7 ms·

The Rise of the Rich Renter

31 points by clumsysmurf 9y ago

jseliger 9y ago
It may also be that smart rich people have gotten over the cult of homeownership: https://www.ft.com/content/00bf5968-f518-11e2-b4f8-00144feabdc0 https://www.ft.com/content/00bf5968-f518-11e2-b4f8-00144feab... or http://www.slate.com/blogs/moneybox/2013/07/29/political_economy_of_homeownership_a_disaster_area.html http://www.slate.com/blogs/moneybox/2013/07/29/political_eco.... Or search for the term "The cult of homeownership" for more. There are well-known possible positives to owning but the negatives are vast too, especially compared to investing in an ultra-low-fee index fund in lieu of a house. Owning a house also made more sense in an era in which a single worker expected to work for a single company at a single site for decades. In an era when two workers may work for a myriad of companies for ranges of six months to ten years, it makes a lot less sense.
- walshemj 9y ago
  realy so why are non residents buying housing as an investment in London Sf NY and Vancouver? And if your rich diversifying from just a me to index fund makes a lot of sense hint if the Rothschild's and other mega rich families run actively managed funds its probably a good idea for you to - I have done very nicely out of RCP on the LSE
  - seqastian 9y ago
    Cause they can't find other save investments and have cash burning in their pocket.
    - walshemj 9y ago
      Why are not stocks /funds on the LSE NYSE the same unless the cash is from the black market and they cant pass money laundering regs?
      - sanswork 9y ago
        Some countries have limits on how much money you can expatriate each year. Some of these also have rules that allow you to move more money as long as it is going to certain things(building industry, land/home purchases, etc).
      - monort 9y ago
        I think upcoming CRS (the global version of FATCA) is one of the reasons. Investment accounts will be reported to homeland automatically.
  - sidlls 9y ago
    Money laundering, safe durable stores of value protected from their governments' confiscation efforts, pure speculation, and being on the wrong end holding the bag all spring to mind.
  - blackguardx 9y ago
    Rich people invest in property because they have enough money to view a million dollar condo as a diversification strategy. Property can be a good investment, but shouldn't be your only investment.
    - sidlls 9y ago
      I'd take 10 houses for $200k in the Midwest over one $2m house in the Bay Area. Appreciation is lower, but rents (as a percentage of cost) are much, much better. The shortfall in appreciation can easily be made up for in better rent yield.
      - sanswork 9y ago
        How does it look once you account for closing costs on 10 houses, maintenance and management of 10 rental properties, etc?
      - jeffdavis 9y ago
        Consider maintenance costs, vacancies, and management fees. Those can take a huge bite out of your rental income and easily drive you into the red.
        walshemj 9y ago
        not if you run it as a property company and not directly own them
        jeffdavis 9y ago
        Can you please explain?
        walshemj 9y ago
        You set up a company who owns the property's you can then claim expenses back against tax - you then pay your self a dividend. As opposed to you owning the houses directly
  - noobermin 9y ago
    I mean, what you're raising is a valid question and one that has been alluded to here before. However, it is pretty politically charged and it's only tangentially related to this article, hence it seems in poor taste to bring it up here.
  - kenhwang 9y ago
    It's very difficult for the Chinese government to discover or seize foreign property. If you illegally exported money from China, you couldn't exactly keep it in a bank where the Chinese government could claw it back. So you buy property in safe markets; housing doesn't drastically change in value (and often appreciates), the money gets "washed" in escrow by random citizens, it's very hard for housing to get stolen or lost (unlike other high value items, like precious metals, diamonds, cars), there's enough supply where the government couldn't possibly monitor all the markets, and it's high enough value where so you only need to succeed a handful of times.
- prostoalex 9y ago
