patrick.net

Just this morning I sort of summed it up for myself in reaction to a much younger coworker who purchased a home in downtown Los Gatos years ago. I said, "If I had played my cards right, I could own a great house in a really great town, but back then I wasn't even playing cards." So there. I don't feel so bad anymore.

Oh my goodness! I feel like I'm back in second grade!

rufita11 says

Just this morning I sort of summed it up for myself in reaction to a much younger coworker who purchased a home in downtown Los Gatos years ago. I said, "If I had played my cards right, I could own a great house in a really great town, but back then I wasn't even playing cards." So there. I don't feel so bad anymore.

I bought mine in LG back in early 90s for 1/8 of todays cost. Some forget how much home prices were before the mania began. But trying to explain such prices to a New Yorker or Bostonian gets lost with their ego. They are not paying for Palo Alto or Los Gatos home.. they are paying for their idea of a Cambridge-Boston on the West Coast. It would have been better had they just moved to Hollywood if they have such egos.

lovelafayette says

RentingForHalfTheCost says

Your problem is you are holding cash, which is a dying commodity. If you held quality stocks then it wouldn't matter over that same period then it wouldn't matter. Your 20% downpayment would actually get you more home.

This makes no sense. Let's say you were going to buy a house for $1 million and had a 20% down payment of $200,000. If the house went up 10% over the last year it now costs $1.1 million. If you held quality stocks that went up 10% your down payment is now $220,000. Your new loan increased by $80,000. If my math is correct you would have needed to earn a 50% stock market return on your down payment just to break even and have the same loan amount.

Math is not RFHTC's strong point

dodgerfanjohn says

But someone moving in three family members per room? At the least I'd toss my dogs crap into their yard.

Very American of you.

thomaswong.1986 says

I bought mine in LG back in early 90s for 1/8 of todays cost. Some forget how much home prices were before the mania began.

Thomas -- people are much less averse to leverage these days. Debt is no longer a four letter word.

Philistine says

800k house just sold on my street in April, and it's 6 people, multi-generational style, in a 3 bedroom house.

Are you kidding me? 2 people per room is nothing. My parents raise 5 kids in a 3/2 1,100 square ft. house in a formerly great school district. We always had lots of friends over too (no wonder my dad converted half the garage into his office). It never seemed that small to little ones.

rufita11 says

Philistine says

800k house just sold on my street in April, and it's 6 people, multi-generational style, in a 3 bedroom house.

Are you kidding me? 2 people per room is nothing. My parents raise 5 kids in a 3/2 1,100 square ft. house in a formerly great school district. We always had lots of friends over too (no wonder my dad converted half the garage into his office). It never seemed that small to little ones.

We wound up a family of six, in what began as a 2/1 semi detatched,,,,make use of the space you have. What began as a large closet was made into a 3rd br, and eventually, my parents finished the attic and moved up there. I still don't get what peoples affliction is to thinking they need so much gotdam sq footage

thomaswong.1986 says

rufita11 says

Just this morning I sort of summed it up for myself in reaction to a much younger coworker who purchased a home in downtown Los Gatos years ago. I said, "If I had played my cards right, I could own a great house in a really great town, but back then I wasn't even playing cards." So there. I don't feel so bad anymore.

I bought mine in LG back in early 90s for 1/8 of todays cost. Some forget how much home prices were before the mania began. But trying to explain such prices to a New Yorker or Bostonian gets lost with their ego. They are not paying for Palo Alto or Los Gatos home.. they are paying for their idea of a Cambridge-Boston on the West Coast. It would have been better had they just moved to Hollywood if they have such egos.

Sounds like you've made a killing! This particular house must have appreciated more than average, since the norm in Santa Clara Co since early 90s is about 4x, not 8x. So since houses are so overpriced now, why not sell and rent? Especially if we are in bubble 2.0 or 3.0?

thomaswong.1986 says

It would have been better had they just moved to Hollywood if they have such egos.

Hollywood isn't about ego, it's about long shot hopes, and dreams. Pretend to be a director for a small sitcom, and you'll nab dates left and right.

errc says

rufita11 says

Philistine says

800k house just sold on my street in April, and it's 6 people, multi-generational style, in a 3 bedroom house.

