“To buy or not to buy…that is the question”
For the sake of simplicity, I am going to apply my rationale to the California housing market. I know that property values have gone up many places, but I think California as a whole probably has the worst affordability problem. California is where I live, it is where I work in the mortgage business, and you can apply the fundamentals that I will talk about to any area of the country. Now let’s get moving!
In this first segment, I want to look at the ‘core’ arguments people use for ‘owning’ versus renting. The 4 main points I hear as to why owning is better than renting are (in no particular order):
1. Tax benefit
2. Appreciation
3. Pride of ownership
4. Stability
Before we get going, I want to say that I have absolutely nothing against owning or renting. I just think the choice should be based on math and finances, and not emotion and ‘hype’. That said…let’s start looking at things.
To look at this rent vs. own decision, we need to look as if we were buying TODAY, not yesterday, not in 2003, and not in 1997. To do this, let’s use a ‘median’ priced type home for California. I will use a price of $550,000. If you live in CA, you know this isn’t going to get you something that great. It will be a 1-2 bedroom condo, or an older, smaller, SFR, that isn’t in a ‘prime’ area. Yes, there are always, exceptions, but I think this is a fair assessment.
Since most people do not have the 110k to put down, and about half of your first time homebuyers put no money down, I will use 100% financing in this example. I will assume ‘good’ credit with a 700+ FICO score. I know 100% financing isn’t preferred, but let’s face it, many of the financial decisions made during this real estate boom aren’t preferred, just very popular. To get a 30yr fixed on this house, we will use a 6.25% 30yr fixed first, and a 9% fixed 2nd. I will use a LOW tax rate of 1% even though 1.25% is more realistic for most areas in California. I will use a flat $75 a month for insurance.
$440,000 at 6.25% = $2,709.16
$110,000 at 9.00% = $885.08
Property Tax 1.0% = $458.33
Monthly Insurance = $ 75.00
Total payment = $4,127.57 **note: if this happens to be a condo or PUD, add HOA fees. Add Mello Roos as well
I know about what a 1 bedroom condo rents for, and I also know what a smaller 1000-1200 sqft house rents for that falls into this price range. You are looking at rents that most likely fall in the $1200 to $1800 a month range for a place like this. I know several friends that rent million dollar plus homes in the $2500 - $3500 range. So I feel comfortable with these amounts. Again, I know that most people do NOT get a 30yr fixed or a fixed 2nd, but if you are getting an interest-only loan, then you are just ‘renting’ from the bank, and banking on the appreciation you hope the property generates. You get a tax deduction, but ’spending a dollar to save 40 cents’ isn’t necessairly the best plan either. Maybe some of the tax pros can chime in on what they see with regards to the actual write-offs for real estate. I have heard from several people that their ‘tax break’ wasn’t all it was cracked up to be. It was nice, but they were expecting much more.
That said, how many people can really afford to spend $4000 a month on their mortgage?? Let’s use the higher debt-to-income ratios of the subprime market at 55% for a full doc loan. Let’s give this person the benefit of the doubt, and assume they have zero debt and zero car payments. I’m trying to err on the side of ‘lower’ than actual costs to show how much money you should really be making. Using the $4,127.57 payment with no other debt, at a 55% debt ratio, you would need to make $7,504.67 per month or $90,056.07 per year. If we throw in a car payment or a little credit card debt, and round the monthly debt payment off at $4600 a month, we would need to make $100,363.63 per year to ‘afford’ this house. Again, let’s not forget that this is with 55% of our income going to DEBT…this is before taxes, food, gas, furniture, savings, health insurance, dental, disability insurance, entertainment, vacations, movies, fun, etc.
Makes you wonder if there is REALLY enough money left over to do anything else after 55% of your income is going to debt payment. Add another 25% to taxes, and you already have 80 cents of every dollar you make spent!! As you can see by this CAR data, most people in California make about half that amount. So it is possible for a couple to ‘afford’ this median priced home. But let’s not forget that I am using a 55% debt ratio and assuming very little debt, and using low estimates for property taxes and no HOA’s. I’m also assuming it is not a fixer upper, and move in ready.
