6 ms·

I might be missing something, but if house prices rise just 1% annually, your differential would shrink dramatically in favor of ownership.

by greedo 12y ago

veemjeem 12y ago
So I live in rent controlled area in the bay area where I pay around $1500 for a 2 bedroom. Using this calculator, it seems like buying almost any kind of home in the bay area would be a very bad decision.
- jakebellacera 12y ago
  Sure, until you decide to move. Then you'd have to pay market prices. Rent control, in San Francisco at least, is an exception that favors the renter and "punishes" the landlord. Even though the owner can't increase their current tenant's rent, the owner is still making an increase on equity due to the home's value increasing.
refurb 12y ago
In the scenario I modeled, I was assuming around ~3% growth. Rent control definitely favors renting in a lot of situations. If you were at the whim of your landlord, then I could see buying being more attractive, especially in a market where housing prices are going up. The real kicker about owning a house is that housing prices never go up a nice steady 2% or 3% per year. They go up 5% one year, then down 5% the next. If you don't have control over when you sell (loss of a job, etc), that can really hammer you.
- kjackson2012 12y ago
  There is no rent control on single family homes in SF, regardless of its age.
bane 12y ago
Rents tend to increase in normal markets at about the rate of inflation, in crazy NYC/SV markets they increase faster while mortgages will stay the same (or can be reduced or offset). In the long run, $4100/mo in 2014 dollars will still be $4100/mo in 2014 dollars 29 years later. Meaning they'll be a fraction of of 2043 dollars via inflation. The mortgage then de facto goes down while rent will continue to increase at least with inflation (or at least it does historically).

6 ms·

I might be missing something, but if house prices rise just 1% annually, your differential would shrink dramatically in favor of ownership.

by greedo 12y ago

I might be missing something, but if house prices rise just 1% annually, your differential would shrink dramatically in favor of ownership.

veemjeem 12y ago
So I live in rent controlled area in the bay area where I pay around $1500 for a 2 bedroom. Using this calculator, it seems like buying almost any kind of home in the bay area would be a very bad decision.
- jakebellacera 12y ago
  Sure, until you decide to move. Then you'd have to pay market prices. Rent control, in San Francisco at least, is an exception that favors the renter and "punishes" the landlord. Even though the owner can't increase their current tenant's rent, the owner is still making an increase on equity due to the home's value increasing.
refurb 12y ago
In the scenario I modeled, I was assuming around ~3% growth. Rent control definitely favors renting in a lot of situations. If you were at the whim of your landlord, then I could see buying being more attractive, especially in a market where housing prices are going up. The real kicker about owning a house is that housing prices never go up a nice steady 2% or 3% per year. They go up 5% one year, then down 5% the next. If you don't have control over when you sell (loss of a job, etc), that can really hammer you.
- kjackson2012 12y ago
  There is no rent control on single family homes in SF, regardless of its age.
bane 12y ago
Rents tend to increase in normal markets at about the rate of inflation, in crazy NYC/SV markets they increase faster while mortgages will stay the same (or can be reduced or offset). In the long run, $4100/mo in 2014 dollars will still be $4100/mo in 2014 dollars 29 years later. Meaning they'll be a fraction of of 2043 dollars via inflation. The mortgage then de facto goes down while rent will continue to increase at least with inflation (or at least it does historically).