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Old 12-01-2014, 11:28 AM
 
5,121 posts, read 6,786,078 times
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Quote:
Originally Posted by redguard57 View Post
Renting vs. owning depends highly on your local market.

Where I live, rents have outpaced sale prices for more than a year which made buying more attractive than renting around the end of 2012. ....
I think this is very true. You can't make blanket statements on which is better: renting or buying because it depends on so many factors such as where you live, what your goals are, and where you are in life.

Where I live there is a shortage of rentals. Four years ago, right before I bought a house, I was renting a two-bedroom apartment for $1800 a month. I bought a three bedroom townhouse with garage when my lease was up and my mortgage was (and still is) $1746 a month (that includes property taxes and insurance). I spend about $2000 a year in maintenance and repairs and $71 per month in HOA fees (which include access to a pool, trash/recycling pick up, and mowing and leaf removal).

Believe it or not, my electric bill is lower (because the previous owners installed new, high efficiency windows as well as high efficiency appliances and HVAC. I replaced all the bulbs with LEDs). My old apartment was so poorly insulated and drafty it was like throwing money out a window and the appliances were the cheapest money could buy, not the most efficient. My water bill is lower since I am now billed by myself and not as part of a larger community (the old apartment would charge per building and divide the total cost among all apartments and I don't use a lot/waste a lot of water). Now I only pay for what I use.

But where I see owning as really paying off is in that my mortgage is fixed. Rent is not. The same 2 bedroom apartment (according to the complex website) is up to $2200 per month now and I am still paying $1746 per month in mortgage... or if you want to roll HOA fees and maintenance into it, $1984 per month. Plus, my home value has gone up. So I am ahead. And I will be paying that $1746 10 years from now too... who knows what rent will be by then... $3000+ or so if it keeps going up at the same rate?
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Old 12-01-2014, 11:57 AM
 
106,166 posts, read 108,140,134 times
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Quote:
Originally Posted by Felix C View Post
Yes that is obvious but what about if another 2008 were to occur while in retirement? Or the presumption is a person is substantially diversified as to weather those economical downturns?

With a residence paid off there is always the residence.

Some people who started early pay off their mortgage early and still in their prime earning years have sufficient surplus for money making endeavours. There are many ways fortunately to slice that pie.

I see the point of not buying in housing inflated areas-Pacific Heights, Lower Manhattan, etc. but housing ownership is perfectly feasible in some areas. A 20 or 30 year mortgage is fixed payment whereas rent will increase in the same 20-30year cycle. And that is fortuitous for someone who purchases in a pre-boom era and maintains their residence well into later decades. Unfortunate for those who look to purchase in an area with high residential ownership costs.
I think all those that got foreclosed on or had short sale would disagree that unlike a stock you still have the residence. I would argue the broad markets have always bounced back just the same as homes eventually could providing you have staying power in both.

by the way the worst of times are already figured into withdrawal rates when setting amounts for retirement amounts.

they hover where they do because of the very worst of time frames we could have or did have based on whether your calculator uses monte carlo or historical data,

in either case a 2008 style drop would likely not be an issue in even a basic withdrawal plan from a retirement planning calculator but that is another discussion.
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Old 12-01-2014, 12:17 PM
 
Location: Miami, FL
8,087 posts, read 9,801,504 times
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Quote:
Originally Posted by mathjak107 View Post
I think all those that got foreclosed on or had short sale would disagree that unlike a stock you still have the residence. I would argue the broad markets have always bounced back just the same as homes eventually could providing you have staying power in both.

by the way the worst of times are already figured into withdrawal rates when setting amounts for retirement amounts.

they hover where they do because of the very worst of time frames we could have or did have based on whether your calculator uses monte carlo or historical data,

in either case a 2008 style drop would likely not be an issue in even a basic withdrawal plan from a retirement planning calculator but that is another discussion.
I explicitly mentioned those who had their homes paid off in retirement. Why would you take this approach to respond if this group is not what I referred to?

You know what... nevermind. Some folks have too much ego to be even minded.

