patrick.net

The landlord (the first one) had no choice. After filing bankruptcy, the landlord could no longer collect rent. The luck came in the length of the bankruptcy process and the subsequent foreclosure. But yes, I realize this is not the norm.

Buying makes sense only if you plan to be there for a long time, and/or if the costs are less than renting. Some properties are there on the cost front.

The problem that I, like many other buyers face, is that if 2 years from now I lose my job and despite having an emergency fund, can no longer afford that house, the supposed equity is gone, especially if I have to sell.

I'm not one of those people who say "don't buy" just to be contrary. There are a lot of good facts presented here, I just think some important ones (like bad landlords and lack of quality rentals) are not highlighted.

Most Sundays I'm out looking at houses. It's the usual mix of REO/foreclosure, which are decently priced but neglected, 1-2 decent properties at a fair price, then the bulk are grossly overpriced attempts at humor by their underwater owners trying to recoup their equity, or at least their downpayment. :)

I previewed my rental about 2 weeks before I moved my family in. It had medium quality light brown carpet in all the living areas and all the walls were custom painted nice neutral colors. We did the walk through with the management company the day before we moved in. All the walls were repainted white, the carpet was replaced with a bottom of the line off-white cheap carpet, and the entire hallway was replaced with cheap vinyl flooring!! I was incredibly upset, but we were already moved out of our old house, and had already signed the lease on this place. I called the management company to give the boss lady a piece of my mind. She tried to convince me that the vinyl was an upgrade! Off white carpet? I have 3 little kids!! What about the paint? I specifically told the representative showing us the house that I loved the interior paint and want it to stay even if it had a few marks on the wall (I saw her write this down, and it was mentioned again at the lease signing). After giving her a piece of my mind, her final answer? "What's the big deal.... it's only a rental." Chaos ensued..... but of course, I still live here today, almost 2 years later. Nothing was ever rectified. Irritating. Oh, but I sold my last house in summer of 2006 for 475k, and could re-buy it today for 210k. I guess I'll survive, after all, "it's only a rental."

I'm on the renter side as well, moving out of a place the landlord is losing to foreclosure. We've found another great place and will be moving in two weeks. I've owned two houses but got out of the LA market because I could see the writing on the wall, and I'm glad I did. I pay half in rent what I would for a mortgage, and couldn't really afford to buy in the great school district I'm in anyway.

There are hassles, but overall renting is the right choice for us (yes, even with kids and pets) now. Ask me again in a year or two.

I've always rented.

The downside for me, which you make a small mention of, is the slipshod maintenance & upkeep that is all too common.

If you get an owner who live the next street over, and is a FixIt type, great.

However in Prop13 country as far as SFH, what is more common is the owners haven't lived in that town in years, and run it through a property management company. The property managers will do minimal repairs, and if you need a new fridge say, will get the cheapest one in the outlet store not a better Energy Star model. So you pay for this in higher utility costs, and so does society. I've even had idiots like this want to nickel-and-dime over smoke detectors. You pay for it in reliability and quality of life issues too. When I'm putting in even a disposal unit, I put in Insinkerator Evolution Compact which is a quiet and excellent unit, not the plastic cheapo grinder.

Living in a Streng home these days that I'm pretty happy about though. The owners moved out of town and let me do repairs and send the bills for parts. When I do the job, it's done RIGHT not as cheap and fast as possible. I find it very sad the Streng "Carter Classic" series of homes didn't take off, and just petered out after the Strengs left the business. It's a neat design with atrium and large skylight in the entryway.

Speaking of living a simple life, this looks interesting:

http://www.guynameddave.com/100-thing-challenge.html

2006-2009 is not the norm and will not be the norm going into the future.

You either guess or hope or both. 2000 - 2006 was also not the norm. We are not at the norm now because the government has decided to put a floor under housing.

