patrick.net

MolotovCocktail says

Homes were never, ever meant to be (near guaranteed) slot machines. Most people considered breaking even on a house was a pretty damn good deal.

You can look up addresses on Zillow to find what it'd cost per month to buy ('refi"), and what it'd cost per month to rent. It says my residence would be $7k per month to own, $4300 to rent. That's an "ownership premium" of 63%, which I think is insane. Folks are still buying.

This is why homie is not impressed when "Bay Area, Cool And Hip" homeowners Talk Smug.

B.A.C.A.H. says

MolotovCocktail says

Homes were never, ever meant to be (near guaranteed) slot machines. Most people considered breaking even on a house was a pretty damn good deal.

You can look up addresses on Zillow to find what it'd cost per month to buy ('refi"), and what it'd cost per month to rent. It says my residence would be $7k per month to won, $4300 to rent. That's an "ownership premium" of 63%, which I think is insane. Folks are still buying.

This is why homie is not impressed when "Bay Area, Cool And Hip" homeowners Talk Smug.

If they can afford it and believe the prices will rise forever, it makes sense to own even though it costs more to do so.

B.A.C.A.H. says

You can look up addresses on Zillow to find what it'd cost per month to buy ('refi"), and what it'd cost per month to rent. It says my residence would be $7k per month to won, $4300 to rent. That's an "ownership premium" of 63%, which I think is insane. Folks are still buying.

Around here, that same Zillow shows about a $2,000 "ownership premium" on a million-dollar home. if so, I cannot see why so many people are buying, especially when closing costs are added in. I would assume that the owners of million dollar homes do not want to rent them out so renting is not really a choice.

B.A.C.A.H. says

You can look up addresses on Zillow to find what it'd cost per month to buy ('refi"), and what it'd cost per month to rent. It says my residence would be $7k per month to won, $4300 to rent. That's an "ownership premium" of 63%, which I think is insane. Folks are still buying.

B.A.C.A.H. says

MolotovCocktail says

Homes were never, ever meant to be (near guaranteed) slot machines. Most people considered breaking even on a house was a pretty damn good deal.

You can look up addresses on Zillow to find what it'd cost per month to buy ('refi"), and what it'd cost per month to rent. It says my residence would be $7k per month to won, $4300 to rent. That's an "ownership premium" of 63%, which I think is insane. Folks are still buying.

This is why homie is not impressed when "Bay Area, Cool And Hip" homeowners Talk Smug.

My area of the 'vale seems particularly skewed towards better to rent. My house has a rent Zestimate™ of a a mere $5760. To buy my $2.6MM turkey, your monthly mortgage and taxes would be $15,000 and $2500. So, there's a 3x premium cost to owning by that metric.

One of the earlier themes here on Pat Net was the number of years it took paying rent to equal the purchase price of a house. For example, if a house rented for $50k per year but cost $800k the number was 16 — a fairly reasonable number. If the number was higher it was better to rent; if it was lower it was better to buy. My house is a factor of 37.

Why do people hold onto their houses even after fleeting the state? Perhaps they look at the last 30 years of ownership and assume the 7 to 10% annualized gain will hold on forever; that's better than any bonds you might buy. Another consideration is that old people might want to hold until they die so that their "kids" can inherit tax free. Either way, people are stubbornly holding excess houses and keeping the purchase prices artificially high compared to rents.

SunnyvaleCA says

Either way, people are stubbornly holding excess houses and keeping the purchase prices artificially high compared to rents.

There are various end games to housing. My mom now owns my home. It's in a trust and I will get it back and can rent it out with no mortgage. My wife is not listed in the trust. By the time my mom passes it will be $3k in rent and only about $4k/yr in taxes. Kids will be gone, so expenses are only the wife and I.

I'm basically retired and it wouldn't be this way without owning a home. And we're talking low prices on houses where I'm at in IL. Outside of tech workers that get stock options I make more than guys/gals in CA paying $1-3M for a house similar to mine OR rent. Not a brag, but I get shit on for my point of view about RE from people that don't understand it. It's made me wealthy enough to not work at 42.

My next goal is vacation/retirement property. Goal is by about 48 to be living in St. Thomas or St. John during the winter months. Stay in IL with hopefully a paid off new home that's 6 years old in spring, summer and fall.

Hated my dad, but he did teach me great financial advice. I've done well.

GNL says

If they can afford it and believe the prices will rise forever, it makes sense to own even though it costs more to do so.

Right, it's all about the expected rise in price compensating for the monthly loss in cash compared to renting the same kind of house.

When prices start falling, they are likely to keep falling down to the level actually justified by rents, as people stop betting on appreciation.

Patrick says

GNL says

If they can afford it and believe the prices will rise forever, it makes sense to own even though it costs more to do so.

Right, it's all about the expected rise in price compensating for the monthly loss in cash compared to renting the same kind of house.

When prices start falling, they are likely to keep falling down to the level actually justified by rents, as people stop betting on appreciation.

