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No, it hasn't. James Truslow Adams coined the term "American Dream" in 1931, pre-suburbs and during the Great Depression, and home ownership isn't part of that dream. Furthermore, it's largely not the dream of millenials, seeing it as a millstone around the neck.
I quote the belief of most of society, you quote one guy. Which one better fits the phrase "societally accepted"? Further, your statement about Millennials happens to be patently false, as well. That generation has been bitching for years about how it's not fair that they can't buy property. And, just recently, the latest "new study" on that group came out and found that, "shockingly", older Millennials were starting to move to the suburbs.
I don't know why that's a shock. People grow up, have families, and move to the suburbs. Everybody said the boomers were just going to live out of vans and smoke weed all day. They gold older, had families, moved to the burbs. Everybody said Gen X was going to live on the streets and attend hair metal concerts for the rest of their lives. We grew up, had families, and moved to the burbs. Now older Millennials are getting older, having families, and moving to the suburbs? Blow me over with a feather, who could have seen that coming! Boy, it's almost as though there's a 3-generation pattern and the rest of them will eventually follow suit.
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Originally Posted by Whatsnext75
Wow. But a cop doesn't put their life on the line in many situations? The business owner also made the choice to put their finances on the line, no one made them do it.
First, most cops (by simple plurality) aren't in a life threatening situation at any given moment, but that's not the point. The point is, the business owner is making a conscious risk of putting up all they have in an effort to create something. A cop took a 19 week seminar and passed an interview. It's not even remotely the same thing.
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You clearly seem to have some personal issues with police/government based on your renting and raving.
You call it ranting and raving, most logical people would call it detached logical evaluation. I've got no problem with police, and my problems with government are limited to that of the government being a bad steward with the money they forcefully take from me in order to keep their business running - and one example is severely overpaying for professions that are relatively easy to fill.
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Many people think the tech sector is overpaid. Not all engineers are building bridges, many are writing code so you can play your video games faster at a higher intensity. Not everyone thinks they should get 150k a yr for that but they do just like some cops get 150k a yr for doing their job.
Your argument has a serious and fatal flaw: No, not all techies are writing code that saves the world. Some of them are, in fact, simply making a video game. However, they're leveraging the same knowledge and engineering chops as someone who is writing something that will change the world. There's a commonality of skillset, therefore, the person making the video game is going to make roughly equivalent to the person writing something more beneficial to society just by virtue of them doing the exact same job, just with different functions. The same way a professor teaching computer science will make roughly equivalent to the professor teaching Sanskrit, even though one is vastly more useful than the other.
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Originally Posted by Whatsnext75
You sound very bitter as well.
Not even a little bit. I make a damn sight more than the highest paid cops, even with their wanton abuse of taxpayer dollars and political corruption-based out of whack salaries. But just because I've kept ahead of their wages doesn't make it any less an affront that we as a people are severely overpaying for a service that could be had - with equal competence - for a fraction of the cost. And I happen to live in one of the areas that is among the worst offenders in that regard.
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In many industries people get jobs based on who they know..
In most of those industries, you aren't completely shut out of the industry if you don't have family already in it, however. And all "knowing somebody" gets you is either a guaranteed phone screen or maybe a foot in the door. It's not exclusive VIP club access in those other fields. They've created a closed ecosystem by which they know they've got a really, really good scam going, and don't want to let outsiders in on their hustle because they're basically guarding their scam.
Again, your arguments are positively terrible here. Just give up, you're not able to win this one.
Taking this discussion on a tangent, I'd argue that one of the cardinal advantages of living in a higher-COL area is that residential real estate is a good investment. Sure, tenants suffer, enriching the landlord, etc. But then, you know, the landlord benefits. In a stagnant area, owners - whether owner-occupants, or landlords - still have to pay house-insurance, still have to pay property taxes, still have to unclog toilets and mow the lawn and repair the roof and so forth. These costs really don't vary much from locale to locale. A 40-gallon electric water heater at Home Depot costs about the same in San Francisco as it does in rural Kansas. But the return on investment, is going to be very different between those two locales.
The "American dream" isn't merely personal independence and primacy, through owning one's own land and domicile. It also presumably includes a retention of value of one's property. If real-property goes like automobiles, depreciating year after year, the very notion of "real" estate becomes suspect.
Sure, there are bubbles and crashes and overheated markets. There are ways to fail, as a homeowner, in the hottest and most vibrant market. But the overarching point, is that in those higher-COL areas that everyone loves to decry, there's a long-term reward to owning property. Owners get paid for the trouble of mowing their grass and painting their siding and updating their windows. In a low-COL area, these chores and upgrades are like repairing a used car - necessary to keep it going, but doing little to preclude decline in its value.