As to the original post: No, renting is not the best of all possible worlds. You could look at it as a sacrifice in your standard of living for the benefit of increased savings. I would suggest taking the money you're saving by renting and using it to afford items of interest which were out of your range before the HELOC-go-round finally seized.

my total net worth is up around six figures since last year (when most asset classes like stocks, bonds and even commodities have been flat year to date).

i rent.

i would not be up anywhere near that if i owned a home.
it would've been a double whammy.
less money to invest because of the down payment and a house that probably would've lost value.

most new home owners i know (that bought in the higher priced areas in the last 3 to 5 years) are not happy with their purchases since they were expecting appreciation. everyone i know who bought after 2005ish, are down at least $100k or more; well one guy bought in palo alto last year and his home value is "up" although he'd have to sell to realize any gains.

i love that i'm in a nice, safe, high income area (redfin shows the average home price in my city is listing at $1M or about $4000/month mortgage payment) and I'm paying minimal rent at $1100/month. not really a fair comparison, but who cares, i'm saving a boatload of money and happy where i am.

between the amount of money I'm saving (mainly because I'm not paying a huge mortgage) and being disciplined and experienced enough to invest it wisely, renting is an easy win for me. it's not even a close call.

there's a stigma with renting, but in the bay area in prime, sought after neighborhoods, it's absolutely the right choice.

But the norm IS a steady appreciation of real property, and despite what Case-Shiller wants you to believe that rate is greater than the rate of inflation.

This means someone who rents and saves is fighting two wars. Housing is going up while the value of his money is going down.

Renting: personally speaking, my savings power and mobility would have been seriously impaired by mortgage debt these past few years. Renting can suck, yes, but I think renting is the way to go for savers. Frankly, the BS that's played out over the last few years with housing has made me reconsider ever taking on a mortgage. Those big silver roach coaches are looking better and better.

As for housing going up up up; I just...doubt it. I think the housing market enjoyed its seven years of feast and is just barely into its seven years of famine. The reason it might not seem that way is because of the aggressive government intervention programs which had the effect of throwing a gargantuan area rug over the hole in the floor -- that, and likely even shadier back door shit that we won't know about until ten years from now when nobody cares anymore. In any case, unless this new housing policy becomes permanent, along with other more radical measures, (40 yr mortgages with 2% down; community service in lieu of down payments, etc.), it seems clear that we will continue to see a very slow but sure reversion to a healthy norm, where residential RE tracks more closely the local wages/salaries of buyers.

What could prevent such a reversion to normal? Undying legions of bubble equity barons endlessly beguiled by the scent of their own bullshit? An increase of foreign investors with property worship? Trickle-down from financial sector bonuses or war profiteers? Could be...a colleague of mine in San Jose just accepted a one year contract in Iraq and will be making just shy of 400K for a job that pays about 150K in the States in order to pay off his mortgage. Sorry, but I can't help thinking what a boring waste of that kind of bread. He'd be better served in the long run by buying a copy of Spider Man # 1 or an Elvis Presley toe nail clipping.

mike4518 says

i love that i’m in a nice, safe, high income area (redfin shows the average home price in my city is listing at $1M or about $4000/month mortgage payment) and I’m paying minimal rent at $1100/month. not really a fair comparison, but who cares, i’m saving a boatload of money and happy where i am.
between the amount of money I’m saving (mainly because I’m not paying a huge mortgage) and being disciplined and experienced enough to invest it wisely, renting is an easy win for me. it’s not even a close call.

BINGO!!! I'm in the same boat. Moreover, mike's comment regarding mortgage payments being $4000 + and being able to rent at just over a quarter of that cost is the whole point of Patrick's site. Hey, if you have several hundred thousand dollars lying around to put toward a down payment that will bring you to a mortgage payment level that is even somewhat close to average rents in the area you want to live then good for you. I suspect, however, that not many people are in that position. Hence, why it is far more likely than not that prices will come down as we move forward. Currently, the purchasing environment is still a laughable, shameful joke.