Buying A House: C or D?

can get out what you put in.

*less* the component that wouldve constituted rent in the equivalent circumstance over the period is i guess the only arm id have in the air here

my views may be colored because my parents bought in 2006 - they topped the market, in a bad way. their house lost 1/3 of its value in the crash and has literally only now returned to where it was pre-2007, thanks to the current housing crunch. that's almost 20 years.

all that said, as might be evidenced by how i've been posting, i am seriously thinking about buying. somewhere. at the end of the day, i do agree with darragh and budo jeru. there is a certain, incalculable benefit to owning a home that can't be put into financial terms. knowing that you can finally erect a shrine to ned raggett in your bedroom without worrying about your security deposit being withheld - priceless!

i wonder also to what extent the personal history skews the weighing up giving all the moving uncertain net present value opportunity cost etc parts but we moved house growing up like i buy shoes now and i gotta say lads "when renting you can always just move" shruggery aint, imo, it

the housing market is rarely left subject to the invisible hand such that a disaster for yr individual homeowner/occupier spells out an equivalent benefit to yr opportunistic genteel housesitter if you get me

xp re personal history!

worse fates befall homes with raggett shrines if i recall my seventies vhs horror correctly

I rented until I was 45 — it suited my peripatetic lifestyle, I moved every few years, lived in different cities, etc. I was somewhat resistant to buying at the time that my wife really pushed it — but now as a homeowner for nearly nine years, I see a whole lot of advantages, for sure. I agree that there is a great sense of assurance about it being your own place — along with yes the hassles of maintenance and so forth. But we've made it really feel like our place in a way I never quite did in any of my rentals, even though I was very fond of some of them. Also of course it helped that we bought in 2014, which in retrospect was a very good time to buy. So I definitely don't discourage it in any way. I just think that the "best investment you'll ever make" hype gets overblown.

their house lost 1/3 of its value in the crash and has literally only now returned to where it was pre-2007, thanks to the current housing crunch. that's almost 20 years.

i absolutely dont want to minimise this, firstly

im trying, i guess, to see how id feel if my house was still worth 'only' x in 2035', at which stage the debt ratio on it is < 50% and ive lived in it the whole time for an unchanging monthly amount- and in my specific circumstance that sounds good to me (im not seeking a year on year asset increase as 'value' is i guess where im setting my own stall here?)

(known graph guy caek will overlay here a line chart of:

interest rates
house prices
rents
wages

over time and simply tap the sign that says "ireland isnt a real economy, remember", im thinking)

yeah to be clear they have definitely not regretted buying it, have gotten 20 years of use out of it, etc. etc.

but i know it did weigh on my mom, who's very risk-averse - knowing that the place you live in is 'underwater', would have to take a loss if we had to sell in an emergency, etc. etc.

knowing that you can finally erect a shrine to ned raggett in your bedroom without worrying about your security deposit being withheld - priceless!

Now I'm curious how destructive to the property such an ofrenda to Ned might be! Also a very specific benefit to home ownership I hadn't innately considered before

yeah i get it

ofc another factor not brought in is there are times in yr life where the cheapest monthly option is simply the biggest factor to be weighed up

xp sorry my post timing game sucks tonight

If you don’t plan to sell or move and you’re confident you’ll never be forced to move by e.g. healthcare costs or climate change, then granted it doesn’t matter what your house is worth.

their house lost 1/3 of its value in the crash and has literally only now returned to where it was pre-2007, thanks to the current housing crunch. that's almost 20 years.

OH HI DERE

otoh our payments have remained almost the same or possibly even gone down slightly, it was $1140 WITHOUT taxes/insurance in 2003 and $1400 with everything now

I feel for your parents, 龜, and I’m glad they’ve been happy enough there to feel it’s home, despite worries

I had the absolutely bizarre experience of dating someone who bought a condo in like, 2006ish and it seemed bad but I wasn’t invested in the relationship yet, then I was, and then I wasn’t. I think she took an absolute bath when she sold it in 2009.

