patrick.net

When I bought my mantra was, "I want the MOST house for the LEAST money".

I wanted at least a 1/4 acre lot,
at least 2K sqft house,
3 brs,
an extra room with a door, not meant to be a LR, Florida Room, Dinning room or Den. That I could use for a slash Office/Studio/Man Cave.

Also wanted a house that had a MIL quarters, or detachable unit, or at least an efficiency on the property.
If I'll be paying a mortgage until I'm 70, I might need some extra help in the form of renting that extra space out, at some point.

That's what I wanted(got), and I had a million reasons for it.

I want to buy because

1) Permanent place to restore cars
2) Can change the property to suit my taste
3) Buying in the area I am looking at is cheaper than renting equivalent property
4) Are I am looking at has strong rental market and the home I buy will be able to do double duty as a rental property if I decide to move.
5) Hard to find what I am looking for in a rental
6) Won't have to hassle with a landlord
7) If you are financing a house interest rates are so low that factoring in a 20% further drop in prices with a rise interest rates makes buying now or later a wash

Buying a house doesn't automatically mean you have to have debt. Expenses..sure. Property taxes, maintenance, etc. But some of us paid cash for our houses or have them completely paid off. I actually own many properties that I rent out and they are all paid off with no mortgages. Buying them was the best decision I ever made because the income they are spinning off is great, especially now that CD's are paying almost nothing.

Renters have continual expenses renting forever so it's not like renters don't have ongoing expenses as well. Plus they will never own renting something. Hey, renting is ok but the fact remains, many people that rent, don't really save up the extra savings vs. owning. It's not like many stash all their savings from renting vs. buying. Many blow their cash and then when they are 60 or 70 and renting all their lives....and don't own anything and don't know where rental prices will be. It's a major bummer. One of the biggest advantages to me is knowing what your fixed cost will be if you have a mortgage and especially retiring and having a place you own without worrying about where you will live. You can then decide if you want to sell and then go rent but at least you will be retired and own the property.

I'm not trying to push buying vs. renting because I rented for many years. But I think everyone has to look at their personal situation carefully and see if buying makes sense for them.

I rented for many years while I was single. I owned a house many years ago before the bubble but sold it during the bubble and then waited on the sidelines many years. Having kids really pushed my motivation to get back in as an owner of a house.

Some of the reasons were stability for the kids. We knew we would be here for the long haul and bought in a great school district and community. We didn't want to move around in rentals which sometimes you can't control. Stability was a big part of that. Also, wife likes gardening and we also wanted to customize the house exactly how we wanted it with the bathrooms we like, hardwood flooring we like, etc.

Buying can make sense for many people. Rents are also very high in good neighborhoods of San Diego in bigger houses (5 bedrooms/ 5 bathrooms). So financially it works out in the long-run as well buying vs. renting.

I do get the arguments from many of you not to own but just as I think many unrealistic owners of houses were permabulls during the bubble, I think many of you are permabears during this housing mess. Prices aren't going to fall forever. Things run in cycles.

I'd like to buy because I'd like to have a home I own flat out by the time I retire. There are a lot of other smaller factors like garage/home theater/game room/etc but like others have said, I realize I can have these just as easily buy choosing to rent a bigger place.

throwing away money because I don't like money

Future cash...so you paid for your home in cash? I would say rent is throwing away money.

My wife and I are getting ready to close on a house purchase in Lamorinda (SF East Bay). I'm a long-time Patrick reader, but after having problems with our second straight landlord--this time, health threatening pest problems not being fixed in a timely manner--and with two young children, one starting Kindergarten and the other starting preschool in the near future, we wanted to stay in the same small community and decided to take the plunge.

We found a reasonably priced probate sale that needs some work (helping us limit crazy, Prop 13-inflated taxes). Financially, we will probably take a loss over time, since it probably will remain cheaper to rent since I believe prices are likely to drop further. Since housing is really an amenity, we see it as an upgrade like paying more to buy a nicer, newer car.

