7 ms·

There's Never Been a Worse Time to Buy Instead of Rent

polka_haunts_us 3y ago
This is where I'm at. I want very little more than to than to buy some permanent property that I can remodel to my taste at my leisure, but mortgage rates just keep going up. Why spend 3.6k+ a month on mortgage when I can spend 2.1k a month to stall. I really can't imagine going in on a house right now without at least a 20% down payment to skip out on PMI (and lowering the amount of the mortgage overall)
- prometheus76 3y ago
  In my area, some homebuilder companies are offering owner financing on the homes they build at rates 2-3% lower than what you can get from the bank.
  - NonEUCitizen 3y ago
    Mind sharing what area you're in?
    - prometheus76 3y ago
      Rocky Mountain West
- nly 3y ago
  Presumably that £3.6K ish is repayment, not interest only. Try working out how much you need to save over 30 years (while renting) to buy a home. Don't forget to account for inflation in any assumed investment return.
- FanaHOVA 3y ago
  Because at the end of the year your assets line for home will be -$25,200. In the mortgage case it'd be -$36,000 for payments but probably like +$25,000 for home equity bought so if cash flow isn't a problem you're better off.
  - Kerrick 3y ago
    If your mortgage payment is $3100/mo let’s say that’s a $450k loan for 30yr at 7.5%, you are not looking at anywhere close to that much added equity after a year. Just about $4k after the first year. Less if the payment was to include taxes and insurance.
    - antisthenes 3y ago
      No one who's considering buying a house is only intending to stay there for 1 year. Using this timeline for equity comparison makes 0 sense. This is more of a reply to the GP, than your post.
- xivzgrev 3y ago
  PMI IS a waste of money, but it's relatively negligible. if it helps you get your house years earlier, that could easily be worth it, not only financially but also happiness (if owning is emotionally important). i paid 5% down on my house and my PMI is only 4% of my all in monthly payment (mortgage, PMI, prop tax, insurance). if i had to wait until i had saved 20% i'd probably still be saving & renting. instead i've already paid down another 5% of my mortgage plus getting the interest tax breaks each year.
  - monkmartinez 3y ago
    The mortgage itself is a waste of money if you don't pay if off early. I wish people understood this better. There is almost no situation where owning a home makes sense if you don't pay it off before the term and we aren't in some wacky pandemic or financial bubble.
    - brahbrah 3y ago
      Would you pay it off early if you have a 2.5% interest rate and could get a guaranteed 5+% on a CD?
      - monkmartinez 3y ago
        Depends... It would depend on the price to service the mortgage. I would do a quick model to see the timeline to "break even" on paying in full verses the total amount of interest paid to service the loan for duration of the term.
      - polka_haunts_us 3y ago
        I'm in this situation with my car right now, I have the money to pay it off but why bother when I can make the monthly payment with savings account interest.
paxys 3y ago
There's never been a worse time to borrow. It is a fantastic time to buy if you have the cash.
- miguelazo 3y ago
  Not really-- prices are still quite elevated. Although the current cash buyers are probably in for a rude awakening when we finally exit this cycle.
  - onlyrealcuzzo 3y ago
    > prices are still quite elevated Or dollars are devalued since there's ~40% more M3 than pre-pandemic: https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Only time will tell which is the case
    - readthenotes1 3y ago
      Iirc, there is a huge surge in the M2 and M3 around 2020 when they reclassified money market money, making a comparison pre and post pandemic problematic
      - onlyrealcuzzo 3y ago
        IIUC, that massively messed up M1 - but should not have impacted M3 much.
        miguelazo 3y ago
        Some interesting commentary on that yesterday also in the WSJ: https://www.wsj.com/articles/another-black-monday-may-be-around-the-corner-interest-rate-federal-reserve-b1df5c21?page=1 https://www.wsj.com/articles/another-black-monday-may-be-aro...
- Groxx 3y ago
  Sure, but if you're free to buy a house in cash you probably don't particularly care about the cost of renting vs buying. In which case this kind of article really isn't for you. You're looking for real estate investment news, not housing.
miguelazo 3y ago
