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It's A Terrible Time To Buy An Expensive House

patrick.net

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

#101

Post by sailfast »

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 changes quite quickly if the homeowner is living in a home worth less than their mortgage (underwater - can't move) or if they can no longer afford to pay their mortgage (have to move / declare bankruptcy). Having to shift to another rental property is a relatively small jump by comparison unless you have to shift school districts due to lack of inventory. How much risk would you take on to ensure your landlord can't kick you out?

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

#102

Post by adaml_623 »

300bps wrote: post #67
adaml_623 wrote: post #60

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.

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 have a valid point but affordability is the monthly payment as compared to their pay packet. At the moment rates are being held very low to try and help the economy. So if rates do rise that's probably (fingers crossed) because the economy has started improving.

So while the basic rule of not buying when rates are expected to go up is true it's possible that larger context may override that rule.

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

#105

Post by njharman »

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 you are an idiot and/or and/or make poor choices you will probably loose. No different than any other business, endeavor or purchase.

Property is so varied geographically, price bracket, types of property, condition of property, even seasonally, that blanket statements "Don't buy expensive house" lack any relevancy.

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

#107

Post by snowwrestler »

dan1234 wrote: post #22
envex wrote: post #9

Earlier quoted context omitted.

Plus renting is basically flushing your money away each money opposed to building equity in something over time.

You're flushing money every month with the interest on a mortgage + taxes + maintenance. You just have to hope that this is less than the amount you'd be paying in rent. (assuming property prices stay flat)

Property prices never stay flat because of inflation.

This matters because the payments on a fixed-rate mortgage do stay flat; they don't adjust with inflation.

I just refinanced to 4.5%. Long-run inflation is 3% so my actual cost to borrow is 1.5%. With the mortgage deduction it is just over 1.1%--nearly free money, in other words.

It's true that I pay property taxes. In my jurisdiction they are just over 1%, so now my actual cost to own is maybe about 2.2%.

Maintenance is a bit of a red herring...most straight maintenance is inexpensive (cleaning, painting) or optional (fancy landscaping).

Most expensive "maintenance" is actually improvements. For example last year I replaced both my A/C unit and furnace. It was a substantial cash outlay, but the new units are far more performant and efficient than the old ones. If I stay in the house another 5 years I will completely recoup that investment in lower monthly energy payments. And if I don't, the modern new appliances will allow me to set a higher asking price in a sale.

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

#108

Post by YokoZar »

corresation wrote: post #66

There are a perilous lack of actual facts backing this up (and some red flags disclaimers like "in expensive areas". What does that even mean from a statistical perspective). For instance I would instant call bullshit on the rent versus owning notion based on basic economics (when rents are less than the price of the mortgage, people don't rent out houses . The notion makes absolutely no sense). Even more indicting i…

People rent out otherwise empty houses regardless of what the mortgage rates are. Selling at a loss is a thing because it's less bad than not recovering anything -- renting below the mortgage price has a similar logic.

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

#109

Post by lsc »

mkr-hn wrote: post #80
lsc wrote: post #72

Earlier quoted context omitted.

>Anywhere Google takes its Fiber is a good bet. This... is not as true as you think it is, even here in Silicon valley. If I could get $50/month/resident out of any of the reasonable-sized condos around here, I could easily give everyone gigabit Ethernet. Problem is? even here in the heart of silicon valley, most people don't give a shit. Faster than wi-fi doesn't matter. Hell, even you and me... I talk about bandwid…

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 are gonna need like 50 neighbors to make the ongoing cost reasonable, so that's harder with single-family homes, but not impossible. Install costs are high, but not that high; generally $5-$15K one-time to trench from the street into a property and splice in, so if you can talk all your neighbors into blowing 10K+ each on the install, plus your $50 each ongoing, well, you could totally do it. The whole project is way more appealing than, say, moving your ass to Sacramento or Kansas or somewhere else you probably don't want to live.

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

#110

Post by kjackson2012 »

300bps wrote: post #67
adaml_623 wrote: post #60

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.

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.
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