patrick.net

ch_tah says

You are buying despite all of the terrible aspects.

I have contingencies, counterweights, and thresholds for all of the "terrible" aspects of ownership. I am extremely picky, and I look at it beyond just the cost, which I have been modeling for a while. For instance, I look at the house's utility. Will it suit me in ten years? What if I'm married with three kids, will it suit me then? What will traffic congestion and energy costs mean, both in terms of my commute and my monthly utility bills? How much will I have to invest in the house to keep it "current", what timeline would I need to do it in, and what are the alternatives if I can't? What if my job moves to Colorado, can I rent the house out at the cost of what I'm paying per month, minus the maintenance/management of the property?

There are dozens of more thoughtful questions people should ask themselves and think about before buying than "this room would look great in green".

ch_tah says

You are condescending and are a know-it-all, yet you are posting on an Internet board about how you just put in an offer on a house instead of using your knowledge to become filthy rich from the bursting of the housing bubble.

I have no interest in getting filthy rich, or even rich, and just want to avoid making a mistake which will put me through years of financial pain and regret. Too many people have shifted from euphoric daydreamers to post-purchase-rationalizers to being outright miserable. Some scumbag realtor took advantage of their trust, brainwashed them with emotional propaganda, and it took years for them to wake up. Watching that transition is heartbreaking.

edvard2 says

The way I look at is that its a cross-beneficial arrangement. We’ve lived in the house for 8 years and in that time we’ve done quite a bit of work to the yard. Mostly it came in the cost of sweat. In return the landlord hasn’t ever raised the rent and we get to have a nice yard that we enjoy.

My landlord has offered me a similar deal. He'll take off a part of my rent if I do the yardwork. I'm very allergic to some of the things in his back yard, so I defer it to him instead, which he doesn't mind.

ch_tah says

More specifically, if your rent payments and your house payments would be the same, yet you have these additional liabilities, would you purchase? If so, why?

Basically what it comes down to is location. Location is everything. Here in VA beach, if you want to be close to the ocean (walking distance was my only requirement when we looked for places to live a year ago) you can rent a condo or a crap house, or you can buy a nice house. The owners of nice houses within walking distance of the beach do not rent annually. They rent seasonally, and they are very expensive obviously. You cannot rent a nice home near the ocean by the year for a reasonable price; you either pay the premium (like 2 grand a week) or you get a marginal house that no vacationer wants to rent by the week, or a condo/apt.

I guess for me personally, it's comparing apples to oranges. I would not usually rent the type of house I'd buy, and I definitely would not rent a place to live that I'd want to turn around and buy. If Im renting, Im doing it for value. Currently we rent to save for a home purchase, so we balance location with the need to not spend lavashly on a rental when we should be stashing that money away for a home. If I buy, I want quality and will pay a premium. So to me the idea that I can modify the home if I own it is a foregone conclusion, and I don't put it in the "benefit" category per se.

It would be like saying one of the benefits of marriage is getting to have sex whenever you want. Which is all well and good, except that it's not mutually exclusive. There are plenty of married people having no sex, and plenty of people having lots of sex who are not married. So the argument that regular sex is a "benefit" of marriage, is thin at best. Regular sex is a benefit of having a significant other, not exclusive to married people. Having someone to take care of you when you're sick is a benefit of marriage. Regular sex is just a possibility when you're married, nothing more. As is the option of messing around with your property if you own it. And not owning the property does not exclude one from modifying it either. As I said before, a lot of landlords welcome you improving their home with your labor. Additionally, I have no desire to do anything with this condo. Like I said, when we buy, we will not buy a condo, so I don't have designs on all the condo upgrades I'll do once we buy our own; I have designs on what kind of house I want and where, that's all. I know I'll be able to modify it if I want to once it's ours, but that's completely peripheral to why we want to buy a home.

The MID is a true benefit. You have to do nothing to get it (besides claim it) after you buy a home, but you absolutely cannot get it if you don't own a home. The two are mutually exclusive, and claiming the benefit requires no additional expenditure from you once you own.

