A 3-Bedroom Spanish Bungalow in the Midst of Jefferson Park: 5749 N. Manton
Chicago architecture is anything but boring.
Take this 3-bedroom spanish bungalow at 5749 N. Manton in Jefferson Park (on the border of Edgebrook.)
Built in 1926, there is nothing else in this style in its immediate neighborhood.
It has a spanish clay tile roof and what looks like its original spanish style fireplace in the living room.
The house is built on a 45×125 corner lot and has a 2-car garage.
It is also a short sale and is listed $55,100 under the 2006 purchase price.
John Debaz at Coldwell Banker has the listing. See the pictures here.
5749 N. Manton: 3 bedrooms, 2 baths, no square footage listed, 2 car garage
- Sold in July 1997 for $175,000
- Sold in August 2006 for $380,000
- Lis pendens foreclosure filed in May 2010
- Currently listed as a “short sale” for $324,900
- Taxes of $4268
- Central Air
- Bedroom #1: 17×11
- Bedroom #2: 12×12
- Bedroom #3: 12×10
- Family room: 15×9 (lower level)
What a cool and unique house for this neighborhood!!!! The price seems right – it should sell. This property as well as my own recent personal real estate issues (contract sale deal falling apart because the real estate agents want to be paid their commission upfront – risky to me b/c the buyer could walk away – instead of in installments) brings me to a general real estate question: HOW IS THE COMMISSION PAID IN A SHORT SALE? I mean, it is obviously the seller’s responsibility – but I am assuming that many sellers in this situation may not have the cash needed for the commission – so what happens?!! This scenario must play out everyday. Anyone?
I never get it why people build a house of completely different style or climate in a place it obviously does not belong too. If this was in California, I might have liked it. In Chicago, it just looks silly and out of place.
Agree with miumiu. I do like clay roofs though because they last a very long time.
Found this online regarding tile.
“Tile lasts a long time – its expected lifespan is greater than the lifespan of the material on which the roofing rests. Tile won’t rot or burn, and it can’t be harmed by insects. It requires little maintenance, and comes in a variety of colors, types, styles and brands.
The biggest drawback to clay tile can be its weight. Depending on the material used to make it, tile can be very heavy – so heavy that extra roof support can be required.”
“I never get it why people build a house of completely different style or climate in a place it obviously does not belong too. If this was in California, I might have liked it. In Chicago, it just looks silly and out of place.”
There are plenty of mediterranean/spanish colonial houses in Chicago- especially in the older established neighborhoods. They were “in” in the 1920s and 1930s. Personally, I think it can be done well but it depends on landscaping etc.
I personally like this design and think that it is ok in Chicago. There are several in Park Ridge and Glenview area but more importantly I love the fact that a street may have distinctly varied styles of homes. Every time I drive out to some of the newer suburbs I am shocked at how all the homes on the street are exactly the fricking same. To me that is far more annoying than seeing an unusual home that does not fit into the typical style of homes in the area.
It dosen’t look too over the top with the spanish stuff. Sure, it might blend in better in SoCal, but aren’t we interested in archaetectural diversity? I think the price isn’t aggressively high but there is a lot for sale in the area with lower asks, imo the kitchen dosen’t look worth payong the higher end for the area – am I missing some significant squarefootage to compensate for that?
Not only is it a short sale but it is also a foreclosure
10 CH 21621 on a $306,000 first mortgages; there is also a second mortgage for $55,000 (refi’d from a $34,000 about 7 months after moving in!); this is a B of A first mortgage so it’s subject to the foreclosure moratorium – good luck trying to close this decade. Default hearing is scheduled for December but it’s up in the air whether or not it will actually go forward. Not only that but it has been listed for 257 days making it more stale than the 6 month old open bag of Doritos in my pantry. The house is one story, the rooms are small, the family room is in the basement (and it was recently remodeled probably with the cash out refinance in 2007) – nothing like a once in a 10 year flood to short out all of your electronics in the basement ‘family’ room. I’ll pass on this. I predict it sells as a foreclosure late next year or in 2012 for $200k.
There’s a similarly sized home on the other side of central directly across from the forest preserve on a 41×210 lot that recently sold for $245k. a stone’s throw from the listed house. Yes it’s not as architecturally significant but if you’re into the 1950’s housing then this is better for you.
http://www.redfin.com/IL/Chicago/5881-N-Central-Ave-60646/home/13513298
Clio–Realtors are paid after a successful closing, not before. I don’t know why you’re being asked otherwise. It’s the risk of the profession and everyone in the business knows that. Review your agency agreement and see what it says.
Short sales always have an agent remark (visible only to agent on the MLS) that says “CC: Pursuant to short sale”. That means the cooperative compensation must be approved by the lien holder on the property as part of the short sale process. The bank essentially pays the commission. There is a risk the bank will want the commission lowered, which typically lowers the commission earned by both the listing and selling agent, but my understanding is that the commission is ususally approved as is in the end.
This house is cute but I don’t see anything about it that makes it worth $325K Maybe $250K. it’s as if they are using the old rule of $100K per bedroom or something like that.
Thanks Chris for the information – greatly appreciate it!!!