The Fed went after inflation in all the wrong places. Would have been infinitely more effective to just ban corporations from owning single family homes.
- paxys 3y ago
  And the Fed can do that how?
  - miguelazo 3y ago
    I'm not suggesting that the Fed could do that. But the Fed isn't the only entity with tools to fight inflation. In fact, it has some of the worst because they take so long to take effect, it's brute force, and it almost always overcompensates.
  - fuzzfactor 3y ago
    Remember when interest rates were 20%?
- bequanna 3y ago
  They are trying to undo their mistake of their over participation in the mortgage markets. Mortgage rates were too low for too long because the Fed was buying them up. Home prices went way up because payments were low and supply was somewhat constrained. Now, the Fed has pulled the rug out and is no longer buying mortgages. People with low rates are sitting still and you'll only see people selling who have to. So, supply is heavily restricted keeping prices higher even with the higher rates. Only a large tick up in unemployment will create more forced selling and a maybe some downtrend in pricing. The alternative (but much less likely scenario) is Congress eliminating some of the very generous tax incentives that exist for owning residential real estate as an investment. I wouldn't hold my breath waiting for this one.
- matchbok 3y ago
  Corporate ownership of homes has been a reality for 100 years. It's a drop in the bucket.
nly 3y ago
I don't agree. I'm London, UK and rents ante rising at an insane pace.
- FanaHOVA 3y ago
  All of these articles only matter if you want to live in places that people don't want to live in. That's why rents are so cheap. If you're in London, SF, New York, etc, it doesn't really matter. Also some of these cities have low averages (like New York given the size of the boroughs) but don't reflect the reality of where people want to live.
- DrBazza 3y ago
  Rather unhelpfully, this Government decided to tax landlords on income not profit. Previously landlords could rent at £1000 pcm, pay their buy-to-let mortgage at £900, and get taxed on the profit of £100, at 40%, that would be £40. Now they get taxed on £1000 = £400, and get a tiny amount of tax relief on the mortgage cost. So many landlords were paying much, much, more tax. So quite a lot of them exited the market. Fewer properties, same number of people chasing places, has increased rents. On top of a stupidly hot property market in London, and it's the perfect storm really. Slow applause for the UK government on this one. They were told this would happen when they made the change several years ago.
- agent008t 3y ago
  Could you give some numbers on this please? Really curious. I am seeing rental yields still under 3.5% (zones 1-2, Victorian terraces converted to 1-2 beds).
  - dukeyukey 3y ago
    Mortgage interest costs have gone up, and rents have gone up alongside them. I live in a 1-bedroom flat in Zone 2; before Covid, we rented a 1-bed with garden for £1450; when we moved a year ago, cost went up to £1600. Now we're moving again, and it looks like prices have gone up to £1700-1800.
    - 3y ago
boromi 3y ago
Anyway to get a non-paywall ?
- FanaHOVA 3y ago
  archive.is
babelthuap 3y ago
[dead]
superfrank 3y ago
https://archive.ph/sxYwn https://archive.ph/sxYwn
- c-fe 3y ago
  off topic, but I am stuck in a captcha loop where i fill it out correctly and its just giving me another one... have done 5 now and just give up. Anyone else or did i just do some "weird online behaviour"?
  - taftster 3y ago
    Yup, me too. Firefox + uBlock. I guess I won't read it.
jupp0r 3y ago
Rents are stupidly high in my area and usually higher than paying a mortgage plus upkeep even at current rates (at least for single family homes). YMMV.
- monkmartinez 3y ago
  Can you give me a rough area of where this is?
  - jupp0r 3y ago
    Santa Barbara
a_m_m 3y ago
i just bought an apartment. it made sense for me for a few reasons... 1) i've been screwed over by too many landlords and have become so exhausted with renting (i was forced out of my last apartment for complaining about not having hot water. i know this is illegal, unfortunately there is nothing you can do about it.) 2) the apartment i found was _perfect_ for me. it had everything i wanted...quite rare 3) i was not thrilled about the idea of waiting for mortgage rates to drop, home prices to go up and then ensuing bidding wars bringing you far over asking, like what happened in the early covid days. 4) rates will drop eventually and i'll refinance maybe it doesn't make all the financial sense in the world, but it worked out for me.