And I'm talking purely this line: "You get to paint your walls any color you wish, without having to clear it with a landlord."

This just sounds like some NAR bullshit propoganda to me. It's a weak argument for owning a home, especially in this day and age. You don't have to ask you landlord's permission to paint the walls yellow? Who gives a flying fuck? That should be #137 on the list of benefits of homeownership, not in the top 5.

Coogan99 says

If you’re honest about these three things, buying almost NEVER makes financial sense over renting. Some SUPER distressed sales have begun to make sense.

That's a completely ridiculous statement. Buying at bubble prices never make sense. Otherwise, assuming you won't be moving any time soon, it almost always makes financial sense to buy. Look at any 15 year period in history and tell me when renting wins.

"Look at any 15 year period in history and tell me when renting wins."

Sure. SF or LA purchased in 1988 or 1989. Houston purchased in the 1980s or afterward. Japan. :)

It's equally ridiculous to give your absolute, as it is Coogan99's absolute. Most people's absolutist statements are ridiculous.

There are many markets right now where buying is cheaper than renting. The Bay Area tends to have the reverse more often.

Buying *should* be cheaper than renting, because of illiquidity, high transaction costs, risk, lack of mobility, etc. Usually when the reverse happens, there's some sort of distortion or other factor causing it.

Schizlor says

This just sounds like some NAR bullshit propoganda to me. It’s a weak argument for owning a home, especially in this day and age. You don’t have to ask you landlord’s permission to paint the walls yellow? Who gives a flying fuck? That should be #137 on the list of benefits of homeownership, not in the top 5.

Wow, 137 benefits of homeownership - you and Klarek should discuss them all; I think he'd disagree with you with the quantity.

I agree specifically, painting walls is a minor benefit; however, the ability to do what you wish with your house overall is a pretty big benefit. Not sure where it is on the list, but if you lump it in to making the place feel like home, where you specifically paint your kids' rooms the way you want, and get to see the joy on their faces, I give that a pretty high value. I'm not saying you can't do this if you rent, but for us, when we did rent, we couldn't.

tatupu70 says

Look at any 15 year period in history and tell me when renting wins.

The average American family moves every seven years. But go ahead and position your goalposts however you can to make your point.

klarek says

It’s a trade-off. Not everybody cares about remodeling, or even wants to pick up a hammer. You’re assuming that every owner is their own Bob Vila. A benefit would be buying a piece of land and discovering an oil well on the property.

You are the one painting everyone with the same brush. Yes, for some, having to do repairs is actually fun. For others, painting is fun. Others, yardwork is fun. For some, none of it is fun. Obviously, for the last group, these aspects of homeownership are not a benefit to them. That doesn't mean it isn't a benefit to the rest. For some reason, you think everyone should think and feel the same way you do. Just because you don't like yardwork, doesn't mean someone else is an F'n idiot for having a garden.

ch_tah says

and get to see the joy on their faces

I guess NAr also suckered you with the "own or your children will be miserable" propaganda.

-Appeal to emotion.
-Dumb them down.
-Get them to stop thinking.
-Use fear, and parental guilt.
-Nobody can stand being thought of as a bad parent.
-Equate home ownership with being a GOOD parent.

klarek says

The average American family moves every seven years. But go ahead and position your goalposts however you can to make your point.

I'm not positioning goalposts. Coogan is. I'm just pointing out that he's wrong.

klarek says

I guess NAr also suckered you with the “own or your children will be miserable” propaganda.

-Appeal to emotion.
-Dumb them down.
-Get them to stop thinking.
-Use fear, and parental guilt.
-Nobody can stand being thought of as a bad parent.
-Equate home ownership with being a GOOD parent.

I'm not sure why you paint me with the falling for NAR crap. I had a list similar to yours above. We did very thorough analysis before we bought. We couldn't have cared less what color the walls were. However, I don't feel the need to attack others for such a preference.

corntrollio says

Sure. SF or LA purchased in 1988 or 1989

Well, I think 1988/89 is very close to bubble territory, but we'll check it anyway. Guess what, prices doubled to 2003.