Meanwhile, I had a brief respite and bought my place post-crash when the federal subsidy was fully in effect, just an instant $8k (iirc) from the government. I think I overpaid a tiny bit and don’t really care now.
It was a fixer-upper and if anyone wants to know about HVAC, roof (complete re-sheathing, some frugal people never reroofed and just threw more shingles on for 80 years) and building a whole new garage, hit me up. I still need a kitchen remodel but I think I’m now appraised at 80% higher than what I bought this for

But it’s still regional because I’ve got like, a house under $230k and presumably my lot alone would be that in San Francisco or w/e

Given the current housing crisis in Australia it is crazy to see the debate. Thankful to be one of the few mid-20yo’s to own a home but I have many friends who would find it bizarre to see people debating whether owning a home is a good thing. Someone otm earlier about how this is really a completely different conversation based upon the variables of country/regulations/historical economic reality of real estate as wealth building. I have some younger siblings I am worried will never be able to buy what I was able to get as a first home in their life, or at least a decade or so later. Though yes units/condos are still in range of accessibility for first home buyers. You just better hope you are in a committed partnership with two full time incomes to make it happen. I am constantly angling my friends to get into the market as soon as they can. For my region of the world, it’s really been a no lose and the security is invaluable

his does happen! if you bought with 20% down in LA around 2006 you likely *could not move* until like 2012, unless you also had significant cash savings.

It really is a timing thing. My house nearly doubled in value a year after I bought it. Australia is crazy

Data point: where I live, my mortgage payment is significantly less than what rent would be, but I am not (alas) a hipster.

We considered selling in 2021 but the conclusion was: can't move because there's nothing we can afford that is better than what we have. Even though we would have profited on the sale, we'd be buying right back into the same market.

Nowadays we would have that same uphill climb, with the added disincentive of higher interest rates.

some frugal people never reroofed and just threw more shingles on for 80 years

When we renovated our bathroom including installing a skylight, we found out that our roof had four layers of shingles when the contractor who installed the bathroom and skylight "installed" the flashing on the skylight by weaving it into the four layers of shingles instead of sealing it to the roof decking, so that the first solid rain after the bathroom was painted we had water dripping through the high-hat above the shower and we ended up having to strip all four layers and getting a new roof just to properly install the skylight.

^^^
Hidden cost avoided by renting.

“For my region of the world, it’s really been a no lose and the security is invaluable”

Depends on your definition of region I guess https://www.nytimes.com/2023/06/19/business/new-zealand-housing-prices.html

we get it, you have decided that renting is better for you

Mod could you retitle this thread to “buying a house: classic”?

Having a scour through realestate.co.nz of the suburb in that article, you see some similar trends of what is happening around me in QLD: sold 2015: $253k to then sold 2023 $580k.
(https://www.realestate.co.nz/property/446-raikes-avenue-te-awamutu-waipa-waikato/n4x0d3q2c).

The issue is people buying at the peek in 2021 for 600k Who have then had their property price go down by 50-100k with a growing interest rate.

Who knows if in 2040 the 530k house will be 1m? But my inclination is that it (sadly) will be. I know next to nothing about investing and the home i bought is my only experience at it. But I think an over 2x increase on 250k in 8 years is nothing to scoff at?

I appreciate the argument caek. There is always a time in life where renting is a good choice, even if that time is just when one is saving for a house. My view is that if you are the “settling down” type though, buying and paying off a house is always a good idea if you can get the timing/location right.

Also to note, there is no mention in that article of people “losing money” in having to sell. Just that they had to sell 100k under what they were hoping (i.e. damn we’re only getting a 150k profit from this property/250k profit). Which is a good thing for the world? Obviously there will be some that have lost and some that will lose money, but overall I think (as a home owner) the stabilisation of housing prices is a good thing for the world. Whole article stinks of crocodile tears at the fact we can’t keep robbing future generations ability to have permanent secure housing for the benefit of our own gross profits

the point of linking that article was not to cry about paper millionaires making a profit of 500k instead of 400k. it's a bad article. i linked it to show that house prices sometimes go down, including right now. "it's really been a no lose" is very easy to say in the past tense (especially if you're in your mid-20s!), but is not necessarily true in the future for a person deciding whether to buy or rent today.

