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Even in the cooling areas, it's still inflated. They're just not having the absurd bidding wars. Sellers are pricing their homes at late 2021 levels and having to cut the prices to get offers now.
If true, that seems like evidence that the market for housing is working. Working markets are not "inflated." They adapt. There is a phenomenon of downward stickiness to prices, but in the real estate market, if you want to sell and you don't have offers, you have three choices:
Let it sit on the market
Drop your price
Take it off the market
What you describe seems like the market is working.
In my current locale, the rent on a studio apartment is less than just the property tax on a smallish (800 sq ft) single family house in a mediocre suburb. So even if I got the house magically for free, COL is lower in the rental than in the purchase. And that’s before insurance and maintenance and the higher utilities of the house.
Not the same at all, because the rental is both smaller and an entirely different type of housing.
What is the purchase price for a studio apt in your area?
What is the rental cost for an 80 sf house in a mediocre suburb?
That is required to make an actual value comp. Sure, sometimes renting is less expensive than purchasing a comparable property. But typically this is not the case.
If true, that seems like evidence that the market for housing is working. Working markets are not "inflated." They adapt. There is a phenomenon of downward stickiness to prices, but in the real estate market, if you want to sell and you don't have offers, you have three choices:
Let it sit on the market
Drop your price
Take it off the market
What you describe seems like the market is working.
These houses aren't worth that much. I hope it all crashes.
Not the same at all, because the rental is both smaller and an entirely different type of housing.
What is the purchase price for a studio apt in your area?
What is the rental cost for an 80 sf house in a mediocre suburb?
That is required to make an actual value comp. Sure, sometimes renting is less expensive than purchasing a comparable property. But typically this is not the case.
It took us a while to reach this juncture in the present thread, but finally, here we go….
If I need underwear, I will buy a new pack. If I need a tuxedo, I’ll rent it. Why? Because the tuxedo gets used 3-4 times in a lifetime, while the underwear gets used, you know, nearly every day. And there’s something disconcerting about rented underwear. Moving on, if I need a commuter car, I’m going to buy one… a used, older, economical and efficient car. But if I need to transport my worldly possessions coast to coast, I’m going to rent a truck – a large one, probably nearly new. It would be silly to buy such a truck, whereas a rental commuter-car quickly gets expensive, racking up the miles.
Returning to real estate, if I buy, I’m going to buy a single family house… probably a capacious one, on a decent chunk of land. Whereas if I rent, the rental is going to be the smallest possible apartment, in the junkiest part of town. Why? Because if renting, I seek to minimize the running-costs. But if buying, I seek to maximize the investment potential. A tiny house, let alone a tiny condo, won’t be good for long-term capital appreciation. And a large rented apartment, let alone a rented house, is going to be expensive, with nothing to show for the trouble.
Well, what happens in some markets, is a dislocation in renting vs. buying. Rents, especially in the so-called blue cities, may actually be frozen, or at least capped. Never mind what are my income or assets. The rent is capped. Sucks to be the landlord, eh!? Pity. But in a house, my property tax goes up-up-up, because our friends in the public-sector want pay raises too, and who are we to begrudge them?
If it were the other way around, well then, I’d be the landlord. Our apartment building isn’t on the market, the owner has casually expressed desire to sell. If the deal were to have made sense, I’d buy the place, and maybe the one next door, and the others on the block. Economy of scale, right? Profits, right? “Bigger pockets”, and all that. Seductive! But the seduction is beguiling. The reality isn’t so appealing. Ergo, I rent.
It's pretty simple. Due to Covid, people are LESS INCLINED to bump shoulders with neighbors in the hallways.
Plus a couple apartment buildings have collapsed.
So demand is up, and supply is down.
Simple as that.
The last bubble was due to speculative buying. That is definitely not the case now.
Yes prices will fall, because there is massive apartment building goin on. But these will fill slowly. People don't want to live in apartments right now.
Whereas if I rent, the rental is going to be the smallest possible apartment, in the junkiest part of town. Why? Because if renting, I seek to minimize the running-costs. But if buying, I seek to maximize the investment potential. A tiny house, let alone a tiny condo, won’t be good for long-term capital appreciation. And a large rented apartment, let alone a rented house, is going to be expensive, with nothing to show for the trouble.
I think more commonly there is balance with renting between something desirable living space and lower running costs, evidence being that most people who rent could probably find something cheaper and smaller but they choose to spend more.
If I need underwear, I will buy a new pack. If I need a tuxedo, I’ll rent it. Why? Because the tuxedo gets used 3-4 times in a lifetime, while the underwear gets used, you know, nearly every day.
we canceled our house purchase because we do think it’s a bubble. Back in 2007 homeowners were denying that it was a bubble same way like they are denying it today. Why, because they are the ones living inside this bubble and will always find justification to say “it’s different this time”. But is it really “different this time”? I don’t think so and that’s why we canceled our house purchase and will wait and see what happens with higher rates.
I like to read his posts. He seems very knowledgeable.
Strange you just joined too
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