Don’t you wonder why for the longest time (decades) that banks wanted people to spend no more than 28-33% of their gross income on housing? Now it is commonly accepted to use 40-43% or even higher in subprime. I won’t even get into ’stated’ income loans right now. If you can’t qualify at a 55% debt ratio, then should you really be buying?
Know that we have a good ballpark of what is costs to ‘own’ ($4100-$4200 a month), and we know what it costs to rent…$1200-$1800 a ‘median’ priced home, which looks like the better option for ‘most’ people TODAY? With the median income in CA only 53k, how many people can really spend $4000 a month on their mortgage for the LONG TERM?!??
I know that pride of ownership is a nice feeling. I know that getting 10-20k back on taxes is nice (rough guess…no number crunching there), I know that reading the OC register and watching the news and hearing about escalating property values is REALLY nice. But what happens IF that appreciation happens to slow, stop, or heaven forbid, go the other way?? I’m not saying it will happen, but can you at least admit that it COULD happen? What is the plan if everything doesn’t go as planned? What happens to that pride of ownership if you can’t sell your house for 5-6% more than what you paid for it to break even?
WHAT?!!??!
Yes, you have 5-6% transaction costs to buy and sell real estate. If you buy the place for $500k today, you can’t sell it for $500k tomorrow and ‘break even’. You need to pay 20-30k to get that house sold. So you better hope that you have some appreciation in there. And no, an appraisal doesn’t mean that is the ‘value’ of your house. The real ‘value’ of your house is what somebody will PAY you for it. Appraisals look at recent sales to guage your value. If the values happen to be declining, your appraisal is a ‘lagging indicator’ of the market.
So, assume you are looking TODAY at buying vs. renting, where do you stand? Let’s answer these questions.
1. Can you afford to put money down? If not, do you have 3-6 months minimum of ALL your living expenses in savings…including your ‘new’ mortgage payment? If no, they I would consider renting.
2. If you have some money down, can you afford a 30yr fixed rate mortgage payment? You probably need to be making $120,000 a year or more to do this realistically in California.
3. Do you like the house and plan on staying a while. Emphasis on staying a while. If your job isn’t set or secure, or you can’t find another high paying job quickly, I would suggest renting for a while.
4. Do you realize that property values MIGHT go down? And if so, are you prepared to take a loss or wait it out? Remember, past performance is NO guarantee of future results. Just because property has doubled in many places, doesn’t mean it will continue to do so.
Even in today’s market that just experienced rapid appreciation the past few years, if you can answer the above questions, and are comfortable with the situation, then by all means, go ahead and buy. If you have the money to put down, are making great money that will continue, can easily afford the home, and plan on staying a while no matter what the market does, then by all means, enjoy your new home.
I’m just here to point out to the people that don’t have the savings, the down payment, or the income to ‘afford’ a house TODAY. I’m here to let them know it is OK to rent! Based on the statistics, I think renting is the smart choice for the ‘average’ person in California with the ‘average’ income. I don’t think getting an I/O or neg-am loan so that you can ‘buy in’ today is the best choice. Those loans were designed to help sophisticated people manage their cash flow, not help people that don’t make enough money get a house they can ‘afford’.
Read some of the stories in the forums. There are people in there with real world stories about how hard it was to ‘live’ with a mortgage that was only 30% of gross income, and not 55%. There are stories about people with kids, families, and people that experienced ‘unplanned’ events. Take their word for it, not mine.
I will get into renting more this week. I know renting can be a pain. Moving, it’s not your place, etc. We will look at this more later in the week.
I hope this helps people some. I know it is not all inclusive, but it should give many people, lots to think about.
I look forward to the comments!
SoCalMtgGuy
February 6th, 2006 14:17
Your numbers in my spreadsheet: It’s equivelent to a 100% down loan, 6.8% (6.25 * .8 + 9 * .2) loan, 0% PMI…
$0 budget for HOA/Maintinence. 1.2% property tax
I get $4118 (close enough) So our numbers match reasonably well. (I think I may be slightly off on principle payments to get the exact 30 year number, also APR vs APY issues). So I need to tune my spreadsheet a little more, but it is “good enuf for government work”.
