patrick.net

Troll.

of course we'd rather own.
but we're not going to overpay so we wait for prices to get more reasonable.

how hard is that to understand?

everyone has their buying price point, some higher, some lower. i'm more numbers driven than most and prices aren't right - for me. they might be right for you, but i'm not you.

the home buyers in 2003-2008 were not data driven and drank the koolaid. i like money(net worth almost doubled over the last 3 years) more than owning a house (decreased about 20-30% nationally over the last 5 years). thus i continue to rent until it makes financial sense to own. it's fairly simple.

even at rental parity, i will underbuy, because i would rather have that money in investments.

here is my point. everyone is different. some will put all their money in a house. some will never buy a house. and there is everyone in between at varying shades of gray. accept that fact and life will make more sense.

and for those that are asking why save/invest to build net worth?
retirement is expensive, namely health care costs.
you need a sizable nest egg to retire well and i plan to retire well.

http://en.wikipedia.org/wiki/Post-purchase_rationalization

One of the ways to deal with the temporary-rental lifestyle is to be reasonable about rents. My wife and I moved when the landlord raised rents by $150. In hindsight, it was a bad idea because we spent about that much in moving fees and hassles.

That said, however, we enjoyed the benefit of learning from our moves. The initial area we rented seemed inferior to the next one, and the next one. There's a reason why Britain had an empire around the world: They were a seafaring nation. For the first few years, we rented and it taught us a lot about the region, and ourselves.

While it's nice to improve one's home, it's also nice to just enjoy what you have. The cracked linoleum in our rental kitchen is trashy, but after a few years, we don't even notice it. Same with the old cabinets. Instead of hanging out at home depot for half of our weekends, we could enjoy the kitchen and even go out with the money we saved.

Regarding socializing and BBQ. As renters in our condo, we have a pool maintained while owners have to spend a lot of their time taking care of it. Also, the condo assn BBQ is quite nice and rarely used. We invite people over all the time. When we ask owners if they would like to come over, we hear them say "Sorry, I'm planning on working on X that weekend". Another said his wife now is unavailable because, I kid you now, she has to work part-time to help pay the mortgage!

A lot of the problem has to do with people buying too much house. We have a two bedroom condo for the two of us and that's more than enough for our _needs_. We'd love another room when a baby comes along, but we can just split that with the computer/guest room. You learn to be more efficient with space and not buy so much kitsch.

So overall, I'd say our renting experience is probably better than buying with the tradeoffs as follows:

Renting pros: Flexibility, don't worry about neighbors so much, save money, gain perspective about what really matters.
Renting cons: Have had landlord ask us to move due to sale, have to worry about rent increases, can't call a place your own and customize, need to worry about space.

Looking back, renting is still better than owning mainly due to the financial factor. Even if you save a little money by buying, in the long term, renting is still pretty good if you can manage the cons.

Let's look at it like renting versus buying a car. Buying a car allows you to save a lot of money compared to renting or leasing. But if were close, I wouldn't think twice about renting or leasing and did just that. When living in a major city, I rented a car about 6 times a year for about $100 each time. I used it to drive to weddings or out of town or when public transportation wouldn't work out. Not only did I save that much money on insurance alone, I also got to drive a brand new car each time and not worry about maintenance.

Housing still needs to fall by 30% to be reasonable.

You know, you'll have to declare that NAR kickback as income, right?

PolishKnight says

So overall, I’d say our renting experience is probably better than buying with the tradeoffs as follows:

PolishKnight, I am happy for you. You sound like a real happy renter. Enjoy it!
Owning a house has its cons. I agree that each has their own path to take. Happy that you made a conscious and educated financial decision.

This is the best post in a long while. I totally agree.

Happy that you have chosen your own path. Financial goal > lifestyle.
That's totally fine. I, on the other hand, own RE and stock/investment also so I am not all-in RE. Building net worth is important, extremely important, and I intend to use both asset class: RE and Stocks to accomplish that.

Hysteresis says

even at rental parity, i will underbuy, because i would rather have that money in investments.

here is my point. everyone is different. some will put all their money in a house. some will never buy a house. and there is everyone in between at varying shades of gray. accept that fact and life will make more sense.

and for those that are asking why save/invest to build net worth?
retirement is expensive, namely health care costs.
you need a sizable nest egg to retire well and i plan to retire well.

