May 08, 2007

HousingPANIC Stupid Question of the Day - Rent vs. Own

Do you rent or own?

If you rent, do you plan on buying in the future? And
what percent do you figure you save in total monthly costs versus the cost of buying your place today?

If you own (outright or rent money from a bank), do you regret not selling last year (when you still could) now that your home's value is dropping every day? And are you tempted to try to sell now?

100 comments:

Joey said...

I own. I bought my place in 1999 before the bubble so if/when prices revert to the mean, my gains will be in line with normal annual gains from 99 to present. That is fine with me as I don't see my place as an investment. For investment purposes my money is not and has never been in real estate

Anonymous said...

I currently rent a home. I plan on buying next year when I think the worst will be over. I might make my landlord an offer since I love the home and dread the though of moving again.

I onwed up until last month. The reason I sold was relocation. I didn't have much trouble selling and after all fees, taxes etc, my net gain was close to $200K on the sale of my home after buying in 2003. I simply do not see much evidence of this doom and gloom HP constantly talks about. Not saying it's not there, just that personally I have not seen it.

Mort said...

So then by your thinking all people either rent, or rent money from the bank? You live in a small world keefie.

Anonymous said...

Mort said...
So then by your thinking all people either rent, or rent money from the bank? You live in a small world keefie.


Three options:

1. Rent

2. Rent from bank

3. Buy home with cash, give up interest earned from bank.

Mort you need to put the pipe down and come back to the real world.

Book It! said...

HERE IT IS! HERE'S WHERE THE LEVERAGE VEHICLE HAS COME FROM WHICH HAS FUELED ASSET PRICE RISES IN EVERYTHING FROM HOUSES TO STOCKS, ETC. Courtesy of Itulip.com, Warren Buffett says:

“The introduction of derivatives just made any regulation of leverage a joke. It’s an anachronism,” he said. Because of them, “there will be some very unpleasant things that happen” in the financial markets. “We may not know exactly where the danger begins and at what point it becomes a super danger.”

Mort said...

anon, why do you trouble me so? Are you mentally challenged? A good percentage of people own their house outright in the USA. Perhaps you are from Russia?

cobra2411 said...

I bought in '01 before the bubble took off. I didn't take the equity so it can go back to 01 prices and I don't care (actually it can go lower because I bought at about 80 cents on the dollar...)

I can't rent a place this nice for less so I'm glad I own and don't have any intentions of selling.

Not everyone is a desperate home debtor...

You and many of the people here have a very pesimistic view of home ownership. You mention renting money from the bank? I pay my mortgage for 30 years and I get a house. You pay rent for 30 years and you're landlord gets a house...

Markus Arelius said...

Rent.

But it's a single family home, so I get to play "homedebtor-pretend" for the next 12months. At least until some smartass asks me the question: "did you buy this house".
They all do that here in OC, California, as if it's any of their business. It's their way of measuring you up and down as to just how rich (or poor) you are in their eyes. I've learned not to take it so seriously anymore.

I did NOT get a rent increase this year. So we are able to save for a down payment on a house and are making good progress doing so. But IMO, you have to make dent in any 30 yr. mortgage when you start off, i.e. make a substantial down payment. Have no intention of buying until middle of next year for the following reasons: 1.) prices here are still too high and can't afford it, 2.) Have children, need bedrooms. Bedrooms are expensive as hell. (So are children, come to think of it!) 3.) I worked to hard for these savings and don't want to see part of it eaten by a realtor before further market value drops in 2008 and maybe 2009 (?).

Anonymous said...

I figure the best shot I have at NOT being at the mercy of someone else is by keeping my small affordable home.

I figure my best shot at maintaining liquidity is NOT paying off the mortage early and investing my money elsewhere.

Balance....

Anon - you think the worst will be over by next year???, I wonder of it two years, if not longer...I think next year we'll still be playing buyer-seller standoff, albeit at a little lower level..

Bitterdebtfreehomeowner said...

I own free and clear. House and 11.5 acres in flyover country: $37,000 a couple years ago. No debts, big garden, lots of ammo, etc.

Funkytown said...

I rent a great place for 11% of my take home pay. Why on Earth would I want to buy? The interest from my CDs alone pays the rent. Buying the same place that I currently rent would cost 35% of my take home pay.

Buying in southern California is throwing your money away. Buying is for suckers.

Anonymous said...

YAWN!

Anonymous said...

I own my home outright. I have no mortgage.

I do pay property taxes. But that is cheaper than renting.

I'm pretty handy, and do my own home repairs. Remodeling is much more cost effective when you are only paying for supplies.

Happy in Glendale AZ

Anonymous said...

I rent an apartment in Silicon Valley and have no intention of buying unless/until buying a home( with 20% down and a 30 year non-exotic mortgage) becomes less expensive than renting. I make just north of $100k/yr working in IT and my housing costs are currently ~$700/month cause I share expenses with my girlfriend. I'm trying to save as much money as possible just in case things get really ugly. Worse comes to worse I can always move back to Canada though if it gets too bad down here. Alternatively, maybe things don't go so bad in the US, I don't need to tap my savings prematurely and I end up sitting on a pot of money that I can use for retirement.

Anonymous said...

I make 120K and rent a TH here in DC/Nova- I cannot afford to even buy a modest ranch/rambler home at these prices- 600-700K for a ranch?. Oh, I forgot, one was "inspired by Frank Lloyd Wright." A ranch inspired by Frank Lloyd Wright-WTF!?

The people are f*cking crazy and they all think it's normal.

As it stands, it is also extraordinarily expensive to rent, which makes it difficult to save a down payment for a house. I am currently paying 2,500/month for a townhouse, which apparently is "worth" between 550-650K. The thing is a POS with crappy insulation, windows, wavy walls and absolutely no yard.

So, yeah, I guess I am saving money by renting the place for 2,500/month as opposed to paying 3,500-4000/month to buy and hoping it doesn't drop in value, but am I really saving anything at these prices?

