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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

#51

Post by randomgyatwork »

dragonwriter wrote: post #26
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 t…

I live in Toronto, 10 years ago a house in the suburbs may have been affordable for someone like me, now they are hugely over priced. I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me.

Maybe rational buyers have been priced out of the market?

Re: The Rise of Renting in the U.S

#52

Post by floppydisk »

brianwawok wrote: post #15
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).

Not having your rent increase or being told to move, as are being able to make your home exactly what you need. My home has a 15x15' home gym with all kinds of upgrades I like.. finding a ready made house with my exact ideal gym? Low odds....

That's the way my recent home buying friends look at it. They know they'll be in this metro area for X years and given most landlords raise rents by 3-5%+ in this area depending on demand, getting a 30 year fixed mortgage lets them lock in housing, in a location they want, for a fixed rate per month that never goes up. In fact, if they do it right, they can refinance and get the rate lower. Net result, housing becomes a fixed, rather than variable, cost they control with the bonus of being able to do with the space as they want. No questions asked.

Re: The Rise of Renting in the U.S

#53

Post by alexchantavy »

kilbuz wrote: post #24

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.

The lower burden might also be because SF incomes are a lot higher than in the Midwest.

Re: The Rise of Renting in the U.S

#54

Post by zurn »

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.

Even with that, homeowners get favourable treatment vs renters (if in the rent alternative the landlord pays capital income tax). Some economists propose that this should be fixed by taxing homeowners for the rent that they are virtually paying themselves. It kind of makes sense but would probably not be very popular.

See eg http://economix.blogs.nytimes.com/2013/09/03/taxing-homeowne...

Re: The Rise of Renting in the U.S

#55

Post by kchoudhu »

chishaku wrote: post #13

Why are mortgage debtors referred to as home owners? Edit: I was being a bit facetious. With liar loans, no down payment mortgages, deferred interest, "prices only go up," etc, it's been too easy to sell home "ownership" to people without their requisite understanding of the risks involved and the constantly changing market realities. I'm all for personal responsibility but the use of language is powerful.

Because in theory, they own the deed to the property, which can in a pinch be sold to pay off the debt.

I know this is an unpopular opinion, but it is true: if done correctly, the purchase of a house should have zero effect on the buyer's net worth.

Re: The Rise of Renting in the U.S

#56

Post by jdmichal »

dragonwriter wrote: post #19
chishaku wrote: post #13

Why are mortgage debtors referred to as home owners? Edit: I was being a bit facetious. With liar loans, no down payment mortgages, deferred interest, "prices only go up," etc, it's been too easy to sell home "ownership" to people without their requisite understanding of the risks involved and the constantly changing market realities. I'm all for personal responsibility but the use of language is powerful.

Because the (home) mortgage debt is a liability assumed against a home that the debtor owns (either to fund purchase of the home or afterwards), and therefore being a home owner is a necessary (but not sufficient, as one can own a home free and clear of mortgage debt) condition to being a (home) mortgage debtor.

Exactly. Mortgages work differently than, say, car loans. Car loans typically have the bank listed on the title until the loan is satisfied, then the title is rewritten to be in the buyer's name. This is why a car can be repossessed without a court order; the bank is quite literally the owner and you only have the right to use the car.

A mortgage, on the other hand, is only secured by the property. The buyer is the owner, period; pulling up my house in the county property records shows my name. This is why banks must go through the courts in a foreclosure process in order to take ownership of the property, and cannot simply repossess it.

Re: The Rise of Renting in the U.S

#57

Post by irishcoffee »

turar wrote: post #42
derekp7 wrote: post #21

Earlier quoted context omitted.

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…

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I read this counter-point a lot. Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere. Am I missing something? Sincere question.

Re: The Rise of Renting in the U.S

#58

Post by cpursley »

bluedino wrote: post #48

I'd have to save up almost a years pre-tax salary to buy a home. Well, one that I would want . I could save up half a years pre-tax salary and buy my not-ideal house. Nice/modern home, good location/schools, or large size. It seems like you can only pick 2 without spending a ton of $. Until then, I rent.

Wow, in my area you can almost buy a (albeit - modest) home outright on a years mid+ level tech salary.

Re: The Rise of Renting in the U.S

#60

Post by dragonwriter »

randomgyatwork wrote: post #51
dragonwriter wrote: post #26

Earlier quoted context omitted.

> 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 t…

I live in Toronto, 10 years ago a house in the suburbs may have been affordable for someone like me, now they are hugely over priced. I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me. Maybe rational buyers have been priced out of the market?

I'm not saying that people aren't priced out of the market, I'm saying that decreases to the general price of money cannot explain people being priced out of the market.

> I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me.

Right, but if the only price increase was attributable to the lower price of money, you'd have a mortgage just as long and with just as much burden now as before the decrease in the price of money -- you'd just pay a higher nominal purchase price on the house, and lower interest and fees associated with the loan.

If, instead, you've been priced out of the market, that means something other than a general decrease in the price of money is involved, because the increase in the prices is out of line with the decrease in the price you would pay for financing. If it is cheaper money driving the price, its money that has gotten cheaper for some other class of potential buyers than it has for you.

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