patrick.net

tclement says

Yep, those are exactly the kind of factors that I'm faced with now. Owning has a bit more predictability, and right now I'm confronted with a decision being made about where I live that is not of my own choosing.

Find a rent controlled place that makes you happy and save money. Invest into business whatever you save and you'll eventually make enough money to not even care about RE prices.

I started similarly, started a business (because we chose to go business loan route and not a house loan route). Later had enough cash to buy a condo with no payments.

It's a greatest thing in life to owe no bird a nickle and be free to move as financial or family goals in life change. Being stuck in some place with debt is shackling masochism.

As things stand, I save between 65 - 70K a year, (not including 401K), thanks in large part to renting. Both mobility and the hands-off freedom that renting provides are really assets in themselves. I could probably save more, but...there's this thing called life that keeps getting in the way.

Renting has more to do with strategy than emotion - which is not to cast emotion as some kind of handicap or anything. For me, staying loose has simply worked much better for navigating the vagaries of of today's job market/economy than paying the premium to own the same thing.

I've also come to prefer dynamism to stasis, and it's getting to the point where the idea of actually buying a permanent residence...kinda depresses me. We're all just passing through, and once you come to accept that, you realize everything else is just propaganda.

renting is not as bad as people make it out to be. Even though I wouldn't choose to do it myself. and it kind of sucks to be at the mercy of your landlord. (This is especially a problem if you're renting someone's house).
That's sort of the price you pay to have more flexibility. It's a double edge sword.

As for the original post. If I was in that situation I'd be tempted to pay the higher rent just to not deal with the hassle of moving.

toothfairy says

I'd be tempted to pay the higher rent just to not deal with the hassle of moving.

$900/mo can cover the interest on a $360,000 loan.

Yes, there is a downside to renting. Moreover, it's not always cheaper to rent.

We bought a modest home 12 years ago in a working-class neighborhood on the edge of a desirable middle class one. We're centrally located and our neighborhood has improved strikingly in the past 12 years (no where to go but up). New homes were built on the vacant lots and young people fixed up some of the older places. Of course, now nothing is selling on our block. But if we could manage to sell our house, even significantly below appraisal, we'd still be ahead financially considering the property's minimal expenses over those 12 years of ownership, relative to rents in this area, and the returns we would likely have earned had we invested the principal in the bear market instead of buying. We own an inexpensive house, in a Midwestern city, and don't have to suffer landlords or apartment living. We have money to travel and eat out. It's an unusual place that we mostly enjoy. If necessary, we could walk away from it without too much angst.

So to answer your question, it depends. Where would you buy and for how much? What is your philosophy on home ownership in general? Could you tolerate further declines in valuation? A house used to be a place where people raised a family, made memories together, and lived their lives out. It still is for many.

Leslie says

We bought a modest home 12 years ago

You bought prior to the current market madness.

bubblesitter says

You bought prior to the current market madness.

The "current" market madness ended 5 years ago. Summer 2006 was when the bubble failed, and it's been mostly downhill since then.

http://research.stlouisfed.org/fred2/graph/?g=266

Oakland has rent control but it does not, because of state law, apply to single family homes. And unfortunately condominiums are counted as single family homes (since each unit has a separate owner). And moving does cost pots. While we hired movers for $500, you also have to consider the cost of first, last and security deposit, as well as possible costs in switching cable service etc.

I have been booted from a rental three times in my life, once for the owner to sell, once for the owner to move back in, and once for the owner to move his in-laws in. It was a *HUGE* inconvenience every time, and right now it would be damn near fatal given what's going on in my household. This is a significant advantage of owning and a big part of the reason I'm still looking while I wait.

I think all things not in a bubble, most of us would like to own rather than rent.

It's really a question of whether the increased cash outlay to own compared to the mental anguish of having to move is of more or less value to you as an individual.

