« First « Previous Comments 34 - 72 of 72 Search these comments
TechGromit
2013 Jun 4, 4:39am
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.
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.
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.
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.
$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.
JodyChunder
2013 Jun 4, 6:30am
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!
You cannot avoid property tax, insurance and maintenance costs by renting. The landlord simply passes them on to you. Unless you are planning to move in with your kids or live under a bridge, housing costs will likely be higher at your retirement time even if they flucuate until then. If you want to live in the same area, you are better off buying now and paying off your principal as quickly 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 ;)
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!
That's true as well. But you can easier grant yourself the little luxuries of the moment (spontaneous travel of the world, good organic food, a hot date..) or early retirement to enjoy for yourself or with your partner/kids if you don't have to slave to the grind to make all these payments for those things. After all time and good health are the most valuable assets, money can be a good facilitator for this as long as you don't fall into the trap that is the voice in your head telling you that the more you earn the more you should spend and possess ;)
FortWayne
2013 Jun 4, 6:53am
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).
Children aren't a hobby. It's a full time job for a whole family.
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.
NO. We don't have a free market in the US where that'd be the case.
In the US lenders profit from loan origination fees, pass the risk on to some one else (usually the Government Sponsored Enterprises), and perhaps collect servicing fees when things go well.
In the first 9 months of 2012 Fannie Mae and Freddie Mac guaranteed 69% of all new mortgages. The FHA and Department of Veterans Affairs took care of another 21% bringing the total to 90%.
The lenders profit regardless of whether those loans written are sustainable.
The group not in the business of servicing loans profits more when the loans are not sustainable and they have a chance at more origination fees sooner than if the debt takers lived in those homes until they'd naturally be ready to upgrade or move for other reasons.
NO. We don't have a free market in the US where that'd be the case.
In the US lenders profit from loan origination fees, pass the risk on to some one else (usually the Government Sponsored Enterprises), and perhaps collect servicing fees when things go well.
In the first 9 months of 2012 Fannie Mae and Freddie Mac guaranteed 69% of all new mortgages. The FHA and Department of Veterans Affairs took care of another 21% bringing the total to 90%.
The lenders profit regardless of whether those loans written are sustainable.
The group not in the business of servicing loans profits more when the loans are not sustainable and they have a chance at more origination fees sooner than if the debt takers lived in those homes until they'd naturally be ready to upgrade or move for other reasons.
That's exactly the problem and it incentivizes all sorts of roaches to inject themselves as early as possible into the money flow and exiting as early as possible soon thereafter wherever government funnels printed money and assumes the risk within government sponsored entities.
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).
Children aren't a hobby. It's a full time job for a whole family.
Aren't they basically squatters?
JodyChunder
2013 Jun 4, 7:59am
That's true as well. But you can easier grant yourself the little luxuries of the moment (spontaneous travel of the world, good organic food, a hot date..) or early retirement to enjoy for yourself or with your partner/kids if you don't have to slave to the grind to make all these payments for those things.
I say, front load the retirement years while you're still young, virile and incautious. Retiring with a spotted, sagging pelt clinging loosely to your blown-out joints flaring with bursitis is not the grand scenario it's chalked up to be. Raise hell now, my friend. THEN, work til you drop.
JodyChunder
2013 Jun 4, 8:02am
Children aren't a hobby. It's a full time job for a whole family.
Let's be honest: Technically speaking, we don't need anymore children. We really don't. I love 'em too, but we've got plenty of people competing for diminishing resources, and nearly everyone wants the same resources as everyone else.
So, yeah...unless you need Junior to help till the north 40, it's a hobby. I'll go one further, and say it's a mixture of vanity and fetish. And that's fine...but it's expensive.
Paying 3k per month rent isn't nearly as dumb as paying 200+ per month for television, or 100+ for a cellular phone,,,,but people do it en masse
tatupu70
2013 Jun 4, 8:11am
NO. We don't have a free market in the US where that'd be the case.
In the US lenders profit from loan origination fees, pass the risk on to some one else (usually the Government Sponsored Enterprises), and perhaps collect servicing fees when things go well.
In the first 9 months of 2012 Fannie Mae and Freddie Mac guaranteed 69% of all new mortgages. The FHA and Department of Veterans Affairs took care of another 21% bringing the total to 90%.
The lenders profit regardless of whether those loans written are sustainable.
The group not in the business of servicing loans profits more when the loans are not sustainable and they have a chance at more origination fees sooner than if the debt takers lived in those homes until they'd naturally be ready to upgrade or move for other reasons.