- lacrimacida 3y ago
  Good luck and hope it works out well for you.
- georgeecollins 3y ago
  I think you made a reasonable decision and you should not get caught up in these cycle narratives. Prices go up and down. You could try to time the market but I think a better strategy is just get what makes sense for you, when it makes sense for you.
- vharuck 3y ago
  If you can afford it and be happy, then it was a good deal.
- ghusto 3y ago
  You absolutely made the right choice. You needed a place to live, and didn't want to continue setting your money on fire paying rent. The best time to buy is as soon as you can. High, low, whatever, it makes no difference in the long run. In that long run, you've bought a house you chose, are not throwing away money, and will eventually make back any money you lost buying high. I have a feeling all the people giving advice to not buy in climate X at any given time are only saying so to feel better that they currently can't.
  - 3y ago
dukeyukey 3y ago
Good Christ, my rent has gone up ~20% over the last 2 years, and we've just been no-fault evicted for the second year running.
- toomuchtodo 3y ago
  Indeed, the math of buy vs rent does not take into account fixing your housing payment for 30 years and the fact that you can't be evicted unless you stop paying your mortgage. What financial arb you get with renting, you trade for no control over your housing situation.
- bowsamic 3y ago
  No fault eviction should be illegal
  - bowsamic 3y ago
    Downvoted for saying it should be illegal? It already is in many countries
JumpCrisscross 3y ago
Sometimes inverting a finding suggests its nuance. In this case, the inverse for a homeowner is it’s a good time to sell and rent. Except the markets with heavy homeownership also have high rents. If you’re in Manhattan, sure, it might make sense to sell and lease back. But in a lot of the country, I don’t think the math works.
- readthenotes1 3y ago
  Used house sales are the lowest since 2010, so probably not a good time to sell either unless you having a fire sell
  - JumpCrisscross 3y ago
    Frequencies are low. Prices are high. Usually, going against the stream is good advice, ceteris paribus.
- esoterica 3y ago
  The inverse does not hold true at all. Homeowners have locked in 3% mortgages that they would surrender if they sold but buyers would have to take out a 8% mortgage to buy the same house. It’s both a bad time to buy and a bad time to sell because every transaction creates a huge deadweight loss that is economically negative for both parties.
  - JumpCrisscross 3y ago
    > inverse does not hold true at all. Homeowners have locked in 3% mortgages that they would surrender if they sold but buyers would have to take out a 8% mortgage to buy the same house We're comparing renting to buying. Renting doesn't require a mortgage.
    - esoterica 3y ago
      But selling means buying back a deeply discounted loan at par value, which is bad.
monkmartinez 3y ago
Something is going to break. It will be prices or rates. My guess is prices will fall precipitously and it will happen soon. I further posit that prices will not be "sticky" as they typically are due to the extreme nature of the imbalance. Once the alarm sounds for the exits, it will be stampede verses an orderly departure. Having sold a home (foreclosure we bought in 2009) in 2021, I am super happy to be renting again. Owning a home is pain in the ass and I say this a person that can remodel a bathroom, install flooring, and fix my own A/C if needed. Constantly on the hook for every problem that invariably crops up is giant time, energy and money drain. My wife on the other hand, hates renting. She wants to paint the walls and decorate... and nest? We end up spending a crap ton of our time and money on the house. It's 100% emotional for her. I understand, but I don't share those emotions. We have had lots of time to talk about it and it will be different when we buy again. She will have a budget for house stuff and I will not be on the hook for every little thing. In short, she is going to step up for maintenance if she wants to buy a house again.
- empath-nirvana 3y ago