Yeah, I could probably find a place for less, but I need some room and everything that is less is next to illegals and other undesirables.

So, I look forward to any crash- if not, I am out as this just ain't worth it.

prof.c said...

Renting since the sale of my house in June '05. Since then, same model asking price is down 20%, and that is the asking price. Not planning to buy until the widespread pain is realized from the resets and foreclosures. Maybe five more years. But since the Mayan calendar shows doomsday at the Winter solstice of 2012, I'm thinking the best opportunity to find cheap land will be 2013.

Anonymous said...

We have been renting for now almost 2 years (DC market was crazy expensive), now we have outgrown our place and IT"S BEEN A BIG DEBATE ON whether to buy now or continue to rent...it looks like we'll rent unitl 08/08 and buy then....i hope that's the right decision...i wonder how much more prices will drop.

Flagg707 said...

Rent. Will own again some day, but rent is so freaking cheap and the insurance is so much less, plus no property taxes (outside of the car) that greed is taking over. I've owned homes in the past and frankly, it was a pain in the butt.

Will buy once, in my analysis, property prices have regressed to where when I count taxes, insurance, upkeep and mortgage that the place will not be a net loss. That's a ways from here.

Plus, spending this time building a solid cash pad seems to be a much more worthwhile financial opportunity.

The fun thing is, this is a money-or-your-mouth thing. Those of us sitting out the homeowner thing at the moment will either pay the price or reap the benefits and we take that responsibility gladly.

Anonymous said...

"I make 120K and rent a TH here in DC/Nova- I cannot afford to even buy a modest ranch/rambler home at these prices- 600-700K for a ranch?."

Because you really don't make 120k, you loser. I get so sick of how people on the internet lie about their income.

g said...

I live in San Diego and I rent. I will not consider buying until buy/rent ratios start to normalize. I may not wait until they regress to historical means simply because I believe certain parts of SD will remain more desireable and no matter how bad the housing crash becomes; they will retain that label of "investment" because even if there are not enough rich Americans to buy property in La Jolla there sure as hell will be plenty of rich Asians coming to buy there in a few years. I am thinking sometime in 2008...

Anonymous said...

>>>A ranch inspired by Frank Lloyd Wright-WTF!?


As a matter of fact, the ranch-style house in a suburban setting was inspired by Frank Lloyd Wright.

Here's just one of many examples:

http://www.i1.net/~dwolfe/wright/

Anonymous said...

Mort said...
anon, why do you trouble me so? Are you mentally challenged? A good percentage of people own their house outright in the USA. Perhaps you are from Russia?


No kidding. And all those people are losing out on interest they could be making by selling their home and putting the money in the bank/investing.

Are you from retardville?

Anonymous said...

At least until some smartass asks me the question: "did you buy this house".
They all do that here in OC, California, as if it's any of their business. It's their way of measuring you up and down as to just how rich (or poor) you are in their eyes. I've learned not to take it so seriously anymore.


ha ha that is so true. On Sunday I was walking the dog in my 'hood. Stopped by to talk to a distant neighbor I hadn't met. Got to chatting, she asked me when I moved in yadda yadda. And of course she went on and on about what a great investment I made. She assumed I bought of course. When I told her, not I'm renting it's as if I just told her I enjoy molesting kids for fun judging by the look on her face. Then I told her that my landlord bought the house for $400K and that the owner was originally asking $498K and I think that the house will be worth $350K in a year at which point I plan on buying the neighborhood. Then the look on her face changed again but more to a "holy shit" kind of expression. I said good day and went about the business of walking the dog.

keith said...

If you own your home outright - no mortgage and no debt - then you're a relative winner in this game.

However, even in this great situation, no mortgage, your net worth is plummeting because you didn't sell at the peak. If you had you could have rented for free and increased your net worth every day by putting the proceeds into a 5.5% CD

But if you didn't, I still congratulate you. The bank doesn't own your house. You do. And a home should be a place to live, pure and simple. Not a lottery ticket and not timed like stock trades.

Anonymous said...

We rent. Buying right now is assinine anywhere except perhaps few Midwest markets.

The place we rent is in a million dollar neighborhood. To buy here would consume nearly all our income, yet here we live for comparatively nothing.

We will buy someday when the 120 rule applies to house "values" again. Until then, we make more money and have more savings by renting and investing our residual income.

Mort said...

No kidding. And all those people are losing out on interest they could be making by selling their home and putting the money in the bank/investing.

Are you from retardville?


You are the one from Retardville, buddy. Are you the same anonypuss that hassles me from time to time? What is your problem, bub?

A person mortgages their house at 6% so they can get 5% at the bank? Brilliant! And Keith, house prices rise and fall, you must protect yourself from dollar devaluations as well as deflations. You must hedge all bets, it could go either way. If you buy low and stay put property taxes stay low. Flipping houses is a sure ticket to property tax hell. Houses rise and fall, you should be diversified.

Mort said...

Oh, and for the record, since we're talking about it, I do have a small mortgage. There are no tax benefits whatsoever. I am neither hot nor cold about paying it off right now. A certain amount of debt is a small hedge against inflation.

Anonymous said...

Currently, I rent in the US after selling at peak in 2005. However, I own some diversified properties overseas. I will continue to invest overseas because the real estate market and the economy in the US are a huge lie.

For the guy who said that he sold his property at a profit of $200k last month: Sure troll, we believe you.

borkafatty said...

I own for $1345 a month PI/TI Have a nice day.

Anonymous said...

"A good percentage of people own their house outright in the USA."

With all the HELOCS wich the "owners" have taken on their properties, no they don't own their homes.

Most foreclosures are from people who borrowed against their equity, to buy crap from China or lease crapppy cars from Ford and GM. Cherry picking the news as usual, Mort?

Anonymous said...

"I pay my mortgage for 30 years and I get a house. You pay rent for 30 years and you're landlord gets a house..."

