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Old 07-01-2022, 02:43 PM   #15
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Originally Posted by Irace86.2.0 View Post
In that sense, we should expect San Francisco, for instance, to level out unless every rich person wants to own a SF getaway/summer home. It still becomes unsustainable, so it necessarily will flatten, eventually.
It's certainly possible, but only dead things stay still forever. What I am trying to say is the long term trend in property value is quite likely to follow the population growth/shrinkage of a given locality. And if we assume continuous population growth, you can usually assume continuous real estate price increases. At least until Mars becomes a more desirable place to live.
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Old 07-01-2022, 02:47 PM   #16
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Did I say new homes exceeded used, or are you referring to when I was talking about a time when buying new was just as reasonable as buying old because home values were flat? Iím a little lost.
That seemed to be the topic of your second paragraph (explaining why persons buy new vs existing). Maybe I misread it, but I reread it again and it still seems that way to me. I could see where you may not have intended that though.
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Old 07-01-2022, 02:47 PM   #17
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It's certainly possible, but only dead things stay still forever. What I am trying to say is the long term trend in property value is quite likely to follow the population growth/shrinkage of a given locality. And if we assume continuous population growth, you can usually assume continuous real estate price increases. At least until Mars becomes a more desirable place to live.

Well, the prices on Mars aint that bad actually. Small community, looks nice.



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Old 07-01-2022, 03:10 PM   #18
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I don’t get the cohesive argument here.

However, I think my nonsense is worthwhile typing out. The issue of homes appreciating is certainly fucked.
1)My parents bought their home in Joshua Tree in 89 for like 90k. My mom was going to try to put it on the market for 1.2 this year. Is that part of the problem of an exasperated market from Airbnb? I’d bet on that.

2) WFH has caused a significant impact to Sacramento real estate prices. My wife and I started actively going to homes, searching programs, rates, etc as first time buyers third quarter 2020. Bananas. Certainly not a repeat of 2005 housing of ARMs and over leveraging one’s self. People were coming from the bay, with significant borrowing capacity and cash effecting their DTI in comparison to someone from Sacramento. We bought in an area I thought I would never fucking live at because I thought I would live in a higher income area when we first started. In a year, there’s been a 30k equity increase in this home in a not great area of metropolitan Sacramento.

3) As a millennial, I do not expect to see a 100+ increase on my home like my parents have. There’s no way I can imagine this property ever worth 3.5. Perhaps inflation could proceed that way and that’s the outcome but a similar return on investment my parents realized through their homes will never happen.

All this being said, we had a lot of help in the way of cash to compete to get what we got for the sake of not renting and investing but living for the sake of our perceived quality of life values. I don’t work on my car in my apartment parking lot and I have two basset hounds that enjoy a backyard. That’s my ROI as far as I’m concerned. I’ll die in this house and hopefully it’s value benefits someone else.
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Old 07-01-2022, 03:53 PM   #19
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Originally Posted by OkieSnuffBox View Post
One thing your failing to bring up when owning vs renting and I do believe a home is a liability, because anything that costs you money is a liability.

I bought my home here in OKC almost 5 years ago. The payment is the same then as it was when I made the first payment. The fancy downtown apartment I rented when I first moved here at the beginning of 2017 is roughly $300/more per month than January 2017. And most properties like that go up each time you renew your lease.

But I also don't have to replace the AC unit if it goes out, or pay the deductible if a hail storm trashes my roof.

And as far as I gather, many people will buy a home vastly too expensive for their income just because the bank will loan it to them. That's one of the few things that keeps me in Oklahoma. I purchased a nice, completely renovated home in a quiet neighborhood, for $156k. So my month payment is only about 22% of my take home, vs the 30-35% gross banks will lend you. And that doesn't include my fiance's salary.
If someone buys then it is an asset with the potential to be in investment, and if it was mortgaged then it is a liability, yet it still can be an investment.

Rents do go up, but so does property taxes, expenses and repairs, etc. It seems like having a fixed mortgage would be better than a growing rent, but the historical data shows renting on average is still cheaper than a mortgage. Most people donít need to raise rates to match the value of their homes. They would rather have a reliable tenant or risk having a vacancy than to maximize their profits. If someone only paid $1000 for their mortgage, and they are renting it out, the home could maybe sell in the future for a $2k mortgage, but maybe the owner is fine renting for $1500 because it is a $500 profit and guarantees it wonít be vacant. Unfortunately for renters, the vacancy rate is at historic lows, so owners have had the confidence to raise rents, which subsequently raises property values, which can raise rents more, and that continues until people canít afford to rent, so they room together and vacancies raise, and the market stabilizes.

These two videos discuss how renting and investing can result in similar or more or less income compared to owning.


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Old 07-01-2022, 04:16 PM   #20
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Originally Posted by Irace86.2.0 View Post
These two videos discuss how renting and investing can result in similar or more or less income compared to owning.
I only watched the first one, but there are so many variables in it, and they obviously picked the ones that would come to their conclusion (which they basically admit).

For example,

buying a house with 5% down and paying mortgage insurance means you basically can't afford the house you are buying. Buy less house, or save more money before buying.

While you are at it, buy a house you can pay off in 15 years rather than 30 and take the 10 years (to 25 used in the example) to invest your house payment. No "rent" is better than lower rent any day.

