patrick.net

Propaganda.

Debt is slavery.

Renting rules.

Call it Crazy says

Check out the rest of the "funding" sources... see any connection or pattern??

You should read up the 2003-2005 reports produced by the Harvard group.. same old story plus they flatly denied of any housing bubble.. so the smartest heads at Harvard missed it big time. It was already pretty clear we decoupled form income/inflation long before 2005.

E-man says

Propaganda.

Debt is slavery.

Renting rules.

1997 + inflation pretty much eliminates any risk!

National Association of Realtors = Instant and permanent disqualification from any discussion of real estate. Anybody that's been paying attention for the last 10 years knows that organization has absolutely no credibility.

Do I really need to bring up quotes from past years?

thomaswong.1986 says

E-man says

Propaganda.

Debt is slavery.

Renting rules.

1997 + inflation pretty much eliminates any risk!

So I guess you're not in the camp that home prices will go back to 1975 level in nominal term then.

I'm in contract to buy a property for $216k. Someone paid $510k for it in 2005. Also in contract to buy another property for $140k. Someone paid $395k for it in 2006. Waiting to get into contract for another one for $265k. Someone paid $505k for it in 2004.

Not sure if they are 1997 + inflation prices, but I figure they should be pretty close. :)

Realtors are Liars. Prices are falling.

To have some credibility here, you have to post good data and well thought out arguments. This guy looks like a newbie realtor trying his hand as this site. Maybe he drinks the kool-aide.

Discussions started by wave9x
it's cheaper to buy than rent
By wave9x 9 comments, latest 52 minutes ago:

There is no "shadow inventory"
By wave9x 170 comments, latest 1 hour ago:

Excellent graph showing SF Bay Area NOT in housing bubble
By wave9x 1 comment, latest 1 week ago:
wave9x says
Page 1 of 1

E-man says

Propaganda.

Debt is slavery.

Renting rules.

Spoken like a true landlord!
http://abclocal.go.com/kgo/story?section=news/local/san_francisco&id=8765551

http://www.huffingtonpost.com/2012/08/26/san-francisco-home-prices_n_1828560.html

http://blog.sfgate.com/ontheblock/2012/08/16/peninsula-rents-going-the-way-of-sf-and-manhattan/

robertoaribas says

do whatever math you like

The math I just did says you have about half-a-million dollars that's not doing anything for eight years.

The reason the lending system works the way it does, is the math. The "time" part of the math is the most important. So the lenders are the ones maximizing the time by earning money at the instant the buyer signs the agreement. Nice deal.

Rent and start a business like "Southern Living at Home" and then you can deduct some of your rent and utilities. Your actual rent could be reduced to $300/month.

To deduct expenses on a mortgaged house, you may have to recapture those expenses when you sell for a profit.

Its seldom really accurate to make blanket statements about economics, especially real estate. I rented for 17 years. 12 of them in the Bay Area. For the past 10 years it was a lot cheaper to rent on average. These days? Its a little more of a gray area. What we're paying for the house we bought is $100 more than what it cost to rent our last place, which was obscenely cheap for what it was- a large 4 BR house. If we were paying current rates to rent what we had been renting, our mortgage is about 30% less than renting the same place.

Honestly I don't give a damned. Who cares? Its ok to rent and its also ok to buy. It comes down to dollars and cents. Do what makes you happy.

FunTime says

The reason the lending system works the way it does, is the math. The "time" part of the math is the most important. So the lenders are the ones maximizing the time by earning money at the instant the buyer signs the agreement. Nice deal.

What's wrong with the lenders making money? Lets say they make $500/month off the loan, and you (as the landlord renting it out) make $250/month clear of all costs. Win/win?

Actually it is WAY more expensive to buy in the bay area. I looked at a normal 3/2 home in Sunnyvale and while it is new and nice they want 1.1 million for it so would need to put 200k down cash and pay 5k a month mortgage plus maintenance costs. I can rent for half.

swebb says

Win/win?

Sure.

My thinking is, though, that people who buy houses generally don't make money. I base this somewhat on my own intuition and, hopefully, more based on the reports of those who really know something.

http://www.econ.yale.edu/~shiller/data/Fig2-1.xls

http://www.fool.com/investing/general/2012/04/11/history-says-your-house-may-not-be-a-good-financia.aspx?source=iaasitlnk0000003

That knowledge combined with the unfounded idea that the lenders really are making money, leads me to think this is a major reason for the huge gap between the few people in the U.S. with massive amounts of money and most of the rest with practically nothing, in terms of net worth.

bscott says

I can rent for half.