If you factor in tax savings in the 28% fed, 9.3% state (the >80k single tax bracket. Savings are less if married and/or kids), the tax-neutral cost/month is ~$2800/month. The Interest, property tax, insurance ALONE is $2300 a month.
(My hypothesis: Interest, property tax, hoa, & insurance, after tax deductions, 10+ years in the same place (possibly 15+) to break even. If prices just stay flat for a few years, I’ll come out VASTLY ahead by renting instead of buying.
February 6th, 2006 14:18
Your numbers in my spreadsheet: It’s equivelent to a 100% down loan, 6.8% (6.25 * .8 + 9 * .2) loan, 0% PMI…
$0 budget for HOA/Maintinence. 1.2% property tax
I get $4118 (close enough) So our numbers match reasonably well. (I think I may be slightly off on principle payments to get the exact 30 year number, also APR vs APY issues). So I need to tune my spreadsheet a little more, but it is “good enuf for government work”.
If you factor in tax savings in the 28% fed, 9.3% state (the >80k single tax bracket. Savings are less if married and/or kids), the tax-neutral cost/month is ~$2800/month. The Interest, property tax, insurance ALONE is $2300 a month.
(My hypothesis: Interest, property tax, hoa, & insurance, after tax deductions, should be less than rent, since rational markets landlords can make money, even if they are actually “spending” more/month in cashflow than the tenants provide).
Compare with rent at $1800/month, saving the difference between renting at tax-neutral cost of buying over 5 years at 3.5% after tax end up being $55k.
The gain after selling in 5 years (7% sell transaction cost) is only 47k if housing goes up by 3%/year. If it stays flat, the gain is -$38k.
I actually am in the category of “Afford to buy”. I’m not buying now. I’d have to stay >10+ years in the same place (possibly 15+) to break even. If prices just stay flat for a few years, I’ll come out VASTLY ahead by renting instead of buying.
(Reposting because of bad tag)
February 6th, 2006 14:26
While estimating tax savings, remember that these savings might not materialize due to AMT.
In my case, we use the standard deduction method, we have no deductible expenses, no stock options etc, yet we’re caught in AMT this year. My understanding is that in this situation, our tax benefit had we had a mortgage would have been zero.
February 6th, 2006 14:32
AMT is included in the spreadsheet, I just don’t graph it anymore, because it gets even more depressing (and I want to keep it “best case” on the buy side).
AMT bumps it up to $2500 tax-neutral nonsavings and $2975 tax neutral monthly cost.
So it adds almost $200/month if in AMT-land.
February 6th, 2006 14:43
Very even keeled synopsis, SoCalMtgGuy.
One important take-home message: This is not just about a bubble bursting. Even if the cost to buy a home stays the same or increase slightly, renting can easily be the best decision for the vast majority of people in high cost places like California.
February 6th, 2006 14:48
I bought, in 1985, for 257. I think my place is likely sell-able for 800, now. Have I done well financially? Probably - if I’d bought Microsoft I’d be better off than I am, if I’d bought Enron I’d have nothing. 1.06ex20 x 257 equals 800 - so if I’d invested 257 I’d have 800 now, and I wouldnt have had to fix any toilets.
It’s better than that: I got housing services, rent out part of the house, and I only put in 50000 down to buy it, so I was fairly leveraged. But it’s not an overwhelming ROI, even though the value has tripled. If things had stayed flat after I bought, it wouldn’t have been that good, and I expect things are likely to go down or stay fairly flat for a long time now. So if I were starting out, it seems to me that renting would clearly be financially better.
The best reasons to buy now are sentimental reasons: put your own coat hooks wherever you want them, plant a tree and know that you can see it grow over 20 years, your kids will feel more secure if they know you own the house. And people will take you seriously at the community association meetings and in the PTA. In Nicholas Weaver’s example above, that has to be worth $8000 a year. Worth it? Maybe, and you have bought a sort of lottery chance for a gain of $11000 a year.
