It's A Terrible Time To Buy An Expensive House • Hacker News Board

Re: It's A Terrible Time To Buy An Expensive House

#121

Post by mkr-hn » Tue, Sep 17, 2013, 4:09 PM UTC

muzz wrote: post #114

mkr-hn wrote: post #80

Earlier quoted context omitted.

It's never obvious why a technology is valuable before someone invents an application for it. No one knew what to do with broadband before VoD and digital delivery (Steam, GoG, app stores, etc.) came along, and we're only a few years into widespread adoption of those technologies. Anything could happen on the 5-15 year time scale we're talking about here. Gigabit Internet and the places that have it could look very a…

> No one knew what to do with broadband before VoD and digital delivery (Steam, GoG, app stores, etc.) came along, and we're only a few years into widespread adoption of those technologies Napster, then other file-sharing services (Morpheus, Kazaa), Bittorrent, etc. This was ~25% of internet traffic in the mid-00s

25% of 5% of the current population of Internet users isn't much. It wasn't that long ago that people wondered if the Internet had staying power. Few people believed it had much influence outside itself before the 2008 elections. The greatest period of Internet growth was post-YouTube. The greatest growth in build out and adoption of gigabit Internet will be post-whatever takes advantage of it.

My point still stands:

> No one knew what to do with broadband before VoD and digital delivery (Steam, GoG, app stores, etc.) came along, and we're only a few years into widespread adoption of those technologies

Re: It's A Terrible Time To Buy An Expensive House

#122

Post by karl_gluck » Tue, Sep 17, 2013, 4:11 PM UTC

hackula1 wrote: post #90

mkr-hn wrote: post #38

Earlier quoted context omitted.

A tepid Twitter IPO right on the back of Facebook's might convince people to start looking to places with higher growth potential. Anywhere Google takes its Fiber is a good bet. I don't know about a bust, but things can only go so high before people with money and ambition start looking elsewhere.

My money is on Austin. Low taxes, reasonable rents, plenty of culture (SXSW, "Keep Austin Weird", lots of nightlife, etc.), and a history of tech seems like the perfect combination.

Ding ding ding. You are correct! The number of people showing up here (disproportionately from California, actually) is pushing housing prices through the roof. Houses sell about 10% over ask pretty much anywhere.

Rent has doubled for most of the area over the last 5 years. In my dismay a few months ago, I did some research into buying a place but quickly came to the same conclusion as the author.

I just did a quick look around my area over on Zillow. A condo comparable to my apartment (townhome style, 2-car garage, similar sq ft / bedrooms, location, etc) is still listed for 23 times my current annual rent, even though rent went up 15% last year. I'm renting for 4.3% the price of an (old!) condo. Anyone who thinks this is sustainable is going to be in for a surprise.

[edit: rent calculations annual...]

Re: It's A Terrible Time To Buy An Expensive House

#123

Post by snide » Tue, Sep 17, 2013, 4:12 PM UTC

equalarrow wrote: post #50

jonnathanson wrote: post #10

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. SF, in particular, seems to be extremely young (though that could be observational bias on my part), well-monied, in sharp undersupply of housing, with rent matching or in some cases exceeding the cost of a mortgage. Historica…

> But it's conceivable that SF basically becomes the Mahattan of the Bay Area, a playground for the rich, while everyone else gets pushed into the outlying boroughs and beyond. In such a scenario, where money is little object to the buyers determined to own in SF, what happens to pricing? I lived in Manhattan and in SF now and I would say, yah, I can see that. Already though, the 'boroughs' are being pushed further o…

I know this is going to sound nuts to you, but if you're a tech worker that can do a day a week at home you really should check out north of San Rafael. Last year I bought a house in Petaluma that was way beyond what I thought I could own. More important to me is that the schools and community are great. 3 parks and a historic downtown all within walking distance. I feel like I live in a town from the 1950s.

Granted, I knew I'd be working more and more at home, but for the first year I road a 1 hour commuter bus (with wifi!) that picked me up a block from my house and dropped me a block from my Soma office. East Bay has BART, but don't discount the other public transportation options that do just as well.

Re: It's A Terrible Time To Buy An Expensive House

#124

Post by snowwrestler » Tue, Sep 17, 2013, 4:19 PM UTC

There's a lot of good technical advice here on pricing real estate, but it's colored by an absolute dislike/mistrust of debt.

Ultimately you have to ask yourself whether you see debt as a form of slavery, or as a financial tool that you can use to your advantage. If it's the former, you probably should not buy a house. If it's the latter, it might make good sense to buy a house (even an expensive one) depending on the conditions.

Re: It's A Terrible Time To Buy An Expensive House

#125

Post by mkr-hn » Tue, Sep 17, 2013, 4:21 PM UTC

lsc wrote: post #109

mkr-hn wrote: post #80

Earlier quoted context omitted.

It's never obvious why a technology is valuable before someone invents an application for it. No one knew what to do with broadband before VoD and digital delivery (Steam, GoG, app stores, etc.) came along, and we're only a few years into widespread adoption of those technologies. Anything could happen on the 5-15 year time scale we're talking about here. Gigabit Internet and the places that have it could look very a…

>Gigabit Internet and the places that have it could look very appealing once the technology that puts it to work starts to gain traction. I certainly agree that gigabit internet will be more valuable in the future than it is now. But, will that make property way more valuable? maybe. thing of it is, compared to silicon valley property values, getting fiber in to multi-family dwellings isn't all that expensive. You ar…

Imagine moving to a place without cable, DSL, or even a wireless provider. Now imagine 5-6 very popular services depend on gigabit speeds in the same way YouTube or Steam depends on cable, DSL, and wireless. How many people would buy a house without a gigabit link in that environment?