That's a good story, but it's not really true. The government did back the vast majority of loans since 2009 but the underwriting standards were good and default rates have been back to historical standards.
Banks do make origination fees so that's why the GSEs have strict rules for what types of loans they'll buy.
That's true as well. But you can easier grant yourself the little luxuries of the moment (spontaneous travel of the world, good organic food, a hot date..) or early retirement to enjoy for yourself or with your partner/kids if you don't have to slave to the grind to make all these payments for those things.
I say, front load the retirement years while you're still young, virile and incautious. Retiring with a spotted, sagging pelt clinging loosely to your blown-out joints flaring with bursitis is not the grand scenario it's chalked up to be. Raise hell now, my friend. THEN, work til you drop.
Hehe maybe you can do and have it all, because when I hear virility I am thinking now of that 78 (?) old geezer finishing the boston marathon who got briefly knocked off his legs during the explosion before the finish line, then he got up, finished the race and proceeded to give an interview ;)
Paying 3k per month rent isn't nearly as dumb as paying 200+ per month for television, or 100+ for a cellular phone,,,,but people do it en masse
True dat.
That's a good story, but it's not really true. The government did back the vast majority of loans since 2009 but the underwriting standards were good and default rates have been back to historical standards.
Banks do make origination fees so that's why the GSEs have strict rules for what types of loans they'll buy.
That's why FRE/FNM and the TBTF's needed billions of taxpayer bailouts and continue to get propped up by the Fed's ZIRP discount window. Or wait, something's wrong here..
Paying 3k per month rent isn't nearly as dumb as paying 200+ per month for television, or 100+ for a cellular phone,,,,but people do it en masse
They are all very questionable choices but yeah I would probably rank the $100 wireless as the biggest vice...
Paying 3k per month rent isn't nearly as dumb as paying 200+ per month for television, or 100+ for a cellular phone,,,,but people do it en masse
They are all very questionable choices but yeah I would probably rank the $100 wireless as the biggest vice...
Thanks to a comment on an old thread by Patrick I switched over to Republic Wireless here in the bay area long ago for $20/month (unlimited everything) which operates as a seamless hybrid Wifi/Cell (3G) system (I think the cell provider is Sprint if no Wifi is available) and have never looked back since.
tatupu70
2013 Jun 4, 9:04am
That's why FRE/FNM and the TBTF's needed billions of taxpayer bailouts and continue to get propped up by the Fed's ZIRP discount window. Or wait, something's wrong here..
Nope--you're confusing time periods.
New Renter
2013 Jun 4, 2:12pm
Paying 3k per month rent isn't nearly as dumb as paying 200+ per month for television, or 100+ for a cellular phone,,,,but people do it en masse
They are all very questionable choices but yeah I would probably rank the $100 wireless as the biggest vice...
Thanks to a comment on an old thread by Patrick I switched over to Republic Wireless here in the bay area long ago for $20/month (unlimited everything) which operates as a seamless hybrid Wifi/Cell (3G) system (I think the cell provider is Sprint if no Wifi is available) and have never looked back since.
Whhaaaa???? Tell me more!
Buy the phone in full and get the $19/month (before taxes) plan. They currently only support one or two phones, but the Motorola defy xt that they sell works well. When I am at home or at work or have access to Wifi then it uses Wifi, otherwise it uses Sprint at 3G speed. Support and sales is online only and was sparse in the beginning, but they have been improving. They ship the phone with all instructions to you after you paid online and once you activated with an initially new number they let you port most old numbers online as well. Also you get signed up for the community where you can find answers for almost all questions in the forum. Call quality is ok and the calls hardly ever drop.
New Renter
2013 Jun 4, 2:35pm
Buy the phone in full and get the $19/month (before taxes) plan. They currently only support one or two phones, but the Motorola defy xt that they sell works well. When I am at home or at work or have access to Wifi then it uses Wifi, otherwise it uses Sprint at 3G speed. Support and sales is online only and was sparse in the beginning, but they have been improving. They ship the phone with all instructions to you after you paid online and once you activated with an initially new number they let you port most old numbers online as well. Also you get signed up for the community where you can find answers for almost all questions in the forum. Call quality is ok and the calls hardly ever drop.
I checked out the site. So far it looks very promising. My wife is reluctant to give up her old DroidX though. What is the other phone that is compatible with their system?
I checked out the site. So far it looks very promising. My wife is reluctant to give up her old DroidX though. What is the other phone that is compatible with their system?
I think it was an LG Optimus.