  The richer you are, the more affordable travel is, and when one sees various options available at relatively affordable price points in Costa Rica, southern Spain, Caribbean or New Zealand, the urge to empty one's brokerage account in order to buy a one bedroom condo in a crowded area plagued by homelessness, inadequate schools, laughable public transportation and overpriced food is not that strong anymore.
jquery 9y ago
Don’t kid, most people aren’t renting because they prefer it. We shouldn’t glorify unaffordability. My “rich” coworkers would largely love to own but they can’t afford the mammoth down payments, and the sky high rents plus sky high taxes make it difficult to save. “One of Aesop's best-known fables is “The Fox and the Grapes.” On its surface, or its literal level of meaning, the story tells of a fox who wants a bunch of grapes hanging above his head. The fox tries desperately to reach the grapes but cannot. He finally gives up, saying that the grapes are probably sour anyway.“ https://en.m.wikipedia.org/wiki/The_Fox_and_the_Grapes https://en.m.wikipedia.org/wiki/The_Fox_and_the_Grapes
- noobermin 9y ago
  To your anecdote, I raise mine. At this stage in my life, I don't want to own a home for most of the reasons in the article they've listed.
- yardie 9y ago
  I would say it depends. Some places RE is so hot while rental vacancies are high that it makes sense to rent. The days of flipping houses to gain 20-50% profit are long gone. A lot of property in our area is being bought by foreign investors. I feel, unless they hold for 10-15 years they will never make their money back. From experience, we’re closing on a house now and not paying much more than the previous owner 10 years ago. 5 years ago we could have probably could have bought for 50% lower.
- jfaucett 9y ago
  > Don’t kid, most people aren’t renting because they prefer it. I can't speak for the USA but in Germany - specifically where we live, home ownership is not/barely worth it financially speaking. The taxes alone for "owning property" i.e. renting it from the government until you die are extremely high. You pay 6.5% (varies by state) of the property value in "Grunderwerbsteuer" when you initially buy and then for a home valued at around 250k (fairly normal prices) you're looking at a 2-4k per year in taxes. Throw on top of that all your upkeep costs in time and money and it really doesn't look like such a nice deal. That's why we haven't bought and I don't want to. Nowadays, "home ownership" is just another name for renting where the costs are slightly less and the upkeep to you in time and effort is more.
techisamix 9y ago
My wife and I are in this percentage. Both educated, making ok money but with a new family and undergrad loans still looming it feels like homeownership is still years away. I will probably be 35 by the time I can buy my first "starter home". We are moving all around the country to find better and more affordable places to live. In fact now that my wife has her master's we're chasing clinics that provide loan repayment just so we can get our debt out from under us. Another reason we keep renting - I've worked other industries that do poorly during a recession and tech feels no different. I'm highly predisposed to not being stuck with a huge mortgage when things get tough which means in a lot of cities I'd never feel comfortable buying a home (insinuating that we couldn't survive on one income).
paulpauper 9y ago
Here’s the upshot: rich households—those earning more than 120 percent of the metro median income—saw their renter share rise by 1.2 percent between 2012 and 2015. Since 2006, that growth was a striking 6.2 percent. The renter share among households making less than 50 percent of the median income, on the other hand, remained roughly the same since 2012. Since 2006, it grew by a modest 2.9 percent. More educated subsets of metro residents also gained renters in this period. This does not make much sense how the author derives the 6.2% figure and then says its 1.2%, nor does a 1.2% gain over a 3-year period seem like much.
- noobermin 9y ago
  That does seem super weak sauce. Also, the "striking" 6.2% included 2008, who's to say that the even among the 1.2 X median people, that the economic hurt wasn't enough to explain the delta there?
  - walshemj 9y ago
    120% of the median income is not "rich" in this day and age
    - noobermin 9y ago
      Hmm, it's above the median, it is well off. But yes, it isn't well off enough to be sheltered from the effects of the great recession, I agree.
      - walshemj 9y ago
