patrick.net

A house is NOT an investment. It's a place to live. Rent vs. Buy depends on which option is cheaper.

Owning stocks and bonds for the long term is investing. Real estate is speculation, unless you're a landlord getting a steady return on investment in the form of rents.

wthrfrk80 says

tatupu70 says

Who said anything about speculating? How about owning a house for 25 years and then selling at a profit?

Can I be sure I will make a profit after owning a house for 25 years, after inflation? Even with property taxes, mortgage interest, insurance, and maintenance?

If so, great. If not, it's just speculation. Better to diversify my speculation than put all my speculative eggs in one basket.

A lot can happen in 25 years. What if I lose my job and have to move? What if the area sees massive job losses and the RE market tanks? What if interest rates go up and I have to lower the selling price to for the "howmuchamonthers"?

Err, well of course it's speculation - you are talking 25 years in the future! The same applies to sticking your money in stocks - nobody knows what will be happening then. And yes, you may spread your risk, but if you rent for 25 years, and rent at a high cost if you live in NY, then you are going to blow through one hell of a lot of money with nothing to show for it.
The fact is that for a lot of people buying a house is a pretty logical decision to make. Your problem is that you live in NY and others on here in the BA.

I don't live in the Bay Area. Where I live (Corning, NY) housing is very cheap. But it's for good reason. There are only a few major employers, and if even one of them moves away or shuts down, it's a huge hit to the RE market. The market is pricing in the risk.

I'm NOT saying it's always bad to buy. If you have a stable job in a stable industry, and the cost of buying is reasonable compared to renting, it makes sense to buy.

wthrfrk80 says

A house is NOT an investment. It's a place to live. Rent vs. Buy depends on which option is cheaper.

Owning stocks and bonds for the long term is investing. Real estate is speculation, unless you're a landlord getting a steady return on investment in the form of rents.

Presumably it's investing only if you make a nice profit when you cash in your stocks. Anyway, I don't quite see how buying a house on the down is speculating whereas buying stocks when they are on a high is investing. RE has gone up in the long-term just as stocks have. When you enter and exit the market is the more important issue.

wthrfrk80 says

I don't live in the Bay Area. Where I live (Corning, NY) housing is very cheap. But it's for good reason. There are only a few major employers, and if even one of them moves away or shuts down, it's a huge hit to the RE market. The market is pricing in the risk.

I'm NOT saying it's always bad to buy. If you have a stable job in a stable industry, and the cost of buying is reasonable compared to renting, it makes sense to buy.

And again, most people don't know how stable their jobs will be into the (long-term) future, but that doesn't necessarily matter as long as you make reasonable financial decisions when you own. Plenty of people have lost jobs but have still made a killing from their houses whilst others have lost everything. That's what happens in life.

Bigsby says

Plenty of people have lost jobs but have still made a killing from their house whilst others have lost everything. That's what happens in life.

So you're admitting if I "make a killing" or "lose everything" on real estate, it's mostly luck? Here's an idea: how about not gambling in the RE market to begin with? If RE prices in Your Town are so volitile that you can "make a killing" or "lose everything" buying RE, maybe the smarter thing is to rent? Let the landlord take all of the risk.

Realtors Are Liars says

tatupu70 says

How about owning a house for 25 years and then selling at a profit?

When you sell it at a profit, let us know.

Realtors Are Liars.

I've done it 3 times in the past.

Bigsby says

Presumably it's investing only if you make a nice profit when you cash in your stocks. Anyway, I don't quite see how buying a house on the down is speculating whereas buying stocks when they are on a high is investing. RE has gone up in the long-term just as stocks have. When you enter and exit the market is the more important issue.

I buy stocks for the steady cash flow in the form of dividends and share buybacks. Not constant buying and selling (i.e. speculating).

RE is not "down." If anything, it's just getting back to the historical mean (nationwide average). Google "Case-Schiller housing index."

Yes, stocks are overvalued. Sucks doesn't it? Cash is losing value thanks to the Fed, so everyone is "yield chasing" in riskier assets instead. The Fed holds the cards in this game.

wthrfrk80 says

Bigsby says

Presumably it's investing only if you make a nice profit when you cash in your stocks. Anyway, I don't quite see how buying a house on the down is speculating whereas buying stocks when they are on a high is investing. RE has gone up in the long-term just as stocks have. When you enter and exit the market is the more important issue.

I buy stocks for the steady cash flow in the form of dividends and share buybacks. Not constant buying and selling (i.e. speculating).

