patrick.net

bubblesitter says

1 more. My rent has not increased in 4 years - not the only exception.

And another. I've only had 1 $50 rent increase in the last 7 years.

RentingForHalfTheCost says

1) buy now at 4% so you can refi at 2% if rates go down - good choice
2) buy now at 4% and kick yourself in the ass when rates go to 6% and your property value sinks by 20%

Re: 2) Why do I kick myself in the ass then? - Do I live differently in the house if it would be worth less than when I bought? I pay my low monthly mortgage that is not going to change ever and move on. The only time you worry about papervalue of the house is if you sell it. In my case, I am not worried about that. I don't want to sell this house. If things go well, I'll buy another house and rent this one out. And with such a below rent mortgage, its easy to break even or even make money with that. When you rent, do you care about what the house is worth? So if you pay 2500/month in rent and the house drops in 100k in value...do you think you get a rent deduction? No. You keep paying 2500 regardless what the house is worth.

The other thing is...if interest rates go up does not mean home prices will crater. It also means that things are picking up. How many people paid ridiculous prices at 6%?

Is it possible that the folks who have little to no rent increases are indirectly benefiting from prop 13 and the time that the owner bought the property? meaning, if they have a small mortgage themselves, they really only want to pay the note plus some profit, but don't need to cover a bubble note and taxes?

Just a thought.

CL says

Is it possible that the folks who have little to no rent increases are indirectly benefiting from prop 13 and the time that the owner bought the property?

Our rent is cheap for the neighborhood (3 br SFH) but it is still $2600 month. The landlord paid off the mortgage a long time ago and pays $800 year in taxes.

We have paid over $400K in rent while waiting for this bubble to pop. Renting is cheaper than buying IF rents are cheap, which is not the case in plenty of places.

So for us, 100K down on a 500K house is a no-brainer.

Now, finding a nice place in a good neighborhood for 500K - that's a whole nuther thing.

tiny tina says

If you are going to do the analysis, you have to get the numbers right. A 400k mortgage at 4% is 1900/mo (30 yr). Property taxes would likely be another $500 and insurance another $80. So you are looking at approx $2500 total. But if you really want to be fair, you need to factor in MID and the fact that you are paying principal as well. I think you are overestimating on maintenance.

In my post I specified over $2,000 per month, which is also the conclusion you made. Thus your analysis is the same as mine. As far as maintenance, well for starters, where do you live? If its not California then that's a whole different ball of wax. I have numerous friends who have bought houses and it doesn't take much to suddenly need to spend 10's of thousands of dollars- such as if you need a new roof, any sort of major or even minor plumbing/electrical work, or construction work. If the house needs foundation work then you could very easily be looking at 100k or more. So maintenance is extremely variable and something I've never had to worry about as a renter.

RentingForHalfTheCost says

BoomAndBustCycle says

Hysteresis says

We just bought and my landlord listed our rental for the SAME price as our mortgage payment! And it does not even have a garage! Rents are insane in desirable areas!

rent is cheap

Rent is FAR from cheap... Last I checked rents were at a historic all-time high and increasing.

In the BA rents are way under the ownership costs. By a lot! That makes them cheap when comparing against the alternative of buying.

edvard2 says

In my post I specified over $2,000 per month, which is also the conclusion you made. Thus your analysis is the same as mine. As far as maintenance, well for starters, where do you live? If its not California then that's a whole different ball of wax. I have numerous friends who have bought houses and it doesn't take much to suddenly need to spend 10's of thousands of dollars- such as if you need a new roof, any sort of major or even minor plumbing/electrical work, or construction work. If the house needs foundation work then you could very easily be looking at 100k or more. So maintenance is extremely variable and something I've never had to worry about as a renter.

