patrick.net

I would rather commute from Fremont for 2 years than overpay for a house that is losing value. In 2 years, that 500k house will be worth 50 to 100k less. What do you think will happen when interest rates start going up?

you seem to be handle your finances in prudent way. I think buying home/condo is not a financially smart decision - owning your home/condo comes with extra expenses which own't happen if you are renting. On other hand, if you want to own your home/condo in south bay for other reasons(non financial) go ahead. Just understand you may lose money

This is your decision. But here are some of my opinions and not financial advice.

No.1: Rent somewhere else. You are renting in the most expensive area of the Bay Area. I work in Silicon Valley but commute from the east bay. My total daily commute time is around 35-40 minutes each way. Yet we rent a 4 BR house for $1,700. To me its worth the commute. To others it isn't.

No.2: latest numbers show modest price declines in the Bay Area YOY. So yes, prices are still falling. But that doesn't sound like that would bother you. If you're looking for a home to live in and not view as an investment then that doesn't matter.

No.3: How's the retirement situation? The saying goes that in order to retire these days you should have around 1 million dollars- not including what you might get from social security, assuming its still around. Make that 2 million if you live in an expensive metro. If you buy a house but have no retirement savings, or not enough then that's not a great thing. The most important investment isn't in buying a house. Its saving for retirement. Real estate doesn't perform all that great compared to stocks anyway.

No. 4: Don't worry if others buy houses and you don't. That's them and not you. If it makes you feel better my wife and I do pretty well financially with a dual income. We've been saving for 8-9 years so far. We have quite a bit saved up at this point and could easily buy, yet we aren't really considering buying anything because even at our income levels and savings the prices are ridiculous. Buy because its something you want to do and not because others did.

No.4: Consider talking to a financial adviser or someone in the loan biz. Lay out your financial situation and come to a realistic conclusion about what you could afford.

No.5: A drastic idea is to consider other states. Sounds like despite your higher rent you're good at saving money. Work another 5-6 years and then move to TX,NC,GA,CO, or some other cheaper state and buy something outright and be debt-free. This is something we have also considered. The recession sort of put the brakes on that. But a decent house in many nice metros like Austin, Raleigh, Nashville, and others can easily be had for 150k or less. Or about 1/4th the price of a crappy starter home in Silicon Valley. Just something to think about.

Good luck.

justwantaniceplacetostay says

What graphs can I see to feel better about this situation :)

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

Whats the max you'd over pay in a year to rent a 2 bedroom ( write that number down) then next to that number write down the amount the realturds will make off your future purchase, or write down what a 3-5 percent loss will be on that condo purchase if /when RE tanks again SF was negative 5.5 percent last year BTW.

also whats the yearly cost of your typical condo HOA fee?? (write that down

Kind of makes your extra rent not look like such a big deal IMHO.

Hope that helps
Money mind tricks work the other way too

Condos are like paying an extra $100K for a place if you consider that HOA fee that never ends.
Save up another $120K. Take your present $120K and buy a Vanguard Tax managed fund with it.
Live with a roommate, a quiet mousey female student may be on craigslist looking right now for a place. Her rich father will pay you nice rent.
Commute from a cheaper location.
There's nothing wrong with your situation except what you are not mentioning: chicks are nagging you for not owning a place.
Because there are jobs in your area there will be less of a collapse of real estate.
You could also roll the dice: you could have made a huge profit if you had taken that $120K and bought AAPL a year ago. Do it now if you have the balls. The only stock that I would do this with is AAPL.
Maybe that's too much, so just buy $100K of AAPL. No sense going whole hog ;)
With your income today I would be going balls to the wall stocks and forget going into debt. But, that's my preference.

