patrick.net

thomas.wong1986 says

Its not a $1 Million home.. you need to figure out what it was selling before the bubble began.

Very true. Considering it rents for 3300/mth and assuming the rental market is more reflective (government doesn't give out handouts for renting) of the current economy, then I would place the value at 600K. Hence, why I offer our staff realtor "Tina Tina" to broker this deal for me. She balked because she probably already called the owners and when she mentioned 600K they hung up. The washer/dryer upgrade they added last year cost them $1500 alone. Not to mention the $6k granite countertops. Why in the world would thy consider 600K when they have spent so much on the place to upgrade. Word.

What's with the spam all of a sudden?

RentingForHalfTheCost says

tiny tina says

RentingForHalfTheCost says

Correct me if I am getting this wrong. Are you saying that it is a much better deal to rent this million dollar home in Monta Vista for 3300/mth than to buy it? I seem like I have been here before, but the answer is starting to change now. I thought it was a great time to buy around here?

Where did I say it was a great time to buy in Monta Vista? Everything I have said is clearly documented. Please copy and paste it below.

Can you please just answer the question? Don't understand the hesitation and resistance. I'll repeat it again

Is it a better deal to rent this place in Monta Vista for 3300/mth verses buying it for the 1million+ it would take? Possible answers are below

1) Yes

2) No

Before I paid $3300 per month, I'd buy something I could afford.

So, we did.

thomas.wong1986 says

RentingForHalfTheCost says

Is it a better deal to rent this place in Monta Vista for 3300/mth verses buying it for the 1million+ it would take? Possible answers are below

1) Yes

2) No

That (rent) wont last long when taxes start going up...

Not so. I have been renting into these types of places for 14 years now. Good landlords care more about their place than raping people. This rental is having an open house so the landlord can select the proper tenants. As a tenant you need to sell yourself. You are taking care of an asset that is most likely the majority of the owners wealth. If you want to try to find the highest bidder in the BA, you are taking your chances. A persons ability to pay high rent doesn't mean they are great tenants.

To dismiss perfectly good rentals because they don't fit your "buy now" attitude is not fair. I bet you can even get a multi-year lease on this place and lock in for as long as you want. That is if you sell your tenant qualities properly.

It is not unlike selling yourself to the bank to get the mortgage. Everyone is more than willing to jump through hoops to improve their credit so they can go into huge debt, but they feel threatened when another individual would like to know their character before letting them rent their house. Doesn't make sense to me.

rootvg says

#

Before I paid $3300 per month, I'd buy something I could afford.

So, we did.

#

Good for you. You drank the "buy what you can afford" kool-aid. I would still sell immediately and you would come out ahead in 5 years. Enjoy the fake ownership lifestyle while you have it.

RentingForHalfTheCost says

rootvg says

#

Before I paid $3300 per month, I'd buy something I could afford.

So, we did.

#

Good for you. You drank the "buy what you can afford" kool-aid. I would still sell immediately and you would come out ahead in 5 years. Enjoy the fake ownership lifestyle while you have it.

No, I bought what I could afford and it's apparently more than you could afford...so therefore I am evil or stupid or both.

I don't come from a place where people think this way. I don't come from a place where people are chronically angry and petty and act like children most of the time. We've done pretty well with those values so far and I'm almost fifty years old.

My lifestyle won't change one bit. I'm still gonna fly once or twice per month. I still have my ham radio toys. My wife and I do work we enjoy and are good at what we do and make low six figures each.

I mean, what the hell's your problem? Can I recommend a good therapist?

Let me be even more frank. If this is what you really believe, you may want to consider relocation. This is what it costs to live here. It's expensive. Some people can't afford it or don't know how to manage their money or whatever but this is how it is. It's been this way for a very long time and now it's getting worse. Living in DC or New York or Boston or even Atlanta (I hear it's starting to get very dense and expensive there in place) are always going to be like this. If you can't afford it, MOVE.

rootvg says

No, I bought what I could afford and it's apparently more than you could afford...so therefore I am evil or stupid or both.