        well that's about 48k given the median salary in the US that's not relay well off puts you just about out of JAM (just about managing ) territory given health care costs
ComradeTaco 9y ago
Many of those who have high incomes would prefer to build equity rather than hand it to landowners. However incomes only rose only modestly above inflation while real estate prices have doubled and even tripled in many places. We're really in trouble as a society if essentials like education, healthcare and housing continue to eat an increasingly large portion of consumer income.
efficax 9y ago
I make a decent living, way above median household income, but my wife and I rent in a dense urban center for the simple reason that even with our income we couldn't afford to own in this area. Even if we weren't paying student loans it would take several years to build up a down payment that would result in cheaper mortgage payments than our rent burden, which would be crucial since homeownership adds property taxes and significant upkeep costs above the mortgage payment. Sure, we could afford a house in the 'burbs, but we don't want to live in the 'burbs. The rent is too damn high, but so are the housing prices.
- tedmiston 9y ago
  Likewise for me. I chose to live in an apartment in the city center / startup hub (and walk to work) vs buy a house in the suburbs with a half hour commute every day. There are condos here but the market is much higher.
- matt_wulfeck 9y ago
  7 years of saving I believe is the average for a down payment. It doesn’t sound like your story is too outside the range of normal.
  - techisamix 9y ago
    I haven't heard that before, link?
  - hammock 9y ago
    Seems to make sense, buy a house 3x your annual income, with 20% down you could get that in 7 years if you save away 8.5% per year. And you have a house at 29
    - davidjnelson 9y ago
      Lol, houses for 3x your income? I take it you don't live in the Bay Area ;-)
yardie 9y ago
We currently live 3 blocks from the beach and have no intention of buying here. The older buildings are prone to flooding, some are sinking, and the foundations are cracking. The newer buildings are incredibly expensive. We’ll stay here until it no longer makes financial sense. Until then I continue to rent while stashing money away for property not near the slowly rising oceans.
nostrademons 9y ago
This is dual to "the rise of wealthy foreign landlords that buy homes site-unseen as investment properties." My wife and I, despite being able to afford a home, have chosen not to buy one. Why? Because home prices in our area run at $2.7M for a 3BR [1], while we're paying $2600/month to rent a 2BR townhome. People we know who have bought are now paying $6-7K/month on housing, for something not much better than what we have (they have a yard and an extra bedroom, but we have a pool). Even with the mortgage interest tax deduction, you're still paying more on interest alone (let alone principal, property taxes, or maintenance) than we're paying in rent. [1] This is perhaps an overestimate - it was a news story about a couple that were outbid 4 times and wanted a fairly nice property. But even so, minimum prices on a 2BR condo in the area now range around $1M+, so the math still doesn't work out.
- rentcontrol 9y ago
  The difference is that with average appreciation rates in California, when they sell they get all of their money back (minus fees, of course). You? Well, you had a place to stay. As long as appreciation + inflation over the period you stay in a house you buy is greater than your interest rate, buying a house is effectively free (minus the downpayment). People bring up maintenance, however this is already taken into account with rental price increases, vs. a fixed 30 year mortgage. Maintenance is an overplayed expense, honestly. EDIT: I can't reply to the children comments, but I just want to say that the situation mention is absurd. 1. 2.7M worth of 1985 S.F. property would be entire neighborhoods and give you more than 6%. Forget houses, 2.7M in 1985 would buy you acres of prime real estate. 2. Even if it did not, it's not necessary to put down 20% on a house. 3. Investing and purchasing a house are not mutually exclusive strategies. 4. Overall, over 40 years buying will always be better.
  - nostrademons 9y ago