OMG renting is so much cheaper. I dont know anyone who has or intends to stay in same freakn house for 30 years. People change divorce get sick die, neighborhoods change, jobs change. You would have to live at same location at least 20 years to get a better deal buying. First portion of loan is almost ALL interest cause banks know you wont have loan for 30 years most likely Majority of people move after 7 years.

Also, it is mentioned that one cannot control rent. Can a home owner control his property taxes? inurance? repairs? natural disasters? Heating bills? I notice home owners never add in heating costs in their calulations. Could be 5K a year or more in areas that have real winters.

NickO says

OMG renting is so much cheaper. I dont know anyone who has or intends to stay in same freakn house for 30 years. People change divorce get sick die, neighborhoods change, jobs change. You would have to live at same location at least 20 years to get a better deal buying. First portion of loan is almost ALL interest cause banks know you wont have loan for 30 years most likely Majority of people move after 7 years.

Another uneducated renter....

Uneducated? lol thats why I sold my house in Mineola ny learly last year after 5 years just in time for 455K and the house is worth about 425 now. Thats why I pay $1550 to rent for a small attached house in kew gardens queens with a backyard and driveway when the house is worth like 425K. Boiler already needed replacement oops not my problem owner had to replace. Hurricare Irene? no worries for me. I just rent. Im no slave to bank or at mercy to tenants. Free to leave whenever I want. You owners keep paying $1 to get back 30 cents in tax deductions. Also pPrices to continue falling for many years. Sorry if your locked into your homes and underwater - not me. Got out in time. Also i had an 4 family bought in 1999 and sold in 2004 for 250K profit. You wont see that again in this lifetime. Whoever owns now your house will BE WORTH 5 PERCENT LESS NEXT YEAR HOW U FEEL ABOUT THAT? AND THE YEAR AFTER AND SO ON

Bellingham Bob says

The "current" market madness ended 5 years ago. Summer 2006 was when the bubble failed, and it's been mostly downhill since then.

http://research.stlouisfed.org/fred2/graph/?g=266

Nope. As long as un-updated 1940's, 2-3 bedroom houses command 450-500k prices... which were 250k prior to 2003, then yes- we're still in "Market madness". Even now you will be hard-pressed to find a halfway decent house in a halfway decent area in the Bay Area for anything less. We're still in a bubble here. Very much so.

tatupu is a troll. Not a particularly good one. Save your fingers NickO.

NickO says

Uneducated? lol

GoranK says

tatupu is a troll. Not a particularly good one. Save your fingers NickO.

That hurts my feelings. I was simply pointing out how similar your post sounded to a similar one by someone espousing owning whcih got this is response

Hysteresis says

another uneducated home owner...

Not everyone lives the in Bay Area. In many, many areas it is cheaper to own right now. From day 1. Speaking in such broad generalities is almost never going to be correct.

You sound a little bitter--why? It sounds like you made the right decision to sell when you did and rent. You should be happy!

PS--you have to heat your home whether you rent or own...

We've been renting a 4BR/3BA home in the Lamorinda area for $3400/mo for about a year and a half. It's fairly spaceous at 2500 sq.ft., and looked great when we first looked at it (appeared to have been updated within the last decade with granite/stainless when they started to become fashionable). We would have been very happy to rent the house long term, but our landlord would not repair or replace anything - - says he has very little income (which I believe since he is a realtor).

We finally got fed up living with a non-working AC (esp. when it's been so freakin HOT lately), leaky faucets, windows that would not properly open/close all the way, etc.. so we recently bought. Spouse and I believe that house prices (including ours) will continue to fall, and that a house purchase is, in general, a poor investment. So, even though we qualified for enough of a loan to purchase our dream house at 4.5%, 30 yr fix, we chose instead to buy something more modest for less than 2x our annual income. We do not ever want to be in a position where we'll worry about making the house payments, nor do we want to cut back on the things we enjoy doing as a family (skiing, traveling to exotic destinations) because we stretched to buy a home. And finally, we do not want to deal with the situation we were in with our last rental, nor move (barring unforeseen circumstances) ever again.

