patrick.net

SFace says

Once that is considered, the return on housing is at par with stocks. Owners net worth are around 30-50X higher than renters. The end result clearly indicates owning has been the better result long term.

I get your point about the uses of the home is equivalent to a dividend. It still will not bring the housing as an investment up to the level of the other vehicles though.

As for the 30-50X higher than renters. People that get rich or are just born rich will obviously buy property. That doesn't mean property made them rich. Your putting the cart before the horse in that statement. If you want to draw some comparison to wealth in owners verses renters you need a better breakdown of the data.

BoomAndBustCycle says

Someone has yet to disprove that US real estate is among the cheapest assets in all of the world.

Its cheap due to violence, bad schools, shrinking middle class, no safety nets and high risks. Our way of life is going from best to not even top 10 at breakneck speeds. Being house poor - and entire nation of house poor - is ridiculous, especially when the economy is consumer based / net importing.

SubOink says

If its such a bad investment, how come everybody that is rich owns property?

The logic of a true Realtor(R). Did you know that most rich people own can openers too?

RentingForHalfTheCost says

See how the rich comes first?

Thank you. Most rich people don't get rich from the real estate, they buy real estate because they got rich from something else.

RentingForHalfTheCost says

SubOink says

RentingForHalfTheCost says

If you look at the very long term, houses have been the worst investment available to the general public:

If its such a bad investment, how come everybody that is rich owns property?

If I was rich I would own property. See how the rich comes first?

Why would you own property if you were rich?? You said yourself that its a terrible investment. Why not just rent whatever you like? You're rich, why bother owning a shitty investment?

:)

wthrfrk80 says

SubOink says

If its such a bad investment, how come everybody that is rich owns property?

The logic of a true Realtor(R). Did you know that most rich people own can openers too?

Most poor people own can openers too. :)

wthrfrk80 says

Thank you. Most rich people don't get rich from the real estate, they buy real estate because they got rich from something else

People get rich in all sorts of ways. But I know a few that definitely got rich via real estate and prove the theory that its a bad investment wrong.

Every investment has a risk and a down side.

Why do all these investors buy up property now?

Anyways, I am not even on the investment side of home ownership. We simply wanted our own place and pay the money towards our own house rather than giving it to a stranger. Not looking at it as an investment per se. It's where my kids will grow up and a place I want to have free and clear when I "retire". I just wouldn't want to risk having to use my retirement money for where ever rents will be in 35 years. Looking back 35 years, they could be double or triple from now. Talking about being ffed.

SubOink says

Why would you own property if you were rich?? You said yourself that its a terrible investment. Why not just rent whatever you like? You're rich, why bother owning a shitty investment?

:)

Now your getting half of the truth. That is a big step forward! Housing is a shitty investment. No one that studies the data will suggest otherwise. When you are rich, you have enough money and look at a house as a shelter and a bit of show-boating your wealth. If people were honest they would agree. The problem lies in people being allowed to show-boat before they get rich. That is a problem in our national housing campaign that has been trying to put an end to income discrimination. "Everyone deserves a home, even when they can't even make the first payment".

SubOink says

Why would you own property if you were rich?? You said yourself that its a terrible investment. Why not just rent whatever you like? You're rich, why bother owning a shitty investment?

Also, if you look at ROI on housing in terms of renting them out, typically you get the best ROI on cheap houses and the worst on expensive houses (where the rich live). These rich people are not only being stupid by buying a terrible investment, but also buying the worst group of a terrible investment. Hmmm...unless there's more to it.

SubOink says

Why would you own property if you were rich?? You said yourself that its a terrible investment. Why not just rent whatever you like? You're rich, why bother owning a shitty investment?

Why do rich people own property? Because they have to live somewhere and can afford to buy with cash rather than with massive debt.

Some rich people do rent. Like Michael Jackson in his final years.

I never said it's *always* bad to mortgage a place to live. In most of the USA it's probably better to do so than rent. That is, if you plan on staying in one area for more than 5 years.

But some places (like coastal CA) are so expensive that it can be wiser to rent.

RentingForHalfTheCost says

Why would you own property if you were rich?? You said yourself that its a terrible investment. Why not just rent whatever you like? You're rich, why bother owning a shitty investment?

Because there is a value/benefit to owning your own home that is more than just economic:

Stability, aesthetics, pets, gardening, sense of "place/home", family. etc.

SubOink says

Most poor people own can openers too. :)

Right! That was my whole point. Just because the rich often own property doesn't mean they consider it an investment. Anymore than they consider their can opener to be an investment.

Is it possible to get rich speculating on real estate? Sure. Just like it's *possible* to get rich speculating in any other asset class. It's also possible to lose your shirt.