What's missing here is that when it comes to rent or buying, you can overpay for both. I think paying anything over $1,500 a month for rent is ridiculous. We never paid more than $1,200 for the 10 years we rented. At the same time, paying a crap ton of money for a house is also equally bad. It comes down to total expended dollars. That's all.
New Renter
2013 Jun 5, 5:42am
What's missing here is that when it comes to rent or buying, you can overpay for both. I think paying anything over $1,500 a month for rent is ridiculous. We never paid more than $1,200 for the 10 years we rented. At the same time, paying a crap ton of money for a house is also equally bad. It comes down to total expended dollars. That's all.
Where do you live again?
I think paying anything over $1,500 a month for rent is ridiculous.
So what's your limit for a mortgage? The kind of limit you wrote seems arbitrary and based on your emotions.
What's missing here is that when it comes to rent or buying, you can overpay for both. I think paying anything over $1,500 a month for rent is ridiculous. We never paid more than $1,200 for the 10 years we rented. At the same time, paying a crap ton of money for a house is also equally bad. It comes down to total expended dollars. That's all.
I agree. While I was a renter, no place that I lived in ever had rent greater than $1600. Then again, I only lived in apartments as a renter. However, some of my friends were cool with renting single family homes and were/are paying over $3,000 a month. Coincidentally.... they always seem to have issues saving money.
Mortgage to me should never be more than 3X's income. Mine is about 2X's, so lower then that. As far as renting, we always shared houses with other renters. The last place before we bought was a 4 BR house with a large yard. Our share was $1200 a month. Yet I know people in SF who are paying $2,500 for a 1 BR apartment. That to me is grossly overpriced.
Mortgage to me should never be more than 3X's income. Mine is about 2X's, so lower then that. As far as renting, we always shared houses with other renters. The last place before we bought was a 4 BR house with a large yard. Our share was $1200 a month. Yet I know people in SF who are paying $2,500 for a 1 BR apartment. That to me is grossly overpriced.
The minimum mortgage here in the bay area that I have seen from acquaintances is 5 x combined income - and I know quite a few where it is closer to 10 x.
Mortgage to me should never be more than 3X's income. Mine is about 2X's, so lower then that. As far as renting, we always shared houses with other renters. The last place before we bought was a 4 BR house with a large yard. Our share was $1200 a month. Yet I know people in SF who are paying $2,500 for a 1 BR apartment. That to me is grossly overpriced.
When I was partying and living by myself, I never went over $1600 in SF and that got me a nice studio w/ big bathroom, kitchen, washer & dryer in unit in a luxury condo complex with pool and gym. That was couple of years ago though. Maybe today $2000 should be the absolute max for a single with a decent salary, but $1500 is even better. Rents seem to have topped out for now anyways.
That to me is grossly overpriced.
Well, prices are different in different places. I, similarly, don't want to live in the places in the U.S. where I could buy a house for $50k. Those places would also not offer me the work I find interesting and, therfore, worth doing more than eight hours a day.
and I know quite a few where it is closer to 10 x.
The median price is 8-10x median income according to an article this week in the SF Chronicle.
tatupu70
2013 Jun 5, 9:49am
Well, prices are different in different places. I, similarly, don't want to live in the places in the U.S. where I could buy a house for $50k.
There aren't too many places left where you can buy for $50K. But I think perhaps there are some places that are less than SF Bay Area but would still offer the work you desire, if you really wanted to consider moving.
There aren't too many places left where you can buy for $50K.
Roberto lists them all the time!
Understood. $50k was an arbitrary number picked to be low. Yes, easily could move from SF Bay Area and buy a house in lots of places even without first getting a job. Maybe I'll do that at some point, but that's just not part of my American dream. I don't care to ever own a house. I value my freedom more. If I thought I could have both, "Sure!"
My interests just don't lie in counter tops and paint colors and furniture. A house seems like a major hobby and I'm not interested. I like having a nice place to live in a great neighborhood with someone else dealing with all the hobby parts I don't like. I water my lemon tree though!
There aren't too many places left where you can buy for $50K.
There are lots of places you can buy at 50k, just not places you want to live.
« First « Previous Comments 34 - 72 of 72 Search these comments
If someone makes this choice (and apparently some folks here consider this to be a wise choice...) in their 30s assuming that they live for 50 more years, that equals to $1.8 million in rent assuming no rent increases. If rent increases at rate of inflation, we are talking an average rent of at least $6,000 a month over a 50 year period which will equate to $3.6 million in lifetime rent. What's even worse is that the rent in retirement will be the highest. Seems like a true slavery to me - by the time that your life is over the landlord has taken you for a very disproportionate amount of your earnings. And there's no option to sell the asset since it doesn't exist.