61–70 of 199 posts
Earlier quoted context omitted.
15% of my post-tax wages go towards rent EDIT: That's 11% of my pre-tax wage
That is very low. In Munich most people are in the 30-50%. I was in the 17%, but that's just because most of my rent is paid out by the company I work for. Otherwise it would be around 30%.
Rent vs buy really depends (1) what's your down payment and (2) how long you're going to stay in your house. If you have a high downpayment, and in the extreme case buy your house in cash, you don't have to pay any interest. You can take into account the revenue you could have got from your capital, but nowadays you can't get much without taking pretty big risks. Then there's the long term. If you end up staying 30 y…
I hadn't considered the impact of #3, even though I knew it was a reality. Being in a position to buy a new house but not take advantage of low interest rates (because I don't want a long amortization on the mortgage), it actually makes little sense to buy right now except maybe if I planned to leverage a diminished equity in a different market. #6 seems somewhat tinfoil-hatty. Does anyone have some data to back up #…
Earlier quoted context omitted.
As a side note, when people say "percentage of your salary" are they referring to pre or post tax? This is never clear to me and I wish people would state it explicitly.
It should be post-tax, but I think a lot of people forget that their nominal salary is not all take-home pay.
Earlier quoted context omitted.
Some very solid points about the market in general, but I wonder how several of these points (particularly the points about oversupply, baby boomers, etc.) apply to places like SF or Manhattan. I was just coming to say the same thing. Solid advice, but housing has such metro-geographical differences, 40% of this doesn't line up with my area (Atlanta). Edit: Had 60% went back and modified to 40% after reading again.
jhonnathanson's point about SF or Manhattan is very clear. But what is special about Atlanta? Sorry, If I am ignorant, I have never been there.
I think there are a lot of generalizations in the article that people have been preaching for a few years now. If you sit on the sidelines and worry about of the potential problems, you're never going to purchase.
Even more indicting is the description of the nationwide market as a singular, when there are enormously different realities across the nation.
I don't know the US housing market very well but I think anybody discussing the national market as a whole is talking through their hat. Different areas are massively different and are going to react differently to stimuli like rate changes.
I agree with the first half of your sentence and disagree strongly with the second half. In many ways, a house works like a bond. The price moves inversely with the interest rate.
This is because, for most people, what determines affordability is the monthly payment. There are two factors involved in monthly payment:
1. Amount borrowed
2. Interest rate
Consider someone that can afford a monthly payment of $2,000 per month. That means that they can afford:
$541,097 borrowed @ 2.00%
$474,328 borrowed @ 3.00%
$418,922 borrowed @ 4.00%
$372,563 borrowed @ 5.00%
$333,583 borrowed @ 6.00%
$300,615 borrowed @ 7.00%
$272,566 borrowed @ 8.00%
You can see how the price of the house someone can afford is pushed down as interest rates go up. And here's the thing - the affordability population is a bell curve. Once you get above a certain payment per month, there aren't enough people above to replace the people disappearing below. That is, there are fewer people that can afford a $3,000 per month payment than can afford a $2,000 per month payment.
The bottom line? The article is spot on. You don't buy a house when interest rates are low and expected to go up.
There's also a very real lifestyle component. If it's a purely fiscal decision, we should all be renting in Dayton, Ohio.
That's why these sorts of articles drive me nuts. He's assuming equal inventory across renting vs. leasing. There are six people in my family, and the local home rental market doesn't support those numbers, at least not in the area where we want to live. In other markets, our only sane options would be renting.
EDIT: I should clarify that I mean owner-occupied housing. You can certainly make money in real estate that you can leverage; properties that you can rent or sale. (Still, as an investor, I have yet to add any real estate.)
As we are on the topic, which percentage of your salary going to pay up rent would you consider "sane"? Edit: I mean post tax. It's a cultural thing, in Italy we don't ever consider the gross salaries.
It's worth noting that patrick was among the few active bloggers that noticed the housing bubble early. Ben at the thehousingbubbleblog, calculatedrisk were two others. Folks that were paying attention and shorted the banks made some money. But of course: this time is different, broken clock, and , etc etc.
CalculatedRisk changed his opinion as the facts changed (he is data-driven, and one of the best blogs out there).
Patrick.net has essentially been a perma-bear on real estate. While that view was correct at one point in time, he never changed his view significantly when the facts completely changed.