If this property has 2 mortgages it will be very difficult to get the short sale approved. The second lien holder is in a subordinate position and would likely take a huge loss, so they are bound to hold up the deal even if the first lien holder approves the short sale. Short sales with just one mortgage are difficult enough. This is why short sales languish on the market…because knowledgeable agents/brokers warn their clients of the long journey ahead with no guarantee of a successful closing. You’re much better off waiting for a better deal or potentially waiting for the short sale property to come on the market as a foreclosure (though that could be a year or longer). So, assuming the buyers must get rid of the property, this is probably headed to foreclosure.
hey guys – when you look at CCRD and you see a Lis pendens filed followed by an assignment what does that mean?
Like
Allot
While these do Belong In L.A.
too many of them next to each other makes them look cheap.
The fact that this may be the only one is a plus.
Price too high though.
Looking at the aerial view it seems like the roof is flat & the tile is just around the edge.
It means robosigning. The documents were never properly transferred into the trust or to the servicer; so the bank files the assignment from the original mortgagee to whomever the current plaintiff is. The affidavit on the assignment says that the person personally reviewed the documents and that were assigned PRIOR to the date of the filing. YOu are witnessing robosigning in action.
“#roscoevillager on October 13th, 2010 at 9:03 am
hey guys – when you look at CCRD and you see a Lis pendens filed followed by an assignment what does that mean?”
Regarding the style of the architecture – remember this is likely a box with a specific architectural style applied to the supporting walls. This “box” could have any number of different styles applied for the exterior.
Plus, this is the midwest/Great Lakes region and any truely “native” architecture would have to be a longhouse, etc or yurt in anon’s case.
Homedelete – what does that mean for someone on the buyer side in the case of a short sale? I originally thought I was dealing with BofA but looks odd…
LOL
love the listing
“Cozy” which is realtorspeak for “small” I’m sure the idiotic agent taking pictures with their polaroid camera idn’t helping this place look any bigger
Also, since this is a warm weather style house, why not take a new picture of the outside where all the trees aren’t dead and there isn’t fresh snow on the ground….
is this Brandon Walsh’s house?
I like this little place but it is overpriced, yes. The neighborhood is extremely inconvenient and the house is small. I notice there are no photos of the baths, which scares me.
It will languish a long time if what homedelete is saying is true about the foreclosure, and I don’t doubt him.
$250K tops, if you can actually close.
“is this Brandon Walsh’s house?”
It’s too small …. too outdated…..and not in Beverly Hills!!!
“is this Brandon Walsh’s house?”
thank you thank you thank you, i needed a good laugh today, thank you for tying it into a throwback!!!!
“why not take a new picture of the outside where all the trees aren’t dead and there isn’t fresh snow on the ground…”
sonies that would require the agent to do more than open the door and flip a couple lights on. (this dig at agents does not include alstars like ChrisM and Eric R).
“The neighborhood is extremely inconvenient and the house is small”
laura love ya and love what your all about, but your WRONG on this one. if its about WALKING everywhere come on its the NW. you can walk to the metra, walk to play nine or 18 holes, colleti’s is a half bloc away. and all your shopping needs are 2-3 miles away (target/walmart/wholefoods/bestbuy/CostCo/jewel/dominicks/peir 1/michaels and you “could” walk to happy foods and starbucks.
as usual i agree with groove,this is a pretty convienient location.lots of nice restraunts and bars on both milwaukee and elston,the produce center is only a couple blocks from there(great little independent grocer)and fairly close to the jeff park el.great family neighborhood,lots of kids.however the person is pretty much overpriced,more like $285.there are a few of these style homes right over there.at this price i would rather have a two-story place than something this small.
Delisted November 2010.
This home is STILL off the market. Yet the lis pendens foreclosure was filed 17 months ago.
If anyone wants to guess when we’ll hit a “bottom” – it’s when all of these properties make their way through the system.
When the bank DOES take this house back- it likely won’t be listed for sale (again) until early to mid-2012.
I’m now also seeing properties purchased in 2009 that are now listed again that are clearly going to have to short sale to sell (again- not enough equity as the downpayments weren’t big enough.) Those will also take years to work through the system.
There are thousands of properties like this house in this post all over Chicago.
Wrong. We probably haven’t bottomed yet, but we will bottom before “all of these properties make their way through the system”. If it were that easy, everyone would buy bottoms.
WRONG. Everyone buys bottoms, it’s just that a NEW bottom is set the next day.
Few, if any, people are trying to buy at the very bottom.
Buyers, at least the ones I know, haven’t bought because there isn’t much ‘new’ or ‘turnkey’ out there at a price that they can afford, and combined with job uncertainty, makes a toxic combination. I know you disagree with my opinion, but that’s the way I see it. And the seemingly dismal sales figures reflect something, maybe something a little more than my opinion (like tightening credit standards), but right off the top of my head, here’s the people I know in their late 20’s or 30’s who DON’T own and why:
~30’s couple, one kid, income $80k a year; owned a townhome – too expensive to own for them, sold in 2007, just missed the crash, renting ever since; can’t find a property they like for what they can afford.
~30’s attorney, too much student loan debt, not high enough income to buy something they want or like (this i would say for probably dozens of younger attorneys)
~30’s couple, youngin’ on the way, 2 car payments, student loans, job uncertainty (teacher), not enough income to buy a house in cook county near work/family
~30’s bachelor – too much student loans, not enough stable income (film production industry)
~30’s bachelor – recently divorced, not enough income, no down payment (divorce…), not interested in getting tied down again;
The list goes on and on and on.
20 years ago, hell, 10 years ago, 80% of the people above would have owned; but times have changed and today they all rent, and are perfectly OK with it….
None are even thinking of timing a bottom..