Do you think that you, as the renter, are not paying ALL of those costs? I've got some bad news for you. The rent I quote to my renters includes:
-The cost of the mortgage
-The property taxes
-The estimated annual maintenance cost of the house itself
-The homeowner's insurance
-And I throw a little bit on top of that just to cover incidentals
It's ALL baked into the rent. And I don't even have to do things like mow the lawn - I can even push off some of the work like landscaping on to you. My property taxes go up? Your rent goes up. If I'm not using a fixed rate mortgage and the rate goes up? Your rent goes up. There are multiple claims against the homeownership insurance policy and the premium goes up? Your rent goes up. Your best case scenario that a rent-increasing event is triggered 1 month into a 12 month lease and you don't feel the rent increase for almost a year, but the back-cost will be baked into the next increase.
Your only argument in favor of being a renter is the concept that the value of the property can collapse. While not an impossibility, history has shown that land has consistently moved upwards in value, and will in general always continue to do so simply because you're talking about a finite resource. Even if the value of your property drops 25% over a span of years, each month you pay into the mortgage, you are either generating a tax write-off for the interest section or equity in the principal. The only thing you ever do as a renter is give your money to someone else and never see it again.
I live in the east bay and make over six figures, which is higher than average for the area.
I choose to rent a room in someones house .
That way, I've been able to get the benefit of higher SF salaries and my cost of living
has stayed about the same. That's how I've been able to save around 50K over the past
one year. And that's with me eating out every day and being crazy with my money at times.
For single men, they can make a killing doing what I'm doing. And in about five years, I'll
pack my bags and move back to home (midwest). I was born and raised in Kansas.
Do you think that you, as the renter, are not paying ALL of those costs? I've got some bad news for you. The rent I quote to my renters includes:
-The cost of the mortgage
-The property taxes
-The estimated annual maintenance cost of the house itself
-The homeowner's insurance
-And I throw a little bit on top of that just to cover incidentals
It's ALL baked into the rent. And I don't even have to do things like mow the lawn - I can even push off some of the work like landscaping on to you. My property taxes go up? Your rent goes up. If I'm not using a fixed rate mortgage and the rate goes up? Your rent goes up. There are multiple claims against the homeownership insurance policy and the premium goes up? Your rent goes up. Your best case scenario that a rent-increasing event is triggered 1 month into a 12 month lease and you don't feel the rent increase for almost a year, but the back-cost will be baked into the next increase.
Your only argument in favor of being a renter is the concept that the value of the property can collapse. While not an impossibility, history has shown that land has consistently moved upwards in value, and will in general always continue to do so simply because you're talking about a finite resource. Even if the value of your property drops 25% over a span of years, each month you pay into the mortgage, you are either generating a tax write-off for the interest section or equity in the principal. The only thing you ever do as a renter is give your money to someone else and never see it again.
You're in the mindset of an urban area with a healthy housing market. I think you've mentioned about being in greater LA, and everyone knows the demand for housing in urban California is very high, with supply constricted.
That's not the case in some parts of the country. I live in a declining small metropolitan area in northeast Tennessee. There is around five to six months of inventory here. Several new apartment buildings were built recently, bringing new inventory onto the market. The asking rent on most of those buildings have actually fallen over the last few months due to lack of demand.
Where I am, housing has basically gone nowhere, adjusting for inflation, since 2000. In the surrounding rural areas, my guess is that those areas have seen absolute price declines over the past twenty years. Landlords cannot necessarily just jack the rent up because it may take awhile to get new tenants.
Do you think that you, as the renter, are not paying ALL of those costs?
In a healthy market, yes. In a decaying and moribund market, not so much. I’m neither a landlord nor a renter, but I keep company with plenty of retired professionals who turned to local real-estate for side-income. Or what they thoughts was side-income! These are engineers, handy guys who know how to replace a water heater. Almost invariably, their rental properties are depreciating, partially vacant, and in need of repair. They can’t raise the rent, if there are plenty of other rental opportunities. Tenants don’t pay? Yes, they can be evicted, but that takes a while. Meanwhile, property values are falling, property taxes are rising, and maintenance is piling up. So why not just sell the real estate, and be done with it? Well, that’s exactly what’s happening – once the landlord becomes willing to accept his/her loss. Until then, the monthly cash-flow keeps bleeding red. The upshot? Renters are getting a pretty good deal.
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Originally Posted by Xanathos
Your only argument in favor of being a renter is the concept that the value of the property can collapse. While not an impossibility, history has shown that land has consistently moved upwards in value, and will in general always continue to do so simply because you're talking about a finite resource. Even if the value of your property drops 25% over a span of years, each month you pay into the mortgage, you are either generating a tax write-off for the interest section or equity in the principal. ....
