patrick.net

SubOink says

Those houses will be passed on to the next generation that will rent them out, fixed income without having a dime invested is nice. I wish I had that coming.

Keep doing this long enough, and violence becomes logical. Having a rentier class sucking up the wealth of nations with unearned income leaves most people poor, hungry, angry and without security.

robertoaribas says

I've already made back 15% of the outlay in one years rent... but hey this could happen or the other could happen.

Correct, a sample size of 1 doesn't mean a trend. I'm glad you are doing everything correctly. Creating positive cash flow in your market and doing the work to analysis and then go after the deals. Most of us here have full time jobs and demanding families and are far from the trenches of low income housing and rentals. I, personally, don't have the time or energy to go hunting for them. I am solely and only interested in my families health and well being. I do my engineering job the best I can to make money and invest. I don't see housing as an investment, I see it as an asset to be used for shelter. One that I feel should be exchanged at the proper value given the supply/demand theory. It is nothing but this, though, with the people in power always adding manipulation. We are talking about two completely different things. Don't confuse them. You are creating cash from the distressed. I am looking at the overall trends and deciding when this downward roller coaster is safe to join.

robertoaribas says

1. baby boomers won't be selling and moving off to Florida, or Arizona as predicted. They are often too financially screwed, so they will stay working. many will stay in the same homes far longer than the planned, because they don't have any real equity anyways.

Heh. Not everyone of these old farts were as smart as Jody and opened up the own Tutti Fruitti or bought rentals like I did. Theyfore, are often unable to keep these jobs as they are age discriminated. That and the bossman can hire up a young turk for half the shekels.

robertoaribas says

In other words, it doesn't seem ANY price / interest rate and price/rent ratio would justify buying to him.

You're picking on the guy because he's thinking a few moves ahead? I bet you're a shitty chess player!

Mick Russom says

SubOink says

The population curve is going up, even with baby boomers dying

The boomers as a class were far more wealthy than the next crop. Gen X to buy what the boomers leave behind in today's prices are not prepared to handle that. The move up buyers arent doing well.

Now that you've bought, you want prices to rise, yes? well, think about your kids. You want housing to skyrocket so your kids can live nowhere near you? Realize that with massive house price bubble inflation so goes the electric bill and tuition. You really want that?

Stable prices would be great, but instead we have FHA-backed speculation. Again. It will be different this time - how?

+1

robertoaribas says

My family left Cuba for a reason!

They left a beautiful country with the most beautiful people in the world.

robertoaribas says

Nope, the ridiculousness of your claims was clearly stated in my post. You seriously think the 'predicted population growth 60 years from now' affects today's prices? I will be 108 then! half the homes we are talking about will have been destroyed and replaced!

Hey, the sun may supernova in just a billion years, shouldn't we factor that in to today's prices too? You really are clueless!

You pulled 60 years out of thin air. My post was showing that our poplulation growth was slowly at an alarming rate. The original post I was eluding to from SubO implied that our growth will offset any issue with the baby boomers as then retire and unload. I have no idea how anyone (including you) can predict what each baby boomer is going to do. You guys are way smarter than me. I don't even know what I am going to have for breakfast tomorrow. That is only in 10 hrs and it is from my own mind. Guessing at the behavior of 70 million plus is the most ludicrous things I have heard. Before you go all slanted, I didn't predict anything. I have been talking in reference to someone saying the baby boomers don't matter. Ludicrous, if all the baby boomers decided to have coke all on the same day, it would cause an instant shortage in all the vending machines. That is power.

robertoaribas says

You really are clueless!