I'll admit that the federal mortgage limits dropping to 625K was an incentive for us, even though I expect prices to drop with this limit change. After many years in grad school, I now have a healthy income but little downpayment saved. Putting 10% down now on a non-jumbo mortgage gets us into a market which we wouldn't be able to enter for a few years once 20% down (plus reserves) is needed for what will soon be defined as a jumbo mortgage.
With my higher income, the tax benefits dampen the loss if prices drop substantially.

Wants and needs,..wants and needs.

" Why do we Buy stuff we don't need? with money we don't have. to impress friends we don't really like." -

Ego's a Bitch. Debt is slavery!

Katy Perry says

Ego's a Bitch. Debt is slavery!

Debt is temporary, so long as you know how to manage it.

Ego is slavery. Keeping up with the Joneses creates lifetime indebtedness in pursuit of a life style not afforded.

The people having problems with landlords and rental issues like noise and stuff....its not renting that is the issue. It's the property. Bad rental situation isn't any reasonable impetus to buy. Motivation to move? Yes. Buy? No.

You can move to a better rental and not have those issues. For instance, the building I live in has very thick solid walls. Literally the only noise ever comes from the hallway only. I can't hear either of my neighbors. I blast my tv and music and they can't hear me either(I've asked).

I suspect its largely an issue of cheaping out on the rental. I have co-workers who make more than I do, yet live in a cheaper apartment nearby in DTLA. They have smell issues, infestation issues, plumbing issues, etc. It's because they cheaped out. They could afford 2-3x what they are paying in rent...easily into the 2500/mo range at least, which gets pretty nice digs...even too much really unless one person needs 1400 sq ft. But instead they cheaped out cause they don't want to "throw too much money away on rent". And thus they live in crap conditions. And then I supose use it as self rationalization to decide to purchase.

Makes no sense to me.

Shawn says

Katy Perry says

Ego's a Bitch. Debt is slavery!

Debt is temporary, so long as you know how to manage it.

Ego is slavery. Keeping up with the Joneses creates lifetime indebtedness in pursuit of a life style not afforded.

Eh, not so much. I'm pretty sure that the vast majority of mortgages are 30 years, and thats anything but temporary. In a declining market most of these mortgage holders can't sell, hence Katy Perry's comments about debt being slavery.

dodgerfanjohn says

Shawn says

Katy Perry says

Ego's a Bitch. Debt is slavery!

Debt is temporary, so long as you know how to manage it.

Ego is slavery. Keeping up with the Joneses creates lifetime indebtedness in pursuit of a life style not afforded.

Eh, not so much. I'm pretty sure that the vast majority of mortgages are 30 years, and thats anything but temporary. In a declining market most of these mortgage holders can't sell, hence Katy Perry's comments about debt being slavery.

It's temporary in the sense that you get to choose how long you want to commit. Nobody says you have to take a 30 year mortage, you could buy smaller and take 15 years. You can also walk away when ever you want.

If you convince yourself that you have to borrow the maximum to have the biggest house and the nicest car, or that it's imoral to walk away from such contracts when they are no longer favorable, the servitude your indebted to isn't the bank. It's yourself.

Seriously! Why would I get a 100K mortgage if the value goes down to 90K the next year. Positive cash flow on an investment property? Misnomer! Try subtracting the value going down from the positive cash flow and wait don't forget to count what that 10K would turn into in 30 years in any other investments.

bubblesitter says

Why would I get a 100K mortgage if the value goes down to 90K the next year.

Mostly because you don't KNOW that it will go down 10% in the next year.

If that's what you think will happen, then wait a year.

I think I might be motivated to buy by my fear of inflation. I think we may see rates of inflation in the 4-5% range, so borrowing money makes somse sense, all other things being equal.

bubblesitter says

Seriously! Why would I get a 100K mortgage if the value goes down to 90K the next year. Positive cash flow on an investment property? Misnomer! Try subtracting the value going down from the positive cash flow and wait don't forget to count what that 10K would turn into in 30 years in any other investments.

What kind of investments? I understand the reasons why you believe housing will go down further, but wouldn't the same reasons affect the stock market too?

immigrant says

What kind of investments? I understand the reasons why you believe housing will go down further, but wouldn't the same reasons affect the stock market too?