Since people who cannot afford to buy are by definition renters, many believe mistakenly that buying is superior to renting. This is false.
The analogy is riding the subway in NYC. Just because the welfare queens and sterno bums ride the subway doesn't mean that a rich dude can't ride it for convenience, sometimes it's faster than a taxi. Can the rich dude afford to take a taxi? Of course.
I get a kick out of stories by foreigners from places where most people cannot afford hosues bragging about buying in the USA. Get a copy of Skrunk and White while you're at it.
Buying houses pleases the women in your life, while being flexible and having a ton of liquid assets makes some people feel "free".
Some guys must "buy the cow" and they therefore must "buy a barn."
In all of the James Bond 007 movies, have you ever seen Bond's house? Me neither.
Funny, I JUST got a call from someone asking to give her a ride to her lawyer, she is losing her house which she inherited free and clear, she "took out some equity" and now they are taking it from her. She's just too upset to drive herself over. I later screened my calls so as not to be roped into it. Let her ride the bus to her lawyer, time to get used to being with the "untermench".
My rich grandmother rented her whole life, but as a child I never noticed since she lived in great places and for long periods of time. She was a businesswoman who died leaving us each a chunk of change. She was the person who had the CASH available for my parents to buy the land on Martha's Vineyard for our summer house.
Of course, she was always welcome.

I am happy to hear that your grandmom did wonderfully by renting.
People accomplish wealth by many means. RE only, stock only, RE and stock, self-employ, lottery. As long as you enjoy what you are doing/having and make financial sense, you are on the right path. :-)

clambo says

In all of the James Bond 007 movies, have you ever seen Bond’s house? Me neither.
Funny, I JUST got a call from someone asking to give her a ride to her lawyer, she is losing her house which she inherited free and clear, she “took out some equity” and now they are taking it from her. She’s just too upset to drive herself over. I later screened my calls so as not to be roped into it. Let her ride the bus to her lawyer, time to get used to being with the “untermench”.
My rich grandmother rented her whole life, but as a child I never noticed since she lived in great places and for long periods of time. She was a businesswoman who died leaving us each a chunk of change. She was the person who had the CASH available for my parents to buy the land on Martha’s Vineyard for our summer house.

masayako2456 says

Can we remodel the kitchen to our taste? Can we have a pet? Can I have my own band room like I always want? I love vintage mid century furniture, should I buy them now or wait until we have a house ‘cos the furnitures made not fit the new house? Can I build a dream backyard to really enjoy it or do I just bring my kid to a public park and call it a day? Can I get a new fridge now or stay with the old, inefficient one?

I will own someday but not for the excitement of spending more money on it, but rather for the stability. Some people don't jump at the chance to throw all their saved money into new things for a box.

It needs to be something I can afford, not the amount the bank will hold me to for 30 years.

PolishKnight says

Renting pros: Flexibility, don’t worry about neighbors so much, save money, gain perspective about what really matters.
Renting cons: Have had landlord ask us to move due to sale, have to worry about rent increases, can’t call a place your own and customize, need to worry about space.

My only comment is .. "Not having to worry about neighbors?"

Sounds reclusive to me.

Building community, having strong relations with your neighbors should be a good thing. I grew up in a nice neighborhood where we knew everyone. There was that sense of community. Summer weekend BBQs, playing with the neighbors' kids,etc...

That something I want for my family.

Big Joe says

You know, you’ll have to declare that NAR kickback as income, right?

You think I am somehow related to NAR? Sorry, I am not. Market (be it stock or RE or anything else) don't really reward extreme bull or extreme bear. The market seldomly go to the extreme scenario. Think Bell curve. The likely housing scenario will probably end up in the 80% quartile. I was more bearish during 2004-2010. Thats when I sold (2005). Now, I am more bullish. That's all.

Did I buy at the bottom of the curve? Don't know. Don't make a make difference. The decision I made from the downturn already get me (and a lot of people) ahead of the game, that allows us freedom to take more risk and get back in the RE game. Do you see? There are many different variables out there and buying RE or any investment is a really personal, and local, decision. There is no absolute right or wrong here. If the decision make sense t you and your priority, then you are in the right path. Just like stocks, it you make 51% of right decision, you are ahead of the game there.

