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A Growing Problem in Real Estate: Too Many Too Big Houses

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Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#331

Post by refurb »

jandrese wrote: post #297
rifung wrote: post #250

Earlier quoted context omitted.

> On the flip side though, after my 15 year mortgage is up I'm not going to pay another dime outside of maintenance on this thing. On a 30 year, you'll still pay a fortune over the life of the loan which makes the renting argument a lot closer. If you can assume historical returns, renting is a financially superior choice. Well, assuming my math was correct. Both are big assumptions admittedly. The reason is that whe…

> over the long term on average home prices don't increase. I assume you mean adjusted for inflation here? Even then that hasn't been true. The problem with renting is that you're still paying the mortgage, only in the renting case you're also paying the middleman who then pays the mortgage. This is why rent per month is higher than mortgage per month for the same house. So the returns from that downpayment you inste…

The problem with renting is that you're still paying the mortgage, only in the renting case you're also paying the middleman who then pays the mortgage. This is why rent per month is higher than mortgage per month for the same house.

That statement is very location specific.[1] In SF, it's cheaper to rent than to buy (on a monthly basis) and because of rent control, it's often cheaper to rent versus buy over your lifetime.

In SF, it costs ~$1,000 to rent what would cost $600,000 to buy. In Cleveland, it cost ~$1,000 to rent what would cost $100,000 to buy.

Obviously very different outcomes if you rent versus buy in each city.

https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#332

Post by 6gvONxR4sf7o »

brightball wrote: post #231
hn_throwaway_99 wrote: post #93

One of the trends that I can only hope continues is getting rid of this idea that home ownership (especially single family home ownership) is the American dream. I live in and own a detached single family home (was a compromise with my spouse) and to be honest, I hate it. I hate having to take care of the yard, to deal with unreliable tradespeople when things break, to deal with the huge expense of minor home repairs…

I agree and disagree. On the one hand, yes, you're right that the repair expenses can be a big deal. If you don't want anything but the basics for the technology in your home, sometimes a home warranty can be a good option too but experiences vary significantly. On the flip side though, after my 15 year mortgage is up I'm not going to pay another dime outside of maintenance on this thing. On a 30 year, you'll still p…

>On the flip side though, after my 15 year mortgage is up I'm not going to pay another dime outside of maintenance on this thing.

Property taxes on 3 bedroom place in san francisco are going to be at least $1,000 a month. Even when you've paid it off, it stays expensive.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#333

Post by showerst »

madengr wrote: post #300
souprock wrote: post #249

Earlier quoted context omitted.

Moving to flyover country is more than affordability. It's also a matter of culture. Some people want stand-your-ground, constitutional carry, and lethal defense of property. Some people want to be surrounded by a particular religious group. Affordability is also more than just being able to buy a place to live. People want land. This can mean being able to hunt in the yard, own a private pond, or walk around without…

Bingo. I live in a “constitution carry” state in flyover country. Currently on travel in a heavy gun-control state that looks like a documentary on the opioid epidemic. Can’t wait to get back.

I wasn't really thinking in terms of politics -- There's still a few hub cities in conservative land that are the main places people live, right? More people live in just the Houston metro area than in all of Missouri, despite rural MO being cheaper and just as conservative.

I guess the point i'm trying to make is in regards to the original poster -- They posited that if people don't have to care about job locations and as much about cost, real estate values in concentrated places would drop.

I'm arguing that if people could move anywhere they preferred, concentrated places would get _more_ popular, because the gains you get living in currently desirable places get more valuable the more time and money you have. Obviously you have some people who's preference is to live somewhere isolated, but most of those people don't currently live in expensive places. There are some people who are holed up in San Diego and waiting until the day they can leave, but that number is probably swamped by the people who'd move there in a heartbeat if they could find a job that payed well enough.

Maybe my sample is skewed, but I'm from a small city in MO, most of my friends are early 30s and starting to settle down and start families, and I know a lot more people who would rather live in NYC/Boulder/Nashville/Dallas than either where they live now, or somewhere more rural.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#334

Post by taurath »

alkonaut wrote: post #28
pjc50 wrote: post #5

This is not only "first world problems", but 1% first world problems. Well, maybe 5%: given > For their retirement in a suburb of Asheville, N.C., Ben and Valentina Bethell spent about $3.5 million in 2009 to build their dream home: a roughly 7,500-square-foot, European-style house with a commanding view of the Blue Ridge Mountains. Put $3.5m into https://dqydj.com/net-worth-percentile-calculator-united-sta... and yo…

I don't get why you'd want to build an enormous house for your retirement ? If anything, I long for the day my kids leave and I can move to a "simpler" place where I don't need to worry about, or pay for, maintainnig a detatched house. What does a rich older couple do in 7500sq ft/700sq m? I'd run out of ideas for rooms after about 200 sq m, and then I'm left to clean the remaining 500 sq m. anyway...

If you can afford to have staff, you get to live in what amounts to be your own private world, completely disconnected. This is the end result of the dream of an individualistic society. Alternately, you can afford to have basically all your personal "village" living in the same spot with you - close friends, family, etc. This usually works out mainly if all your income is passive.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#335

Post by refurb »

treis wrote: post #302
mcguire wrote: post #290

Earlier quoted context omitted.