Japan--bubble.

Houston looks pretty good too. If you bought in 1987, you are up ~80% over 15 years.

ch_tah says

I’m not sure why you paint me with the falling for NAR crap.

Because practically every reason you present or defend re: home ownership is crap that NAR puts in their commercials. They even managed to squeeze it in this awful ad:

http://www.youtube.com/watch?v=Ubsd-tWYmZw

Let's make it about the children, because you can't live in a good school district unless you own, so call a realtor today!

ch_tah says

For some reason, you think everyone should think and feel the same way you do. Just because you don’t like yardwork, doesn’t mean someone else is an F’n idiot for having a garden.

I don't dislike yardwork at all. I just have some particular allergies and would rather not do it for the house I'm renting. I also have this handy slave called a "landlord" that comes and does it for me.

My point is that you are still confused as to what a "benefit" entails. You eat up the NAr bullshit and assume that if parameter differentiates owning from renting, it is a benefit. It's not, it's a trade-off. Like owning a big car versus a small one, having a cat versus a dog, and taking the highway versus the backroads. If somebody is trying to tell me there is net or inherent benefit in any of these things, I'd be skeptical about what they're trying to sell me. In your case, you're just drinking the koolaid that some realtor gave to you.

That isn't a personal attack or an insistence that you agree with my views, I just don't think you understand what the meaning of "benefit" is when it comes to housing. NAR has sold to you the euphoria and responsibility of ownership which you are still only looking at from the lens they had you view it through. Over time you'll figure it out. All it will take is two back-to-back emergency repairs/accidents and you'll snap right back into reality.

tatupu70 says

Well, I think 1988/89 is very close to bubble territory, but we’ll check it anyway. Guess what, prices doubled to 2003.

Nothing wrong with bubbles -- you would include bubbles in price increases, so why can't I include them in price decreases? How about Los Angeles County from 1982 to 1997 (http://www.laalmanac.com/economy/ec37.htm). It went up 48.0% for median price, inflation was 66.3% (per CPI). That's without considering costs of ownership in 15 years. Yes, that's from the 90s bubble in housing.

You are selectively picking years for Houston, which got slaughtered even without considering inflation:

http://money.cnn.com/2005/09/19/real_estate/buying_selling/price_declines/

"Oil patch" cities, suffered even sharper declines. In Oklahoma City prices plummeted 26 percent from 1983 to 1988. It took 15 years for prices there to return to nominal 1983 levels.

Houston home prices fell 22 percent from $111,000 to $86,800, and also took 15 years to rebound.

Counting inflation, the average Houston home, which cost just $159,700 in 2004, is actually worth less now than it was 22 years ago. When, adjusted for inflation, a home cost about $219,000 in 1983. In Oklahoma City, the inflation-adjusted price in 1983 was $196,600. Today, it's just $135,100.

ch_tah says

Not sure where it is on the list, but if you lump it in to making the place feel like home, where you specifically paint your kids’ rooms the way you want, and get to see the joy on their faces, I give that a pretty high value.

We clearly have different value systems. I grew up with rooms with white walls and can tell you the color of the walls had very little to do with my happiness or sadness. :) This is specifically buying into a bizarre form of marketing. It's also trivial to do as a renter unless you're a crappy tenant or have a crappy landlord.

Anyway, I think the point is that people have different reasons to buy, and different people see value in different things. Some people hate having landlords, but maybe they've always had crappy landlords. Who knows?

As I've mentioned before, it's also reasonable to buy a house as *consumption* (as opposed to investment) when the rent vs. buy calculation doesn't make sense, as long as you understand that it's consumption. Many people don't understand that, however, because most people don't do the math.

This is all still a far cry from the nonsense from NAR about investments. Most realtorsused house salesmen wouldn't know an investment if it bit them in the ass. When most realtorsused house salesmen are talking about investment, they're either talking about speculation or forced savings. Neither is likely the ideal form of investment for the typical primary residence owner.

