13 ms·

Maybe Americans aren't dumb enough to keep buying houses?

184 points by spottiness 15y ago

pstack 15y ago
I'm glad I bought a house, because paying $1,100/mo (including tax and insurance) for a 3,000sqft home with a yard where I can mostly do what I want and have control over my living environment and get a tax break on about half of that monthly payment sure beats the $1,200/mo I was paying for a 1,000sqft apartment in which I had been robbed of $30,000 during a home invasion where the person had a key (maintenance crew, surely, who had access to the keys) and let themselves in while I was sleeping. The rent/own ratio may be different in San Francisco (where I've lived) and New York, but there's a lot of other country out there that exists besides those two and Seattle. There's Portland, Denver, Chicago. Plenty of places. I live in a fairly expensive city (on par with Portland, where I lived most of my life). Still, my house didn't cost a lot more than the mount I'd already paid in rent during my adult life. I did the math and I have paid about $170,000 in rent. That includes apartments I've lived in in Portland, San Francisco and Denver since 1999 and is not adjusted for inflation. It includes the 400sqft hellhole in San Jose that I paid $1,200/mo for in 2000 and the 400sqft studio and 585 sqft 1bdrm in Portland, and the 1,000sqft 2 bdrm in Denver. The house I bought last year was only $25,000 more than that. Even if my home loses a ton of value (and it probably has and will), at least at the end of paying $200k into it, I'll have something worth something, versus what I have after about thirteen years of renting for $170,000 . . . which is nothing. The real problem with the home market is that it's being artificially buoyed, to keep current home owners happy at the expense of houses dropping even more in price, so someone can reasonably eventually buy a home even if they're making an average income. After all, isn't that how the market is supposed to work? Stuff drops in price, other people get an opportunity to own that stuff who previously may have been priced out of participation. Also, the article states that someone who just bought a house and lost 10% due to decrease in value plus commissions when selling is unlikely to enter the market again any time soon. Well, why are you buying a house just to sell it a few years later? I bought my house so I could live in it. I would like it to increase in value, eventually, too. I'm not counting on it, but it would be nice. If it doesn't, at least I have a home to live in and will eventually own it (because I didn't buy the maximum house that my credit score and loanability would have allowed). I don't know a lot about the housing market and I'm not an economist, but I do know that I'm glad I bought a house last year (with a rate under 5%) and wish I would have done so many years ago, instead of putting it off for a decade. (On the other hand, if I had done it a decade earlier, I probably would have taken a big hit over the last few years, so whatever). Also, the other nice thing is that I'll be paying the same amount (except for tax changes) for the next 15-30 years that it takes me to pay off the house. In my apartment, I'd gone from paying $900 to $1,200/mo in only four years for the same unit. Oh, and I don't have people stomping on the floor above me 24x7, so I can't sleep. And I don't have to allow someone from the maintenance/leasing office come into my home nearly any time they want with a 24hr notice. And I can (and did) run ethernet in the walls. And I can (and did) setup my home theater and run it at 50% power instead of having neighbors complain when I ran it at 5%, before. And when I have a guest that stays for more than three days per year, total, I don't have to register them with the leasing office. And I know my neighbors and they have lived here for a couple decades and are friendly and helpful. I never even saw the neighbors at my apartment. So, yeah. I guess I'm dumb enough.
- Spyro7 15y ago
  pstack, my situation is similar to yours. I think that the difference between us and the people that they are referring to in that article is that we consider a house to be a place to live and not merely a medium-term investment. I think that the thing that really lead to the housing market bust was that a ton of people started buying houses just to sit on them for a few years and then sell for a profit. The speculation fed on itself until it became unsustainable, then it fell apart. It is just a shame that this had an impact on regular long-term homeowners as well. So, yeah, if you're dumb enough then so am I.
  - pstack 15y ago
    I thought that was what they were referring to, also, but they keep referring to the rent versus ownership ratio as well as the maintenance work issue. I think they're talking about actual homeowners buying homes to live in, because of the way they keep basing it on that. Though I guess they could be using those to draw a basis for why nobody will buy the houses an investor is stockpiling?
    - Spyro7 15y ago
      They refer to the rent-ownership ratio and the maintenance work, but they also implicitly dismiss the longer-term argument for owning a house. They keep talking about the costs of home ownership with no talk of the benefits that can result from owning vs renting - painting a picture that home ownership is a really dumb thing to do. To me, by not discussing the long-term benefits of home ownership they are looking at the issue all wrong. Their analysis is focused only on the short to medium term and the valuation of the house itself. They are discussing homes in a similar way to how one would look at any investment - ignoring that a home should be considered differently because of the non-monetary values that come along with home ownership. Of course, a home is an investment and it can provide capital gains, but there are other, not easily quantifiable, benefits to home ownership that make it attractive. To ignore these benefits is to miss the picture completely.
      - 15y ago
deleted 15y ago
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ck2 15y ago
Wrong, Americans aren't dumb enough to buy houses until prices drop to pre-bubble prices. Prices are still kinda crazy and unjustified compared to 2005. Also, the average person can probably not get credit anymore and the wealthy desire only so many 2nd homes.
- _delirium 15y ago
  Yeah, I think the credit issue is a big part of it. Whether it's a good idea or not, if it were as easy to get a mortgage today as it was in 2005, I'm pretty sure a lot of Americans would be getting huge mortgages. So it may be overstating the case a bit to claim that Americans have in aggregate made a rational decision not to buy houses--- versus simply not being able to buy houses anymore due to a change in the banking situation.
- pstack 15y ago
  I posted this in my own comment, but I agree that a lot of people won't buy homes until they drop even more. Unfortunately, I don't know how much more they're going to drop. There is a lot of artificially maintaining the value of homes, because politicians want to keep the voting block happy (people in debt with a family). I bought my home, because rates dropped below 5% and I had a chunk of money on hand, found a home I really liked, and was kind of sick at the thought that I'd just handed over almost $200k in just over ten years by renting apartments. I make a solid income and owning a home isn't a trivial expense to me, so I can't imagine someone making a go at it if they have a family and an income that is half or a third. Prices should drop to whatever their natural un-aided point would be, so that all those people out there who will either never own a home or only do so by getting into unfathomable debt (all over again) will actually be able to own a piece. Imagine what the long term benefit to the economy would be if prices dropped just long enough for tens of millions of people to lock in rates on their own home? It would transform the economy as well as, perhaps, society. Owning a home would be the rule, instead of exception. Being in debt to own a home would be an exception. High rent would be an exception. There would be much more discretionary income to put back into other industries. Or, better, for people to stick into their savings so that they can retire with a home to live in and finances to support themselves.
dangrossman 15y ago
You have to pay something to have a place to live. If you rent a little townhome for $1700/month for just 5 years, that's over $100k gone with nothing tangible in return. Even if your house will depreciate $50k between buying and selling it, are you worse off than renting?
- nwmt 15y ago