  Homeowners aren't going to sell into a market with precipitously declining prices. The market will just freeze up. This is probably the primary reason house prices haven't adjusted. People who have low rates locked in aren't selling their houses to buy new houses, because they would be taking a huge loss to do so. The only thing that's going to cause prices to drop are: rising interest rates + declining rental rates causing rental units to become unprofitable and go back on the market, or a wave of foreclosures, which seems unlikely given how many homes have very low rate mortgages right now. I don't think either of those are going to lead to a precipitous decline.
  - monkmartinez 3y ago
    > Homeowners aren't going to sell into a market with precipitously declining prices. If they "need" to move they will. Lose the ability to pay property taxes, baby boomer's departing earth, AirBnBust, raising insurance rates, job loss, and many other reasons... The market is frozen right now. Mainstream media is lying to us, Realtors are manipulating the listings, Homebuilders are playing games with listings, accounting and land. The charade will not hold up for much longer.
SamBorick 3y ago
I think people forget you can't live inside an index fund. It's hard to value a higher predicted YoY return when you have to spend a month out of every year moving because rent went up again.
- esoterica 3y ago
  You can’t live inside an index fund but you can pay rent with your index fund returns.
  - antisthenes 3y ago
    How many people can actually pay $2000/month just from their index fund returns without drawing on the principal? Even if you assume 4% real return (beating inflation), you'd need to have at least 600k worth of index funds, and you won't be growing it. Even for HN users, that's a lot of money. This strategy will never work for more than 1-2% of the population.
    - 88913527 3y ago
      A quarter of households have net worths greater than $600,000. https://dqydj.com/net-worth-percentile-calculator/ https://dqydj.com/net-worth-percentile-calculator/
tonymet 3y ago
Another case of poor journalism discussing inflation in the abstract. What are the drivers? There are still buyers at the elevated prices even with 8+% mortgage rates. Despite wages being effectively negative against CPI and actual inflation. So who are the buyers?
deleted 3y ago
[deleted]
globular-toast 3y ago
If you want to own a house then the best time to own a house is right now. Why does everything always have to about investments and speculation and all that crap? What about, you know, actually living your life? If you do everything "right", according to the financial experts, the richest you'll ever be is at the moment before you die. The reason to own a house is you want to own a house. You want it to be yours. You want to do whatever you want to it. You want to accept the responsibility of its maintenance because the advantages of ownership outweigh the responsibilities. If that's what you want to do then do it. Or you could get depressed listening to these bozos who live their life like it's a game that you're somehow losing despite living in a developed country, no needs unmet and sleeping peacefully every night.
- esoterica 3y ago
  Unless you have infinite money you have to weigh the costs against the benefits of a major purchase like a house.
  - globular-toast 3y ago
    Yes, of course, but I feel like these kind of articles only ever account for the financial benefits. It you want to own a house it doesn't matter if it costs more than renting. Usually getting what you want does cost something and it's truly bizarre that we think house ownership should be all benefit with no cost.
tamimio 3y ago
The system was never “worse” it’s been always bad, taking the power from people and gave it to the banks, who happens to be real owner, in fact, even if you are wealthy and bought it with the whole price upfront, the system still requires you to pay hefty taxes that if you don’t, the municipal can have a lien on your property and claim it, aka: they took your home.. the whole system is rigged, especially when money from bankers is theoretically unlimited since they can print more in any “crisis” to keep the system up while you, grind your whole life on something you never owned.
anuraaga 3y ago
Isn't it normal for mortgage payments to be at least to some degree higher than rent if talking averages? Bought property tends to be much larger right? I tried to find normalizing factors like it talking about payment per square foot but didn't seem to find any. I assume WSJ wouldn't push out anything completely off so what am I missing? The difference has grown just much more than it should have?