Thanks. Glad you have to resort to personal attacks and name calling to get enjoyment. I hope you continue to do well, but eventually give other people to credit they deserve as well. I work hard, have a great family, am one of the top engineers in my specialty and have so far avoided both the two major stock markets crashes (both time close to 100% cash) and the housing crash. These were not flukes on my account, they were calculated actions I took. I don't see myself as clueless at all. I might get emotional, might get distracted, have definitely been know to be utter wrong (just ask my wife). But clueless, nope. Never been in that area before. Thanks for challenging me though. It keeps me sharp and maybe just maybe makes me take advantage of opportunities to come. Your contempt for people actually helps people. Maybe that is your intention. I had a coach like that once. We all thought he hated us, but then the year we went undefeated we finally made him smile. ;)

Mick Russom says

Now that you've bought, you want prices to rise, yes? well, think about your kids. You want housing to skyrocket so your kids can live nowhere near you? Realize that with massive house price bubble inflation so goes the electric bill and tuition. You really want that?

Actually, I could care less if prices go up or down as I never want to sell this house. I spend less money on my mortgage now than in previous years renting. We save more money than before and speaking of kids - They will inherit at least this house fully free and clear. They will be able to rent it out for income or live in it themselves and get a financial head start in life that I never had. That alone is making me happy.

It took a lot of work for us to get here but we did it and are proud of it. It feels great to wake up in your own home and be in a financial better situation than while renting and dealing with a$$whole landlords.

I am gonna keep on working and saving money until I can buy a second home that I can rent out to one of you guys that are waiting for 1975 prices.

And why do you hate me for that?? Why can I not buy a second and third home if I make enough money??

SubOink says

ctually, I could care less if prices go up or down as I never want to sell this house.

That's the right spirit, though you might could start to care when you see junior move in ten or fifteen years up the road and he's buying the same digs for half and taking his left over lucre and putting toward other more fabulous discretionary purchases which remain out of reach for your family on account of that one line item eating into a such disproportionate amount of your personal wealth.

JodyChunder says

SubOink says

ctually, I could care less if prices go up or down as I never want to sell this house.

That's the right spirit, though you might could start to care when you see junior move in ten or fifteen years up the road and he's buying the same digs for half and taking his left over lucre and putting toward other more fabulous discretionary purchases which remain out of reach for your family on account of that one line item eating into a such disproportionate amount of your personal wealth.

Well, its gonna be the same damn payment until the house is paid off. Not sure why it would hurt me more in 15 years from now. Especially since I am saving more money now than in the rent situation.

But either way, juniors get a house that is paid off when they are a little older. If I croak early - bingo, life insurance jackpot hits, house paid off instantly with left over money. My kids worst case scenario is I live long...lol

SubOink says

My kids worst case scenario is I live long...lol

Your kids are gonna be on Daddy Deathwatch!

robertoaribas says

However, in any market today where someone can buy a home 20% down 30 year fixed, and lock in a mortgage way the heck under rent, in some cases at half of rent... what is your point again?

The point is speculators borrow money from the people they victimize (taxpayers underwrite the banks and GSEs that lend) to own property they dont occupy to exploit the hard working middle and lower classes. I cant wait for violence against landlords. I cant wait.

If one looks up newly listed (over the last seven days) homes in trulia.com for homes near my zip 19063 you will see more homes are being listed as foreclosure than in previous times. The pricing had been fairly steady for the last few years; maybe they will start to fall a bit... This may be a pretty good leading indicator.

robertoaribas says

Mick Russom says

I cant wait for violence against landlords. I cant wait.

I seriously hope you seek professional psychological help. You seriously have some deep issues...

Seriously! Get help!!

Or better...if you hate landlords so much, buy a friggin' house!! Jeez.

I don't think Mick is crazy. He's tired of being a slave to his overlords. That's perfectly normal. Basic biology.

wthrfrk80 says

I don't think Mick is crazy. He's tired of being a slave to his overlords. That's perfectly normal. Basic biology.

Hey,slavery has not worked in USA before and debt slavery will not either. Cash or FU America,as AF- Tony Manero says. :)

bubblesitter says

Hey,slavery has not worked in USA before and debt slavery will not either. Cash or FU America,as AF- Tony Manero says. :)

Slavery works great. For the slave owners.

Agree: Cash or FU America!

EastCoastBubbleBoy says

Time will tell who is right.

I knew I'd get flack for this thread, but I stand by my prediction that when we look back on this mess in another year or two, early 2012 will be seen as "the bottom".