  If the potential home buyer wanted to keep their monthly outlay at $1700 whether they rent or own, then I think in 5 years if they lose $50k on their house they are likely out more money with a bigger headache than renting would've cost them. Without property tax, $1700/mo means taking a 25 year loan of $320k at 4% interest. Obviously whether this is too high or too low depends entirely on where they live, but again I'm assuming that they were getting a similar place for roughly $1700/mo in rent, and are comfortable in that lifestyle. That's also assuming they have the cash for a down payment ($65k if they want to put 20% down). So, if you run the mortgage numbers, in 5 years, assuming interest rates stay at 4%, they will have paid $61k in interest. Property taxes over 5 years (where I live, anyway) on a $385k home would be $15k-$20k on top of that. If we factor property tax into the $1700/mo, then they can only afford a $265k loan, and only pay $50k in interest over 5 years. Either way, $50k or more interest + $18k in property tax + $50k in depreciation + $15k in closing and real estate fees costs them a lot more than renting for the same time period, and that's assuming that nothing goes wrong. If their roof starts leaking, the deck collapses, they need to move for work or their growing family in less than five years, they are in an even worse situation. (One might suggest we should amortize the $15k in closing and real estate costs over the 5 years and buy a smaller place accordingly, but at that point your $1700/mo rent becomes more like $1150/mo in mortgage payments, so at that point the question becomes how out of whack the renting and buying markets are, assuming again that you want to maintain a similar living standard, and not be downsizing as you're turning 30.) The obvious question then is how likely "even if your house will depreciate $50k" ends up being.
  - dedward 15y ago
    At the risk of inflaming some - if you were buying the home, a paper loss in market value is irrelevant unless you are planning on selling the home during that time. The real problem here is that we're not really talking about home ownership or buying a house - we're talking about taking out huge loans from banks and paying them off over decades, along with a ton of interest, and hoping that property values increase so we can trade up to something bigger and end up in exactly the same situation- rinse, repeat. The real problem is that we discuss "ownership" of homes when we don't really own them - the bank does.
drp 15y ago
It's really difficult to make general statements about the wisdom of buying versus renting across an entire country with extremely diverse local real estate markets. We made an up-to-date heat map of US rent ratios here: http://hotpads.com/search/rent-ratio-heat-maps http://hotpads.com/search/rent-ratio-heat-maps that demonstrates how some markets, even at the state level, are still tilted toward the buyer while others favor renters.
- caffeine5150 15y ago
  I think that it's not just an issue of region but also of price range. I am a life long renter and I've seen that rents tend to stay within a certain band - they only go so low or so high generally. So a small apartment might be still $1200 to rent vs. a mortgage of $1100 whereas for a high end home, rents might only get to say $5k or $6k vs. a mortgage of $12k on the same home. I rent a house for $4500 per month that would cost me a $7500 mortgage if I bought it. Another issue is the fact that not everyone can buy a house that they're going to realistically want to live in for 30 years. Your family grows, you change cities due to job opportunities, etc. So for the guy who knows he's going to be single and stay put, it may make sense for him to buy a $200k house instead of paying $1200 in rent for an apartment. But for many others, buying makes absolutely no sense.
- blhack 15y ago
  Just want go say that hot pads is one of my favorite websites. I get on it when I'm bored and just look at random places to live all the time. You [or your group] do an outstanding job. Thank you for it.
bmccormack 15y ago
Five years ago, I thought about buying a home, and everyone around me was saying "You HAVE to buy a home. Don't THROW AWAY YOUR MONEY by renting. Houses NEVER lose value." While it's obvious that this flawed logic existed five years ago before the bubble burst, I'm surprised at how much of it still remains. I'm surprised that consumers are still trying to play numbers games to justify purchasing homes, but perhaps as the OP suggests, the supply of buyers is less than before. If you want to buy a home for lifestyle reasons, great, but make sure that's clear; there are so many people who are stuck in their homes without a job because they thought they were clever at math. When my wife and I were figuring out what to do with our lives, we decided to put my finding a good job above owning a home. Because of this, I was able to accept a job in NYC and move from the suburbs of Atlanta without worrying about selling a home in a horrible real estate market. We'll consider buying a home after I feel more rooted in the tech industry, but for now, we appreciate the flexibility that renting affords.
- pstack 15y ago
  A very valid point. As others have stated, buying a home should be more about quality of life and living than making a buck and that has to be on your time schedule; not someone else's. The worst thing you can ever do is buy a home when you're not ready for a home -- and you know better than anyone else if you're ready. When you start waking up in the morning and thinking "god damn, I wish I had a home, so I could . . ." then it might be time to start giving it consideration. For me, I had dealt with a home invasion. I'd lived in my apartment for five years and someone walked in while I was asleep and stole everything (the layout of the apartment was such that I wasn't disturbed by the intruder - if you were in the back bedroom, you couldn't even hear someone banging on the front door). I lived alone. Nobody else had keys . . . except the leasing and maintenance offices. Took $30k worth of stuff. So, I started waking up in the mornings feeling a bit unsafe, wishing I had a sweet surveillance/alarm system, and also thinking about how great it would be to have room for my entertainment system (and get to blast it as loud as I wanted). Also, I kind of still want to get a dog and that wouldn't have worked in the apartment. Enough things started to bug me that I just sat up one day and said "let's go look at houses". Until you are home shopping for those reasons (or similar reasons of your own), then you may be doing it for all the wrong reasons. Maybe because friends are all buying homes. Maybe because you feel like you're still a "kid" as long as you keep renting. Who knows? In the mean time, definitely don't buy into the idea that you have to go for it because people around you are talking about it and you feel like you're missing out. You might be the sanest of them all. I didn't buy a home until I was starting into my 30s. I could have done it a decade before and went so far as to check out homes and even get approved for loans. It just never felt quite right, until last year. And I have been happy that I finally did so, when I did. Well-being accounts for a lot, too. Whatever you may be losing "on paper" with renting, you may be compensated for in peace of mind, right now. You can focus on work and savings and family rather than finding a trustworthy and affordable lawn service, worrying if your boiler is going to make it another year, wondering why in the hell that sink is draining slowly, when it isn't clogged up, wondering how much it would cost to turn that spare room into a sex dungeon. . .
mdasen 15y ago