Don't ever buy a condo....

justwantaniceplacetostay says

100K is earning nothing sitting around

Think of that 100k vanishing in the next 2-3 years of housing depreciation. Earning nothing is not worst thing in the world. Many people, lots of my friends, are underwater and wishing they were renters now. You are in a strong position. I don't think now is the time at all to lose that position. Listen carefully to the president and the fed when they talk of the housing. They see the real numbers, not the watered down numbers from corrupt organizations like NAR, and they are scared. Very scared.

justwantaniceplacetostay says

Just trying to understand whats happening here

High paying jobs are flowing into the valley. Silicon Valley firms fired them pretty fast in late 07-09, so it was incredible you got a start around 2008.

Google hired around 5K the past 18 months, Apple and the usual tech players and software player. Then there are the new multinationals coming in. Amazon lab 216, Dell research, nokia, Motorola, Ford, GE and hundreds other all doing product design and research in the region. Salaries have risen significantly off of 2009 as well.

If you can start your career in 2008 and saved up 120K in four years not counting maximizing your 401K, there are several thousands other's like you, most have been renting and creating a massive demand in the 2K-3K rent level that most people like yourself prefer.

There's plenty of demand in Silicon Valley, most who rents for 3K can just as easily buy if they choose so. Once you double up and have kids, most people in your income range will eventually buy and especially so in the pipeline as renters will convert to owners once the signal is clear, therefore there are plenty of demand in places like Cupertino. If you wait for it to be safe chances are everyone will do the same and you can forget about a buyer's market.

edvard2 says

No.5: A drastic idea is to consider other states. Sounds like despite your higher rent you're good at saving money. Work another 5-6 years and then move to TX,NC,GA,CO, or some other cheaper state and buy something outright and be debt-free. This is something we have also considered.

The guy is an immigrant in his early 30's. He's not going anywhere and quit his stable job heading in the peak of his career for NC, Austin, GA or CO.

SFace says

The guy is an immigrant in his early 30's. He's not going anywhere and quit his stable job heading in the peak of his career for NC, Austin, GA or CO.

Amazing. I would never in a million years try to assume I knew anything about a total stranger on the internet.

justwantaniceplacetostay says

What graphs can I see

http://research.stlouisfed.org/fred2/graph/?g=4Jy

shows how out-of-phase housing and jobs are in the South Bay since 2000.

during the crush of 2000 housing starts collapsed, and during the dotcom collapse housing starts went up.

Now that hiring is up a bit housing is down!

50 starts a month vs. 20,000 new jobs in a single batch isn't going to cut it.

to feel better about this situation :)

oh.

wow, one guy has you getting married, having kids AND having a mortgage.
Got entanglements with debt? :)

edvard2 says

SFace says

The guy is an immigrant in his early 30's. He's not going anywhere and quit his stable job heading in the peak of his career for NC, Austin, GA or CO.

Amazing. I would never in a million years try to assume I knew anything about a total stranger on the internet.

not amazing, just listening. the guy arleady said the following:

"Thanks for the discussion folks. I have been anti-owning since I started working 4 yrs ago thus just maxed out 401k each yr and paid off student/car loans. Feels good to be debt free in early 30s so I am very cautious about getting into the big debt needed for this"

and

"As an immigrant, I would never leave the Bay Are due to its multiculturalism, ease of assimilation, plentiful jobs and good weather. Only NYC compares favorably but is too crowded for my taste."

http://patrick.net/?p=1206309

SFace says

not amazing, just listening. the guy arleady said the following:

Not sure what you're proving seeing as how one of those quotes was certainly not by me. But that's besides the point. I don't know you nor would I make a claim that I knew what any of your thoughts or ideas might be. Thus there isn't an argument to be had here.

I was in this position last year. My rent at North Park was jacked up 25% and I lost my temper and bought a house in Blossom Valley (South San Jose) with a monthly payment + taxes equal to my raised rent.

Stupid decision making process? Yes.
Has my house lost 25k according to Zilllow? Yes.
Have I spent $15k on repairs and improvements? Yes.
How long I'll have to live here to break even: 7 or 8 years.
Do I regret it? No.

