patrick.net

Not owning something outright is not remotely the same as renting it.

You are right. When you own it you have to pay interest, taxes, maintenance, mortgage origination fees, and realtor fees when you sell it. Thanks for the clarification.

EconPete says

You are right. When you own it you have to pay taxes, maintenance, mortgage origination fees, and realtor fees when you sell it. Thanks for the clarification.

Yes, and when you have paid off your mortgage, you can sell it and keep the proceeds. What can you sell after 30 years of renting?

I can't believe this argument continues to be made on pat.net. If you can't see the difference between renting and owning with a mortgage, then you should probably continue to rent. You don't have the financial sense to be a homeowner.

tatupu70 says

I can't believe this argument continues to be made on pat.net. If you can't see the difference between renting and owning with a mortgage, then you should probably continue to rent. You don't have the financial sense to be a homeowner.

I agree completely.

For example, paying $2000 per month in interest + property taxes + insurance + maintenence isn't any different than paying $2000 per month in rent. It's money "down the drain" that you'll never see again.

If you can't see that, you probably don't have the financial sense to be a homeowner.

During the bubble, prices were so high that in many (most?) cases a person could lose much less equity (money) per month renting than "buying." Now that prices have returned to "normal", that's no longer the case.

wthrfrk80 says

I agree completely.

For example, paying $2000 per month in interest + property taxes + insurance + maintenence isn't any different than paying $2000 per month in rent. It's money "down the drain" that you'll never see again.

If you can't see that, you probably don't have the financial sense to be a homeowner.

During the bubble, prices were so high that in many (most?) cases a person could lose much less equity (money) per month renting than "buying." Now that prices have returned to "normal", that's no longer the case.

For the OP's comment, it's irrelevant whether a person made or lost money on their real estate purchase. It still remains that buying a house does not mean you are renting it from a bank.

You don't own it until you pay it off. That's why banks want you to put down 20%, it mitigates all the risk, so even if you stop paying they'll still win by selling it later.

But if your liabilities are no bigger than 25% of your take home income you should be fine. We paid cash for our place, so not a dime to a bank and of course cuts down on closing costs.

wthrfrk80 says

For example, paying $2000 per month in interest + property taxes + insurance + maintenence isn't any different than paying $2000 per month in rent. It's money "down the drain" that you'll never see again.

Utilities go up too, significantly.

I'd buy renting from the City/Country/State as for property taxes as those fees never go away. But for a mortgage you gotta live somewhere. I'm paying less than what I paid for a smaller house that I rented for ten years.

Your argument didn't even make sense during the bubble, as it was cheaper to rent, I couldn't figure out any rhyme or reason for buying those super inflated houses back then.

Check out the stats for my neighborhood. Zillow and the loser investor committee, are working overtime to spin the facts.

But it says here, the average LISTING price is 226K while the average sale price 68K(mostly 1br condo sales and smaller 800sq ft 2br houses).
Avg. Listing Price $226,556 Wk ending May 02
+$13,530
+6.4%
w-o-w
Median Sales Price $68,100 Feb '12 - Apr '12
-$3,125
-4.4%
y-o-y
128 Homes For Sale 0 Open Homes

Houses continue to fall in value, but I can't be bothered with that, as I got to live somewhere and the quality of life since I bought my house has gone up in many aspects. I can enjoy my 10,000 sqft lot, and plant and garden as I see fit, and I am free to make changes in the house to suit our taste and needs, and not some cheap crap repair the landlord had done that looks worse than it was before.

I hope houses get even more cheaper, seeing how I am a saver spite what those in the teetering stock market says.
My rainy day fund is growing to the point where I can put down payment on another property. Or at this rate I'll pay cash. Of course I'll be able to do so, with the tax ramifications of taking money out of a retirement account or 401k.

Don't buy, I'll buy in your stead.

Gosh.

Please stop creating threads like these. You're stating the obvious and it's literally a waste of time.

GUAB says

Gosh.

Please stop creating threads like these. You're stating the obvious and it's literally a waste of time.

I agree. The flock of people who don't understand this simple fact are the same ones that think a 1000sqft shack is worth 2 million. They think the credit they can get is their wealth rather than the banks. 30 years of a debt slave is exactly what the bank wants everyone to believe. Good luck to all.

Bigsby says

It still remains that buying a house does not mean you are renting it from a bank.

Correct. IF you are actually buying it...i.e. paying the entire cost with cash. Of course, only the very wealthy can do this.

When you have a loan or mortgage, the interest on the borrowed money is essentially the same thing as "rent." You're renting (borrowing) the money, and the cost of this privilege is paid by rent (interest).

The words are different, but the financial effect is the same.

CaptainShuddup says

Of course I'll be able to do so, with the tax ramifications of taking money out of a retirement account or 401k.

Don't buy, I'll buy in your stead.

Two wrongs don't make a right. i.e. take money out of your appreciating 401k to leverage the funds to buy a depreciating asset (house). Oh boy...