Simply put 3% returns on a 10 year CD and put the CD proceeds at the expiry on the next one and so on up to six times. There are plenty of mutual funds that guarantee 5% returns performance over a 10 year period. You can come up with your own if you think outside of a crappy wooden box!

bubblesitter says

There are plenty of mutual funds that guarantee 5% returns performance over a 10 year period

?

bubblesitter says

Simply put 3% returns on a 10 year CD

http://www.bankaholic.com/last-nationally-available-3-cd-is-gone/

Bellingham Bob says

bubblesitter says

There are plenty of mutual funds that guarantee 5% returns performance over a 10 year period

?

bubblesitter says

Simply put 3% returns on a 10 year CD

http://www.bankaholic.com/last-nationally-available-3-cd-is-gone/

“Nessuna soluzione . . . nessun problema!„

Haha. I guess 10 year is gone.

dodgerfanjohn says

The people having problems with landlords and rental issues like noise and stuff....its not renting that is the issue. It's the property. Bad rental situation isn't any reasonable impetus to buy. Motivation to move? Yes. Buy? No.

Totally, totally agree. As I mentioned before I basically rent exactly what it sounds like the OP wants, and what's more, I'm paying $1,200 for our share. Its a nice neighborhood with good neighbors. Sweet situation in any case.

My reasons

1) Desire to stay in a area/locality with access to good schools ( Yes. you can rent also but you need to be lucky to get a home with good/accommodating landlord )

2) would like little bit of freedom to choose flooring, choose energy efficient appliances, lifestyle

I think y'all really meant to say.

1.Impress my friends and family.
2.Keeps my wife from running off with another loan owner Or keeps my man working and controlled doing fix it stuff for me.
3.My ego thinks I've really made something of myself
4 I like being a debt slave. it makes it easier to set my life's priorities which is to Work.

Katy Perry says

I think y'all really meant to say.

That's a little extreme, Katy. Look, I'm certainly sympathetic to your viewpoint, but it doesn't really help to engage in hyperbole.

In most markets, buying should be cheaper than renting over a reasonable period of time. Renting will often be cheaper than short-term buying (which is why the "starter home" concept is silly in many areas). If you're staying for a long time, it may make sense in most markets to buy.

In addition, engaging in consumption to buy when it's not cheaper than renting can make sense if you understand it's consumption.

What I don't understand are the "freedom" arguments, which are mostly questionable and based largely on personal neuroses.

There is little you can't do as a renter in reality assuming your landlord is not that asshole that you rented from in college -- you can paint, you can have a shop in your garage, you can buy appliances, you can plant stuff in planters, etc. During times in my life I have been a renter, it has been rare (or non-existent) that a landlord has not been accommodating on this stuff.

The so-called "freedom" that some people refer to is often really consumption or compromise. Many hobbyists believe they need some facility at their house, but in most cases, (a) this could be done as a renter, (b) it would be more efficient to do this outside of your home as bmwman does, and (c) assuming you're on a budget, you are generally hyperoptimizing for this one hobby while compromising on some other factor of your house (e.g. I'll accept a less than ideal ___ because I can have my workshop).

Even when I've been an owner, it has made sense not to think of my house as a Swiss army knife that can do everything because of point (c) above. There can be benefits to aggregation, and it can be cheaper to engage in some hobbies outside your house. At the same time, there can be must-haves -- e.g. I need a home office, but those are usually based on job-factors or family-factors, not hobbies.

Ultimately, it depends on the city you live in and a certain number of personal preferences. That's why I don't understand why either side gets so militant -- do you really need to defend your personal preferences so strongly?

DoctorRenter says

My wife and I are getting ready to close on a house purchase in Lamorinda

Really! Are you really purchasing with 100 percent cash? I doubt it.
If not you're buying a loan. I hate how people mess with my grammar.
Remember the bank thinks they own something too. They own the house and they own you (their little worker bee.) At least the Va jay Jay is happy.
My landlady works for me BTW,.. and she knows it. It sucks for her but that's the facts.

Being a loan owner doesn't guarantee you a thing except debt today.
bugs don't care if you rent or own really they don't.