One of the things that he's critically missed is that it's unfair to only compare the price of buying vs. the price of renting today. When you purchase a house, your mortgage is set for the term of the mortgage. Rent is usually only set for a year at a time and does go up. The NY Times buy vs. rent calculator in the article that he links, uses 3% as a baseline rent increase per year. So, after 5 years, a $1500 rent could be expected to cost $1740. That's not too impressive if you assume it's a place worth $375k and at his 2% taxes and maintenance price, you'd have $625 in costs in addition to the mortgage - well over the $240 that the rent had risen. However, after 15 years, that theoretical rent would have risen to $2300 and eclipsed the cost of taxes and maintenance. Now, as home values rise, taxes would rise with it, but then you own something that you can sell for more money and have made a good investment so it isn't a good argument to say, "well, one's home could go up in value a lot every year which would mean more taxes." It depends on what you're buying a property for. Frankly, the NY Times calculator (http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula...) is going to be a lot better than my crude calculations. However, if you're buying a property to stay in for a good while, it can be a better idea to buy. The costs of selling don't matter that much when you've stayed in a place for a long time. It also depends on your market. I've priced things out in the Boston area against rent (more urban than Greenspun), and it really depends on how long you're going to stay in that place. Most of the cities here offer you a homestead exemption on your property taxes if you live there and it's usually around 200k - meaning that if you buy a place for $400k to live in rather than rent, you're actually only paying half the property tax rate. The towns tend not to have that exemption. So, if you want to be in one place for a decade, the calculator shows that buying can be a nice option. Buying a house isn't something to go in for like buying an iPhone and getting a two-year cell phone contract. It requires a careful look at the costs and that you're relatively settled in life. It isn't a panacea of money, but it can be cheaper and can be stabilizing. While it isn't everyone, there are people who really like an area, have a job that won't see them have to move, and would stay in that house for 20-30 years. -- Plus, if you look at Trulia's rent-vs-buy index (http://trulia.movity.com/rentvsbuy/ http://trulia.movity.com/rentvsbuy/), you'll see that Greenspun has cherry-picked the worst cities to buy to do his calculations. Trulia notes that in 36 out of its 50 cities studied, it is "much less expensive to buy than rent". That includes real cities like Chicago, Wahsington DC, San Diego, Minneapolis, Philadelphia, and Atlanta. He's used a buy-to-rent ratio of 30:1, but the average for the 50 cities shown is 14.22. So, we live in the Boston area and buying here is an expensive proposition that might not make sense. However, there are many places that have much more favorable ownership conditions. If you're in a market where the buy-to-rent ratio is below 15:1, the NY Times calculator will show you how favorable buying is. And, frankly, that's most of the country. Where Greenspun and I live seems to be the exception, not the rule and his calculations are based on data that doesn't apply to most people. It applies to him and it applies to me based on where we live, but it probably isn't something that one should generalize to the country.
ahi 15y ago
The rent vs buy index is misleading. I used to live in Ann Arbor where rent is mediocre, but home prices are ridiculous. On paper the ratio still looks pretty good because the median rental property is downtown while the median home for sale is in the suburban neighborhoods. I was on the board of a downtown housing cooperative and the ROI on properties in the downtown area was nonexistent. I moved 5 miles to the east to rough around the edges Ypsilanti and the situation was completely reversed. You can have a house downtown paid off with 5 years of rent payments. Further out you go into the surrounding farmland, the lower rent becomes and the higher sale prices get.
- antidaily 15y ago
  Interesting. The perception when I was in school was that the rent was too damn high. I never really looked at house prices, but I knew someone who got into a 2 bedroom off Main near Stadium for around $190k (in 2005 or so), which seemed reasonable considering its location. related: Ann Arbor/Detroit HN group http://groups.google.com/group/hn-ann-arbor-detroit http://groups.google.com/group/hn-ann-arbor-detroit
visava 15y ago
http://patrick.net/housing/crash3.html http://patrick.net/housing/crash3.html Analysis to help you decide whether to buy or rent.
nhangen 15y ago
Those of you renting and hating on home ownership should ask yourself where you'd live if someone hadn't bought a home and allowed you to rent it from them.
- cgopalan 15y ago
  Wrong argument. Firstly, rented homes are not only from homeowners. Second and more importantly, for people that already have a home through say inheritance, or ability to pay outright cash, it makes sense for them to use it as a source of income. Not saying those are the only people for whom home-ownership makes sense, but the cases above are the easiest non-subjective examples to cite in favor of home-ownership. And neither homeowners nor renters need be indebted to each other.
  - nhangen 15y ago
    Personally, I don't understand the anti-mortgage sentiment at all. I can buy a home at 5%, and then use the money I'm saving to build something else in order to make a higher return. Point being is that it's not always black and white (banks bad, cash good). Also, though homeowners aren't the only source of rental properties, outside of city life, they are the most prominent. Either way though, the same argument applies. Without someone buying a property and renting it, there would be no place to rent. The house I'm renting to someone in NC is being paid off because of my renters. It's not income now, but when it's paid off, that's $1k/month free to me.
    - cgopalan 15y ago
      This might be going off the main topic here, but I'll address it: For someone who has the ability to pay outright, I agree that paying a monthly amount might give some flexibility. If someone is making a monthly payment because thats all they can do, its basically debt and holds you down. I agree though, that its not always black and white. Back to the main topic: Should renters be indebted to home owners? Its all a case of supply/demand. I dont see renters having a shortage. Which means that more people are willing to rent out their home, than renters wanting to find a place to rent. In this market, homeowners need renters more than renters need homeowners. If say in a hypothetical situation all homeowners stopped putting out their houses for rent, more people will gravitate towards other sources of rentals like rental properties owned by companies. These rental property companies do not have an emotionally-vested interest in their home. They see it just as a service. I agree when you pay off the money for your house, the renters give you free money. But this is close to the end-game and by this time you would have to factor in also opportunity costs. I am not saying the opportunity cost is huge, but usually a mortgage holds you down for 30 years (in most cases), and its too long a time to just consider what happens at the end of it.
raintrees 15y ago
Well, if true, this is good news for cash flowing investment real estate purchases, on both sides... Property Owners may have a better chance at returns, if they are able to raise rents to match inflation. And Property Managers (people to buffer the owner from the tenants) are typically charging 10% of rent. There is income to be made...
RealGeek 15y ago
The real property inflation is in New Delhi and Mumbai, India. Real estate in Delhi is more expensive than New York. A house built on a 500 yards lot will set you back $6 million. Moreover, the real estate prices are growing @ 50% every year and high as 100% in some areas. Compared to that, I would say houses in America are affordable. I hope India's real estate bubble gets burst.
angstrom 15y ago
Perspectives obviously vary by market and circumstance. In mine I'm fine with renting. I tend to stick around the 1700/mo range in NYC. For that, I don't have to own a car or the maintenance and depreciation associated with it. I still pay transit, but it is significantly less than the cost I paid in Ohio to drive 40-60 miles to work. My income mirrors my actual worth. I've seen people shortchanged because companies know that person is chained to a mortgage. I'm not paying maintenance, insurance, or front loaded interest on a home. (Tax deductible not that impressive) After rent is subtracted from my net pay I still have enough to turn around and invest in a diverse array of investment options. A home is a savings account with a maintenance fee. Viewing it as anything else IMHO is wishful thinking. An apartment is that same service fee condensed. Remember, in my situation both the house and a car have costs I don't have to worry about. Having freed myself of those problems I have much more spare time, more investment options, and flexibility. I'm perfectly ok with not having a lawn, neighbors degrading property values, or surprise expenses. To other people those negatives are perfectly acceptable, they cite the lack of space, public transit, and neighbors as negatives. I don't mind any of them.
tatsuke95 15y ago
There are a few defensive home owners in this thread who seem to be missing the point: The main problem is that the general public sees renting as throwing money away, and that owning a home is unconditionally "better". I'll make the assumption that this community has higher-than-average financial literacy, and hence there are people who have made the right decision with respect to rent/buy. However, I don't think this is true in general, and often times the rent/buy choice is much, MUCH closer than people assume.