First - to clarify - when I say its almost never cheaper to buy than rent, I mean if you look at individual properties today, and estimate what they could rent for.

But to answer the question: 15 year period ending today.

Assume you had a 30yr mortgage @ 8.4% 1994 to 2001
refi #1 7.0% 2001 to 2005
refi #2 5.6% 2005 to today

Case Schiller is up from 78 -> 125 = 3.2% annual home price appreciation

S&P 500 annualized 1994-2010 6.58%, lets call this opportunity cost
http://en.wikipedia.org/wiki/S%26P_500

Taxes ~1.25%
Maintenance and improvements ~1.25%
Transaction costs in year 15 come out to ~0.5% per year

So you've borrowing money from the bank at ~5% after tax deduct
and you've borrowing money from yourself at ~6.58%

to invest in an asset which appreciates at 3.2%-1.25%-1.25%-0.5%= 0.5%

Beyond that, rent vs buy is property specific, but its clearly not a home run. **Historically**, aka any period that doesn't end in 2004,2005,2006,2007, a home only "really" appreciates at ~0.5% after non-interest expenses. This 15yr period is very close to the numbers for 1900-2000, fyi.

ch_tah says

ChrisLA says

I would imagine the article isn’t talking about CA where you can see 3 identical houses next to each other, one for 599, one for 399 and one for 199 and wonder what will happen once interest rates go back up.

Are you full of crap again? Or can you provide some addresses?

I'll do once you stop salivating.

klarek says

Because practically every reason you present or defend re: home ownership is crap that NAR puts in their commercials.

That's not remotely true. What usually happens is someone, particularly, a permabear takes an article like the one at the beginning of the thread and pulls out a tiny snippet while ignoring important parts of the article and then calls the whole article crap. It's annoying to see.

klarek says

I just have some particular allergies and would rather not do it for the house I’m renting.

Interesting, just like Schlizor, you don't want to do things because you are in a rental, which leads me to believe you would do it if you owned. Yet, you and he, keep bashing the concept of homeownership pride and the like.

By saying it's a trade-off versus a benefit is now using semantics. Having back to back emergencies as a homeowner means I'll have to eat the cost. It also means, I don't have to call my landlord and wait to see if he cares enough to take care of it immediately or not. You want your hand held (or your garden tended to); I'd rather have control. I'm still not sure why your way is right, and my way is wrong.

corntrollio says

We clearly have different value systems. I grew up with rooms with white walls and can tell you the color of the walls had very little to do with my happiness or sadness. :)

I doubt it impacts any child's happiness. What will make them unhappy is if mommy and daddy bought so they could paint the walls, end up in a stressful situation due to a job relocation and decreasing property values, engage in nightly fights, and end up getting a divorce. THAT will impact a child's happiness, not something trivial like daddy needing to ask the landlord before painting a wall, or having to paint it back when they move.

I actually feel sorry for somebody who thinks their position as a homeowner makes their child happy. It makes me angry that such a narcissistic and naive mindset could be planted by a criminal enterprise, much like how DeBeers convinces people that "diamonds are the ultimate symbol of love".

I'd say that people deserve better than this, but they've clearly proven by falling for it that they don't.

corntrollio says

Anyway, I think the point is that people have different reasons to buy, and different people see value in different things. Some people hate having landlords, but maybe they’ve always had crappy landlords. Who knows?

Exactly. I'm not sure why Klarek and others can't understand that.

ch_tah says

Exactly. I’m not sure why Klarek and others can’t understand that.

Well, I personally think using a cheap paint job as justification for making the biggest purchase in one's life deserves mockery, but I can leave that personal preference out of a logical argument when needed. I don't think Klarek objects to the concept, but rather the marketing around it, although I don't speak for Klarek.

klarek says

I doubt it impacts any child’s happiness. What will make them unhappy is if mommy and daddy bought so they could paint the walls, end up in a stressful situation due to a job relocation and decreasing property values, engage in nightly fights, and end up getting a divorce. THAT will impact a child’s happiness, not something trivial like daddy needing to ask the landlord before painting a wall, or having to paint it back when they move.