I'm not calling a absolute bottom quite yet, but I say were close enough to the bottom that it's not worth waiting anymore.

Lets take an example here. Say a house you have your eye on back in 2005 was 300k. Since then prices have slipped a good 50%, the house is now priced at 150k. Now if you wait another 2 year, yes the price could slide even further say another 5%, so it's $142,500, less than what you would have paid for the house if you had purchased it 2 years earlier. If continue to rent for another year years, figure $1,500 a month rent, that 36k in rent spend in two years to save yourself $7,500. not a wise strategy in my opinion. In fact the house would have to fall another 25%, from 150k before you would break even on what you would be spending on rent and what you could be saving waiting for prices to slide further.

My point is the the biggest price declines are long over. Sure the market could slide another 5 or 10%, but in most areas, it's not worth the wait. For all intensive purposed we ARE at the bottom in most markets.

Maybe in the San Fransisco bay area where houses still go for 600k for a 2 bedroom 1 bath 1960's house waiting may be a wise move, but I'm also guessing that rents are a hell of lot higher then $1,500 a month. at even $2,000 a month, that 48k in rent payment over 2 years, houses have to fall at least 8% to break even.

TechGromit says

My point is the the biggest price declines are long over. Sure the market could slide another 5 or 10%, but in most areas, it's not worth the wait. For all intensive purposed we ARE at the bottom in most markets.

Maybe in the San Fransisco bay area where houses still go for 600k for a 2 bedroom 1 bath 1960's house waiting may be a wise move, but I'm also guessing that rents are a hell of lot higher then $1,500 a month. at even $2,000 a month, that 48k in rent payment over 2 years, houses have to fall at least 8% to break even.

I am in general agreement with this. The big slides happened already in the majority of America. They didn't happen as dramatically in high demand areas because they are high demand areas. Even when prices were blown out to astronomical proportions, people were thoughtlessly borrowing $millions because they "had to live there." When prices slid a bit, many of the people that thought the 2006 prices were insane & waited said, "hey prices are down, we can afford that now, AND there's a big tax credit" and jumped in. Compared to 2006, prices in these areas do seem "reasonable" and there are more people that see it that way than there is inventory. Combine that with the stupid FHA doling out $625k loans with 3.5% down and tech workers pulling $200k+ per household while having little financial sense, and you get prices that didn't crash as hard here as they did elsewhere.

Just FYI, the phrase is, "for all intents and purposes." I used to have that one mixed up too!

Rents in SF are crazy high compared to damn near anywhere else in the region. A 2BR apartment up there in a highly desirable area will run WAAAAY more than a 3BR pre-furnished corporate housing unit down here in the heart of the Silicon Valley about 1.5 miles from Google. You really have to LOVE the city life to pay that, and a lot of people do. If you can do without owning a car, it would save some cash, although not enough to make up the difference. It's about more than just money for many people though.

Now, down here in the SV, rents made a 30-50% jump last year, which really pissed me off. In summer 2010, I negotiated a LOWER rent on my unit. A year later, it was "$260 more or get out," and when I got out, they got someone on a new lease for $1000 more! We moved a few blocks away and are paying $1775+utilities for a ~900SF 2BR/1.5BA townhouse apartment. We should have gotten on things a couple of months earlier because the same unit was renting for $1500 then. Prices have dropped since then (it seemed to be largely related to Google's hiring spree), and I fully intend to negotiate a lower rent this coming August, or just move somewhere cheaper in this neighborhood.

robertoaribas says

I love it when the communists show up

You might want to read some Jefferson on property in the USA. You are calling people communists by you seek to deny freedom by hoarding resources you don't need. Even the richest guy, Warren Buffet, calls generational wealth the lucky sperm club. You were lucky enough to leverage money capitalized by the lower and middle classes and those people must rent an existence from you.