One way to success is to think a bit opposite from the crowds. When everyone say BUY BUY BUY, you should think if it's time to sell. When everyone is saying SELL, SELL, SELL, you should think about buying. That's all. In 2004-2005 timeframe, I considered selling when everyone around me are buying $600-900k houses. Some even bought with one income (and foreclose later on) because they rather do ARM only than be "priced out forever" or "miss out a great chance to make fast money". At that time, when your nearby soccer mom tell you buying RE is the way to wealth, you know you need to sell. Just like these days, when Lindsay Lohan tell you inflation is killing us all and we need to move our money away, it's time to think again.

Personally I'd rather rent until next summer when prices bottom, but that's just me.

rowemoore says

Personally I’d rather rent until next summer when prices bottom, but that’s just me.

That's very fine. As long as you research and guts tell you that's the right thing to do. Good luck finding a new place.

I was happier when I was a renter.

As a homeowner, I've invited a parasitic relationship with a banker and the taxman, neither of which is as good as a decent landlord.

I'm now responsible for all the continual deterioration that houses go through as they age. I'm a pretty good handyman but some of the bizarre and arcane requirements of the Chicago building code seem to say "Contractors know best how to do this our way".

I owned more of my life before I owned a home.

Cook County resident says

I was happier when I was a renter.

As a homeowner, I’ve invited a parasitic relationship with a banker and the taxman, neither of which is as good as a decent landlord.

I’m now responsible for all the continual deterioration that houses go through as they age. I’m a pretty good handyman but some of the bizarre and arcane requirements of the Chicago building code seem to say “Contractors know best how to do this our way”.

I owned more of my life before I owned a home.

If that's the case, why don't you sell your home then and go back to renting?

ch_tah says

If that’s the case, why don’t you sell your home then and go back to renting?

I will. My wife and I put down a big downpayment when we bought the house in 2008. She died a year later. Even with the high taxes, renting wouldn't be a whole lot cheaper.

I'm hoping that unemployment will go down and house prices will go up. People who want to buy tell me how much they like the house, but their financial situation is lousy.

“Not having to worry about neighbors?”

"Sounds reclusive to me."

Sadly, that's more of a problem with society in general rather than owning/renting. Most of my neighbors don't socialize with each other. It's not that we don't try to be friendly. We say hello to people and chat with them, but nothing happens. Perhaps it has to do with us not having a lot in common.

When I grew up in a working class Polish neighborhood in the states, 90% of us went to the same church, I delivered papers to the neighbors, kids would come by for trick or treating, and 90% of mothers were SAH and shared babysitting.

When we go to parties, the slavic people tend to form a table as well as other ethnic groups. That's not to say that inter-socialization doesn't go on (the party organizer met everyone from work) but one of the problems with diverse, metro neighborhoods is that people socialize beyond their neighbors. When I was growing up, it was called the "California syndrome."

So unfortunately, most of my interactions with my neighbors are things that cause me to worry. One is a smoker. Another calls in people who violate association rules. Another has dogs that yap at you and make noise. If I was an owner, I probably would be really peeved at them but since I'm not "married" to them, so to speak, I have a more live-and-let-live viewpoint. I wonder if they think the same way towards me versus someone they'll need to spend the next 20 years with.

Cook County resident says

I will. My wife and I put down a big downpayment when we bought the house in 2008. She died a year later. Even with the high taxes, renting wouldn’t be a whole lot cheaper.

I’m hoping that unemployment will go down and house prices will go up. People who want to buy tell me how much they like the house, but their financial situation is lousy.

Well, if you agree with most people on this board, you'd be better off selling now rather than waiting. With the crash that is about to occur (next year, until next year when it is next year and so forth), it'll be 50 years until we get back to current prices.

"PolishKnight, I am happy for you. You sound like a real happy renter. Enjoy it!
Owning a house has its cons. I agree that each has their own path to take. Happy that you made a conscious and educated financial decision."

We certainly would love to buy a house, but either renting or owning one would certainly hit us financially for about twice what we pay now in rent.

So ironically, the biggest bubble selling point "You THROW away money on rent!" also helped us to economize and prioritize. We'd LOVE to own a home and hey, throw in a learjet too. :-) Oh, and going out to expensive restaurants 5 times a week.

But as adults, we balance out all the factors. It's fantastic to have money in the bank. We can go on a vacation without guilt or worry.

This begs the question: Why don't we just buy the condo then?

It's not that we can't afford it. After 5 years, we can buy it outright in cash. But we wouldn't save a lot of money so where's the benefit in giving up the good things about our rental I just mentioned?