Fair point, but at least for my region of the world (and I would suggest most the western world), the overwhelming majority of those who own properties have benefited from it? Not everyone, not every location, not every time frame, but from a broad view of the past 100 years, it seems hard to argue that renting is “overall” a better idea than buying. Nothing against your situation, I am sure you have dotted your i’s and crossed your t’s to work out that this is the best situation for you right now, and should be thankful that you have the choice between the two options unlike so many young people! All the best to you

yeah i think the overall point is that real estate - putting aside the use value you get from it by living in it - is an asset subject to market forces, and that it can be a risk like any other asset class. in america, real estate prices mostly go up but just ask someone from detroit, anywhere in the rust belt, whether that's always the case.

taking a step back, though - housing, like healthcare, should be a universal right, and should be provided by the government. the US, being the US, gestures vaguely in this direction by propping up the housing market via the 30-year mortgage and being a willing buyer of mortgage securities, but obviously it is nowhere near sufficient and the real estate market has grown extremely distorted in certain areas of the country as a result, not to mention creation of an preference for energy-inefficient single family homes in the suburbs over more sustainable, dense, energy-efficient urban housing.

taking a further step back, maybe property rights should be abolished entirely, capitalism dismantled and the US government overthrown? just throwing it out there.

that's a good idea, but i also like the other suggestion in this thread which is to pay your mortgage off in full.

Fair point, but at least for my region of the world (and I would suggest most the western world), the overwhelming majority of those who own properties have benefited from it? Not everyone, not every location, not every time frame, but from a broad view of the past 100 years, it seems hard to argue that renting is “overall” a better idea than buying.

i mean yes, property ownership is beneficial! when there is enough property to go around, it is good for everyone. when there isn't, you see rentier capitalism set in. we may be lucky enough to see the creation of a new feudalism in our lifetimes - i trust that sounds appealing?

Bit of a change in discussion. I was responding to whether mortgaging vs. renting is beneficial to the individual making that decision. Is the current housing system beneficial to the majority? No. For those in the means to make that decision, yes. Should things change (i.e. at the bare minimum, stabilisation of housing prices through raising interests rates a la NZ)? As I have previously said, yes.

House prices in NZ have gone up an absolutely crazy amount in the past decade. So unless you bought right at the peak of the market and have been forced to sell pretty soon after, you're fine.

I'm also in Australia, in the country's most expensive real estate market, Sydney. The house I was lucky enough to buy a decade ago has consistently made more money than I have, even when you throw in a couple of price dips. The economics in Australia, with its very high immigration rate and significant barriers to housing construction, means that as HP says that you are almost never going to be a loser if you buy, as long as you can hold on to your property for a few years. OTOH, renting in Sydney is an absolute nightmare. Hideously expensive, hideously competitive, and you have virtually no rights as a tenant.

xp for me, i was holding onto the old time notion that you buy once you meet that special someone. it happened, but then we both twiddled our thumbs for so long until other circumstances essentially forced our hands into buying a house. it's worked out, but i wish we'd looked into it sooner. but on the other hand, neither of us could bear to part with the house we bought at this point, no matter its current market value.

House prices in NZ have gone up an absolutely crazy amount in the past decade.

they've roughly doubled. that's 7% YOY. i get that doubling in ten years seems like a great return, and for housing it is very unusual (historical rate of return in the US is 4% YOY). but 7% YOY is the *average* rate of return on the S&P500.

that said, i just read https://en.wikipedia.org/wiki/Australian_property_bubble. and i thought california was fucked up. own the second you can afford to there. good grief.

(i actually rented in sydney as a grad student in 2005. i even rented my fridge. i love to rent.)

I'm enjoying this idea that rain only rains on owner-occupied homes and the cost of roof maintenance is not factored into rents. If you dodge that cost it means you have a shitty landlord and when the roof starts leaking you have to go back into the rental market to find a new place to live.

Due to California's fucked up Prop 13, property taxes are fixed forever at the purchase price of your house and not their market value. So people tend to hang on to their homes there.

If you already own one home you're already getting the benefit of home ownership, especially in California.

i have and am enjoying the discussion but every time someone says "apart from the value you get from living in it" i think we should set the dogs on them

we need a button for that

Yeah there are some misunderstandings I think.

