prefer a mortgage instead paying more because I believe I can get better return than 4.5% with the cash on hands. I want a house of my own, though, that's a luxury item for my family to enjoy, not a necessity, of course. Nothing is necessity except food, water & medicines.

- For the 2nd house, it's my investment property. All paid. Collecting rents at 14% RoI annually

To me, at least, own a small debt in order to grow wealth is perfectly okay. As long as you don't own too much and has the ability to pay back, you are borrowing others money to make your own.

For mortgage, at 4-4.5%, it's a good way to build wealth especially when U.S. government is giving so much perks for investors (capital gains 15% for 1+ year holding period) and homeowners (mortgage interest is tax deductible + no tax $250k for single, $500k for couples on primary residence). I made my 1st bucket of cash from these government rules. If one can't fight it, join it. I did that in 2001/2002 timeframe.

The government is obviously rewarding homeowners and investors & certain purchasing behavior. Afterall, this is a capitalist country. As long as one don't get over their heads and borrow more than he/she can afford, we can use money to make more money. Housing market is here to stay. It's on the downward trend now, yes. So many people get hurt by it, but I know so many friends of mine made money from it also.

Katy Perry says

no one says “when I grow up I want to be a debt slave.”

WOW now that I think about it,… I’ve never heard anyone say

“I just want to be free” either,…hmmmm

Hey folks “I JUST WANT TO BE FREE!!!!”

Renting is better now as the job market is not stable and job security is pretty much a thing of the past. Longest job was 3 years at large company and then layoff. Stayed at another company 2 years then moved to better job then layed off again. My rent in Mountain View is $1600 a month compared to $4000 that would be for a condo mortgage. So far cheaper to rent. I would rather have the extra 2-4k in cash each month. Plus I do not know how long I will stay in bay area.

Sounds like a great plan. Good job, SJ.
SJ says

Renting is better now as the job market is not stable and job security is pretty much a thing of the past. Longest job was 3 years at large company and then layoff. Stayed at another company 2 years then moved to better job then layed off again. My rent in Mountain View is $1600 a month compared to $4000 that would be for a condo mortgage. So far cheaper to rent. I would rather have the extra 2-4k in cash each month. Plus I do not know how long I will stay in bay area.

masayako2456 says

I bought the 1st one in Dec 2010

Oh you poor thing

masayako2456 says

Can I get a new fridge now or stay with the old, inefficient one?

Easy Jim, be careful what you wish for.
I bought a new nifty side by side 30cf fridge and had to demo and remodel my whole kitchen. There's a good damn reason the cabinets are right next to the Refrigerators at home despot.
That $1600 dollar refrigerator ended up costing me about 8K. And three weeks of a house in disarray and stress.
Had I known that refrigerator dimensions have intentionally been altered to make existing cabinetry obsolete, I would have waited to buy the fridge for when was motivated to remodel instead of "OH Crap Now I have to remodel".

As you can guess I waited more than 10 to buy a house from when I actually decided I wanted a house. I sat out the bubble with a genuine disgust for the whole episode. The banks, realtors, or speculators were not getting one thin dime from me.

Sure it was long resentful pissed off wait. But you know what?
FWIW I've got a house with plenty of room, 10,000 sqft lot, 2400sqt house, with an in laws quarters, that I am currently using as my music studio and work office space. But when or if I buy another this place will serve as two income rental places.
And when I think about the alternative to what could have been, Spending 250-300K on 800 sqft because I was afraid of being priced out for ever, vs what I actually ended up with, which is exactly what I said I wanted all along.

I can't stop grinning with satisfaction. Sure it was a miserable 10 year wait, but buying in those conditions was not a suitable alternative. 300K at 6% + interest, or 2500 to 3500 monthly morgage nut for thirty years.

Shiiiiiiiiiiiiiiiiiiiiiiiiiiiiit I got off easy.

I was thinking about this old thread today in my current rental.

Before I rented out my last house, we built a beautiful baby's nursery that was featured by some major magazines and D*sney. I spend days painting and designing the nursery and I won't be shy to say it was stunning. My son is now old enough where he wants his room to be very unique and we've been looking at this nautical custom sailboat room. It will require new floors, new windows (think submarine windows) and a sailboat (bed) installed. No way will a landlord let us do this.

We've also been looking at houses in the past 6 months to buy and one of the thing I also want is a work shed and a paved side garage so I can work on some classic cars. I want to convert an old Porsche 356 into an electric car and repaint a 70's Bronco 4x4. Again, things you can't do if you are a renter. I can rent a paint booth and a garage but that is going to cost $1400 a month as another rental. I also have a boat and an exotic car that I can't store at my current rental so they stay at my parents.

Some buyers like that granite kitchen counter or 50K landscape backyard. I just want a man-cave to call my own. A custom garage with a lift and a paint booth. I've seen my peers invest 100K on their garages. I don't plan on doing that for any rental. So I guess in my circumstances, I'm an unhappy renter looking for a place to call home so I can do all the stuff I want to do.

eastbaydude says

I've seen my peers invest 100K on their garages. I don't plan on doing that for any rental.

Yes, and I don't even plan that for any house I own! If you'd like to engage in more consumption by engaging in some consumption, that's fine. I'm not sure what this has to do with anything, other than you like to spend money on material things and then use that desire to justify your decision. There is nothing wrong with that, but different strokes for different folks.