Let it go, another "genius" who doesn't have a clue of what a CAP RATE means. Keep on spinning that wheel, hamster.

Anonymous said...

We rent.
I sold in 05/05 and had owned for 8 yrs.
The cash is in CD's waiting for the right time to buy again. I won't even start looking until end of 08 maybe even 09.
We rent a NEW (built in 04 and was for sale for 2 yrs) 2100 sq.ft. single story for only $1400 in Nor Cal (sacto area)

My biggest delima at this point is what area do i want to buy in to raise my two small children. They are not even in school yet but, I would like to settle in a location by the next two years.

I am not sure how anyone could NOT see this coming but, they are out there. My own Best Friend (RE agent) didn't even see it and Forclosed on thier dream home. She even sold my home.

Anonymous said...

Anon, May 08, 2007 4:32 PM

Your a douche. Maybe you would like to see my W-2 or better yet, pay my f*cking 30K tax bill.

Go eat a bag of dicks.

Anonymous said...

"As a matter of fact, the ranch-style house in a suburban setting was inspired by Frank Lloyd Wright."

Not the one I saw my friend...

westwest888 said...

"Because you really don't make 120k, you loser. I get so sick of how people on the internet lie about their income."

That's right anon troll, no one with Internet access can possibly make 120k. Especially someone who lives in Washington, DC, the area leading the country with the most advanced degrees per capita. http://tinyurl.com/2b5jtq

How on Earth would someone with a masters of science, an MBA or a JD make 120k? Maybe they'd go to one of the best colleges in the country and work in the nation's capital.

And you're pissed because that seems like an awful lot of money. Well, after you save some for retirement and pay taxes you get about 60% of that if you're lucky. That's $6000 a month take home and you what are we going to do? Spend 50% of it on a $400,000 mortgage?

Think before you post. Even people who make $120,000 need HP.

Pop said...

"Because you really don't make 120k, you loser. I get so sick of how people on the internet lie about their income."

If 120K is considered bragging to you, then I feel for you. I would tell you what I make, but I really don't want to upset you.

I bought in SoCal in 2001, my payment is now about 1/2 what it would cost to rent a comparable place, and I will have it paid off in about 7 more years. I could have treated my house as an investment and sold last year (or even now, inventory is very low in my area and pretty much everything is still selling), but I have actual investments to fund my retirement. And anyone with half a brain has to admit, no one knows what will happen. Hyperinflation, deflation, stagflation- as the other poster said, my house is shelter and stability for my family, and I won't speculate with that. Having said all that, I expect prices to drop back to early 2000s levels.

Anonymous said...

There is no f-ing way I regret 'renting money form the bank' ;-)
Especially since I bought pre-bubble, zero down, 100% financing on a 30 year fixed rate 5.375!!!! My mortgage is approx. 1400 (WITH TAXES). The same house would rent for 2200. ANd to boot it's a newer home in Southern California. My wife is happy, my kids have a nice big yard to run around in, swimming pool, jacuzzi, perfect pad for entertaining. Best part is my wallet is happy!!!!!!!!

Anonymous said...

Seriously how many people do you all know that can buy a house CASH? Most people I know rent money fron the bank. Even if prices plummet 50%, the house that most people would settle for would wipe out their life savings if they paid cash.

Anonymous said...

I own, but I bought in socal in 2000 with 27% down, refid into a 5.25% fixed 30 year, taking out nothing.

I have enough liquid assets to pay off mortgage in total---three or four times.

I didn't want to sell because it would require moving and there isn't anything to rent longer term where I want to live.

Area 51 said...

In support of Anonymous 3:07:

Mort must not be able to read beyond the number 2.

Because in option 3. Anon laid out the full ownership option and is correct in highlighting the loss in interest which could be gotten from other investments.

Sorry Mort, you *really* do need to put down that crack pipe.....

Here's more to 3. "Full ownership:"
Loss of interest. (currently beating inflation)
Loss of buying power due to inflation. (Hopefully nominal price keeps pace! Dropping in many places!)
Losses due to maintenance costs. (necessary just to tread water!)
Losses due to property taxes. (undoubtedly higher for owner vs. portion paid by renter)

This has all been mentioned a thousand times before....

Bubblewatcher said...

We own. We bought in 1999 before this bubble took off and our total cost of ownership is less than what it would be to rent our place, so what would be the point of renting? We used the "Greenspan opportunity" to shorten the term and rate on our mortgage so that in about 10 years it'll be paid off.

Between now and then, depending on just how far down this market craters, maybe we'll upsize and rent out our current condo.

Anonymous said...

I own a 2 unit, bought in 2000 at a foreclosure resale in a very nice neighborhood. (previous owners got divorced and neither of them would pay the mortgage) The upstairs tenant, at a very reasonable rent, pays all but 100.00 of the mortgage and taxes.

I live pretty much for free. No Regrets. Have thought about selling,but at a 30 year fixed rate of 5.75, I won't sell unless I move out of town.

Prices in Buffalo have remained pretty stable and I have a huge equity cushion.

No regrets at all....

Anonymous said...

Rental should be no more that 5% of the price of the home, likely even less in these bubble days. To buy what I want costs 3.5k/month in PITI Sale price ~500k). After tax breaks its about 2.5k add in carrying costs of about 500/month and its 3k. Rent for the same unit in the same locale is current around 2k. Tha additional partial carrying costs are about 250/month. So the delta is about 750/month. Rents are dropping as units that are not selling are being converted into rentals. Condo projects are converting to apartments further putting downward pressure on rents. More people are opting to rent than buy so thats likely proping up rents. So it appears rents will at least stay flat. So I will rent & wait for the ideal home to come around and I'll save the delta to improve the downpayment while drops in price lowers the carrying costs. Once the math says buy is the better choice then I will buy.

Anonymous said...

"I pay my mortgage for 30 years and I get a house."

Yeah? But 30 years from now your house will be worth LESS than it is now, but your carry cost will be THROUGH the roof. (think carry cost, wear and tear, TAXES)
HAR HAR HAR

I dont think you get it because your head is way up your momma's ass.