The value of your home does matter apart from the day you sell, and the equity is not as illiquid as people seem to think. It's considered good collateral by a bank. So you can take a home equity line of credit against it for cash needs or remortgage/get a second mortgage. The equity doesn't just sit there like a sock full of gold coins under your bed until the day you sell necessarily.

i have and am enjoying the discussion but every time someone says "apart from the value you get from living in it" i think we should set the dogs on them

And another benefit in the US is that if you have a conventional 30-year fixed-rate mortgage you can lower your payments if the interest rates go down by doing a refinance or rate adjustment, whereas your payments do not go up even if interest rates rise. For 30 years.

That's part of why the housing market is so tight. No one wants to give up their sweetheart mortgage rates they got by lowering their interest 2 or 3 times in the last few years.

Also lack of supply. When I look at the proposals of the major political parties in the UK (where I live) I feel pretty confident that supply isn't going to catch up to demand. Sure there will be some dips related to interest rates etc but the broader picture isn't changing anytime soon

otm, the odds are stacked for owner occupiers and wont be unstacked any time soon

not as much as they are being stacked towards investment vehicles here but that at least could be torn up to popular acclaim in fairly short order imo

The value of your home does matter apart from the day you sell, and the equity is not as illiquid as people seem to think. It's considered good collateral by a bank. So you can take a home equity line of credit against it for cash needs or remortgage/get a second mortgage. The equity doesn't just sit there like a sock full of gold coins under your bed until the day you sell necessarily.

― felicity, Friday, July 7, 2023 3:43 AM (five hours ago)

And another benefit in the US is that if you have a conventional 30-year fixed-rate mortgage you can lower your payments if the interest rates go down by doing a refinance or rate adjustment, whereas your payments do not go up even if interest rates rise. For 30 years.

That's part of why the housing market is so tight. No one wants to give up their sweetheart mortgage rates they got by lowering their interest 2 or 3 times in the last few years.

― felicity, Friday, July 7, 2023 3:53 AM (five hours ago)

it's considered good collateral if you live in a good area. again, if you bought in detroit right when the auto industry started falling out, you're not doing so well 30 years later.

re: interest rates, have you been paying attention at all to the news cycle? what the fed is doing? and yes, you can refinance if rates fall. but ZIRP was by all accounts an economic anomaly that may never be seen again in our lifetimes. if you're buying a house now, i wouldn't bet that rates will fall to what they were post-2008 - or covid, for that matter. nobody can predict the future.

Yeah nobody can predict the future but I’d say that the demand for housing in NYC continuing to outstrip supply is probably as safe a bet as you can get. Don’t see the need to muddy the water with spurious points about buying oceanfront property vs rising tides or buying in the middle of nowhere.

Also lack of supply. When I look at the proposals of the major political parties in the UK (where I live) I feel pretty confident that supply isn't going to catch up to demand. Sure there will be some dips related to interest rates etc but the broader picture isn't changing anytime soon

― Tracer Hand, Friday, 7 July 2023 bookmarkflaglink

Was reading this just yesterday. There could be a turn fairly soon. Sounds like broader picture stuff.

https://www.theguardian.com/business/2023/jul/04/risks-of-a-uk-housing-crash-rising-by-the-day-as-fixed-rate-mortgage-deals-end

Yeah nobody can predict the future but I’d say that the demand for housing in NYC continuing to outstrip supply is probably as safe a bet as you can get. Don’t see the need to muddy the water with spurious points about buying oceanfront property vs rising tides or buying in the middle of nowhere.

― half the population ¯\_(ツ)_/¯ (gyac), Friday, July 7, 2023 9:18 AM (four minutes ago)

ah yes, NYC, which famously has not flooded twice in the last 15 years from hurricane and is impervious to the effects of climate change, and where the us army corps of engineers is *not* currently fielding a $50 billion proposal to build what are basically 10 foot walls around lower manhattan, which is essentially oceanfront property?

I guess now we have an answer to this question 🙃

anyway, as you were. just curious why anyone in the uk gives a shit about interest rates given how the mortgage market there works.

xp What about all of the coastal regions that don’t get priority? Like no shit they’re shoring up a city that people actually want to live in.

buying any form of real estate in NYC, let alone a HOUSE for crying out loud, is so far beyond my reality that this whole thread feels like I've drifted on to some hotshot wall street finance subreddit. would that we even had the luxury of weighing the long-term financial benefits of renting vs. owning!