You started by saying a $400k mortgage is over $2k - it's just not true. Anyway, I do live in the BA. As I said, you may be able to find a house with a new or relatively new roof and not need to worry about a big expense any time soon. We bought and had our roof repaired - cost $1k. We also had some electrical work done, around $500. These are things that can easily be found out by an inspection before purchasing. As for foundation issues, again, it should either be disclosed by the seller (if known) or determined by an inspection before purchasing. I'm not sure how many houses have foundation issues, but to write off housing as a whole because a small number have foundation issues is as silly as not buying in CA because an earthquake may hit some day. It seems more and more like some people just make up stuff to worry about to justify not purchasing. Nothing in life is certain - no crap. Your chances of getting killed or severely injured in a car accident (with your long commute) are much, much higher than the things some of you guys are worrying about.

I am not buying a house in Bay area. Old dilapidated houses selling for half a million+. Crap. I just bought a brand new house in north Gilroy. Commute is about 10 miles longer than it would be where I was planning to buy earlier but I got excellent price for a five bedroom house, something you would not find in crowded areas in silicon valley..

The days of easy credit for mortgages are gone for at least a generation -- so the chance of another bubble in the BA is zilch.

That is not to say that there will not be bidding wars in the fortresses -- there already are. Difference is that instead of dozens of bidders there will be just a few and instead of going for 10 - 15% over asking, it will be just 1 -5%.

tiny tina says

You started by saying a $400k mortgage is over $2k - it's just not true.

A $400,000 mortgage at 4.25% ( which is incredibly low and I would assume I'd get because I have a credit score of over 800) would be $ 1,967.76 . Thus if the argument is over 30-40 bucks, then I "guess" you can claim you won the argument. But that's pretty close to being $2,000 so what's the difference? Additionally, that 400k price didn't include the $100,000 down payment. Divided over 30 years that works out to be an additional $277 per month. Thus if we're gonna' get literal and specific, that means the monthly cost if all dollars were accounted for would be $2,244.00, if the down payment were also included into the mix.

Also- a good foundation and a bad foundation are night and day in terms of how well a house will not only hold up in an earthquake, but hold up in general. I know this because at one time in my life I sold earthquake retrofit hardware and let's just say that if your house is not properly secured then the chances of the house literally falling down in an earthquake are drastically higher. A lot of the houses in the BA are built in the 20's-40's and A LOT of them have crumbling, older, and inadequate foundations. But even for something as routine as needing new new shingles for the roof, you're easily looking at anywhere from $20,000-$40,000. Most asphalt based shingles are good for maybe 15-20 years. They DO wear out and they must be replaced unless you want the roof to rot away. So for the typical owner they can expect to spend money on at least 2 sets of shingles over a lifetime, thus figure a total of $40,000-$80,000 over the life of the house... for a set of shingles. Also- ever bought exterior paint? The decent stuff is around $30-$50 per gallon these days.

The decision to purchase for us isn't that big a deal. Like I said, we've saved for well over 10 years and if we really wanted to we could simply semi-retire to another state and say the heck with it. I came from another part of the country where 400k is the absolute nicest house on the block. A house with ACRES of land. For 200k I could own a pretty nice house on a decent amount of land and have a ton leftover. So perhaps my idea of "value" is different from others who might have only skipped from one major metropolitan area to another as most in the BA have done. Its just that for me, when I look at our situation, which is about the best scenario you could get- perfect credit, good jobs, lots of savings, retirement, and so on, at the end of the day $400,000-$500,000 for a mediocre house is still pretty ridiculous.

SubOink says

RentingForHalfTheCost says

Today's 4% could turn into 2% before this free money train turns around. Then home prices could go up for a change. ;)

So what. Then you re-fi at 2% and it gets even cheaper.

Austinhousingbubble says

SubOink says

those that can afford to buy - buy. Those that can't - don't. It's been that way forever.

Ha! (HA!!!) The choice whether to buy anything today has more to do with available credit than it does with individual solvency.

And in order to get credit you have to qualify. Some do, some don't.

