Mine is. But that's not the point. Renting gets you nothing, ROI on real estate after you figure in tax benefits, are better than any fixed income investment you can make currently. The adage location location location is true, if you buy in an establish neighborhood the risk even in a down market is mitigated to an extent.

@tendmote, do you invest your money in the stock market? This is just as risky. At least with a home, it gives you leverage, to borrow against the principle if all else fails. If your the guy though that lives paycheck to paycheck, maybe it's not for you. I think you said that you live somewhere around San Fran , that market is quite stable now, and even with current California tax policy, the demand only continues to grow.

If you want to create wealth, you must assume some type of risk, no one will just hand it to you. A home, is a place that can create wealth, maybe for the next generation, but you get the benefit of living there

I put my money in stock and bond index funds. These are not leveraged, as such they're not nearly as risky as a mortgage. It's not the percentage fluctuations in housing prices that are dangerous, it's the leveraged debt involved that magnifies the P&Ls.

Renting gets you freedom from housing market risks, and a roof over your head, no property tax, no maintenance, and the ability to move whenever you want. And at any rate even if I thought real estate was a good idea I could construct a portfolio that tracked the market without betting on a particular property. Vive le rent!

@tendmote: I think you are taking your own situation (or perhaps those close to you), and projecting it on "everyone." I agree home ownership is not for everyone. However, I disagree with your statement that nobody's life is stable enough to be thinking 15+ years.

@ssorenn: I don't know about tendmote, but I live in the SF area and I agree with your assessment. Property values in Palo Alto or Mill Valley are hot and will continue to be fairly safe investments. People who bought new 5-bedroom houses on a credit card in traditionally undesirable suburbs with two hour commutes from SF are, unsurprisingly, finding their houses have dropped substantially in value.

You do pay property tax. It's in your rent. Landlords want to make money. You also pay for maintenance. In your rent. As for moving whenever you want, there's still the lease.


As I've been saying, for some people renting may totally be the way to go. For others it is a good idea to buy real estate. It depends. All people are different. All markets are different. A blanket " all home ownership is bad" statement is moronic.

Tendmote, if you stay with your means, the mortgage debt should not be an issue. Now most lenders, especially for first time buyers require 30% LTV. The risks are truly mitigated, much more so than you stock or bond funds, even if there not leveraged. But everyone should do what they feel is right for them....

I live in the SF area as well (East Bay). It's a bubble man! Don't spend all your unrealized P&L in one place :)

@HG, I'm coming out your way at end of month, napa baby. You are correct, if you buy in existing established places(you might get less for money because prices have already established themselves) but there will be demand for said property when you decide to leave.

^@HM

@tendmote: The NYT article you linked starts off talking about a couple who bought in 2010 for 810K and are selling now for 1.35M. They never would have made that profit had they kept renting through the last four years. The article also says: "The wisdom of buying versus renting depends heavily on each person’s financial situation, plans and preferences. And the cliché about all real estate being local holds; each neighborhood can have its own unique dynamics in the for-sale and for-rent housing sectors that must be considered." That's the same thing I'm saying in this thread. I don't understand why your takeaway from the article is that home ownership is not right for anyone.

@ssorenn: Napa is lovely, many fantastic restaurants all along Highway 29. I think if I lived in that area, I'd go for Yountville rather than Napa proper.

I. Going to you yountville and staying at the bardessono Great place, right near the French laundry. I just used napa as a generalization. I try to go the every year and a half or so, it's harvest, and I love it.

F'ing auto correct

@The Hanged Man

"bought in 2010 for 810K and are selling now for 1.35M"

That's evidence of a crazy bet. That's volatility. It's a win for that particular couple, but it also suggests that the 1.35M is susceptible to a proportionate downward swing. That's risk, and a lot of it.

But those risks are usually not equal, wait if we get a downturn in the stock market, you will feel the same way.