Anonymous said...

Renting saves money, to be sure.

But so does riding the bus, but many of us own cars. Cars are money pits. Most of us think nothing about spending vast amounts of money on car payments that include lots of interest, gasoline, maintenance, repairs, insurance, yearly registration and emission test fees...

Renting is dandy for a single people who can easily pick up and move. For families, having to move because a landlord decided to put his house on the market is no fun -- I've been there. I draw some satisfaction from the fact that the guy cannot sell his money pit. Actually, I didn't HAVE to move, but I wasn't willing to tolerate the inconvenience of being intruded upon at any time...something I was not used to as a long-time homeowner in the past.

If you can easily afford the payment on a conventional loan and you have no plans to move, why not buy a home? Naturally, you will want to select the best builder/location/deal that you can.

The way inflation is going, $350k homes might be worth a million bucks in 20 years, who really knows? Then again, they might be worth less than what you bought it for.

So what? Gotta live somewhere. Yeah, the bank really owns it, I know that. Yeah, it can fall in value...so can anything you buy.

I just know I enjoy having a roof over my head that I know I can keep as long as I can make my payment. Feels pretty damn good.

I could rent a bigger house for what I'm paying, sure. I could rent the same size house for considerably less, yeah, got it. I could probably buy the house I bought for less in a couple of years, ok ok. But in a couple of years, so many people who thought they were gonna be rich from flipping houses will be so freaking poor, I will seem wealthy from their point of view.

Anonymous said...

"I do pay property taxes. But that is cheaper than renting.
"

Obviously you DONT live in Orange Co Commiefornia.

My coworker's property taxes ARE HIGHER than my rent. hahaahhhaha

So, even if their box is paid off, they STILL pay more (HOA fees, MelloRoos, carry cost...etc) than I do for my rent! Geessh, stupid people in OC will NEVER get it.

Anonymous said...

"Because you really don't make 120k, you loser. I get so sick of how people on the internet lie about their income."

I am not sure who that was who said they make 120K, but I have no reason to doubt them.

Because you can't fathom making 6 figures yourself; that makes you the loser.

I will not say what I make, but I am a Regional Director for an international Conglomerate connected to Energy production including Oil and Gas gathering and nuclear power generation.

120K pay scale is mid management.

Pull your head out of your ass.


Happy in Glendale AZ.

Anonymous said...

Own. Sold in bubbly NoVa in April of 2005, bought in much cheaper Burlington VT with the proceeds in November of 2006. Total ongoing costs of my home - PT, utils, etc. - are less than $500/mo.

The Thinker said...

I am currently renting a house for less than 1/5th of the price of owning that same house. I am putting the other 4/5th into the bank.

Why would I buy if I can rent for a fraction of the cost? The Thinker does not THROUGH MONEY AWAY you know!

Anonymous said...

Rent. Will buy from a starving baby boomer in at least 5 years from now. Tons of them will sell their homes and buy tiny ones (as the average baby boomer has what I saved the last 2 years for retirement).

Enjoy the freedom that renting gives me while I'm young.

Mammoth said...

The Mammoth owns (~35% paid off, anyway) a house on a beautiful 2½ acre piece of land complete with 2 ponds, a stream running through, some tall firs and some open space. The mortgage payment is $1750/month, which is about $300 more than it would rent for.

Is this extra $300 per month ($3,600/year or ~$36,000 total still left to pay) worth it? Let’s see…on one hand I don’t have to deal with a landlord or worry about the property being sold and being forced to move. I can do whatever I like to the house & land – plant fruit trees, build a greenhouse and put in a garden without having to ask for permission. There is also the very secure feeling that in ten more years the monthly payment will drop by $1,200 once the mortgage is paid off.

Now, if I was renting, perhaps I would save $36,000 over the next 10 years. That’s enough to buy a decent new car today – no thanks, its better to just drive my already paid-off used car and put this money into home ownership with no regrets.

-Mammoth

Mammoth said...

Clarification on my post above:

***Is this extra $300 per month ($3,600/year or ~$36,000 total EXTRA still left to pay)***

-Mammoth

Mike F said...

We own.... Most of our house (that is, we paid for most of it with cash and have a comparatively small mortgage, costing us less than half of what rent would be in the area).

The question of whether to buy or rent is complicated, and in our case was influenced by the desire to be "in the zone" for a specific suburban public school with a record of excellent academic achievement. Rentals in this suburb are very hard to find as a result. We plan to be here for at least the next ten years, and do not view this house as an investment except that it
a) is a valuable asset enabling us to borrow funds to invest in various non RE areas more cheaply (My funds are up an average of 30% in the last twelve months!)
b) will likely be sold far into the future when we retire.

I question Keith's comments, however. These two statements:

"you didn't sell at the peak. If you had you could have rented for free and increased your net worth every day by putting the proceeds into a 5.5% CD"

"I still congratulate you.... a home should be a place to live, pure and simple. Not a lottery ticket and not timed like stock trades."

seem contradictory to me. Which one is it?

Mike F

Anonymous said...

As a recent college graduate, i do what all college grads do for the summer - move in with the parents. I start medical school in August, so i will be back to renting a rathole next to my school.

I look forward some day to owning a house, but now is definately not the time to take on more debt (my medical school education is going to cost at least 160,000 dollars).

Bob Reno said...

You and many of the people here have a very pesimistic view of home ownership. You mention renting money from the bank? I pay my mortgage for 30 years and I get a house. You pay rent for 30 years and you're landlord gets a house...

Why do homedebtors always assume everyone is like them and will live in the same house for 30 years? Do you have any idea what a small percentage of Americans do that any more?
The more accurate comparison is I pay rent for 30 years and my landlord gets a house, but I can walk away from the train wreck at almost any time, take a better job in another town or retire to the beach. You get to pay a 6% realtor fee plus closing costs every few years, raising liability insurance and at the end of the 30 years you still have 20 years left on your mortgage from your last refi.

