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

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

#161

Post by VLM » Tue, Sep 17, 2013, 5:34 PM UTC

snowwrestler wrote: post #147

VLM wrote: post #142

Earlier quoted context omitted.

Thats a pretty good definition of speculation not investment. Its investment if you can oil the wheels as a landlord such that you can rent money from a bank cheaper than renting the land from the landlord. That of course is a mathematical impossibility at this time in most areas.

It is possible to speculate in real estate, but most homeowners don't. Speculation is typical high-risk and short term. Most residential real estate transactions are neither.

LOL define any real estate transaction in the last decade or so, especially home equity withdrawls!

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

#162

Post by VLM » Tue, Sep 17, 2013, 5:43 PM UTC

nsxwolf wrote: post #96

If you have a family, there are benefits to setting down roots and buying a house. When you rent, you never know what the future holds. The owner might want to sell the property at some point and not renew your lease. This becomes a very disruptive life event for children. Homeowners of course do relocate for other reasons, but it tends to be on their own terms and not someone else's.

"This becomes a very disruptive life event for children."

Between the ages of 6 and 12, maybe. Below that age they don't really notice or care, above that age the coverage area for middle and high schools is so immense that if you move out of the coverage area it was intentionally. There are eleven thousand household units in my kids high school. Seriously claiming I wouldn't be able to rent a single one?

The worst case scenario would be kids around 10 and you live in an elementary district that has precisely one apartment building or perhaps only one (perhaps illegal?) private house rental.

The long term effects of financial devastation to the family are probably worse than having to go to a different school "Well, you can't go to college because we don't have the money anymore to help because we stayed in our upside down house back when you were in 3rd grade; but on the bright side we didn't have to move to the apartment complex on the other side of the elementary school district"

The argument is identical to if you rent an apartment while going to university, in theory you might have to drop out of that university and transfer to another if you need to move and no one will rent to you. Very few people indeed report this tragedy..

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

#163

Post by pc86 » Tue, Sep 17, 2013, 5:43 PM UTC

malyk wrote: post #138

equalarrow wrote: post #50

Earlier quoted context omitted.

> 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…

Prices in the east bay are still way over asking and there is a lot of cash. My wife and I paid $75k over asking for our 1300ft2, 1 bed, 1 bath house in north oakland just shy of a year ago. We bid on 6 houses total and every one of those was in the same ballpark over ask. I'm not sure what it's like over the hills, but in north oakland and berkeley you'll still have to pay over asking and compete against 5-10 other…

I see this and it blows my mind, coming from a low-income family growing up and a low-COL but mid-to-high-income household now. I've never heard of anyone even paying asking price, let alone above it (and having the seller pay most or all of closing costs is a non-starter around here). We only paid $113k for our 3br 2.5ba home (list $139k) with the seller chipping in $7k or so seller's help and although it wasn't the case when we bought it a few years ago, we make more in a year than the house is worth.

This is tempered by the fact that the medium HHI of our zip-code is in the high 30k's and we've got the amenities to match, but we're in a suburban area outside of small city/large town (200k or so during the week?) and with me being a developer my income isn't necessarily tied to a specific geographic area.

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

#164

Post by r00fus » Tue, Sep 17, 2013, 5:44 PM UTC

njharman wrote: post #105

I bought a duplex 4 years ago. With rent from other side my total (taxes, insurance, mortgage) has been ~$500 (1/2 to 1/3 of what I could rent for. PLUS I've gotten tax benefits, and $250/mo equity. When I buy a house shortly, the duplex will start making $500/mo + ever increasing equity amount. Until I decide to cash out. Property/land is one of the most available avenues to wealth. But, it's no silver bullet. If yo…

Are you factoring in maintenance? Depending on the age and quality of the construction, you might be looking at big issues lurking under the radar (ie, plumbing, roof, etc). When we bought our duplex, the house inspector didn't really go into an amazing depth of detail, I wish we'd had more focus on the foundation (sometimes acts like a sump - solution is a french drain estimated @ $5-10k).

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

#165

Post by olalonde » Tue, Sep 17, 2013, 5:46 PM UTC

mberning wrote: post #51

Or 10 reasons why it is a great time to buy a cheap house. I bought a roughly ~$100k home back in 09 which I could now rent for about $800-900 per month. There is a nice little house on a smaller lot right around the corner listed for only $65k. For somebody like me that has a decent income and decent credit the opportunities to buy nice little rental properties and make a tidy rental income have never been better it…

Wow, my apartment in China is only 800$/month but it's worth 370,000$. I really wonder why people keep buying real estate in China. I guess they are hoping to make money from the increasing value of properties rather than the rent.

