Will the home prices ever go down? (Boston: 2014, renter)

[sawyer2]

Originally Posted by redplum33

What about renting in the Boston area?

Sell the house, put the money in the bank and earn 2.2% interest, and use the interest to pay a significant portion of your rent. No property taxes, no home repairs, huge bank account.

Seems to me that this would work well in the current market.

You would still be net negative over time because of inflation. Real estate is still a great long term hedge against inflation.

[porterhouse]

Originally Posted by sawyer2

Real estate is still a great long term hedge against inflation.

I feel that this can't be overstated right now. My sense is that inflation is considerably out on front of the government manipulated metrics.

[timberline742]

Originally Posted by porterhouse

I feel that this can't be overstated right now. My sense is that inflation is considerably out on front of the government manipulated metrics.

Why do you think they're manipulated? They keep the same formula... the problem has been with the formula itself, which has traditionally undervalued such things like energy costs in the overall equation, but its a valuable index, just like the unemployment rate (which is effectively manipulation proof) being a great relative index.

[semiurbanite]

Originally Posted by GeePee

There is no way I can find a similar setup to what I have for even double my mortgage in the current state of rental prices.

Good deal: https://www.realtor.com/realestatean...-36730?view=qv

[GeePee]

Originally Posted by semiurbanite

Good deal: https://www.realtor.com/realestatean...-36730?view=qv

No Thanks.

[porterhouse]

Originally Posted by timberline742

Why do you think they're manipulated? They keep the same formula... the problem has been with the formula itself, which has traditionally undervalued such things like energy costs in the overall equation, but its a valuable index, just like the unemployment rate (which is effectively manipulation proof) being a great relative index.

The government manipulates via the basket of goods used to determine CPI, which they can and do edit. As you pointed out, key drivers such as food and energy are probably under weighted. This certainly makes the CPI as a means of determining inflation less accurate. Both parties have a vested interest in low and managed inflation. How much this under represents real inflation is a much more detailed discussion and I don't pretend to have all the answers.

In terms of this thread there is no doubt that inflation is on the rise, whether you use government statistics or base it on your personal day to day expenses living in this area. As pointed out, real estate is one of the best hedges against inflation.

[redplum33]

Originally Posted by sawyer2

Real estate is still a great long term hedge against inflation.

Originally Posted by porterhouse

As pointed out, real estate is one of the best hedges against inflation.

Generally speaking, perhaps. But buying into a bubble (i.e. the current Boston market) isn't, IMO.

[jayrandom]

Originally Posted by redplum33

What about renting in the Boston area?

Sell the house, put the money in the bank and earn 2.2% interest, and use the interest to pay a significant portion of your rent. No property taxes, no home repairs, huge bank account.

Seems to me that this would work well in the current market.

First, the math on these sorts of calculations is always sort of dodgy. The own/rent spread isn't likely big enough to cover all the transaction costs associated with selling your house and moving. What's far more likely is that you'll go from a dwelling that's worth $3000/month to a dwelling that's worth $2000/month. That's a reasonable thing to do if you can't afford the $3000/month, but more than likely you'll take a hit in the quality of your life.

And for what? To possible hit the bottom of the real estate market? The risk being that this isn't the top and that you'll end up moving, and living somewhere worse than you are now, all to make 2.2% in interest on your home equity?

Who thinks like this? I place a high value on having somewhere permanent to live. I did the move every year nomad life and it's OK, but moving is hassle, as is looking for a new place to live, as is waiting on a landlord to fix stuff, as is having to ask a landlord when you want to change stuff. If you don't like having a house and paying property taxes (directly to the city/town, as opposed to through the landlord to the city/town) and for home maintenance (again, at least directly), this plan makes sense. It's not an investment decision, though, it's a personal decision.

[redplum33]

Originally Posted by jayrandom

First, the math on these sorts of calculations is always sort of dodgy. The own/rent spread isn't likely big enough to cover all the transaction costs associated with selling your house and moving. What's far more likely is that you'll go from a dwelling that's worth $3000/month to a dwelling that's worth $2000/month. That's a reasonable thing to do if you can't afford the $3000/month, but more than likely you'll take a hit in the quality of your life.

And for what? To possible hit the bottom of the real estate market? The risk being that this isn't the top and that you'll end up moving, and living somewhere worse than you are now, all to make 2.2% in interest on your home equity?

Who thinks like this? I place a high value on having somewhere permanent to live. I did the move every year nomad life and it's OK, but moving is hassle, as is looking for a new place to live, as is waiting on a landlord to fix stuff, as is having to ask a landlord when you want to change stuff. If you don't like having a house and paying property taxes (directly to the city/town, as opposed to through the landlord to the city/town) and for home maintenance (again, at least directly), this plan makes sense. It's not an investment decision, though, it's a personal decision.

I do.

Hypothetically, let's say I have 1 million dollars, no place to live, and a desire to live in the Boston area. What would you suggest?

[massnative71]

Originally Posted by redplum33

I do.

Hypothetically, let's say I have 1 million dollars, no place to live, and a desire to live in the Boston area. What would you suggest?

It would all depend on how long I planned on staying. Renting is basically pissing your money away, but unless you plan on spending a minimum of 5 years then it's tough to come out ahead when owning unless you plan on renting it out down the road.