My personal answer to all of this random consumption you wrote about was "who gives a shit?" I don't want to paint my car in my house -- if I had a 70s Bronco, I could get a guy to do an awesome paint job, and then save the extra thousands of dollars I would need to buy good equipment to do that with on other things that I care about. And I'd avoid the fumes, and the hassle, and the mess that would fuck up my house. Meanwhile, it's just another day at the paint shop, which is much better at aggregating costs than I am, since I only paint a car every few years.

SubOink says

So the memories you built in your own home are very different because one day your kids are old and inherit the house they grew up in. Quite different than looking back at the 15 rental houses you jumped around in, don't you think?

All this nonsense about house vs. home and leaving the house to your kids. That sort of conceptualization doesn't really work for me, and I'm not a "bitter renter" -- I've owned and rented at various times and even rented when I could afford to buy, so let's get rid of those canards. For one thing, have you ever cleaned out grandma's house? There's all this crap you can't believe was accumulated that you mostly throw away because it's not useful to anyone else. You can keep the items that are meaningful, but the house is a dilapidated hovel with "deferred maintenance" that it's a hassle to get rid of. Why would I want to inherit the house I grew up in when my parents spent years and years complaining about how it was too small and how they wanted to move to a bigger place in a nicer neighborhood (which they did, oddly enough, after I moved out, not that we ever lived in a bad neighborhood -- just "movin' on up...").

At the end of the day, you have yourself, your thoughts, and your toys. Toys are easily exportable from house to house, but if you engage in overconsumption of any one thing, whether it's a house, or a Bronco or anything else, it can compromise yourself or your thoughts. The building those things are done in doesn't even enter into the equation for me. In fact, if I overspend on the building, it might keep me from having memories because I couldn't afford a vacation or other activity that I wanted to do. People move for all kinds of reasons -- does that mean their memories are magically extinguished? No, it means that they had a job situation change, a financial situation change, a personal situation change, or a personal preference change.

If people could just admit they have different goals in life from other people and different preferences without making all kinds of judgments, we wouldn't see this need to justify one's life in these threads. I don't need to justify mine to you.

Your observations are flawed controllio.

Your body-shop advice is misguided. I'm talking about a hobby, a passion. I know people who build their retirement boats in their garage.
Some are restoring their 1/4 million dollar ferrari.

In my example, I'm going to have some classic cars (for my hobby) in which I will be restoring.
It won't happen 1-2 days at a body shop. I may take years for a ground up restoration; stripping it down to the frame.
I may wake up in the middle of the night when I have an idea or motivation to do some welding and fabrication.
I'll be teaching my son how to rebuild an engine. The engine block may be left in the open in my workshop all summer and I'll work on it here and there every other Sunday morning.

That is how I view home ownership. The ability to have the freedom to do what you want (in a non HOA community). Some people like to re-do their nursery, add a patio. Heck, I know a guy who suffers from a terrible bout of gout so he built himself a japanese sauna in his backyard.
Sure, he can go to the rent-a-sauna which doesn't open 24 hours a day. With his own home, he can get a hot sauna at 3AM if he wants to. As a renter, why would anyone have an incentive to invest in 'hardware' or upgrades that the landlord can simply veto or benefit.

So I guess in if I was to look at it from a logical fiscal point of view, it doesn't make sense for me to rent a garage for 10 years to support my hobby when doing it in our own home/garage is
more cost-effective. A home is more than the roof and shelter from the elements. Growing up, I had wonderful memories of my parent's home. One year, the backyard was a golf course. The next, we made it into a go kart race track. In high school, we converted it to basketball court.

eastbaydude says

That is how I view home ownership. The ability to have the freedom to do what you want (in a non HOA community).

Yeah, and that's BS, because you could spend enough money to do that without owning a home, and it might even be cheaper than buying a house. People often confuse ownership of a material good with "freedom." I am not more free because I own my own lawn mower; rather I'm engaging in consumption to have my own when it would actually be a better economic model if groups of neighbors chipped in to buy a communal lawn mower that was just passed down with the house. If I want to have my own auto shop, why does it need to be attached to my house? Ultimately, I am more free if it's not -- because I might move to a new neighborhood or the next town over, or maybe even across the country and I can sell my unattached auto shop to a fellow enthusiast, instead of taking a massive hit on the sale of my house because the new owner doesn't need an auto shop.

If you want to consume, go ahead and consume (no judgment from me), but don't conflate it with some nonsense about memories in a "home" or a "passion." Ultimately it's consumption. House buying is just yet another form of consumption.

Even with your classic car hobby, you don't need a house. You could buy or rent a dedicated car shop if you chose to do so. It has absolutely nothing with buying a house, other than it happens to be attached. In addition, very little stops you from doing a lot of that in a rental. I've even lived in a rental that had a nursery done up better than I would have done it myself -- I paid nothing extra for this!

eastbaydude says

Heck, I know a guy who suffers from a terrible bout of gout so he built himself a japanese sauna in his backyard.

A sauna (i.e. a wood room designed for containing steam) in his backyard. Okay, if you say so.

eastbaydude says

A home is more than the roof and shelter from the elements. Growing up, I had wonderful memories of my parent's home. One year, the backyard was a golf course. The next, we made it into a go kart race track. In high school, we converted it to basketball court.

No, see, this is exactly why your statement is flawed. Your parents' house is no longer a golf course, and yet you still have a memory of it.

Look, none of this is to take the extreme viewpoint as some people take here that buying is always a waste. In fact, I have a much more nuanced opinion, and you can look back through prior posts of mine to find it. Buying can make financial sense, and in most markets it should be cheaper than renting. I've done both at various times. In some markets, like mine, it's currently cheaper to rent. But that has absolutely nothing to do with my memories or my hobbies -- there's no reason to tie those things together.