Incorrect. It is not at all about what you can afford. That is the trick realtors use on people to forget about assessing the value in the asset. I can afford a lot, and mainly because I didn't fall for the "buy what you can afford" crap. I don't think you are evil, stupid or both. Like I said, though, I think it was not a wise idea to buy into a soft market. Your idea was not wise. Wise people can do things that are not wise. It doesn't mean that they live an evil and stupid life. It mean they made a mistake and they are human. I have made many, and learned and now think that my judgement helps me asses situations and avoid making more mistakes. You could be the smartest, kindest person in the world, but if you tell me your just bought a house in the BA, I would tell you that you were incorrect to do so.

rootvg says

Before I paid $3300 per month, I'd buy something I could afford.

Anyone explored the asymptotic effect this type of thinking might have on rents?

I guess only time will tell who is right. Both sides have placed their "bets."

RentingForHalfTheCost says

Can you please just answer the question? Don't understand the hesitation and resistance. I'll repeat it again

Is it a better deal to rent this place in Monta Vista for 3300/mth verses buying it for the 1million+ it would take? Possible answers are below

1) Yes
2) No

Answer:
3) It depends.

I wouldn't pick either. If you are spending that much on rent, you probably aren't saving much towards purchasing. And I wouldn't buy such a small place for that much money.

If someone really wants to live in the Monta Vista hood, I don't think there are many options in terms of renting, so I could see why some people choose to buy even though renting is technically cheaper. Some people are so hooked on the schools that they figure owning guarantees they'll be there, whereas renting could force them to move.

RentingForHalfTheCost says

Can you please just answer the question? Don't understand the hesitation and resistance. I'll repeat it again

Is it a better deal to rent this place in Monta Vista for 3300/mth verses buying it for the 1million+ it would take? Possible answers are below

1) Yes
2) No

The answer is YES, it is a better deal to rent.

http://patrick.net/housing/calculator.php?uaddr=%2C+&rent=3300&price=1000000

It's not even close. Do not buy for $1,000,000 if you can rent the same thing for $3,300/month.

The only factor that could possibly change that is appreciation. Will the house appreciate significantly in the time you own it? I don't think you should count on that.

On craigslist I see two other houses that are comparable in terms of rent/size - one is $3500 and another $3800. So if Mr. Landlord kicks you out, your rent goes up (still cheaper than buying) or you are stuck moving your kids from their friends and school (that's gonna be fun for everyone I'm sure). I don't think it is as clear cut as you make it. If you want to only look at it in terms of money and ignore all other aspects of life, then sure, renting is the clear choice in this example. I think when talking about Monta Vista, many people are thinking beyond the numbers.

tiny tina says

If you want to only look at it in terms of money and ignore all other aspects of life, then sure, renting is the clear choice in this example. I think when talking about Monta Vista, many people are thinking beyond the numbers.

Like I've said before, I'm in the wrong business. I need to get into money lending.

tiny tina says

Answer:
3) It depends.

Why am I not surprised you would invent a new answer. ;)

Patrick: Is there any city in the US where the upper tier of housing is in line with rents? I checked into San Antonio (very little bubble if any) and Asheville, NC (not sure if there was a bubble there) and they have plenty of million dollar houses with rents around $3k.

Edit: A list of cities would be better than just finding one.

RentingForHalfTheCost says

Why am I not surprised you would invent a new answer. ;)

I know, I'm the first person ever not to be boxed in when given 2 choices. So creative of me...

I need to lend money to creative people...

wthrfrk80 says

I need to lend money to creative people...

Well, we are close. We have money being lent to people who know how to use creative income reporting.

tiny tina says

RentingForHalfTheCost says

Why am I not surprised you would invent a new answer. ;)

I know, I'm the first person ever not to be boxed in when given 2 choices. So creative of me...