RE is not "down." If anything, it's just getting back to the historical mean (nationwide average). Google "Case-Schiller housing index."

Yes, stocks are overvalued. Sucks doesn't it? Cash is losing value thanks to the Fed, so everyone is "yield chasing" in riskier assets instead. The Fed holds the cards in this game.

Housing is down compared to what it was, and at or near historical norms in many parts of the US. And if constant buying and selling = speculating, then how on earth does buying and living in a house for 25 years translate into speculating while sitting on stocks doesn't???

Bigsby says

And if constant buying and selling = speculating, then how on earth does buying and living in a house for 25 years translate into speculating???

Ok, point taken. Living in a house for 25 years is not speculating.

If only it were possible to live in the same place for 25 years. Seems like the world changes too much for that.

wthrfrk80 says

Bigsby says

Plenty of people have lost jobs but have still made a killing from their house whilst others have lost everything. That's what happens in life.

So you're admitting if I "make a killing" or "lose everything" on real estate, it's mostly luck? Here's an idea: how about not gambling in the RE market to begin with? If RE prices in Your Town are so volitile that you can "make a killing" or "lose everything" buying RE, maybe the smarter thing is to rent? Let the landlord take all of the risk.

Where am I saying it's just luck? I said no such thing. I simply said some people have come out ahead and some people have lost out (especially recently). Historically though, far more people have come out ahead in their RE purchases.

And there's absolutely no gaurantee that you will sell your house at a profit after 25 years, after taking inflation into account. During that 25 years, that house "investment" generated "negative dividends" in for form of:

1) Mortgage interest
2) Property Taxes
3) Insurance
4) Maintenance

The benefit of the house comes from money saved on rent. You don't want to overpay for that rental savings.

If house prices are cheap relative to rents, you should buy. If house prices are expensive relative to rents, you should rent. See Patrick's rent vs. buy calculator to see which option causes the least loss of money (yes, they BOTH result in a LOSS of money, not just the rental option!)

This thread is getting a little ridiculous.

Raise your hand if you think that most people should rent (ie., not buy) for their entire lives.

I'm not talking investing or speculating, or trying to make a profit in any way - I am referring to the very basic need for SHELTER.

I am not talking about people who have a pile of cash they need to put somewhere and are wondering/debating whether real estate or the stock market or bonds are a better bet. Or people who already own a house - mortgage or no - and have money left over.

I am not sure if that is what some posters are suggesting, or if they are merely saying that no one should buy right now, that it would be better if everyone help off on buying for a few years (or longer).

The idea that everyone, or most of the population should rent is mighty appealing to the folks at the top of the financial food chain. How about selling all those foreclosures in bulk to a small percentage of the population so everyone else can rent? Oh yeah, they're trying that.

Serfs and manors anyone?

-

wthrfrk80 says

And there's absolutely no gaurantee that you will sell your house at a profit after 25 years, after taking inflation into account. During that 25 years, that house "investment" generated "negative dividends" in for form of:

You almost certainly will come out behind after taking inflation into account. Owning real estate solely for capital appreciation is a horrible investment. Which is why pretty much nobody does it.

wthrfrk80 says

And there's absolutely no gaurantee that you will sell your house at a profit after 25 years, after taking inflation into account. During that 25 years, that house "investment" generated "negative dividends" in for form of:

1) Mortgage interest

2) Property Taxes

3) Insurance

4) Maintenance

The benefit of the house comes from money saved on rent. You don't want to overpay for that rental savings.

If house prices are cheap relative to rents, you should buy. If house prices are expensive relative to rents, you should rent. See Patrick's rent vs. buy calculator to see which option causes the least loss of money (yes, they BOTH result in a LOSS of money, not just the rental option!)

I didn't say there was any guarantee.

wthrfrk80 says

If house prices are cheap relative to rents, you should buy.

That's fine,but then you are stuck in that for who knows how long? cuz buy equivalent to rental are POS nowadays. There are no move up opportunities if one has bought post 2007.

1sfrenter says

I am not sure if that is what some posters are suggesting, or if they are merely saying that no one should buy right now, that it would be better if everyone help off on buying for a few years (or longer).

I think the majority of posters on this site are suggesting not to buy at this time, some of them with seemingly evangelical zeal.

wthrfrk80 says

Even when the mortgage is paid off, you don't "own" your house. Try missing a few property tax payments and see how much you really "own."

Even when the mortgage is paid off, you're renting the land from Your Local Government.