APOCALYPSEFUCK is Tony Manero says

If you can't pay cash, you're enriching a bank, another name for a financial crimes enterprise.

So, remember:

It's CASH or FUCK YOU, America!

I take it all your money is tucked under your mattress then. Where do you live by the way?

APOCALYPSEFUCK is Tony Manero says

It's CASH or FUCK YOU, America!

But don't forget that the headquarters of the financial crimes industry keeps printing more and more cash, making your stash worth less and less over time.

Right now, mort-gauge rates are so low relative to inflation that it might be a good time to buy a moderately-priced house rather than rent, depending on which part of the US you live in.

Bigsby says

I take it all your money is tucked under your mattress then. Where do you live by the way?

You might want to bring some ammo with you. ;-)

wthrfrk80 says

You might want to bring some ammo with you. ;-)

I thought he'd spent all his money on barb wire and chickens.

Bigsby says

I take it all your money is tucked under your mattress then. Where do you live by the way?

Near a mattress store! With all the money saved not paying interest to the banking cartel one needs a lot of mattresses.

Bigsby says

Yes, and when you have paid off your mortgage, you can sell it and keep the proceeds. What can you sell after 30 years of renting?

The renter can keep his savings, which could be huge, perhaps twice the value of the house.

Everything depends on the PRICE of the house. If you pay too much, you're screwed. If you get a good deal, then you can save money over renting, or make money as a landlord.

There is no meaning to the rent vs buy question if you don't consider the rent and the price. My calculator sometimes shows green, and sometimes red, depending on the rent and the price: http://patrick.net/housing/calculator.php

Usually red though.

The renter can keep his savings, which could be huge, perhaps twice the value of the house.

Everything depends on the PRICE of the house. If you pay too much, you're screwed. If you get a good deal, then you can save money over renting, or make money as a landlord.

There is no meaning to the rent vs buy question if you don't consider the rent and the price. My calculator sometimes shows green, and sometimes red, depending on the rent and the price: http://patrick.net/housing/calculator.php

Usually red though.

You say that, and I'm sure that some renters do save a lot, though I suspect rather a lot live from pay cheque to pay cheque. And if they do that for 30 years, they will have nothing to show for it.
Anyway, right now looks a pretty good time to buy for the majority of people in the US if they can afford to do so.

How about taking a class in property law if you don't know the difference between renting a property and purchasing a property.

Do you use the same analysis when you mock people for "buying" a car versus leasing a car?

Bigsby says

I suspect rather a lot live from pay cheque to pay cheque.

Those individuals should NOT be buying a house. That's far too much risk (for them AND the lender) if something goes wrong. Threre's a high risk they'll end up losing the house to foreclosure.

Bigsby says

if they do that for 30 years, they will have nothing to show for it.

If they barely make enough to cover the rent, then how are they going to make mortgage payments with are usually higher in expensive areas like CA?

DukeLaw says

Do you use the same analysis when you mock people for "buying" a car versus leasing a car?

I would if it were much more expensive to buy the car than lease the car, yes. Typically though, it isn't. Nobody "invests" in cars with the "get rich quick" mentality since cars depreciate rapidly.

Look, it's not always a bad thing to borrow money for a house in order to save on rent. It all depends on the ratio of the price to rent. Some areas have such high prices relative to rents that it can be better (from a purely financial perspective) to rent.

Use Patrick's calculator.

wthrfrk80 says

Those individuals should NOT be buying a house. That's far too much risk (for them AND the lender) if something goes wrong. Threre's a high risk they'll end up losing the house to foreclosure.

You say that, but looking at the rate at which people save, then a great many people clearly live little beyond pay cheque to pay cheque. That doesn't mean they can't buy a house. Maybe they've saved some money in the past, or have inherited money, or live in the great swathes of the US where house prices are very reasonable. Why exactly shouldn't those people buy homes?
And I imagine most people don't go from renting at a certain price to buying at 2 or 3 times that amount. Rent seems to be getting very high in the BA, so if you are a person paying 3/4/5k on rent, then I'm sure you can stretch to paying for a house purchase if you so wish.

Bigsby says

That doesn't mean they can't buy a house. Maybe they've saved some money in the past, or have inherited money, or live in the great swathes of the US where house prices are very reasonable. Why exactly shouldn't those people buy homes?

As long as they can afford it with some "factor of safety" than there's no reason they shoulnd't.

a lot depends on taxes... where we are taxes can range from 7500 to 10000 for a 3 br 2 bath house... you will never see your spent tax money again just like you will never see your spent rent again...

RentingForHalfTheCost says

CaptainShuddup says

Of course I'll be able to do so, with the tax ramifications of taking money out of a retirement account or 401k.

Don't buy, I'll buy in your stead.

Two wrongs don't make a right. i.e. take money out of your appreciating 401k to leverage the funds to buy a depreciating asset (house). Oh boy...

That's precisely why you should never take money from a 401K for a down payment.

