It's A Terrible Time To Buy An Expensive House

I hear you on the house inspection. As a naive first-time buyer, I was told over and over again to get an inspection and I did. And, all-in-all, it was a waste of $300. The roof was more damaged than I was led to believe, and there were several huge "code" violations with the plumbing and electrical. Luckily, I have family handy-men who taught me how to correct these problems myself and on the cheap. If you decide to pay for a home inspection in the future, make sure you don't use one that is recommended by your realtor (facepalm).

The "maintenance" issue is often misunderstood and the costs are different depending on if you live in the home or are renting it out to someone else. Case in point, my furnace started failing a few years ago. I could have fixed it on a Saturday afternoon for a hundred or so (it was made in 1986 -- they were not particularly sophisticated devices back then). If I wasn't living in the house, I would have gone this route. Instead, due to the $250/month heating bill to keep my house at a cool 65 in the winter coupled with the availability of generous tax credits, I upgraded the A/C and furnace. I now keep my home at 75 degrees and pay $80 in the coldest months of the winter.

Most of the problems I've run into have a similar theme. I could have gotten another few years out of my roof with patch work ($~100), but I replaced it because I wanted a better looking (and functioning) roof ($3000). I had a water tank problem that, I discovered, wasn't even failing -- the temp was just set too high. ($0) Due to tax credits and a desire to run more than one device that consumes hot water, I replaced it. ($800) People who are afraid of the unpredictability of these costs can purchase insurance (read the fine print and no, it's usually not a good deal). And a lot of the really expensive repairs that you hear about have more to do with people failing to inspect their home regularly, themselves (get in the attic, watch the way the water drains when it rains, etc). It's a lot cheaper to fix a downspout/gutter that's imperfect than it is to solve a foundation issue that creeps up as a result of water affecting the stability of the ground around a basement.

The article doesn't really apply to where I live. If you're renting out here, it's at a set of suburban-ish apartment complexes (900sq. ft. 2br, 1ba $800) or extremely low-end houses usually in undesirable neighborhoods vs a dearth of single family homes around 1400 sq. ft, 3br, 1.1 or 2 ba with basement space not included in the square footage. While there are homes in the million plus range, they're huge or have something that's highly unique about them (like a million dollar light house[1], supposedly the only one in Michigan that can be privately owned -- and even that's been sitting on the block for two years with the offering price dropped from 1.5 million).

[1] http://www.oldhousedreams.com/2012/04/20/1886-lighthouse-por...

Glad you brought up the Bay...entirely different animal than anywhere in the country. Oakland does represent a potential bright spot, but I disagree that there needs to be displacement to achieve it.

Oakland, like most cities, suffers from antiquated and restrictive zoning model (among other things). Already a crowded city in most parts (Lake Merrit), it is largely inefficient. Although they are on different scales (3M vs 300K), Chicago is a good model of how to develop a downtown--the one area where Oakland could add 100k--and help the crime issue. You could argue Detroit has a better downtown.

> If you decide to pay for a home inspection in the future, make sure you don't use one that is recommended by your realtor (face palm).

This x 1000.

In fact, I think that's one of the big lessons learned in my first property purchase. If I could do-over, I'd have hired a completely independent inspector (rated highly on yelp/servicemagic/angieslist) and maybe have two separate inspections. At the very least we could have negotiated some compensation from the sellers.

I don't make any assumptions about that 8% - I used the figure and the assumptions from the original article.

If you rent, and put the difference into a savings account, then using the assumptions from the article, you'll be able to buy a house outright in 20 years.

I think you're pretty much agreeing with that..?

I am of course assuming that interest rates (or other return on investment), house prices, inflation and salary increases are all sensible, going in the same direction at the same rate, or near enough.

If you put your money in a pure tracker (e.g. tracking the Dow Jones, FTSE 100, or similar index), then you'll probably be better off in the long term, perhaps able to buy outright in a little less time.