Here's the thing: my "rent" didn't increase this year! All that anxiety is gone. I was paying rent for 12 years before I bought. I'm going to pay off this house in 8. But, unlike 12 years of paying the same amount in rent, I am going to end up with a house that I'll only owe property taxes on ($500/month "rent"--nice).

Plus, all the intangibles: I got a pet (without paying "$50/month pet rent" or begging for a landlord's permission). I doubled my square footage and no longer have to walk 100m and get in an elevator to get from my car to my apartment. Checking my mail doesn't require 2 keys. My mailing address is no longer 5 lines of complex numbers and apartment numbers.

Yes, these grouchy bears will say you aren't wasting money and should keep keeping through the nose for rent in a complex that doesn't even have sufficient parking or that you should commute from the hinterland. Make your own decision.

justwantaniceplacetostay says

Every single quality apartment complex in the south bay area (carlyle, north park, avalon, archstone, etc etc) are now quoting ~2500 for 2BR and ~3200 for 3BR and they barely have any availability. Once of my coworkers got into this 2BR for 1900 a year ago which is now 2480. And I dont want to commute from fremont.

Here's a secret: for $20,000 down and $1,500 a month (total cash flow including taxes and insurance with flood and earthquake coverage) you can have a 1200 square foot 3 bedroom, 2-bath home built in the 1990s with central heat/air and no common walls with neighbors conveniently located in Sunnyvale (adjacent single family houses sell for $600K, town-homes cost $700K, and "luxury" apartments rent for $2100-$2900 a month for 1 and 2 bedrooms) or Mountain View. Annual increases generally run $30 a month.

You do get the stigma of living in a trailer park.

Some are very nice (no renters allowed and all homes must have well-maintained living landscaping in front which is better than the Menlo Park neighborhood I last lived in with $1.5M ranch homes (with gardeners) mixed amongst duplexes and other small apartment buildings (some overgrown with ROUSes lurking in the bushes). Some aren't.

Transaction costs are higher as a percentage but lower in absolute terms than single family or condominium homes. Real-estate agents get 4% a side and listing agents often have an $8K minimum. Loan costs (without tax payments and the things you'd otherwise pay) were on the order of $1700.

Assuming a FSBO exit with $4K commission, $1K legal + listing costs, and flat prices I could break even in 13 months versus a $2K 2 bedroom apartment rental and 7 months versus a $2500 single family home rental.

If the world metaphorically ends we kept our cash, and if it just comes close we can't loose more than $90K on the deal.

saywhatyouwill says

Yes, these grouchy bears will say you aren't wasting money and should keep keeping through the nose for rent in a complex that doesn't even have sufficient parking or that you should commute from the hinterland. Make your own decision.

Well, the thing about renting is that its just much of a diverse decision with as many diverse choices as buying. We rent a large house but our rent has not gone up. Except this year for a piddly amount. We have pets too and the landlord is ok with that. Our rent is inexpensive and it would take 10-15 years to make up for the typical bay area down payment now required for your typical postage stamp 550-600k starter home. We've been in this house for over 8 years. I know all the neighbors and the neighborhood like the back of my hand. Ironically we've been there longer than about 1/3rd of the street as houses get sold and bought in an endless cycle.

At the same time I can see the positives in buying. You get your "own" space. You can do with it ( to an extent according to local and state codes) what you want. Eventually someday in the distant future it'll be "yours" ( except you'll always owe taxes and things like roofs, drywall, paint, and concrete are expensive), but the end goal is to free up money for other things- like retirement for example. You don't have to worry about rising rents come the inevitable latest-greatest bay area bubble. It also gives you a sense of permanence and a means to become part of the community.

But to me about 90% of the reason people buy are more for psychological versus financial reasons: The fear of rising rent, the belief that having kids or getting married automatically means they "should" buy a house. Societal pressures and expectations or maybe even peer pressure from co-workers and friends who bought. Let's face it: Go to any party in the Bay Area with folks in their 20's-40's and the conversation very quickly turns to housing since its perhaps the most dominating thing in the Bay Area due to its exorbitant costs. I have to admit that its a cozy idea. I would be lying if I too didn't want to buy a house. We've been saving forever. We'll buy someday. Not sure if it'll be here. But at the same time buying has risks, just like renting. You could lose a job ( I've lost a job twice in my young career so far), or some other real-world scenario. Perhaps your job requires you to relocate, or some other unforeseen event.