This is where I'm at. I want very little more than to than to buy some permanent property that I can remodel to my taste at my leisure, but mortgage rates just keep going up. Why spend 3.6k+ a month on mortgage when I can spend 2.1k a month to stall. I really can't imagine going in on a house right now without at least a 20% down payment to skip out on PMI (and lowering the amount of the mortgage overall)

prometheus76 3y ago
In my area, some homebuilder companies are offering owner financing on the homes they build at rates 2-3% lower than what you can get from the bank.
- NonEUCitizen 3y ago
  Mind sharing what area you're in?
  - prometheus76 3y ago
    Rocky Mountain West
nly 3y ago
Presumably that £3.6K ish is repayment, not interest only. Try working out how much you need to save over 30 years (while renting) to buy a home. Don't forget to account for inflation in any assumed investment return.
FanaHOVA 3y ago
Because at the end of the year your assets line for home will be -$25,200. In the mortgage case it'd be -$36,000 for payments but probably like +$25,000 for home equity bought so if cash flow isn't a problem you're better off.
- Kerrick 3y ago
  If your mortgage payment is $3100/mo let’s say that’s a $450k loan for 30yr at 7.5%, you are not looking at anywhere close to that much added equity after a year. Just about $4k after the first year. Less if the payment was to include taxes and insurance.
  - antisthenes 3y ago
    No one who's considering buying a house is only intending to stay there for 1 year. Using this timeline for equity comparison makes 0 sense. This is more of a reply to the GP, than your post.
xivzgrev 3y ago
PMI IS a waste of money, but it's relatively negligible. if it helps you get your house years earlier, that could easily be worth it, not only financially but also happiness (if owning is emotionally important). i paid 5% down on my house and my PMI is only 4% of my all in monthly payment (mortgage, PMI, prop tax, insurance). if i had to wait until i had saved 20% i'd probably still be saving & renting. instead i've already paid down another 5% of my mortgage plus getting the interest tax breaks each year.
- monkmartinez 3y ago
  The mortgage itself is a waste of money if you don't pay if off early. I wish people understood this better. There is almost no situation where owning a home makes sense if you don't pay it off before the term and we aren't in some wacky pandemic or financial bubble.
  - brahbrah 3y ago
    Would you pay it off early if you have a 2.5% interest rate and could get a guaranteed 5+% on a CD?
    - monkmartinez 3y ago
      Depends... It would depend on the price to service the mortgage. I would do a quick model to see the timeline to "break even" on paying in full verses the total amount of interest paid to service the loan for duration of the term.
    - polka_haunts_us 3y ago
      I'm in this situation with my car right now, I have the money to pay it off but why bother when I can make the monthly payment with savings account interest.

paxys 3y ago

There's never been a worse time to borrow. It is a fantastic time to buy if you have the cash.

miguelazo 3y ago
Not really-- prices are still quite elevated. Although the current cash buyers are probably in for a rude awakening when we finally exit this cycle.
- onlyrealcuzzo 3y ago
  > prices are still quite elevated Or dollars are devalued since there's ~40% more M3 than pre-pandemic: https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Only time will tell which is the case
  - readthenotes1 3y ago
    Iirc, there is a huge surge in the M2 and M3 around 2020 when they reclassified money market money, making a comparison pre and post pandemic problematic
    - onlyrealcuzzo 3y ago
      IIUC, that massively messed up M1 - but should not have impacted M3 much.
      - miguelazo 3y ago
        Some interesting commentary on that yesterday also in the WSJ: https://www.wsj.com/articles/another-black-monday-may-be-around-the-corner-interest-rate-federal-reserve-b1df5c21?page=1 https://www.wsj.com/articles/another-black-monday-may-be-aro...
Groxx 3y ago
Sure, but if you're free to buy a house in cash you probably don't particularly care about the cost of renting vs buying. In which case this kind of article really isn't for you. You're looking for real estate investment news, not housing.