My point is that if something changes the SV market situation, like an exodus of investors to Texas or another Google Fiber location, housing prices are going to fall fast as the money leaves.

Re: It's A Terrible Time To Buy An Expensive House

#126

Post by 300bps » Tue, Sep 17, 2013, 4:21 PM UTC

kjackson2012 wrote: post #110

300bps wrote: post #67

Earlier quoted context omitted.

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 payme…

You likely won't get high interest rates like 8% unless you have higher inflation rates. So someone who makes 2000/month right now, by the time the Interest rates increase to 8%, their salary would have Also increased.

I happen to be an expert on this topic (i.e. I work as the technology person on a fixed income trading desk managing $28 billion of assets including a few billion in mortgage backed securities).

You likely won't get high interest rates like 8% unless you have higher inflation rates

This is completely wrong. The only thing preserving low interest rates is the Fed purchasing mortgage backed securities (see http://www.newyorkfed.org/markets/mbs_faq.html). When that stops, interest rates will go up dramatically. You could argue that the Fed will only stop doing that once inflation kicks in but that is not true. The Fed is on extremely thin ice as it is now. They're only supposed to purchase and sell Treasuries for their open market operations (http://www.federalreserve.gov/monetarypolicy/openmarket.htm) and manipulating the mortgage market is significantly outside of their charter.

So someone who makes 2000/month right now, by the time the Interest rates increase to 8%, their salary would have Also increased.

There are literally millions of possibilities that could happen that don't fit your theory. Never heard of stagflation?

My goal is not to write a dissertation in an HN comment so that's enough for me.

Re: It's A Terrible Time To Buy An Expensive House

#127

Post by lacksconfidence » Tue, Sep 17, 2013, 4:21 PM UTC

ctdonath wrote: post #81

eloisant wrote: post #28

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…

Discussions about "rent vs buy", and the corollary of "mortgage vs cash", rarely address the problem of you MUST make that payment every month . Pay up or lose it. The notion of paying every month, pretty much for life, is deeply ingrained in society to the point of not renting/mortgaging seems downright weird. (It's kinda like the recurring threads where living on $1/meal is met with outrage by most, despite many do…

This seems to miss a large percentage of the population which live in mega-citys. People arn't putting out a million dollars for "McMansions". A million dollars buys you an 800 sq ft 1 bed 1 bath condo. We are accepting the "brick shoebox", and we are paying through the nose for it.

Edit: And, at least for me, moving far away where its cheaper is not an option. My children will know their grandparents, and not because they make a 4 hour drive each way once a month or some such.

Re: It's A Terrible Time To Buy An Expensive House

#128

Post by lsc » Tue, Sep 17, 2013, 4:25 PM UTC

mkr-hn wrote: post #125

lsc wrote: post #109

Earlier quoted context omitted.

>Gigabit Internet and the places that have it could look very appealing once the technology that puts it to work starts to gain traction. I certainly agree that gigabit internet will be more valuable in the future than it is now. But, will that make property way more valuable? maybe. thing of it is, compared to silicon valley property values, getting fiber in to multi-family dwellings isn't all that expensive. You ar…

Imagine moving to a place without cable, DSL, or even a wireless provider. Now imagine 5-6 very popular services depend on gigabit speeds in the same way YouTube or Steam depends on cable, DSL, and wireless. How many people would buy a house without a gigabit link in that environment? My point is that if something changes the SV market situation, like an exodus of investors to Texas or another Google Fiber location,…

tl;dr: the fiber will come to the consumer, not the other way around.

You misunderstand. I'm not saying that gigE isn't great. Certainly within the next decade, (and hopefully sooner) nearly all of us are going to demand gigE to the home.

My point is just that the economics of the situation are such that the presence of gigE lines isn't going to move the price of real-estate all that much. In expensive areas, the cost of real-estate utterly dominates the cost of getting gigabit network connections, if all your neighbors want the same speed.

The main reason gigabit to the home is unaffordable right now is due to low density of demand, and as you point out, that is going to change.

Re: It's A Terrible Time To Buy An Expensive House

#129

Post by snowwrestler » Tue, Sep 17, 2013, 4:29 PM UTC

rtpg wrote: post #118

toddmorey wrote: post #68

I think the madness won't end until we stop looking at housing as an investment vehicle. Housing is an expense. We're all renters to some extent. Even when I own my home "in the clear," I'll continue to have tax and maintenance obligations forever. 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.…

I've always been confused about the housing as investment idea. We don't consider cars to be an investment either do we? I feel like the idea can only help to drive the prices up further.

Cars are not an investment because, unless we are talking about collectible antiques, cars always depreciate. That's why it's more accurate to think of cars as expenses.

Real estate can appreciate. It's not guaranteed to do so, but it can, and with significant leverage. That's why it's considered an investment.

Re: It's A Terrible Time To Buy An Expensive House

#130

Post by muzz » Tue, Sep 17, 2013, 4:32 PM UTC

karl_gluck wrote: post #122

hackula1 wrote: post #90

Earlier quoted context omitted.

My money is on Austin. Low taxes, reasonable rents, plenty of culture (SXSW, "Keep Austin Weird", lots of nightlife, etc.), and a history of tech seems like the perfect combination.

Ding ding ding. You are correct! The number of people showing up here (disproportionately from California, actually) is pushing housing prices through the roof. Houses sell about 10% over ask pretty much anywhere. Rent has doubled for most of the area over the last 5 years. In my dismay a few months ago, I did some research into buying a place but quickly came to the same conclusion as the author. I just did a quick…

Property taxes in Austin are roughly 3% of the current value.

If your monthly rent is 0.4% of current value, then over 12 months you'd pay a total of 4.8% of current value.

So more than half (3 / 4.8) ie most of your rent paid would be going to pay the property taxes alone.