Yes, I would think so but, I also think we are in an extreme wealth/income inequality system now. No, I am not woke or some other BS. I don't think "they" were kidding when they said you won't own anything but, they were wrong about the you'll be happy part.

It’s colossal stupidity that we let turn housing into ever appreciating CC. That kind of system sinks society.

GNL says

Right, it's all about the expected rise in price compensating for the monthly loss in cash compared to renting the same kind of house.

When prices start falling, they are likely to keep falling down to the level actually justified by rents, as people stop betting on appreciation.

There's lots of stuff on the internet about AI causing elimination of white collar "knowledge" jobs. Peggy Noonan, a political commentator, penned an editorial in the weekend WSJ about the phenomenon.

Here in the BayAreaCool And Hip, I have immediate family employed at some of those household name Silicon Valley companies you all have heard of, who have front row seats to what is happening. Job eliminations at employers with revenue and profit soaring as roles are replaced by AI. A long-time friend of mine was laid off with fifteen others in a manufacturing department where the "knowledge work" was sufficiently automated to retain two engineers from the original 18, - making 16 redundant. The AI changes are real. What's happening now is the tip of the iceberg.

When I was working in hardware technology development, I suppose about 80% of the time I spent on the job was doing stuff that an unsavvy person like me could train an AI to perform. Another way of saying that is my department could reduce the number of engineers by 80% and get the same results.

All the decades that manufacturing was leaving the region (first aerospace, then computers, then semiconductors) the region's cheerleaders crowed that our region will thrive because we're a knowledge economy, where knowledge workers are in demand and the pay is high. We don't need manufacturing. We have the world at our fingertips and The Sky Is The Limit.

I get it. Some AI will need some retained knowledge workers to run it. Maybe I would have been one of the 20% to stay on in my department to do that. What about the other 80% who drive the local economy?

If this AI deployment unfolds the way it looks like it's unfolding, Silicon Valley and the Bay Area are in the direct sights of the change. Other regions' knowledge worker payrolls in jobs like paralegal, accounting, etc will be reduced. But the Cool And Hip Bay Area may be hammered, since our Knowledge Worker employment cohort is highly paid and has driven our regional economy for a long time. Laid off techies competing for a shrinking number of jobs even as colleges continue to crank out new engineers is going to hit salaries and compensation for those who land a gig.

Time will tell if the changes affect rents and house prices.

WookieMan says

Not a brag, but I get shit on for my point of view about RE from people that don't understand it. It's made me wealthy enough to not work at 42.

From your posts, it looks like your wealth is more from parental hand me downs and a highly paid wife. Didn't you say your mom bought your old house and you borrowed against your mom's stock portfolio? Are you now claiming to be a self-made real estate investor? Or is this just another of your extreme exaggerations? Leveraging your mother's money makes you a shrewd RE businessman in the same way that having a drone permit makes you an "FAA certified" expert competent enough to lecture actual pilots about flying. Is this why you have not published the promised pictures of your home build, since it would expose the house as being just another mid-sized minimum code structure?

Patrick says

When prices start falling, they are likely to keep falling down to the level actually justified by rents, as people stop betting on appreciation.

I have been hearing that since the sixties. The acid test would be to find any period in the last century where if anyone who held a home for 10 years actually lost money. I am referring to reasonably sized populated areas, not small towns where a mine, military base, or rural distribution center closed down.

Fortwaye says

It’s colossal stupidity that we let turn housing into ever appreciating CC. That kind of system sinks society.

Or just evil. Maybe the goal of lefty government is to keep the population in debt. Why else did they invent the "Reverse Mortgage" except to decrease the number of mortgage free homes?

Fortwaye says

It’s colossal stupidity that we let turn housing into ever appreciating CC. That kind of system sinks society.

What is CC?

Glock-n-Load says

What is CC?

Credit Card

Maybe I heard it first on PatNet back in the 'naughties, but for most of the history of this country, it was always more expensive to rent than to own. Then the 90's hit, and shit got seriously fucked up.

Until it becomes less expensive to own than to rent, I'll continue to rent. For appreciation and opportunity cost I have PM's and stocks. I can wait.

stereotomy says

but for most of the history of this country, it was always more expensive to rent than to own.

Just a couple thoughts.
1) It makes sense that it would be more expensive to rent than own. If you are a landlord, you have to keep the place up and you have to cashflow +.
That's just business sense...unless appreciation is the goal? When will appreciation end? Again, I think we've entered an new paradigm.
2) Maybe a large enough stock of rentals exist that have low enough debt that lower rents still cashflow?
3) The drive to own is big enough to make it this way?

B.A.C.A.H. says

Time will tell if the changes affect rents and house prices.

Other threads discussing that;

https://patrick.net/post/1382641/2024-11-18-post-labor-economy-challenge

https://patrick.net/post/1313956/2018-02-21-artificial-intelligence

https://patrick.net/post/1382702/2024-11-24-farming-robot-kills-200-000-migrant

https://patrick.net/post/1378388/2023-01-25-another-episode-hype-tech-series-with

MolotovCocktail says

Other threads discussing that;

Thank you for sharing. I missed those that were mostly posted as the backstory of what's unfolding.