In US, there are many not qualified for refinance. Too many who can't afford buy houses. Not many aspire to be landlord, most here are probably interested in buying homes for themselves or I could be wrong. If u cn buy a couple of houses for renting, maybe can't put yourself in the same league with others. Can't dictate what others to do based on your financial situations. Most don't buy for various reasons ..... Loan qualification doesnt mean much in affordability. Many might qualify for 1M loan, but how many could claim that they still have same discretionary spending as before after the purchase.

Edvard, all I asked is for you to do the numbers accurately. I'm not sure why you keep running away from this and continue on about how you could semi-retire in another part of the country. I assume next you'll start going on about stocks as great investments. Just do the math with all of the correct variables: MID, money towards principal, etc. You keep doing half-A'd analysis. I think if you did a full analysis, you'd find that purchasing is not nearly as expensive (compared to renting) as you are making it out to be.

tiny tina says

Edvard, all I asked is for you to do the numbers accurately.

.... which I already did in the highly detailed response above. No further explanation needed.

SparrowBell says

Too many who can't afford buy houses.

Have you gone thru the loan app process in the last 2 years? I have. It's changed. Now, its actually pretty tough to get a loan. Just like they gave a loan before to anyone that had a last name, now its equally as hard. So you are wrong in saying that people that can NOT afford a home, buy one. At this point, if you get a loan, you can afford it.

SubOink says

SparrowBell says

Too many who can't afford buy houses.

Have you gone thru the loan app process in the last 2 years? I have. It's changed. Now, its actually pretty tough to get a loan. Just like they gave a loan before to anyone that had a last name, now its equally as hard. So you are wrong in saying that people that can NOT afford a home, buy one. At this point, if you get a loan, you can afford it.

They asked us for credit reports, three months of pay stubs and a verification letter from each of our employers. That was it.

sheltielover1 says

In the BA rents are way under the ownership costs. By a lot!

Vallejo or Richmond or parts of Oakland, maybe.

The "Bay Area" is too diverse economically to make broad statements like this.

edvard2 says

.... which I already did in the highly detailed response above. No further explanation needed.

Are you kidding? You've never once accounted for MID or principal payments in your calculations. You've clearly made up your mind against purchasing, so why let a full analysis get in the way of that.

rootvg says

They asked us for credit reports, three months of pay stubs and a verification letter from each of our employers. That was it.

You didn't have to provide documentation of assets (bank accounts, investment accounts, etc.)?

tiny tina says

Are you kidding? You've never once accounted for MID or principal payments in your calculations. You've clearly made up your mind against purchasing, so why let a full analysis get in the way of tha

Nope. As mentioned, my full explanations makes it very clear, and thus once again, I stand by my statements which are based off of simple mathematics and nothing more. Either way, I already fully and easily proved my above points.

rootvg says

They asked us for credit reports, three months of pay stubs and a verification letter from each of our employers. That was it.

Plus bank accounts and assets.
And when you are self-employed the real fun starts...

Now try getting a loan without two jobs...without sufficient income...without any savings...

That was my point. If you qualified easily, as in... have enough income, stable jobS then bingo then you can afford it. But that does not mean its easy to qualify.

tiny tina says

You didn't have to provide documentation of assets (bank accounts, investment accounts, etc.)?

Yes, 3 months of bank statements, too.

1sfrenter says

Yes, 3 months of bank statements, too.

So aside from providing most if not all of your recent financial history, they didn't ask for much.

When we refi'd recently, they also asked for 2 years of tax returns and specifics about our rental properties. I don't think they could have done much more of a thorough job. If every bank does similar analysis, then people who are buying nowadays are more than qualified.

tiny tina says

1sfrenter says

Yes, 3 months of bank statements, too.

So aside from providing most if not all of your recent financial history, they didn't ask for much.

When we refi'd recently, they also asked for 2 years of tax returns and specifics about our rental properties. I don't think they could have done much more of a thorough job. If every bank does similar analysis, then people who are buying nowadays are more than qualified.