A scenario similar to yours could happen to a renter too. Out of curiosity, are you speaking from experience or are you just making crap up?

klarek says

corntrollio says

We clearly have different value systems. I grew up with rooms with white walls and can tell you the color of the walls had very little to do with my happiness or sadness.

I doubt it impacts any child’s happiness. What will make them unhappy is if mommy and daddy bought so they could paint the walls, end up in a stressful situation due to a job relocation and decreasing property values, engage in nightly fights, and end up getting a divorce

What can also affect a childs happyness is when the parents end up in a stressful situation due to having to move every 2 years and not having a stable place to live. New friends, new school.

In general, all these arguments are useless because in any situation there can be positive or negative outcome.

Rent vs Buy discussions are therefore quite pointless. We all want the same. A nice place to live to raise our family. If you can achieve that via renting, great. If you can achieve it via buying, great. Ultimately, we all would like to own a house not because NAR is telling us but because when you own something you feel like you have achieved that stability. When I paid off my first major car, I loved the idea of "no matter what happens, this car is mine." I know that a 30 year mortgage is far from really owning but we all know how fast life passes you by. Those 30 years will be over one day and if that's the day when you can say "I own this house, its mine and no matter what happens, I will always have a place to live".

I have noticed that house owners have never told me "biggest mistake in life was buying this house" (I am not talking about subprime idiots who got their ass handed to them by buying something they never should have bought). I have heard from many perma renters though "I wish we bought 20 years ago".

ch_tah says

That’s not remotely true. What usually happens is someone, particularly, a permabear takes an article like the one at the beginning of the thread and pulls out a tiny snippet while ignoring important parts of the article and then calls the whole article crap. It’s annoying to see.

The whole article was crap. You opted to defend the crappiest part of the crap article.

ch_tah says

Interesting, just like Schlizor, you don’t want to do things because you are in a rental, which leads me to believe you would do it if you owned. Yet, you and he, keep bashing the concept of homeownership pride and the like.

I did plenty of things when I owned. Keep your assumptions pegged to your wisdom of the trade-offs of home ownership: as few and thin as possible.

ch_tah says

By saying it’s a trade-off versus a benefit is now using semantics.

Schlizor tried to tell you that like 20 posts ago, and you thought it would be better to argue rather than pondering it for a second to realize he was right.

ch_tah says

Having back to back emergencies as a homeowner means I’ll have to eat the cost. It also means, I don’t have to call my landlord and wait to see if he cares enough to take care of it immediately or not.

That's why you word your leasing agreement carefully. If his response is unreasonable, and you can prove it (for instance, the invoice on the replacement purchase he made for whatever broke was more than 24 hours after he acknowledged the problem), then you have a claim against him. In the same way, if you knew of a potentially damaging defect in the house and neglected to tell him, he would have a claim against you if it were included in the rental agreement.

I'm starting to think that home ownership is really attractive for failed renters. In fact, just to come full circle with my point in the last paragraph, I booted a tenant/roommate for violating our lease agreement. I was the cruel evil landlord who didn't understand his needs or some bullshit, so rather than manning up to what he did, he impulsively bought a house at more than 8 times his annual salary. You know what the first thing he did when he bought the place? He exercised his new-found euphoria as a homeowner and painted the walls a hideous dark-blue color. His theme was "the house of blues", which it was, right up through the bank's repossession.

ch_tah says

I’m still not sure why your way is right, and my way is wrong.

I didn't say your way is wrong. Your rationale is bizarre, and based on platitudes, sentiments, and feelings similar to that of a 6 year old with a new bicycle. Why do some people view the biggest purchase in their lives based on emotions? Do you get emotional when you buy a car? What about a toaster? CD? Sandwich? Pack of gum?