Yeah, this was the case even back in 2004 when I really thought I was serious about buying something in San Francisco. Sure you can buy something much further away and maybe start to make that change, but does it keep up with the other costs of the distance away from work, for example. That would be an interesting study! As you move further from the place you spend most of your time, work, does the cost reduction or net cost have a linear relationship to the distance? If not, you could pick a distance with an optimal cost effect.

Housing "costs" are a tad bit more complex then some of these calculators and speculations will have you to believe. Even those paying cash for housing right now are assuming untold risk. When you buy RE you assume the responsibility of the RE taxes, which are variable. What with local/state governments being so FUBAR and in debt, the person holding the deed is liable for whatever happens in the future, if the local government decays away, then the house will fall to zero

That's part of the reason why I think rents have been rising, is the renters are being forced to pay a premium for not taking on the risk of tying their name to the liability (taxes) part of house ownership. If one is using levered financing, then the risk is much greater.

Renting is the sure thing, and its become more a crowded trade of late. Owning a house, paying cash or using highly levered financing, comes with great risk. We can pretend like the Fiscal Cliff, and auto cuts in spending set to begin jan 2013 don't exist and don't matter, but do so at your own peril.

I think so long as interest rates are falling, paying a premium for renting over buying is sensible. It will be interesting to see what happens when the 30+ year trend of falling rates, changes course (if that's even possible)

errc says

It will be interesting to see what happens when the 30+ year trend of falling rates, changes course (if that's even possible)

It's not. Everyone is in debt: individuals, governments, and the big banks. ZIRP is here to stay. Unless they get fusion power working.

Roberto, I think that this is the real crux of the issue: all sorts of financial engineering is going on and nobody has any idea of when or if it will end. Lots of people have reason to WANT it to end and for the market to be free. Still, nobody knows what will actually happen in that regard, although it is probably fairly safe to assume that market intervention/manipulation isn't going away at any point in the foreseeable future.

The manipulation of the housing market is merely a symptom of the generally ailing US economy. It is not the ailment itself. I think that a lot of people are so fixated on RE because of personal desires that they don't see that the messed up housing market is just one indicator of the greater issues facing our economy. The housing market can't truly improve (in terms of resembling something like a free market) until the greater economy returns to solid fundamentals, and I doubt that anyone really thinks that that will happen any time soon. Our mostly FIRE-based economy is going to stay that way, and probably become increasingly more FIRE-based as automation and outsourcing of productive work continue.

E-man says

thomaswong.1986 says

E-man says

Propaganda.

Debt is slavery.

Renting rules.

1997 + inflation pretty much eliminates any risk!

So I guess you're not in the camp that home prices will go back to 1975 level in nominal term then.

I'm in contract to buy a property for $216k. Someone paid $510k for it in 2005. Also in contract to buy another property for $140k. Someone paid $395k for it in 2006. Waiting to get into contract for another one for $265k. Someone paid $505k for it in 2004.

Not sure if they are 1997 + inflation prices, but I figure they should be pretty close. :)

Learn from your victory. Prosper from your failure.

My parent's home valuation was about 600K in 2004/5, it went down to about 150K and maybe now they could get 200K for it, but I wouldn't pay 5 pennies for a house in that hood.

600k to live in the hood? Wow. Just...wow.

But hey the weather is nice. Sunny with a chance of bullets.

Darrell In Phoenix says

freak80 says

Sunny with a chance of bullets.

lmao.... Anywhere in CA , AZ or NV.

IMHO also FL, TX, and ???

freak80 says

600k to live in the hood? Wow. Just...wow.

But hey the weather is nice. Sunny with a chance of bullets.

I just want to see a study on the IQ and psychological mindset of the person who buys a 600K in that type of area.

Darrell In Phoenix says

Nonsense Robert.

Rents are low in Phoenix and there isn't any pricing power due to the massive inventory of excess empty housing here.

And that is precisely the cost in most overbloated areas. Rents have gone NOWHERE. Pricing is falling and rents have remained because rent is about equivalent to purchase or a bit more BUT smart money knows that the property is still going to fall so they bite the bullet and watch the drama of the Theatre of The Ignorant unfold.

No one in their right mind is going to purchase a 500K place even if their rent is more than the mortgage on a 500K as clearly that 500K place is heading toward 250K on the fasttrack.

edvard2 says

Its seldom really accurate to make blanket statements about economics, especially real estate. I rented for 17 years. 12 of them in the Bay Area. For the past 10 years it was a lot cheaper to rent on average. These days? Its a little more of a gray area. What we're paying for the house we bought is $100 more than what it cost to rent our last place, which was obscenely cheap for what it was- a large 4 BR house. If we were paying current rates to rent what we had been renting, our mortgage is about 30% less than renting the same place.