miguelazo 3y ago

The Fed went after inflation in all the wrong places. Would have been infinitely more effective to just ban corporations from owning single family homes.

paxys 3y ago
And the Fed can do that how?
- miguelazo 3y ago
  I'm not suggesting that the Fed could do that. But the Fed isn't the only entity with tools to fight inflation. In fact, it has some of the worst because they take so long to take effect, it's brute force, and it almost always overcompensates.
- fuzzfactor 3y ago
  Remember when interest rates were 20%?
bequanna 3y ago
They are trying to undo their mistake of their over participation in the mortgage markets. Mortgage rates were too low for too long because the Fed was buying them up. Home prices went way up because payments were low and supply was somewhat constrained. Now, the Fed has pulled the rug out and is no longer buying mortgages. People with low rates are sitting still and you'll only see people selling who have to. So, supply is heavily restricted keeping prices higher even with the higher rates. Only a large tick up in unemployment will create more forced selling and a maybe some downtrend in pricing. The alternative (but much less likely scenario) is Congress eliminating some of the very generous tax incentives that exist for owning residential real estate as an investment. I wouldn't hold my breath waiting for this one.
matchbok 3y ago
Corporate ownership of homes has been a reality for 100 years. It's a drop in the bucket.

nly 3y ago

I don't agree. I'm London, UK and rents ante rising at an insane pace.

FanaHOVA 3y ago
All of these articles only matter if you want to live in places that people don't want to live in. That's why rents are so cheap. If you're in London, SF, New York, etc, it doesn't really matter. Also some of these cities have low averages (like New York given the size of the boroughs) but don't reflect the reality of where people want to live.
DrBazza 3y ago
Rather unhelpfully, this Government decided to tax landlords on income not profit. Previously landlords could rent at £1000 pcm, pay their buy-to-let mortgage at £900, and get taxed on the profit of £100, at 40%, that would be £40. Now they get taxed on £1000 = £400, and get a tiny amount of tax relief on the mortgage cost. So many landlords were paying much, much, more tax. So quite a lot of them exited the market. Fewer properties, same number of people chasing places, has increased rents. On top of a stupidly hot property market in London, and it's the perfect storm really. Slow applause for the UK government on this one. They were told this would happen when they made the change several years ago.
agent008t 3y ago
Could you give some numbers on this please? Really curious. I am seeing rental yields still under 3.5% (zones 1-2, Victorian terraces converted to 1-2 beds).
- dukeyukey 3y ago
  Mortgage interest costs have gone up, and rents have gone up alongside them. I live in a 1-bedroom flat in Zone 2; before Covid, we rented a 1-bed with garden for £1450; when we moved a year ago, cost went up to £1600. Now we're moving again, and it looks like prices have gone up to £1700-1800.
  - 3y ago

boromi 3y ago

Anyway to get a non-paywall ?

FanaHOVA 3y ago
archive.is

babelthuap 3y ago

[dead]

superfrank 3y ago

https://archive.ph/sxYwn https://archive.ph/sxYwn

c-fe 3y ago
off topic, but I am stuck in a captcha loop where i fill it out correctly and its just giving me another one... have done 5 now and just give up. Anyone else or did i just do some "weird online behaviour"?
- taftster 3y ago
  Yup, me too. Firefox + uBlock. I guess I won't read it.

jupp0r 3y ago

Rents are stupidly high in my area and usually higher than paying a mortgage plus upkeep even at current rates (at least for single family homes). YMMV.