Last edited by Felix C; 12-01-2014 at 01:33 PM..
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Old 12-01-2014, 12:27 PM
 
Location: moved
13,593 posts, read 9,632,557 times
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Ultimately houses are both financial assets and physical things. This is both the curse and the appeal of houses. Stocks, bonds and so forth are just financial assets. If I don't maintain my house, its value will decline. If my jurisdiction passes property tax levies, the cost of house-ownership will rise. Such vicissitudes don't apply to strictly financial assets.

House prices are ultimately paced by inflation and demographics. Equity prices are ultimately paced by profit growth. If recently fashionable economic analysis is to be believed, profit growth is faster than "real" economic growth, suggesting that equities will enjoy stronger capital gains that houses.

Houses can however produce more cash flow than equities, either in the form of a paid-off house obviating what would have been a rental cost for the occupant, or through rental income for a non-occupant owner. Whether such rental cash flow exceeds interest on bonds or dividends on stocks of course depends on many factors.

Personally I'm disconcerted by houses being both physical things and financial assets. I don't do well with physical things. On my watch, they decay, rust, fray, break, rot. For me, renting would make more sense (even though I'm a house-owner). For others, it's the reverse. The upshot is that we can't really disentangle the lifestyle-aspect of house ownership from the financial-aspect. Those who enjoy the house-ownership lifestyle will extol its financial benefits, and vice versa.

Also, a data point about rent. 20 years ago, a one-bedroom apartment in a decent part of my "metropolitan" region rented for around $500 per month. Today it rents for maybe $700. That's a 1.7% annualized increase - substantially lower than inflation. Not exactly a runaway increase in rental costs, is it?
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Old 12-01-2014, 12:36 PM
 
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Some people have had bad experiences with home ownership. That is especially true over the past 10 years. I am on house number 8 so I think I have learned a few things. For several of the houses I owned, ownership was a break even proposition. I think I even lost a bit on one of the houses. I moved quite a few times within several years so my mortgage tax savings were used up by closing costs. Even for the worst cases, I enjoyed the benefits of home ownership versus renting. I did not have to worry about the home owner feeling that they should have access to check on their investment. I could make any changes I wanted. Since I was intent on pursuing a career and moving when necessary, I avoided major remodeling. I did make some minor improvements which I enjoyed and which typically more than paid for themselves when it came time to sell.

The house I had prior to my current house, I lived in for 21 years. For that house I have no doubt that I came out way ahead versus renting. For most of the time I lived in that house, it would have cost much more to rent than I had to pay on the mortgage, insurance and taxes. In addition the house appreciated more than double. If I had invested my downpayment and rented my return would have been a fraction of the amount of appreciation. In addition I had a pretty decent salary and the home deduction made a lot of difference in my taxes. It would take me a day to try to figure out what I saved with home ownership versus an equivalent rental. Just a quick estimate, I think the cost of the rental would have been about double.

Well the old house is ancient history. A year and a half ago I bought another house. I spent 9 months on the house search working on it several hours a week. This time I think I really did it right. First as I have previously mentioned I did not rollover the equity from my past house. Instead I invested that money and got a low rate 30year fixed mortgage. For the past 18 months of home ownership the amount of money I mortgaged has returned over $30,000 after deducting the mortgage costs. Then there is the issue of appreciation. Well the housing market has been slow, certainly appreciation in only 18 months must be close to zero. Wrong. I bought in a very high demand area. Demand is high but there is no additional supply. There are no houses for sale in my area and any houses that go on the market seem to be instantly sold. According to Zillow my house has appreciated 40% in the past 18 months. Zillow was remarkably accurate when I was looking for houses. Even so I am not sure I believe the numbers and certainly appreciation long term will be much, much lower.
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Old 12-01-2014, 12:54 PM
 
106,166 posts, read 108,140,134 times
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Quote:
Originally Posted by ohio_peasant View Post
Ultimately houses are both financial assets and physical things. This is both the curse and the appeal of houses. Stocks, bonds and so forth are just financial assets. If I don't maintain my house, its value will decline. If my jurisdiction passes property tax levies, the cost of house-ownership will rise. Such vicissitudes don't apply to strictly financial assets.

House prices are ultimately paced by inflation and demographics. Equity prices are ultimately paced by profit growth. If recently fashionable economic analysis is to be believed, profit growth is faster than "real" economic growth, suggesting that equities will enjoy stronger capital gains that houses.