A friend of mine from Ohio said a colleague of his applied for a loan and the bank wanted THREE YEARS of financial statements.

tiny tina says

rootvg says

They asked us for credit reports, three months of pay stubs and a verification letter from each of our employers. That was it.

You didn't have to provide documentation of assets (bank accounts, investment accounts, etc.)?

No, that was it.

rootvg says

tiny tina says

rootvg says

They asked us for credit reports, three months of pay stubs and a verification letter from each of our employers. That was it.

You didn't have to provide documentation of assets (bank accounts, investment accounts, etc.)?

No, that was it.

Just to clarify. We are not talking about getting pre-approved but going thru the loan process for real. Did you buy a house?

No, this was the whole process.

It seems to me that banks take a lot more time going over you if this is to be your first home. When we bought our first one in 1995 in Texas for eighty grand, you'd have thought it was eight hundred grand. In 2003, we borrowed two hundred grand and it was like applying for a car loan. The process here this year wasn't much different. Everything is online now. Most of the documents we submitted were soft copy and confirmed over the telephone.

The question is like asking what I would do if I were going to be struck by lightning. It's possible but so improbable I don't give it any serious thought.
No matter WHAT happens to real estate prices where I am, I'm going to do the same thing I have been doing since 1982, buy mutual funds.
Stocks balls to the wall baby.
Why stocks you ask? (in case you ask). Interest rates are low.
The TV talking heads who want to hear themselves talking for as long as possible may present a more windy answer, but that is the short answer.
I told my friend a few years ago who wanted me to get silver (for some reason he liked it more than gold).
I wanted to buy gold and swiss francs myself three years ago, but I could NOT make myself do it, and I got more AAPL, my one and only stock besides mutual funds.

tiny tina says

rootvg says

They asked us for credit reports, three months of pay stubs and a verification letter from each of our employers. That was it.

You didn't have to provide documentation of assets (bank accounts, investment accounts, etc.)?

Nope.. They asked for the amounts in 401k. Told them, but did not need to provide any docs. It took us 2 weeks to get our loan approved and completed.

There is no way anyone who actually traveled to anywhere else in the US, would think that buying a house in the Fortress is a financially savvy decision. As it stands you can buy a house in the best town in Chicago for about 1/5 of what you would pay in a comparable fortress area of SJ/SF. As far as the amenities, let's compare:

Jobs - Chicago is much more diverse
Pay - About the same, unless you are working in the financial sector, then Chicago is higher.
Public Transportation - Chicago wins head-over-foot
Culture (Museums, Theaters, Music) - No question there (Chicago winner again)
Nature - Tie (Chicago has more green stuff, BA more mountains)
Friendly People - Chicago, winner again.
Fresh Water - Great lakes is the largest supply of fresh water in the world.
Earthquakes - Sorry Chicagoans, the Bay Area has you beat, there.
Sports Teams - Chicago has better teams.
Food/Restaurants - Chicago has better, unless you are Asian.
Schools - Chicago, again no question.
Weather - Yes, agree BA has the better weather, but that's about it.

So after this comparison, do you still think that the BA fortress should be 5x higher than the Chicago fortress?

tiny tina says

I think you are overestimating on maintenance. Most things can be done by yourself, and you never know - you might buy a place with a new A/C or roof, so a big expense isn't likely for many years.

Have you seen the current stock of housing in the BA. For past time I take the family at least once a month and check out half a dozen housing around the peninsula. Maintenance is not something you can gloss over with most of the houses. Single pain windows tells you right away the state of things. Most functional pieces of the house are as old or older than me in most cases. You do find a few that have been totally retrofitted, but they tack on another 500K or more to the price to account for the 200k in renovations they did.