- deleted 15y ago
  [deleted]
bluekite2000 15y ago
Relevant:http://www.khanacademy.org/video/renting-vs--buying-a-home?playlist=Finance http://www.khanacademy.org/video/renting-vs--buying-a-home?p...
jbail 15y ago
Referencing Zillow is the first indication you have no clue about the real estate market. Two examples: The house I live in has a carriage house behind it. It's zoned as a rental, has a kitchen, bathroom, bedroom and about 800 sq ft of studio type space with about a 15 ft ceiling. Does this information appear on my Zillow page? Nope. Zillow has no way to enter that type of information and its valuation is missing this very crucial bit of info. Secondly, where I used to live (in the mountains above Boulder), there was a house for sale next door. It was on one acre and was a modified single wide trailer. Zillow said it was worth $350,000. They said the property I was living on next to it (5 acres, a main house twice the size of our neighbor and a detached cabin) was worth $420,000. Seemed way off to me. Well, the house next door went for sale and sold for $149,000. After that, I don't trust Zillow at all. They have a lot of work to do before someone could take any statistics they provide seriously.
adharmad 15y ago
I have always wondered how the housing/renting market would be if mortgages were not tax deductible (or rents were also tax deductible).
- shawnee_ 15y ago
  The Realtor lobbying group (the National Association of Realtors) is bigger than Exxon's, number 4 on the list: http://www.opensecrets.org/orgs/list.php?order=A http://www.opensecrets.org/orgs/list.php?order=A Getting rid of the mortgage interest deduction would probably be the best thing to happen to the US since the Constitution. Especially for people in less than desirable neighborhoods. Slumlords wouldn't be able to function. Housing prices would go down, rents would go down, people who wanted to own could own affordably, and renting would be insanely affordable. The U.S. Tax Code is one giant game that steals short-term investment power from the majority people (low to medium income people) and gives it to the wealthiest people for them to write new rules of the game.
jdvolz 15y ago
Can we just all agree that owning a business is the real American dream and whatever you choose to do (rent or buy) after that has significantly less affect on your situation than owning your own business? I would certainly rather own a business that generates whatever my rent or mortgage would be, than to own a house that costs me that mortgage.
jodrellblank 15y ago
tl;dr: author feeling unhappy, unexcited and trapped, fears becoming boring, blames house ownership. More and more Americans will be conditioned to the idea that home ownership is a waste of time and money, not to mention the inflexibility that it imposes on a person [..] That would barely pay for property tax, maintenance (winters are harsh), and landscaping (weeds are aggressive). [..] Another advantage for renters is that they can free their minds from the clutter that prevents homeowners from doing or thinking anything interesting. [..] The rest of us go to Home Depot every few days and pull weeds. [..] They withdraw themselves from the market of potential buyers, at least for 10 years or so until they forget what wounds they suffered and how boring they were when they owned.
djacobs 15y ago
http://www.nytimes.com/2011/05/11/business/economy/11leonhardt.html http://www.nytimes.com/2011/05/11/business/economy/11leonhar... has some data on the price-to-rent ratio in various markets. From a grammar perspective, I think this sentence is interesting. It is literally the first time I've ever seen a URL as the subject and first word of a sentence. Of course, this violates everything I know about a) link sharing [0] and b) good writing, but it's interesting nonetheless. [0] http://www.goodusability.co.uk/2009/01/dont-say-click-here-on-link-text/ http://www.goodusability.co.uk/2009/01/dont-say-click-here-o...
pingswept 15y ago
I think it's interesting to compare Greenspun's attitude to Mike Rowe's recent Senate testimony about the lack of skilled workers in the trades in the US. Greenspun thinks that going to Home Depot and pulling weeds clutters the mind and prevents us from writing novels and building empires. Mike Rowe wishes that we weren't a nation of people who just left a check on the counter for the plumber. I rented for years, and not being able to fix stuff when it broke (without losing the investment when we moved) drove me crazy. I feel a strong desire to maintain my own home, even though I know I'd do better financially hiring cheap labor to do the work while I go make money faster building an empire.
gopi 15y ago
If you think US rent-vs-own ratios is expensive than you have to check other countries. Every country from the developed western europe/canada/australia to the developing india/china to the thirdworld african countries have worst rent-vs-own ratio than US, yet the prices are still appreciating there.
supercanuck 15y ago
Its interesting to me and a testament to how the topic of housing impacts the psyche of Americans that even on Hacker News the emotional arguments take on a stronger conviction than the logical ones.
- nhangen 15y ago
  It is interesting, but it reminds me of the TV vs no TV argument. Very strange division here.
nemik 15y ago
This thread reminds of those articles about how people without children are happier. Then a bunch of parents post how giving birth was the best decision they made.
carsongross 15y ago
If you play around with the rent vs. buy calculator at the NY Times for a while, you will come to two conclusions: 1) The rent vs. buy decision is almost entirely based on your expectation of future house price changes versus rental prices changes. Everything else is around the edges. 2) Regardless of your opinion on the first question, you should never buy a house when you think there is a significant chance you will leave in less than five years. I think housing will go down another 20-40% from here (causing widespread bank failures and eventually the dissolution of the Federal Reserve) and rents will be stable to down due to the deflationary pressures we are facing. Therefore, I will not buy a house. YMMV.
code_duck 15y ago
Why not? Americans, like most humans, are dumb enough to keep doing a long list of stupid things that would exceed a reasonable comment length if listed here. Usually the only time they stop a stupid activity is when it's impossible to continue.
wanderr 15y ago
In my area at least, buying makes a lot of sense. Prices are at an all-time low, but rent hasn't gone down at all. The same type of house renting for $900/month can be had with a mortgage of $350/month. As long as you are comfortable with renting the place out when you want to move, it's had to imagine why buying would be 'stupid' right now.
jleyank 15y ago
Decades of personal experience shows that unless you can switch jobs without moving owning a house is a good way to lose money. It can also act as an anchor, preventing or delaying job changes that should be made.
nice1 15y ago
It is amazing how people try to make sense of everything purely in terms of money. The correlation between value understood in monetary terms and real value is far from perfect. A man who does not own land is more like a slave than a free citizen.
ams6110 15y ago
A bit off topic, but what justifies paying a realtor 5-6 percent in real estate commission anymore? Actually last time I talked to an agent about listing a property they quoted 7.5% but obviously that's negotiable. Before the internet, realtors were the gatekeepers of "for sale" property information. But that's all online now. What do they really do to justify such a large cut on the transaction? The times I have bought and sold a house with a realtor they actually did very little. They helped prepare the offer (using boilerplate that can be easily found online now, or you can pay a real-estate attorney a couple of hundred to prepare one) and introduced me to a couple of lenders, then showed up at the closing to get their check.
dirtyaura 15y ago
Khan Academy has a great series on renting vs buying Part 1 http://www.khanacademy.org/#/v/renting-vs--buying-a-home?p=Finance http://www.khanacademy.org/#/v/renting-vs--buying-a-home?p=F... Part 2 http://www.khanacademy.org/#/v/renting-vs--buying-a-home--part-2?p=Finance http://www.khanacademy.org/#/v/renting-vs--buying-a-home--pa... Detailed analysis http://www.khanacademy.org/#/v/renting-vs--buying--detailed-analysis?p=Finance http://www.khanacademy.org/#/v/renting-vs--buying--detailed-...
tt 15y ago
I'm surprised no one has mentioned the Case-Shiller index chart showing home value fluctuation over the past 100+ years: http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011... It's pretty telling what you should do regarding buy or rent (beyond the NYT calculator).

