patrick.net

Slavery would be mortgaging a home far enough from work that it requires 2 hours of daily commute by car or rail. 8-12 hours at the office. Then add two hours more. That's slavery. The part about it being self imposed makes it insanity IMO.

It depends on what you're comparing it to.

With a $120K/year starting compensation package and brand new computer science degree that can be a fine option which beats living in fly-over country or someplace with fewer jobs and worse weather like Seattle especially when you're used to living with house mates.

It beats a $6K/month mortgage on similar properties especially in declining markets like we saw over most of the last five years.

It beats commuting for a total of 2-4 hours a day.

Once you retire you no longer need to live where the jobs are in your chosen industry and can opt for much lower cost areas.

Similarly once your youngest child graduates from highschool public school quality is no longer directly relevant to your life.

OTOH, $3000 for the same location and square footage you could get for $1500/month would be silly.

Personally I looked at the options of $500K 1200 square foot 1950s 3/2 ranches, $2300/month to rent such properties, $650K town houses with common walls and HOA fees on top of the mortgage, $2100 - $3000/month for two bedroom apartments ranging from OK to nice and new, and bought myself a double wide trailer in the same place on which my expenses total $1500/month for slot rent, chattel mortgage, and insurance with flood/earthquake coverage.

No common walls, double paned windows which shut-out noises from breeders' spawn and central air so I don't roast when I do that, private 400 square foot deck with a nice tropical garden theme (28 palm trees, elephant ear plants, mandevilla and trumpet vines) where the shortest neighbor separating barrier is a six foot high fence. It's nice.

The patnet motto should be adjusted from debt is slavery to America is slavery since all we do is piss and moan about how unfair life is all of the time.

If you don't like your rent become a drifter or find some other alternative way of living, there are many online sources for this kind of lifestyle. But please don't whine about how other people choose to live their life. There are advantages to both owning and renting. Please stop the shitposting.

Let's be honest, either situation is serfdom.

Renting: You rent forever, never own the land, it's just a big bill that you trade for the opportunity to live inside, under a roof. That money never comes back in any form, it just disappears.

Mortgage owners: You pay for 30 years, pay taxes, HOA, fix everything, and after all that you own an old box. Better make sure your job is stable.

In the end, you have to do what makes sense for your situation. Compare rent vs buy, and which ever comes up with the lower cost to live under a roof, go for that one.

Call it Crazy says

dublin hillz says

Paying $3,000 rent per month is slavery

Depends who you are paying "rent" to.... A landlord or to a bank...

Don't forget all the other perks of "ownership": Real Estate taxes, closing costs going in and out, repairs, maintainance, upgrades, etc...

Yes, you either are paying a landlord or the bank rent, but at least with the landlord I don't have to pay half of what I take home in property taxes for the assessed value of my home. My sister got a "great deal" on a house in Santa Cruz, only to find out that the assessors office decided that their home was worth four times what they paid. So much for getting a great deal. Now there is a water dispute that cost $80,000. Yummy.

dodgerfanjohn says

Slavery would be mortgaging a home far enough from work that it requires 2 hours of daily commute by car or rail. 8-12 hours at the office. Then add two hours more. That's slavery. The part about it being self imposed makes it insanity IMO.

Commuting is a very interesting issue - funny how in college most people want to live next to campus, yet once people start working they are ok with putting up with killer commutes.

hrhjuliet says

My sister got a "great deal" on a house in Santa Cruz, only to find out that the assessors office decided that their home was worth four times what they paid. So much for getting a great deal

Well, that would be pretty simple to fix. Simply appeal the assessed value. Assuming she bought at an arms length transaction, it should be pretty simple.

Straw Man says

Sure, appealing is simple. Winning the appeal - not so much.

If you have an arms length transaction that establishes the price, you have a pretty strong case.

Straw Man says

tatupu70 says

Well, that would be pretty simple to fix. Simply appeal the assessed value. Assuming she bought at an arms length transaction, it should be pretty simple.

Sure, appealing is simple. Winning the appeal - not so much.

She appealed, and lost.