“chuk on October 2nd, 2011 at 12:41 pm
Wrong. We probably haven’t bottomed yet, but we will bottom before “all of these properties make their way through the system”. If it were that easy, everyone would buy bottoms.”
“WRONG. Everyone buys bottoms, it’s just that a NEW bottom is set the next day.”
Uhhh. What? Did you even read what I wrote? All I said was that we would bottom BEFORE all of the foreclosures went through the system.
“All I said was that we would bottom BEFORE all of the foreclosures went through the system.”
This is short sighted; because foreclosure beget foreclosures….the number of foreclosures today will not be the same tomorrow; and someone today who chooses to pay their mortgage may stop tomorrow after his neighbor short sales for 70% of what he owes….
Add to your list
30’s professionals thinking of buying in town both for enjoyment and diversifying assets, but won’t buy as they think the market is too uncertain and the prices are still coming down. No one wants to be a knife catcher as good old G would say.
There are many people who don’t buy because they don’t like the uncertainty. It is not only the folks who cannot afford to buy.
“This is short sighted; because foreclosure beget foreclosures…”
So? You are confused, because you lack any real world experience. You have never experienced any market “bottoms”. You think that the last foreclosed property will sell for less than the one before it (all things being equal). Simply put, that is naive, and completely wrong. They mythical “last” foreclosure will sell for MORE than the one before it. The market prices it in.
Take a look at this made up example of outstanding foreclosures.
Date 1 – 1,000,000
Date 2 – 1,200,000
Date 3 – 1,400,000
Date 4 – 1,600,000
Date 5 – 1,400,000
Date 6 – 1,200,000
Date 7 – 1,000,000
Date 8 – 800,000
Date 9 – 600,000
Date 10 – 400,000
Date 11 – 200,000
Date 12 – 0
At what “Date” do you think market will bottom?
“The market prices it in.”
Blah blah blah. I *Hate* that stupid phrase. I reminds me of this ne’er-do-well I know who goes around quoting things like:
“the market prices it in” and
“you make money on the buy, not on the sell”
and “Bulls And Bears Get Rich, But Pigs Get Slaughtered” and thinks this is real investing advice.
First of all, that little market maxim is a logical fallacy because according to that theory, everything is always “priced in.” When is something not ‘priced in’? The only thing that is not ‘priced in’ is when ‘no one saw it coming’ like the subprime/prime/great recession crisis? Right – tell that to the 2006 buyer that the subprime crisis was ‘priced in’ to the price of his underwater home.
Second of all, how do you know prices will start ‘going back up’ i.e. ‘They mythical “last” foreclosure will sell for MORE than the one before it’? What textbook says this MUST be the case? Why must real estate always go up?
Finally, the problem is that no one knows when the last foreclosure will be so there’s NO WAY it can be ‘priced in’; DQ’s ticked up last month; and the banks aren’t really even forthcoming about the shadow inventory; the various entities who try to predict these things – analysts at ibanks, corelogic, etc, they can’t even agree on a number…
This it’s pretty obvious too anyone in the trenches this mess is going to go on for years.
Ha, you are clueless. BTW, what is the answer to my question?
“There are many people who don’t buy because they don’t like the uncertainty. It is not only the folks who cannot afford to buy.”
A random look at income, assets and debt levels of the average American tells you that ‘affording to buy’ and what I call ‘treading water in debt’ are not the same thing…despite what others may tell you. That may not be your case moomoo, but, it is for the vast majority of people (none of whom seem to walk into sonies office)…
“Ha, you are clueless. BTW, what is the answer to my question?”
Your question is nonsense, it has no answer. Only you would think that it has an answer.
And again, it presupposed that REAL ESTATE ALWAYS GO UP….
another logical fallacy…
Does real estate always go up Chuk?
Is that why the last foreclosure will sell for more than the previous one?
Oh wait, it’s because the market prices it in. I always forget.
“Your question is nonsense, it has no answer. Only you would think that it has an answer.”
Sure it does. Unless you think real estate WILL ALWAYS GO DOWN.
“And again, it presupposed that REAL ESTATE ALWAYS GO UP….”
Nope. It just means that it won’t ALWAYS GO DOWN.
“Does real estate always go up Chuk?”
No. Does real estate always go down hd?
“Is that why the last foreclosure will sell for more than the previous one?”
Nope. But you are too much of a novice to understand what it means.
“Oh wait, it’s because the market prices it in. I always forget.”
Well, that’s because you are clueless.
HD, a couple of thoughts re: who is and who isn’t buying.
First, among the late 20-something/early 30-somethings I know, I can only think of a few who did NOT decide to purchase over the past couple of years. Those who dind’t are either single with no plans to become coupled in the near future, or coupled with (i) no plans to have children in the near future and (ii) rather excellent rental situations. Granted, most of the folks I know (in Chi, at least) in that general age range are in the large law firm (or comparable income) setting, though many are also dealing with student loans. My household pays about the same towards student loans each month as we do towards our mortgage; up until about a year ago, we were paying about the same towards our student loans as we did toward our landlord’s mortgage.
Second, among the richest people I know – all of whom, with the exception of one 40-year old in another state, are between 65-70 – all own homes. Before you answer, “well, duh, of course they do, they’re rich and it’s not like they’re just starting careers, like the folks I’ve described,” let me add that most of these folks seem to have purchased their homes (along with various vacation, etc. homes over the years) on a shoestring, i.e., well before they were well-to-do. All seem to have had the mentality of “buy the biggest, best home in the nicest, most exlusive area I can, even if I have to max out my credit cards and borrow from third cousins in order to buy the place,” and did so back when buying a home was actually difficult and expensive (in terms of interest rates). I don’t think any have regretted it, and I know for a fact that at least of few of them made $1 million+ in selling their homes (granted, that was at the peak of the recent bubble).