It is called winning every argument you ever entered into. I have lost many and I use it as a sign of my ability to learn. If someone poses new data then I try my best (I'm sure I fail sometimes) to read it, analyze, and then form an opinion. Not an easy skill to stick to, but we all should at least try. The inability to answer yes/no is a sign that you might be slipping on that virtue. Just an observation from a stranger.

RentingForHalfTheCost says

Well, we are close. We have money being lent to people who know how to use creative income reporting.

True that. That's the downside of lending to "creative" people. From what I can see of the whole housing bubble fiasco out there, there are a lot of "creative" people in the Bay Area. And they caused plenty of "collateral damage" to the rest of the economy.

wthrfrk80 says

RentingForHalfTheCost says

Well, we are close. We have money being lent to people who know how to use creative income reporting.

True that. That's the downside of lending to "creative" people. From what I can see of the whole housing bubble fiasco out there, there are a lot of "creative" people in the Bay Area. And they caused plenty of "collateral damage" to the rest of the economy.

Do you honestly believe we've never seen any of this before?

You should talk to some people who were around during the Great Depression (aren't many left, admittedly) who bought stocks on margin and lost everything.

We've seen all this before. Japan is slowly coming out of its lost decade. A lot of people think China may be next.

The Bay Area is a bubble. We all know that. It's a place where a lot of people want to live but can't...which also has plenty of opportunity for people with either too much education or money and with strong personalities who've been told all their lives that they're better than everyone else and can therefore change the world.

If you know all that, it's easy to avoid making their mistakes. Period, paragraph.

RentingForHalfTheCost says

The inability to answer yes/no is a sign that you might be slipping on that virtue. Just an observation from a stranger.

Ok. Here's one for you:
Did you stop beating your significant other?
1) Yes
2) No

Please stick to your requirement of only selecting Yes or No because there is no possibility of it being anything else.

tiny tina says

Ok. Here's one for you:
Did you stop beating your significant other?
1) Yes
2) No
Please stick to your requirement of only selecting Yes or No because there is no possibility of it being anything else.

So you're saying there really is a third or fourth option on the "rent vs. buy" question?

I suppose you could "occupy" the house without paying rent or a mortgage. Not sure how long that would last...

wthrfrk80 says

So you're saying there really is a third or fourth option on the "rent vs. buy" question?

Well, considering I gave a 3rd option of "it depends," yes, I'm saying there was a 3rd option. His question was which is a better "deal." If I'm a wealthy guy with a family of two kids and really, really want my kids to go to Monta Vista high school, with the expectation that prices will rise in the future in that school district, then buying for $1M is a better deal than renting which brings the possibility of not being able to send my kids to that school. If you leave everything out and just go by the current numbers and ignore the possibility of rising rents, etc., then renting is a better deal. Thus, "it depends."

If I go into Cupertino with the idea to send two kids through K-12, I would buy instead of rent for the very reason Tina stated.

I disagree Cupertino buying in Cupertino will come out on the losing end fianancially as well. The downside of buying prime property is miniscule compared to the upside.

No, it's not necessarily a better deal than renting. Even if you have the cash to buy the house, you might be better off investing the cash in stocks and bonds, rather than sinking the $ into an overpriced house.

$3300/month = $39600/year

$39600/$1,000,000 = 3.96% annual return on investment (in the form of saved rent). And maitenance, property taxes, and insurance are included in the rent, but not in the purchase price. And that doesn't include transaction costs and realtor fees.

3 to 4% is a pretty crappy return on investment, especially when the investment asset is very non-liquid, very non-diversified, and very risky (prices swing up and down at the mercy of the Fed's interest rates, thanks to the howmuchamonthers).

That's one outcome based on a 1M home in 2012 will be 1M in 2022 and the rents does not escalate one penny. Not a good result for sure. Something like 10K a year wasted compared to buying.

What if the home is 2M dollars in 10 years and/or the rent is now 6K? The risk and reward looks a lot different. Risk 10K for 50K? What If I roll over the 1M cash into a 2.5% interest deductable ARM?