monkmartinez 3y ago
Can you give me a rough area of where this is?
- jupp0r 3y ago
  Santa Barbara

a_m_m 3y ago

i just bought an apartment. it made sense for me for a few reasons... 1) i've been screwed over by too many landlords and have become so exhausted with renting (i was forced out of my last apartment for complaining about not having hot water. i know this is illegal, unfortunately there is nothing you can do about it.) 2) the apartment i found was _perfect_ for me. it had everything i wanted...quite rare 3) i was not thrilled about the idea of waiting for mortgage rates to drop, home prices to go up and then ensuing bidding wars bringing you far over asking, like what happened in the early covid days. 4) rates will drop eventually and i'll refinance maybe it doesn't make all the financial sense in the world, but it worked out for me.

lacrimacida 3y ago
Good luck and hope it works out well for you.
georgeecollins 3y ago
I think you made a reasonable decision and you should not get caught up in these cycle narratives. Prices go up and down. You could try to time the market but I think a better strategy is just get what makes sense for you, when it makes sense for you.
vharuck 3y ago
If you can afford it and be happy, then it was a good deal.
ghusto 3y ago
You absolutely made the right choice. You needed a place to live, and didn't want to continue setting your money on fire paying rent. The best time to buy is as soon as you can. High, low, whatever, it makes no difference in the long run. In that long run, you've bought a house you chose, are not throwing away money, and will eventually make back any money you lost buying high. I have a feeling all the people giving advice to not buy in climate X at any given time are only saying so to feel better that they currently can't.
- 3y ago

dukeyukey 3y ago

Good Christ, my rent has gone up ~20% over the last 2 years, and we've just been no-fault evicted for the second year running.

toomuchtodo 3y ago
Indeed, the math of buy vs rent does not take into account fixing your housing payment for 30 years and the fact that you can't be evicted unless you stop paying your mortgage. What financial arb you get with renting, you trade for no control over your housing situation.
bowsamic 3y ago
No fault eviction should be illegal
- bowsamic 3y ago
  Downvoted for saying it should be illegal? It already is in many countries

JumpCrisscross 3y ago

Sometimes inverting a finding suggests its nuance. In this case, the inverse for a homeowner is it’s a good time to sell and rent. Except the markets with heavy homeownership also have high rents. If you’re in Manhattan, sure, it might make sense to sell and lease back. But in a lot of the country, I don’t think the math works.

readthenotes1 3y ago
Used house sales are the lowest since 2010, so probably not a good time to sell either unless you having a fire sell
- JumpCrisscross 3y ago
  Frequencies are low. Prices are high. Usually, going against the stream is good advice, ceteris paribus.
esoterica 3y ago
The inverse does not hold true at all. Homeowners have locked in 3% mortgages that they would surrender if they sold but buyers would have to take out a 8% mortgage to buy the same house. It’s both a bad time to buy and a bad time to sell because every transaction creates a huge deadweight loss that is economically negative for both parties.
- JumpCrisscross 3y ago
  > inverse does not hold true at all. Homeowners have locked in 3% mortgages that they would surrender if they sold but buyers would have to take out a 8% mortgage to buy the same house We're comparing renting to buying. Renting doesn't require a mortgage.
  - esoterica 3y ago
    But selling means buying back a deeply discounted loan at par value, which is bad.

monkmartinez 3y ago

Something is going to break. It will be prices or rates. My guess is prices will fall precipitously and it will happen soon. I further posit that prices will not be "sticky" as they typically are due to the extreme nature of the imbalance. Once the alarm sounds for the exits, it will be stampede verses an orderly departure. Having sold a home (foreclosure we bought in 2009) in 2021, I am super happy to be renting again. Owning a home is pain in the ass and I say this a person that can remodel a bathroom, install flooring, and fix my own A/C if needed. Constantly on the hook for every problem that invariably crops up is giant time, energy and money drain. My wife on the other hand, hates renting. She wants to paint the walls and decorate... and nest? We end up spending a crap ton of our time and money on the house. It's 100% emotional for her. I understand, but I don't share those emotions. We have had lots of time to talk about it and it will be different when we buy again. She will have a budget for house stuff and I will not be on the hook for every little thing. In short, she is going to step up for maintenance if she wants to buy a house again.