All things to consider. In the end there's not really a wrong choice.

E-man says

SFace debunked this thing with you a couple of times in different threads already. Why are you keeping on repeating this fallacy? Maybe real estate in NC and TX doesn't outperform the stock market, but not in the Bay Area. Again, timing is everything.

Its basic econ 101 that if you look at any chart showing the comparative performance of overall real estate versus overall stocks it breaks down as follows since the 1890's.

Stocks: Since 1900 to 2011 the overall average return has been around 7%-9%

Real Estate: To be more specific, nationally real estate only returned in and around 3%-4% from 1900-2010.

Keep in mind we're talking about broad statistics. But in that regard stocks are more favorable because you can in fact invest very broadly in it versus real estate where its more like betting everything on red ( because most people can only afford ONE house in a single area) which means no real diversification.

edvard2 says

Stocks: Since 1900 to 2011 the overall average return has been around 7%-9%
Real Estate: To be more specific, nationally real estate only returned in and around 3%-4% from 1900-2010.

every time you make this claim, either you intentionally or unintentionally forget the housing dividend. If you buy to live for yourself or lease to someone else, that will generate a cash return or avoid rent which is another form of cash return. Coupled with the dividend (which is already included in your stock return but not house return), buying beats renting historically.

No- real estateE-man says

Real estate is about leverage. If you're leveraged 5:1. A 3% appreciation will give you a 15% return on your money. Beats the heck out of the stock market. What if you could leverage 30:1?

If leveraging is supposed to be the magic moneymaker for real estate then then of course you couldn't ignore compounding interest when it comes to stocks. What most people fail to comprehend is that with stocks, there comes a point where once a stock matures to a certain point it begins to compound at dramatically greater and greater overall value. This alone is yet another reason why stocks are by and far a much better investment than real estate. Either way, this is an old argument and trying to explain basic, fundamental economics is tiresome.

SFace says

every time you make this claim, either you intentionally or unintentionally forget the housing dividend.

Why would I care about "housing dividends" when I can just as easily mention stock dividends? As much as half of your typical appreciation in stocks comes from dividends. The real question is what investment, overall will perform better. As I very clearly showed above and as can be easily looked up in any basic economic primer, stocks by and large are the better investment.

edvard2 says

Why would I care about "housing dividends" when I can just as easily mention stock dividends?

Of course it matters, the 9% historical return you swear by already includes dividend. That is capitals gains and release of equity.

That 3-4% housing return is strictly capital. It does not include cash dividend the owner enjoys by renting the home out net of expense. Or conversely, the cash saved from avoiding rent net of direct expense.

If you fail to see that, you need econ 102. I just had to point out this fatal flaw to your conclusion and add value to Patrick.net.

SFace says

Of course it matters, the 9% historical return you swear by already includes dividend. That is capitals gains and released of equity.

This is a cyclical argument.

But to play along further, a few critical and overly obvious things are being left out of the whole "housing is better" suggestion. With housing comes expenses and that includes:

Buying costs
Selling costs
Maintenance
Taxes
Interest
Insurance

On top of that for most who buy the house ISN'T AN INVESTMENT!
What I mean by this is so let's say Mr and Mrs homeowner own a nice little cottage they bought 10-15 years ago. Let's assume they sell at the peak of a housing bubble. Great. They pocket whatever appreciation they might have gotten. Only problem is that all the other houses in their area are ALSO just as costly. Thus if they don't want to rent they would then have to pour that money right back into another house. That is unless they did like a lot of Californians and "cashed out" and moved to Texas.

lastly, if I buy a stock , that stock won't need paint, light bulbs, lawn care, plumbing, or a new roof every 20 years. Nuff' said. I've already said what I want to say and if others want to believe real estate is a better investment despite what the history books say then great. Buy some houses. I personally don't care.

edvard2 says

We rent a large house but our rent has not gone up. Except this year for a piddly amount. We have pets too and the landlord is ok with that. Our rent is inexpensive and it would take 10-15 years to make up for the typical bay area down payment now required for your typical postage stamp 550-600k starter home.