Would I do it? No, I’d rent. But I’m not selling the house I have - I can afford to hand onto it, we’ve paid down our mortgage, and my kids are very attached to it.
February 6th, 2006 14:49
I am lucky enough to have a great roomate in a cheap apartment close to my work. I pay 578 dollars a month in rent. I just finished paying off my car (I’ll never buy a car on credit again) and I have not had credit card debt for years. With such low expenses I am looking at pocketing over a third of my income as savings a month. Right now that is about 1700 a month. I could afford a single rental place in Orange County CA, but why toss the money away? I work alot and just need a place to store my slim belongings, sleep, shower, and cook. I owe nothing to no one and that is a great feeling. If I’m going to buy a home, I will do it using some common sense as well as on my terms. I have enough math sense to see these loans don’t add up well if the market shifts. Thanks for the great site and it is refreshing to hear other people talking about the madness that seems to have gripped people.
February 6th, 2006 15:38
So. Cal Market Guy:
You forgot the cost to maintain a house that you don’t have when you rent.
My family has been renting homes and apartments for over 40 years and on average you will spend $750-$1,000 per year for an apartment unit and $1,000-$2,000 per year for a home.
Property owner currently renting in SF (who has spent over $20K since Sept. doing repairs on a single small apartment.)
February 6th, 2006 15:40
I have recently had this conversation with a couple of people. One is a friend, 31, who, due to a career change found herself at 28 up to her eyeballs in debt and a modest income. Three years later, and the help of a second job, managed to pay off the credit cards, although she leases her car (which to me = renting). She asked me recently if I thought she should buy a place. Without discouraging her I ran some numbers and showed her how much more it would cost over her current rent. She was floored. I’m sure there are plenty of realtors and loan brokers who could have made the decision very appealing by not focusing on the numbers, but instead on “why throw your money away on rent?”
The other was my girlfriend’s sister. She mentioned that she was thinking of buying a modest place. She currently rents a decent sized house in an average area. Their rent is low because they have been there for a long time. But I asked how much it would rent for if they were moving in new right now. She thought it would rent for $1800. I asked her how much it would sell for. The thought it would sell for 600k. Unbelievable! P&I alone is $3694/mo, not including Taxes and Insurance!
Even more remarkable, even after that I could hear in both of their voices a sense of, “well, what you say makes sense, but I really want to….” Too many people let real estate become an emotional decision.
Well done SoCalMtgGuy on this site. You take most of the emotion out of the picture. I am certainly in a position to buy if I wanted, 75k in taxable savings and investment, 40k 401k that I could theoretically borrow from, low six figure income. I’m just fine waiting for prices to make sense. In the meantime, I put away about $2,500/mo.
February 6th, 2006 15:58
Stay tuned everybody. I will be covering this topic more throughout the week.
There is no way to cover this topic entirely in one post. Keep the comments coming, as I’m sure many of the points will be included in further posts.
Thanks!
SoCalMtgGuy
February 6th, 2006 16:14
SoCalMtgGuy,
Great work! Your numbers look good and explain it in a nutshell.
I would be a renter in california. I’m from Sacramento and it is just nuts to buy up there now. A good investor always buys low and sells high. You should sell into the strength and hold tight. Unfortunately people will try and pick a top but that is virtually impossible. The top has passed us by. What will happen is a lot of vulnerable people will buy high and have to sell low. How soon we forget about things. Thank you for all you hard work on the site.
February 6th, 2006 16:43
I’m in the same situation as alot of others on this board.I sold a townhouse I paid $121,000 for 1996 sold in 2003 for $350,000. Big reason I sold is I had twins in 2001 and townhouse was not working for us it had no garage ,to many stairs etc..Also neighbors who had bought units new in 1991 had to wait till 2001 to break even.I was scared I would be stuck there for years.