Are you kidding me? 2 people per room is nothing. My parents raise 5 kids in a 3/2 1,100 square ft. house in a formerly great school district. We always had lots of friends over too (no wonder my dad converted half the garage into his office). It never seemed that small to little ones.

We wound up a family of six, in what began as a 2/1 semi detatched,,,,make use of the space you have. What began as a large closet was made into a 3rd br, and eventually, my parents finished the attic and moved up there. I still don't get what peoples affliction is to thinking they need so much gotdam sq footage

It's needed to put all the crap you don't really need on display ;)

errc says

rufita11 says

Philistine says

800k house just sold on my street in April, and it's 6 people, multi-generational style, in a 3 bedroom house.

Are you kidding me? 2 people per room is nothing. My parents raise 5 kids in a 3/2 1,100 square ft. house in a formerly great school district. We always had lots of friends over too (no wonder my dad converted half the garage into his office). It never seemed that small to little ones.

We wound up a family of six, in what began as a 2/1 semi detatched,,,,make use of the space you have. What began as a large closet was made into a 3rd br, and eventually, my parents finished the attic and moved up there. I still don't get what peoples affliction is to thinking they need so much gotdam sq footage

I was at the open house when this place was for sale. It's a 1400 sqft house on a 4000 sqft lot, built in 1926. The bedrooms are roughly 10x12's. This is what $800k buys you in the heart of LA. And it's not a traditional family of 6. There's an older couple that I assume to be grandparents or aunt/uncle or something, then there's two younger-ish couples. Maybe it's not even a family. Could just be some new arrangement for swingers/homedebtors.

Multigenerational swingers going into debt together. Sounds like a win to me!

Scott, it's cyclical.

Kudos to the folks that got in during 2010-2011 when the prices and interest rates were low.

But if prices are up 30-40% in the past 18 months, whatever you do, don't jump in now like dummy.

Rent until the next opportunity. This isn't it.

BayArea says

Scott, it's cyclical.

Kudos to the folks that got in during 2010-2011 when the prices and interest rates were low.

But if prices are up 30-40% in the past 18 months, whatever you do, don't jump in now like dummy.

Rent until the next opportunity. This isn't it.

It's a tough decision. The wait can be 5-8 years to the next housing bottom. What if you waited that long and the same houses would be selling for today's price? From an inflation adjusted basis, you get a slightly better deal, but not from a nominal price viewpoint.

Unless we have a crystal ball, you can't say that home prices will be cheaper than now in the next housing bottom.

BayArea says

Kudos to the folks that got in during 2010-2011 when the prices and interest rates were low.

I'd wait before lavishing those kudos, kiddo...until those same market wunderkinds liquidate their stock just before the next shitstorm.

E-man says

It's a tough decision. The wait can be 5-8 years to the next housing bottom.

Could even be 10-15 years.

Let me make your life easy !
stop looking at the MARKET. use a simple calculator.for the house you want to move in to,does it makes sense to rent it from somebody for 1 or 2 years or does it make sense to rent it from the bank for 30 years lease. if its cheaper to rent from bank , do it. keep in mind that the rent ( mortgage) from bank remains fixed for 30 years.

USE this on the SAME house you plan to move in to :
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

Here is case shiller divided by inflation for 20 cities. This doesn't help too much if prices are really up 30% for a given house. But across the board, I wouldn't worry too much having missed the boat.

E-man says

BayArea says

Scott, it's cyclical.

Kudos to the folks that got in during 2010-2011 when the prices and interest rates were low.

But if prices are up 30-40% in the past 18 months, whatever you do, don't jump in now like dummy.

Rent until the next opportunity. This isn't it.

It's a tough decision. The wait can be 5-8 years to the next housing bottom. What if you waited that long and the same houses would be selling for today's price? From an inflation adjusted basis, you get a slightly better deal, but not from a nominal price viewpoint.

Unless we have a crystal ball, you can't say that home prices will be cheaper than now in the next housing bottom.