If I was in this situation, I would have kept renting too.

In the South Bay, rents are going up 5%-10% city-wide. The complexes like North Parks and Avalons have increases of 25% or more. The question for someone in the complexes (like the OP) is whether the inflating rent justifies the risk inherent in buying a house at this time.

saywhatyouwill says

If I was in this situation, I would have kept renting too.

Our situation is a bit unusual in that the LL bought the house a long time ago, likes us, and we take care of the place. He's totally aware that he could turn around and ask a lot more for it. But I assume having good tenants is pretty valuable. My parents owned 2 rental propertied when I was growing up. It was a royal pain in the ass and if you got renters that messed things up it was pretty costly- even if the repairs were minimal. So as a result I try and take good care of where we rent. The situation is probably different for apartment complexes where I imagine rent is raised automatically with the market. If rents were to go crazy in our area ( hopefully not for a while ) of the LL raises the rent dramatically we "might" consider buying. Until things are fine and I see no reason to buy.

The OP question brings up a calculation I've been pondering.

Using his numbers, let's say the choice is either renting at $2500 or buying at $500k.

Using some bearish/renter friendly numbers: rent doesn't rise in 10 years, housing prices continue to deflate slowly at 3% each year for the next 10 years.

At year 10, if you rented at $2500/mo, you've spent $300k on rent. The $500k house is now $350k. Let's suppose you were able to save an additional $250k (on top of the $100k you already have) and buy in cash, that purchase is now equivalent to a $650k purchase.

At year 10, if you buy now with a 15 yr fixed rate mortgage @ 3.25%, your total payment (P+I) after 15 years is $605k. I believe the view is that prop taxes are a wash with the mortgage discount.

The key assumptions are that rents stay flat for 10 years - highly questionable based on recent data, and prices don't decline rapidly or more than 30%.

To me, if these are the two options, it seems like buying is a better choice. If prices go down less than 30%, it's by far a better choice.

edvard2 says

This is your decision. But here are some of my opinions and not financial advice.

Thanks edvard2. As SFace deciphered from his sleuthing :), I am an immigrant who in 30s except that I spent way too much time getting a masters and phd degree instead of working right after a masters degree. I probably have to stay here for career purposes until much later.

I am good on the retirement front, maxed out 401k starting 2008 and the 5K trad IRA so have around $125K there and continue to do that. I agree thats more important to continue than the house.

It would be great find that elusive good landlord situation. Some of those individual condos seem to run less than the complexes at around 2100 for 2br even in sunnyvale.

Perhaps another option you might want to look into is in renting a house and perhaps doing so with another housemate)s). That's the way we've always done it. The advantage over renting in a complex is that often times the LL is a small time landowner who usually owns just that house. In older neighborhoods you'll find a lot of houses owned by folks who bought them as a rental in the 60's-70's and have owned them forever and thus they're not as likely to raise the rent if they get a good renter. I've lived here for 12-13 years and have never paid more than an average of $650 per person. Rent has never been a big expense for me.

E-man says

edvard2 says

Stocks: Since 1900 to 2011 the overall average return has been around 9%

Real Estate: To be more specific, nationally real estate only returned in and around 3% from 1900-2010.

Real estate is about leverage. If you're leveraged 5:1. A 3% appreciation will give you a 15% return on your money. Beats the heck out of the stock market. What if you could leverage 30:1?

Cheers. :)

Learn from your victory. Prosper from your failure.

Works both ways unfortunately. A 3% depreciation gives you a 15% depreciation. That beats the heck out of no one but yourself and your savings. 30:1? Why, are you feeling lucky today? You deserve what you get if you play this game of leverage, so no tears when you lose everything.