Call it a rejection of being penny-wise/pound-foolish, but I believe that the more expensive a purchase you make, the more thought you need to put into it, and the LESS emotional you need to be. Be emotional with your children. Realize that their smiles have absolutely nothing to do with you being a homeowner and everything to do with them being cared for, and around people they love.

corntrollio says

ch_tah says

Exactly. I’m not sure why Klarek and others can’t understand that.

Well, I personally think using a cheap paint job as justification for making the biggest purchase in one’s life deserves mockery, but I can leave that personal preference out of a logical argument when needed. I don’t think Klarek objects to the concept, but rather the marketing around it, although I don’t speak for Klarek.

Not just that, but the notion that a renter in unable to paint their own walls. I suppose that falls in the marketing you're referring to. My current lease says I can do anything I want to the house, as long as it's returned to its original condition unless stipulated otherwise from my landlord. I can paint the entire house, walls, ceiling, doorknobs, whatever. I just have to make it not look hideous when I move out. Owning actually isn't a whole lot different. If you don't want to deter sellers, you better paint those hideous walls back to a neutral color.

SubOink says

I have noticed that house owners have never told me “biggest mistake in life was buying this house”

Your sample size doesn't mean it's fact. While I may have never heard that specific phrasing, I do know people whose house has been an albatross because they can't move, and so this limits their job possibilities without having a massive commute or taking a massive loss. Some of them took losses -- some because they were willing to buy a house as consumption and some because they "just wanted to buy." I honestly don't know very many perma-renters -- a lot of renters either will buy in the future or have bought previously. I'm sure there are some in San Francisco, but that is also often where buy vs. rent can be way out of whack because of rent control -- it is to your advantage to be a perma-renter.

SubOink says

Those 30 years will be over one day and if that’s the day when you can say “I own this house, its mine and no matter what happens, I will always have a place to live”.

Even among Baby Boomers, I know very few people who have lived somewhere for 30 years. Maybe people's grandmas, but their houses were not really inhabitable for other people any more ("deferred maintenance" to put it kindly). :)

SubOink says

Rent vs Buy discussions are therefore quite pointless.

Definitely not pointless. Especially if anyone uses the i-word -- investment -- in reference to a home purchase. Rent vs. buy is an important factor in whether housing is heavy consumption or not.

SubOink says

Ultimately, we all would like to own a house not because NAR is telling us but because when you own something you feel like you have achieved that stability.

Alternatively, some of us are more confident in our financial situation. I don't see living in a long-term rental as "unstable," , especially when my other financing activities are doing quite well. That sounds like a personal preference, not more, not less.

SubOink says

Rent vs Buy discussions are therefore quite pointless. We all want the same. A nice place to live to raise our family. If you can achieve that via renting, great. If you can achieve it via buying, great. Ultimately, we all would like to own a house not because NAR is telling us but because when you own something you feel like you have achieved that stability. When I paid off my first major car, I loved the idea of “no matter what happens, this car is mine.” I know that a 30 year mortgage is far from really owning but we all know how fast life passes you by. Those 30 years will be over one day and if that’s the day when you can say “I own this house, its mine and no matter what happens, I will always have a place to live”.

But what if the government takes it away through adverse possession or a meteor hits it! Then you'll realize, it wasn't really yours. Yeah, or some crap like that! :)

ch_tah says

A scenario similar to yours could happen to a renter too.

How so? Renting doesn't lead to being underwater. It doesn't trap a person or his family in his house. It doesn't restrict his movements and ability to take on a better job. In fact, the only situations I've ever heard of where a couple split because they were renting is because one side demanded they buy, the other side wouldn't relent, and their problems escalated from there. That could just as equally be attributed to the problem of owning, and people's general stupidity about the "benefits" of owning, but in these particular cases the spouses wanting to rent were completely vindicated.

SubOink says

What can also affect a childs happyness is when the parents end up in a stressful situation due to having to move every 2 years and not having a stable place to live. New friends, new school.

I wasn't aware of a law that had passed which states that upon termination of a lease, the lessee cannot stay in the same school district.

klarek says

How so? Renting doesn’t lead to being underwater. It doesn’t trap a person or his family in his house. It doesn’t restrict his movements and ability to take on a better job.