I have been renting a very modest 1950’s house in Reseda (a very middle class neighborhood) since I sold for $1625 month and last year went up to $1725.Would like to stay one more year keep the girls in private school they are in but landlord wants to sell.Now I’m faced with moving again and made an offer to rent nice 1 story townhouse with garage in Oak Park (very nice area in Ventura ) for $2,000 per month.Landlord won’t rent to me because credit score is only 670 (due to bankruptcy in 2002 due to $100,000 in uncovered medicals related to having my twins)I had 2 people with credit scores of almost 800 willing to cosign.Owner was a realtor who bought unit February 2004 for $388,000.
I also am sitting with $250,000 proceeds from my sale.If owners won’t rent to me where are all these people going to go that loose their house in the future.I’m frustrated and really don’t want to buy now and know it won’t be a smart decision .Wondering if I’m going to be able to find a decent place to rent.
February 6th, 2006 17:27
twins mom–having $250k in the bank should blow most landlords away regardless of your FICO score (SoCalMtgGuy would know, but I believe some lenders discount FICO dings due to unforeseen medical bills that could happen to any of us). Have you considered offering to prepay, say, three months’ rent up front? That ought to appeal to a potential landlord.
February 6th, 2006 18:01
twins-mom, you’ve been paying rent on time for about 2.5 years, right? The Minneapolis Federal Reserve Bank wrote a report last year on how all the “good renters” were gone, due to loose credit (they’d all bought houses) — and the Upper Midwest has seen far less froth than California. So I suspect your potential landlord is using credit score as a euphemism for “I don’t want to rent to someone with 5-year-old twins.” And he figures he’ll get away with it, as rejected tenants have no way to check the FICO of whomever he accepts.
Try another landlord, one who recognizes that children will not necessarily wreck the building. (I assume yours won’t, and that your current landlord will give you a positive reference.)
February 6th, 2006 18:08
twins mom
I am confused. You have 250K in cash, yet claimed BK for 100K
How does that work? Why cant you prepay the rent to the guy who won’t rent to you. Things are not adding up and you are not telling us everything. Spill your guts!
CG
February 6th, 2006 18:38
I filed bankruptcy in early 2002 my place was only worth around $190 then based on the most recent comp. You were allowed to have a certain amount of equity and still do bankruptcy.I think it was $75,000. The only reason I have money is the sale of my townhouse in late 2003. It went up that much in that time.I have also had the money in some good mutual funds and it has grown.
I guess I could prepay if he would let me but would prefer to keep the money invested.
My current landlord will give me a great reference .One of the reasons this house has worked is it was great to not have to worry about damage as it is not in perfect shape. As a matter of fact landlord wanted to refinish wood floors before I moved in I told him forget it because I didn’t want to worry about damage. My girls are older now and a little less destructive.But maybe this landlord did not want to deal with 2 young children.It was 2 bedrooms and 1300 square feet so space wise would have worked although we are in a 3 bedroom now.Landlord that rejected me wanted $6000 which is equivalent to 3 months rent up front.Are you suggesting I offer more .
February 6th, 2006 18:57
Thank You!!!
I have done this calculation numerous times and always end up with the same result. I make $125k, and buying does not make sense for me. My whole paycheck would go into the purchase. Everyone I work with is doing interest-only, just for the tax benefit. They all keep telling me that RE will only go up here. I don’t buy it based on the creative financing and current state of the bond market.
February 6th, 2006 19:35
I am renting a 1.5 bedroom in San Francisco for $2000 a month. If I stay here for two years, that is $50,000 dollars. The place I rent would sell for maybe $900k. It just kills me to think of $50k and not much to show for it. I guess I am saving money not paying a $5000 dollars in a mortgage.
February 6th, 2006 19:44
I’m renting in a very high-income, high-value RE market in Calif. When I first rented this beautiful home in 2001, my rent was $4,500/mo and the home was valued at $2.0M. My monthly cost to own—after tax benefits—was over $10,000. It was a no-brainer to rent.
Four years later, my rent is still $4,500/mo. The home is still valued around $2.0M. I wasn’t buying in 2001 and I’m not buying in 2006.
Had I bought in 2001 for $2.0M (and I could have afforded to), I would have paid $275,000 more in monthly housing costs over the past 50 months than I have by renting. Not to mention no additional costs for road repair, tree cutting, roof repair, appliance repair that would have added an additional $40,000 over the past four years.