E-man says

SFace debunked this thing with you a couple of times in different threads already. Why are you keeping on repeating this fallacy? Maybe real estate in NC and TX doesn't outperform the stock market, but not in the Bay Area. Again, timing is everything.

Like the timing from 2007 to now? -30% on most houses. That didn't beat the market. Real estate sucks most in the bay area. You overpay and then can lose more than you really should. You know something is wrong when most people have to get jumbo loans just to afford a standard 3/2.

you want feel good news? hmm...well...

E-man says

SFace debunked this thing with you a couple of times in different threads already. Why are you keeping on repeating this fallacy? Maybe real estate in NC and TX doesn't outperform the stock market, but not in the Bay Area. Again, timing is everything.

I missed SFAce's debunking. Am I to think he was more thorough than the sources cited in this article? This article claims Shiller has calculated the mean return on investment in real estate to be 3%.
http://money.cnn.com/galleries/2007/real_estate/0704/gallery.stocks_v_realestate.moneymag/index.html

Actually, a 3% ROI is pretty sweet in today's financial climate.

FunTime says

I missed SFAce's debunking. Am I to think he was more thorough than the sources cited in this article? This article claims Shiller has calculated the mean return on investment in real estate to be 3%.
http://money.cnn.com/galleries/2007/real_estate/0704/gallery.stocks_v_realestate.moneymag/index.html

The headnote numbers fail the application test and is not measuring the same thing. In real life,

If I bought a house for investment for 200K and rent is 1,300 bucks a month on the get-go, historicaly over 100 years, that 200K house had returned 3%-4% appreciation, well below equity.

But the caveat is the housing dividend that are not counted:

Annual rent: 15,600
Property tax: (2,500)
Provision for maintenance (2,000)
Insurance and other Cost (1,500)
Return 9,600
Housing Dividend 4.8%

If you bought a house for investment historically, in addition to the actual appreciation, the home owner pocketed about 5% as well. Actual return is on par with equity. If you bought a home to live, the 200K investment saved you (15,600 bucks in rents avoided less direct cost) 9,600 bucks in rent as well, another form of dividend.

How does an apartment REIT make their money? They make money on the cash return from operations and the cash return from appreciation. A mortgage doesn't change that fact as leverage offsets the cash flow reduction.

saywhatyouwill says

I was in this position last year. My rent at North Park was jacked up 25% and I lost my temper and bought a house in Blossom Valley (South San Jose) with a monthly payment + taxes equal to my raised rent.

The rent in South Bay has increased tremendously this year, but I was surprised by the 25% hike in your rent. We live at North Park and were told the max increase was 10% and our rent went up about 8%, from $2025 to $2195 for 2B2B late last year. I think current tenants tend to get better rates than newcomers. Maybe, you were paying much lower market rate.

SFace says

If I bought a house for investment for 200K and rent is 1,300 bucks a month on the get-go, historicaly over 100 years, that 200K house had returned 3%-4% appreciation, well below equity.

I think the problem with this argument is that there are two totally different forms of data being discussed in parallel. Sure- I too could just as easily stick in a "What If" scenario. I previously mentioned that on average and historically speaking stocks have returned around 7-9%. That is an overall general average. I could turn around and create a totally realistic scenario claiming that if I were to invest in XXX stocks and do XXX in regards to my investment strategy and also happened to do XXX at a certain time and so on and so on my returns could just as easily be more like 15-20%, which as seen from the past has happened and sometimes for a long streak.

Saying that you get XXX in rent and so on is like saying I invest in XXX stocks in order to end up with XXX results. That still does not really change the overall long term trend which is as stated before, stocks in general will outperform real estate. That doesn't mean that some people can't find ways to make more from real estate than if they had invested in stocks. Likewise there are also plenty of people who make many times more the average return in stock investments and more so than if they had taken the same amount and stuck it in houses.

But the takeaway is what does this all boil down to comparing the two?

