4 ms·

I find it better to look at rentals than house prices, because house prices are being driven up by people who really, really want to own (due to few sellers). (

• randycupertino 8y ago
  Except then you're always at the mercy of a landlord who can raise your rental rates, and you won't be building any equity. There's no rent control on the Peninsula. I know people who have gotten a $600/month rent increase and been totally screwed. Whereas owners benefit from Prop 13 which is basically rent control for owners- their property taxes never go up.
  • sdenton4 8y ago
    Not building equity == ploughing piles of money into better investments than a house...
    • lpolovets 8y ago
      I agree and disagree. In most areas, I think it's true that other asset classes outperform real estate. One challenge in the Bay Area is that housing has been going up faster than non-housing investments. For example, I just checked the house next door to me on Trulia, and it's up 6X in 20 years. That's an almost 10% annual rate of return. So in fact if you don't own a house, you're probably falling even further behind from your house-owning peers. At least in this area.
      • overeater 8y ago
        So you're saying if you buy a house, you will be making incredible gains. If not, then you will be making gains at least as good as everywhere else. Sounds like win-win to me.
        • lpolovets 8y ago
          There are very few assets that return 10% annually for 20 years. It's impossible to know what will happen in the next 20 years, but owning a house in the Bay Area for the last few decades would have been a much better investment than paying a little less for rent and investing what's left over.
          • fjsolwmv 8y ago
            6x in 20years is lower return than stock shares in most of the employers that have been driving up housing prices (for obvious reasons -- those companies' growth are funding the housing price gains)
            • usaar333 8y ago
              Not sure why you are being downvoted, but this is correct. The returns on VITAX far outperformed leveraged housing. (see 3rd final thought at https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...) Besides, 10% is about the long-term S&P 500 average return.
              • hikarudo 8y ago
                Not to mention that by owning you have to pay property tax, which should be considered when comparing investment returns.
            • jfnixon 8y ago
              It is normally a Bad Idea to invest heavily in your employer due to the Putting All Your Eggs In One Basket principle. If anything happens, you lose your job and investments.
    • dominotw 8y ago
      But you are putting down only your savings in other investments , much lower amount.
    • SomewhatLikely 8y ago
      However, the house is leveraged. At 20% down any gains in house equity represent five times the same percentage gain in an unleveraged investment. If you put 200k down on a 1m house and the house appreciates to 1.1m, then that 10% gain in equity is a 50% gain on what you actually invested. Of course losses will be magnified too.
  • mateo411 8y ago
    There is rent control in East Palo Alto. However, every other city on the Peninsula does not have rent control.
    • bruckie 8y ago
      Mountain View, too: https://www.mountainview.gov/depts/comdev/preservation/rentstabilization.asp https://www.mountainview.gov/depts/comdev/preservation/rents...
      • mateo411 8y ago
        You are correct. Mountain View recently added rent control.
• s0rce 8y ago
  Relatively low interest rates (locked in for 30 years), tax deductible mortgage interest (some) and prop13 make ownership still economically beneficial even if you don't assume massive appreciation. This assumes you stay at least 5 years due to large transaction costs. Obviously you have expenses associated with ownership and some opportunity costs due to not investing the down payment but from all the math I've done if you want to stay and you can swing a 1.5M house it makes sense to buy.
  • usaar333 8y ago
    > Relatively low interest rates (locked in for 30 years), tax deductible mortgage interest (some) and prop13 make ownership still economically beneficial even if you don't assume massive appreciation. That's not true in many parts of the Bay Area. See linked post above: https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...
    • s0rce 8y ago
      Good point, it certainly depends on how you do your model. Accurately predicting the housing market appreciation and your investment rate of return is challenging. Also, renting vs. buying have different risks (monetary and otherwise).
  • triviatise 8y ago
    Interest is no longer tax deductible above 750K loan (1 million if grandfathered)
• shanghaiaway 8y ago
  Rents are driven up by people who really, really want to rent.