patrick.net

phikapme says

but... you must factor in the mortgage interest deduction you would be saving, locking in your payment for an extended period of time and eventually having no payment if you decide to hold on to the property and keep it as an asset for you and your family. when you are elderly you could even rent it out to someone else,

Again it all depends. In many cases the deductions are not enough to make up the difference, ESPECIALLY if the house is depreciating.

"And so will your mortgage.... do you think your real estate taxes and your home owners insurance will stay at the same level as they are now??? Let's also hope you have a fixed rate loan and not an ARM...."

If you're a renter, and your landlord's taxes, insurance, maintanance, et al, go up, so will your rent. Most landlords do what they do, for a positive cash flow. If the property owner's costs go up beyond the point where he/she is willing to "eat" the increases, your rent WILL increase.

soeren says

If you're a renter, and your landlord's taxes, insurance, maintanance, et al, go up, so will your rent. Most landlords do what they do, for a positive cash flow. If the property owner's costs go up beyond the point where he/she is willing to "eat" the increases, your rent WILL increase.

Nonsense.

Increased operating expenses are NEVER automatic pass through costs.

Nice try though.

bmwman91 says

Most Americans live in an area where the land can't output enough food to sustain all the people there; we are completely dependent on cheap energy to refrigerate and truck food in from remote agricultural areas.

And yet a few on this forum complain that California sends too much money to the farm states. How else is that food going to get to you? In blimps?

bmwman91 says

Rent in this area is, for the most part, less than the cost of interest, insurance and property tax which are all of the "throw away your money" costs. That's after the tax breaks (which are basically a case of "spend $2 to save $1").

That's just it. From a purely financial perspective, how is it better to "buy" (if you can even call it "buying" when you're just going deep into debt)?

phikapme

Going back to your original question. I think its pretty normal for people to have doubts about the housing market considering what we all have been through in the last few years. The government has allowed Wall Street and the Banks to turn the people into debt slaves.

The economy is about confidence. Confidence that there is law and you will be protected by the law. Unfortunately, there are two different laws now, one for the favored (connected and rich) and the other for you and I.

Renting is about transparency. You pay the going rate that you can accurately establish if its fair or not. It's a cash and carry business, that means there is no financial hocus pocus. Some us prefer to have honest transactions where we know the rules and have flexibility. That means renting.

I do not know where you live so I have no idea if homes are at a bottome where you live. However, where I live, If you are buying, that means you are gambling (or do not care) that the house prices will not decline, that your job will be there tomorrow. There is no transparency in home prices right now. If there was, not one of the major banks would be solvent.

The government and media is working very hard to tell you that the economy is improving and housing has bottomed. These are the same people that have said the same thing since 2008.

The question is will you gamble your family's economic future on the words of those that are only interested in taking your money.

It is possible that the FED maintains zero interest rates for the next 10 years. Go take a look at the Japanese housing market and see how that has worked out for property owners. It is also a possibility that the fed presses control alt delete for al those digital dollars.

Final end to my rant. Yes we have to live some where. Houses are not assets. You do not need to perform maintenance on assets. Homes are shelter.

Last time I checked you need cash or credit to get things....

inflection point says

It is possible that the FED maintains zero interest rates for the next 10 years. Go take a look at the Japanese housing market and see how that has worked out for property owners. It is also a possibility that the fed presses control alt delete for al those digital dollars.

What same people fail to look at is expensive today could be cheap tomorrow. What happened to all of those gold bears saying that 600, 700, 800 and even a $1,000 per ounce was a bubble and it would come crashing down. well, theyre still waiting. those who bought are sitting pretty.

some say the biggest risk is not taking the risk. The guy who bought a really "expensive" home in SFBA in 1982 is sitting pretty now. People like to do the math taking a snap shot of today. Yes, rental prices may be lower in your neighborhood now, but if you have a stable job and dont plan on leaving the community, rental prices will eventually catch up. when? well thats the gamble. Investing in real estate is not placing your money in a savings account. Just like any stock, there is volatility. But if you bought when every shoe shine boy in town was buying. well... to me, thats not proper money management. everyone was talking about how much money they were making in the real estate market and thats the sign of a bubble.