So basically, your real estate philosophy, if you were to explain it to an upwardly mobile/upper middle class 30 or 40 something or a well-to-do 50, 60 or 70 something, is that they are impetuous fools, and that the smart money in this town is still waiting for the right moment in time at which to “get in the market.”
HD – if you are so smart, why are you miserable? I don’t get it. I actually think you will be so much more happy and secure when you make that baby step and buy your first house. The memories, peace of mind, and happiness it will provide your family cannot be measured in dollars – stop the nonsense NOW!!!
Don’t worry HD. Chuk is a real estate and stock market genius! He knows all.
I didn’t mean to start a “who will buy at the bottom” discussion with my comments about this house. The only way you’ll buy at the very bottom is by getting lucky. Because no one will know what that is until we are well past it.
My point simply was- this house has been facing foreclosure for 17 months now. The bank still hasn’t taken it. Many of us who read Crib Chatter regularly also know people who are living in and/or renting in properties where the bank should take possession (and has not done so yet.) Heck- there is even one person who reads this blog who is living in a condo that the bank DID take back- but they haven’t kicked him out and he’s paying no money to live there (only the assessments.)
So… suffice it to say- it’s still a mess in Chicago real estate. And given the nature of the slow pace of these things- it will be YEARS before the foreclosures/short sales work their way through the system. Gosh- all you have to do is look at what is selling and/or listed even in LP and Lakeview. A lot of them are short sales now.
For every condo owner who decided to “wait” to sell (or are now renting it out)- they are years and years away from breaking even (in some cases- it will be decades.) Many people are riding it out right now. They’re not selling. They’re not moving. But what happens when it finally dawns on them that they’ll have to live there 10 years to “ride it out”? 10 years in a 1 or 2 bedroom condo- maybe with 1 or 2 kids?
Also- when you look at what is happening in neighborhoods like Portage Park and Jefferson Park- it is a wholescale correction of housing values there. What sold for $350,000 in 2006 are selling for $175,000 in 2011. Who knows in 2012. Again- houses like the one in this post- aren’t even ON the market yet. But they’re coming. Oh boy- are they ever coming. Thousands of them.
As for future buyers- many of the 20s and 30-somethings have a lot of debt. Be it education, credit card, car loans etc. With tighter lending requirements- they’re going to have to really change their lifestyles in order to buy going forward. I’ve heard of instances where banks have said “no” to mortgages unless the buyer gets rid of car payments- for instance.
Out of the people I know who are looking to buy- 90% are looking in the suburbs. They’re married. They’re starting families. They can’t afford anything in the “good” school districts (unless it’s a condo.) They realize they’re not raising the kids in a condo. Their money goes further in the suburbs. In 90% of the cases- the parents gave them the downpayment for the suburban house. I only know one person who bought in the last year who saved up the money themselves.
The number of sales has ground to a halt in the city. It is REALLY, REALLY slow. As HD keeps pointing out, the expensive houses in Irving Park, for instance, haven’t had any sales in months (years?) What is selling are the “deals” and some of the million dollar properties. It also has to be completely move in ready. If you have to put in a new kitchen or baths- forget it. Buyers want “new.”
“Don’t worry HD. Chuk is a real estate and stock market genius! He knows all.”
Nope, just a lot more than you and HD. How’s granny’s shares of EK doing? Oh, that’s the one 100 year old company she didn’t buy…
“The only way you’ll buy at the very bottom is by getting lucky. Because no one will know what that is until we are well past it.”
That’s a lame excuse for people that don’t know what they are doing.
“So… suffice it to say- it’s still a mess in Chicago real estate. And given the nature of the slow pace of these things- it will be YEARS before the foreclosures/short sales work their way through the system.”
Years? Maybe. But you don’t need to work through all of them for prices to bottom. Which was my only point.
I also agree with HD- that none of the people I know who bought this year were thinking of a “bottom.” They just know the house is within their budget (for a monthly payment) and they have to live somewhere.
One person bought a house from a baby boomer who was retiring to Florida who originally listed it for $810,000 and sold it to them for $520,000 nearly 2 years later. Ah- yes- reality finally set in on those sellers.
“Nope, just a lot more than you and HD. How’s granny’s shares of EK doing? Oh, that’s the one 100 year old company she didn’t buy…”
What if she did? What if in a portfolio with 20 stocks she owned EK for the last 35 years? Big deal. Her other holdings would have more than made up for any loss that that would have caused. (though- you would think Granny would have sold awhile back- seeing that the stock has been in danger for years.) Yes- Granny actually DOES watch the portfolio and rebalances/sells if the business is no longer the same business.
It’s REALLY not hard Chuk. She has gotten rich! Rich beyond anyone’s wildest dreams for a middle class girl. She bought the best companies in America and held them for the last 40 years (just about.) And she’s STILL holding them. Getting quite nice dividends.
Did you know you can make 4%, 5%, 6%, or more just by buying these companies? Double your money in 7 years- just for doing nothing!
This is a great country with lots of opportunities. Everyone should be as patient and forward looking as Granny. She never sold when things got rough (and, boy, did they ever in the 1970s.) And then she rode the largest bull to riches. Sure- things are rough again. But she’s reinvesting those dividends again. She’ll be fine. She is diverse. Thanks for asking though Chuk.