As little as 30 years ago, my parents faced a similar dilemma: they had a "love nest" when they first got married and us 4 kids were in a 3 bedroom rental duplex. For a little more in PITA, they could buy their own SFH. So it was a no-brainer for them. But at this point in the market, it still isn't a compelling reason for me either financially or personally. If I buy, I want to upgrade AND save money. Promises of future bubblicious profits via a pyramid no longer are a motivator for me or other buyers.

YoY San Jose Asking Prices - last 5 years

PolishKnight says

Sadly, that’s more of a problem with society in general rather than owning/renting. Most of my neighbors don’t socialize with each other. It’s not that we don’t try to be friendly. We say hello to people and chat with them, but nothing happens. Perhaps it has to do with us not having a lot in common.

I think this really became common place when the bubble started, people just kept on swapping out all around with constant buy/sell on housing that we lost all the permanent neighbors. Everyone became just a transient home owner who simply sold a few years down the line and moved away.

This housing bubble didn't just screw people financially, it for many of us destroyed our communities.

I sold in 06 and I'm ready to buy back in this year (or next....depends if I can find a deal)

I need a house since I need a garage to store all the awsome toys I am collecting as a direct result of all this cash I have due to selling at the peak.

Seriously now is a great time to buy anything that was typically paid for with HELOC money by loan owners who now need cash (they all do! lol). RV, Harley,German Cars,Boat, High End Furniture. Anything that cannot be moved into a small apartment can be had for very cheap now used.

Its really a great deal for them, they might have paid 120k for a new 2005 mercedes (actually they paid zero its heloc money and these people are defaulting on everything). So now they can get say 20-30k for that mercedes and its WIN-WIN for them and the new buyer of the car! They get 30k cash after driving a sweet ride for free for 5 years, I get a good deal on a bubble mobile. Thats better than cash for clunkers as no innocent cars are destroyed. Its basically as if they stole the car but they didn't....its completely legal! What a great country! Happy Sunshine Capitalism Time!

Everyone's situation is going to be different. Some people live in crappy houses. Some people rent really nice houses. And vice-versa. You mention having a place of your own to have people over for BBQ- to "Show off" and so forth. This week my parents are coming over. We're having a backyard BBQ this weekend, we're going to have home-grown tomatoes, strawberrys, peas, and fruit from the various fruit trees. They get to sleep in our spare bedroom. This is a 4 bedroom house that we rent.

Truth be known its a nicer house than any of the houses my friends who bought own. In our area what we could buy would actually mean a downgrade because our house would probably go for 700k. We could probably afford 500k- I say "afford" because to me anything over 350k-400k is ridiculous and I don't want to pay that amount.

We've lived in this house for 8 years. The rent has never been raised. I know all the neighbors. Like yourself- I collect mid-century furniture ( Except almost all of mine was founf in the trash for free) I also collect various other things. I used to concern myself about the hassles of moving it. There's such a thing as storage you know.

We have painted rooms to our taste, landscaped the yard, some projects here and there. Either the materials to do so were free or the landlord paid for them. In other words- I get a nice house the way I want it and it didn't cost anything except my time. 8 years of living in a large house, furnished with things I like, with a nice, big backyard to "Show off". Oh- and the rent is $1,300, or about 1/3rd the cost of buying the same house.

So does it bother me that we rent? nahhh... seems to be working out for us. Do we want to own? Sure. But not because we want to paint and knock down "Our own" walls. Its more that someday we'll retire somewhere else- preferably early- and buy a house to live in with zero debt.

In the meantime we've saved enough cash to buy a house lock-stock-and barrel almost anywhere in the country minus the overpriced coasts. If we bought in the Bay Area we could easily put down at least 60%, which I wouldn't because again- the prices are ridiculous.

masayako2456 says

Can we remodel the kitchen to our taste? Can we have a pet? Can I have my own band room like I always want? I love vintage mid century furniture, should I buy them now or wait until we have a house ‘cos the furnitures made not fit the new house? Can I build a dream backyard to really enjoy it or do I just bring my kid to a public park and call it a day? Can I get a new fridge now or stay with the old, inefficient one? People said you can rent a good house in a nice neighborhood.