My argument is less about renting vs. owning, than about the fact that for higher-income people, a "low" COL locale is actually high-cost, and vice versa. No, I don't mean outliers like San Francisco or Manhattan, which admittedly have shockingly ridiculous markets. But I do mean say Northern Virginia, vs. Appalachian Virginia. Or the DFW area, vs. some tumbleweed ranch in rural West Texas. Or Philadelphia, vs. some dying town in the Alleghenies.
But towards your specific point, if I am paying for the maintenance and taxes on a property, whose value declines relentlessly over a period of generations, the my equity is declining, even if I've paid off my mortgage. But my carrying-costs keep rising, because the municipality needs money to build schools etc. Tax-write-off? Not exactly, if the price of the house is say less than one's annual salary. The various real-estate tax write-offs are wonderful in high-COL places, effectively subsidizing higher-end houses. They don't help much, if you're in a $100K house in the Heartland (which in 10 years will become a $85K house).
You're in the mindset of an urban area with a healthy housing market. I think you've mentioned about being in greater LA, and everyone knows the demand for housing in urban California is very high, with supply constricted.
That's not the case in some parts of the country. I live in a declining small metropolitan area in northeast Tennessee. There is around five to six months of inventory here. Several new apartment buildings were built recently, bringing new inventory onto the market. The asking rent on most of those buildings have actually fallen over the last few months due to lack of demand.
Where I am, housing has basically gone nowhere, adjusting for inflation, since 2000. In the surrounding rural areas, my guess is that those areas have seen absolute price declines over the past twenty years. Landlords cannot necessarily just jack the rent up because it may take awhile to get new tenants.
Even if housing costs remain flat, let's look at your options:
As an owner: All interest paid on your mortgage is a write-off. It is, in fact, the single best write off on your taxes each year unless you encounter a catastrophic medical event. All non-interest goes into flat-equity (let's call it a 0% savings account). All of your money is being put to work in some capacity, whether it's $20,000 in tax deductions or $4,000 in equity (I just came up with a random 2K monthly nut).
As a renter: Nothing you pay is a write off, and all money you give to the landlord goes directly into their pocket. You just pay $24,000.
Which is the better deal?
Your argument seems to be taking on a bit of a different angle - that being, it's possible to be a landlord and lose money each month because the rental value of the property does not exceed the cost of owning the property. OK, fine. Let's say you actually rent the place out for $200 a month less than what your nut is - so 21,600.
-You're still getting the deduction on the interest section of the mortgage, and you're still socking away $1,600 in equity. That's still a better deal than just handing $21,600 to someone else and losing $21,600.
Let's take it even further than that. Let's say that a significant out of pocket expense occurred, and you actually *lost* money on a rental in a given year. You can write off $25,000 worth of losses, and any excesses can be carried forward to future years. You're still winning vs. just handing your money to someone else. And all of this is predicated upon an assumption that the value of the property will *never* increase, which history has shown to not be the case except in towns that are flat-out dying.
The fatal hole in this argument about "declining areas" is that the topic of this thread is HCOL areas. Which are not declining. Which renders the entire exercise moot, since declining areas are outside the scope of conversation. The attempt to sidebar over to the concept of real estate in a barren corn field and the possible decline of its value has no bearing on the landlord/tenant relationship in an HCOL.
Believe it or not, some people are FROM the Bay Area! I wasn't born here, but my family moved to San Mateo (father was transferred) when I was 6 1/2 - and today my mother, sister/niece/nephew, and closest friends are still here. So when you tell someone to move from their HOME and leave friends/family behind, it's asking us to start a whole new life alone somewhere else. I think about relocating, but it's sad to consider not being able to see my loved ones regularly, and making a whole new circle of friends at age 40.
Not to mention, finding a job comparable to what we have here might not be so easy... I've applied for jobs in Oregon, but even with the lower COL they don't pay nearly enough. I also rarely make it past the screening interview (which is unusual for me), probably because they'd rather hire someone more local. So yeah, easier said than done!
Exactly!
I decided to focus on pivoting my career enough for better paying roles. It's working. I'd still like to make more, but things are comfortable for me now, and I am gradually catching up in terms of other financial markers.
It seems in many higher COL areas being an owner of rental property is largely a play on property appreciation, not renter income. A condo in San Fran that would cost ~$4k/month to rent is selling for 1.175 million. Where I'm at you can buy a duplex that will generate ~$1.8k/month in rent for $225k (which still isn't a great investment). Not to mention the enormous differences in property taxes and the HOA fees associated with the condos. I'd honestly prefer to be a renter in that instance unless my plan was to live in San Fran for the rest of my life. Unless of course you think the insanely high San Fran market will continue to appreciate for the next 5-10 years. If it even appreciates at 5% for the next 10 years you are talking about a 1.4k sq ft condo in San Francisco going for about 2 million. I just don't see that happening, but then again the prices today are astronomical too, so who knows.....
But renter income doesn't actually match up with the current costs. I'd rather have a cash flow positive income property that doesn't appreciate!
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