Honestly I don't give a damned. Who cares? Its ok to rent and its also ok to buy. It comes down to dollars and cents. Do what makes you happy.

Quite right...your situation and conclusions similar to mine.

I also live in Bay Area, rented for the past 10 years - and was loud and clear why we rented despite excellent, steady incomes.

The last house rented (April 2010 begun) was a mere 3 blocks from here in the same cluster of homes, was the same size, number of bedrooms and view. Of course, the same school system and all else. It was built in 1986, tho likely a fine home 25 years ago, it hadn't been updated inside. We paid all utilities incl. garbage pickup.

We bought and been here since July 2012. It's a 12 year old house only 3 blocks away. After 20% down payment (quite a nut, for us) this house costs 15% less (mortgage, interest, taxes) than we paid monthly for the rental. Rents have gone up ~10% from 2010....so the real differential today is more like 20%. If you factor in mortgage interest deduction, it's more like 25%.

Yes, I realize there is maintenance now where there was none previously....but 25% difference is more than sufficient buffer for that hassle. Our realtor kindly bought us the 1 year home warranty (mandatory by lender) so except for $100 dedeductible all major maintenance is thankfully covered the first year.

In the 10 years renting we had a good landlord (this last one thankfully), an average one and the first one for 5 years was a shitbag of a human being. I think we made a smart financial move and left the potential dirtbag landlords behind.

I'm not anti buy or rent....but there's a proper time and place for each and each according to our own lives. A much better case for ownership can be made today than at anytime in the past 10 years.

Darrell,

Because we rented and saved so much over the past 10 years - we were able to make a substantial down payment on this house and have invested in silver and gold with some of the rest.

We were able to score a 2.9% mortgage rate because our FICO's were sound, thanks in part to renting and being entirely debt free save the monthly credit card bills (paid dutifully in full each month). In an era of continued currency debasement, gold and silver will likely appreciate enough in coming years to pay the house off when due...and in the meantime I have no lousy landlord and am living in the best house we have ever had the pleasure of living in.

So, what happens a decade down the line is of little concern - there are so many possible outcomes to future events it's impossible to guess - however TODAY, for our particular circumstances, it was a slam dunk correct decision for us to buy. Cheers.

How about the South Florida area? I have so many people telling me that prices are going up. I really don't see much of a change when I look at prices so I'm not sure what they are talking about. But does anyone know if South Florida is still on the decline?

Darrell In Phoenix says

Your personal circumstances have nothing to do with the fact that you paid a grossly inflated price for a rapidly depreciating asset.

I agree, it's the key part few understand.

jsmarket says

Darrell,

Because we rented and saved so much over the past 10 years - we were able to make a substantial down payment on this house and have invested in silver and gold with some of the rest.

We were able to score a 2.9% mortgage rate because our FICO's were sound, thanks in part to renting and being entirely debt free save the monthly credit card bills (paid dutifully in full each month). In an era of continued currency debasement, gold and silver will likely appreciate enough in coming years to pay the house off when due...and in the meantime I have no lousy landlord and am living in the best house we have ever had the pleasure of living in.

So, what happens a decade down the line is of little concern - there are so many possible outcomes to future events it's impossible to guess - however TODAY, for our particular circumstances, it was a slam dunk correct decision for us to buy. Cheers.

Your story is charming BUT it also appears to me like an ideal commercial for the industry to lure in those who rented played it safe and have some cash and credit.

bmwman91 says

The housing market can't truly improve (in terms of resembling something like a free market) until the greater economy returns to solid fundamentals, and I doubt that anyone really thinks that that will happen any time soon.

My take on this is even with a sound economy solid fundamentals aren't going to be solid and real until housing returns to true VALUE to THE DOLLAR and from todays standpoint that means major further declines.

That comment is to complicated and you are forgetting that whatever the reason the housing market is recovering that is all that really matters. True, the fedeal governmanrt and the banks are sleeping together and manipulating the free market but that is the way it is. So why try to Over analyze it? JUst get out there and buy some damn property andmake some great investments while thew opportunity exists.

You could argue all day about the reasons why and meanwhile you will miss the boat. I know bc I have done it and am enjoting $20000 cash flow a month for my Real Esate investments over the last 5-6 years. The negative thing about this site is people argue over things that don't matter... and debate over the market and USA policies etc in the free market. Meanwhile the greatest opportunity in 60 years is passing you by every single day.