184 points by spottiness 15y ago

I'm glad I bought a house, because paying $1,100/mo (including tax and insurance) for a 3,000sqft home with a yard where I can mostly do what I want and have control over my living environment and get a tax break on about half of that monthly payment sure beats the $1,200/mo I was paying for a 1,000sqft apartment in which I had been robbed of $30,000 during a home invasion where the person had a key (maintenance crew, surely, who had access to the keys) and let themselves in while I was sleeping. The rent/own ratio may be different in San Francisco (where I've lived) and New York, but there's a lot of other country out there that exists besides those two and Seattle. There's Portland, Denver, Chicago. Plenty of places. I live in a fairly expensive city (on par with Portland, where I lived most of my life). Still, my house didn't cost a lot more than the mount I'd already paid in rent during my adult life. I did the math and I have paid about $170,000 in rent. That includes apartments I've lived in in Portland, San Francisco and Denver since 1999 and is not adjusted for inflation. It includes the 400sqft hellhole in San Jose that I paid $1,200/mo for in 2000 and the 400sqft studio and 585 sqft 1bdrm in Portland, and the 1,000sqft 2 bdrm in Denver. The house I bought last year was only $25,000 more than that. Even if my home loses a ton of value (and it probably has and will), at least at the end of paying $200k into it, I'll have something worth something, versus what I have after about thirteen years of renting for $170,000 . . . which is nothing. The real problem with the home market is that it's being artificially buoyed, to keep current home owners happy at the expense of houses dropping even more in price, so someone can reasonably eventually buy a home even if they're making an average income. After all, isn't that how the market is supposed to work? Stuff drops in price, other people get an opportunity to own that stuff who previously may have been priced out of participation. Also, the article states that someone who just bought a house and lost 10% due to decrease in value plus commissions when selling is unlikely to enter the market again any time soon. Well, why are you buying a house just to sell it a few years later? I bought my house so I could live in it. I would like it to increase in value, eventually, too. I'm not counting on it, but it would be nice. If it doesn't, at least I have a home to live in and will eventually own it (because I didn't buy the maximum house that my credit score and loanability would have allowed). I don't know a lot about the housing market and I'm not an economist, but I do know that I'm glad I bought a house last year (with a rate under 5%) and wish I would have done so many years ago, instead of putting it off for a decade. (On the other hand, if I had done it a decade earlier, I probably would have taken a big hit over the last few years, so whatever). Also, the other nice thing is that I'll be paying the same amount (except for tax changes) for the next 15-30 years that it takes me to pay off the house. In my apartment, I'd gone from paying $900 to $1,200/mo in only four years for the same unit. Oh, and I don't have people stomping on the floor above me 24x7, so I can't sleep. And I don't have to allow someone from the maintenance/leasing office come into my home nearly any time they want with a 24hr notice. And I can (and did) run ethernet in the walls. And I can (and did) setup my home theater and run it at 50% power instead of having neighbors complain when I ran it at 5%, before. And when I have a guest that stays for more than three days per year, total, I don't have to register them with the leasing office. And I know my neighbors and they have lived here for a couple decades and are friendly and helpful. I never even saw the neighbors at my apartment. So, yeah. I guess I'm dumb enough.

Spyro7 15y ago
pstack, my situation is similar to yours. I think that the difference between us and the people that they are referring to in that article is that we consider a house to be a place to live and not merely a medium-term investment. I think that the thing that really lead to the housing market bust was that a ton of people started buying houses just to sit on them for a few years and then sell for a profit. The speculation fed on itself until it became unsustainable, then it fell apart. It is just a shame that this had an impact on regular long-term homeowners as well. So, yeah, if you're dumb enough then so am I.
- pstack 15y ago
  I thought that was what they were referring to, also, but they keep referring to the rent versus ownership ratio as well as the maintenance work issue. I think they're talking about actual homeowners buying homes to live in, because of the way they keep basing it on that. Though I guess they could be using those to draw a basis for why nobody will buy the houses an investor is stockpiling?
  - Spyro7 15y ago
    They refer to the rent-ownership ratio and the maintenance work, but they also implicitly dismiss the longer-term argument for owning a house. They keep talking about the costs of home ownership with no talk of the benefits that can result from owning vs renting - painting a picture that home ownership is a really dumb thing to do. To me, by not discussing the long-term benefits of home ownership they are looking at the issue all wrong. Their analysis is focused only on the short to medium term and the valuation of the house itself. They are discussing homes in a similar way to how one would look at any investment - ignoring that a home should be considered differently because of the non-monetary values that come along with home ownership. Of course, a home is an investment and it can provide capital gains, but there are other, not easily quantifiable, benefits to home ownership that make it attractive. To ignore these benefits is to miss the picture completely.
    - 15y ago

deleted 15y ago

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ck2 15y ago

Wrong, Americans aren't dumb enough to buy houses until prices drop to pre-bubble prices. Prices are still kinda crazy and unjustified compared to 2005. Also, the average person can probably not get credit anymore and the wealthy desire only so many 2nd homes.

_delirium 15y ago
Yeah, I think the credit issue is a big part of it. Whether it's a good idea or not, if it were as easy to get a mortgage today as it was in 2005, I'm pretty sure a lot of Americans would be getting huge mortgages. So it may be overstating the case a bit to claim that Americans have in aggregate made a rational decision not to buy houses--- versus simply not being able to buy houses anymore due to a change in the banking situation.
pstack 15y ago
I posted this in my own comment, but I agree that a lot of people won't buy homes until they drop even more. Unfortunately, I don't know how much more they're going to drop. There is a lot of artificially maintaining the value of homes, because politicians want to keep the voting block happy (people in debt with a family). I bought my home, because rates dropped below 5% and I had a chunk of money on hand, found a home I really liked, and was kind of sick at the thought that I'd just handed over almost $200k in just over ten years by renting apartments. I make a solid income and owning a home isn't a trivial expense to me, so I can't imagine someone making a go at it if they have a family and an income that is half or a third. Prices should drop to whatever their natural un-aided point would be, so that all those people out there who will either never own a home or only do so by getting into unfathomable debt (all over again) will actually be able to own a piece. Imagine what the long term benefit to the economy would be if prices dropped just long enough for tens of millions of people to lock in rates on their own home? It would transform the economy as well as, perhaps, society. Owning a home would be the rule, instead of exception. Being in debt to own a home would be an exception. High rent would be an exception. There would be much more discretionary income to put back into other industries. Or, better, for people to stick into their savings so that they can retire with a home to live in and finances to support themselves.

dangrossman 15y ago

You have to pay something to have a place to live. If you rent a little townhome for $1700/month for just 5 years, that's over $100k gone with nothing tangible in return. Even if your house will depreciate $50k between buying and selling it, are you worse off than renting?