FlyingMonkeyWarrior said...

I own. Bought at peak because of house fire.
It is not an investment. I bought the least expensive home I could get in the most expensive zip and the got a 30% off of appraised value. My home is never for sale and my private corporations are my investments. Then looking to invest off shore with "inflation/recession proof" deals. Have gone into business in Europe, South and Central America recently.
I am waiting for the Hatteras Yachts to go into the secondary market after the crash. Tiny home (can't lose that much $) big ship for a song. Maybe a Harley Custom Trike, repo from a fliptard will be fun, too.

Anonymous said...

I rent. In the Fall I will get pre-approved and start serious low-balling. If no bites, wait untill next fall. It's not getting any better any time soon.

I live in "flyover country" where home prices haven't reached crazy levels but foreclosures are still way up from the big out state banks making crazy loans. I think more people will be moving to flyover country where you don't have to be rich (or lie on a loan application) to buy a decent home.

g said...

Countrywide up 7% on takeover rumors - wow. If that happens (along with the various subprime lender private equity takeovers of recent weeks) I'm officially taking the view of "there is a MASSIVE coverup going on".

Or no, am I being silly, could it somehow be a good investment to take on a huge steaming pile of terrible loans and a huge loan origination business right at the beginning of a housing bust cycle that is following the biggest housing boom in history?

Throw in the fact that consumer credit leapt up by a number 3 times higher than most prognosticated as consumers charge up the cards while desparately trying to hang onto their plummeting-in-value McShack and things are starting to become distinctly malodorous.

Actually, no. This is bad. Really bad.

Anonymous said...

New Century sold, the backing and guarantees? of owner repayment on house loans, and houses?? for 34 cents on the dollar, does this imply value?

soldnowrenting said...

Rent.

Bought in June 2003. Sold in Sept 2006. Pocketed $150K+. Split between a HSBC account and Emigrant Direct at 5+%. Saw this debacle coming from a mile away - even before I started to read these blogs. Suprised more people didn't - it's kinda common sense. I laughed when someone bought my 1200 sft 2bd/2ba condo for $465K in SCA (OC).

If I make over $100K, and can't afford a house that's $100K less than the median in OC($600K+), it doesn't take a rocket scientist to figure fundamentals are waaay out of wack.

Now renting 2700 sq ft. McMansion w/ pool, 8000 sqft yard for $2500/month including pool and yard service. Same house would cost me $900K!

My only concern is how long it is going to be until I can safely buy in again!! I fear it may be 2010+ with how sticky thing are being. Luckily my wife is on-board 100%, and my daughter loves her huge yard.

Good luck to all.

Anonymous said...

It IS a very silly assumption to think someone is a liar because they say they make over $100k a year.

I've seen that again and again on this blog -- must be a relatively uneducated and non-entrepreneurial crowd to think $100k per year is a lot.

keith said...

I've gotta agree, $100k is the new $20k.

Say you make $100k, after taxes and 401k your take home is $50,000

A glass of wine at the pub here is $10, so that's 5,000 glasses of wine. 365 days a year that's 14 glasses of wine a day, or one an hour for your waking hours

If you were a total alcoholic, you'd be homeless in London on $100,000 a year

Anonymous said...

"Why do homedebtors always assume everyone is like them and will live in the same house for 30 years? Do you have any idea what a small percentage of Americans do that any more?"

I bought 18 properties in Phoenix starting in 1984 through 2000.

I had every one of them rented out with short gaps in between renters.
I could tell you horror stories about bad renters, home invasion, and drug dealing; even a murder.

But all in all, I carried positive cash flow on every property. Some renters stayed in the same property over 10 years. Some did their own repairs at my expense but saved me from getting expensive service calls. Others called every time the toilet leaked because they were too lazy to open the lid or jiggle the handle.

I couldn't believe the property increases starting in 2001. I began to unload those houses in 2003. By August 2005 I only had one property left. The murder scene, where the place was stigmatized.

It was the first house I bought and had lived in.

I paid 42K for it in 1984 and finally sold it in March 2007 for 337K.

Now, I would not buy another house or go through being a landlord. At my baby boom age of 51, I don't have to.

There were times when I barely got by and tired of being woken up in the middle of the night with a leaky faucet or burst pipe.

But in the end, I made a killing.

I still work my ass off, but would never rent from someone else or rent out a property again. Not in this market.

I am waiting on the sideline, gold stockpile and cash. But real estate does not appeal to me at this time.

I see a crash on the horizon and a storm brewing.

I’m waiting for opportunity, happy in Glendale AZ. I most likely will live in this house for a very long time.

Mort said...

WASHINGTON – Nearly 40 percent of all residential properties in the United States, owner-occupied and rental units, are not mortgaged but are owned free and clear. [link]

Pop said...

"The Mammoth owns (~35% paid off, anyway) a house on a beautiful 2½ acre piece of land complete with 2 ponds, a stream running through, some tall firs and some open space."

Where does the Mammoth live? Sounds incredible!

Anonymous said...

In Minneapolis, we have not seen as much of the unrealistic price increases as elsewhere, but I am at least waiting until the spring season is over. I'm waiting for the despair of fall to kick in. Maybe I'll buy in December, during a blizzard.

I'll just pop in on a dark snowy night with a lowball offer. Jery Dickens-ey of me, dontcha think?

Mammoth said...

Yo Pop,

Mammoth lives in Kingston, Washington, which is across Puget Sound, and to the northwest of Seattle.

Houses here is still affordable (when compared to Seattle, anyway).

Cheers!

Anonymous said...

"Your a douche. Maybe you would like to see my W-2 or better yet, pay my f*cking 30K tax bill.

Go eat a bag of dicks."

Huahuahua...I thought that I would never hear that grotesque expression again, after Louis CK special on HBO. He went on and on about that expression. Too funny!

Frank said...