SFace says

What if the home is 2M dollars in 10 years and that rent is now 6K? The risk and reward looks a lot different.

Sure, anything is possible. What if the house is 500k in 10 years and the rent is $4k?

Nobody knows what will happen. What are the risks of each scenario?

Mr. Wong keeps bringing up Silver Creek as a comparison to Cupertino. It's true that the houses in Silver Creek are nicer, for the same $. But:
- HOA
- middle and high school there is not as good. I know several people living in Silver Creek, they all send their kids to private school. Evergreen High is good, but Silver Creek country club is not in that area. Plus there's the risk that the district moves the boundaries- you were in Evergreen High, but not any more. This is not important for everyone, but it's important for the people buying in Cupertino
- commute time. Some people enjoy longer commutes, which is good for them. Most people don't. There's more jobs from Santa Clara to NW than the other way. Grinding up and down 101 every day is not so fun unless you enjoy a lot of time in the car.
- A lot of these communities are designed with no local retail. so if you want to buy something, you have to drive a few miles. Again, ok for some people, not good for others. Cupertino was described as "horrid" for its relatively boring surroundings; but Cupertino's got more going on than Silver Creek.
so, for the same money, some pros, some cons. But it's not as straightforward as looking at the pics of a newer 3000 sq ft house vs a 1960 1500 sq ft house.

Buying a sh** house for 1M with land under, worth 900K and with assumption that this land will keep grow in value, is a very risky proposition IMO.

SiO2 says

middle and high school there is not as good. I know several people living in Silver Creek, they all send their kids to private school. Evergreen High is good, but Silver Creek country club is not in that area. Plus there's the risk that the district moves the boundaries- you were in Evergreen High, but not any more. This is not important for everyone, but it's important for the people buying in Cupertino

I would much rather buy a 3000 sq ft house in Silver Creek than a 1960 1500 sq ft in Cupertino:

1. Silver Creek schools are better than Cupertino schools. Cupertino schools district only spends $6000/student, where San Jose spends over $10000/student. Cupertino schools are riding on the laurels of the parents, not the teachers. This makes the teachers worse than in other school districts. You child will actually learn less going to a Cupertino school, than he would in San Jose.

2. If you are working anywhere in San Jose or Santa Clara, your commute will be shorter from Silver Creek.

3. Cupertino was never as overpriced, in its history, relative to Stevens Creek as it is right now. There was absolutely nothing there, which changed in the last 5 years, which made is so much better than other parts of Bay Area.

So buying a house in cupertino, or anywhere in the fortress, is just buying into the hype, not unlike buying back in Las Vegas back in 2006.

tiny tina says

RentingForHalfTheCost says

The inability to answer yes/no is a sign that you might be slipping on that virtue. Just an observation from a stranger.

Ok. Here's one for you:

Did you stop beating your significant other?

1) Yes

2) No

Please stick to your requirement of only selecting Yes or No because there is no possibility of it being anything else.

My answer (and it is of the Yes or No form) is the opposite of your answer to the following question.

The last time you cheated on your spouse did you feel any guilt?
1) Yes
2) No

There, you have my answer and it met your requirement. ;)

SiO2 says

Mr. Wong keeps bringing up Silver Creek as a comparison to Cupertino. It's true that the houses in Silver Creek are nicer, for the same $. But:

If your gonna buy a $1M home than buy a $1M home that feels like $1M home.. and not some cottage that feels like a $200K home.

thomas.wong1986 says

If your gonna buy a $1M home than buy a $1M home that feels like $1M home.. and not some cottage that feels like a $200K home.

Exactly. Why spend $1M on a house just to be shame of it. LOL

bob2356 says

So what is your point? Don't move places you won't be accepted, that's not rocket science.

This land is your land/This land is my land...

RentingForHalfTheCost says

My answer (and it is of the Yes or No form) is the opposite of your answer to the following question.