    You can't count on that appreciation going up forever, though. Once the number of buyers or wealth of buyers declines, home prices will too. I look at a lot of the houses here and see Detroit in 50 years. I moved here in 2009 and there was a big drop in house prices then, enough that everyone who bought in the boom years of 2004-2007 went underwater and many were foreclosed upon. Yes, I'm kicking myself for not buying then - though honestly, the money was in Google stock options instead and Google stock has gone up a lot more than Silicon Valley housing prices, so I probably still ended up ahead.
buf 9y ago
I rent simply because I cannot afford to buy in the area I desire and I refuse to commute an hour.
rentcontrol 9y ago
Personally, I ask my friends who complain about rent why they just don't change what they want, e.g. roommates, worse quality, further away, worse amenities, etc. and generally they say they want it all. Well, unfortunately to have it all you have to pay. Paradoxically, those who want to live in the city will want to enjoy the amenities, which cost money. Money that will take them that much further from buying a house. Clearly, from the behavior they must not want a house that much.
closeparen 9y ago
Is anyone surprised? The fall of the private car has us contending for less and less land (near work, near transit stations, etc). Of course everyone’s housing situation moves down a few notches when we throw away the vast tracts of housing supply enabled by freeways and parking. High rises and elevators could compensate, but so far no city is contemplating adding downtown luxury condos at anywhere near the rate it’s divesting from sprawl.
htormey 9y ago
If you are in an apartment with rent control it really changes the rent/buy equation. I’ve lived in a two bedroom rent controlled apartment in San Francisco for the last 7 years. I pay significantly below market rate for rent. I also have enough to afford a down payment on a house here. Their is no incentive for me to purchase a house unless I lose my rent controlled apartment and even then I probably wouldn’t buy. I know many of my peers who are in similar situations. I’d say the same is true of NYC.
- bradleyjg 9y ago
  Rent control unbundles the bundle of rights that is property ownership. The result from the renter's perspective is a hybrid between tenancy and ownership. It's not the only way to unbundle it either. Consider the more traditional life estate, for example.
hiram112 9y ago
Mid 30's guy - make over six figures, no wife, kids, or other expenses. I could easily buy my own modest home with cash, but instead I pay about $2K for a tiny studio in the middle of an expensive city. I actually have been looking to buy a home in my high COL East Coast city this year, and here is why I'm holding off on it: 1. An actual 'home' like I grew up in with a few bedrooms, garage, yard, etc. within a one hour commute to most jobs would be $750K. Maybe I could get that down to $400K with a 2 hour each way commute. That's simply way too much money (taxes, insurance, upkeep) for a single guy, and the commute isn't worth it anyway. 2. I could buy the same type of tiny studio / one bedroom where I live for about $500K - way more than I'm paying for renting, all things remaining equal. In other words, renting is lower cost than owning at the moment. 3. I could buy the same tiny condo with an hour commute for $250K, but then I'm stuck there. The equity I gain is minimal since half the costs (about $1k / month) are HOAs, taxes, insurance, etc which will only go up over time. When it's all said and done, there is almost no reason for someone like me to own. If I had a wife and kids, maybe. But as a single guy no way. The low interest rates of the fed and lack of new construction ( NIMBY) have again pushed up prices to 5x-6x the median family income in my area - about as high as 2006. Mortgage interest deduction is worth almost nothing because rates are so low (contrary to the Realtor and mortgage industry), and it may be going away anyway. Jobs aren't stable enough where I'm comfortable being tied to one area. In our industry, even if your company doesn't lay you off or go under or whatever every 3 years, it's a bad idea to get to comfortable with one way of doing things - one framework, language, stack, etc. You need to keep jumping jobs if you ever want a raise. Nor do I feel like being tied to one locality or another when it's apparent many of them are woefully underfunded with their pensions / health insurance for retirees. Gouging home owners for higher property tax bills will be the main way they balance their books.
- htormey 9y ago
  This plus rent control is very similar to my situation in San Francisco. The only thing which would change this is if I had kids.