Now here we are in Q3 of 2025 and the Gold Collar payroll in the Cool And Hip Bay Area Knowledge Economy is shrinking.

BigSky says

The acid test would be to find any period in the last century where if anyone who held a home for 10 years actually lost money.

Detroit, MI (pop. ~630,000): From 2006 to 2016, median home prices fell from $73,479 to $45,000, a ~38% decline, driven by the housing crash and industrial decline.

Cleveland, OH (pop. ~370,000): From 2005 to 2015, prices dropped from $112,800 to $66,000, a ~41% decrease, impacted by foreclosure waves post-2008.

Flint, MI (pop. ~95,000, borderline midsize): From 2000 to 2010, prices declined from $67,900 to $50,200, a ~26% drop, due to economic stagnation.

Las Vegas, NV (pop. ~650,000): From 2006 to 2016, prices fell from $317,000 to $200,000, a ~37% decline, hit by the subprime crisis.

But even getting the same price after 10 years is a big loss because of the inflation caused by the Fed, at least 25%.

Not to mention the realtor vig of 6%.

BigSky says

have been hearing that since the sixties. The acid test would be to find any period in the last century where if anyone who held a home for 10 years actually lost money. I am referring to reasonably sized populated areas, not small towns where a mine, military base, or rural distribution center closed down.

How about the entire state of West Virginia?

https://lindynewsletter.beehiiv.com/p/the-housing-issue-we-don-t-talk-about-a6bb

That's a great point. If these areas were halfway decent, it would really add to the housing stock. Many of these places are ideal for young families to start out - if they weren't crime-ridden, shit-school dumps.

And if they ended up gentrified and going to DINKs, then that would free up more of the closer burbs, so there would still be a beneficial impact.

MolotovCocktail says

How about the entire state of West Virginia?

Much of Upstate NY, parts of Ohio, etc. in Rustbeltia, too.

Aaron Clarey had a great intro that was similar:

"I worked at the Lumber Mill for a year while your mother waited tables part time at Earl's cafe, took my pay stub to Community Bank, and we brought our first Ranch house! You just need to bootstrappity and roll your sleeves up!"

Booger says

And I’m pretty sure it’s going to stay like this.

Glock-n-Load says

And I’m pretty sure it’s going to stay like this.

Unsold at that price or even one 20% off of it?

Yup.

MolotovCocktail says

Glock-n-Load says

And I’m pretty sure it’s going to stay like this.

Unsold at that price or even one 20% off of it?

Yup.

I don’t understand your question/comment.

Glock-n-Load says

MolotovCocktail says

Glock-n-Load says

And I’m pretty sure it’s going to stay like this.

Unsold at that price or even one 20% off of it?

Yup.

I don’t understand your question/comment.

So we know what it sold for?

Glock-n-Load says

MolotovCocktail says

Glock-n-Load says

And I’m pretty sure it’s going to stay like this.

Unsold at that price or even one 20% off of it?

Yup.

I don’t understand your question/comment.

@Glock-n-Load

MolotovCocktail was saying that "going to stay like this" can be interpreted to mean that that house will stay unsold at the current price, and still stay unsold at 20% off.

He's saying prices need to fall a lot to make sales now.

Patrick says

Glock-n-Load says

MolotovCocktail says

Glock-n-Load says

And I’m pretty sure it’s going to stay like this.

Unsold at that price or even one 20% off of it?

Yup.

I don’t understand your question/comment.

Glock-n-Load

MolotovCocktail was saying that "going to stay like this" can be interpreted to mean that that house will stay unsold at the current price, and still stay unsold at 20% off.

He's saying prices need to fall a lot to make sales now.

In general, yes. Even Interest rate cuts will only effect sales at current prices on.the margin.

MolotovCocktail says

MolotovCocktail says

But don't worry. Housing Experts on PatNet have assured us this will only effect coasts and cities.

MolotovCocktail says

But don't worry. Housing Experts on PatNet have assured us this will only effect coasts and cities.

.

Lumber is at spring of 2018 price levels. It looks like lumber prices steadily climbed from 2015 to 2018.

.



.

I love Wall Street apes, and it's true the market can stay INSANE for longer than you can keep your short going or economically possess puts, but eventually there is price discovery.

There are two things in life that are inevitable, as Franklin said, death and taxes. And bum knees and strokes after 70 despite the Centrum Silver and Mall Walks.

Not only are the kids gonna be alright, in the end they might get a deal better than the luckiest of all Boomers got who brought at the precise time the interest rate-home price balance was in the sweetest of spots.

I can't see the meme he posted anymore but, it ain't gonna go back to the way it was before. I'm just going out on a limb and predicting that house prices will stay elevated for a long time. Loooong time.

GNL says

I'm just going out on a limb and predicting that house prices will stay elevated for a long time. Loooong time.

How? Who's going to pay those prices?

How can they?

I can't believe that after all the data about income-to house prices ratios and undeniable demographic trends ppl here still refuse to accept reality.

But then again, there's Coastal Wookie, so...