nwmt 15y ago
If the potential home buyer wanted to keep their monthly outlay at $1700 whether they rent or own, then I think in 5 years if they lose $50k on their house they are likely out more money with a bigger headache than renting would've cost them. Without property tax, $1700/mo means taking a 25 year loan of $320k at 4% interest. Obviously whether this is too high or too low depends entirely on where they live, but again I'm assuming that they were getting a similar place for roughly $1700/mo in rent, and are comfortable in that lifestyle. That's also assuming they have the cash for a down payment ($65k if they want to put 20% down). So, if you run the mortgage numbers, in 5 years, assuming interest rates stay at 4%, they will have paid $61k in interest. Property taxes over 5 years (where I live, anyway) on a $385k home would be $15k-$20k on top of that. If we factor property tax into the $1700/mo, then they can only afford a $265k loan, and only pay $50k in interest over 5 years. Either way, $50k or more interest + $18k in property tax + $50k in depreciation + $15k in closing and real estate fees costs them a lot more than renting for the same time period, and that's assuming that nothing goes wrong. If their roof starts leaking, the deck collapses, they need to move for work or their growing family in less than five years, they are in an even worse situation. (One might suggest we should amortize the $15k in closing and real estate costs over the 5 years and buy a smaller place accordingly, but at that point your $1700/mo rent becomes more like $1150/mo in mortgage payments, so at that point the question becomes how out of whack the renting and buying markets are, assuming again that you want to maintain a similar living standard, and not be downsizing as you're turning 30.) The obvious question then is how likely "even if your house will depreciate $50k" ends up being.
- dedward 15y ago
  At the risk of inflaming some - if you were buying the home, a paper loss in market value is irrelevant unless you are planning on selling the home during that time. The real problem here is that we're not really talking about home ownership or buying a house - we're talking about taking out huge loans from banks and paying them off over decades, along with a ton of interest, and hoping that property values increase so we can trade up to something bigger and end up in exactly the same situation- rinse, repeat. The real problem is that we discuss "ownership" of homes when we don't really own them - the bank does.

drp 15y ago

It's really difficult to make general statements about the wisdom of buying versus renting across an entire country with extremely diverse local real estate markets. We made an up-to-date heat map of US rent ratios here: http://hotpads.com/search/rent-ratio-heat-maps http://hotpads.com/search/rent-ratio-heat-maps that demonstrates how some markets, even at the state level, are still tilted toward the buyer while others favor renters.

caffeine5150 15y ago
I think that it's not just an issue of region but also of price range. I am a life long renter and I've seen that rents tend to stay within a certain band - they only go so low or so high generally. So a small apartment might be still $1200 to rent vs. a mortgage of $1100 whereas for a high end home, rents might only get to say $5k or $6k vs. a mortgage of $12k on the same home. I rent a house for $4500 per month that would cost me a $7500 mortgage if I bought it. Another issue is the fact that not everyone can buy a house that they're going to realistically want to live in for 30 years. Your family grows, you change cities due to job opportunities, etc. So for the guy who knows he's going to be single and stay put, it may make sense for him to buy a $200k house instead of paying $1200 in rent for an apartment. But for many others, buying makes absolutely no sense.
blhack 15y ago
Just want go say that hot pads is one of my favorite websites. I get on it when I'm bored and just look at random places to live all the time. You [or your group] do an outstanding job. Thank you for it.

bmccormack 15y ago

Five years ago, I thought about buying a home, and everyone around me was saying "You HAVE to buy a home. Don't THROW AWAY YOUR MONEY by renting. Houses NEVER lose value." While it's obvious that this flawed logic existed five years ago before the bubble burst, I'm surprised at how much of it still remains. I'm surprised that consumers are still trying to play numbers games to justify purchasing homes, but perhaps as the OP suggests, the supply of buyers is less than before. If you want to buy a home for lifestyle reasons, great, but make sure that's clear; there are so many people who are stuck in their homes without a job because they thought they were clever at math. When my wife and I were figuring out what to do with our lives, we decided to put my finding a good job above owning a home. Because of this, I was able to accept a job in NYC and move from the suburbs of Atlanta without worrying about selling a home in a horrible real estate market. We'll consider buying a home after I feel more rooted in the tech industry, but for now, we appreciate the flexibility that renting affords.

pstack 15y ago
A very valid point. As others have stated, buying a home should be more about quality of life and living than making a buck and that has to be on your time schedule; not someone else's. The worst thing you can ever do is buy a home when you're not ready for a home -- and you know better than anyone else if you're ready. When you start waking up in the morning and thinking "god damn, I wish I had a home, so I could . . ." then it might be time to start giving it consideration. For me, I had dealt with a home invasion. I'd lived in my apartment for five years and someone walked in while I was asleep and stole everything (the layout of the apartment was such that I wasn't disturbed by the intruder - if you were in the back bedroom, you couldn't even hear someone banging on the front door). I lived alone. Nobody else had keys . . . except the leasing and maintenance offices. Took $30k worth of stuff. So, I started waking up in the mornings feeling a bit unsafe, wishing I had a sweet surveillance/alarm system, and also thinking about how great it would be to have room for my entertainment system (and get to blast it as loud as I wanted). Also, I kind of still want to get a dog and that wouldn't have worked in the apartment. Enough things started to bug me that I just sat up one day and said "let's go look at houses". Until you are home shopping for those reasons (or similar reasons of your own), then you may be doing it for all the wrong reasons. Maybe because friends are all buying homes. Maybe because you feel like you're still a "kid" as long as you keep renting. Who knows? In the mean time, definitely don't buy into the idea that you have to go for it because people around you are talking about it and you feel like you're missing out. You might be the sanest of them all. I didn't buy a home until I was starting into my 30s. I could have done it a decade before and went so far as to check out homes and even get approved for loans. It just never felt quite right, until last year. And I have been happy that I finally did so, when I did. Well-being accounts for a lot, too. Whatever you may be losing "on paper" with renting, you may be compensated for in peace of mind, right now. You can focus on work and savings and family rather than finding a trustworthy and affordable lawn service, worrying if your boiler is going to make it another year, wondering why in the hell that sink is draining slowly, when it isn't clogged up, wondering how much it would cost to turn that spare room into a sex dungeon. . .