Maintenance is a nightmare, I have owned many homes in my life time and have many rentals. Anyone that downplays it is either not paying attention or have a biased slant. 1% of the property value is not uncommon. You might get lucky for a few years, then bam! back to the trend line. ;)

So far in my rental for the last 2 years, I have calculated at least 20K for the owner in issues and this place is pretty well kept compared to most.

tiny tina says

Edvard, all I asked is for you to do the numbers accurately. I'm not sure why you keep running away from this and continue on about how you could semi-retire in another part of the country. I assume next you'll start going on about stocks as great investments. Just do the math with all of the correct variables: MID, money towards principal, etc. You keep doing half-A'd analysis. I think if you did a full analysis, you'd find that purchasing is not nearly as expensive (compared to renting) as you are making it out to be.

I thought his number were much more detailed than yours. I disagree with your comment about purchasing is less than renting in the BA. This site was created because it is not. Period.

tiny tina says

edvard2 says

.... which I already did in the highly detailed response above. No further explanation needed.

Are you kidding? You've never once accounted for MID or principal payments in your calculations. You've clearly made up your mind against purchasing, so why let a full analysis get in the way of that.

MID and principle payments are dwarfed by the month to month declines around here. Let alone the yearly declines. I'd say renting two places is getting equivalent to purchasing one in most of the BA. Yup, you heard me.

SubOink says

SparrowBell says

Too many who can't afford buy houses.

Have you gone thru the loan app process in the last 2 years? I have. It's changed. Now, its actually pretty tough to get a loan. Just like they gave a loan before to anyone that had a last name, now its equally as hard. So you are wrong in saying that people that can NOT afford a home, buy one. At this point, if you get a loan, you can afford it.

If you can afford a home then you don't need a loan. Pretty simple. :)

Those that can't afford rent money in order to buy. Then you chip away for the next 30 years paying back the bank. You basically take from your future to improve your present. Works well in an appreciating house market, sucks like the dickens in a depreciating market (what we are currently in).

SubOink says

And in order to get credit you have to qualify. Some do, some don't.

Yeah, but let's be clear...the bar to qualify for a 97% leveraged loan is pretty fucking low and getting lower. Loan originators, at the behest of the NAR lobby and even the FED, have actually relaxed some of the standards this past quarter.

It's less to do with those who can afford to buy, buy and more like those who are allowed the facility to speculate, speculate.

Austinhousingbubble says

SubOink says

And in order to get credit you have to qualify. Some do, some don't.

Yeah, but let's be clear...the bar to qualify for a 97% leveraged loan is pretty fucking low and getting lower.

It's less to do with those who can afford to buy, buy and more like those who are allowed the facility to speculate, speculate.

Finally, someone talking sense. I couldn't agree more. No where else in any asset class can you get someone to take 97% of the heavy lifting. This is a housing welfare country, always has been always will be. We are just now starting to see the damage that can do to everyone. I don't mind helping kids get educated, I don't mind helping people ride bullet trains between SF and LA. I'll even go so far as to say I don't mind supporting the national sporting teams. I'll be dammed if I am happy with my money bailing out the greedy and the idiotic. They shouldn't receive one cent of my tax money. I work hard to not be them, not to help them push their immoral virtues down my throat.

RentingForHalfTheCost says

If you can afford a home then you don't need a loan. Pretty simple. :)

Nonsense.

Austinhousingbubble says

Yeah, but let's be clear...the bar to qualify for a 97% leveraged loan is pretty fucking low and getting lower. Loan originators, at the behest of the NAR lobby and even the FED, have actually relaxed some of the standards this past quarter.

Go thru it and you'll see for yourself.

If you can afford to rent a house at 3000/month then you can afford to pay off a house for 3000.-/month

I don't see the logic. Sorry.

SubOink says

If you can afford to rent a house at 3000/month then you can afford to pay off a house for 3000.-/month

I don't see the logic. Sorry.

The logic is pure and simple. A house which I own with a $3000/month (PITI) in my neighborhood, isn't the same house I rent for $3000/month.