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Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

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Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#41

Post by DontchaKnowit »

Velorivox wrote: post #33
Atreiden wrote: post #17

I'd point out that the data for homes is averaged nationally. Historically, there have been Good Places and Bad Places to buy a home. Home price growth in in-demand coastal areas is very different than in rural areas. In the US, "Flyover states" I'm sure skew this number heavily. Part of this is captured by the Volatility Index mentioned > Individual houses are 4x the volatility of a housing index, close to the same…

> If you pick a good location, buying a home is a fantastic purchase. It ties up that investment money in an asset that you can actually USE. Also: It's a leveraged investment for most people (mortgage). If you put in 20% and your house tripled in value over the last ten years (which is what happened in SF & Seattle afaict), you make an annualized return of 27% (for a whopping 1070% total, i.e. more than 10x), after…

I mean you can make any investment look great if you just make up the return.

What percentage of houses triples in value over 10 years? And home much are you spending in maintaining, insuring, and paying taxes in 10 years?

I think your point still stands but its not nearly as fabulous an investment as you are suggesting

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#42

Post by [deleted] »

DontchaKnowit wrote: post #41
Velorivox wrote: post #33

Earlier quoted context omitted.

> If you pick a good location, buying a home is a fantastic purchase. It ties up that investment money in an asset that you can actually USE. Also: It's a leveraged investment for most people (mortgage). If you put in 20% and your house tripled in value over the last ten years (which is what happened in SF & Seattle afaict), you make an annualized return of 27% (for a whopping 1070% total, i.e. more than 10x), after…

I mean you can make any investment look great if you just make up the return. What percentage of houses triples in value over 10 years? And home much are you spending in maintaining, insuring, and paying taxes in 10 years? I think your point still stands but its not nearly as fabulous an investment as you are suggesting

[deleted]

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#43

Post by dekhn »

stopping wrote: post #32

I've done the math on this many times, and it still puzzles me how anybody would choose to buy a house in the Bay Area today versus renting an equivalent one. When mortgages are over 2x rent, the calculation skews tremendously in favor of renting and investing the difference in an index fund. This considers all possible factors and even chooses favorable conditions for homeowners (high appreciation, low stock market…

This is my conclusion (and the path I've taken - basically max our index and retirement accounts).

I've explained this to people and been told I'm stupid and irrational. Another thing I saw was families moving from the. midwest to the bay area (to work for FAANG) and getting tons of pressure from their back-home families to buy a house, and then spend a miserable decade living in a Sunnyvale housing complex.

Our plan is to wait for kids to leave home, retire somewhat early and buy a modest house in an area with lower costs and a political climate I can tolerate.

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#44

Post by msgodel »

bravetraveler wrote: post #30
Atreiden wrote: post #17

I'd point out that the data for homes is averaged nationally. Historically, there have been Good Places and Bad Places to buy a home. Home price growth in in-demand coastal areas is very different than in rural areas. In the US, "Flyover states" I'm sure skew this number heavily. Part of this is captured by the Volatility Index mentioned > Individual houses are 4x the volatility of a housing index, close to the same…

I'd point out that while an asset, yes, it is a liability. Not in the typical financial sense, either! I'm hesitant on buying because I have next to no certainty in my role. If I be a good little Business Man and make someone else filthy rich, have all the make-up beers, and show up on time: at-will employment is still a thing. I may still be forced out by circumstance. Equity might make the hit softer, I don't know.…

The ugly thing is that you're most likely to get laid off when the market is down. I've argued this with people so many times and I think some of them are finally starting to see what I was saying.

btw I don't think getting rid of at will employment will change that. These cycles are so long they'll certainly find a way to get rid of you during a down cycle if they want to.

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#45

Post by dlcarrier »

They both also default to much lower increases in rent than the US average, so it's off on both ends of the equation. Over the last few decades, inflation-adjusted rent has increased by several percent per year: https://nowbam.com/rent-prices-vs-inflation-and-income-growt....

The calculators are useless if the data going into them is useless, but even if it perfectly reflected past national averages, that doesn't make it a great predictor of future local results. If you're buying a bunch of properties spread throughout the country and over time, it could be useful, but for individual choices it's probably not. Here's a great read on the uselessness of comparing a bunch of averages to individuals: https://www.goodreads.com/book/show/24186666-the-end-of-aver...

From a broad perspective, most investors don't rent property out at a loss, so in general it's going to be more expensive to rent, unless you own a property for a short enough amount of time that closing costs play a significant role. Even then, occupancy rates aren't 100%, so average rent needs to make up for that. On the other hand, the margins aren't super wide, so rent is still in the general ballpark of the price of ownership.