People are sitting on a lot of cash right now – they are flocking from the stock market and don’t know where to invest. Among people I talk with, people are fed up of living frugally and they are ready to start spending money on themselves. Many are ready to buy a house. It gives them a place to park their money AND enjoy their investment.
Chuk- I never said you have to work through ALL of the foreclosures to hit a bottom. But there are still thousands upon thousands out there. And every day someone in the neighborhood who is paying on their $350,000 mortgage and just barely getting by asks himself, “why am I paying on this when it’s worth just $150,000?”
Yes- the strategic walkaways are happening all over Chicago and the suburbs now. Short sales/foreclosures are a cancer. All you need to do is look at the buildings in Chicago where they have spread. Once they infect a high rise- the whole building is doomed. Eventually- nearly everyone in the building will throw in the towel.
Eventually- it will stabilize. It WILL reach a bottom (because there are simply no new foreclosures/short sales to come through in that building.) But it will take years for this to happen.
Also- we will hit a bottom when no one cares about real estate anymore. When no one is attacking HD for NOT buying. But since many people on this site still insist that renters are losers- we are not even close to a bottom.
“She never sold when things got rough (and, boy, did they ever in the 1970s.)”
If only she was smart enough to sell then and buy back later. Think of the returns she could have had. As they say, ignorance is bliss.
Of course you did:
“If anyone wants to guess when we’ll hit a “bottom” – it’s when all of these properties make their way through the system”
“Eventually- it will stabilize. It WILL reach a bottom (because there are simply no new foreclosures/short sales to come through in that building.)”
Wrong. There will always be foreclosures and short sales. Yet we will still bottom. Weird, isn’t it?
“Also- we will hit a bottom when no one cares about real estate anymore.”
Wrong. Plenty of people still cared about stocks in 2008, and we bottomed then.
“When no one is attacking HD for NOT buying.”
HD isn’t being attacked for not buying. He’s being attacked for being clueless. Big difference. I think you CAN buy now, not that you HAVE to buy now. I also think you can buy over the next 2-3 years. In 7+ years, it won’t matter much either way.
“But since many people on this site still insist that renters are losers”
Lifelong renters are losers. Temporary renters are not. Why didn’t granny rent her house for 80 years?
“Eventually- nearly everyone in the building will throw in the towel.”
And be replaced by people with much lower costs basis. See how that works? Do you think EVERYONE needs to sell before prices begin to rise?
Here is the problem with people with limited experiences in any market. They think the market THEY lived through is the entire market. Here’s a tip: Not everyone bought at the top. Historically speaking, very few did.
“If only she was smart enough to sell then and buy back later. Think of the returns she could have had. As they say, ignorance is bliss.”
Why in the hell would you sell when you’re getting dividends? You make no sense. No long term investor can EVER time the market like that. EVER. Everyone thought the world was ending in the 1970s. If she sold and sat there she wouldn’t have gotten back in for the next 10 years. Remember- it wasn’t easy to sell in the 1970s. You had to contact your broker. You got charged large fees. You couldn’t just “buy and sell” like you do now.
She would have been much, much poorer. As they say- a huge percentage of most people’s “gains” happens in just a few days of trading the market every year. So if you miss that- you miss the gains for that year. What’s the point? Every single quarter, her stocks have paid her dividends. Come rain or shine. Imagine that share she bought in 1974? It is still paying her today. It’s just incredible really.
But you’re a guy. Women are better long term investors. We aren’t emotional. We don’t panic when times are rough.
Have you ever wondered why those media stories are always about the little ole lady who dies and leaves like $6 million to some charity and it turns out she owned all these stocks for years and years? They’re almost never about the little old man who does the same. I’ve always wondered why. But I guess it’s just because women don’t sell. So they die rich.
“They think the market THEY lived through is the entire market. Here’s a tip: Not everyone bought at the top. Historically speaking, very few did.”
In some buildings- yes- they did. There were wait lists in these buildings- if you recall. They sold out some buildings in literally 24 hours. All of those units “sold” for the same price.
Now- here we are several years later. Sure- there are those who bought the foreclosures in those buildings. Their cost basis is different. I’m waiting to see if they’ll make any money. So far- I only seen a few of these 2008/2009 buyers attempting to sell (NOT the flipper/rehabbers- but someone who bought it, has lived in it, and for whatever reason is now selling.) Yes- their basis is different. But in some cases, the market has gone down since they bought (they were knife catchers.) But- I haven’t seen enough examples yet to see how many will be successful.
Yes- eventually- it will all reset. And then we’ll find a floor. But there are many variables at work- including rising interest rates and other things which could put a damper on any kind of price recovery for years.
“Why in the hell would you sell when you’re getting dividends?”
What good is 5% when you lose 50%?
“If she sold and sat there she wouldn’t have gotten back in for the next 10 years.”
Not my fault she didn’t know what to do.
“But you’re a guy. Women are better long term investors.”
Of course. That’s why so many hedge fund managers, CEO’s, fund mangers, etc are women…
“We aren’t emotional. We don’t panic when times are rough.”
Only because you don’t know what you’re doing. So it’s easier to do nothing.
“Have you ever wondered why those media stories are always about the little ole lady who dies and leaves like $6 million to some charity and it turns out she owned all these stocks for years and years?”
That her husband bought and worked himself to an early grave for.
“They’re almost never about the little old man who does the same.”