Oh, and by the way, our last move cost $4,000.

Hey smart folks:

My underwater house is in the 94602. Is there a solution for TClement that involves my house? (It's a nice one, neighbor).

Is there a solution for TClement that involves my house?
That's legal? Not that I can think of...
BTW CL, I found your house. The tax basis on your property is $505k (tax year July 1, 2010 - June 30, 2011). I have to admit, I'm leaning more towards the walk away option for you. I hope that Wells makes you an offer you can't refuse. Let us know how it turns out.

Hi CL,
Wish I knew, neighbor, I'd probably jump at the chance. And how the heck does EBGuy figure out which is your house?

CL says

Hey smart folks:

My underwater house is in the 94602. Is there a solution for TClement that involves my house? (It's a nice one, neighbor).

I have a feeling you're going to get foreclosed on.

With renting the problem are greedy property corporations like AIMCO and Archstone who jack up the rent each year. Archstone is notorious for doing this to renters in the bay area.

^ I'll push a pencil through my cheeks before I rent from a corporate apt complex again.

$1320/mo, $1450/mo, $1750/mo. Fuckers.

edvard2 says

Last time I looked the average income was around 65-70k here. That compared to Austin TX where the median is around 63-65k... but with an under 200k median home price compared to the 700k+ you'll have to pay these days in SF.

Yeah, but wealthy foreigners do not covet to own a residence in Rick PerryLand. Not the kinda Exit Strategy they are interested in.

It is different here and it is different this time.

Sybrib says

Well suppose the borrower gets laid off and is out of work for awhile. Like that never happens to anyone. Just ask the 1,000 former Solyndra workers.

Fannie & Freddie are more lenient about missed checks than the LL.

http://www.ezlandlordforms.com/documents/3722/california_3_day_notice_to_pay_or_quit/

You don't get the impact of the MID if you are not in a high income bracket.

$34,500 single, $69,000 married filing joint to reduce a 4% interest rate to 3%.

Well, po' people don't get past the $5800/$11600 std deduction I guess.

Bellingham Bob says

Fannie & Freddie are more lenient about missed checks than the LL

Could be, in that case, frame the discussion like that, it's not about the MID working in one's favor. It's more about the moral hazard.

Bellingham Bob says

^ I'll push a pencil through my cheeks before I rent from a corporate apt complex again.

$1320/mo, $1450/mo, $1750/mo. Fuckers.

“Nessuna soluzione . . . nessun problema!„

Same thing is happening to me right now, though not as bad. $1445/mo (first month free!), then $1516/mo, now $1786 (or $1636/mo if I sign a new 12 mo lease). An apartment similar to mine in the same complex is listed on craigslist for $1995/mo now.
I used to be a "hardcore renter", but now I'm more and more considering to buy. Most apartments just suck. They may put in new carpets and granite countertops, but the insulation, windows, the build quality in general leaves a lot to be desired.
Thing is, I might move in a few years, or I might stay put. And I don't know how much sense it makes to buy a tiny house or a 1br condo if hell might freeze over and I start a family?

When you rent you have to stay fluid. Having a kid works against that. When I rent (as I am now) I'm ready to go in 5 days... and why not? I'm renting right?

Here's a tip: If you rent again, don't rent from and Agent. Also try find a rental that has been a rental FOR A LOOONG TIME. The best senario is a home owned by multiple family member. The best part is... they keep multiplying and will never reach a consensus to do anything with the property. I'm, lucky I live in just such a property...

Oh F*ck did I just jinxed it, didn't I?

tclement says

Hi CL,

Wish I knew, neighbor, I'd probably jump at the chance. And how the heck does EBGuy figure out which is your house?

I've been posting my situation for a while, so if you give enough details one can figure it out.