Real estate: 3-4%
Stocks: 7-9%

SparrowBell says

saywhatyouwill says

I was in this position last year. My rent at North Park was jacked up 25% and I lost my temper and bought a house in Blossom Valley (South San Jose) with a monthly payment + taxes equal to my raised rent.

The rent in South Bay has increased tremendously this year, but I was surprised by the 25% hike in your rent. We live at North Park and were told the max increase was 10% and our rent went up about 8%, from $2025 to $2195 for 2B2B late last year. I think current tenants tend to get better rates than newcomers. Maybe, you were paying much lower market rate.

From what I gather its a matter of timing. People got really good deals around oct nov when all the interns for tech companies left. Many of these places are rented for intern corporate housing in summer.

In many of these places there seems to be some online system that changes prices on a daily basis based on supply and demand. Also apartments that are more than 2-3 weeks start decreasing in rent. e.g there was one 2BR in Bella Vista going for 2190 but only one.

But on average and 1BR is 1850-1950, 2BR is 2250-2450 and 3BR is pushing 2750-3050.

Last year a 3BR in Avalon was 2345

edvard2 says

lastly, if I buy a stock , that stock won't need paint, light bulbs, lawn care, plumbing, or a new roof every 20 years. Nuff' said.

There's a lot along this line that rarely gets said and I agree strongly with this line of thinking. My stocks don't call me on the phone. Time is most of what we get from life. I already spend more of mine working than I want, so investments that require more work are not interesting.

I also think a belief in leverage is a belief along the lines of "some things do come for free." I just see a lot of stress in the lives of my friends who are leveraged. All investment advice starts with risk comfort, but I think few really figure out, or are in touch, with their investment and risk comfort

saywhatyouwill says

Has my house lost 25k according to Zilllow? Yes.
Have I spent $15k on repairs and improvements? Yes.
How long I'll have to live here to break even: 7 or 8 years.
Do I regret it? No.

Here's the thing: my "rent" didn't increase this year! All that anxiety is gone. I was paying rent for 12 years before I bought. I'm going to pay off this house in 8. But, unlike 12 years of paying the same amount in rent, I am going to end up with a house that I'll only owe property taxes on ($500/month "rent"--nice).

Plus, all the intangibles: I got a pet (without paying "$50/month pet rent" or begging for a landlord's permission). I doubled my square footage and no longer have to walk 100m and get in an elevator to get from my car to my apartment. Checking my mail doesn't require 2 keys. My mailing address is no longer 5 lines of complex numbers and apartment numbers.

^^^This! Similar situation, bought in late 2010 and don’t regret it a bit. We rented for 7 years (thanks to Patrick.net for helping me keep my sanity when no one out there thought prices in the BA could fall). We had saved a large down payment plus 1 year of living expenses in case of job losses. I actually expected our value to be much lower by 2012 and for the market to be slower but two houses in my neighborhood went sale pending recently within one week of listing – this is San Jose-Willow Glen/Rose Garden and the schools are not good (except for Bellarmine). The prices seem to be stabilizing (for the moment).

At the end of the day you need to do what makes you happy, whether that means renting and stashing cash or enjoying owning your own home. No one knows the future so you can only do your best to estimate the future market. Life is not a purely financial decision though – at least not for me.

Personally I would not buy a condo. We rented one for 7 years and while the rent did stay low (had a great private owner landlord), the HOA was power hungry to the point that they complained about my plants on the deck. Who doesn’t like plants? I have a nice garden now :) (not that you couldn’t have that if you rented a house). I hope to pay this place off in 10 years and then just owe property tax. I do not think Prop 13 is a good thing but it is what it is and definitely has advantages.

Rents are a roll of the dice. I remember during the height of the dotcom days paying $2450 for a mediocre 2/1 in Mtn View. I’m glad to be done with that. Of course I cannot just move at the drop of a hat now…

Regarding MID, it’s one of the only deductions you get if you happen to be “lucky” enough to get nailed with AMT.