Home buying questions - economic benefit (Frisco, Highland Park: rental market, cheap house, neighborhoods)

[EDS_]

Originally Posted by bencronin04

Oh absolutely not. That goes back to the house and value of it. Older people own houses, thus they have a higher net worth.

We simply disagree.

[bubbyK]

Originally Posted by EDS_

Unless there is a serious national recession there is no way Dallas area home values come down over the next several years.............the employment picture is just too good and the area is still a significant home buyer's value leader of most all other large/good economy cities in The US.


I see the recent local price run up as a nothing more than a broad price correction. Prices have been too low here for too long relative to the strength of the local economy and real take home pay.


Today, especially here in Dallas, there is very little low quality home lending going on.

EDS, I can understand your viewpoint on this, however many on these boards have not lived through a time of rising interest rates. We're in a world of unprecedented firsts.

For those that did, the late 70's and early 80's were a time when you begged someone to take your house payment over for you.

We have no real idea what's in store in the future.

[EDS_]

Originally Posted by bencronin04

Oh absolutely not. That goes back to the house and value of it. Older people own houses, thus they have a higher net worth.

Continued from above........

Obviously to to degree you are right. Homeowners do skew older than renters - everyone agrees with that. However, the age difference does not skew to the degree many people think. I just looked it up 63.9% of renters are 35 or older versus 90.1% for homeowners. That 26.2% relative difference alone does not come close to explaining a 40-fold difference in net worth.

If the difference in net worths between the groups was 100/200% I might agree with you, instead the difference is 4,000%.

Along each ten year age bracket from 15-84 homeowners earn significantly more money than renters.

It comes down to a combination of uncomfortable racial metrics, income differences, long term goal directed behavior differences, state/city specific tax policy that forces many to rent (NYC, SF, LA etc.) and mind-set.

[EDS_]

Originally Posted by bubbyK

EDS, I can understand your viewpoint on this, however many on these boards have not lived through a time of rising interest rates. We're in a world of unprecedented firsts.

For those that did, the late 70's and early 80's were a time when you begged someone to take your house payment over for you.

We have no real idea what's in store in the future.

I'm 51 so I do remember the Carter era........although only as a high school student.

There is absolutely nothing on the horizon that portends Carter era interest rates.

[serger]

Originally Posted by EDS_

Continued from above........

Obviously to to degree you are right. Homeowners do skew older than renters - everyone agrees with that. However, the age difference does not skew to the degree many people think. I just looked it up 63.9% of renters are 35 or older versus 90.1% for homeowners. That 26.2% relative difference alone does not come close to explaining a 40-fold difference in net worth.

If the difference in net worths between the groups was 100/200% I might agree with you, instead the difference is 4,000%.

Along each ten year age bracket from 15-84 homeowners earn significantly more money than renters.

It comes down to a combination of uncomfortable racial metrics, income differences, long term goal directed behavior differences, state/city specific tax policy that forces many to rent (NYC, SF, LA etc.) and mind-set.

Well, that's the thing, in general, the income level is very much higher in the homeowners group, hence the higher net worth.

[Transplanted99]

Some observations:

1a) there are few homes for rent the higher up the price scale you go and
1b) landlords for those higher scale homes tend not to want to be landlords for the long term, hence there is little chance for the renter to avoid switching costs in a series of rental properties
2) renters (who plan to become future homeowners) rarely rent the equivalent property to what they will eventually purchase (they are saving money for a purchase, after all).

Simply... They are different markets.

It is one flaw in the rent vs buy debate - any apples to apples comparison is going to be to a limited segment.

I would suggest that the OP's budget of $400K in the DFW area is not a segment that offers a clean apples to apples discussion.

$400K should buy a nice 4Bed, 3.5Bath, 3 Car Garage, in a nice school district in the northern suburbs. Assuming a (good) FICO of 700, with 20% down, that is a monthly mortgage payment ~$1.7K ( Credit Score Calculator: Estimate Your Loan Savings with Higher Scores ) + ~$1K property tax (from some poster above).

Renting something similar might be ~$3200 ( Houses for Rent in 75093 - Plano, TX 75093 Rentals - realtor.com® ), but most seem to be well above that.

Markets change, but the dynamics right now look uneconomic to rent the same type of property as one would purchase, in this price range.

[EDS_]

Originally Posted by serger

Well, that's the thing, in general, the income level is very much higher in the homeowners group, hence the higher net worth.

Right, that's most of my point above.

[serger]

Originally Posted by Transplanted99

Some observations:

1a) there are few homes for rent the higher up the price scale you go and
1b) landlords for those higher scale homes tend not to want to be landlords for the long term, hence there is little chance for the renter to avoid switching costs in a series of rental properties
2) renters (who plan to become future homeowners) rarely rent the equivalent property to what they will eventually purchase (they are saving money for a purchase, after all).

Simply... They are different markets.

It is one flaw in the rent vs buy debate - any apples to apples comparison is going to be to a limited segment.

I would suggest that the OP's budget of $400K in the DFW area is not a segment that offers a clean apples to apples discussion.

$400K should buy a nice 4Bed, 3.5Bath, 3 Car Garage, in a nice school district in the northern suburbs. Assuming a (good) FICO of 700, with 20% down, that is a monthly mortgage payment ~$1.7K ( Credit Score Calculator: Estimate Your Loan Savings with Higher Scores ) + ~$1K property tax (from some poster above).

Renting something similar might be ~$3200 ( Houses for Rent in 75093 - Plano, TX 75093 Rentals - realtor.com® ), but most seem to be well above that.

Markets change, but the dynamics right now look uneconomic to rent the same type of property as one would purchase, in this price range.

Well, currently this budget (400k) cannot buy that (above) in 75093 (one house pending, that's it). In Frisco, a bit better but not very much, maybe 20 houses.

Additionally, the OP was talking about 15 year mortgage, so the monthly is more.

[Johnhw2]

Originally Posted by EDS_

I'm 51 so I do remember the Carter era........although only as a high school student.

There is absolutely nothing on the horizon that portends Carter era interest rates.

The level of gov debt is at record levels relative to GDP and does suggest a cost if debt issue on the table.

I agree there is a mindset difference in owners and renters. One understands assets, ownership and liabilities whilst the other just sees liabilities.

[EDS_]

Originally Posted by Johnhw2

The level of gov debt is at record levels relative to GDP and does suggest a cost if debt issue on the table.

I agree there is a mindset difference in owners and renters. One understands assets, ownership and liabilities whilst the other just sees liabilities.

I like the way you are thinking.

The CBO predicts that debt v. GDP will stay relatively constant over the next 10 years. There is absolutely no sign of significant inflation in the near or medium term. I like The Yellen Fed's eye towards inflation. It's more of a get in front of it before it takes hold.

The Dallas Fed Trimmed Mean PCE inflation number for the year leading into May is 1.6%.

Unlike Volker who during the Carter era had no choice but to ramp up rates in part because The Fed. was late to being tightening quarters earlier, although that's simplified.