I have both rented and owned at various points, and it made sense at various points to do one or the other. Certainly there were times where I could have afforded to buy, but rented instead, so let's get rid of that canard right now. We could take these rationalizations one by one:

1) There's no evidence I would customize my kitchen if I bought a house without seeing that house first.
2) I have had pets in rentals -- plural for both pets and rentals.
3) I don't know what a band room is, but I don't see why not.
4) What stops you from buying furniture? If you're like many people during the boom, paying big bucks for a non-ideal house, you could easily have the same problem with a house you bought, and then you're stuck because you own it.
5) I don't know what a dream backyard is, and although I haven't personally done it, I have friends who rent who have improved the backyard and made arrangements with the landlord to apportion the payments appropriately.
6) The fridge? You're talking about making a multi-hundred thousand dollar purchase (in my area, half-million minimum) based on a fridge you could buy for $300? I question your judgment if that's the case. For one place I rented, I did buy a fridge, and then sold it to the next tenant (no need for me to cart it around). In another, I actually bought new water-efficient laundry machines because the landlord didn't provide them, and that turned out to be a great decision. There's no reason you couldn't move the fridge to the garage and buy your own.
7) I've lived in perfectly nice rentals. Some of them were nicer than places that were bought, at least to start off (pre-remodeling).

Look, these are all factors to consider, but let's not pretend that these are the factors that should apply to everyone. There are financial factors, mobility factors, job factors, personal preferences, etc.

clambo says

Get a copy of Skrunk and White while you’re at it.

Clambo, you made a good point about the subway, but if you're going to be snarky, it's STRUNK and White.

@edward2: I am happy for you. Looks like you get a great deal $1300 for a nice big house in a great neighborhood. Great!! :-)

Seriously?

A faked foreign written accent, braggado unlimited, near absurd positions and statements,

and Im the only one that understands that masayako is a troll?

what part of yourself is the same no matter if you rent, borrow, or really own?

what part of you is the same whether you are single, married or divorced.

what part of you is the same when you had no kids and what part is the same, now that you do?

the real part of you, that does not change with this temporary category or role, is your true self. This part ( the real you) can truly be happy no matter what.

many of us do not really know ourselves. to truly be happy, one must find this person.

it has nothing to do with things, having or not having them, roles or other ego driven perceptions of self.

so ask yourself. "who am I, what makes me happy?"

hint it's not a thing or object is it?

Great Post Masayako - I couldn't agree more. Well said. Of course, the haters here will crucify you for it...

This message board is fun. The trolls make it more fun.

Real Estate is a spectator sport in CA (similar possibly to watching christians getting massacred by lions in ancient Roman colliseum) and this board is how we communicate our pleasure or displeasure to the emperor or each other.

dodgerfanjohn says

Troll.

haha.

be happy where you are is what I got out of the original post.

debt slavery is not my version of happiness at this time.

dodgerfanjohn says

Seriously?
A faked foreign written accent, braggado unlimited, near absurd positions and statements,
and Im the only one that understands that masayako is a troll?

Troll.

bubblesitter says

http://en.wikipedia.org/wiki/Post-purchase_rationalization

Exactly. Ironic that a self-professed student of human behavior can't recognize his own motivations.

SubOink says

Great Post Masayako - I couldn’t agree more. Well said. Of course, the haters here will crucify you for it…

Homeowner circle-jerk begins.

Edvard,

If you are renting a nice 4 bedroom home with a big backyard in a good neighborhood where equivalent homes are going for $700k... Then your landlord is a very benevolent man, your father or a moron!

When i moved to los angeles in 2002... My first 550 sq ft 1 bedroom apt rental in Burbank was $1100 a month. The fact that you found a $700k 4 bedroom home at around the same time to rent without a single rent increase even during the bubble years... Well you basically won the lottery... 99% of the population couldnt get the sweetheart deal you got, its a fairy tale for the majority of renters.

this sounds like a fallacy, a fallacy of false dichotomy.

There are more than 2 choices here. People have their options, housing preferences don't make everyone happy or sad. Some of us might not care much about these issues, and we are capable of being more than just happy or sad like some bipolar chick.

Happiness to me is being free, not being tied down to debt, mortgage, place or a job. We live very comfortably, and somehow do not seem to care for NAR propaganda about how our happiness must be attached to certain commercial goods or huge debt.

EMan says

housing preferences don’t make everyone happy or sad.

That's cultural. In USA happiness and sadness is tied to home, in the psyche on common mass.

Happiness is a state of mind and can not be qualified or quantified by mere possessions.

I own my home but to explain why would be an exercise in futility.

Does owning my home make me happy? Let’s just say that my dog greeting me when I come home makes me happy; it’s only for a moment but one that is frequently reborn.

I can’t say that about my house.