I currently rent. I pay $3,500 a month for a house; many of that same model are still listed for $1.2 million which is what they sold for in 2006. I'm in Newport Beach, CA.

As a result I am saving well over $4,000 a month.

I would very much like to buy; however I'd be insane to buy in this market. I like the house I'm in but most homedebtors are still asking $1.2M. The few that have sold have gone for around $800k. With CA foreclosures going wild I figure they'll drop below $600k in the next year.

I honestly don't like renting, I can't remodel anything, etc., however I'd be a total idiot to buy in the current market.

Anonymous said...

I see a lot people here saying that they own, bought before the bubble, they are on a fix, their families want a roof, yadda, yadda, yadda... Hey, if you don't care about your Net Worth sinking, if that's not important to you, if the subject of finance feels like pulling teeth to you, HPs respect that. It's totally stupid, but we respect that.

OTOH, some of us are anal about financial strategies, such as Cap Rate, IRR, Net Worth, etc. Just don't keep trolling that you did a wonderful investment, because we know that your Net Worth is taking a beating.

For the other "Trumps" who calculate returns just like those stupid TV programs such as "Flip That House" or "What's Worth", Realtors and bankers are peeing on your back and saying that it's raining.

Anonymous said...

"I've seen that again and again on this blog -- must be a relatively uneducated and non-entrepreneurial crowd to think $100k per year is a lot."

I have noticed that too. In a lot of parts of the country, 100k is still good money but not in the "highly desirable" areas. Personally, I am disappointed if I have capped fica by May.

Anonymous said...

"I am a Regional Director for an international Conglomerate connected to Energy production including Oil and Gas gathering and nuclear power generation."

The real evil doers.

Frank said...

Because you really don't make 120k, you loser. I get so sick of how people on the internet lie about their income.

I just love how these anons come up with totally illogical comments like that. Since when can't high income people rent? My neighbor across the street is a millionaire developer who rents because he knows it would be stupid to buy now. He didn't get rich by pissing his money away.

At least until some smartass asks me the question: "did you buy this house".
They all do that here in OC, California, as if it's any of their business. It's their way of measuring you up and down as to just how rich (or poor) you are in their eyes.


I must be really lucky as I don't get that at all, and in fact most people congratulate me for being smart for renting instead of buying. Of course half my street is renters. I think the OC snobbery is more prevalent in the inland communities where the wannabes live rather than on the coast here.

However when I lived in Scottsdale and Phoenix I got that crap ALL THE TIME. In Arizona you are considered a common criminal if you rent and people won't even associate with you ... but hey, that's a HUGE wannabe community.

Frank said...

Especially since I bought pre-bubble, zero down, 100% financing on a 30 year fixed rate 5.375!!!! My mortgage is approx. 1400 (WITH TAXES).

If you bought zero-down for 30 years at 5.375, and you're making the minimum payment every month, you are going to pay about three times the sale price over the life of that loan.

What an idiot. All zero-downers are idiots.

Paul E. Math said...

I rent. I would prefer to own for the same reasons that other people prefer ownership: freedom to renovate or plant trees, pride, etc. But, all in all, I have a pretty good deal with my current apartment. I pay $1100, a short drive from Cambridge and Boston, indoor parking, lofted bedroom overlooking the living room. I can drive a new car and save >20% of my gross income in my 401k and other savings plans. I would like to save more but I don't really make much money, well south of 6 figures.

I will admit that, in some ways, you 'get more' by owning v. renting. But I would like the average home-owner to admit that they also pay more, that their home is not an 'investment', at least not a good one.

Renters are NOT 'throwing their money away on rent' any more than mortgage-holders are throwing their money away on interest. Less so, in fact. It gets very tiresome trying to explain this to home-owners.

At the end of 30 years the homeowner has a house. At the end of 30 years I have an extra $500 - $1000 per month saved with compounded interest.

Anonymous said...

I agree that $100k is not big whop these days. However, if that's 2 incomes combined, then it's pretty low. If you don't have a small business to take advantage of tax incentives, that's low also.

The main issue is what you do with $120k, how well you invest, how well you protect from taxes. If you read the book "The Millionaire Next Door", you will see that most of the people making $120k have lower Net Worths than savvy investors/savers earning much less.

According to the latest statistics:

"In 2005, the median annual household income according to the US Census Bureau was determined to be $46,326.

In the year 2005, there were approximately 113,146,000 households in the United States. 17.23% of all households had annual incomes exceeding $100,000."

So here you have it, only 17% of the population earn over $100k per year, and most of that is COMBINED income of 2 spouses. I guess they must be all here on this Blog.*wink wink*

Very interesting link below, listing the 100 highest-income places in the US:

http://tinyurl.com/24vul4

RAYNLA said...

I made this post a few days ago but I thought it was appropriate to reiterate my point.


I am a happy RENTER. 35 years young. No Kids. I make 70K a year, I drive a nice sports car on Sundays and I have a company car with paid gas for the other days of the week. I pay $800.00 for a 1 bedroom APT in the San Fernando Valley section of LA. I live In a nice building with people from all over the world and we have a courtyard just like the one on Melrose Place. I go out of the country on "Holiday" every year. I have traveled to 47 states in the US. I treat myself to a great Ruth Chris Steak every now and again, and I have less than $500.00 in CC debt.

What I am trying to say is that I have a great quality of life!

I am about to get married soon and she makes about to same $ as I do and we will continue to RENT! Albeit this time a new 2 bedroom "condo" that some FB can't sell for $1350.00 a month. No maintenence, insurance, HOA, taxes, depreciation, ETC. And when the 1 year lease is up and we want a change of scenery we can simply move into another FB's flip gone flop. If I need to leave the state or the country for a job, simply give 30 days notice and see ya!

When homes in LA are 50%-60% off in 3 years and Marshal Law hasn't been declared, we will RENT an even nicer place on the beach.

I am living the AFRICAN AMERICAN DREAM. Mr. King would be proud!!!