In 20-30 years time, I'd rather "rent" from the local gov't in the form of taxes than rent from a landlord (with increasing rent payments caused by inflation) 'til the day I die.

Rent for 30 years = payment for a consumable (ie., shelter)
Mortgage for 30 years = payment for 30 years with the possibility of having something at the end

I know that some people are able to rent and save and invest the difference and come out ahead, but there is something to be said for the forced savings that a mortgage allows.

If your household income is more than 150K a year, you are probably (hopefully) saving and investing. But also know that you are in the top 10%, and your situation is vastly different than the majority of Americans, and your saving and investment advice is irrelevant. The rest of us just need a place to live.

Realtors Are Liars says

Bigsby says

Aye, nobody's ever made a profit on a real estate transaction involving a house.

You're catching on. Building materials depreciate. Houses are a loss ALWAYS.

Realtors Are Liars.

As predictable as predictable can be.

Realtors Are Liars says

Bigsby says

As predictable as predictable can be.

And you backpedal from those facts every single time.

Why is that?

Realtors Are Liars.

What 'facts' would those be?

Realtors Are Liars says

Bigsby says

What 'facts' would those be?

Ducking and weaving is the same as backpedalling.

Realtors Are Liars.

I think you should go and build another one of your $60 a square foot houses you keep blathering on about and leave the rest of us in peace.

Realtors Are Liars says

Houses are a loss ALWAYS.

Compare 30 years of renting (include inflation) to 30 years of PITI (and maintenance).

Depending on where you live, even if housing goes down, at least afetr 30 years you will have something (yes you still pay taxes and maintenance) and your kids might have something.

In both cases you will have paid for shelter.

I could pay cheaper rent right now (move to a crappy neighborhood, rent a smaller house, get a place without a yard, etc.), but I choose to pay a little more for the house I rent because I want a decent place to live and raise my kids.

Does it make sense for me to pay $500 more pre month in rent because I like the neighborhood, the city, the commute, the yard, the large kitchen, etc.? Maybe not, but anyone who rents makes the choice to spend a certain amount per month based on what they can afford and what is important to them in a home.

Otherwise, we could all just rent any old hovel without windows and pay as little as possible. Which, of course, most renters don't so. Unless they are really broke and they have to, and they spend their days dreaming of living someplace nicer one day.

So buying a home (yes, renting money from the bank) has the same emotional and personal considerations.

Where you choose to live is not a simple mathematical equation, whether you rent or buy.

Realtors Are Liars says

Bigsby says

I think you should go and build another one of your $60 a square foot houses you keep blathering on about and leave the rest of us in peace.

I think I'll stay right here exposing your lies day after day.

Now refute the facts. You won't because you can't. You can't because they are facts.

Here's another fact for you;

Realtors Are Liars.

I won't because I still don't know what 'facts' you are referring to and seemingly neither do you. I guess I can put your posts down to workplace injuries - too many cheap planks of wood landing on your head.

Realtors Are Liars says

Bigsby says

I won't

Of course you won't. You're too busy ducking, weaving and running.

Realtors are Liars.

I'm still waiting.

Come on now RAL, everybody know that Real Estate only goes up. Renting is for losers.

Realtors Are Liars says

1sfrenter says

even if housing goes down, at least afetr 30 years you will have something

IF?

Housing prices are falling.

After 30 years you'll have a depreciating expense.

Realtors Are Liars.

I imagine the biggest danger most house buyers could face is purchasing one of your $60/sq. ft. efforts.

And you're still trolling. Why is that? You should be out building one of your death traps or do you not work these days?

Realtors Are Liars says

Housing prices are falling.

After 30 years you'll have a depreciating expense.

Maybe so, maybe so. But either way I am paying a monthly expense for shelter.

Are you suggesting no one ever buy a home, or that everyone just wait? If the latter, for those of us who already have been paying a chunk of money in monthly rent while waiting for this bubble to unwind (not the speculators and investors, just the hoi polloi), what exactly is it you are suggesting?

Or are you perhaps, a troll for the 1%, who is greedily licking their chops at the prospect of the barrel you'll have us all over when 90% of all property is owned by the 1% and everyone rents from them?

1sfrenter says

Or are you perhaps, a troll for the 1%, who is greedily licking their chops at the prospect of the barrel you'll have us all over when 90% of all property is owned by the 1% and everyone rents from them?

You're already renting all property from the 1%. The rent is called 30 years of "mortgage interest." Renting money to "buy" property isn't much different than just renting the property.