Believe me, I would much rather own. My wife is constantly after me to buy. But it didn’t make sense in 2001 and it doesn’t make sense now. At least for my neighborhood. When the cost to own and rent start coming closer together, I’ll re-evaluate. I don’t mind paying a premium to own (let’s say 10% or 20%). But not a 100% premium.
February 6th, 2006 20:04
It’s a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.
Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.
This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent.
February 6th, 2006 20:25
realist wrote “property will continue its 30% yearly price increase” — I’m assuming it’s all tongue and cheek right?
When the inflation is 2-4% per year and the pay raises aren’t going up that much more, if not lot less, I cannot see how the home prices can continue rising, especially since the interest rate has been raised by the Feds for the past 14 (15?) meetings. Or maybe “realist” can show us, in numbers, how this can still work in spite of all the negatives I can think of?
February 6th, 2006 20:33
SoCalMtgGuy,
You forgot to account for the opportunity cost.
It is best to use an NPV calculation to get the full evaluation just like you would evaluate a new business venture.
See http://www.economics.pomona.edu/GarySmith/BuyRent/BuyRent.html
The way things are today, a simple back of the envelope calculation is enough to come to a rational decision.
But then again those emotions !!
Don’t forget folks, it is the wifes that are really the driving force. Regardless of what the model says, wifes always insist on home ownership. That is why this can never be a rational decision based on just numbers like an investment for the married folks.
I’m lucky to be married to a woman that is happy to rent.
Despite having very high income with lots of savings, I do not have an emotional attachment to home ownership. Enjoying other aspects of life (traveling all over the world, healthy lifestyle, long vacations etc..) are much more important to my family.
Good luck to you all.
February 6th, 2006 20:43
Hey SF renter:
You’re not throwing money away. If you bought the same place for $900,000 with 10% down and a 6.25% mortgage for 30 yrs fixed, your payment would be $4987 and in the first year alone you would “throw away” $50,356 on interest alone and accrue a mere $8000 in equity. And what if the market falls 10% and you fair value falls to %819,000. You’re basically underwater at that point 80K+, your down payment is GONE with another year of nearly $50,000 thrown away on interest.
You are way ahead of the game right now, and are very likely saving much more than the $3000 per month.
February 6th, 2006 20:43
Great site! Thank you, SoCalMortgageGuy, for this site. You have done me and others a tremendous amount of service. Keep up the good work.
Observer
February 6th, 2006 20:53
Dorf,
Where in California has real estate prices not gone up even on the high end? I’d love to know the area because my dad who sold his Manhattan condo 9 months ago and wants to move back to Southern California is looking for a rental. All the 2 million dollars houses he is looking at are renting for way more than $4500.2 and 3 bedroom apartments in upscale buildings in Santa Monica not even very close to the water are $4-5,000. It’s crazy here.
February 6th, 2006 21:33
On “Face the State” Sunday, the guest reported that from 2000-2005 in CT, median housing is up 63%, and median income 18% statewide. Even with low interest rates, since about 2003 it hasn’t been possible to buy on a median family income without an interest only loan, even with a 20% downpayment, unless one were willing to earmark most take-home pay. Rents are up maybe 10% over that time, albeit from an already high level. I would estimate in my area, that selling prices are up 88% over that time. I can remember everyone at work quietly bragging about their 401(k) values during the .com boom, and remember wondering why they were so enthusiastic over companies with no earnings, or even companies valued over 100X trailing earnings (people who were old enough that a significant portion of their retirement investments should more properly have been allocated in bonds). It simply didn’t make much sense to me. AOL? Why would anyone pay a 33% premium to log into a portal, when it wasn’t much better than the services we used to get with QLINK on the C64 with a 300 baud modem, I wondered? Well, I didn’t make much from the stock market then, but I didn’t lose anything either. A few years later, as I saw housing starting to rise, I didn’t take the bait either. Some asset appreciation made sense to me, what with record low interest rates, but I didn’t think people would be so quick to jump into another round of investment mania so soon after taking their stock market belumping. Now, by my inaction, I’ve cornholed myself deep into the ranks of the downtrodden renters. My conservative plan to save up enough of a downpayment so that the monthly mortgage payment would be readily affordable even if I were on unemployment doesn’t seem so lofty now. One downside to waiting to buy I’ve not seen mentioned is that if this takes very long to play out, say 10 years, many of us will need enough saved to pay off a mortgage in 20 years instead of 30, unless we want to enjoy working into our golden years. I don’t foresee any way this can end but badly.
