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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

#61

Post by msgodel »

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.

[flagged]

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

#62

Post by RijilV »

It feels really market by market. Where I live, the house I’ve been in is 50-75% mortgage cost vs rent on a comparable property. That mortgage is a bit over 10 years old, and has been below rent rates for nearly the whole time. Sure, I have upkeep, but I also get to make whatever modifications I want (and that’s a thing that’s appealing to me). And yes, I live in a major west coast city.

These broad numbers games feels like rationalizing a decision today. Maybe it’s true for a particular locale (I don’t live in the Bay Area), but these articles feel like they’re painting with too broad of a brush given I can’t maths out a negative for my situation.

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

#63

Post by sorcerer-mar »

msgodel wrote: post #61
sorcerer-mar wrote: post #39

Earlier quoted context omitted.

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.

[flagged]

What's especially negative about population growth from immigration as compared to domestic population growth, or simply productivity growth from technological advancement?

All of these increase the value of land. Why are you singling out immigration?

(I suspect I know what's special, but curious to hear your answer anyway)

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

#64

Post by nunez »

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.…

I bought recently. Mortgage lenders seem to be much more willing to work with people who can't make their mortgage than landlords are. Deferred plans, interest only payments, and more. In Texas, landlords can evict you within three days of missing a rent payment. THREE. DAYS! I got hit with this letter when auto pay screwed up. It's pretty scary.

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

#65

Post by ethbr1 »

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…

100%!

People underappreciate how valuable access to leverage can be in terms of boosting returns from a home. Putting 5% down, claiming the interest on taxes, and keeping 100% of the price appreciation is a solid deal.

Furthermore, since they're a hard asset, homes generally scale with inflation and thus serve as a hedge.

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

#66

Post by msgodel »

sorcerer-mar wrote: post #63
msgodel wrote: post #61

Earlier quoted context omitted.

[flagged]

What's especially negative about population growth from immigration as compared to domestic population growth, or simply productivity growth from technological advancement? All of these increase the value of land. Why are you singling out immigration? (I suspect I know what's special, but curious to hear your answer anyway)

Getting kicked out of your house being necessary to support it is one big issue. This never seemed to make sense when we had domestic population growth and if we can't fit people without taking drastic measures like that maybe we're just out of room.

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

#67

Post by weepinbell »

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…

I really like your point about rent growth. I quickly grabbed numbers from FRED on rent growth in the same period as analyzed in this blog:

https://fred.stlouisfed.org/graph/?g=1Kion

And then computed the annualized percentiles of growth over every 10 and 20 year period:

Percentiles 10 Year 20 Year

0.1 2.759994509 2.955813986

0.2 2.857204716 3.026836408

0.3 2.990680184 3.126358739

0.4 3.127881625 3.147020404

0.5 3.199826901 3.269223125

0.6 3.418119435 3.360219255

0.7 3.558537072 3.523213118

0.8 4.20459087 3.876319675

0.9 5.606452092 4.488515605

1 6.820735567 4.991026738

You're definitely right that they underestimate rent growth, at least if you're assuming that you should be making conservative estimates. Plugging some of these numbers in, I don't think this changes the overall conclusion of the post, but it does change the magnitude non-trivially so I think it's very worth considering. Thank you!

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

#68

Post by archagon »

sorcerer-mar wrote: post #58
readthenotes1 wrote: post #50

Earlier quoted context omitted.

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 b…

No I'm advocating for the prevention of feudalism where a permanent landed gentry can extract wealth in perpetuity through no contribution whatsoever than having a deed. I agree that property square feet is a bad metric. The right way to do this is actually to tax based on the unimproved value of the land, which would in fact create many many more multifamily dwellings by virtue of increasing the carrying cost of lan…

In my opinion, a person should not be forced to move just because of economic circumstances outside their control. Unless you're a spry 20-something with no real connections, moving will be incredibly disruptive and potentially traumatic.

One person's "landed gentry" is another's "housing stability."

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

#69

Post by archagon »

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…

If you're in a place with good tenant protections (rent control), then yes. And it's true that large swaths of the Bay Area fall in this category. But otherwise, the threat of arbitrary rent increases and/or eviction can be overwhelming if you're looking for long-term stability.

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

#70

Post by bravetraveler »

nunez wrote: post #64
bravetraveler wrote: post #30

Earlier quoted context omitted.

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.…

I bought recently. Mortgage lenders seem to be much more willing to work with people who can't make their mortgage than landlords are. Deferred plans, interest only payments, and more. In Texas, landlords can evict you within three days of missing a rent payment. THREE. DAYS! I got hit with this letter when auto pay screwed up. It's pretty scary.

I've found landlords both more auditable and flexible than jobs or even lenders, sadly. I'll buy something when I can afford it (in more than one sense, too). That frees me to pick a place not tied to financing or any particular location.

All roads lead to uncertainty, I'd rather travel it with a heavy purse. Good for smacking away problems or making trades on the way.

If it becomes less fashionable to force people to relocate, maybe I'd find it wise to invest. Until then autonomy is valuable. Days? Cute! Three hours is no problem with a could-be down payment in your pocket and no attachments.

With RTO/AI/Actually-Indians... it's an arms race for those of us who 'survive'. I'd rather buy when it dips or with less competition. Not directly contribute to building Company Town 3.0 while my peers and I try to outbid each other and suckle from the same teet.

Game theory is telling me either I'm getting laid off or someone else is, there may be advantage in waiting. Costs nothing but opportunity, funny: provides that too.

A couple more tropes to close: accounting tricks all the way down, money plays.

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