Does no one on this site actually know people who were foreclosed on because they mortgaged homes they couldn't actually afford?

The division. I work in has ~170 employees. I know of 10!?!??? who were foreclosed on!

Ill buy when I can comfortably afford to do so...and where I can do so without killing myself to get to work. $100k+ a year entitles NOTHING and I'm not stupid enough to let a REA convince me I can't afford not to buy a $600k 1100 sq ft cracker box.

Until I can, I rent.

Paying $3K rent is a way better deal than losing $6K for the same house in the same place on mortgage, opportunity cost (what else you could have done with the money), property tax, insurance, repairs, realtor commissions, etc etc etc.

Just compare one option to the other.

I'm not saying never buy, but I am saying that it's profoundly stupid to think that rent is always wasted money.

hrhjuliet says

She appealed, and lost.

Was it a short sale or foreclosure? Otherwise, I'm not sure how that's possible.

Straw Man says

No matter what you say and what kind of evidence you present it is ignored.

I've appealed and won twice. You have to have done your homework beforehand and have the data to support your assertion, but it's not that hard.

Especially if you have an executed contract. Then it should be a piece of cake.

cheapest house listed in my city is $900k. mortgage, tax+fees, insurance, maintenance, would probably be over $4k/month

my rent is less than $1200/month; i'm on the west side (the good side).

walk to the downtown. good schools (api in the 900s few years ago - but haven't checked recently). easy access to the highway (but not too close). couple of miles from bart and caltrain station. it's very safe so i go running late at night (occasionally i'll run just before midnight).

seems like a deal even if i'm not building equity.

drew_eckhardt says

With a $120K/year starting compensation package and brand new computer science degree that can be a fine option which beats living in fly-over country or someplace with fewer jobs and worse weather like Seattle especially when you're used to living with house mates.

http://www.forbes.com/sites/joelkotkin/2012/05/17/the-best-cities-for-tech-jobs/

So which areas offer better long-term, broad-based prospects for tech growth? The most consistent performer over the period we assessed is the Seattle-Tacoma-Bellevue, Wash., metro area, which takes first place on our list. Its 12% tech job growth over the past two years and 7.6% STEM growth beat the Valley’s numbers. More important for potential job-seekers, the Puget Sound regions has grown consistently in good times and bad, boasting a remarkable 43% increase in tech employment over the decade and an 18% expansion in STEM jobs. Seattle withstood both recessions of the past decade better than most regions, particularly the Valley.Seattle withstood both recessions of the past decade better than most regions, particularly the Valley. The presence of such solid tech-oriented companies as Microsoft, Amazon and Boeing — and *lower housing costs* than the Bay Area — may have much to do with this.

Straw Man says

tatupu70 says

Well, that would be pretty simple to fix. Simply appeal the assessed value. Assuming she bought at an arms length transaction, it should be pretty simple.

Sure, appealing is simple. Winning the appeal - not so much.

In most cases, you have as a matter of right, a further appeal to your district or circuit court (as the case may be).

Over the years, ive learned to bring my circuit court complaint to the assessment appeal, asking, who among the assessment board would accept service of process & whether they would be willing to reiterate their testimony in open court...

Since doing this, ive gone 11-1 in front of the various assessment boards - and the 12th one I won in the circuit court. You all may find a local attorney willing to do the same for you for a flat fee arrangement. Just FYI...

I'm not saying never buy

Actually, you pretty much are...

gsr says

So which areas offer better long-term, broad-based prospects for tech growth?

Probably Serbia and other places in Eastern Europe. With low numbers it won't take many new jobs each year to produce staggering increases expressed as percentages and the labor costs remain low enough that guys who were successful in the US can bootstrap moderate sized operations they'd need to raise venture capital for here.

The totality of tech growth is also the wrong way to look it it because the category is so inclusive. Two jobs making incremental improvements to an on-line retailer's efficiency count double one job building a complex new product combining solid software engineering, research from the last five years, and a little innovation. A pair of $15/hour data center jobs count more than one engineering position.

Startup count is also wrong because that term covers everything from three guys at big companies moonlighting through profitable companies with nine figures of funding.