Freedom is for you, but its not for me. You should be savagely taxed on your unearned rentier income. Nothing to do with communism, is about there being some opportunity for those that are not so lucky. You dont need more than one SFR and you dont need to be a slumlord. You are free to buy whatever, but you dont need more than one SFR, and you certainly dont create enough value to charge the rents you charge. Why should the hard working people support such vast amounts of unearned income?

robertoaribas says

Thank you Abuelo y Abuela for getting on that flight to NY . Pretty brave move going penniless to a new country, and starting over, but it worked out in the long run!

They way people like you behave today, those same people, your grandma and grandpa, were to do the same thing today, they would basically live under a slumlord for their entire lives, and their kids and grandkids would be destitute.

The USA has been destroyed by the rentier class.

Realtors Are Liars says

Prices are still at 2004 levels. The bottom is 1996 levels.

That's assuminig we ever get back to 1996 interest rates. Would the Fed allow it? Too many banksters lose if interest rates rise.

Realtors Are Liars says

Prices are still at 2004 levels. The bottom is 1996 levels.

Realtors Are Liars.

Not in my area. Prices are back to pre-2001, with current interest rates mortgage payments are way less than rent. Even at 120% LTV on my house my mortgage payment is less than rents in my area for most apartments. And I live in the Bay Area (although not the REAL Bay Area, lol )

Realtors Are Liars says

Prices are still at 2004 levels. The bottom is 1996 levels.

Realtors Are Liars.

But how long will it take to reach your 1996 price level? 2 years? 4? 6? If your renting for $1775 a month, in a year your spending $21,300 in rent, 2 years $42,600, 4 years $85,200 and so on. I looked at a housing price chart, for median-priced house adjusted for inflation were 150k in 1996, they are around 175k right now. So your going to wait out the market to save another 25k when you spending 21k a year doing it? Unless your living in a cave (or your parents) rent free, it make absolutely Zero sense to wait. Your far better off to buy NOW even with the depreciation hit.

bmwman91 says

We moved a few blocks away and are paying $1775+utilities for a ~900SF 2BR/1.5BA townhouse apartment.

I can't claim to be any expert in San Fransisco real estate market, but you can get a 2 bedroom, 2 bathroom 2,600 sq ft house for about 600k. It order for it to make more sense to continue renting the house would have to lose 3.5% value a year to break even the first year, 3.6% the second, 3.7% the third year to break even on rent vs. deprecation.

Tude says

Even at 120% LTV on my house my mortgage payment is less than rents in my area for most apartments.

You can't just compare you rent payment to your mortgage payment like you are doing. There are expenses to owning a home that sometimes dwarfs the mortgage payment. Property tax, insurance, maintenance, principal appreciation/depreciation if any, the lose of investment returns from your downpayment, just to name a few. Come on people, this is you frigging life savings. At least do the correct math, and stop doing crap comparisons.

Realtors Are Liars says

Nice cherry picked numbers to support your false assertions.

Prices are falling.

Prices are at 2004 levels.

Realtors Are Liars.

You are absolutely correct, price are falling, I do not dispute this fact.

Realtors may be liars but you sir seem like a fool. Can you enlighten me where my my logic is flawed?

TechGromit says

bmwman91 says

We moved a few blocks away and are paying $1775+utilities for a ~900SF 2BR/1.5BA townhouse apartment.

I can't claim to be any expert in San Fransisco real estate market, but you can get a 2 bedroom, 2 bathroom 2,600 sq ft house for about 600k. It order for it to make more sense to continue renting the house would have to lose 3.5% value a year to break even the first year, 3.6% the second, 3.7% the third year to break even on rent vs. deprecation.

This is absolutely incorrect. Just use the rent-vs-buy calculator on this site rather than guessing. 600K purchase verses 1775/mth. Not even close - continuing renting! Don't become a slave to the seller and the bank. 600k is equivalent to about a 3500-4000/mth rent payment. Do the math if you don't believe me.

RentingForHalfTheCost says

There are expenses to owning a home that sometimes dwarfs the mortgage payment. Property tax, insurance, maintenance, principal appreciation/depreciation

Of course they are not the same, but my entire point is to NOT buy a house because the house is going to continue to depreciate is just insane. The decreasing amount of depreciation vs the higher amount what your paying in rent more than offsets what saving by waiting.