31 points by clumsysmurf 9y ago

It may also be that smart rich people have gotten over the cult of homeownership: https://www.ft.com/content/00bf5968-f518-11e2-b4f8-00144feabdc0 https://www.ft.com/content/00bf5968-f518-11e2-b4f8-00144feab... or http://www.slate.com/blogs/moneybox/2013/07/29/political_economy_of_homeownership_a_disaster_area.html http://www.slate.com/blogs/moneybox/2013/07/29/political_eco.... Or search for the term "The cult of homeownership" for more. There are well-known possible positives to owning but the negatives are vast too, especially compared to investing in an ultra-low-fee index fund in lieu of a house. Owning a house also made more sense in an era in which a single worker expected to work for a single company at a single site for decades. In an era when two workers may work for a myriad of companies for ranges of six months to ten years, it makes a lot less sense.

walshemj 9y ago
realy so why are non residents buying housing as an investment in London Sf NY and Vancouver? And if your rich diversifying from just a me to index fund makes a lot of sense hint if the Rothschild's and other mega rich families run actively managed funds its probably a good idea for you to - I have done very nicely out of RCP on the LSE
- seqastian 9y ago
  Cause they can't find other save investments and have cash burning in their pocket.
  - walshemj 9y ago
    Why are not stocks /funds on the LSE NYSE the same unless the cash is from the black market and they cant pass money laundering regs?
    - sanswork 9y ago
      Some countries have limits on how much money you can expatriate each year. Some of these also have rules that allow you to move more money as long as it is going to certain things(building industry, land/home purchases, etc).
    - monort 9y ago
      I think upcoming CRS (the global version of FATCA) is one of the reasons. Investment accounts will be reported to homeland automatically.
- sidlls 9y ago
  Money laundering, safe durable stores of value protected from their governments' confiscation efforts, pure speculation, and being on the wrong end holding the bag all spring to mind.
- blackguardx 9y ago
  Rich people invest in property because they have enough money to view a million dollar condo as a diversification strategy. Property can be a good investment, but shouldn't be your only investment.
  - sidlls 9y ago
    I'd take 10 houses for $200k in the Midwest over one $2m house in the Bay Area. Appreciation is lower, but rents (as a percentage of cost) are much, much better. The shortfall in appreciation can easily be made up for in better rent yield.
    - sanswork 9y ago
      How does it look once you account for closing costs on 10 houses, maintenance and management of 10 rental properties, etc?
    - jeffdavis 9y ago
      Consider maintenance costs, vacancies, and management fees. Those can take a huge bite out of your rental income and easily drive you into the red.
      - walshemj 9y ago
        not if you run it as a property company and not directly own them
        jeffdavis 9y ago
        Can you please explain?
        walshemj 9y ago
        You set up a company who owns the property's you can then claim expenses back against tax - you then pay your self a dividend. As opposed to you owning the houses directly
- noobermin 9y ago
  I mean, what you're raising is a valid question and one that has been alluded to here before. However, it is pretty politically charged and it's only tangentially related to this article, hence it seems in poor taste to bring it up here.
- kenhwang 9y ago
  It's very difficult for the Chinese government to discover or seize foreign property. If you illegally exported money from China, you couldn't exactly keep it in a bank where the Chinese government could claw it back. So you buy property in safe markets; housing doesn't drastically change in value (and often appreciates), the money gets "washed" in escrow by random citizens, it's very hard for housing to get stolen or lost (unlike other high value items, like precious metals, diamonds, cars), there's enough supply where the government couldn't possibly monitor all the markets, and it's high enough value where so you only need to succeed a handful of times.
prostoalex 9y ago
The richer you are, the more affordable travel is, and when one sees various options available at relatively affordable price points in Costa Rica, southern Spain, Caribbean or New Zealand, the urge to empty one's brokerage account in order to buy a one bedroom condo in a crowded area plagued by homelessness, inadequate schools, laughable public transportation and overpriced food is not that strong anymore.

jquery 9y ago

Don’t kid, most people aren’t renting because they prefer it. We shouldn’t glorify unaffordability. My “rich” coworkers would largely love to own but they can’t afford the mammoth down payments, and the sky high rents plus sky high taxes make it difficult to save. “One of Aesop's best-known fables is “The Fox and the Grapes.” On its surface, or its literal level of meaning, the story tells of a fox who wants a bunch of grapes hanging above his head. The fox tries desperately to reach the grapes but cannot. He finally gives up, saying that the grapes are probably sour anyway.“ https://en.m.wikipedia.org/wiki/The_Fox_and_the_Grapes https://en.m.wikipedia.org/wiki/The_Fox_and_the_Grapes

noobermin 9y ago
To your anecdote, I raise mine. At this stage in my life, I don't want to own a home for most of the reasons in the article they've listed.
yardie 9y ago
I would say it depends. Some places RE is so hot while rental vacancies are high that it makes sense to rent. The days of flipping houses to gain 20-50% profit are long gone. A lot of property in our area is being bought by foreign investors. I feel, unless they hold for 10-15 years they will never make their money back. From experience, we’re closing on a house now and not paying much more than the previous owner 10 years ago. 5 years ago we could have probably could have bought for 50% lower.
jfaucett 9y ago
> Don’t kid, most people aren’t renting because they prefer it. I can't speak for the USA but in Germany - specifically where we live, home ownership is not/barely worth it financially speaking. The taxes alone for "owning property" i.e. renting it from the government until you die are extremely high. You pay 6.5% (varies by state) of the property value in "Grunderwerbsteuer" when you initially buy and then for a home valued at around 250k (fairly normal prices) you're looking at a 2-4k per year in taxes. Throw on top of that all your upkeep costs in time and money and it really doesn't look like such a nice deal. That's why we haven't bought and I don't want to. Nowadays, "home ownership" is just another name for renting where the costs are slightly less and the upkeep to you in time and effort is more.

techisamix 9y ago

My wife and I are in this percentage. Both educated, making ok money but with a new family and undergrad loans still looming it feels like homeownership is still years away. I will probably be 35 by the time I can buy my first "starter home". We are moving all around the country to find better and more affordable places to live. In fact now that my wife has her master's we're chasing clinics that provide loan repayment just so we can get our debt out from under us. Another reason we keep renting - I've worked other industries that do poorly during a recession and tech feels no different. I'm highly predisposed to not being stuck with a huge mortgage when things get tough which means in a lot of cities I'd never feel comfortable buying a home (insinuating that we couldn't survive on one income).