In my short time of trading stocks i've learned calling the bottom can be a humbling learning experience. im not preaching to go out and over extend yourself in the real estate market and im no expert myself. I recently purchased a townhome in 2010 in a nice suburb of los angeles. prices softened up some, but i was able to rent it out for what my PITI was. I recently purchased a SFR in same community and planning on keeping both properties in my family and not looking to sell. Im 30 years old. I view the townhome as positive cash flow when i eventually retire to help subsidize my pension down the road. My plan is to live in my current SFR forever and pay it off when i retire. having no RENT or MORTGAGE when i stop working is my goal.

both homes I view as savings accounts. as long as the rental market can sustain my mortgages I can care less what the value is at this time. just chipping away at the debt and plan to own both homes free and clear down the road which can provide flexibility for my family.

I'll take the gamble with rental prices sustaining themselves or going up from here. The government is committed to making funny money to prop up this economy at any price.

buying a home is not for everyone and it does involve risk. but once again, ask the guy in 1982 who bought and people told him home prices were "expensive". ask how does it feel to own that asset free and clear and how much return on investment he made when the rental market finally caught up and blew by his PITI. now the home is a cash cow producing positive cash flow or he can sell and get a nice chunk of his money back. then ask the guy who rented for the last 30 years and tally up how much hes given landlords over the years and nothing to show for it.

buy, stop checking your home on zillow, go to sleep and wake up in 30-years. i'll bet you'll be happy.

phikapme

I am hoping for the sake of my children and yours that all of this is resolved. Timing is everything in most of lifes endeavors.

dunnross says

phikapme says

ill gladly pay back my mortgage with meaningless US dollars at that point. while all the renters scurry around trying to make ends meet.

If renters are trying to make ends meet, who would be able to buy your house when interest rate reaches 20%?

Ask the people who were selling houses in 1980. They'll be able to tell you.

inflection point says

The economy is about confidence. Confidence that there is law and you will be protected by the law. Unfortunately, there are two different laws now, one for the favored (connected and rich) and the other for you and I.

That about sums it up. Well put!

rootvg says

Ask the people who were selling houses in 1980. They'll be able to tell you.

buy and hold my friend, buy and hold.

phikapme says

rootvg says

Ask the people who were selling houses in 1980. They'll be able to tell you.

buy and hold my friend, buy and hold.

Buy when prices are falling? Hold when prices are falling?

Why?

phikapme says

both homes I view as savings accounts.

I don't have to pay property taxes or insurance on my savings accounts.

phikapme says

rootvg says

Ask the people who were selling houses in 1980. They'll be able to tell you.

buy and hold my friend, buy and hold.

I was just talking to my parents, who called me on a Sunday night from Ohio, which only happens when someone has died or is dying. He said there were people buying houses in that era even with things far worse than they are now. Housing was seen as a hedge, just as precious metals are right now.

wthrfrk80 says

phikapme says

both homes I view as savings accounts.

I don't have to pay property taxes or insurance on my savings accounts.

The equities in my portfolio don't need a new $20,000 roof. Or a $10,000 boiler.... every 15 years.

CalifGal says

Buy when prices are falling? Hold when prices are falling?

Why?

yup... buy low and sell high buddy.

phikapme says

CalifGal says

Buy when prices are falling? Hold when prices are falling?

Why?

yup... buy low and sell high buddy.

And when will prices be higher when prices are falling?

CalifGal says

The equities in my portfolio don't need a new $20,000 roof. Or a $10,000 boiler.... every 15 years.

Tile roof on my homes, those last at least 30-40 years. marketed at 50. i guess ill do one of those in my lifetime.

equities are nice and should be apart of your portfolio with real estate.

phikapme says

CalifGal says

The equities in my portfolio don't need a new $20,000 roof. Or a $10,000 boiler.... every 15 years.

Tile roof on my homes, those last at least 30-40 years. marketed at 50. i guess ill do one of those in my lifetime.

equities are nice and should be apart of your portfolio with real estate.

You're "homes"? What is a "home"?

Don't be silly. Roofs are replaced every 20 years max. A single family residence is a depreciating liability. And depreciating liabilities don't belong in a portfolio.