Because no one cares about those stories because they are such a common occurrence.
“In some buildings- yes- they did.”
Once again, the exception does not make the rule.
“Also- we will hit a bottom when no one cares about real estate anymore.”
Wrong. Plenty of people still cared about stocks in 2008, and we bottomed then.”
It wasn’t the bottom Chuk. Simple as that. Bull markets begin when the final buyers throw in the towel. Didn’t happen in 2009. But we’re getting closer. Boy- do people hate stocks now. And if we plunge some more- they’re going to hate them even more. The last 3 years have been a bear market rally. That was it. Just like 1929-1930’s rally (but that petered out faster than this one.)
“In some buildings- yes- they did.”
Once again, the exception does not make the rule.”
When you have 8,000 units sell in one year at the peak of the market (or was it 10,000?) in just the downtown alone- I’d say they were all buying at pretty much the same time. That is NOT an “exception.”
Besides- it doesn’t matter much if they bought in 2006 or 2007 or whenever. If they bought in the last 10 years- they’re probably going to sell for less than they paid for it (unfortunately for them.) So it all matters on what they did with financing. Did they refinance and pull money out in the last 10 years? Then they’re screwed. If they were diligant, took no money out, and paid down the loan, they may be able to sell (for a loss- which sucks)- but they won’t need to do a distress sale.
It’s just really, really brutal out there. I feel awful for those people I see who bought in 2001 and did everything right (have lived there a decade!) and STILL are taking a loss.
FYI: Actually- most rich people rented apartments in Chicago 80 years ago (although my granny was NOT rich.) They rented in buildings like The Drake and the others on East Lake Shore Drive and in the luxury buildings in the Gold Coast.
They were all built as luxury apartment buildings- essentially. They only became co-ops and condos in later years (after the Depression) when tenants banded together to rescue their foreclosed buildings.
So, you are saying the S&P is going to go below 666, and knowing that, you are going to not only hold all the stocks you have now, but you are going to buy more at thus level? Interesting…
There is only 1 “bottom” in the market. That’s at 0. But I think it’s safe to at least call a “bottom” when the market has doubled. And we will have dozens more “bottoms” over the next 100 years. So, if we go below 1929 prices in 10 years, does that mean we never bottomed after the depression?
“When you have 8,000 units sell in one year at the peak of the market (or was it 10,000?) in just the downtown alone- I’d say they were all buying at pretty much the same time. ”
Ha. How many people live in downtown Chicago?
“I feel awful for those people I see who bought in 2001 and did everything right (have lived there a decade!) and STILL are taking a loss.”
Why? You should be envious of them. Most of them still did better than you. You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.
“If they were diligant, took no money out, and paid down the loan, they may be able to sell (for a loss- which sucks)- but they won’t need to do a distress sale.”
Why does this “suck”? Didn’t they live in the house for 10 years? If you buy a car in 2005, and sell it for a loss in 2010, did it “suck” that you bought it? Should you have rented a car instead? I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.
“What if she did? What if in a portfolio with 20 stocks she owned EK for the last 35 years?”
Here’s the part you don’t realize. The 100+ year old companies that remain today are a TINY fraction of companies that have existed over the last 100 years. Chance are, if you bought 20 companies 100 years ago, they are ALL out of business now. You can’t just take the 1% that survived in hindsight and say “oh, just buy those”. Even as bad as F and GM are now, do you have ANY idea how many car companies there were 80 years ago? What are the odds that you would have picked THOSE two which ended up being the “best” of the bunch?
I use a magic 8 ball. Shake it and ask it questions. It guides the way.
“Here’s the part you don’t realize. The 100+ year old companies that remain today are a TINY fraction of companies that have existed over the last 100 years.”
She didn’t buy 100 years ago. We’ve already talked about how many 100 year old companies are in the S&P 500 (or whichever it was.) It was like 10%. It’s not very hard to pick out the “winners” today. Of course- you could have bought Woolworths in 1920. But if you owned it for the next 30 years you would have been fine.
You could have bought Apple in 1999 right when it was about to go bankrupt (but then didn’t.) Who knew it would come up with some new products and not be EK? Or Wang computers? There are no “sure” things- which is why you try to buy companies that dominate their industries and pay you dividends. Then you re-evaluate to see if the company is STILL dominating its industry.
It’s not hard.
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
You can’t say that. Assessments, new furnaces, painting, special assessments, new roof, new gutters, lawn maintenance etc. etc. And then you end up taking a loss in the end as well?
Why is this being better off than renting? You essentially paid the bank to live there. That’s no different than paying a landlord. And then you had to write a check to the landlord/bank just to move! Yikes.
It really sucks for those people though. They did everything right and weren’t expecting the greatest housing bust in history to happen when they want to sell 10 years later.
“But I think it’s safe to at least call a “bottom” when the market has doubled.”
Please chuk. I beg you (again.) Go read the history of the stock market. Study up. A bull market is just that- a bull. It doesn’t retest the highs and lows once, twice, three times or whatever. That is a bear market. Always has been. Always will be. How many times have we crossed 10,000 on the Dow in the last 10 years? That is classic bear market behavior. It did the same thing in the bear market of 1966-1981. It crossed over the key technical level dozens of times. Could never break out.
A bull actually keeps going up. It NEVER retests the low (see 1982-2000 market.)