The important number is how many interesting (topping Maslow's Hierarchy of Needs with self-actualization) technical jobs there are which are the sort people experienced and good enough to choose can decide between.

The most consistent performer over the period we assessed is the Seattle-Tacoma-Bellevue, Wash., metro area, which takes first place on our list.

I tried Seattle and the East Side. While they had some well paying tech jobs they didn't have enough interesting ones for people who've yet to earn their millions where I define interesting as the right mix of technology, life cycle (starting before there's too much product and process to have significant impact doing fun things and making customers' lives better at the lowest practical engineering costs), and business/technical plans lacking holes you can drive trucks through. Earning your millions means not needing a paycheck so you can start from the beginning as a founder in a company doing technically interesting things and avoid technical and business mistakes you've seen before which is possible in any city with enough of a technical scene to let you build a team (I had no problem getting 11 great team-mates starting as first engineer in Boulder, CO. and that was one of three engineering groups). Before then the small fraction of viable companies isn't big enough to match up with time for a job change when you divide the total company count by 4 or more even if there is no difference in quality and there is a difference. There's group think going on and the guys with business customers in Boulder still seem disproportionately interested in selling expensive boxes with low margins, long sales cycles, and consequently big runways (the last one I worked for spent $160M without profitability) which don't make good exits for rank and file employees ($360M gross isn't much with that much in especially with massive dilution) versus software as a service with high margins, much of this month's revenues recurring from last month's, and consequently short runways.

Boulder, CO seems to have a similar size startup community compared to Seattle but with more systems software emphasis, better weather, and nicer snow for alpine sports although it suffers from similar issues. I lived there for fifteen years, loved it, and never planned to leave but there were career limits I considered unacceptable.

Then there's Silicon Valley which received 41% of 2011 Venture Capital funding and everything else with the SF Bay Area as a whole doing about as well as the rest of the country put together.

The presence of such solid tech-oriented companies as Microsoft, Amazon and Boeing — and *lower housing costs* than the Bay Area — may have much to do with this.

That's fine if all you want is a big pay package (as an unmarried guy in Boulder, CO working for startups I had a 15 year loan on my home, maxed out my 401k, my last five vacations were international with three involving chartered helicopters, skydived most weekends, got most of the way through my pilot's license before my instructor moved, bought a 3-year old German sports sedan and new European motorcycle, and wondered what to do with my extra cash. Big is much more.), low taxes, and moderate cost of living although your chances of doing interesting work in those companies is fairly negligible even reasonably far up the food chain.

That's my judgement after working for Microsoft then Amazon as a SDE 3 through two re-organizations (distributed systems engineering caching then Dynamo; and Amazon Web Services in the S3 group) who knew other guys working as Principal Engineers.

Counter points are working for five startups elsewhere (2 before product, 3 before series-B, 4 before their pivot; 3 in Boulder, CO and 2 in Silicon Valley) and interacting with dozens in Seattle, Boulder, and Silicon Valley.

There's lots I don't like about Silicon Valley (you could characterize it as one big strip mall starting in San Jose and stopping somewhat south of San Francisco with a high cost of living and no nearby snow sports), although if you're a good software engineer evaluating employment opportunities based on both what you get to do and the business prospects there isn't a reasonable alternative.

That said other people haven't been programming computers for thirty years, gone to school as Woz scholars, spent a couple decades delivering multiple distributed systems products to customers, and have more inclusive definitions of what constitutes good work.

3K a month in rent v 3K a month in mortgage? In either situation, you better be pulling in at least a 150K combined annually by my rough math, and don't have any expensive hobbies, (like children).

Straw Man says

Worthless without numbers. What was your reduction in taxes? Impress us with your numbers

The first time was significant to me, about $1000/yr or 25%. It was a situation as described where the assessed value was much higher than the sales price I paid. I simply brought the contract to the hearing and it was done. Couldn't have been easier.