And so could you if you weren't a slave to Angelo Mozilo.

RayNLA

raynla said...

BORKAFATTY said...I own for $1345 a month PI/TI Have a nice day.



NO...you RENT for $1345 a month PI/TI. Have a nice day.

Anonymous said...

I don't want to say how good my particular deal of renting Vs. owning is... It's REALLY that good. I live in a second home/ vacation investment area.
That said. I still think
http//tinyurl.com/3b75fj explains my choice well. No kidding, in my area things are going downhill quickly and people have realized that no one is buying so they are desperate to rent to anyone even vaguely reliable.

Anonymous said...

I made the original post about the 120K- the point being that things are absolutely crazy when someone making 120K can't afford to buy a MODEST home in their locale, which is just the plain fact here in DC/Nova due to the bubble. And yes, after paying rent, utilities, student loans and taxes, there is not much left to play with or save- but I am trying. That said, what once seemed like a pretty good salary 5-6 years ago is really not that much any more. As Kieth and others have correctly noted, 120K sure seems like 20-50K- and just a sad state of affairs.

Lu Chan said...

I owe 150 on a house I bought for 199 in 2002. Comparables are selling for 260 here in Minneapolis now. Even if we tank back to 200 I'll be fine because I'm paying off the principal quickly and I like where I live. and I also live under my means so I have less worry of financial calamity....oh and Minneapolis has one of the most stable and diverse job markets in America. So yes I'm happy I own but I wouldn't want a 500K piece of new construction 50 miles out of town right now (I'm comfortably 15 minutes from downtown).

banshee said...

I do both...rent the house we live in, here in San Diego because we moved here for cool work in 2005 and couldn't stomach buying.

OTOH, we've left a trail of 3 houses we still own and rent out behind us after various moves...bought in 1992, 1997, and 2000. All cash flow positive, all refinanced during the lowest rates (4.875-5.25 for 15 year fixed) with no money out. We'll own them all in about 10 years, maybe a bit less, god willing and the creek don't rise.

None of this was well-planned, I'm not a genius. I'm feeling really lucky right now. We wanted to buy in San Diego, but didn't want to sell a property, and didn't want to tie up all our savings in another house. And I never even considered an exotic loan.

Of course, I also got a 30yr fixed rate loan at 8+% for our first house in 1992 since I was convinced Bill Clinton would send the economy into the tank :^)

Good luck to all!

Bitter Renter said...

This thread is funny. All competitive put-down talk, "I make 120K", "you're a loser", "I made 200K last week on the sale of my house", "bullshit, ya did not".

Posturing, perhaps lying, perhaps simply bragging. All about real estate and who is the more saavy moneyman. Real estate. Shelter. What humans live in.

There's always been keeping up with the Joneses but this culture lately has gotten nutty. 75% of Americans make less that 65K. Yes, I know that's hard for the 100 & 120K people to fathom. Had a friend visit me once here in Portland about 5 years ago. When I told him I made 42K he about choked on his steak. He easily made 100k+ then and probably more now. I make 55K. But you know, I do make it and plenty of others make it.

And sure, most of us would like houses someday but if the income doesn't get up there it's not going to happen. Does that mean I get a bad life? Probably not. But that's much of the angst behind this blog. The renters, particularly the renters who make good money, are afraid of getting locked out and would relish and cheer a crash. The added bonus feeds back into that hypercompetitive thing mentioned earlier with the renters then enjoying seeing the buyers take it in the shorts. Justified, of course, by buyer arrogance and chiding of renters by buyers who made great money. Despite the fact that none of them knew or could foresee the bubble of the last 5 years.

The discussions on the blog are like the seemy underbelly of capitalism, the dark impulses that motivate and feeds its success. In public it's advertised as the system that will make us all prosperous, happy and marching into the future. But in private it's all about cutthroat competition, masking others unhappy and behaving badly as cultures like this one always have. Those dark impulses are very apparent here.

yabloco said...

Sold in September 05. Have discovered un unexpected freedom in my professional life. I can now move and work anywhere I want to be and command a better salary if a demand for my services is higher. Also, knowing I can take a year or two off and live in France or South America can not compare with a burden of owing a mortgage.

Anonymous said...

I sold my house in SD a couple months prior to the peak. Renting now for a fraction of the mortgage and I pocketed nearly $175,000.

Best decision I made in my life and it about made up for my getting burned in the tech bubble back in 2001.

I would like to own again, but the market here has a long way to go to get back to a healthy equilibrium.

Anonymous said...

amazing. According to the IRS less than 5% of all Americans make $100K or more. Yet on HP, people think $100K is minimum wage. Sure thing boys.

PS: I make a gajillion dollars an hour.

Bitter Renter said...

Well, it's not so much that HPers think 100K is minimum wage, it's that they have no respect for anyone not in that top 5%. Very few in our culture do. From government policies to educational institutions to the guy next door, everyone is slavishly devoted to making sure that top 5% is healthy, happy and safe. We've even evolved to a place where many believe the rich should be able to escape supporting their country through taxation.

It's called "aspirational politics". The idea behind is that many believe they are going to get rich soon and when they do they want to be able to avoid taxes. Thus they not only ignore the upper classes reaming them blind, they make excuses for them. "The top 5% pays 90% of the taxes", etc. Yeah, but when 5 families control 98% of the wealth, they're getting an 8% deal by only being taxed on 90%.

Then there's the republican ideal of removing taxation from wealth (cap gains) and putting it all on work (income tax). That way, a small but groqing minority of people who get all of their income from cap gains will pay zero towards their culture. Zero for defense, zero for infrastructure, zero for medical research, all the things that benefit the upper classes the most. After all, whose "stuff" is the military defending? Most of us would lose little and see little change in the unlikely event of being invaded and conquered. In fact, I would suggest that many of us would be better off.

That's why, throughout history, the elites of a culture become complicit with a conquering force from the outside. They cozy up to preserve their place in the societal hierarchy. It would be no different here. If by some chance Islamic terrorists gained a foothold here, that top 5% would be furiously studying the Koran and forcing their women to wear veils.