I guess the assumption I have here is everyone here WANTS to buy a house at some point. If you want to be a renter forever, then why are you here, what difference does it make how much houses cost because your renting forever anyway.

Yes in most cases houses WILL cost more to own then to rent. But at some point the house will be paid off and the cost of living will drop considerably. You will always have a rent payment.

TechGromit says

I can't claim to be any expert in San Fransisco real estate market, but you can get a 2 bedroom, 2 bathroom 2,600 sq ft house for about 600k

It's batshit crazy to pay that kind of money for that size of a house. Unless its on the beach in Hawaii. Or unless the walls are covered in gold foil.

Quit making bankers rich. And if you've got $600k cash to blow, put it in Canadian and/or Aussie dollars and earn interest until the next big financial meltdown lets you buy up assets on the cheap.

Realtors Are Liars says

Show some logic instead of BS to support your false assertions.

You logic is circular. You sound like a broken record repeating the same thing without explaining why. Congratuations, your the third to make my Ignore list. Good Bye.

TechGromit says

3.5% value a year to break even the first year, 3.6% the second, 3.7% the third year to break even on rent vs. deprecation.

I'm not completely sure, because I don't quite understand what you're illustrating, but I think the mathmatical flaw you made here is that you're representing the loss/gain as a linear function by incrementing 0.1% per year, when the bulk of the math involved with comparing two types of spending money with interest involve the exponential characteristic of compound growth/loss. Try the calculators here at patrick.net or at nytimes. They do this for you and allow you to plug numbers for varying parts of the comparison.

RentingForHalfTheCost says

Tude says

Even at 120% LTV on my house my mortgage payment is less than rents in my area for most apartments.

You can't just compare you rent payment to your mortgage payment like you are doing. There are expenses to owning a home that sometimes dwarfs the mortgage payment. Property tax, insurance, maintenance, principal appreciation/depreciation if any, the lose of investment returns from your downpayment, just to name a few. Come on people, this is you frigging life savings. At least do the correct math, and stop doing crap comparisons.

I know all the expenses, I have owned a home for nearly 10 years. My PITI comes to less than I would pay for rent, before any tax deductions. I also have the ability to do as I see fit in my home (we have animals). We have also done work to make the home super energy efficient, reducing our PG&E bill to less than $50 a month.

FunTime says

I'm not completely sure, because I don't quite understand what you're illustrating, but I think the mathmatical flaw you made here is that you're representing the loss/gain as a linear function by incrementing 0.1% per year, when the bulk of the math involved with comparing two types of spending money with interest involve the exponential characteristic of compound growth/loss.

What I was illustrating was if your spending 20k on rent, in order for you come out ahead by waiting for the house to depricate, the 600k house have to fall 3.5% in price the first year. So in 1 year the house would have to cost less then 580k to make the waiting worth it when you paying 20k in rent. Now assuming the house is now 580k, the amount deprication would have to be ever greater to equal or exceed 20k in rent. It's roughly 3.6% the end year, now the house is 560k, you need a 3.7% deprecation the third year to equal 20k in rent and so on.

Yes i'm completely aware that the mortgage, taxes, upkeep, etc on a 600k or even 580k house is far higher than the $1,775 rent. Everyone is saying wait prices will continue to depricate, so my assumtion is everyone is going to buy at some point, basing when your going to buy solely on deprication isn't a good statagy in my opinion. There are other reasons to wait, for example you don't have 20% saved yet for a good down payment, but waiting on prices to fall further should no longer be one of them based on the agruement I laid out.

TechGromit says

So in 1 year the house would have to cost less then 580k to make the waiting worth it when you paying 20k in rent.