The second time was much smaller--I was just pissed because they tried to raise the assessed value of my house when prices in my area were clearly falling. Again I had data of comparable sales and YOY price change in my area though. You have to have data.

drew_eckhardt says

With a $120K/year starting compensation package and brand new computer science degree

Around here you don't make anywhere near that amount of money, even with some experience. In fact you would need to be in a management position or have a clearance.

donjumpsuit says

For the past 2 years, rates have been between 3-4%. So more or less, this
particular deduction really doesn't even crest the standard deduction these
days.

So for all those who claim that this is incentive to buy, it's only incentive
if you take deductions in other areas (read self-employed).

Not really. You can also deduct state taxes and property taxes. In many areas, that will get you to the standard deduction already.

donjumpsuit says

Lastly, Property taxes on a $600k property, which more or less is the mean
around the Bay Area if you weren't paying attention, is about $10k.

See--there's your std. deduction right there.

At 4% on a 480K loan, you're talking about $18K in interest in year one. So, $18K + $10K + state taxes ($10K?) sure looks like you're beating the standard deduction.

You're also getting $9K in principal repayment in year one as well.

But most of the other stuff you list is true. It's really a simple matter of using a rent vs. buy calculator.

Don jumpsuit, you get people claiming you can deduct more because several posters here are landlords and own more than one property.

In my experience, every mom and pop landlord cheats on their income tax returns.

donjumpsuit says

These are all income DEDUCTIONS.

So in other terms, for the HONOR to pay $18k (interest) and $10k (property
tax), I get to deduct $28k from my income.

So in other terms, really, I am saving ~30% of $28k. So $8k. And, on top of
it, both of those deduction don't qualify for state taxes.

So in this scenario, the benefit of owning a house, is the reduction of $8k
in taxes every year.

The only thing I'd say is that the last sentence should say the "tax benefit" of owning a house... There are other benefits like principal repayment, fixed housing cost, potential asset appreciation, etc.

But there are also downsides like you noted. Like I said--there are good calcluators out there that will sum up all the plus and minus for you.

donjumpsuit says

With those kind of assets, honestly, they aren't sitting as cash in the bank

With those kinds of assets if someone is looking to buy it is not advisable to have that money in the stock market. The vast majority of people even those in the finance industry (where there is likely to be conflict of interest since they get paid based on assets under management) don't recommend investing in the market for the downpayment funds.

It seems like only 2 choices are being discussed - either paying rent for life or taking full 30 years to pay back the home loan. But there's also another choice that's better that either one - prepay principal, save money on interest and be rent/mortgage free as soon as possible.

Small modification: "Don't buy or rent things you don't need with money you don't have to impress people you don't like". This still holds and might do wonders to asking prices/rents ;)

JodyChunder says

3K a month in rent v 3K a month in mortgage? In either situation, you better be pulling in at least a 150K combined annually by my rough math, and don't have any expensive hobbies, (like children).

That's right. Currently the combined income of our household is above 200K and we keep rent at around 2400. Leaves a cushion for emergencies and room to continually grow investments. I think 3k in rent/mortgage with 150K combined is already overstretched if you have a kid, but may work if you are just a double-income-no-kids household.

As long as a budget is practiced and housing costs are less than 30% take-home, it's an advantage to slowly spend $1.8 million dollars on housing over 30 years versus spending it all at once and digging out of the hole. I don't think people carefully calculate leverage and the costs of buying houses.

mell says

JodyChunder says

3K a month in rent v 3K a month in mortgage? In either situation, you better be pulling in at least a 150K combined annually by my rough math, and don't have any expensive hobbies, (like children).

That's right. Currently the combined income of our household is above 200K and we keep rent at around 2400. Leaves a cushion for emergencies and room to continually grow investments. I think 3k in rent/mortgage with 150K combined is already overstretched if you have a kid, but may work if you are just a double-income-no-kids household.

$3,000 in rent hurts way more than $3,000 PITI HOA because none of the rent can be deducted from taxable income compared to interest + property tax when owning. This is especially true in california where state tax alone can get you close to standard deduction. Then, there's the principal paydown as well that part of the $3,000 goes to.

From Goran

"In the end, you have to do what makes sense for your situation. Compare rent vs buy, and which ever comes up with the lower cost to live under a roof, go for that one."

