Home buying thread

TJT said:

Here in Texas on a 3/2 1500 sqft house I paid ~$7k this year.

Shit sucks.

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My house in NE Florida is about this size and I'm paying about 2.5k in property taxes.

Blazin said:

@Fucker great post but I chuckled at your property tax amounts. Can always tell if someone isn’t from NY NJ or PA by what they think a lot of property taxes is.

I pay almost as much in property taxes as I do federal income taxes and unlike the feds they want their pound of flesh no matter what kind of financial year I have.

Sanrith Descartes can relate I’m sure. This is me getting my property tax bill every year. Nice homes (around a million) are $20-30k/yr
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Add Illinois to that mix. It’s about the same, with million dollar houses having property taxes north of 20k easily. It’s basically a 2nd mortgage.

Sludig said:

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This or another thread someone said, no body super solid long term tends to be propertyless.

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I'm 43 and renting a 4/3, though I've owned before (where I lost money over 7 years). In my area it's pretty much break even or actually cheaper to rent than own when you consider taxes, maintenance, and investment opportunity cost of the down payment/equity. Rents are basically in line with the interest portion of current mortgages. We just have to save what would have been the equity portion, which isn't a problem to budget for.

We chose this area for family proximity and A++ schools and only need to be here another 10 years until my kids graduate, at which point we'll buy a more modest house aimed at retirement.

Of course, if the rent/own relationship changes, so will we. We shopped fairly seriously over the last year but the supply is so stupidly tight we couldn't land a place we liked without absurdly overpaying. The buying MO around here is to bid up to the bleeding max of affordability and then throw in another 150k. No thanks.

Captain Suave said:

I'm 43 and renting a 4/3, though I've owned before (where I lost money over 7 years). In my area it's pretty much break even or actually cheaper to rent than own when you consider taxes, maintenance, and investment opportunity cost of the down payment/equity. Rents are basically in line with the interest portion of current mortgages. We just have to save what would have been the equity portion, which isn't a problem to budget for.

We chose this area for family proximity and A++ schools and only need to be here another 10 years until my kids graduate, at which point we'll buy a more modest house aimed at retirement.

Of course, if the rent/own relationship changes, so will we. We shopped fairly seriously over the last year but the supply is so stupidly tight we couldn't land a place we liked without absurdly overpaying. The buying MO around here is to bid up to the bleeding max of affordability and then throw in another 150k. No thanks.

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Right, rent are insane as well as prices. If you could rent for 1k, mortgage for 2k. The argument that renting is better could be there and probably still exists in some areas.

Ive held that yeah, even as home prices rise, you may not be profitable after all the assorted costs, but at least you are still getting quite a bit of your investment back on sale instead of rent that is a for sure loss, only outweighed by a healthier balance of rent vs own.

I'm not sure i see rent prices collapsing in any time frame, even if prices go down a bit on houses due to high interests.

I dont under stand rent prices. I wanted to keep my current home as a rental if I moved. But looking at current rents in my area, my 3% mortgage, being 60% paid off, my equity was get me about 1% cash on cash return.

fris said:

I dont under stand rent prices. I wanted to keep my current home as a rental if I moved. But looking at current rents in my area, my 3% mortgage, being 60% paid off, my equity was get me about 1% cash on cash return.

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Right. The rent/buy calculus is highly local. Particularly in upscale areas the universal "real people must own homes" mentality means that demand for rental can be seriously depressed compared to the desire to buy. The limited rental demand can be filled by landlords who bought farther in the past and whose required revenue for break even is much lower than a new entrant like you. Obviously there is always competition from lower-SES tenants trying to get into nicer areas, but in my experience landlords will weep tears of joy to get a tenant with good income, assets, and bulletproof credit. My last landlord liked us so much they kept rent flat for seven years and only declined to renew because they wanted to move back into the house themselves (which was a function of our taking good care of it).