A renter can just as easily lose his/her job or be forced to relocate. There's no doubt that a "tradeoff" of owning is lack of mobility. That doesn't mean a couple renting is in any better shape than a couple that owns. I've never advocated purchasing when a couple is not able financially. If we follow the rules of Klarek in purchasing, the house should be rentable if you are forced to relocate, so you shot your own hypo in the ass.

SubOink says

What can also affect a childs happyness is when the parents end up in a stressful situation due to having to move every 2 years and not having a stable place to live. New friends, new school.

That could happen for both renters and homeowners. "Owning" a home means you're paying rent to the bank for most people unless you just so happen to buy outright with cash. I know more than my fair share of people who bought and were forced to relocate for various reasons within a year or 2.

SubOink says

I have noticed that house owners have never told me “biggest mistake in life was buying this house” (I am not talking about subprime idiots who got their ass handed to them by buying something they never should have bought). I have heard from many perma renters though “I wish we bought 20 years ago”.

I know my fair share of people who've told me they wish they hadn't bought. In fact, one of my friends who owned for 5-6 years said he will never buy a house again.

corntrollio says

Alternatively, some of us are more confident in our financial situation. I don’t see living in a long-term rental as “unstable,” , especially when my other financing activities are doing quite well. That sounds like a personal preference, not more, not less.

Precisely. I will agree that I would like to own my house, but when I say own- I mean I OWN the house free and clear. That means buying it for cash. Most people choose to spend 30 years paying the bank plus interest. They also pay 30 years of property taxes and upkeep. The only difference is that it'll take those who used a bank 30 years to "own" their house. It'll take me the time it takes to open a suitcase and sign a piece of paper.

edvard2 says

It’ll take me the time it takes to open a suitcase and sign a piece of paper.

Yes, as long as you ignore the time it takes for you to save the money to buy. You've already said you've been renting your current place for 8 years. How many more until you buy (in cash of course)?

corntrollio says

Nothing wrong with bubbles — you would include bubbles in price increases, so why can’t I include them in price decreases?

I'd prefer not to include them in increases or decreases. And I specifically stated in my post that excepting bubbles, buying is better.

corntrollio says

You are selectively picking years for Houston, which got slaughtered even without considering inflation:

Kind of. You said anytime in the 80s so I picked a year in the 80s. But, you have to really try to find any point for Houston where buying doesn't win.

one of my friends who owned for 5-6 years said he will never buy a house again.
Just out of curiousity, could you name they city they live in? They must have been hit hard by depreciation to say something like that...

Coogan99 says

But to answer the question: 15 year period ending today.
Assume you had a 30yr mortgage @ 8.4% 1994 to 2001
refi #1 7.0% 2001 to 2005
refi #2 5.6% 2005 to today

I think you could do better for most of that time period, but no big deal.

Coogan99 says

Case Schiller is up from 78 -> 125 = 3.2% annual home price appreciation
S&P 500 annualized 1994-2010 6.58%, lets call this opportunity cost
http://en.wikipedia.org/wiki/S%26P_500

The only money subject to the opportunity cost is your down payment. But the rest of your methodology doesn't make sense. Your house isn't a pure investment--it's your shelter. We're comparing buying vs. renting. You need to find the total cost of renting for 15 years vs. the total cost of owning for 15 years.

edvard2 says

I know my fair share of people who’ve told me they wish they hadn’t bought. In fact, one of my friends who owned for 5-6 years said he will never buy a house again.

5-6 years...bought in 05-06? Yeah, I'd be pretty bummed too.

tatupu70 says

And I specifically stated in my post that excepting bubbles, buying is better.

No, you said:

Look at any 15 year period in history and tell me when renting wins.

I gave you 4 answers at minimum and could find more probably. You take your market as it comes, so it's silly to exclude bubbles from consideration, positive or negative.