Houses can however produce more cash flow than equities, either in the form of a paid-off house obviating what would have been a rental cost for the occupant, or through rental income for a non-occupant owner. Whether such rental cash flow exceeds interest on bonds or dividends on stocks of course depends on many factors.

Personally I'm disconcerted by houses being both physical things and financial assets. I don't do well with physical things. On my watch, they decay, rust, fray, break, rot. For me, renting would make more sense (even though I'm a house-owner). For others, it's the reverse. The upshot is that we can't really disentangle the lifestyle-aspect of house ownership from the financial-aspect. Those who enjoy the house-ownership lifestyle will extol its financial benefits, and vice versa.

Also, a data point about rent. 20 years ago, a one-bedroom apartment in a decent part of my "metropolitan" region rented for around $500 per month. Today it rents for maybe $700. That's a 1.7% annualized increase - substantially lower than inflation. Not exactly a runaway increase in rental costs, is it?

houses do not produce more cash flow than equities as they neither produce income or produce cash flow if you live in it but they can IMPROVE cash flow by cutting housing costs if less than renting.

they can help cut expenses if costs fall enough but from an accounting standpoint cutting expenses is not the same as increasing income.

in fact I am on the fence right now.

we rent and can buy a similar apartment as a co-op for 300k. since I am not an aggressive investor anymore my benchmark for this is a muni bond ..

if I figure a muni bond on that 300k I have I will take A 12-14K DECREASE A YEAR IN INCOME buying , but my housing costs will drop to only 8k a year from almost 20k. of course if I actually figured my investment returns I would be giving up far more income by buying.


the higher income we get renting is still better than the cost cutting from buying but we are watching it carefully. a few more increases may make buying the better deal.

Last edited by mathjak107; 12-01-2014 at 01:20 PM..
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Old 12-01-2014, 01:12 PM
 
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Buying a condo in NYC is a whole lot different than the typical single family house in a residential or suburban area. You will have rules, regulations, coop fees and maintenance.
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Old 12-01-2014, 01:17 PM
 
106,166 posts, read 108,140,134 times
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we would buy a co-op here in bay terrace. the place we are interested in if we do would run us about 8k a year in maintenance . there is a flip tax that helps keep the maintenance low. those who leave help pay for those who stay.

I have owned as investments or lived in co-ops off and on for many years now. to be honest life has been pretty transparent as far as rules for us.

even the co-ops we own by central park have not been a problem even as far as hindering
sales.
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Old 12-01-2014, 01:50 PM
 
Location: Centennial, CO
2,254 posts, read 3,047,646 times
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Quote:
Originally Posted by ncole1 View Post
Real estate does not "create" wealth. Typically it only appreciates at around the overall rate of inflation and provides a small income via real or imputed rent, net of non-capital owner cost (taxes, insurance, maintenance).



You are "conveniently forgetting" (word choice?) the fact that they had a much higher income to begin with.

I'm sure the average net worth of people who own yachts over $300,000 is greater than the average net worth of those who don't. That hardly means that buying the yacht is a path to wealth!
Even IF real estate appreciates at around the pace of inflation (historic appreciation is actually slightly higher than inflation ~3% per year vs. just over ~2% per year), at the very least it's a vehicle for savings via the equity built up with each mortgage payment. Plus there's the added utility of it, you know, providing a place to live.

Agree on your pointing out the fallacy in confusing correlation with causation, although comparing to buying a yacht is a poor and extreme example. It's a depreciating asset while a home is on average an appreciating one.
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Old 12-01-2014, 01:53 PM
 
Location: East TX
2,116 posts, read 3,034,895 times
Reputation: 3349
Quote:
Originally Posted by harry chickpea View Post
feh. When the total tax burden on the average person is more than 50% of wages, those pinhole leaks in the fiscal boat are nothing compared to the cannonball hole in the bottom.
The tax burden is attached to the need for more and better just as much as personal spending. If you want less taxes, move to a location where there are little or no services. Haul your own trash, move your own snow, drill a well type locations where the government is not expected to provide every little convenience and comfort.

Interestingly, while I despise big government, I have yet to pay anywhere near 50% in total tax burden. If I combine property, sales, income, and any other tax I can think of, it does not come near 50%. Maybe 25% if I count it all up.

American are in debt because we spend too much. Pretty simple really.
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