Rent vs. Buy Visualization of Top 50 Cities • Hacker News Board

Re: Rent vs. Buy Visualization of Top 50 Cities

#101

Post by MichaelSalib » Tue, Jan 25, 2011, 1:29 AM UTC

teyc wrote: post #95

jacques_chester wrote: post #63

I have come to the conclusion that buying to occupy is no longer a rational decision. Consider a grid. On one axis, housing purchases are cheap or expensive. On the other axis, the local economy is vibrant or moribund. Hence: * Cheap + Vibrant: Basically doesn't exist. * Cheap + Moribund: Bad place to buy, you're tied to a high-risk location. * Expensive + Vibrant: Purchase cost will eat up the advantage of the local…

ahh I've heard of that before. It is the idea that markets are perfect. But in reality, you only need to find one house that is improperly priced. Given banks are pretty tight on lending now, a borrower who can convince the bank to lend is better placed to offer a lower price.

Eh, what are the odds that you're actually good at finding such a house?

I mean, everyone thinks that they're an above-average driver; people naturally overestimate their own skills. And most people have absolutely zero training or practical experience in assessing either real estate markets or houses. And buying a house is not an emotionally neutral task that most people can remain clinically detached from: most people can't help looking at a house to buy and seeing their future there, visualizing their kids growing up there, etc. So they're likely to be emotionally attached to any house they like well enough to buy, which further reduces their ability to make a rational decision.

My claim is that for every person who is actually skilled at this, there are many more who think they're skilled but really are not skilled at all.

Re: Rent vs. Buy Visualization of Top 50 Cities

#102

Post by hugh3 » Tue, Jan 25, 2011, 1:40 AM UTC

A note on the chart: it's very pretty, but why? As soon as you load it up you see cities floating around the map in a way that cities really don't. And once they stop floating around, the cities aren't quite in the right geographical locations; to find the unlabelled dot that's Oakland I had to first click on an unlabelled dot that happens to be Sacramento.

Re: Rent vs. Buy Visualization of Top 50 Cities

#103

Post by megablast » Tue, Jan 25, 2011, 1:41 AM UTC

cletus wrote: post #66

jacques_chester wrote: post #61

Earlier quoted context omitted.

> Frankly I think any system that encourages people to create homes for others to rent as doing a public good. All good and well, but land releases have not kept up with demand. A supply of cheap money from the US, the mining boom and negative gearing have lead to massive increases in housing prices in the past 10 years. It's not sustainable, IMO. We in Australia brag about sailing through the GFC, but if inflation b…

> All good and well, but land releases have not kept up with demand This point I've heard too often and it's one I vehemently disagree with. Australians need to get over this quarter acre with a 250sqm house nonsense. What's more the government should stop subsidizing it to the degree that they are. It's not simply a question of land but all the infrastructure that goes along with it: water, power, roads, schools, et…

This is more up to councils and state governments, and there is movement in this direction, encouraging high to medium density housing rather than low density.

Re: Rent vs. Buy Visualization of Top 50 Cities

#104

Post by whatusername » Tue, Jan 25, 2011, 1:42 AM UTC

snagage wrote: post #78

cletus wrote: post #47

Earlier quoted context omitted.

> I'd suggest to keep working in the U.S. and invest in housing back in Australia. As it happens I do own a house in Australia that is rented out but when you're paid in one currency and your costs are in another you open yourself up to exchange rate risk. So I'm way of overweighting myself in AUD liabilities. It's not a currency I'd be betting against in the next 10 years. Likewise, the USD looks like it'll only get…

> Frankly I think any system that encourages people to create homes for others to rent as doing a public good. I don't see the tax breaks as a good thing as it skews market forces and inflate property prices. They also throw up a moral dilemma: Why should property investors get tax breaks (offset interest payments against personal tax) and not home owners. What you start to see some single young professionals in Aust…

Moral Dilemma? It seems a logical way of treating it.

The additional income is treated as taxable income. The additional expense (aka Interest) is treated as a deductible expense.

Re: Rent vs. Buy Visualization of Top 50 Cities

#105

Post by snagage » Tue, Jan 25, 2011, 1:46 AM UTC

whatusername wrote: post #104

snagage wrote: post #78

Earlier quoted context omitted.

> Frankly I think any system that encourages people to create homes for others to rent as doing a public good. I don't see the tax breaks as a good thing as it skews market forces and inflate property prices. They also throw up a moral dilemma: Why should property investors get tax breaks (offset interest payments against personal tax) and not home owners. What you start to see some single young professionals in Aust…

Moral Dilemma? It seems a logical way of treating it. The additional income is treated as taxable income. The additional expense (aka Interest) is treated as a deductible expense.

1. It's deducted against personal income. 2. Nobody is allowed to do it on their own home

Re: Rent vs. Buy Visualization of Top 50 Cities

#106

Post by yummyfajitas » Tue, Jan 25, 2011, 1:46 AM UTC

smiler wrote: post #96

louislouis wrote: post #65

Earlier quoted context omitted.