Also A victim mentality doesn't just stop once you borrow for a house. I think it gets worse actually Blame the bank, Blame the Agent, blame the other nieghbors, Blame the builder, blame the PO, Blame the city the state the nation,.................

corntrollio says

Ultimately, it depends on the city you live in and a certain number of personal preferences. That's why I don't understand why either side gets so militant -- do you really need to defend personal preferences so strongly?

You do make a good point. I just call it like I see it. We can all agree that these are nutty times. Things are really out of whack and many of my friends and family have been hurt over the years by all of this.
some still don't really get it (like my parents).

I'll always defend renters and knock down all the lame reasons people need to borrow for a house. I'll always defend a real cash flow purchase though ( and a 100percent cash purchase.) But the ego driven mindless reasons to Borrow vs rent is such BS to me. I find it almost impossible not to comment. I mean this is Patrick.net! Maybe go to this blog if you want more support on borrowing for a house or being a debt slave.
http://piggington.coms/user_forum

edvard2 says

dodgerfanjohn says

The people having problems with landlords and rental issues like noise and stuff....its not renting that is the issue. It's the property. Bad rental situation isn't any reasonable impetus to buy. Motivation to move? Yes. Buy? No.

Totally, totally agree. As I mentioned before I basically rent exactly what it sounds like the OP wants, and what's more, I'm paying $1,200 for our share. Its a nice neighborhood with good neighbors. Sweet situation in any case.

You know what's worse? A bad loan owning situation, or maybe realizing you don't own a thing but debt and liability.

there's nothing wrong with using a mortgage to purchase a home. Especially if you dont feel like tying up all of your cash.

renters who cry foul and say you dont really own anything either sound more like jealously to me.

AM said: With a 10 or 15 yr mortgage, if I have the ability to service the debt in a meaningful fashion - then that debt is productive and helps me get to the future where I don't have to pay rent at all.
The ROI on a paid off home usually isn't that great. That's not to say paying off a mortgage is a bad thing as many folks benefit from a paid off home in retirement. It's a nice fixed return with home equity available in an emergency. But going for a shorter term on the mortgage basically says "I don't have the financial discipline to do anything better with my money than stuff it into the piggy bank which is my home". The truth of the matter is, though, most Americans probably fall in that category where they benefit from the forced savings account aspect of a mortgage.

I never thought I would buy a home. This changed though on 9/8/11 when I closed on a very nice home about 10 miles north of Denver. I moved from San Jose, CA. When I lived in SJ I swore I would NEVER buy, at least not in that area, not in Calibubbleya. I barely make 6 figures so 3x that doesn't back Jack in that area. Renting sucked, I could of/should of moved, but the place I was at was nice and a in a good location downtown. What sucked about it was the constant influx of spoiled college students who didn't give a rats ass about quiet hours. Home from the bar at 2:30am on Wednesday morning, yep, time to crank the jams. Incompetent landlords too. Constantly giving out my parking space to new renters. As I said I could have/should have moved. Why didn't I? Every time I shopped around the rent prices made me sick. Luckily I qualified for a below market rate on my unit, so the cost was low for the area. LOL. Still makes me chuckle to think a six figure income earner was getting subsidized housing, but that's California for ya.

One day I thought "What if I could take my Cali salary out of Cali?" Hmm... I was being groomed for management and my team was being built on the other side of the world (Pune, India). I approached my boss with this and he talked to his boss and the verdict was "Live where you want, your team is remote anyway".

BOOM SHAKA LAKA!

My reasons for wanting to buy are many, mostly inline with what's been post already. It puts a smile on my face watching my little girl play in the backyard. Watching my wife in her kitchen. Hanging in my basement, playing my guitar louder then ever possible in my old apartment. I may be a slave to debt as Ms. Perry says, but I've never been happier. I am fully expecting the value of this place to drop below what I paid. Am I going to cry and stop paying the mortgage, and whine, and then bitch about it? Nope. I'm going to live here for a very long time, pay this place off at least 10 years early (30 year mortgage here) and keep smiling.

If something beyond my control happens and I can't follow through with my plan, then I will take the memories of living here with me wherever I go.

If you rent all your life and then die, what do you have? Do you get a Patrick.net t-shirt for your corpse? LOL.

toothfairy says

sound more like jealously to me.