paulpauper 9y ago

Here’s the upshot: rich households—those earning more than 120 percent of the metro median income—saw their renter share rise by 1.2 percent between 2012 and 2015. Since 2006, that growth was a striking 6.2 percent. The renter share among households making less than 50 percent of the median income, on the other hand, remained roughly the same since 2012. Since 2006, it grew by a modest 2.9 percent. More educated subsets of metro residents also gained renters in this period. This does not make much sense how the author derives the 6.2% figure and then says its 1.2%, nor does a 1.2% gain over a 3-year period seem like much.

noobermin 9y ago
That does seem super weak sauce. Also, the "striking" 6.2% included 2008, who's to say that the even among the 1.2 X median people, that the economic hurt wasn't enough to explain the delta there?
- walshemj 9y ago
  120% of the median income is not "rich" in this day and age
  - noobermin 9y ago
    Hmm, it's above the median, it is well off. But yes, it isn't well off enough to be sheltered from the effects of the great recession, I agree.
    - walshemj 9y ago
      well that's about 48k given the median salary in the US that's not relay well off puts you just about out of JAM (just about managing ) territory given health care costs

ComradeTaco 9y ago

Many of those who have high incomes would prefer to build equity rather than hand it to landowners. However incomes only rose only modestly above inflation while real estate prices have doubled and even tripled in many places. We're really in trouble as a society if essentials like education, healthcare and housing continue to eat an increasingly large portion of consumer income.

efficax 9y ago

I make a decent living, way above median household income, but my wife and I rent in a dense urban center for the simple reason that even with our income we couldn't afford to own in this area. Even if we weren't paying student loans it would take several years to build up a down payment that would result in cheaper mortgage payments than our rent burden, which would be crucial since homeownership adds property taxes and significant upkeep costs above the mortgage payment. Sure, we could afford a house in the 'burbs, but we don't want to live in the 'burbs. The rent is too damn high, but so are the housing prices.

tedmiston 9y ago
Likewise for me. I chose to live in an apartment in the city center / startup hub (and walk to work) vs buy a house in the suburbs with a half hour commute every day. There are condos here but the market is much higher.
matt_wulfeck 9y ago
7 years of saving I believe is the average for a down payment. It doesn’t sound like your story is too outside the range of normal.
- techisamix 9y ago
  I haven't heard that before, link?
- hammock 9y ago
  Seems to make sense, buy a house 3x your annual income, with 20% down you could get that in 7 years if you save away 8.5% per year. And you have a house at 29
  - davidjnelson 9y ago
    Lol, houses for 3x your income? I take it you don't live in the Bay Area ;-)

yardie 9y ago

We currently live 3 blocks from the beach and have no intention of buying here. The older buildings are prone to flooding, some are sinking, and the foundations are cracking. The newer buildings are incredibly expensive. We’ll stay here until it no longer makes financial sense. Until then I continue to rent while stashing money away for property not near the slowly rising oceans.

nostrademons 9y ago

This is dual to "the rise of wealthy foreign landlords that buy homes site-unseen as investment properties." My wife and I, despite being able to afford a home, have chosen not to buy one. Why? Because home prices in our area run at $2.7M for a 3BR [1], while we're paying $2600/month to rent a 2BR townhome. People we know who have bought are now paying $6-7K/month on housing, for something not much better than what we have (they have a yard and an extra bedroom, but we have a pool). Even with the mortgage interest tax deduction, you're still paying more on interest alone (let alone principal, property taxes, or maintenance) than we're paying in rent. [1] This is perhaps an overestimate - it was a news story about a couple that were outbid 4 times and wanted a fairly nice property. But even so, minimum prices on a 2BR condo in the area now range around $1M+, so the math still doesn't work out.

