patrick.net

I'm just grateful today for not throwing away money on property taxes or excessive rent.

Logan Mohtashami says

mell says

Btw gold is approaching $1050,

A break of 1060. downside is as low as 680.

Never even reached $1000, but hey - where is Logan?

JasonM says

about you are paying FOUR FUCKING THOUSAND in rent these days?

You could really benefit from learning about minimalism. One of the most important factors is that you always live within your means. For instance my wife and I recently decided to move out of a house and save $700 by moving to an apartment. We'll miss the extra bathroom, but the additional money we'll have to put into long term investments, and take more vacations will be well worth it! On the other hand if we owned the place we live in, we'd be stuck with our mortgage payment till someone bailed us out by buying our house.

Seems like you just like being unhappy.

Strategist says

Jason, in the end you have to take responsibility for your actions. I'm sure both sides of the argument was presented on Patnet, and you decided to go with the bears. You could have purchased a home in 2010, 2011, 2012, 2013, 2014 and 2015, but did not. If you can afford $4,000 per month in rent, you can afford $4,000 per month in a mortgage.

I would say....stop crying over spilt milk and buy a home right now. The shortage of homes is very severe, unemployment is declining, the economy is slowly but surely picking up steam. This spring we will see the beginnings of one of the greatest real estate bull markets ever seen by living Americans.

I wonder if Jason ended up buying 2 years ago when he went on that rant. He would have been well ahead if he purchased even 2 years ago.
Nothing has changed from2 years ago. The shortage of homes is still severe, probably even more severe. The economy continues to improve, and unemployment continues it's downtrend. Bottom line......Home prices can go only one way. Higher higher and more higher.

NuttBoxer says

You could really benefit from learning about minimalism. One of the most important factors is that you always live within your means. For instance my wife and I recently decided to move out of a house and save $700 by moving to an apartment. We'll miss the extra bathroom, but the additional money we'll have to put into long term investments, and take more vacations will be well worth it! On the other hand if we owned the place we live in, we'd be stuck with our mortgage payment till someone bailed us out by buying our house.

In reality.....Your mortgage would be what you are paying in rent right now. You would also have a lot of equity.
Hope you learn from your mistakes.

I have been doing pretty good by not buying a house and investing all on SP500, what it's historically better

Strategist says

In reality.....Your mortgage would be what you are paying in rent right now. You would also have a lot of equity.
Hope you learn from your mistakes.

You mean in hindsight, which is always perfect.

Tell me, how would I extract said "equity"? And how would said "equity" be affected by say, an economic crash? And If I lost my job, would this equity enable me to continue paying my mortgage?

I've paid less than mortgage my whole life except for the past six months, I'll take my profit, my freedom, my time, and my inflation/economic crash proof investment over your decaying, inflation bloated, non-liquid "equity" any day.

The answers to the multiple questions in the OP depend on what JasonM have done with the money he didn't have to plop down as a downpayment.

Did Jason put his "Downpayment Savings" in Stock?

Or did he believe that Trump was gonna crash the stock market. After all, the Very Serious People told him, from Posters on Pat.net to Paul Krugman himself, that Trump was gonna tank the market.

KimJongUn says

The answers to the multiple questions in the OP depend on what JasonM have done with the money he didn't have to plop down as a downpayment.

ja says

I have been doing pretty good by not buying a house and investing all on SP500, what it's historically better

Oops, smart Patneters have beat me to it.

NuttBoxer says

Tell me, how would I extract said "equity"? And how would said "equity" be affected by say, an economic crash? And If I lost my job, would this equity enable me to continue paying my mortgage?

If you have enough equity, you could extract it with an equity line, or by selling the home. I would not recommend either.
In the event of an economic crash you are likely to lose your equity until the market comes back.
If you lost your job, an equity line would enable you to pay your mortgage. How would you pay your rent if you lost your job?

Curious what you think the removal of the SALT deduction will do to CA home prices. It personally affects my situation because I won’t have enough to itemize without my $13k state tax deduction. My mortgage interest and property tax deduction only come to $17k combined. Need them both plus the personal exemptions x family of 4 to make itemizing work.

We will survive because the child tax credit will be in play for us at a higher income than before and the lower tax rates in some brackets. But still won’t make up for currently itemizing about $43k... down to being forced to take the $24k standard deduction. Hell, even the “doubling” of the standard deduction is disingenuous in my families case... currrently my standard deduction plus my personal exemptions come to $28900. So where does that double standard deduction kick in?