mdasen 15y ago

One of the things that he's critically missed is that it's unfair to only compare the price of buying vs. the price of renting today. When you purchase a house, your mortgage is set for the term of the mortgage. Rent is usually only set for a year at a time and does go up. The NY Times buy vs. rent calculator in the article that he links, uses 3% as a baseline rent increase per year. So, after 5 years, a $1500 rent could be expected to cost $1740. That's not too impressive if you assume it's a place worth $375k and at his 2% taxes and maintenance price, you'd have $625 in costs in addition to the mortgage - well over the $240 that the rent had risen. However, after 15 years, that theoretical rent would have risen to $2300 and eclipsed the cost of taxes and maintenance. Now, as home values rise, taxes would rise with it, but then you own something that you can sell for more money and have made a good investment so it isn't a good argument to say, "well, one's home could go up in value a lot every year which would mean more taxes." It depends on what you're buying a property for. Frankly, the NY Times calculator (http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula...) is going to be a lot better than my crude calculations. However, if you're buying a property to stay in for a good while, it can be a better idea to buy. The costs of selling don't matter that much when you've stayed in a place for a long time. It also depends on your market. I've priced things out in the Boston area against rent (more urban than Greenspun), and it really depends on how long you're going to stay in that place. Most of the cities here offer you a homestead exemption on your property taxes if you live there and it's usually around 200k - meaning that if you buy a place for $400k to live in rather than rent, you're actually only paying half the property tax rate. The towns tend not to have that exemption. So, if you want to be in one place for a decade, the calculator shows that buying can be a nice option. Buying a house isn't something to go in for like buying an iPhone and getting a two-year cell phone contract. It requires a careful look at the costs and that you're relatively settled in life. It isn't a panacea of money, but it can be cheaper and can be stabilizing. While it isn't everyone, there are people who really like an area, have a job that won't see them have to move, and would stay in that house for 20-30 years. -- Plus, if you look at Trulia's rent-vs-buy index (http://trulia.movity.com/rentvsbuy/ http://trulia.movity.com/rentvsbuy/), you'll see that Greenspun has cherry-picked the worst cities to buy to do his calculations. Trulia notes that in 36 out of its 50 cities studied, it is "much less expensive to buy than rent". That includes real cities like Chicago, Wahsington DC, San Diego, Minneapolis, Philadelphia, and Atlanta. He's used a buy-to-rent ratio of 30:1, but the average for the 50 cities shown is 14.22. So, we live in the Boston area and buying here is an expensive proposition that might not make sense. However, there are many places that have much more favorable ownership conditions. If you're in a market where the buy-to-rent ratio is below 15:1, the NY Times calculator will show you how favorable buying is. And, frankly, that's most of the country. Where Greenspun and I live seems to be the exception, not the rule and his calculations are based on data that doesn't apply to most people. It applies to him and it applies to me based on where we live, but it probably isn't something that one should generalize to the country.

ahi 15y ago

The rent vs buy index is misleading. I used to live in Ann Arbor where rent is mediocre, but home prices are ridiculous. On paper the ratio still looks pretty good because the median rental property is downtown while the median home for sale is in the suburban neighborhoods. I was on the board of a downtown housing cooperative and the ROI on properties in the downtown area was nonexistent. I moved 5 miles to the east to rough around the edges Ypsilanti and the situation was completely reversed. You can have a house downtown paid off with 5 years of rent payments. Further out you go into the surrounding farmland, the lower rent becomes and the higher sale prices get.

antidaily 15y ago
Interesting. The perception when I was in school was that the rent was too damn high. I never really looked at house prices, but I knew someone who got into a 2 bedroom off Main near Stadium for around $190k (in 2005 or so), which seemed reasonable considering its location. related: Ann Arbor/Detroit HN group http://groups.google.com/group/hn-ann-arbor-detroit http://groups.google.com/group/hn-ann-arbor-detroit

visava 15y ago

http://patrick.net/housing/crash3.html http://patrick.net/housing/crash3.html Analysis to help you decide whether to buy or rent.

nhangen 15y ago

Those of you renting and hating on home ownership should ask yourself where you'd live if someone hadn't bought a home and allowed you to rent it from them.

cgopalan 15y ago
Wrong argument. Firstly, rented homes are not only from homeowners. Second and more importantly, for people that already have a home through say inheritance, or ability to pay outright cash, it makes sense for them to use it as a source of income. Not saying those are the only people for whom home-ownership makes sense, but the cases above are the easiest non-subjective examples to cite in favor of home-ownership. And neither homeowners nor renters need be indebted to each other.
- nhangen 15y ago
  Personally, I don't understand the anti-mortgage sentiment at all. I can buy a home at 5%, and then use the money I'm saving to build something else in order to make a higher return. Point being is that it's not always black and white (banks bad, cash good). Also, though homeowners aren't the only source of rental properties, outside of city life, they are the most prominent. Either way though, the same argument applies. Without someone buying a property and renting it, there would be no place to rent. The house I'm renting to someone in NC is being paid off because of my renters. It's not income now, but when it's paid off, that's $1k/month free to me.
  - cgopalan 15y ago
    This might be going off the main topic here, but I'll address it: For someone who has the ability to pay outright, I agree that paying a monthly amount might give some flexibility. If someone is making a monthly payment because thats all they can do, its basically debt and holds you down. I agree though, that its not always black and white. Back to the main topic: Should renters be indebted to home owners? Its all a case of supply/demand. I dont see renters having a shortage. Which means that more people are willing to rent out their home, than renters wanting to find a place to rent. In this market, homeowners need renters more than renters need homeowners. If say in a hypothetical situation all homeowners stopped putting out their houses for rent, more people will gravitate towards other sources of rentals like rental properties owned by companies. These rental property companies do not have an emotionally-vested interest in their home. They see it just as a service. I agree when you pay off the money for your house, the renters give you free money. But this is close to the end-game and by this time you would have to factor in also opportunity costs. I am not saying the opportunity cost is huge, but usually a mortgage holds you down for 30 years (in most cases), and its too long a time to just consider what happens at the end of it.

raintrees 15y ago

Well, if true, this is good news for cash flowing investment real estate purchases, on both sides... Property Owners may have a better chance at returns, if they are able to raise rents to match inflation. And Property Managers (people to buffer the owner from the tenants) are typically charging 10% of rent. There is income to be made...

RealGeek 15y ago

The real property inflation is in New Delhi and Mumbai, India. Real estate in Delhi is more expensive than New York. A house built on a 500 yards lot will set you back $6 million. Moreover, the real estate prices are growing @ 50% every year and high as 100% in some areas. Compared to that, I would say houses in America are affordable. I hope India's real estate bubble gets burst.

angstrom 15y ago

Perspectives obviously vary by market and circumstance. In mine I'm fine with renting. I tend to stick around the 1700/mo range in NYC. For that, I don't have to own a car or the maintenance and depreciation associated with it. I still pay transit, but it is significantly less than the cost I paid in Ohio to drive 40-60 miles to work. My income mirrors my actual worth. I've seen people shortchanged because companies know that person is chained to a mortgage. I'm not paying maintenance, insurance, or front loaded interest on a home. (Tax deductible not that impressive) After rent is subtracted from my net pay I still have enough to turn around and invest in a diverse array of investment options. A home is a savings account with a maintenance fee. Viewing it as anything else IMHO is wishful thinking. An apartment is that same service fee condensed. Remember, in my situation both the house and a car have costs I don't have to worry about. Having freed myself of those problems I have much more spare time, more investment options, and flexibility. I'm perfectly ok with not having a lawn, neighbors degrading property values, or surprise expenses. To other people those negatives are perfectly acceptable, they cite the lack of space, public transit, and neighbors as negatives. I don't mind any of them.

tatsuke95 15y ago

There are a few defensive home owners in this thread who seem to be missing the point: The main problem is that the general public sees renting as throwing money away, and that owning a home is unconditionally "better". I'll make the assumption that this community has higher-than-average financial literacy, and hence there are people who have made the right decision with respect to rent/buy. However, I don't think this is true in general, and often times the rent/buy choice is much, MUCH closer than people assume.

deleted 15y ago
[deleted]

bluekite2000 15y ago

Relevant:http://www.khanacademy.org/video/renting-vs--buying-a-home?playlist=Finance http://www.khanacademy.org/video/renting-vs--buying-a-home?p...