Having said that, you have to live somewhere and renting for us no longer made sense. We don't live in Palo Alto.

DukeLaw says

How about taking a class in property law if you don't know the difference between renting a property and purchasing a property.

Do you use the same analysis when you mock people for "buying" a car versus leasing a car?

Absolutely. Words are different but the effect is the same. If you don't have the cash then you will have to rent something; the asset from a true owner, or the cash from a bank. Pick your weapon. If you don't get this then I mock you. ;)

wthrfrk80 says

If they barely make enough to cover the rent, then how are they going to make mortgage payments with are usually higher in expensive areas like CA?

Because a little realtor told them they could. That is until they couldn't.

But,but after 30 years you do own the place,isn't it?

RentingForHalfTheCost says

If you don't have the cash then you will have to rent something; the asset from a true owner, or the cash from a bank. Pick your weapon. If you don't get this then I mock you. ;)

Exactly.

Bigsby says

Rent seems to be getting very high in the BA, so if you are a person paying 3/4/5k on rent, then I'm sure you can stretch to paying for a house purchase if you so wish.

Geez, you just said they were living pay check to pay check. Now they have extra money each week that they can squeeze? What you forget, is that as a renter they always have the option to downsize with ease. If rents do go up, and I don't see it, you can find a cheaper smaller place and your life hasn't changed that much. If you push your luck and take a 30 year pair of debt cuffs from the cartels, and find you can't keep up with the payments, life changes big time. You are betting on things going perfect, and this is not a perfect world. Hey, if you want to impress and have a gambling streak in your blood, then go for it. Good luck to all.

RentingForHalfTheCost says

If you push your luck and take a 30 year pair of debt cuffs from the cartels, and find you can't keep up with the payments, life changes big time. You are betting on things going perfect, and this is not a perfect world.

That's the thing. The world is changing rapidly, companies boom and bust (especially high-tech ones), RE in the Bay Area is volitile thanks to inelastic supply & demand, global oil production is peaking, etc etc.

If you're going to buy a place, you need a "factor of safety", as they call it in the engineering world.

RentingForHalfTheCost says

DukeLaw says

How about taking a class in property law if you don't know the difference between renting a property and purchasing a property.

Do you use the same analysis when you mock people for "buying" a car versus leasing a car?

Absolutely. Words are different but the effect is the same. If you don't have the cash then you will have to rent something; the asset from a true owner, or the cash from a bank. Pick your weapon. If you don't get this then I mock you. ;)

At least you're being consistent :p. Like I've stated previously, I had enough money to buy recently and my purchase/rent ratio was under 15. That was good enough for me in SF. But my point to the OP is whether he's going around to all these car "renters" and berating them for using the term "my car".

RentingForHalfTheCost says

Geez, you just said they were living pay check to pay check. Now they have extra money each week that they can squeeze? What you forget, is that as a renter they always have the option to downsize with ease. If rents do go up, and I don't see it, you can find a cheaper smaller place and your life hasn't changed that much. If you push your luck and take a 30 year pair of debt cuffs from the cartels, and find you can't keep up with the payments, life changes big time. You are betting on things going perfect, and this is not a perfect world. Hey, if you want to impress and have a gambling streak in your blood, then go for it. Good luck to all.

People can live pay cheque to pay cheque but still have extra money tucked away for a rainy day.
And from what keeps getting posted on here, rents are not going down, quite the opposite in fact. And it's all well and good you saying people can downsize blah-blah, but that's not necessarily so easy for a person with a family.
And quite frankly, if your life changes for the worse, then things wouldn't be too great whether you were renting or had purchased. Nothing in life is risk free. You make the decision that is best for you based on your current circumstances.

The same way I say "come over to my apartment " when I am a renter.

Buying RE is an investment that can have added value as home. In California -- near the coast -- smart investors have made fortunes off of RE.

I think Patrick sums it up nicely here, although I bet if he could go back in time to Palo Alto in the early nineties, he may buy even if renting was cheaper. ;)

Bigsby says

People can live pay cheque to pay cheque but still have extra money tucked away for a rainy day.

You just smeared the definition of living check-to-check. If you have ever been in that situation then you would know this. It means not having money stashed away for anything. It means hoping for that next check to cover the bills. I know more than one home-owner in the BA that is in this boat.

Bigsby says

Nothing in life is risk free. You make the decision that is best for you based on your current circumstances.

Finally something I agree with you on. I see little risk in renting in the BA and lots in buying right now. You see it different. Good luck to you.

RentingForHalfTheCost says

You just smeared the definition of living check-to-check. If you have ever been in that situation then you would know this. It means not having money stashed away for anything. It means hoping for that next check to cover the bills. I know more than one home-owner in the BA that is in this boat.

I just 'smeared' the term? Don't be silly.

Bigsby says

I just 'smeared' the term? Don't be silly.

Usually when people say "living paycheck to paycheck" they mean not having any money stashed away and needing the next paycheck just to cover basic essentials. In other words, they have no "emergency fund."