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The Rise of Renting in the U.S

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Re: The Rise of Renting in the U.S

#21

Post by derekp7 »

rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

That tax deduction does get smaller every year (as the interest/principal balance changes).

The biggest issue I found with owning is that the equity doesn't build up fast enough at the beginning (with a 30-year mortgage), so if you sell after 10 years the costs pile up to the point that you have almost no net proceeds (5% commission, survey/title/transfer tax/inspections, plus prorated property taxes). A 200K property could easily cost you 20K or more to sell.

The best thing you could do is to put as much down as you can, on as cheap of a property as you can (condo, townhouse), then send in additional principal payments so that you could pay it off in 6 - 10 years. Then you can either put away extra savings after that, or move into a slightly more expensive place (about 60K more than your current house), and start the 6 year cycle over again.

Re: The Rise of Renting in the U.S

#22

Post by prostoalex »

Financing for real estate projects dried up after 2008, and single-family construction is not an industry that can deliver overnight when demand has risen.

For more analytical view of the real estate market, check out UBS' report (which is bullish) http://files.ctctcdn.com/f0054e99301/0f155366-4016-4c0f-ade0...

Looking at current buy-vs-rent ratios is not very useful, as we don't have much insight into the reasons for renting. Some prefer personal mobility that comes with renting, but some are just waiting on more affordable/accessible/convenient ownership options to pop up, and will be buying in a few years.

Re: The Rise of Renting in the U.S

#23

Post by theseatoms »

sosuke wrote: post #20
tomg wrote: post #5

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...

I love it, but it doesn't include the rent being raised every year like clockwork. Right now it's $1500, next year $1575 etc

Buy a basket of REITs (with geographic exposures of your choosing) to hedge against changes in land value.

Re: The Rise of Renting in the U.S

#24

Post by kilbuz »

The statistic that went most against my intuition is that San Francisco has the one of the lowest 'rent burdens' in the US. That is, rent as a percentage of income is on the low end and equivalent with many Midwestern cities. I'm guessing that the typical SF renter paying 25% of income on rent may be dealing with a lot less space (and more roommates) compared to someone in Pittsburgh or Minneapolis.

Re: The Rise of Renting in the U.S

#26

Post by dragonwriter »

api wrote: post #16

As a side effect of historically cheap money, house prices have risen so high that entire younger generations are locked out of home ownership in quite a few areas. There are a few outliers but in general it's good jobs, affordable housing, pick one.

> As a side effect of historically cheap money, house prices have risen so high that entire younger generations are locked out of home ownership in quite a few areas.

If it is a side effect of cheap money, how is it pricing people out of the market? The rising sticker price of the property should be offset by the lower price of money which is driving it, so that the actual total real cost of the purchase (including the financing cost) is the same.

Only if something other than the general price of money (an increasing spread between the price of money for favored debtors and disfavored ones, presumably including the young people priced out of the market) is driving real estate prices should someone be priced out of the market.

Re: The Rise of Renting in the U.S

#27

Post by yolesaber »

api wrote: post #16

As a side effect of historically cheap money, house prices have risen so high that entire younger generations are locked out of home ownership in quite a few areas. There are a few outliers but in general it's good jobs, affordable housing, pick one.

I suspect we will see a reversal of the current urban migration once people have saved up enough money and been in a big city long enough to realize its a losing game trying to get a place not in the burbs.

Re: The Rise of Renting in the U.S

#28

Post by eljimmy »

martythemaniak wrote: post #10
rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

We don't have mortgage deductions here in Canada, but the home ownership percentage is nearly the same as in the US. There's many fine reasons, including customizing and fixing a place to your liking, which you can't do with rentals. Personally, what I'd really love to do is build my own house.

You can customize a rental (to an extent), you just need to get approval from your landlord first.

Of course it would be purely for the benefit of your day to day life as you wouldn't get anything back out of it (if and when you decide to move).

To each his own.

Re: The Rise of Renting in the U.S

#29

Post by pc86 »

derekp7 wrote: post #21
rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

That tax deduction does get smaller every year (as the interest/principal balance changes). The biggest issue I found with owning is that the equity doesn't build up fast enough at the beginning (with a 30-year mortgage), so if you sell after 10 years the costs pile up to the point that you have almost no net proceeds (5% commission, survey/title/transfer tax/inspections, plus prorated property taxes). A 200K propert…

Actually the best thing to do is just to have a lot of money. Problem solved!

Your scenario assumes a location (or person) with:

  - Desirable housing in the $60-100K+ range
  - Employment sufficient to generate high paying positions
  - The will to sock away a large part of your income for close to a decade, just to have a paid-off home (which is not a big enough benefits to be a means unto its own)
20% down at a minimum and a 15-year mortgage (or a 30-year paid off in 15 which is close to the same price) is a pretty bullet-proof way to secure a livable property, be able to save beyond just paying your mortgage, and have the freedom that you can get out of dodge in under a decade if you absolutely had to.

Re: The Rise of Renting in the U.S

#30

Post by rayiner »

thrownaway2424 wrote: post #8
rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

The tax deduction is baked into the price.

Maybe, maybe not: http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in....

This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment. So at least at first, you'd lose more to the elimination of the deduction than you would gain in reduced payments.

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