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

#166

Post by zurn » Tue, Sep 17, 2013, 5:49 PM UTC

badman_ting wrote: post #6

The part about high price/low interest rate vs the opposite was really helpful. I am trying to figure out how to think about this so it's well-timed. Thanks.

The central banks lower interest rates when the economy is stalling. Conversely, central banks set high interest rates when the economy is overheating.

If low interest rates would make housing overpriced and high rates would make housing underpriced, it would mean housing was cheap pre-2008 and expensive in 2008-2012. Was it so?

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

#167

Post by virmundi » Tue, Sep 17, 2013, 5:50 PM UTC

codex_irl wrote: post #117

mberning wrote: post #51

Or 10 reasons why it is a great time to buy a cheap house. I bought a roughly ~$100k home back in 09 which I could now rent for about $800-900 per month. There is a nice little house on a smaller lot right around the corner listed for only $65k. For somebody like me that has a decent income and decent credit the opportunities to buy nice little rental properties and make a tidy rental income have never been better it…

What part of the country do you live in? I bet it is not in the SF bay area ;-)

Probably not, but not everything is the Bay.

I'm moving to Florida. I plan to buy a house that is 30k. Small bungelow. Just me, the wife, the dogs and a cat. At the same time I plan on buying a 55k fixer-upper.

The first I should be able to pay in cash. The second, won't get bought until my current home sells. However, that second house, once improved (by us: we do flooring, plumbing, painting and simple eletrical) should value at 160k.

Once we move to the fixed house, we'll rent the other for 500 a month. Should be doable since my wife is currently in FLA in a 300 sq/ft studio at 500 a month.

I purposely didn't want to go to the Bay for this reason. I avoid California at all cost for this reason. My long term plan is to startup a tech firm, hire college grads, train them and try to keep them with the company for 5+ years. Hard, but doable. The nice thing is they can get 45k a year, and get a pretty nice home/environment that would be hard to beat. So we'll see, but again the Bay really matters in the HN echo chamber.

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

#168

Post by VLM » Tue, Sep 17, 2013, 5:51 PM UTC

minimax wrote: post #155

dxhdr wrote: post #137

Earlier quoted context omitted.

The data is out there, but really it's common sense. On the margin, a buyer purchases a house with a monthly payment he/she can afford. The monthly payment is determined based on the purchase price of the house and the interest rate. The higher the rate, the higher the payment. If rates raise, the margin buyer will no longer be able to purchase the same priced house. Prices must fall to clear the market. Yes, increas…

I understand the theory, but when I look at the data it looks like: http://research.stlouisfed.org/fred2/graph/?g=mth The last real period of rising mortgage rates was in the 70s. You can pretty clearly see that home prices were rising in spite of rising financing costs.

More like very early 80s.

On the other hand, the price of everything more than doubled in the 70s due to stagflation.

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

#169

Post by twoodfin » Tue, Sep 17, 2013, 5:56 PM UTC

dxhdr wrote: post #135

twoodfin wrote: post #76

Earlier quoted context omitted.

Agree. And where are the indications that interest rates will rise substantially any time soon? I'm not saying that's impossible, but this piece seems to take it as an article of faith that we're in a period of unsustainably low rates.

http://mortgage-x.com/images/graph/fhfb_contract_rate.gif We are in unprecedented territory here, interest rates have never been this low. Is it sustainable? Who knows. Given history I'd be more inclined to believe it's not.

Doesn't that chart contradict the article? Home prices didn't decline from 1960 to 1980, as interest rates climbed dramatically:

http://www.multpl.com/case-shiller-home-price-index-inflatio...

There's obviously some relationship there, but it's not as clear cut as this article makes it out to be.

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

#170

Post by VLM » Tue, Sep 17, 2013, 5:56 PM UTC

laurent123456 wrote: post #106

Shouldn't the post be renamed "10 Reasons it is a Terrible Time to Buy an Expensive House, in the US "? It sounds like a general article but it's really only about the US.

If you research housing bubble related issues, its currently worse outside the US "in general". Canada, China, Europe, India especially, Dubai, Australia...