What are really the chances you can rent a house of $500K value that signficantly less than the mortage payment? The renter is still paying things like annual property taxes and insurance, as well as expected maintenance (it's just built into the monthly rent payment).
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Old 07-01-2022, 04:26 PM   #21
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It's certainly possible, but only dead things stay still forever. What I am trying to say is the long term trend in property value is quite likely to follow the population growth/shrinkage of a given locality. And if we assume continuous population growth, you can usually assume continuous real estate price increases. At least until Mars becomes a more desirable place to live.
That is definitely a factor among many factors, which is also why I suggested real-estate speculation can still be alive in a flat/recessive, US market due to individual and local trends, but as a whole, the trend for the average necessarily needs to flatten.

I like the topic of population changes because our world and economy is built so much on growth that if we saw no growth or a decline in the population, what would we see? A depression or recession isnít really a bad thing if population growth is in decline or is stagnant, right? Wages can still go up increasing buying power and increasing consumption per capita such that we see economic growth during a population decline or stagnation, but it is an interesting idea. They say maybe 8-10 billion will be the max, and most of that population growth will come from Africa. Several countries are seeing population decline. I donít know if it has been an issue for them. It is always a concern when there isnít enough population in younger generations to support retiring generations, or is it?
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Old 07-01-2022, 05:19 PM   #22
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I only watched the first one, but there are so many variables in it, and they obviously picked the ones that would come to their conclusion (which they basically admit).

For example,

buying a house with 5% down and paying mortgage insurance means you basically can't afford the house you are buying. Buy less house, or save more money before buying.

While you are at it, buy a house you can pay off in 15 years rather than 30 and take the 10 years (to 25 used in the example) to invest your house payment. No "rent" is better than lower rent any day.

What are really the chances you can rent a house of $500K value that signficantly less than the mortage payment? The renter is still paying things like annual property taxes and insurance, as well as expected maintenance (it's just built into the monthly rent payment).
In April 2022, the median listing home price in Sonoma County, CA was $829K, trending up 10.6% year-over-year. At 20% down, that is $166k plus closing costs and fees, which would probably push the price around $200k. The median household income is $86,173. If a couple could manage to save $20k/year then it would take ten years to save for a home, but then the median home would be higher, so they would need to save more. They might be wiser to buy with less down and pay mortgage insurance than to wait and save while renting. It probably depends.

So if the rate of return on investments is greater than the interest rate on liabilities then it makes more sense to invest than to pay off a loan faster. While a 15 year loan has a smaller interest rate than a 30 year loan, and it would feel nice to be debt free, it would be wiser to invest with someoneís extra money than to pay off a home faster. Typically the return on investments in a basic S&P 500 fund is higher than the 30 year mortgage rate.

In many rent controlled areas, it is possible to pay far, far less in rent to get the same housing that someone just bought, but in all the ways I just mentioned in the other post above, rentals tend to be cheaper. If rents get too high relative to mortgages then more people just buy.

But this isnít about the benefits of buying versus renting thread. I was mostly making the point that the current trajectory of the US housing market is unsustainable, but more importantly, the concept that houses will continue to appreciate faster than wages, such that they will forever be an investment, is also unsustainable and unfounded. If we look back in 300 years, we couldnít say that homes forever appreciated at 10%, but wages appreciated at only 3.5%. That canít happen.
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Old 07-01-2022, 08:19 PM   #23
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i started saying that the current pricing trajectory is unsustainable about a decade ago.

my grandparents paid $40k for their new house, in the '40's. my parents paid $80k for their house, early 80's. my house was $150k about 5 years ago, but is already estimating at about $210-$280k. median wages in the area were around $50k, but that's moving up to about $70k really fast once housing prices shot above $200k.

compounding this issue is college debt, and employment. used to be that everyone went to college to make the 'big' money, but now the market is so saturated with people with degrees, all that's left is the lower paying jobs, but everyone racked up thousands in student loans that need to be paid back, which significantly lowers the down payment and monthly payments they can afford for housing.

i think the word we're looking for is 'deferred problem'. old/rich people bought what they wanted because there were more populations of them, and they had the time to save and pay off previous debts. now the young/poor are coming in, but the old/rich already drove the market up. i've felt for a long time that we're putting off a very large depression. there needs to be a reset somewhere, and it's going to be more and more painful the longer we put it off.
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Old 07-01-2022, 08:25 PM   #24
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Things go up and then go down
Thats what she said
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Old 07-01-2022, 08:33 PM   #25
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I said up and down not in and out
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Old 07-01-2022, 08:52 PM   #26
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Different strokes for different folks.
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Old 07-02-2022, 12:44 AM   #27
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So if the rate of return on investments is greater than the interest rate on liabilities then it makes more sense to invest than to pay off a loan faster. .
Tell that to all the folks that lost their homes, or were stuck far upside down in a house during the last real estate bubble. You are ignoring risk, but I've gone around this enough to know I will not convince you otherwise.

I do believe you are skewed by a west coast market though. I paid $240,000 for my 4 bedroom 2800 sqft house in 1995. It is now worth right at twice that, and it's value had never really grown by 10% a year despite it's location in one of the most in demand Atlanta suburbs.

I don't consider it an investment though, never considered a house that, but I bought stability, and I'm good with that. Never would have gotten that renting.
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Old 07-02-2022, 12:50 AM   #28
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My parents bought their house in 1965 for 19k. Worth 2.8 million now. Location, location, location.
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