In the end, if you want to rent then rent, and if you want to own than own. The pricing difference isn't enough to make an uncomfortable living situation worthwhile. Do you prefer the control and long-term stability of owning your property over the effort it takes to manage it yourself? Then buy! Do you prefer the freedom of moving often and the convenience of someone else managing and maintaining your property over the ability to live somewhere indefinitely or chose how your residence is remodeled? Then rent!

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#46

Post by bryanlarsen »

dlcarrier wrote: post #45

They both also default to much lower increases in rent than the US average, so it's off on both ends of the equation. Over the last few decades, inflation-adjusted rent has increased by several percent per year: https://nowbam.com/rent-prices-vs-inflation-and-income-growt... . The calculators are useless if the data going into them is useless, but even if it perfectly reflected past national averages, that doesn't ma…

> most investors don't rent property out at a loss

I was under the impression that this was actually fairly common in places with rapid house price appreciation. Which includes a good portion of the places where people want to rent. The main source of profit for the landlord is the capital appreciation rather than the rent, so they're willing to rent at levels that wouldn't be profitable if they weren't also planning on profiting from the rising prices.

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#47

Post by Velorivox »

DontchaKnowit wrote: post #41
Velorivox wrote: post #33

Earlier quoted context omitted.

> If you pick a good location, buying a home is a fantastic purchase. It ties up that investment money in an asset that you can actually USE. Also: It's a leveraged investment for most people (mortgage). If you put in 20% and your house tripled in value over the last ten years (which is what happened in SF & Seattle afaict), you make an annualized return of 27% (for a whopping 1070% total, i.e. more than 10x), after…

I mean you can make any investment look great if you just make up the return. What percentage of houses triples in value over 10 years? And home much are you spending in maintaining, insuring, and paying taxes in 10 years? I think your point still stands but its not nearly as fabulous an investment as you are suggesting

> I think your point still stands

Thanks.

> its not nearly as fabulous an investment as you are suggesting

In case it wasn't clear, I'm not trying to give investment advice (my comment is very focused on what happened, not what will happen). I am however, implying that a lot of people made bad financial decisions by misapprehending their situation and consuming the wrong "content". I believe many people can be spared significant regret if they double-check, disbelieve, or replace much of what they’re told by the internet.

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#48

Post by jrs235 »

DontchaKnowit wrote: post #41
Velorivox wrote: post #33

Earlier quoted context omitted.

> If you pick a good location, buying a home is a fantastic purchase. It ties up that investment money in an asset that you can actually USE. Also: It's a leveraged investment for most people (mortgage). If you put in 20% and your house tripled in value over the last ten years (which is what happened in SF & Seattle afaict), you make an annualized return of 27% (for a whopping 1070% total, i.e. more than 10x), after…

I mean you can make any investment look great if you just make up the return. What percentage of houses triples in value over 10 years? And home much are you spending in maintaining, insuring, and paying taxes in 10 years? I think your point still stands but its not nearly as fabulous an investment as you are suggesting

The home value didn't triple. Their equity did. Put $60,000 down on a $300,000 home. Live in it three years. Sell it for $540,000. Just made $240,000 in three years by investing $60,000. Granted there's also costs associated with carrying the home and mortgage one needs to count against the full profit and return.

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#49

Post by poisonborz »

adiabatichottub wrote: post #14

Okay, somebody help me out here. Maybe I'm missing something, but the basic equation is that you as tenant are paying the landlords costs plus their profit. How can renting ever be cheaper than buying?

Eg. when you live in a premium apartment. For even moderately nice houses 20 years of rent would pay a third of the home's value at the start of the renting period. And rent will never increase as much as the property value, no taxes and maintenance. It's much cheaper AND simpler, especially if you are unsure how long you stay.

Re: Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

#50

Post by readthenotes1 »

sorcerer-mar wrote: post #39
readthenotes1 wrote: post #22

Earlier quoted context omitted.

"You'll never get forced out because your landlord wants to sell." Where I live, the highest source of inflation for me has been property taxes. It's almost as if my landlord wants me to sell.

Hot take: that’s actually desirable. Sell and let someone who can make better use of it (i.e. more readily stomach the property tax) take possession. Calcified landed gentry just sitting on dirt that appreciates due to the efforts and investments of everyone around them is Bad, Actually.

Not for those of us who like our home and have made a life here.

What you're advocating for is treating potential club members better than current club members. It doesn't make that much sense.

If you really were advocating for sensible policies, you would be advocating for many many more multifamily dwellings and/or taxes being directly proportional to the cost of the infrastructure needed to support it--generally by linear feet of roadway taken instead of property square feet.

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