The answer is clear: California must conform to a better, national standard and rejigger the laws that punish work and consumption while underplaying the property tax.

Raising the property tax rate will cause prices to fall, making houses more affordable and stabilizing the tax base. A tax base that depends on wages and consumption declines at the moment it's needed the most (ie a Recession).

Another great thing, and this could be done on a Federal Level, is to require all states to have Anglo-Saxon Water Rights. Not Imperial Spanish ones that favor latifundia, aka Slave-run Plantations or Estates.

And to charge the commonly held riprarian resources based on FLAT water use. In other words, residences and farms would pay the same rate per gallon.

As for plantation owners, they didn't make California great; technology and aerospace did,even if Lockheed Martin makes the taxpayer drop the soap once in a while.

In vast majority of cases, investing downpayment in stock market will seriously under-perform buying a house with 20% down due to leverage issues and rent increases. It is literally an unforced error in terms of tennis and may result in serious long term regrets.

$50k in the stock market with minimal commissions/flat fee trades in 2008... then fast forward almost a decade. SPY was what, $140 in May 2008? It's $240 now? That's a gain of $100/unit, though weeks later it crashed to $68/unit. That's a 70% gain in almost a decade, even if you brought just before the market tanked.

During that time you also collected dividends.

You also pay no taxes on stock price gains until you sell them. With DRIPs there is no taxation on dividend reinvesting either until you sell the stock many years later if you buy and hold like most of your portfolio should be.

With real estate, you pay property taxes annually AND capital gains at sale. There are also maintenance costs, not only roof patching or window caulking, but also leaves don't rake themselves. Maintenance for the SPY ETF is a fraction of a fraction of 1%.

Have California Properties average 70% gains since the middle of 2008 with almost no maintenance and no annual taxation?

anon_7ebb1 says

In vast majority of cases, investing downpayment in stock market will seriously under-perform buying a house with 20% down due to leverage issues and rent increases. It is literally an unforced error in terms of tennis and may result in serious long term regrets.

Thank You. Absolutely right. Lets take Jason's example.
With 10% down the difference is even more drastic. Stocks went up roughly 30% in the last 2 years, while the median home increased 15%. If you had 10% down, and purchased a home, you would up 150%, vs 30% for stocks. 60% if you went on margin. There is no comparison. Our system makes buying your own home the best investment you can ever make.

TwoScoopsMcGee says

With real estate, you pay property taxes annually AND capital gains at sale. There are also maintenance costs, not only roof patching or window caulking, but also leaves don't rake themselves. Maintenance for the SPY ETF is a fraction of a fraction of 1%.

With stocks you also pay capital gains tax. With your home you pay no capital gains tax for the first $500K in appreciation.
I cannot stress enough....buying your own home is the best investment you can ever make.

Sniper says

Strategist says

I cannot stress enough....buying your own home is the best investment you can ever make.

That's where you're wrong. Buying your home gives you SHELTER first, that's the MOST important piece. You have control over your shelter versus your landlord. Any investment growth is icing on the cake.

Yes, but there is a lot of icing, in warm coastal regions. With the fucking taxes state of California imposes, along with the appreciation, buying a home in California gives you one hell of a return.
Look at it this way.... A 6% long term appreciation, with 4% interest rates, is like getting paid to buy a home in California. So tell me, how can California be an expensive place to live in, when you actually get paid to live in your own home. More so when property taxes are not high, and we get tax write offs for the interest and property taxes, for both federal and ridiculous state taxes.
The numbers clearly show buying your own home in California and many other states is an incredible deal. Not a great deal in parts of the country where long term appreciation is very low.

Strategist says

Not a great deal in parts of the country where long term appreciation is very low.

So what happens in those areas (like here by me)?

Sniper says

Strategist says

Not a great deal in parts of the country where long term appreciation is very low.

So what happens in those areas (like here by me)?

I thought New York, New Jersey were appreciating areas. If you are happy there, have friends and family, you really have no reason to move. What good is life if you are not happy? You seem to have everything there. Roots, family, friends, grandchildren. Philosophically, you have everything. Most people would would love to have what you have.
From an investment point of view it's a whole different animal, but you have lots of alternatives in the stock market.

Rent: A

Mortgage interest + property tax + HOA + maintenance - (tax deductions): B

If B < A, then buy

As a general rule of thumb, B < A in lower class areas. B > A in affluent areas.

Strategist says

If you have enough equity, you could extract it with an equity line, or by selling the home. I would not recommend either.
In the event of an economic crash you are likely to lose your equity until the market comes back.
If you lost your job, an equity line would enable you to pay your mortgage. How would you pay your rent if you lost your job?