Well, NOT buying declining value property sounds like financially smart decision to me. Is that all you can come up with?

bubblesitter says

toothfairy says

sound more like jealously to me.

Well, NOT buying declining value property sounds like financially smart decision to me. Is that all you can come up with?

well if you wanted a rising value property you shouldve bought in 2005

toothfairy says

shouldve bought in 2005

You meant before 2000? correct? Care to honestly disclose when you bought?

Edvard2, are you the same person as Bob on burbed.com? Just curious, as Bob has the exact same situation. Lives in the east bay with a housemate, from the southeast, wants to move to Austin or Nashville or someplace like that but still lives here.

Greg1867 says

My reasons for wanting to buy are many, mostly inline with what's been post already. It puts a smile on my face watching my little girl play in the backyard. Watching my wife in her kitchen. Hanging in my basement, playing my guitar louder then ever possible in my old apartment. I may be a slave to debt as Ms. Perry says, but I've never been happier. I am fully expecting the value of this place to drop below what I paid. Am I going to cry and stop paying the mortgage, and whine, and then bitch about it? Nope. I'm going to live here for a very long time, pay this place off at least 10 years early (30 year mortgage here) and keep smiling.
If something beyond my control happens and I can't follow through with my plan, then I will take the memories of living here with me wherever I go.
If you rent all your life and then die, what do you have? Do you get a Patrick.net t-shirt for your corpse? LOL.

#1. You just compared apples to oranges(rental apartment vs. purchase house). If you wish to make compelling arguments, compare like situations. You disingenuously attempt to make the reader of your post believe that renting an apartment is the same price as your mortgages on a house, and thats pure bullshit.

#2. Rental houses have backyards for your kid to play in and kitchens for your wife to cook in, and basements(theres basements in California?) to play guitar in.

#3. What puts a smile on my face is an abundance of 20 year old inexpensive hookers.

Greg1867 says

One day I thought "What if I could take my Cali salary out of Cali?" Hmm... I was being groomed for management and my team was being built on the other side of the world (Pune, India). I approached my boss with this and he talked to his boss and the verdict was "Live where you want, your team is remote anyway".

Truthfully I don't understand why this situation isn't more common these days. I'd say that 95% of the interaction I have with people at my job are with people who don't even live here. I'm on the phone half the day with people from all over the country. If I were offered the chance to "Live where I want", you'd better believe I'd be packing tomorrow. Hell- I'd even take a significant pay cut.

^ you can now buy a house on an acre+ in CO for the cost of an apartment in CA again:

http://www.redfin.com/CO/Larkspur/1976-Kinnikinnik-Dr-80118/home/35255416

Monthly outgo: $1860
Outgo less principal repayment: $1400
Average cost of ownership over 30 years: $1100

The median in this area went from $360k in 2002 to $490k in 2006, now it's back down to $370k.

I think that's a good level to buy at.

Bellingham Bob says

median in this area went from $360k in 2002 to $490k in 2006, now it's back down to $370k.
I think that's a good level to buy at.

How is this a like argument? I can buy a house in Detroit for less than the change I hand a hobo.

So f----- what?

dodgerfanjohn says

How is this a like argument? I can buy a house in Detroit for less than the change I hand a hobo.
So f----- what?

How is that a like sentence? It's a pretty simple argument really--prices are back to non-bubble levels.

What does the price of a house in Detroit have to do with anything?

dodgerfanjohn says

So f----- what?

Waiting for the bottom is a questionable exercise.

The example I gave was a house that sold in 1997 for $335k sold this summer for $425k.

In 1997, rates were 7.5% - 8%, and the conforming limit was $214,000.

Compared to 1997, the 2011 price of this house was a bargain.

The original point was that one can buy some good land now for what it costs to rent in CA.

It's a point well worth taking seriously.

I don't see a bottom forming yet, but I do think if certain things happen in the next year or two we could very well see jaw-dropping inflation across the board later this decade.

Maybe I'm beeing trolled?

Even at the height of bubble mania it was cheaper to mortgage in some parts of the country than pay rent in a CA apartment so in dont get the argument