On the consumer side, IMO, it's just a mercenary calculation on maximizing long term gains based on your personal finances and local conditions. I've found this calculator to be invaluable over the years, and the optimal choice is not nearly as cut and dry a most people assume. You can interpret the results in reverse to find a rent level that makes sense for your current mortgage and alternative investments:

Captain Suave said:

In my area it's pretty much break even or actually cheaper to rent than own when you consider taxes, maintenance, and investment opportunity cost of the down payment/equity.

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But what about when you figure in 10% quarterly inflation? If you buy, you know what your mortgage will be in 10 years. How much has rent gone up in your area in the last 2?

Control said:

But what about when you figure in 10% quarterly inflation? If you buy, you know what your mortgage will be in 10 years. How much has rent gone up in your area in the last 2?

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Personally, my rent has been flat for seven years, and I started at a point below the tax, interest, and insurance costs would have been for me on the same property. I haven't had trouble getting multi year leases if I want them. Most private landlords renting nicer houses will forgo a rent increase if it means not missing a month's revenue during tenant turnover.

The calculator I linked includes rent growth rate and overall inflation, so you can make assumptions as you see fit and determine what does or does not work for you.

Captain Suave said:

Personally, my rent has been flat for seven years, and I started at a point below the tax, interest, and insurance costs would have been for me on the same property. I haven't had trouble getting multi year leases if I want them. Most private landlords renting nicer houses will forgo a rent increase if it means not missing a month's revenue during tenant turnover.

The calculator I linked includes rent growth rate and overall inflation, so you can make assumptions as you see fit and determine what does or does not work for you.

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Fair enough, although the point was less about your specific situation and more about locking in some certainty. That's why I asked about the area instead of your rent specifically. You might have a great deal now, but when you finally have to move, then what? I'm pretty sure no calculator (or reasonable human) would have predicted the financial situation over the last couple of years. As terrible as buying might be right now, renting right now sounds terrifying.

Control said:

Fair enough, although the point was less about your specific situation and more about locking in some certainty. That's why I asked about the area instead of your rent specifically. You might have a great deal now, but when you finally have to move, then what? I'm pretty sure no calculator (or reasonable human) would have predicted the financial situation over the last couple of years. As terrible as buying might be right now, renting right now sounds terrifying.

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I don't have hard numbers, but from paying background attention to the rental market prices haven't gone up that much. Maybe 20 or 25 percent since I got here in 2014? 30 at the outside? That's about 3-3.5 percent a year. The thing is, even moreso than the purchase price of houses, which can be driven up or down by borrowing and mortgage rates, rents are tied heavily to income levels. They can't outstrip wage growth or landlords run out of solvent tenants. (Above probably more true at the upper end of the market.)

As far as certainty, yes, I don't have any really beyond duration of my lease. But that cuts both ways. The last time I owned a house I ended up moving after only 8 years for family and employment reasons, and between transaction costs and bad market timing lost nearly $75k. With a lease, if your life changes beyond the scope of your previous plans you just move. Frankly, it's an enormous relief being totally debtless without the psychological weight of a mortgage hanging out there.

I don't see myself living in my current area for more than 10 years or so until my kids graduate, so if I have to move another time that's no big deal. If my rent goes up (within reason) my wife and I have decided it's an acceptable premium to pay against the alternative of cheaper housing nearby (but shit schools) and sending our kids to private school.

In the background, I wouldn't mind buying just to have a place I have more control over and in fact I spent the last year shopping, but as you say the market is absolutely fucking bananas. We've come out extremely well so far investing what would have been our equity contributions, and having done that I'll just suck it up and buy if renting becomes a bad deal. Yeah, I missed out on the recent house price explosion but I got the stock returns from 2014 to now instead. I'm reasonably sure I'm significantly ahead on net even with the equity market shitshow this spring. At the very least it's a wash and my assets are a lot more flexible than they would be tied up in house I'm living in.

Sanrith Descartes said:

Where have I seen this before? Hmm 2005-2006?

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But this time is totally different! Pinky promise swear. 20% annual appreciation is the new "normal" and completely sustainable.