If you want to mitigate your mortgage risk, look at a 15 year loan. Loan payments are higher, so you will get less for your money, but you start paying more of the principal faster, raising your equity faster

@ssorenn I won't feel the same way because my stock and bond investments are not leveraged; I can take a percentage hit. If some person puts all their money into a down payment for the 1.35M, and it swings by more than the down payment amount, they've lost their savings.

But it's relative. The only people who are assuming a 70%LTV mortgage on 1.35m home, should be able to afford the swings that come with owning that house.

So, for ex: I payed $950,000 for my home in 02. In 06 I had an offer for 1.3 m. I did not take it....by 09 it was worth $720,000. That sucked. But I could afford my home and the amount I agree to pay to the bank. Now it's much better.

When you go to rent, they do background on you to make sure you can afford the rent based on possible income you have. And they usually hold first and last months rent

"If some person puts all their money into a down payment for the 1.35M, and it swings by more than the down payment amount, they've lost their savings."

They shouldn't be putting their whole savings into the down payment in the first place! Good God, did a house hit you as a child? This opposition of yours makes no sense.

What is this nonsense about building equity? There are 10 million other investments that build equity much better than pouring all of your money (and money you don't have) into one property whose value could be destroyed in a decade's time.

Not to mention the amount you're pissing away via property taxes and maintenance costs, and the down payment you'll never see again.

The house next to my old one was sold by a real estate flipper near the market top for about $250,000 and three months later lost about $100,000 in value when the market started dropping. It still hasn't recovered in value for the guy who bought it. It's all a matter of market timing because real estate is cyclical just like any other investment.

If you have the income or savings to hold on through the housing cycle then it doesn't matter. But if you are heavily mortgaged and don't have the cash to make payments then it's a risky investment.

Not to mention the amount you're pissing away via property taxes and maintenance costs, and the down payment you'll never see again.

Spoken from the guy with nothing---ooooooh

Property taxes and maintenance costs are built into in your rent. How else do you think they get paid for?

@"Property taxes and maintenance costs are built into in your rent"

Yeah, but if the roof rots or some other maintenance catastrophe occurs, it's not your problem. Also in a lot of places rents are stabilized, so property tax hikes can't really be passed through to a current tenant.

Randomizer is right about the market timing aspect... real estate... so much risk.

Bottom Line :
If you rent 100% of what you pay is lost money and at the end of 30 years you have gained nothing.If you buy it, keep your mortgage for 30 years making the same mortgage payment you will have an asset worth hundreds of thousands of dollars.

The other thing people dont take into account is the time value of money. In 20 years, inflation will mean you make more money a month but your mortgage payment doesn't change but your rental expense would. Take two scenerio's :

1. I make $4000 a month. My rent is $1500 a month (so 38% of my income). 20 years go by. I am now making $6000 a month but have to pay $2300 a month in rent (38% of my income)
2. I make $4000 a month. My mortgage payment is $1500 a month (38% of income). 20 years go by. I am now making $6000 a month but still pay $1500 (25% of my income).

Of course there are market questions (like if you can rent the same house for less money than the mortgage) but at least in my area....a mortgage payment is about 75% as much as rent.

Course this assumes that a person who is stable enough to know he isn't going to move around alot.
If you think its likely you may move, then buying may not be a good choice. But if your married with kids and are stable, renting is just a ridiculous choice.

"Course this assumes that a person who is stable enough to know he isn't going to move around alot. "

Exactly. The economy is tending more and more toward needing to relocate to pursue economic opportunities. People stuck in the same town for 30 years don't end up making as much.

Location , location, location. --- if you purchase in desire able places resale will not be an issue.

"if you purchase in desire able places resale will not be an issue"

Well, you better hope so. Your assurance is not that reassuring though. It's a big bet. The other side of the trade in those deals where the house appreciates 500K in 4 years, you never hear from. Survivorship bias.

Dude, there are no insurances in anything in life, oh sorry , there is one---you are going to die someday. If you have a family like Dyager said and want to have something to show for your money after many years, the RISK, and it is risk, is small