empath-nirvana 3y ago
Homeowners aren't going to sell into a market with precipitously declining prices. The market will just freeze up. This is probably the primary reason house prices haven't adjusted. People who have low rates locked in aren't selling their houses to buy new houses, because they would be taking a huge loss to do so. The only thing that's going to cause prices to drop are: rising interest rates + declining rental rates causing rental units to become unprofitable and go back on the market, or a wave of foreclosures, which seems unlikely given how many homes have very low rate mortgages right now. I don't think either of those are going to lead to a precipitous decline.
- monkmartinez 3y ago
  > Homeowners aren't going to sell into a market with precipitously declining prices. If they "need" to move they will. Lose the ability to pay property taxes, baby boomer's departing earth, AirBnBust, raising insurance rates, job loss, and many other reasons... The market is frozen right now. Mainstream media is lying to us, Realtors are manipulating the listings, Homebuilders are playing games with listings, accounting and land. The charade will not hold up for much longer.

SamBorick 3y ago

I think people forget you can't live inside an index fund. It's hard to value a higher predicted YoY return when you have to spend a month out of every year moving because rent went up again.

esoterica 3y ago
You can’t live inside an index fund but you can pay rent with your index fund returns.
- antisthenes 3y ago
  How many people can actually pay $2000/month just from their index fund returns without drawing on the principal? Even if you assume 4% real return (beating inflation), you'd need to have at least 600k worth of index funds, and you won't be growing it. Even for HN users, that's a lot of money. This strategy will never work for more than 1-2% of the population.
  - 88913527 3y ago
    A quarter of households have net worths greater than $600,000. https://dqydj.com/net-worth-percentile-calculator/ https://dqydj.com/net-worth-percentile-calculator/

tonymet 3y ago

Another case of poor journalism discussing inflation in the abstract. What are the drivers? There are still buyers at the elevated prices even with 8+% mortgage rates. Despite wages being effectively negative against CPI and actual inflation. So who are the buyers?

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globular-toast 3y ago

If you want to own a house then the best time to own a house is right now. Why does everything always have to about investments and speculation and all that crap? What about, you know, actually living your life? If you do everything "right", according to the financial experts, the richest you'll ever be is at the moment before you die. The reason to own a house is you want to own a house. You want it to be yours. You want to do whatever you want to it. You want to accept the responsibility of its maintenance because the advantages of ownership outweigh the responsibilities. If that's what you want to do then do it. Or you could get depressed listening to these bozos who live their life like it's a game that you're somehow losing despite living in a developed country, no needs unmet and sleeping peacefully every night.

esoterica 3y ago
Unless you have infinite money you have to weigh the costs against the benefits of a major purchase like a house.
- globular-toast 3y ago
  Yes, of course, but I feel like these kind of articles only ever account for the financial benefits. It you want to own a house it doesn't matter if it costs more than renting. Usually getting what you want does cost something and it's truly bizarre that we think house ownership should be all benefit with no cost.

tamimio 3y ago

The system was never “worse” it’s been always bad, taking the power from people and gave it to the banks, who happens to be real owner, in fact, even if you are wealthy and bought it with the whole price upfront, the system still requires you to pay hefty taxes that if you don’t, the municipal can have a lien on your property and claim it, aka: they took your home.. the whole system is rigged, especially when money from bankers is theoretically unlimited since they can print more in any “crisis” to keep the system up while you, grind your whole life on something you never owned.

anuraaga 3y ago

Isn't it normal for mortgage payments to be at least to some degree higher than rent if talking averages? Bought property tends to be much larger right? I tried to find normalizing factors like it talking about payment per square foot but didn't seem to find any. I assume WSJ wouldn't push out anything completely off so what am I missing? The difference has grown just much more than it should have?