You could become a wealthy landlord, but only if rents are high relative to prices. In coastal CA, prices are high relative to rents. A poor ROI. If you don't know what I mean by ROI, google it.

wthrfrk80 says

Why do rich people own property?

Because they're rich. Think about it. If you're worth 100's of millions of dollars, a multi-million dollar house would be like one of us going out and buying a flatscreen TV. The price is incidental. When we talk about irrational home purchases, its usually in referrel to a lot of Bay Area home buyers- those who even though might make good income will spend 50% or more of their incomes on a mediocre, grossly overpriced house. There's a big difference.

edvard2 says

Because they're rich. Think about it. If you're worth 100's of millions of dollars, a multi-million dollar house would be like one of us going out and buying a flatscreen TV. The price is incidental. When we talk about irrational home purchases, its usually in referrel to a lot of Bay Area home buyers- those who even though might make good income will spend 50% or more of their incomes on a mediocre, grossly overpriced house. There's a big difference.

Correct. That was my whole point.

edvard2 says

Because they're rich. Think about it. If you're worth 100's of millions of dollars, a multi-million dollar house would be like one of us going out and buying a flatscreen TV. The price is incidental. When we talk about irrational home purchases, its usually in referrel to a lot of Bay Area home buyers- those who even though might make good income will spend 50% or more of their incomes on a mediocre, grossly overpriced house. There's a big difference.

Yup.

Lots of people here seem to think that rich people are all super penny pinchers. Many ARE, and you will see that they spend a small percentage of their income. However, when the income is millions of dollars per year, a $1M house is no big deal. Say they spend 1 entire year's worth of income on a house, and they still have multiple years' worth of income in investments. So what if the house loses value? It would be like one of us buying a new TV and finding that the same model is listed on Craigslist for 40% less a year later. No biggie. That's the textbook definition of being rich: you can buy really expensive stuff without it having any really measurable impact on your net worth.

There are also stupid rich people out there, that don't stay rich for more than a generation or so. Spending TOO much, and not paying attention to income, is how that happens.

1sfrenter says

Because there is a value/benefit to owning your own home that is more than just economic:
Stability

Most of the stability in owning a home is chosen. Signing yourself up for 30 years of payments which includes paying interest on a very high dollar amount is the kind of discipline I'd rather not choose.

If a person decides, "I'm going to rent this place until my kids are out of high school" they choose a similar amount of stability. I'm guessing being kicked out of a rental is less common than the loss of a home due to financial stress.

SubOink says

If its such a bad investment, how come everybody that is rich owns property?

I'll just write it, since this kind of logic prevails and many, many people don't understand the flaw in this thinking when they look at statistics and other studies. Correlation is not causation!

Secondly, everybody who is rich does not own property. So even your correlation was either based on a non-factual idea or was not carefully worded.

FunTime says

Correlation is not causation!

oink is not going to understand this statement.

FunTime says

I'll just write it, since this kind of logic prevails and many, many people don't understand the flaw in this thinking when they look at statistics and other studies. Correlation is not causation!

It's Realtor(R) logic.

FunTime says

I'm guessing being kicked out of a rental is less common than the loss of a home due to financial stress.

If you have to "guess" about this, can I guess that you are not a renter?

I have been renting for about 30 years (my entire adult life) and since most of my friends are teachers, artists, etc.they are also renters. I can assure you that renting has not provided us the kind of stability you speak of. And that's in a city that has strong rent control and tenant's rights.

I have found that some of the biggest housing bears are people who already own houses and like to suggest that the rest of us become life-long renters.

1sfrenter says

The value is housing is not purely financial.

What a lot are saying is that the value of housing is helfpul when even a little financially considered. Look at how people make any other purchase. Look at how they buy a house. Why are they so different!

1sfrenter says

If you have to "guess" about this, can I guess that you are not a renter?

I'm also an artist, although not for money. I've never figured out a way that works for me to be an artist without a job. I grew up in a very poor family, so I've never lived in any residence which was owned by me or my guardians. I'm a lifelong renter.

At this point, it looks like staying in the Bay Area means staying a renter. I could have gotten mortgages, but I'm planning for a time when my job/art time is more even.

http://money.cnn.com/galleries/2012/retirement/1203/gallery.investing-advice-adult.moneymag/6.html

RentingForHalfTheCost says

When you are rich, you have enough money and look at a house as a shelter and a bit of show-boating your wealth.

Makes no sense. Why would showing off "the worst investment possible" be even considered showing off then?

All rich people could just rent, multiple homes. After all, they are rich. They can afford it. No need to buy.

I am just playing devils advocate here.

1sfrenter says

Because there is a value/benefit to owning your own home that is more than just economic:

Stability, aesthetics, pets, gardening, sense of "place/home", family. etc.