February 6th, 2006 22:06
Silicon Valley Geek-
Not all wives are “nesters” that want to own homes based on emotions. I am a wife who is smart and logical enough to see that paying $1200 a month for a home that can be sold for 600k (according to the identical one that just sold for that amount next door) is much smarter than buying it. There are many emotion filled illogical women out there, but not every single one of us is!!
February 7th, 2006 00:30
Twins Mom - you make an excellent point: where will all the foreclosed-upon buyers go, when they they are forced to sell? Further, if their FICO score drops due to bankruptcy, how can they qualify on a rental application? Twins Mom, sorry about your difficult medical situation. I bet your twins are wonderful kids, and you sound devoted to giving them a wonderful life.
DrWende - the landlord is not prejudiced against children. The standard CAR rental ap does ask for$15 to run a credit check. This protects the landlord from renters who are late, or who don’t pay and then skip town during month 3, because it takes several months to be evicted. We had to provide copies of paycheck stubs to get this rental, as well as copies of driver’s license and SSN (he keeps this on file for all his victims, I mean tenants, although he didn’t run the credit check after all).
SiliconValley - not so quick to judge! I, a woman, had the idea to sell my custom home (with a killer kitchen, exotic granite, Viking rangetop, it was so coooool!), just to get the money in the bank. Husband finally agreed. Closed escrow last month, and am a happy renter. There’s a post in the forum where a woman told us that her fiance so badly wants a house. Other sympathized, bec. men want their own digs, that they can fix up. Other men have that need for land, acreage. My girlfriend sold her house 3 years ago, at what she thought was the top of the bubble, and now she is so tired of renting and wants a house of her own again, that she is ready to buy again in spring or summer. (Why? - the market is much higher than when she sold, and she sold to get out of the bubble…makes no sense.)
February 7th, 2006 09:21
Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.
LOL. I agree totally, although I think appreciation will accelerate to 100% per year forever. LOL.
“What? You want 100 dollars to 1 Yen?”
February 7th, 2006 11:16
Bottom line is buying at the top of the peak (right now) does not make sense for anyone. Even if you have that kind of cash to throw around. Why buynow when there is a chance of it dropping soon? Hec, Its dropping now right? Why not wait and snap up a cheaper deal. But like it is mentioned in this post, buyers let emotions get involved. THe old ‘if I dont buy now I will never get in!’
I will admit that was me and my wife in 2003. Didnt know jack about the industry, just the basics. And let emotions get involved. I took the plunge for 230k on a nice home. Honestly, I a can say that was the best ’stupid’ move I have ever made. Since then, prices have skyrocketed. I wouldnt be able to afford my own house right now! For me it was just simple luck that I barely got in. I have nothing against renting as I rented for years because I always thought homeownershio was an unreachable thing for single guy who just got his career going.
I was wrong, my rent then was 1000k and now my house payment is 1400 (fixed). 400c notes more. Makes sense to me.
February 7th, 2006 18:15
Probabably a late comment to “Twins Mom”. Sorry to hear about your issues regarding getting a place to rent. Also sorry to hear about your issues with your bankruptcy and the health bills.
But since so much of what we talk about here is relate to personal responsibility — individuals taking ownership of their own actions, I’ve been a wee bit bothered all day about the outline of your situation.
In short, unexpected medical bills ($100k) caused you to have to declare bankruptcy. But because you were able to retain ownership of your townhouse, you have (about 2 years later) about $250k in cash.