CalifGal says

And when will prices be higher when prices are falling?

i dont have a crystal ball. prices of homes have risen and fallen before. go check the history books. same with almost all risk assets. im not a day trading with real estate. this isnt instant gratification here. my notes are talking about down the road 30 years.

CalifGal says

Don't be silly. Roofs are replaced every 20 years max. A single family residence is a depreciating liability. And depreciating liabilities don't belong in a portfolio.

i just bought a home that was built in 1987 with a tile roof. its original with no problems and thats 25 years. research tile roofs please.

phikapme says

CalifGal says

And when will prices be higher when prices are falling?

i dont have a crystal ball. prices of homes have risen and fallen before. go check the history books. same with almost all risk assets. im not a day trading with real estate. this isnt instant gratification here. my notes are talking about down the road 30 years.

"Homes"? Are you a realtor? Only a realtor calls a house a "home".

No you don't have a crystal ball. Prices are falling. And housing prices have never "risen" with the exception of the bubble years. And with the way prices are falling, there is no reason to suggest they'll be higher ever considering housing prices never rise.

phikapme says

i just bought a home that was built in 1987 with a tile roof. its original with no problems and thats 25 years. research tile roofs please.

A "home"? What is a "home"? Do you mean a house? Are you a realtor?

Tile roofs are immaterial.

CalifGal says

"Homes"? Are you a realtor? Only a realtor calls a house a "home".

No you don't have a crystal ball. Prices are falling. And housing prices have never "risen" with the exception of the bubble years. And with the way prices are falling, there is no reason to suggest they'll be higher ever considering housing prices never rise.

not a realtor, just a regular guy. google home prices in 1982 and today. you tell me if the nominal value has risen or fallen.

CalifGal says

A "home"? What is a "home"? Do you mean a house? Are you a realtor?

Realtors are liars. Prices are falling. ;-)

The assumption of course is that inflation will keep pace as it did from 1982. Or more importantly, wage inflation for home prices. That is the big factor here that is being missed. The recent data has shown stagnant incomes for the last decade. Until we see household wage inflation why would home values rise?

phikapme says

i just bought a home that was built in 1987 with a tile roof. its original with no problems and thats 25 years. research tile roofs please.

That is until you walk on it. That and the falling tiles are heavy enough to do some serious damage.

BTW some members of my family have 150 year old houses with tile roofs. Yes they can last if you take care of them, if they were installed properly and for God's sake you DON"T walk on them

S

Call it Crazy says

If they ever sat down and calculated their "savings" from their tax deduction they will actually see they pay $10K to $20K additional as an "owner" to save maybe $3K in their tax liability as a "renter".....
Such a totally ridiculous argument!!!

I agree that the tax deduction argument is overhyped, especially for the median earner in the country....but it actually can be quite favorable and not insignificant at all if you make enough money and are buying an expensive enough of a house. So it's not so simple...

soeren says

Most landlords do what they do, for a positive cash flow. If the property owner's costs go up beyond the point where he/she is willing to "eat" the increases, your rent WILL increase.

It's more about the market conditions than it is about the cost to the landlord...If their costs increase by $500 / month but the market won't bear the additional cost in monthly rent, how is the landlord going to increase the rent?

Housing is really no longer a roof over your head, it's an investment, and a source of income for government, utility companies, contractors, etc.

Not everyone can afford to buy a house, probably not enough to go around.

everything says

Housing is really no longer a roof over your head, it's an investment, and a source of income for government, utility companies, contractors, etc.

And don't forget bankers.

phikapme says

ask the guy in 1982 who bought and people told him home prices were "expensive". ask how does it feel to own that asset free and clear and how much return on investment he made when the rental market finally caught up and blew by his PITI. now the home is a cash cow producing positive cash flow or he can sell and get a nice chunk of his money back. then ask the guy who rented for the last 30 years and tally up how much hes given landlords over the years and nothing to show for it.

Interesting choice of a benchmark 1982. On its face its a logical choice as it is exactly 30 years ago which is the fruition time for the traditional mortgage. The person who just paid off their mortgage is sitting pretty in their newly paid off with 1982 dollars house - unless they HELOC'd.

It also happens to be the year interest rates hit their peak, ~15%. By most bear logic that puts enormous downward pressure on the sale price of a house. Sure anyone that bought at that time will have done well as interest rates declined with time. How do you expect that to happen today when interest rates are already so low? Seems to me you are comparing apples to oranges here.