I agree. I frankly don't get this "wait til the next dip" mentality - its almost as if everyone believes the house they didn't buy at 400k in 2010, which zoomed up to 500K now, will sell for 400K (or less) a few years from now. More than likely, when the new "bubble" bursts, the place may drop from 500K to some number north of the initial 400K entry point. Moreover, whose to say this is the peak? Why cant it stagnate at this level for years as inflation plays catch up? Why cant it go to say 550K or more, before it retraces - putting that 400K re-entry point further out of reach?

Witness our esteemed host Patrick who decided to "wait" and not buy in 1999 when homes in Palo Alto were going for 600K-800K. He sat and waited as PA homes zoomed past 1M going to 1.5M at the 2007 peak.

He finally got his vindication for waiting as PA homes eventually dropped a few percentage points, down to 1.3M or so at the bottom. But did that realistically work out well for him? Passing on a home at 800K, only to buy it 14 years later at 1.3Million? Its no surprise that he still rents, and likely will do so forever as PA has been pushed out of reach.

Note, before anyone gets hysterical, I am not saying buy now or be priced out forever. The 2000-2007 bubble was a once in a lifetime event, and unlikely to be repeated. And this only applies for people who want to someday buy and move on with life (i.e. not the landlord/investor mentality). The example of Patrick is an extreme one, and not likely to be repeated by anyone waiting in the here and now.

What is more likely however, is that you may do better by waiting on an inflationary basis, but losing on a nominal one - and unfortunately, that's not very satisfying to most people. Very few people run around saying "im soo glad I didn't buy when the home bottomed at 400K! Instead, I waited, and scooped it up on the cheap 6 years later at 430K - ha ha!!!"

Hot damn, I can buy 2 planes, new cars, boat, and huge house on airstrip outside the RBA for less cash! This is insane!

CDon says

im soo glad I didn't buy when the home bottomed at 400K! Instead, I waited, and
scooped it up on the cheap 6 years later at 430K - ha ha!!!"

Exactly and meanwhile even at conservative $2,000 a month in rent, they dropped $144,000 in rent while price went up "only" $30,000 - a truly terrible decision from Lifetime Housing Costs perspective.

E-man says

Borrowing $1M at 6% interest rate is the same as borrowing $2M at 3%. For high network clients, they can borrow $1M at 1.25% from Interactive Brokers, or 2.2% at Charles Schwab.

No, it is not the same. The interest you pay will be close but the principal on the $2m loan is twice as much. You will end up paying roughly 50% more on the $2m loan. Borrowing $1m at 6% is close to $1.4m at 3%.

JodyChunder says

BayArea says

Kudos to the folks that got in during 2010-2011 when the prices and interest rates were low.

I'd wait before lavishing those kudos, kiddo...until those same market wunderkinds liquidate their stock just before the next shitstorm.

I'm not sure what your getting at here. Unless you think prices will drop below 2010-2011 levels, they can liquidate at anytime they choose. By the looks of things today, they got quite the cushion.

CDon says

Witness our esteemed host Patrick who decided to "wait" and not buy in 1999 when homes in Palo Alto were going for 600K-800K. He sat and waited as PA homes zoomed past 1M going to 1.5M at the 2007 peak.

He finally got his vindication for waiting as PA homes eventually dropped a few percentage points, down to 1.3M or so at the bottom. But did that realistically work out well for him? Passing on a home at 800K, only to buy it 14 years later at 1.3Million? Its no surprise that he still rents, and likely will do so forever as PA has been pushed out of reach.

A broken clock is right twice a day and liar realtor tells the truth once in a blue moon when he says buy now or forever be priced out (assuming the time is 1999, the place is Palo Alto, and he is talking to Patrick)?

That begs the question. If income and inflation are accounted for, how does $800K in 1999 compare to $1.3M in 2013?

BayArea says

If income and inflation are accounted for, how does $800K in 1999 compare to $1.3M in 2013?

Considering ONLY inflation, 800K in 1999 should be about 1.115 million in 2113. If we take into consideration incomes, then I would not know...

BayArea says

I'm not sure what your getting at here. Unless you think prices will drop below 2010-2011 levels, they can liquidate at anytime they choose.

Yes, I think that.