1sfrenter says

Mortgage for 30 years = payment for 30 years with the possibility of having something at the end

Yup, a 30 yr old piece of crap that needs major updates. You don't think there will be better building materials, better engineering technique, better built-in media and communication systems? Your 30 year old home will be a tear down, so what did you really end up with? 30 years of an inability to invest your money when you buy into today's prices. Buy in 3-5 years when the prices come down to historical averages if you must buy.

RentingForHalfTheCost says

Yup, a 30 yr old piece of crap that needs major updates

And that assumes it's still standing. There's an awful lot of shitty run-down housing in the BA. Even if it's a relatively new house, houses aren't built to last anymore. They're made of vinyl, particle board, and glue.

I would advice to avoid spending money on something you'll end up hating over years. If you buy something you aren't happy with, you'll hate it even more after you spend thousands upon thousands in repairs and maintenance.

Silicon Valley bubble isn't going to last forever. Big companies like Google will stick around, but all this random little companies that provide less than marginal service will probably be going away sooner or later. Prices will drop just like they did during DotCom crash.

Silicon Valley is relaying too much on one industry.
Detroit use to have very high pay blue collar jobs with all possible perks. If in 1950 one could tell, that in next 15-30 years Detroit will decay beyond imagination, everybody would laugh of him.

REpro says

Silicon Valley is relaying too much on one industry.

Hasn't much of Silicon Valley gone to India already?

America is in a state of permanent decline.

wthrfrk80 says

Hasn't much of Silicon Valley gone to India already?

When tech gadgets are sent for production overseas, research and technology (often with tax subsidy) attached to it, is given away for free.

wthrfrk80 says

Even when the mortgage is paid off, you don't "own" your house. Try missing a few property tax payments and see how much you really "own."

Even when the mortgage is paid off, you're renting the land from Your Local Government.

I am game for this definition. It is more in line with reality that everyone going around living in debt saying they own their leased car, leased house, leased wife, etc. The only thing you really own are your mistakes. ;)

Realtors Are Liars says

tatupu70 says

RentingForHalfTheCost says

As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off

Ding, ding, ding, ding. Do you see the word collateral in that sentence?

Ding, ding, ding, ding. Do you see the sentence "lender holds the deed" in that paragraph?

Yup, The holder of the deed is the owner. Amazing how you just skip over the last sentence where it says "the mortgage holder occupies the house as if they were the owner". Read - "as if". I know, I'm waiting my time. Where is that ignore button before I get dumbed down in the process of trying to help. Ugh

robertoaribas says

30 years of an inability to invest your money when you buy into today's prices.

Who said I had any money to invest in the first place? The assumptions floating around here are astounding.

Rent and PITI are identical right now, in the places we are looking. 100K interest free deferred payment (40 years, heck I'll be dead by then) down payment assistance from the city and a mere 2.5% cash from me.

Not sure about the rest of the readers here, but the bottom 90% of Americans are not sitting around wondering how to invest their money: we are trying to figure out how to pay the rent or the mortgage, keep our jobs, and feed our kids.

If I decide to move and get another rental, I would probably have to come up with over 8K cash for first, last and security deposit. For a 500K house: 13K. Monthly nut: 3K whether I rent or buy.

I'll gladly pay the additional maintenance (with a house/painter carpenter and auto mechanic couple, I know we can do more ourselves than the average homeowner) than have to deal with haughty, imperious, greedy landlords for the next 5-10 years.

Besides, I want another big dog. And maybe some pygmy goats.

RentingForHalfTheCost says

Yup, The holder of the deed is the owner. Amazing how you just skip over the last sentence where it says "the mortgage holder occupies the house as if they were the owner". Read - "as if". I know, I'm waiting my time. Where is that ignore button before I get dumbed down in the process of trying to help. Ugh

Sorry, I think you were already dumbed down. Yes, the bank holds the deed. What ownership rights does that give them? Do they have any rights to the appreciation of the asset? Are they responsible for any liabilities caused by the asset? Do they have any access to the asset?

What ownership rights does the bank have??

Who cares about "ownership rights"? That's academic. The fact is: if you stop paying your mortgage, the bank gets the house. Or at least that's the way it was until recently.

Unless you're buying outright with cash, you're either renting from Your Landlord or you're renting money from Your Bank. Do whichever option is cheaper and less risky.

Mortgage interest is "rent" too: it's rent paid to use money you don't own. If it's cheaper to rent money than rent houses, do that. If it's cheaper to rent houses than rent money, do that.