I'm not a renter for life. Well, OK so far I am.

When will I buy? When I have certainty I've settled someplace, have great work, and my job will never vaporize from under me.

This hasn't happened yet but I'm not ruling it out.

Call it Crazy says

Very good points, actual wages have been virtually stagnant for multiple decades and recently it has actually started to head down. And these numbers are before inflation is factored in. I just posted this chart on the other thread.

Look at the chart again. It's REAL income. REAL= inflation adjusted.

Call it Crazy says

What is your fascination with 1982??? You keep making references to that year in many of your posts?? Is that your birth year??

The only significance with (1982) is that it was 30 years ago, which is the usual amortization timeline of a mortgage. Go back, 20 or even 15 years ago and people who bought back then are doing just fine. As noted, take out the recent housing boom and fall during the last 10 years and pretty much every home bought prior has been a good investment.

A stock trade takes 2 people. meaning, each has a perspective on which way the market may be going. Bears may win some battles, but over the long-run, Bulls always win the war (overall stock market). Im not preaching that in 2, 5 or 10 years that your investment will be a good one. but over 30 years you should be fine.

investing in equities doesnt always provide a safe environment for your money as an alternative to real estate. look at the boom and bust of the stock market during the last 10 years. Besides a savings account, if you want to make money on your money, you have to be willing to take a risk.

you can wait it out with all of your fancy graphs and reasoning on why housing will fall. i've tried that in stock market and sometimes it just does what it wants. or outside influences such as money printing effect it. if the market doesnt fall and you miss the bus. well thats the risk you take. im not on here bashing people who wont buy a home, everyone has their reasoning. im just providing perspective that its not a terrible investment opportunity over the long-run.

From what I can tell most people on the boards here are living in the Bay Area, which is the second worst market in entire nation to buy something in right now.

There is a big difference between stocks and having a mortgage.
The SEC sure knows it.
Try to set up a trading account for options. You fill out an application, they want to know 1. your income 2. your liquid financial assets.
They don't care if you have a house that is not underwater. They don't care if you own a Ferrari and are making payments on it.
Anyone who says houses go up as stocks do has no understanding of what makes house prices rise. This rise is caused by wage inflation.
Stocks go up normally as their profits grow, if any. There are some companies that are growing profits and growing sales and this tends to attract buyers of the stock, and it rises in price. People tend to pay a multiple of the profits of the stock, for example Apple stock today is about 13 X the profit per share. If Apple profit jumps another 98% this quarter (like last quarter), the shares of AAPL should rise.
A house cannot grow. The house that can increase its square foot area is impossible.
If real wages after taxes are falling in any area, it's likely that the house price will fall there. Of course, the exceptions exist, e.g. Cupertino, San Francisco, as outsiders are buying who made money somewhere else, or the wages in that location are not falling, or house prices are already cheap ((eg Phoenix).
My grandmother was a renter all her life, and she ran a successful business beginning in the 1920's. She loved cash and hated debt. I never knew she was a renter since she lived in awesome houses.
My little old lady neighbor is richer than God and she has an awesome house. But, her net worth is her stocks which she has owned for decades. She told me how she has owned Deere for 60 years for example.
Do you think that farming worldwide will go out of style soon? Deere makes the finest farm equipment on earth.
Never confuse an investment with a house purchase. One you live in, another you can live on.

clambo says

My grandmother was a renter all her life, and she ran a successful business beginning in the 1920's. She loved cash and hated debt. I never knew she was a renter since she lived in awesome houses.

it would have been nice to also inherit your grandmother's home that could have been bought with 1920 dollars.

also, why is debt so bad with all of the inflation that has happened and posed to take place in the future? im happy to borrow money today and pay it back with devalued dollars in the future.

i dont want to go back and forth with this, but buying a house is a hedge against inflation like an equity. just a different avenue to diversify your portfolio. especially if its where you can live and raise your family.

FortWayne says

From what I can tell most people on the boards here are living in the Bay Area, which is the second worst market in entire nation to buy something in right now.

Quality Auto Repair Since 1979

Where is the worst market?

seaside says

Where is the worst market?

New York, Manhattan.