So debt is your answer. Figures, since debt is how most people get a house to start with. I enjoy living debt free and within my means. Keeps me from having to go through the shock of reality if rampant credit should ever disappear.

If I lose my job, I move to a smaller place. Since I'm just renting it's an easy, and immediate solution.

I do plan on buying some land for homesteading at some point, but waiting until my investment pays off, and I can do it with a minimum of debt.

Sniper says

In the event of an economic crash, can you guarantee your landlord will continue to pay HIS mortgage? What if he gets foreclosed and the sheriff shows up to kick you out? What do you have as saved equity in that situation?

Money I put into an investment with return not based on a bubble economy. If the sheriff shows up, it's a rental, I just move on to whatever is affordable given the market. Again the beauty of renting and living within your means.

Our system makes buying your own home the best investment you can ever make.

——————

My how quickly people forget.

When you say “our system”, do you mean Free Market Capitalist system? Or American Lemon Socialism?

I haven’t forgotten the housing crash from ten years ago. All the so called “Capitalists” demanded that the government bail them out, otherwise that system was going belly up. That system you celebrate that makes the same buildings that decay to literally Negative value over time, go up in perpetuity (when priced in US dollars).

Sniper says

errc says

My how quickly people forget.

When you say “our system”, do you mean Free Market Capitalist system? Or American Lemon Socialism?

Why you angry bro?

Didn't Bernie give you the free house he promised?

Your comment doesn’t make any sense.

I’m not angry

Bernie didn’t promise me a free house.

Why not try and answer the questions rather than attacking the messenger?

errc says

Bernie didn’t promise me a free house.

Really, he offered everything else under the sun for free? How did he miss that?

BayArea says

Rent: A

Mortgage interest + property tax + HOA + maintenance - (tax deductions): B

If B < A, then buy

Buy even if B > A, because in a few years B < A.

errc says

I haven’t forgotten the housing crash from ten years ago.

So what? the market came roaring back and went even higher. Happens every time.

NuttBoxer says

If I lose my job, I move to a smaller place. Since I'm just renting it's an easy, and immediate solution.

You can do this as a homeowner as well, you know that I assume? The reality is most people are completely fucked if they lose their job unless a spouse is a massive bread winner. You lose a job, you lose your house. Whether you rent or own. Not much to it. You move in with mom and dad or relative or a cool friend. The benefit of owning is the landlord (bank) will take absolute minimum 9 months to maybe years to kick you out. Even in tenant friendly cities, you stop paying, you're out in 90 days or less. There's value to that whether anyone want to admit that or not.

NuttBoxer says

Strategist says

If you have enough equity, you could extract it with an equity line, or by selling the home. I would not recommend either.
In the event of an economic crash you are likely to lose your equity until the market comes back.
If you lost your job, an equity line would enable you to pay your mortgage. How would you pay your rent if you lost your job?

So debt is your answer. Figures, since debt is how most people get a house to start with. I enjoy living debt free and within my means.

Are you really debt free if you are paying your landlord's mortgage?

Strategist says

Are you really debt free if you are paying your landlord's mortgage?

Absolutely!

I'm completely debt-free and have a good pile of money in the stock market. More all the time. Thanks, Trump!

And yet I still rent. Why? Because it's cheaper. And because I'm too lazy to change things.

Strategist says

Buy even if B > A, because in a few years B < A.

Not necessarily. For me, and it's been a damn long time, B > A even now. Cost of owning the same thing is significantly larger than renting it. I won on a month to month basis for, oh, 18 years in a row. True that I did not participate in the appreciation of the land under the house, but I got mine in the stock market.

Land did really appreciate around here, but the stock market did about the same for me that the land would have done. So I don't get all that excited about the arguments anymore.

Buying real estate in the SF bay area is like buying AMZN or some other similarly overpriced stock. It looks like a poor investment when you crunch the numbers, but it has been making good returns for 5 years straight right now.

rando says

I'm completely debt-free and have a good pile of money in the stock market. More all the time. Thanks, Trump!

If you didn't already diversify investments into some realestate, you should consider how diversified you are right now, and look for the next opportunity to add it to your investments. I think ideologically, you are so anti-home buy, that you cannot admit to yourself that ...

rando says

Cost of owning the same thing is significantly larger than renting it.

