Buy or Rent a House - Today's Market

[Mr. White]

I understand that, it pretty much gets people (not investors) to bid the total amount that they qualify for, which is retarded in itself since it takes value completely out of the equation. 30 years is a hell of a long time for things to go wrong, especially if one is using two incomes to do any sort of justifying. For the prices we're seeing I'd definitely be renting,no question.

P.S. you most definitely do not own your home as long as you have a mortgage. Same goes with anything else that's a secured debt.

30 years is also a hell of a long time for things to go right! Bookmark this thread and check back in 30 years. My uneducated guess is Bay Area average housing prices will quadruple.

 

[auntiebling]

I thought the title was Buy or Rent a Horse.

neither. horses are frequently given away cuz it's going to be ridiculously expensive either way

 

[mlm]

There is also zero chance that you have checked every major metropolitan area out for decent houses in decent neighborhoods in that price range.

Yeah, I hear Detroit is pretty affordable. So is St Louis

 

[mike23w]

Bookmark this thread and check back in 30 years. My uneducated guess is Bay Area average housing prices will quadruple.

use "rule of 72" which tells you how long it takes to double your money.

at 10% cagr, it takes 7.2 years to double your money. in 28.8 years, your principal quadruples.

so you expect a 10% compounded return every year for 30 years, which is a higher return than any broad asset class that has a long-run history (even higher than the US stock market which has been on a very long bull run).

i'd bet every dollar i have against you.

 

[MikeL]

Yeah, I hear Detroit is pretty affordable. So is St Louis

Well, to be honest you don't really need to buy. You can just live in those homes and fight off outsiders. It's like your own mini-apocolypse game.

 

[MrIncredible]

Yeah, I hear Detroit is pretty affordable. So is St Louis

Hey-he hasn't put any caveats on his statement.

Worcester Massachusetts was voted one of the better places in the country to raise a family-second biggest city in New England-decent biomedcal and medical jobs, great hospitals and some very good colleges. You can get a decent property there for 200k.

http://www.telegram.com/article/20140621/NEWS/306219738/1116



Archimedes is just whining that he can't find what he likes for the price he wants. He wouldn't want to deal with the snow or humidity or whatever else hurts his concept of paradise, as if one might both exist and for some reason be affordable.

 

[Mr. White]

use "rule of 72" which tells you how long it takes to double your money.

at 10% cagr, it takes 7.2 years to double your money. in 28.8 years, your principal quadruples.

so you expect a 10% compounded return every year for 30 years, which is a higher return than any broad asset class that has a long-run history (even higher than the US stock market which has been on a very long bull run).

i'd bet every dollar i have against you.

I'll take that bet! (unless you have more than 5 dollars, i'm broke).

 

[JesasaurusRex]

You don't really own a house even if you pay off rent. Lulz property tax.

very true

Hey-he hasn't put any caveats on his statement.

Worcester Massachusetts was voted one of the better places in the country to raise a family-second biggest city in New England-decent biomedcal and medical jobs, great hospitals and some very good colleges. You can get a decent property there for 200k.

http://www.telegram.com/article/20140621/NEWS/306219738/1116



Archimedes is just whining that he can't find what he likes for the price he wants. He wouldn't want to deal with the snow or humidity or whatever else hurts his concept of paradise, as if one might both exist and for some reason be affordable.

 

[Archimedes]

There is also zero chance that you have checked every major metropolitan area out for decent houses in decent neighborhoods in that price range.

I've searched representative markets all over the Western United States to get a sense of current prices. All over California, Washington, Oregon, Idaho, Colorado, New Mexico, Arizona, Texas, Oklahoma, Nevada, even Montana because my wife has family there. $200k will not buy you nice house/nice neighborhood in any of the major cities in those States. It'll buy you an older, tired home in a marginal neighborhood or a garbage cookie cutter tract home. Cheap money has driven up prices to ridiculous levels everywhere; not just California.

 

[Archimedes]

You don't really own a house even if you pay off rent. Lulz property tax.

So true. Even if you pay cash for a house, the property tax bill is a big chunk of change every year. And in a lot of States, the percentage rate is way higher than California, so even though the house price is lower, the property tax bill is equal or higher.

 

[Archimedes]

Archimedes is just whining that he can't find what he likes for the price he wants. He wouldn't want to deal with the snow or humidity or whatever else hurts his concept of paradise, as if one might both exist and for some reason be affordable.

Not at all. I'm just smart enough to know that its a seller's market right now and prices are inflated everywhere. I was merely responding to the dated idea that there are nice homes to be had for $200k if one is just willing to move out of California. That's a joke right now.

 

[CABilly]

use "rule of 72" which tells you how long it takes to double your money.

at 10% cagr, it takes 7.2 years to double your money. in 28.8 years, your principal quadruples.

so you expect a 10% compounded return every year for 30 years, which is a higher return than any broad asset class that has a long-run history (even higher than the US stock market which has been on a very long bull run).

i'd bet every dollar i have against you.