Ahh, thanks. That helped me understand what you're saying a lot better. I'm still a little confused. You seem to be applying a popular idea which suggests that all the money spent on rent is lost and all the money spent on a house is gained. So you're showing that the market value of the house must go down in order for renting to make sense. That isn't the case if that's what you're saying. You'll be spending money in both cases, so you'll always be losing some money independent of the value of the house. The question posed by the calculators is, "How do the gains compare?" If the market value of a house is depreciating, it's really difficult to find cases where you're not better off renting. Because of the ways markets were played with investment securities, like CDOs, sold by investment firms such as those represented on Wall Street, it has rarely made sense to buy in the Bay Area because renting is so much less expensive.

Have you played with the calculators? It's kind of fun to just plug in ridiculous numbers to start observing the dynamics of the situation and then try to make them more reasonable and connected to your case/life.

TechGromit says

but waiting on prices to fall further should no longer be one of them based on the agruement I laid out.

Assuming no appreciation/depreciation in your calculation it still is suffice to say that renting for 1775/mth is much much better than buying for 600k. Plug in the numbers and play with the assumptions.

My assumptions:

- no price movement on the house at all! (very optimistic IMHO)
- 4% for you mortgage rate (assuming a perfect credit score),
- that you are like the average and sell in 7 years,
etc.

The finally verdict is you would be about 150K poorer to buy verses rent. Not even close.

http://patrick.net/housing/calculator.php?uaddr=%2C+&rent=1%2C775&price=600%2C000

If you change the assumption to a 3% annual house price appreciation then renting or owning are basically equivalent over a 7 year period. That used to be possible and if you think it still is, then buy. I don't

FunTime says

You seem to be applying a popular idea which suggests that all the money spent on rent is lost and all the money spent on a house is gained.

No really, When you rent you money is lost. When you buy a house and it deprecates in value you also lose money. (well not actaully lose unless you try to sell) The question is which one loses more money at this point in the market.

Many people were smart to wait on buying houses from the peak. When houses were depricating 10 or 20% a year from 400k, the houses were losing between 40k to 80k a year in value, far more than what it cost to rent. Now that houses are down to the 150k or less range and losing value at a much slower rate, 2 or 3% a year, what your paying it rent is far more than the house is losing in value. So to base when your going to buy solely when the market bottoms doesn't make sense since your losing less money in the long run by buying instead of renting.

FunTime says

"How do the gains compare?"

What I'm really interested in is how the loses compare, which one lost more by waiting.

TechGromit says

No really, When you rent you money is lost. When you buy a house and it deprecates in value you also lose money. (well not actaully lose unless you try to sell) The question is which one loses more money at this point in the market.

You are always renting. You either rent a house or rent money. If you have the full cash then you are stealing from your investment growth so in effect renting money from yourself. No one really owns. Everything has a cost you pay for whatever privilege you are getting.

TechGromit says

When you buy a house and it deprecates in value you also lose money.

Plus interest. That's the real killer there.

Agreed that rental money is lost although, of course, you still got to live in a certain place for a certain time which is sometimes lost in discussions.

In some cases, when you compare the monthly rent with monthly cost to buy, there is a big difference and the rent payment is much less. So that gives a person room to do something else with that difference. So that difference opportunity is also figured into the calculations, but I didn't see where when I just peeked at the patrick.net calc.

RentingForHalfTheCost says

You are always renting.

Basically true. It cost money to exist, weather your homeless, renting an apartment or own a mansion. But when you buy, you have the opputunity to lower your expenses eventaully. We'll take my first house as a good example. I paid 90k for my first house total expenses $800 a month for mortgage, taxes and insurnace. We'll assume upkeep of $200 a month to keep things simple. The same house would cost about $1000 to rent at that time. In 30 years my living expenses would drop to to somewhere around $500 a month, no mortage, but higher taxes, same upkeep, your rent will proably be $1,500 a month by then. Total cost over the course of my life to "live" $288,000 in housing expenses with a mortgage for 30 years and say I live another 30 years at $500 a month, $180,000, grand total for me to exist $468,000. If I had rented however, say $1,000 a month rent for the first 30 and $1,500 for the next 30, so thats $360k + $540k = $900,000. in the long run, buying would be cheaper in this case.