Yes- we’re going to go under the last lows. I have a long term horizon. Decades chuk. I don’t care what the stock market is doing this week or next. I am investing the entire time. In fact, I don’t even remember what it did 3 years ago. Does anyone? Unless they ran a hedge fund that went under- or invested with Bernie Madoff- I doubt it. Don’t be in the stock market if you need that money. It’s for long term investing.
We’re 11 years into the bear market. They last anywhere from 11 years to 26 years (historically.) Could it be longer than 26 years? Sure. But given the pessimism among you, Bob and others- I don’t think we’ll go that long. But who knows? It could be another 10 years of this for all anyone knows.
“A bull actually keeps going up. It NEVER retests the low (see 1982-2000 market.)”
Then we must still be in a bull market per your definition. We haven’t gone below 1982 prices.
“Yes- we’re going to go under the last lows.”
How can that be? You said it was a great time to buy now, and that the S&P 500 PE was so low. You realize what you are saying is the exact same as someone buying a condo in 2006 could say? So what if their condo goes down 50%, they plan on owning for decades. What makes YOU any better?
“I don’t even remember what it did 3 years ago. Does anyone?”
Yes. Smart people.
“Unless they ran a hedge fund that went under- or invested with Bernie Madoff- I doubt it.”
Really? REALLY!?!?!?
WOW. How much debt are you wallowing in? Your student loan payment is as much as your mortgage? I wouldn’t be able to sleep at night.
“My household pays about the same towards student loans each month as we do towards our mortgage; up until about a year ago, we were paying about the same towards our student loans as we did toward our landlord’s mortgage.”
“Don’t be in the stock market if you need that money. It’s for long term investing.”
Really? So all the folks who make (and lose) money on trading “growth” stocks shouldn’t be in the market? And all the companies that pay no dividends shouldn’t be, either?
C’mon!
I don’t even know what’s being argued with these 2 anymore.
“I don’t even know what’s being argued with these 2 anymore.”
I’ll sum it up for you: Sabrina thinks the market won’t “bottom” until all foreclosures have worked through the system. I believe the market will “bottom” before the “last” foreclosure is sold. Then HD spewed a lot of nonsense.
In other words, the guy who won’t accept that ‘parity’ has a definition is now holding others to precise phrasing?
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
Could you show your math for these two conclusions?
“Could you show your math for these two conclusions?”
Does he get to assume that they would have rented someplace *exactly* as nice as what they bought?
“We aren’t emotional.”
this conflicts with my experience.
“In other words, the guy who won’t accept that ‘parity’ has a definition is now holding others to precise phrasing?”
Huh? Why shouldn’t I. HD has long argued that the “last” foreclosure will sell for LESS than the one before it. He is wrong. The “bottom” will occur while many foreclosures are still in the pipeline.
And how come you were never able to show me the math behind your “parity” argument? Could it possibly be that if you use the correct definition of “parity” that it shoots a giant hole in your “it’s cheaper to rent” theory?
“Could you show your math for these two conclusions?”
Sure. As soon as you show me the math behind your “parity” calculations.
“Does he get to assume that they would have rented someplace *exactly* as nice as what they bought?”
Sure, as long as he shows the math indicating that *exactly* as nice is what the OVERWHELMING majority of people who bought in 2001 would have rented.
You just gave him his out.
HD saves tons of money every month by subletting your sub-basement level storage space in the uptown SRO, but that’s (pretty clearly, imo) not the comparison chuk is suggeting.
That scenario could really go either way depending on what assumptions you make… No clear winner.
“Could it possibly be that if you use the correct definition of “parity” that it shoots a giant hole in your “it’s cheaper to rent” theory?”
No, because that is your straw man, not my theory.
“Sure. As soon as you show me the math behind your “parity” calculations.”
That is a calculation that is specific to the buyer and property. I have given you the math before, and it’s pretty simple, just take rent for an equivalent unit and then take all the costs of ownership for the individual. If they equal, they are at parity. Try to remember, too, that principal reduction is not a cost. Your insistence that it is something difficult to compute is amusing.
Now, how will you show the math for your statements:
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
I’ll tell you what, if you only show the math for a random 10% of the 2001 purchasers I’ll agree that the results can be extrapolated to the entire set. Now, get to it!
I wonder why chuk asked for the math.
“If they equal, they are at parity. Try to remember, too, that principal reduction is not a cost. Your insistence that it is something difficult to compute is amusing.”
It’s not difficult to compute. For me. And I am the one that said principal reduction is not a cost. All you need to do is factor an interest only loan, and add your taxes, insurance, etc to it. The problem for you is, if you do it that way, you will find LOTS of places selling for below rental parity.
Take a $200k condo.
Interest only = $480
Taxes = $300
—————-
Multiply by .72 to get after tax effect = 561
HOA = $300
Insurance = $50
——————————–
561 + 300 + 50 = 911. I don’t care how many misc expenses you come up with, you aren’t renting a 200k place for that.
So, it’s not a question of what “parity” is. The question is, what variables do YOU use in the calculation? So, why don’t YOU show me YOUR calculations for the above example?
“Multiply by .72 to get after tax effect”
That’s a bit generous on the actual net effect. Especially for the typical buyer of a $200k place (i.e., someone with HHI of ~$70k).
Where is the repair and replacement expense? What about the effect of the standard deduction? Transaction costs? I guess the math wasn’t simple.
“The problem for you is, if you do it that way, you will find LOTS of places selling for below rental parity.”
Why is that a problem for me? Does it have something to do with the straw man you created, as opposed to any theory I have actually proposed?
“And I am the one that said principal reduction is not a cost.”