Absolutely. But the renters here will argue that. It's weird when we rented for all those years I was never feeling like I am in MY home. I always liked being on month to month after the initial 2 year or 1 year lease, to be flexible as in possibly finding a better house or maybe even buying. But after getting kicked out a few times due to them selling, I hated the insecurity of every month could be the month of the famous phonecall and then the nightmare search for another house begins all in the middle of full time work etc etc...sucks!! And nobody in LA signs a 4-5 year lease. Landlords don't do that.

We spent so much money on moving each time. $2-3k BAM!

You get to the point where you don't even want to put anything in the house because you never know when you may move. And on top of it you spend money like a mortgage, so your saving is not increasing any faster than paying a mortgage.

We just did our taxes this year. Massive refund. First time. Amazing. Prop tax was paid by tax refund and there is money left over.

SubOink says

Absolutely. But the renters here will argue that. It's weird when we rented for all those years I was never feeling like I am in MY home.

Its a case-by-case situation. I've never been kicked out of a house I've rented and the house we rent now we've been in for 9 years. It also "feels" like our home. Live anywhere that long and that will happen. We re-did the back yard, painted the living room, etc etc. Big deal.

The fear of being "kicked out" is every bit as much of a concern-or should be- for a homeowner. In this day in age no job is secure and if you lose one and own a house, well too bad- the payment comes do at the first of the month and you can't simply move to a cheaper situation unless you sell. Unlike a renter that has that ability to move somwhere cheaper. I definitely know my fair share of homeowners who lost jobs and lost their house as a result.

SubOink says

Makes no sense. Why would showing off "the worst investment possible" be even considered showing off then?

Because they don't think of it an an investment. They think of it as a luxury good. Like a Ferrari. Or a yacht. Or a glass of fine wine. Or a jet. They don't expect a return on those purchases. They buy them because they're nice to have and they can afford it. They're investments are in stocks and bonds. And maybe real estate if they're collecting rents.

wthrfrk80 says

Because they don't think of it an an investment. They think of it as a luxury good. Like a Ferrari. Or a yacht. Or a glass of fine wine. Or a jet.

I'll use myself as a real-life example to further this notion. In my "other life" prior to getting my current career going I worked at retail stores making $8-$10 an hour. I did this from the time I was around 16, all the way through college, and the first 2-3 years after graduating college. I can recall taking out a loan for a computer. It took me over 2 years to pay it off. It cost $1,500 which at the time to me with my financial situation was a HUGE amount of money. In fact, most anything like a TV, CDs, cell phones, and a nice dinner all seemed impossibly expensive. I was just barely scraping by.

Fast-forward to now after 10+ years in my career and I make a lot more. I'm not rich, but I can go out and buy a computer, a flatscreen TV, or even a econo-car no problem. Not to say I do this all that often as I'm a cheap-ass who still drives the car I had in high school. But when I go out to a nice dinner I no longer worry about how much it is or what it'll do to my monthly expenditure or what sort of dent it will make in my savings account. Not that I take this for granted, but these are all things that at one time were very big deals to me since they were outside the realm of what I could really afford. Now I can and that notion has more or less evaporated.

What if I made millions and millions of dollars? A nice house would be the same thing. Not neccesarily an investment per-say, but given that its value in the end would probably be a non-issue since I wouldn't be counting on it for my finanancial well-being unlike most people who do simply because their purchasing power is limited and a house to them is this extremely expensive thing that could very easily ruin them financially if things don't go well.

SubOink says

We just did our taxes this year. Massive refund. First time. Amazing. Prop tax was paid by tax refund and there is money left over.

The government and the people with money in this country thank you. Actually, I thank you too, because your willingness to loan the government money all year takes a little sting out of how much I disagree with where my taxes get spent.

SubOink says

All rich people could just rent, multiple homes. After all, they are rich. They can afford it. No need to buy.

Some do.

SubOink says

Why would showing off "the worst investment possible" be even considered showing off then?

Sociology.

Nomograph says

edvard2 says

If the bubble returns to the BA, what will you do?

I have a better question:

When you figure out that there are a lot of wealthy, successful people in the nice areas and you'll never be able to afford a house on the peninsula, what will you do?

There ARE a lot of wealthy, successful people in the nice areas and for that reason those areas will never be affordable. My understanding is Danville and Alamo were high in the early seventies and they're high now.

It's EXPENSIVE to live here. Some will not be able to afford it. Some who are here, should not be.

What else is there to know?

F. Continue posting about how smart you are about not buying.

rootvg says

There ARE a lot of wealthy, successful people in the nice areas and for that reason those areas will never be affordable.

Are you saying that wealthy people like to overpay? How did they become wealthy, then?

rootvg says

There ARE a lot of wealthy, successful people in the nice areas and for that reason those areas will never be affordable. My understanding is Danville and Alamo were high in the early seventies and they're high now.