Do you have an example of a 15-year period where there was no bubble (per your condition, not mine), and housing returns (including total cost of ownership) outpaced inflation + T-bills? In order for housing to be an "investment," it needs to have a higher return than the risk-free rate to compensate for its risk.

It's probably hard to find a 15-year period where there was no bubble at all. Even for something like the 1950s, you had the post-WWII boom and in the 1960s you had the lowest interest rates ever until recently. That suggests to me there was some bubble/bust effect there, although we don't have as great statistics from that era.

Coogan99 says

First - to clarify - when I say its almost never cheaper to buy than rent, I mean if you look at individual properties today, and estimate what they could rent for.

And I think it's impossible to say that. Most important is your timeframe--if you plan to live there for an extended period, buying almost always wins. Then, of course, location. In some areas of the BA, it is clearly better to rent. But the BA is more the exception than the rule anymore. The last numbers I saw for the US in general had the rent ratio at ~10.

corntrollio says

No, you said:
Look at any 15 year period in history and tell me when renting wins.

Actually, I said:

tatupu70 says

Buying at bubble prices never make sense. Otherwise, assuming you won’t be moving any time soon, it almost always makes financial sense to buy. Look at any 15 year period in history and tell me when renting wins.

Notice, where I said "otherwise"?

corntrollio says

I gave you 4 answers at minimum and could find more probably

lol--you gave me 4 and I showed you were wrong. Let me know when you find one that is actually true.

corntrollio says

Do you have an example of a 15-year period where there was no bubble (per your condition, not mine), and housing returns (including total cost of ownership) outpaced inflation + T-bills? In order for housing to be an “investment,” it needs to have a higher return than the risk-free rate to compensate for its risk.

I'm not saying housing is an investment. I'm saying buying beats renting. Those are two very different conditions. Buying housing purely based on appreciation potential is not an investment I would ever make.

ch_tah says

Yes, as long as you ignore the time it takes for you to save the money to buy. You’ve already said you’ve been renting your current place for 8 years. How many more until you buy (in cash of course)?

My point being that there's more than one way to buy a house and my method of doing so leads to the same outcome. Technically, I could buy right now in just about any other housing market free of the coasts. At this point I see little reason to do so as my job pays well and I'm comfortable renting. Nothing lost.

tatupu70 says

lol–you gave me 4 and I showed you were wrong. Let me know when you find one that is actually true.

Check again. Those 4 are clear losses when you consider cost of ownership: again LA 1982-1997, OKC in the CNN article, Houston in the CNN article, Japan. Take your market as you find it.

You can parse your own language any way you want, but that one sentence was pretty unambiguous and unqualified. You gave a challenge, and I accepted it. And even above you concede that it might not be true in the Bay Area.

I'm not really interested in a pure buy vs. rent discussion, as it has been rehashed many times, and I've given my own nuanced opinion on the issue numerous times. There are times when either is a benefit, and there are times when either makes sense; not everyone is a good candidate to be a homeowner, and ownership doesn't make sense for everyone.

ch_tah says

A renter can just as easily lose his/her job or be forced to relocate. There’s no doubt that a “tradeoff” of owning is lack of mobility. That doesn’t mean a couple renting is in any better shape than a couple that owns. I’ve never advocated purchasing when a couple is not able financially. If we follow the rules of Klarek in purchasing, the house should be rentable if you are forced to relocate, so you shot your own hypo in the ass.

I wasn't talking about a loss of job, I was talking about the stress created by being stuck and missing a good job opportunity.

"Honey, you should take the job."
"I can't. We can't sell this place without taking a substantial loss."
"It's worth it for the job though, so let's do it."
"You also said it would be worth it to own, and it's your fault we're in this position."

Just a simplified portrayal of what's been going on and will continue to go on in millions of households throughout the country. A house becomes a financial shackle, whether the value falls or remains flat. People who are lured to it use guilt tactics to convince their spouses to jump in (ask anybody who is married to someone from China, you're bound to get into a fistfight if you argue against home ownership), using the same bullshit emotional plots discussed above. This can create resentment in the same way that we resent NAr's bullshit tactics being used on the public.