It's not just about lowest cost. One of my biggest fears of owning is getting into a neighborhood I like and then having nightmare neighbors move in. Most people I know who own have at least one neighbor who sucks the enjoyment out of being at home. If you rent, you can stay out your lease (or not) and move. Even in a country property, you have the weird, creepy guy who shoots at things in the middle of the night, or the guy with a huge grow operation and sketchy people at all hours.

Try putting pride on the shelf and renting a small apartment in the bad part if town for small money and save like a demon until you have enough to begin living as the owner class. Then invest wisely and join the ranks of the rentiers.
Only problem with this is if you have kids this option isn't great. Good for single guys tho

Rufita11, The flip side of renting is that your landlord might tell you "hey, your lease is up in 30 days, prepare to move". This happened to a friend of mine, so they get to look for a place to live, and move, on short notice. Especially annoying if one has kids in school.

Drew, the mobile home can work, but there've been a few recent cases in SJ where the land owner either substantially raises the rent or sells the land. Then you can see if the home is actually mobile.

Now, owning a house isn't perfect either, as Rufita11 states. I suspect that one reason the "ownership premium" is higher compared to rent in higher-priced neighborhoods is that in such a neighborhood there's a lower probability of nightmare neighbors.

Goran_K says

Mortgage owners: You pay for 30 years, pay taxes, HOA, fix everything, and after all that you own an old box. Better make sure your job is stable.

The difference here is that old box can be worth quite a bit of money. Some of those old boxes in Redwood City, CA are worth over 600k for a 3 bedroom, 1 bathroom, 1,000 sq ft house. When you rent you end up with NOTHING after 30 years. Rents are $2,500 in Redwood a month, but property taxes are under $800 a year for property owners. It true owner get shafted compared to renters the first years of ownership, but in the end it's the owners that are Far better off.

TechGromit says

When you rent you end up with NOTHING after 30 years.

Nothing except all the money you saved not owning and 30 years of living exactly where you wanted.

Without calculations, people have a psychological/emotional limit, like the $3000 of this thread, at or above which they will only buy houses. That leads to advantageous rental markets at some prices.

rufita11 says

One of my biggest fears of owning is getting into a neighborhood I like and then having nightmare neighbors move in.

I think one of the biggest fear for people who don't buy is that they won't be able for afford their chosen neighborhood if they don't lock in when they can afford it.

How many current residents could afford to live in Palo Alto if they had to buy in at today's prices?

Housing bears think there's some magical price/income ratio that's a constant.

In reality, once the buildable land becomes scarce the price/income ratio starts increasing, albeit slowly with many ups and downs.

"Buy now or be priced out" is a funny meme, but there's absolutely some truth behind it.

zesta says

Housing bears think there's some magical price/income ratio that's a constant.

It's not magic and not constant. It's an indicator of something amiss. When people spend more money than they make, bad things happen. When a majority of people spend more money than they make, very bad things happen. The lenders will keep that balance carefully to keep that massive flow of interest money.

dublin hillz says

$3,000 in rent hurts way more than $3,000 PITI HOA because none of the rent can be deducted from taxable income compared to interest + property tax when owning. This is especially true in california where state tax alone can get you close to standard deduction. Then, there's the principal paydown as well that part of the $3,000 goes to.

I'd say the tax advantages you mentioned by owning are neutralized by the fact that you cannot "downsize" as fast if you need to (or move to a cheaper location), you are tied to the area/county/state/country, and - if you happen to be in a long-term relationship or marriage and it goes south then ownership and control of the house will likely be determined by lawyers and courts. Furthermore people tend to rent a less spacious (prestigious) place than they would like to own, so they have more money to pour into other investments. That being said, I would like to see the tax advantages for owners to go as there is zero justification for them.

mell says

Small modification: "Don't buy or rent things you don't need with money you don't have to impress people you don't like". This still holds and might do wonders to asking prices/rents ;)

But! Also don't wait until you've got cancer to splash out on some of the good stuff in life. Lobster Thermidor and Old-Fashioneds go better without the polyps!