Anonymous said...

I'm 24 and I rent. I pay $210 a month (Midwest city) for my place with a roommate. The location blows, but if I can dodge the crackheads and the Gangsta Disciples, the inside of my place is very nice.

This has allowed me to go without formal employment for the past 2 years. I make my money from online poker and have 15k in savings. Whenever I want I can take 4 days in Chicago, and I can spend the day on the patio of a coffee shop earning.

Now I've decided to go to law school, so I'm trading in my easy-going life for the ability to have influence. Plus, a new neighborhood will be nice.

I'm glad I did this because 2 years ago I was not mature enough to handle law school and my future. Now I am.

Anonymous said...

I make $108k a year salary, $120Kish with bonus. I'm not going to complain that I'm poor since that would make me an uber douche considering millions of people live on 1/5 of that.

However at the same time I am sick and tired of people, and especially politicians assuming I'm 'rich'. Look at any tax breaks like student loan deductions, IRA contributions, child tax credit etc and they are all capped at about $100K a year, as if at $100K a year you're on easy street.

After income tax, 401(k) contribution, rent, car payment, student loan payment, health insurance premium there isn't a hell of a lot left over and I hardly feel rich.

Richard said...

My wife and I have been renting a home since selling ours in November '05, insisted on and got a rent reduction after the first year but will soon move to an even cheaper, smaller place while I focus on building a home on an 11 acre piece of mountain property we bought ten years ago. I haven't worked steadily for well over a year now after spending 25 of them chasing $$. Enough.

Bitter Renter said...

After income tax, 401(k) contribution, rent, car payment, student loan payment, health insurance premium there isn't a hell of a lot left over and I hardly feel rich.

------

You're right, someone making 108K poor-mouthing is a douche.

That 401 contribution is still your money. And do you really think we're going to believe they pay you 108K and don't give you health benefits?

In our twisted culture those that are the most comfortable complain the loudest. That's why our policies have been geared towards comforting the comfortable in the past few decades.

Anonymous said...

The discussions on the blog are like the seemy underbelly of capitalism, the dark impulses that motivate and feeds its success. In public it's advertised as the system that will make us all prosperous, happy and marching into the future. But in private it's all about cutthroat competition, masking others unhappy and behaving badly as cultures like this one always have. Those dark impulses are very apparent here.
=====
Well, isn't that good? That it's out in the open, I mean?

Jugador said...

I own, and just recently purchased. I live in the midwest, and rent prices are very close to the cost of ownership.

I honestly have no idea how you people in DC and California can afford to live.

Anonymous said...

That 401 contribution is still your money. And do you really think we're going to believe they pay you 108K and don't give you health benefits?

I really don't give a fuck what you believe.

Anonymous said...

WASHINGTON – Nearly 40 percent of all residential properties in the United States, owner-occupied and rental units, are not mortgaged but are owned free and clear. [link]

May 08, 2007 11:00 PM

--------------------------------
Mort, I think there is some confusion between you and the anon. What the anon means to say is that if these homeowners that are free and clear of mortgage debt were to sell and rent instead, the money from the sale could be better used by earning interest in investments. I'm not taking either side, because it would depend on how much one could rent for in a given area and what return one can get on investments.

Anonymous said...

Mort the dolt said: You are the one from Retardville, buddy. Are you the same anonypuss that hassles me from time to time? What is your problem, bub?

A person mortgages their house at 6% so they can get 5% at the bank? Brilliant!

__________________________________
No you 'tard. A person sells their $500K home. Puts that $500K in the bank. Earns $25K a year on that money and spends $25K a year renting the same house....without worrying about property taxes, HOA fees, insurance, maintenance, repairs or the fact that the house may be worth $400K in a year from now.

Can you understand this simple concept?

Anonymous said...

We sold six months ago for relocation, thank god. But had put it up for sale eight months earlier than that because I could tell things were getting weird: For Sale signs started popping up everywhere, etc. We were lucky to get a buyer before things *really* started dropping.

Will rent for a while. Also in SoCal in a nice old neighborhood we love, but no way am I throwing all our cash at a house that cost $100,000 in 1998 and was on sale for $770,000 before we rented it!

As for Mr. Dummy who thinks $120K is something to brag about, at $150 my wife and I couldn't qualify for a mortgage on this place today. So we're relatively poor as far as the still-outrageously-overpriced SoCal market goes. When houses are in the $100K-$150K range around here again, which they will be eventually, I'll buy and I'll buy cash.

Oh and every For Sale sign on my street that's come down since about Thanksgiving has come down for a renter, not a buyer. We're kind of a little club in the 'hood.

burn baby burn said...

For al those anon a$$holes out there who say” when things get bad I am just going to raise your rent”. Well my genius apartment complex tried and I am out of here. Today I signed a new lease for a bigger apartment in a nicer neighborhood. Closer to the light rail and guess what it is 15% less expensive and I get my first month free at the new place. I did not pay an application fee and no deposit. That means the cost of my move will be beer and pizza for my friends. So bust of luck losers. Now that it has started how are you feeling now? Has it started to collapse around you yet? Desperation is a pregnant female dog! enjoy

Anonymous said...

How ever do you survive on a mere 108K?

Anonymous said...

"This thread is funny. All competitive put-down talk, "I make 120K", "you're a loser", "I made 200K last week on the sale of my house", "bullshit, ya did not"."

You must be new to the Blog. What you're accusing most people here is just a projection because your earnings are low. If being in a survival mode against the current corrupt system makes us cut-throat capitalists to you, so be it.

Now get your organic ass out of the bean bag and go study some career management concepts, because increasing your salary from $42k to only $55k in 5 years sucks big time. Some people here make over $100k by investing heavily in education, transferable skills, and financial knowledge, instead of smoking pot all day while the world goes by. BTW, don't you have to build something out of hemp, instead of reading this blog?