It's EXPENSIVE to live here. Some will not be able to afford it. Some who are here, should not be.

What else is there to know?

There are a lot of wealthy successful people in Des Moines, Iowa, too. Mountain Brook, Alabama is one of the ten wealthiest communities in the entire country. Bloomfield Hills, Michigan has the second highest median income in the country, just ahead of Beautiful Belle Meade, Tennessee, and just behind Palm Beach, Floriders. It would be interesting to do a comparison of the cost of living in these places and a place like Danville.

Austinhousingbubble says

rootvg says

There ARE a lot of wealthy, successful people in the nice areas and for that reason those areas will never be affordable. My understanding is Danville and Alamo were high in the early seventies and they're high now.

It's EXPENSIVE to live here. Some will not be able to afford it. Some who are here, should not be.

What else is there to know?

There are a lot of wealthy successful people in Des Moines, Iowa, too. Mountain Brook, Alabama is one of the ten wealthiest communities in the entire country. Bloomfield Hills, Michigan has the second highest median income in the country, just ahead of Beautiful Belle Meade, Tennessee, and just behind Palm Beach, Floriders. It would be interesting to do a comparison of the cost of living in these places and a place like Danville.

Fair enough, but there isn't the demand for those places that we have here. There also isn't so much old money and then you have the California emotional, follow-the-leader high school culture thing to worry about.

When we say the Bay Area is a bubble, we mean it. This is Disneyland. When we try to explain this place to my parents, they look at us like we're nuts.

There's too much money here, too many over credentialed arrogant assholes who can't think straight and too many interlopers from all over the world looking to seek their fortunes at someone else's expense by redefining reality. If you come here not knowing that, you will eventually get hurt. The laws of physics, economics and common sense have not been repealed. Two and two will NEVER equal five no matter how many people say so and no matter how many times they say it.

Bloomfield Hills is a nice place. It snows there, but it's nice. Moreland Hills, Ohio is also nice with similar demographics. Around Columbus, Upper Arlington is nice. I think Jack Nicklaus still lives there. In the Cincinnati area, I like Blue Ash. I'd live there in a second.

Down your way, I like Round Rock. Georgetown is also a good bet although it's further away. Go south and there's San Marcos. I got my hair cut there once, during a day trip to the outlet mall.

wthrfrk80 says

SubOink says

Makes no sense. Why would showing off "the worst investment possible" be even considered showing off then?

Because they don't think of it an an investment. They think of it as a luxury good. Like a Ferrari. Or a yacht. Or a glass of fine wine. Or a jet. They don't expect a return on those purchases. They buy them because they're nice to have and they can afford it. They're investments are in stocks and bonds. And maybe real estate if they're collecting rents.

Ross Perot has invested primarily in Treasuries for years and years. He says it's not about return on his money but return OF his money.

wthrfrk80 says

SubOink says

Makes no sense. Why would showing off "the worst investment possible" be even considered showing off then?

Because they don't think of it an an investment. They think of it as a luxury good. Like a Ferrari. Or a yacht. Or a glass of fine wine. Or a jet. They don't expect a return on those purchases. They buy them because they're nice to have and they can afford it. They're investments are in stocks and bonds. And maybe real estate if they're collecting rents.

Even in general aviation, most of the big airplanes are owned by paper corporations for tax and liability reasons. I can name several flight schools right off the top of my head where the school doesn't own the planes. One of them is a fairly prestigious operation over at Livermore Muni.

RentingForHalfTheCost says

BoomAndBustCycle says

The inevitable depression and morale crushing layoffs that would commence... It would be a hard, chaotic reset button on our financial system.

Bring it ON! Time for us sinners to pay and pay dearly. We can take it. Who is not up for a good round of suffering. I'd vote for this if there was a vote. And I own multiple houses (just not any in the BA). I'd rather get us back on track to eventually be prosperous again, regardless of how long it took. Even if it took longer than I live. At least we would be passing down something worth inheriting. Right now, we are passing on an economy build on junk bonds in all honesty. 61% of the bonds are being bought by the fed. What a joke.

Won't happen. It should but it won't.

dunnross says

rootvg says

There ARE a lot of wealthy, successful people in the nice areas and for that reason those areas will never be affordable.

Are you saying that wealthy people like to overpay? How did they become wealthy, then?

Who cares? It's not my business either way.

Nomograph says

dunnross says

Are you saying that wealthy people like to overpay?

Do wealthy people overpay for a Maserati when they could have purchased a Honda Civic?

No, but buying a crappy old house in a place like Palo Alto, is like buying a Honda Civic for the price of Maserati, just because it has Michelin Tires.

rootvg says

cares? It's not my business

Then why do you judge your gay neighbors?