If I shortsell, and you need to buy (or choose to) it could be a smart thing. I barely ever manufacture meth in it, and when I do, it's usually in the garage. :)

I guess what I'm asking is is there a solution for TClement that involves my house? Timing, real assessing of the improvments I made, etc?

I'm not a money guy, so if there's a solution out there I'd listen. I am wrestling with the idea of a short or a FC, or some magic offer from Wells to keep me there.

CL, just do a short sell. You obviously can't keep the house, time to move on.

Right--I'm cool with that, Gorank. I was thinking of it for him and his family. It's a nice house and wouldn't have the normal icky feeling that a typical FC might have. At the very least, I can tell him to keep his eyes on my address when it is auctioned, no?

SJ says

With renting the problem are greedy property corporations like AIMCO and Archstone who jack up the rent each year. Archstone is notorious for doing this to renters in the bay area.

That is not my experience with Archstone, although admittedly somewhere other than the Bay Area, but then any easy solution is to rent from someone other than Archstone. They certainly don't have anywhere near a market monopoly.

I always feel like the biggest problem people have mentally with renting is that they equating it to the shitty slumlord they had in college. It doesn't have to be like that.

Nested says

so we recently bought. Spouse and I believe that house prices (including ours) will continue to fall, and that a house purchase is, in general, a poor investment. So, even though we qualified for enough of a loan to purchase our dream house at 4.5%, 30 yr fix, we chose instead to buy something more modest for less than 2x our annual income.

Nested, do we take that to mean that you didn't buy in Lamorinda?

E-man says

it doesn't make any sense to hang onto a house that's about $300k underwatered

No sense at all.

Bank gave you money, secured by the house.

If you haven't refi'd, that's a purchase money loan, and if you're in a non-recourse state, it's the bank's problem not yours.

Walk-away with no 1099 issue ends next year.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

but banks can't 1099 you if you have a non-recourse loan anyway.

CL says

I was thinking of it for him and his family. It's a nice house and wouldn't have the normal icky feeling that a typical FC might have. At the very least, I can tell him to keep his eyes on my address when it is auctioned, no?

Hey, CL, I appreciate it. Buying is a possibility for us. Let me know how to get in touch, and maybe we can go to the bank with a proposal.

Bellingham Bob says

E-man says

it doesn't make any sense to hang onto a house that's about $300k underwatered

No sense at all.

Bank gave you money, secured by the house.

If you haven't refi'd, that's a purchase money loan, and if you're in a non-recourse state, it's the bank's problem not yours.

Walk-away with no 1099 issue ends next year.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

but banks can't 1099 you if you have a non-recourse loan anyway.

“Nessuna soluzione . . . nessun problema!„

I wondered that...non-recourse will mean that the forgiven amount can't be taxed as income? So the forgiveness act really only applies to recourse states? Makes sense, but that's good to know.

TClement--I'll friend you or whatever the kids are saying nowadays.

Sure, CL

tclement, I couldn't help myself and looked up your old place. I wanted to fault you for giving up your low tax basis (and King Middle School for you child), but all I can say is: Well played! Way to take the (tax free!) money and run. Not many people could do what you did; best of luck finding a new place (did you write your landlord a letter?)

Hi EBGuy, I guess I did all right with my old place in Berkeley and I'm still waiting for the right time to upgrade. Today I spoke with a realtor who showed us a nice rental (still a bit too high for my tastes, but not $4k.) The great thing was that when I said I was waiting for a few years to buy, she said: "depends on the price range. If you're looking for a more expensive house, there's a long way for them to fall." I have to say, I was impressed (not to mention validated).

I've now heard 4 different stories about the law pertaining to this abusive rent increase. The latest (from the aformentioned honest real estate agent) is that if she has more than one rental property, rent control applies, regardless of whether it's a SFH. Oh well, I'll be glad to be out from under her incompetent and arrogant landlordship anyway. :)