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Rent vs. Buy Visualization of Top 50 Cities

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Re: Rent vs. Buy Visualization of Top 50 Cities

#121

Post by deathflute »

vaksel wrote: post #43
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…

Your numbers seem to be a little off, unless we are talking about places that are closer to bronx or buildings that are falling apart. In midtown, that 1BR will run you ~$2,500 to rent and close to $1 million to buy. Maintenance fees should also be higher, at least $800.

I agree. 2000$ is a _very_ cheap 1 BDR in manhattan, more likely an "alcove" studio. You really have to go 2500$+ to have anything decent.

Re: Rent vs. Buy Visualization of Top 50 Cities

#122

Post by hartror »

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…

Small nitpic: your example of a house in Perth is out on the end of the bell curve. Perth has seen explosive growth driven by the resources boom, which have driven more people with more money to the west.

Re: Rent vs. Buy Visualization of Top 50 Cities

#123

Post by leelin »

Daisy wrote: post #31

Hi everyone, Thanks for your feedback & questions. Just wanted to chime in and hopefully clarify the methodology that goes into Trulia's Rent vs. Buy Index. To make an apples-to-apples comparison, we only looked at the median list price and annualized median rent for two bedroom apartments, condos and townhouses in the 50 largest U.S. cities based on population. As such, this index does not look at single family home…

  By using 15 as our baseline for the interpretation key as
  opposed to 12 (which would only account for a year's worth
  of rent), we are able to account for the additional costs
  such as property tax and homeowners insurance.
Sorry you completely lost me on this line of reasoning, and I actually suspect you've got it quite wrong.

Why does 12 account for a year of rent as you say? The ratio is already the price of the house divided by the ANNUAL rent, is it not? Why 15 vs 12 vs 20 vs 30??? Also, additional costs of homeownership like tax and insurance means you should demand a LOWER ratio to truly make the cost of renting and owning equal, not higher as you suggest!

My understanding is the ratio is basically a proxy for the P/E ratio (just like P/E ratio in stocks). It is the price of the house divided by the income you would receive renting it. That ratio can float to whatever the market is willing to pay.

The graphic on Trulia specifically says though that the ratio is the point where renting == buying. How do you get 15?

One metric some people in this discussion are using is the ongoing carry costs of buying vs renting. With borrowing costs at 5% interest rates on 30-year fixed mortgages, along with a 40% marginal tax rate in places like NYC and SF, then the ratio that makes buying and renting about equal is much higher than 15; it has an upper bound at 33, because you can borrow at 3% factoring in tax deduction (1.00 / 0.03), but needs to be adjusted to account for HOA dues, real estate taxes, state income tax, nasty transaction costs, etc.

Re: Rent vs. Buy Visualization of Top 50 Cities

#124

Post by rdouble »

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…

Veering off-topic, but how do people in Australia rent apartments? It seems the answer is NOT "craigslist."

Also, from just walking around Melbourne and Hobart, it seems that Australian cities are more ownership oriented than major American cities. I've seen maybe 2 "for rent" signs. Am I just not seeing the rentals?

Re: Rent vs. Buy Visualization of Top 50 Cities

#125

Post by cletus »

rdouble wrote: post #124
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…

Veering off-topic, but how do people in Australia rent apartments? It seems the answer is NOT "craigslist." Also, from just walking around Melbourne and Hobart, it seems that Australian cities are more ownership oriented than major American cities. I've seen maybe 2 "for rent" signs. Am I just not seeing the rentals?

In America it's common for one company or landlord to manage an entire building. In Australia that's extremely rare. In NYC for example, you have co-op buildings, which is a new concept to me. Australia really has no equivalent. Pretty much all apartments in Australia are "condos" in American nomenclature (it's not a word Australians use).

Real estate agents list properties for rent, typically in their windows, on their website, in the newspaper and/or on one or both of the big property websites (RealEstate.com.au and domain.com.au). That's one thing I like: when looking for a rental you only really need to check those two sites.

It's unusual to put a "for rent" (or "for lease") sign up. "For sale" sure.

You can rent something directly from the owner but it's reasonably unusual. Even if the owner finds a tenant they'll typically use a real estate agent to manage the property (do inspections, organize maintenance, take the rent and so on).

So anyway, the lack of rental signs doesn't mean anything. In my experience you only see them in front of larger buildings on the lower end of the economic scale.

Re: Rent vs. Buy Visualization of Top 50 Cities

#126

Post by timcederman »

rdouble wrote: post #124
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…

Veering off-topic, but how do people in Australia rent apartments? It seems the answer is NOT "craigslist." Also, from just walking around Melbourne and Hobart, it seems that Australian cities are more ownership oriented than major American cities. I've seen maybe 2 "for rent" signs. Am I just not seeing the rentals?

Last time I had to rent in Australia, which was 5 years ago, it was a combination of the newspaper and property managers. I went to each real estate agent in the area I wanted to rent, and they each had a large list of every property available in the area. Some they had keys for, which they gave you in exchange for your ID, so you could go look at them on the spot.

It's a lot more common in Australia for people to use property managers, and a lot less common to have large commercial rental properties. I believe gumtree.com.au and housemates.com.au are both popular now.

Re: Rent vs. Buy Visualization of Top 50 Cities

#127

Post by timcederman »

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…

Buying property in Australia at the moment would appear to be highly risky. I was hesitant back in 2002, and it's far worse now. The only thing that has kept prices high is the incredible increase in rent, which I'm still struggling to fathom. In 2004 I was renting a 110^m 2 bedroom apartment on the Brisbane river for $780 a month.

Australia has managed to inflate their housing market further, thanks to government intervention, and it seems that it needs to pop at some point. Long term, these types of capital gains in housing are unprecedented.

Here's a good summary. http://en.wikipedia.org/wiki/Australian_property_bubble

Re: Rent vs. Buy Visualization of Top 50 Cities

#128

Post by wisty »

jacques_chester wrote: post #61
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. 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…

3-500k won't get much of a McMansion in Australia. It might cover a townhouse.

Re: Rent vs. Buy Visualization of Top 50 Cities

#129

Post by light3 »

rdouble wrote: post #124
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…

Veering off-topic, but how do people in Australia rent apartments? It seems the answer is NOT "craigslist." Also, from just walking around Melbourne and Hobart, it seems that Australian cities are more ownership oriented than major American cities. I've seen maybe 2 "for rent" signs. Am I just not seeing the rentals?

It's very similar to craiglist actually, theres many sites that advertise privately rented houses and shared rooms, e.g http://gumtree.com.au

Re: Rent vs. Buy Visualization of Top 50 Cities

#130

Post by brc »

rdouble wrote: post #124
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…

Veering off-topic, but how do people in Australia rent apartments? It seems the answer is NOT "craigslist." Also, from just walking around Melbourne and Hobart, it seems that Australian cities are more ownership oriented than major American cities. I've seen maybe 2 "for rent" signs. Am I just not seeing the rentals?

Very few 'For Rent' signs because most Australian cities have a rental shortage, at least in the heart of the city. I have a property in Brisbane that has been vacant for 3 weeks in the last 10 years. It is highly unusual for it to be vacant between tenancies.

The reasons are varied, but increased planning laws and high immigration means that the supply of city properties is not keeping up with demand.

And yes, home ownership is very big in Australia.

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