I have a tough time believing the $1.3M 3/2 homes in Campbell and Willow Glen and the $2M homes in Los Gatos and Saratoga that would be starters anywhere else were $250k - 500k in the mid-late Seventies.

Pretty sure my aunt bought a 3 story Victorian (the whole building) in the Haight in the seventies for I think less than $80k.

We're in a crazy market now, but like they say there just isn't more land being made.

 

[mike23w]

I have a tough time believing the $1.3M 3/2 homes in Campbell and Willow Glen and the $2M homes in Los Gatos and Saratoga that would be starters anywhere else were $250k - 500k in the mid-late Seventies.

Pretty sure my aunt bought a 3 story Victorian (the whole building) in the Haight in the seventies for I think less than $80k.

We're in a crazy market now, but like they say there just isn't more land being made.

apples and oranges.

• the prediction was for the average bay area price to gain 10%/year compounded over 30 years.
  
  we're not talking a single house or even houses in a single city but the entire bay area.
  i could find individual stocks or individual houses (using hindsight no less!) that gained 10,000 percent in 30 years but that doesn't tell me much. that's like winning a $1M lottery and recommending everyone buy lottery tickets to fund their retirement.
• over the very long run(decades) house prices track income because over the long run people need to pay their mortgage. unless you think bay area buyers, in general, are going see their income increase 10% every year over the next 30 years (if you argued inflationary pressure with data as your theory for higher prices i'd be interested), prices won't be rising at that rate.
• the "they aren't making land anymore" trope was a rationalization for high prices before the RE bubble popped in 2008/2009. prices in the bay area still collapsed (fell between 30%-40% depending on how you measure it even with trillions of dollars in stimulus and historically low rates). there has alway been land constraint in the bay area so that is far from sufficient for explaining price movement. prices are a function of supply and demand, land constraint is but a small part of the supply equation ; it ignores the other factors affecting supply and completely ignores the demand side.
• past performance does not guarantee future results;
  saying "someone i know made money in the past" provides no insight unless you explain why it did so well in the past, and why that trend will continue in the future.

 

[caideN]

Many say this "bubble" will not crash because of the continued influx of high tech and wealthy corps in the Bay Area. .com is no longer a "phase," it is here to stay and so are all the wealthy tech bros.

 

[Mr. White]

apples and oranges.

• the prediction was for the average bay area price to gain 10%/year compounded over 30 years.
  
  we're not talking a single house or even houses in a single city but the entire bay area.
  i could find individual stocks or individual houses (using hindsight no less!) that gained 10,000 percent in 30 years but that doesn't tell me much. that's like winning a $1M lottery and recommending everyone buy lottery tickets to fund their retirement.
• over the very long run(decades) house prices track income because over the long run people need to pay their mortgage. unless you think bay area buyers, in general, are going see their income increase 10% every year over the next 30 years (if you argued inflationary pressure with data as your theory for higher prices i'd be interested), prices won't be rising at that rate.
• the "they aren't making land anymore" trope was a rationalization for high prices before the RE bubble popped in 2008/2009. prices in the bay area still collapsed (fell between 30%-40% depending on how you measure it even with trillions of dollars in stimulus and historically low rates). there has alway been land constraint in the bay area so that is far from sufficient for explaining price movement. prices are a function of supply and demand, land constraint is but a small part of the supply equation ; it ignores the other factors affecting supply and completely ignores the demand side.
• past performance does not guarantee future results;
  saying "someone i know made money in the past" provides no insight unless you explain why it did so well in the past, and why that trend will continue in the future.

I looked up median home price in San Mateo County in 1984 & 2014 YTD. $160400 vs $882700. I didn't save the links where I found this info.

And I said "my uneducated guess". I don't claim it is guaranteed, just like you can't guarantee home prices won't quadruple in 30 years.

I'll still take your bet. arty

 

[drewcandraw]

good thing my mom bought our house when she did for sub 200k in daly city around 1995. I miss that wise woman.

My best friend living in san bruno is paying 1800 for a 1 bedroom apt. I told him that he might as well rent a house cause that is ridiculous.

 

[Reli]

Many say this "bubble" will not crash because of the continued influx of high tech and wealthy corps in the Bay Area. .com is no longer a "phase," it is here to stay and so are all the wealthy tech bros.

What IS true is that the BA recovered quicker, and has much lower unemployment than the US overall. So I don't see any crash coming. With that being said, I think interest rates will finally start to rise next yr, which will stop home prices from rising as quickly as they have.

 

[mike23w]

I'll still take your bet. arty

we both know neither of us are going to wait 30 years and pay the winner.

 

[Mr. White]

we both know neither of us are going to wait 30 years and pay the winner.

I'm good for it, trust me.

 

[mike23w]

I'm good for it, trust me.

you're telegraphing.

people that say 'trust me' are the least trustworthy people around. if you were really trusthworthy, you wouldn't need to tell me.

it's kind of like people that say "i'm not an asshole but ....", then they act like an asshole.