rentcontrol 9y ago
The difference is that with average appreciation rates in California, when they sell they get all of their money back (minus fees, of course). You? Well, you had a place to stay. As long as appreciation + inflation over the period you stay in a house you buy is greater than your interest rate, buying a house is effectively free (minus the downpayment). People bring up maintenance, however this is already taken into account with rental price increases, vs. a fixed 30 year mortgage. Maintenance is an overplayed expense, honestly. EDIT: I can't reply to the children comments, but I just want to say that the situation mention is absurd. 1. 2.7M worth of 1985 S.F. property would be entire neighborhoods and give you more than 6%. Forget houses, 2.7M in 1985 would buy you acres of prime real estate. 2. Even if it did not, it's not necessary to put down 20% on a house. 3. Investing and purchasing a house are not mutually exclusive strategies. 4. Overall, over 40 years buying will always be better.
- nostrademons 9y ago
  You can't count on that appreciation going up forever, though. Once the number of buyers or wealth of buyers declines, home prices will too. I look at a lot of the houses here and see Detroit in 50 years. I moved here in 2009 and there was a big drop in house prices then, enough that everyone who bought in the boom years of 2004-2007 went underwater and many were foreclosed upon. Yes, I'm kicking myself for not buying then - though honestly, the money was in Google stock options instead and Google stock has gone up a lot more than Silicon Valley housing prices, so I probably still ended up ahead.

buf 9y ago

I rent simply because I cannot afford to buy in the area I desire and I refuse to commute an hour.

rentcontrol 9y ago

Personally, I ask my friends who complain about rent why they just don't change what they want, e.g. roommates, worse quality, further away, worse amenities, etc. and generally they say they want it all. Well, unfortunately to have it all you have to pay. Paradoxically, those who want to live in the city will want to enjoy the amenities, which cost money. Money that will take them that much further from buying a house. Clearly, from the behavior they must not want a house that much.

closeparen 9y ago

Is anyone surprised? The fall of the private car has us contending for less and less land (near work, near transit stations, etc). Of course everyone’s housing situation moves down a few notches when we throw away the vast tracts of housing supply enabled by freeways and parking. High rises and elevators could compensate, but so far no city is contemplating adding downtown luxury condos at anywhere near the rate it’s divesting from sprawl.

htormey 9y ago

If you are in an apartment with rent control it really changes the rent/buy equation. I’ve lived in a two bedroom rent controlled apartment in San Francisco for the last 7 years. I pay significantly below market rate for rent. I also have enough to afford a down payment on a house here. Their is no incentive for me to purchase a house unless I lose my rent controlled apartment and even then I probably wouldn’t buy. I know many of my peers who are in similar situations. I’d say the same is true of NYC.

bradleyjg 9y ago
Rent control unbundles the bundle of rights that is property ownership. The result from the renter's perspective is a hybrid between tenancy and ownership. It's not the only way to unbundle it either. Consider the more traditional life estate, for example.

hiram112 9y ago

Mid 30's guy - make over six figures, no wife, kids, or other expenses. I could easily buy my own modest home with cash, but instead I pay about $2K for a tiny studio in the middle of an expensive city. I actually have been looking to buy a home in my high COL East Coast city this year, and here is why I'm holding off on it: 1. An actual 'home' like I grew up in with a few bedrooms, garage, yard, etc. within a one hour commute to most jobs would be $750K. Maybe I could get that down to $400K with a 2 hour each way commute. That's simply way too much money (taxes, insurance, upkeep) for a single guy, and the commute isn't worth it anyway. 2. I could buy the same type of tiny studio / one bedroom where I live for about $500K - way more than I'm paying for renting, all things remaining equal. In other words, renting is lower cost than owning at the moment. 3. I could buy the same tiny condo with an hour commute for $250K, but then I'm stuck there. The equity I gain is minimal since half the costs (about $1k / month) are HOAs, taxes, insurance, etc which will only go up over time. When it's all said and done, there is almost no reason for someone like me to own. If I had a wife and kids, maybe. But as a single guy no way. The low interest rates of the fed and lack of new construction ( NIMBY) have again pushed up prices to 5x-6x the median family income in my area - about as high as 2006. Mortgage interest deduction is worth almost nothing because rates are so low (contrary to the Realtor and mortgage industry), and it may be going away anyway. Jobs aren't stable enough where I'm comfortable being tied to one area. In our industry, even if your company doesn't lay you off or go under or whatever every 3 years, it's a bad idea to get to comfortable with one way of doing things - one framework, language, stack, etc. You need to keep jumping jobs if you ever want a raise. Nor do I feel like being tied to one locality or another when it's apparent many of them are woefully underfunded with their pensions / health insurance for retirees. Gouging home owners for higher property tax bills will be the main way they balance their books.

htormey 9y ago
This plus rent control is very similar to my situation in San Francisco. The only thing which would change this is if I had kids.