Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Rental America: Why the poor pay $4,150 for a $1,500 sofa

washingtonpost.com

Post reply on HN
Print view View original

21–30 of 53 posts

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#21

Post by tdees40 »

bdamm wrote: post #4

Most will turn up their noses for buying a sofa this way, and yet most folks here will happily suffer just as shocking a cost in order to buy a house.

That statement assumes interest rates are irrelevant. Sure, if you have a 4% interest rate (the going rate these days), you'll pay 72% more than the value of your house, but that completely ignores the time value of money. A 4% interest rate is pretty great (especially when it's tax deductible!), and just saying that because the undiscounted cash flows that you spend are greater than the initial value of the house means very little.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#22

Post by bane »

SnowProblem wrote: post #11
arbuge wrote: post #9

Earlier quoted context omitted.

Which is particularly ironic when you consider that the cost of the house typically exceeds the cost of the furniture several times over.

Unlike a couch though, you need a place to live. Is it cheaper to continue renting until you can afford to buy outright? I thought the answer was no.

Correct

http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#23

Post by javajosh »

abbot2 wrote: post #10

A better question would be "why the poor buy a $1500 sofa"?

Agreed. Seriously, poor people should be dumpster diving or cruising garage sales for furniture, not buying new. This is just people being stupid with what little money they have, and they get little or no sympathy from me. This is true even though, in general, I support a much stronger safety net and tighter regulation on predatory financial practices like payday loans. The vital difference is between necessity and luxury, and by ignoring that distinction this article is a lovely straw-man argument for mercenary conservatives to latch on to.

Almost all loans that don't feed into some sort of income producing activity are bad loans.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#25

Post by Karunamon »

turar wrote: post #14

This may sound offensive, but is buying a $1500 sofa really a good decision if you're "poor"? I don't consider myself poor, and I bought a $500 sofa, it's pretty nice and has worked well for many years. I also have a lot of good used furniture that I've bought for almost nothing off Craigslist.

I don't understand how it's really "financially ignorant" to pay high interest rates for the benefit of deferring costs over time? If your credit isn't great, it takes a long damn time to repair. These rental outfits both help rebuild that credit and provide a valuable service, imo.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#26

Post by gibrown »

Off topic, but since there are a couple of "why would someone poor buy a $1500 sofa" I thought I would link to a really great article discussing this: http://talkingpointsmemo.com/cafe/why-do-poor-people-waste-m...

You can substitute sofa with iphone, designer clothes, BMW, etc.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#27

Post by kchoudhu »

jeffwass wrote: post #18
bdamm wrote: post #4

Most will turn up their noses for buying a sofa this way, and yet most folks here will happily suffer just as shocking a cost in order to buy a house.

A key difference is that the sofa is a wasting asset, with decreasing resale value over time. A house usually retains or has increasing resale value.

> A house usually retains or has increasing resale value

I'm not sure we should be so willing to trust this statement after 2008.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#28

Post by stakecounter »

bdamm wrote: post #4

Most will turn up their noses for buying a sofa this way, and yet most folks here will happily suffer just as shocking a cost in order to buy a house.

No. Nobody on here would take a loan on a house with "effective annual interest rates of more than 100 percent" as mentioned in the article. It's true that people spend much more on a house than if they bought it outright, but they do so at interest rates low enough to where it makes financial sense because the expected return from investing the rest in a low cost index fund beats out the loan interest.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#29

Post by abbot2 »

FLUX-YOU wrote: post #24
abbot2 wrote: post #10

A better question would be "why the poor buy a $1500 sofa"?

>Normal families have sofas, she says, and you’ll do what it takes to feel normal.

Seriously? I don't consider myself poor by any standard, but I'll also think 5 times before buying a 1500 sofa. It's just stupidly expensive.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#30

Post by scottkduncan »

aliston wrote: post #8

While this particular example applies largely to the poor, you could write a similar article about the vast majority of Americans. How about "Why engineers in the Bay Area pay 1 million for a 600k condo" or "Why smart people pay 400k for a 150k education." Fundamentally, the high price of the couch is really a reflection of the risk made in the "loan." Americans are too leveraged and don't save enough across the boar…

The difference between the two examples you cited and the one from the article is that both condos and education are investments that are likely to have a positive ROI, whereas renting a couch and taking on debt for other day-to-day necessities will not.
Post reply on HN