... when you are paying your mortgage, anything going to principal is paying yourself. Roughly my mortgage was 3K, 1K being paid to principal a month. That means you would have to be renting for 2K. Want to argue on property taxes, insurance, and upkeep costs? Fine. Show me you can rent a 5 bedroom, 2 bath, 2000+ square foot single family home for 2K, and then beat the additional costs. Can't be done.

Additionally the current home price has gained 120K, each year, for the past 3 years, not including the work we have done to the home. Rent/mortgage would now be around 4K if one was to acquire the property now.

If I took ALL the money invested, put into, and tied up in the house, and bet it all on a winner like AMZN for three years (roughly a 500 -> 998 per share price gain), I'd still only make 200K. That's a 200K gain for a hell of a lot of risk!

People who have an opportunity to buy a SFH in an area they want, should work to do it, when there are deals to be had. When you see a maximum of fear take hold in the housing or stock market again, it's time to buy.

Hint: right now its not bad to get some cash ready to do that buying. People look pretty optimistic for what has been a very long, tired, slow cycle. Anything people have in the stock market, I'd say they should be willing to let sit there for 5-7 years, and don't pull your money out when it drops. Too late.


Here, just read G-Sachs:
http://www.businessinsider.com/market-valuations-goldman-sachs-warns-most-expensive-since-1900-2017-11
When your main business is investing, and one potential you mention is a big bear market ... Logan will call you an America hater ... but I really don't care that I missed this years run up sitting on a chunk of cash, or next years.

Too each their own. Best of luck.

Sniper says

What investment would that be that won't be affected in the next crash?

Anything not tied to fiat currency for it's main source of value. Land and houses obviously still have intrinsic value apart from dollars, but they won't retain their current inflated values. Especially if they don't have a well on the land. Gold and silver are the most common historical hedge. But there are other assets that will retain, or gain value, food is a good example. Proper storage and control/security become an issue though, as food isn't as easily transported as coins. Personal business's that can maintain a steady supply of their product, and sell something people always need, are another one.

WookieMan says

The benefit of owning is the landlord (bank) will take absolute minimum 9 months to maybe years to kick you out.

That is a good point. Was three years for some people during the last housing crash. You'd still have to calculate your down against other top investments, upkeep, taxes, against the money you save waiting for the sheriff.

Rew says

when you are paying your mortgage, anything going to principal is paying yourself.

Of course, I already took that into consideration.

Still way cheaper for me to rent my place in particular, and it's generally cheaper to rent than to own in most of the SF Bay Area.

The numbers are facts:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

The inputs to that calculator are the subjective part. People tend to assume way too much appreciation in the value of the land. (Houses never appreciate. Only the land under it appreciates. A house is a wooden box which sits out in the rain and slowly rots.)

Slowly rots is right. My 200 year old house cost $180 on the earliest land records from the year 1832.

In 2012 I pulled up one room of antique floor boards and sold them to a lumber co for $300 nearly double the cost of the whole house!

anon_4c105 says

Slowly rots is right. My 200 year old house cost $180 on the earliest land records from the year 1832.

In 2012 I pulled up one room of antique floor boards and sold them to a lumber co for $300 nearly double the cost of the whole house!

I would have paid $1 million for it if you threw in the worthless lot beneath the floor boards. Too late.

anon_4c105 says

Slowly rots is right. My 200 year old house cost $180 on the earliest land records from the year 1832.

In 2012 I pulled up one room of antique floor boards and sold them to a lumber co for $300 nearly double the cost of the whole house!

Assuming you bought in 1832...

anon_7ebb1 says

In vast majority of cases, investing downpayment in stock market will seriously under-perform buying a house with 20% down due to leverage issues and rent increases. It is literally an unforced error in terms of tennis and may result in serious long term regrets.

Yes.. using a loan will give you potentially more rewards (and more risk). It's difficult to get a loan to invest on stocks. But if we compare apples to apples, stocks tend to do better than housing, considering everything.


http://www.fau.edu/newsdesk/articles/homeowners-cant-count-on-property-appreciation-for-wealth.php
Abstract:

It is ell accepted that homeowners, on average, have greater total wealth than renters. However, Beracha and Johnson (2012) show that in a strict “horserace” comparison, renting creates higher wealth than ownership in the majority of cases. In this paper, we revisit Beracha and Johnson's buy versus rent model to investigate factors affecting the wealth outcomes of the buy versus rent decision. Three key findings emerge: (1) the difference in wealth between renting and owning can be most affected by choices within the scope of the individual rather than through the impact of exogenous market variables; (2) households that fail to reinvest buy-rent cash flow differentials acc