A fourth risk: Fed raises interest rates then your monthly mortgage payments cost more than renting and hopefully not more than you can afford.

If interest rates go up and the person who you're renting off has a mortgage on the place and his interest rates go up - your rent will go up.

Then you move out and rent from someone who isn't charging above-market rates.

"Mark to mortgage" == vacancy. If you want to successfully speculate on real estate (as any homeowner does, landlord or occupant), you need to be willing to take losses over long periods of time.

Re: Rent vs. Buy Visualization of Top 50 Cities

#107

Post by hugh3 » Tue, Jan 25, 2011, 1:47 AM UTC

jacques_chester wrote: post #81

cletus wrote: post #77

Earlier quoted context omitted.

FWIW http://www.wired.com/science/planetearth/magazine/16-06/ff_h... As far as stamp duty goes, IMHO that system needs to be abolished. Property taxes should be applied smoothly rather than transactionally. For one thing, stamp duty reduces the flexibility of the labour market. Consider: someone owns a house in Sydney worth $1 million. They're offered a job in Perth for, say, $150,000. Now to sell up and buy a new ho…

You're right that the carbon footprint is lower, but that doesn't change the fact that the collision of politics and economics has prevent urban density from increasing in Australia. We need both to release land and increase density or will are beggaring ourselves unnecessarily. As for stamp duty, the states rely on it too much to give it up.

Urban density has been increasing markedly in Australia over the past few decades, at least in Sydney. Not quite as fast as some folks would like (ie everybody with a spare quarter acre that they'd rather put up twenty units on) but density is certainly going up.

In my opinion, though, what Australia really needs to do is to develop the infrastructure outside the major cities to persuade people to move out there. Australia can easily accommodate another ten million people, but not if they all want to live in Sydney and Melbourne. Why can't Broome and Mildura and Wagga Wagga have two hundred thousand people?

Re: Rent vs. Buy Visualization of Top 50 Cities

#108

Post by whatusername » Tue, Jan 25, 2011, 1:52 AM UTC

jacques_chester wrote: post #87

kscaldef wrote: post #84

Earlier quoted context omitted.

> On one axis, housing purchases are cheap or expensive. On the other axis, the local economy is vibrant or moribund. Neither of these things is binary.

If it wasn't clear, I'm using "axis" in the sense of continuous values.

So then look for Cheap + Improving.

Re: Rent vs. Buy Visualization of Top 50 Cities

#109

Post by tomsaffell » Tue, Jan 25, 2011, 1:53 AM UTC

klochner wrote: post #86

tomsaffell wrote: post #71

Earlier quoted context omitted.

That's only a part truth. My example specifically deals with San Francisco (because Trulia showed it to be a 'rent not buy' city). In SF there have not been anything like the level of defaults seen elsewhere in the US. Elsewhere in the US, rate adjustments on ARMs were just one part of the problem. The other bigs ones behind the recent crisis were: over inflated house prices (in SF, prices were only down ~15% on peak…

My point is that you're taking on significant risk with a cavalier attitude. Let me try another: > if rates soar that means the economy has recovered and your house is worth more You realize that LTCM went bankrupt betting on asset price correlations?

Well, the intention was not to be cavalier, but to try to ignore the risk side of the equation as much as possible, because thats what Trulia did, so the analysis could be comparable. Having read all the subsequent comments regarding risk, I now see that what I should have said is comparing renting to buying on a _cost only_ basis, w/o considering the differences in risk, is not a helpful analysis.

I still stand by the original assertion: buying in SF can be cheaper than renting (see the revised numbers), and the risk and reward there entailed is actually pretty small if: buying now (after a recent fall), getting a 30-yr fixed rate, and sticking around for ~5+ years

Re: Rent vs. Buy Visualization of Top 50 Cities

#110

Post by RickRoll » Tue, Jan 25, 2011, 1:55 AM UTC

keyle wrote: post #38

cletus wrote: post #29

I'm from Australia but now live in NYC and I've been debating the question about whether to buy or rent. It's amusing to me to see a big red circle on this graphic for NYC. I can understand why. NYC is a special case in many ways. For one thing, from a purely financial perspective, your best bet is to find a rent stabilized apartment that is well under market value and then invest your money elsewhere, possibly on bu…

Hey mate. Interesting perspective. without knowing your financial situation, I'd suggest to keep working in the U.S. and invest in housing back in Australia. Both are great prospects but you might be able to buy 2 houses near the beach in Australia (say Perth / Adelaide) for the price of one in NYC. In a way, it gives you diversification that NYC doesn't. Also buying walking distance from the beach gives you that sec…

>> buying walking distance from the beach gives you that security that land value will never go down

Riiight, global warming is a fraud by those science guys ...