The last time you cheated on your spouse did you feel any guilt?
1) Yes
2) No

There, you have my answer and it met your requirement. ;)

Your answer did not meet the requirement. And it's not my requirement, it's your stupid requirement.

The requirement was selecting only yes or no, not merely having yes and/or no in the answer. Learn how to comprehend. Your attempt to be clever backfired.

Anyway, if you ever have some cash and want me to represent you for your purchase in Monta Vista, let me know and I'll go take the test. Otherwise, keep hoping for prices to drop to $300k when they are currently selling for $1M+. What's the saying...put hope in one hand and crap in the other and see which fills up first.

tiny tina says

Anyway, if you ever have some cash and want me to represent you for your purchase in Monta Vista, let me know and I'll go take the test.

Don't really need any representation. The cash in hand is representation enough. Soon 600K cash will get me that Saratoga/Monte Vista house that can be lived in. I'll wait. If the gov't keeps pumping up the market it will only mean the inevitable will happen even harder. This country is on a one way road. The only plan we can develop right now is how to pick ourselves up after we fall. The time it took me to write this note, we just went another 10 million in the hole. That is about 1000 houses in Stockton right now. Kapput! Gone! Never to return.

http://www.usdebtclock.org/

RentingForHalfTheCost says

Soon 600K cash will get me that Saratoga/Monte Vista house that can be lived in. I'll wait. If the gov't keeps pumping up the market it will only mean the inevitable will happen even harder.

Except that the scumbags at the Fed are printing money to keep nominal house prices from correcting. Got to protect the Big Banks from their own mistakes.

That's the problem. The Fed holds the cards in this sucker's game. Will the Fed keep printing money for a decade? If so, maybe you should get into debt and "buy" a house. Will the Fed opt for sound money and low inflaction? Then rent until prices correct.

We're at the mercy of the Fed.

RentingForHalfTheCost says

tiny tina says

Anyway, if you ever have some cash and want me to represent you for your purchase in Monta Vista, let me know and I'll go take the test.

Don't really need any representation. The cash in hand is representation enough. Soon 600K cash will get me that Saratoga/Monte Vista house that can be lived in. I'll wait. If the gov't keeps pumping up the market it will only mean the inevitable will happen even harder. This country is on a one way road. The only plan we can develop right now is how to pick ourselves up after we fall. The time it took me to write this note, we just went another 10 million in the hole. That is about 1000 houses in Stockton right now. Kapput! Gone! Never to return.

http://www.usdebtclock.org/

If they put us on the Amero, those Dollars may not go as far as you planned.

Keep in mind what Lou Rukeyser always said. People have been betting against us since 1776 and they're always wrong. Talk to people who were around during the Great Depression. Talk to people who were in World War II, a war in which the Germans almost beat us and didn't only because of our natural resources. They're all gonna tell you the same thing.

My realtor got a call on Friday from a friend of hers, demanding to know why the house we bought sold as cheaply as it did. I guess there's a foreclosure at the other end of the street, that smells like mold inside and they're asking $799K for it. We got ours for almost two hundred thousand less.

If you're actually waiting on Saratoga to come down to the $600K range, you're gonna wait a long time. Bernanke would never allow it to happen and the next Fed chief (coming sooner than you think) won't either. People would be standing outside their offices with pitchforks.

And don't bother with the snide, silly comments. I was raised in this business and in the financial services business, remember? I thought everyone's dad owned three pairs of wing tips, a suit for each day of the week and got rid of his cars every three years. No one told me different.

tiny tina says

Patrick: Is there any city in the US where the upper tier of housing is in line with rents? I checked into San Antonio (very little bubble if any) and Asheville, NC (not sure if there was a bubble there) and they have plenty of million dollar houses with rents around $3k.

Edit: A list of cities would be better than just finding one.

Yes, pretty much everything in the middle of the country is reasonable even at the high end. It's the coasts that are bad deals for high-end buyers (compared to renting the same thing there).

I should definitely do an analysis and publish a list of cities.