Well, yeah, except 2008 kinda put a dent in that.

Only if you were forced to liquidate before the rebound. Even if you bought at the absolute peak in ~2008 you'd still be way ahead today.

Not if you live in Phoenix[1], Miami[2], Las Vegas[3], Chicago[4] or a host of other US cities.

[1]https://fred.stlouisfed.org/series/PHXRNSA [2]https://fred.stlouisfed.org/series/MIXRNSA [3]https://fred.stlouisfed.org/series/LVXRNSA [4]https://fred.stlouisfed.org/series/CHXRCNSA

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#336

Post by refurb »

thousandautumns wrote: post #308
anthonypasq wrote: post #283

Earlier quoted context omitted.

lol at assuming mortgage is the only expense to owning a house

More like lol at assuming your rent doesn't cover the other expenses of owning a house. You think your landlord is just taking the loss? When you rent, you are paying, if not directly, for every expense associated with the house, plus extra for the landlords profit margin.

The rental market and the home buying market as separate and not perfectly correlated. In SF right now, it's cheaper to rent than to buy, so yes, if a landlord bought today and rented it out they'd be taking a loss.

The thing is that landlords may have purchased the place a long time ago. They can still make a profit with rent being less than what a mortgage+ would be today.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#337

Post by scarface74 »

rifung wrote: post #250
brightball wrote: post #231

Earlier quoted context omitted.

I agree and disagree. On the one hand, yes, you're right that the repair expenses can be a big deal. If you don't want anything but the basics for the technology in your home, sometimes a home warranty can be a good option too but experiences vary significantly. On the flip side though, after my 15 year mortgage is up I'm not going to pay another dime outside of maintenance on this thing. On a 30 year, you'll still p…

> On the flip side though, after my 15 year mortgage is up I'm not going to pay another dime outside of maintenance on this thing. On a 30 year, you'll still pay a fortune over the life of the loan which makes the renting argument a lot closer. If you can assume historical returns, renting is a financially superior choice. Well, assuming my math was correct. Both are big assumptions admittedly. The reason is that whe…

Are you accounting for the fact that if you pay off the house you are now living rent free with only maintenance + property taxes + insurance?

Would the difference between rent vs buy be enough to draw down at what is considered a safe rate of 4% to pay for some place to stay - ie if you could save $1000/month by renting instead of having a paid off house would you be able to have an extra $300,000 (12000/.04)?

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#338

Post by refurb »

jandrese wrote: post #313
larrywright wrote: post #226

Earlier quoted context omitted.

I came here to make this same comment - renting forever is probably fine for people who are willing to accept a certain kind of lifestyle, but for most people it's too limiting. Got kids and want a playset in the backyard? Not in an apartment. Want a wall where there isn't one, or remove a wall that you'd rather not have? Again, nope. Want a home theatre with a big subwoofer so you can watch movies at home (one of my…

The way I see it renting will always be more expensive because you have all of the same costs but you add in one other person to pay: the landlord. Maybe the landlord can hire less expensive maintenance staff than you can, but maybe they can't. Is it really that different to have the house plumber come down and fix something vs. hiring a plumber from the yellow pages? The landlord has to pay the mortgage same as you…

The rental market isn't based on what it costs to own a home plus a profit. It's a separate market and can often result in rents that are lower than the monthly cost of ownership.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#339

Post by MrFantastic »

Balgair wrote: post #116
andechs wrote: post #114

Earlier quoted context omitted.

It's similar to a telecommunications giant - as the customer, you need to pay a cost of switching (moving expenses, hookup fees etc.). So it's in their best interests to try to squeeze customers when possible, even with the occasional person that moves out, they'll net a lot more from tenants who just don't bother to dispute the increase.

True! We've decided to be nimble, and it does take a toll (no pool tables, no big patio furniture, smaller couches, etc). But saving the cash is worth it to us. 12% on 1000k/mo rent comes out to an extra 1440/year that could be saved. To us, such a thing is worth the weekend of moving hell.

I bet moving costs at least $400 out of pocket plus you have to value you time. 2 people packing and moving is 20+ hours each. 40 hours * $20/hr = $800 so you are breaking even at best.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#340

Post by refurb »

thorwasdfasdf wrote: post #326
djakjxnanjak wrote: post #230

Earlier quoted context omitted.

My earthquake insurance is more like 0.1% and I'm pretty sure the rates are set by the state - where are you getting your numbers? If the cost were 0.5% I don't think it would be worth paying, that would buy a lot of seismic reinforcement.

You must of got one hella of a deal! For CA: "Based on where you live, insuring a single-family house can cost from $2.50 to $5.50 per thousand dollars of coverage" .25% to .55% That's quite significant. https://www.valuepenguin.com/california-earthquake-insurance...

Yes, but most earthquake insurance policies have huge deductibles and the house is often worth ~1/3 of the entire property, so your number could still align with what others said.
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