jbail 15y ago

Referencing Zillow is the first indication you have no clue about the real estate market. Two examples: The house I live in has a carriage house behind it. It's zoned as a rental, has a kitchen, bathroom, bedroom and about 800 sq ft of studio type space with about a 15 ft ceiling. Does this information appear on my Zillow page? Nope. Zillow has no way to enter that type of information and its valuation is missing this very crucial bit of info. Secondly, where I used to live (in the mountains above Boulder), there was a house for sale next door. It was on one acre and was a modified single wide trailer. Zillow said it was worth $350,000. They said the property I was living on next to it (5 acres, a main house twice the size of our neighbor and a detached cabin) was worth $420,000. Seemed way off to me. Well, the house next door went for sale and sold for $149,000. After that, I don't trust Zillow at all. They have a lot of work to do before someone could take any statistics they provide seriously.

adharmad 15y ago

I have always wondered how the housing/renting market would be if mortgages were not tax deductible (or rents were also tax deductible).

shawnee_ 15y ago
The Realtor lobbying group (the National Association of Realtors) is bigger than Exxon's, number 4 on the list: http://www.opensecrets.org/orgs/list.php?order=A http://www.opensecrets.org/orgs/list.php?order=A Getting rid of the mortgage interest deduction would probably be the best thing to happen to the US since the Constitution. Especially for people in less than desirable neighborhoods. Slumlords wouldn't be able to function. Housing prices would go down, rents would go down, people who wanted to own could own affordably, and renting would be insanely affordable. The U.S. Tax Code is one giant game that steals short-term investment power from the majority people (low to medium income people) and gives it to the wealthiest people for them to write new rules of the game.

jdvolz 15y ago

Can we just all agree that owning a business is the real American dream and whatever you choose to do (rent or buy) after that has significantly less affect on your situation than owning your own business? I would certainly rather own a business that generates whatever my rent or mortgage would be, than to own a house that costs me that mortgage.

jodrellblank 15y ago

tl;dr: author feeling unhappy, unexcited and trapped, fears becoming boring, blames house ownership. More and more Americans will be conditioned to the idea that home ownership is a waste of time and money, not to mention the inflexibility that it imposes on a person [..] That would barely pay for property tax, maintenance (winters are harsh), and landscaping (weeds are aggressive). [..] Another advantage for renters is that they can free their minds from the clutter that prevents homeowners from doing or thinking anything interesting. [..] The rest of us go to Home Depot every few days and pull weeds. [..] They withdraw themselves from the market of potential buyers, at least for 10 years or so until they forget what wounds they suffered and how boring they were when they owned.

djacobs 15y ago

http://www.nytimes.com/2011/05/11/business/economy/11leonhardt.html http://www.nytimes.com/2011/05/11/business/economy/11leonhar... has some data on the price-to-rent ratio in various markets. From a grammar perspective, I think this sentence is interesting. It is literally the first time I've ever seen a URL as the subject and first word of a sentence. Of course, this violates everything I know about a) link sharing [0] and b) good writing, but it's interesting nonetheless. [0] http://www.goodusability.co.uk/2009/01/dont-say-click-here-on-link-text/ http://www.goodusability.co.uk/2009/01/dont-say-click-here-o...

pingswept 15y ago

I think it's interesting to compare Greenspun's attitude to Mike Rowe's recent Senate testimony about the lack of skilled workers in the trades in the US. Greenspun thinks that going to Home Depot and pulling weeds clutters the mind and prevents us from writing novels and building empires. Mike Rowe wishes that we weren't a nation of people who just left a check on the counter for the plumber. I rented for years, and not being able to fix stuff when it broke (without losing the investment when we moved) drove me crazy. I feel a strong desire to maintain my own home, even though I know I'd do better financially hiring cheap labor to do the work while I go make money faster building an empire.

gopi 15y ago

If you think US rent-vs-own ratios is expensive than you have to check other countries. Every country from the developed western europe/canada/australia to the developing india/china to the thirdworld african countries have worst rent-vs-own ratio than US, yet the prices are still appreciating there.

supercanuck 15y ago

Its interesting to me and a testament to how the topic of housing impacts the psyche of Americans that even on Hacker News the emotional arguments take on a stronger conviction than the logical ones.

nhangen 15y ago
It is interesting, but it reminds me of the TV vs no TV argument. Very strange division here.

nemik 15y ago

This thread reminds of those articles about how people without children are happier. Then a bunch of parents post how giving birth was the best decision they made.

carsongross 15y ago

If you play around with the rent vs. buy calculator at the NY Times for a while, you will come to two conclusions: 1) The rent vs. buy decision is almost entirely based on your expectation of future house price changes versus rental prices changes. Everything else is around the edges. 2) Regardless of your opinion on the first question, you should never buy a house when you think there is a significant chance you will leave in less than five years. I think housing will go down another 20-40% from here (causing widespread bank failures and eventually the dissolution of the Federal Reserve) and rents will be stable to down due to the deflationary pressures we are facing. Therefore, I will not buy a house. YMMV.

code_duck 15y ago

Why not? Americans, like most humans, are dumb enough to keep doing a long list of stupid things that would exceed a reasonable comment length if listed here. Usually the only time they stop a stupid activity is when it's impossible to continue.

wanderr 15y ago

In my area at least, buying makes a lot of sense. Prices are at an all-time low, but rent hasn't gone down at all. The same type of house renting for $900/month can be had with a mortgage of $350/month. As long as you are comfortable with renting the place out when you want to move, it's had to imagine why buying would be 'stupid' right now.

jleyank 15y ago

Decades of personal experience shows that unless you can switch jobs without moving owning a house is a good way to lose money. It can also act as an anchor, preventing or delaying job changes that should be made.

nice1 15y ago

It is amazing how people try to make sense of everything purely in terms of money. The correlation between value understood in monetary terms and real value is far from perfect. A man who does not own land is more like a slave than a free citizen.

ams6110 15y ago

A bit off topic, but what justifies paying a realtor 5-6 percent in real estate commission anymore? Actually last time I talked to an agent about listing a property they quoted 7.5% but obviously that's negotiable. Before the internet, realtors were the gatekeepers of "for sale" property information. But that's all online now. What do they really do to justify such a large cut on the transaction? The times I have bought and sold a house with a realtor they actually did very little. They helped prepare the offer (using boilerplate that can be easily found online now, or you can pay a real-estate attorney a couple of hundred to prepare one) and introduced me to a couple of lenders, then showed up at the closing to get their check.

dirtyaura 15y ago

Khan Academy has a great series on renting vs buying Part 1 http://www.khanacademy.org/#/v/renting-vs--buying-a-home?p=Finance http://www.khanacademy.org/#/v/renting-vs--buying-a-home?p=F... Part 2 http://www.khanacademy.org/#/v/renting-vs--buying-a-home--part-2?p=Finance http://www.khanacademy.org/#/v/renting-vs--buying-a-home--pa... Detailed analysis http://www.khanacademy.org/#/v/renting-vs--buying--detailed-analysis?p=Finance http://www.khanacademy.org/#/v/renting-vs--buying--detailed-...

tt 15y ago

I'm surprised no one has mentioned the Case-Shiller index chart showing home value fluctuation over the past 100+ years: http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011... It's pretty telling what you should do regarding buy or rent (beyond the NYT calculator).