Have you ever considered paying back those people/organizations that didn’t get paid when you declared bankruptcy? I fully realize that you don’t have any legal obligation to do so, but you received $100k in life saving service that has to be absorbed by society at large. Now I know that hospitals massively overchange (particularly the uninsured), but in lieu of paying the full amount, perhaps a small payment or donation to those who helped? Maybe $10k?
Food for thought
February 7th, 2006 20:57
I think the thing I like best about this site is the sense of perspective. Thankfully, I’ve had no outside pressure on me to buy a house… well, nothing that isn’t defused by “Can’t afford it”… but with four siblings who own and dozens of friends who own, I do feel left behind.
So I read this site, and I realize I’m not left behind so much as playing a different game… or at least, not in such a bad position as I thought. Sure, my siblings have homes, but they’re much older than me, except for the one who is a rocket scientist and makes enough money to afford a house. Sure, my friends own homes, but they got assistance from parents, from relatives remembering them in their wills, or just plain good timing.
Most of them are older than me, too.
It’s the renting with kids that really bothered me, but many parents rent and turn out perfectly wonderful kids. So I don’t have to freak out about getting a house before having kids.
I keep reminding myself…
February 8th, 2006 00:07
I’m sorry if I’ve offended the smart women here.
Almost all of my close friends have nesting wives, hence their difficulty in detaching emotions from a rational buy/rent decision.
February 8th, 2006 06:23
And to those of you who post with your stories of how much you save, how you never buy anything on credit, I ask you this: 1. Do you have any kids, and if so, do you offer them opportunities for piano lessons, gymnastics, soccer, tutoring? Not all of those, of course, but at least one or 2 activities per kid. 2. Do you live in a high-rent or cheap-rent part of the country? Is it possible for you to pay less than $2K/month to rent?
We Americans have it backwards. We feel that we are entitled to everything from Tennis lessons for us to piano lessons for the kids. You are supposed to work it backswards. You take 10% of the top from your salary into a direc deposit savings account and then make do with the rest. The if there is money left over for piano or tennis lessons or starbucks so be it. No one is entitled to anything.
February 8th, 2006 12:16
—Twins Mom asked: Where in California has real estate prices not gone up even on the high end? —-
I live in Marin County, just north of SF. The homes that were high-end ($2M+) in 2000-2001 haven’t appreciated much at all during this ‘boom’.
Why? Not really sure. But you have to remember that SF had dot-com mania from 98-00. Lots of newly-minted millionaires (at least on paper) were created in a very brief period of time. Many of them bought fancy homes in Marin because it’s 20 min to downtown SF and it’s like living in the woods.
That drove the high-end through the roof in the late 90s, but the low-mid end in Marin didn’t move at all because the paper dot-com millionaires weren’t interested in 3-br bungalows and ranchers.
When the dotcom mania ended, the demand for $2M+ homes here in Marin fell off a cliff. So those homes haven’t gone up much at all for the past 4 years. OTOH, the low-end (characterless homes that were $400K-$500K in 2000-2001) are now selling in the $850K-$1.1M range.
The values b/w low-end and high-end have compressed over the past four years. You don’t get much for $1M anymore here. But you can get a hell of a home for $2M if you’ve got the dough.
February 8th, 2006 14:16
Dorf,
Thanks for sharing where you are at and the situation there. In the Los Angeles area
(Santa Monica,Brentwood,high end areas of San Fernando Valley, Agoura , Westlake ,Calabassa and several others)prices are very high for those type of rentals as far I see. Of course rentals still are cheaper than owning and paying a mortgage but I have not seen a rental where you could get a 2 million dollar home for $4500.Of course way out of my price range but I have been looking in that range for my parents.
Fast Eddie In California
Thanks for sharing you concerns.I will give thought to what you said.In my wildest imagination I would never have thought that 2 years after filing bankruptcy the real estate market would take off like it did.Bankruptcy was not something entered into lightly .
February 22nd, 2007 02:25
tupac…
shakira…
February 27th, 2007 21:28
Handbags…
interesting…
February 28th, 2007 23:55
amoxil…
interesting……