Bravo for you. Then why did you previously insist it was included in rent “parity” calculations?
Are you trying to argue that your typical 2001 buyer paid interest only for 10 years?
Also “Multiply by .72 to get after tax effect”, doesn’t work that way. You can only multiply the portion beyond the standard deduction, which is significant if you’re married. In your 200k example there would be very little tax benefit if you’re married.
You are also ignoring maintenance, upfront costs and lost opportunity costs (to be fair in 2001 example that would be largely insignificant for most).
“Are you trying to argue that your typical 2001 buyer paid interest only for 10 years?”
Those are two related–but still spearate–arguments.
“Then why did you previously insist it was included in rent “parity” calculations?”
I didn’t. I said SOME people include it in their calculation. They are wrong.
“Are you trying to argue that your typical 2001 buyer paid interest only for 10 years?”
Nope. Not at all. I am talking about rental parity calculation TODAY. And I am only talking about COSTS. The easiest way to do that is to use interest only.
“You are also ignoring maintenance, upfront costs and lost opportunity cost”
What opportunity cost? It is 100% financed with interest only. And I am not ignoring maintenance. I included the $300 per month HOA. As far as other costs, You would need to know what time frame you are comparing to amortize those costs over, etc. My example is overly simplistic. And that’s exactly why I asked G to “show his math”. For some strange reason, he is unable to, despite claiming how “simple” it is.
It’s easy to say “my math is wrong”. What’s not so easy is to “show the math”.
“They are wrong.”
So, now you agree with me about that? Just clean up your math and stop with the straw men and you’ll really have learned something.
“My example is overly simplistic.”
On that, we agree. Even so, you were wrong.
“Also “Multiply by .72 to get after tax effect”, doesn’t work that way. You can only multiply the portion beyond the standard deduction”
Depends. I have more than $11,400 in itemized deductions before I even get to taxes, etc.
“So, now you agree with me about that? Just clean up your math and stop with the straw men and you’ll really have learned something.”
Ha, in other words, you can’t do it, but you will pretend that you can. Nice try.
“On that, we agree. Even so, you were wrong.”
Prove it.
“Prove it.”
I already did. You omitted the effects of the standard deduction, repairs and replacements and transaction costs.
“Ha, in other words, you can’t do it, but you will pretend that you can. Nice try.”
Oh yes, chuk, you got me. That math is so hard, especially in your simplistic format. Only the best and brightest can master that HP-12C.
“Depends. I have more than $11,400 in itemized deductions before I even get to taxes, etc.”
So?
If my cousin picks up appliances that fall off trucks, my long-term maintenance costs will be less, too, but that’s inapplicable to the typical buyer of a $200k home, which is the context being discussed.
“Nope. Not at all. I am talking about rental parity calculation TODAY. And I am only talking about COSTS. The easiest way to do that is to use interest only.”
You need to make realistic assumptions, not easy ones.
Enough of this laughingly simple rent parity example. I’m still waiting for the real world math for these two conclusions:
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
I’ll still settle for only a random 10% sample to prove these claims.
“You need to make realistic assumptions, not easy ones.”
Nope. You have to look at COSTS only. Of course no one is buying it with 0 down interest only now. But what do you care about the principal payment? OK, your mortgage payment is 829.78, and 350.62 goes towards principal on day 1. 479.17 is interest. Better? Opportunity cost on down payment? Figure the same as the interest cost. 2.875%.
“Enough of this laughingly simple rent parity example.”
It’s so simple, yet you can’t do it. What’s the problem? Show me your rent vs own calculation for my example.
” but that’s inapplicable to the typical buyer of a $200k home, which is the context being discussed.”
Doesn’t matter. That is the whole argument. The formula is NOT the same for everyone. For example, I am buying a 200k place in Chicago, and my deductions are already over the standard deduction. So for ME, 100% of the taxes and interest can be written off. For others, they may not. Yet G seems to think it’s so easy, and that it is clear if something is at “rental parity”.
“You need to make realistic assumptions, not easy ones.”
Maybe you are buying a 2nd home, using a HELOC on your first. Funny, not a single person has been able to show me the math behind THEIR rent vs own equation. Wonder why?
“That is the whole argument. The formula is NOT the same for everyone.”
Then what are you going on about, chuk?
“G on October 3rd, 2011 at 12:31 pm
That is a calculation that is specific to the buyer and property. I have given you the math before, and it’s pretty simple, just take rent for an equivalent unit and then take all the costs of ownership for the individual. If they equal, they are at parity. Try to remember, too, that principal reduction is not a cost. Your insistence that it is something difficult to compute is amusing.”
“Yet G seems to think it’s so easy, and that it is clear if something is at “rental parity”.”
The math is easy, chuk. Those HP12-C skills of yours are not unique.
chuk on October 3rd, 2011 at 1:30 pm
“Funny, not a single person has been able to show me the math behind THEIR rent vs own equation. Wonder why?”
chuk on October 3rd, 2011 at 1:32 pm
“Doesn’t matter. That is the whole argument. The formula is NOT the same for everyone.”
You can’t make this stuff up, folks.
“OK, your mortgage payment is 829.78, and 350.62 goes towards principal on day 1. 479.17 is interest. Better? Opportunity cost on down payment? Figure the same as the interest cost. 2.875%.”
So you are doing your math with a 5/1 arm? This whole thing started with a 10 year time frame… and if you sell within 5 years transaction costs are a huge chunk.
And you really suck if all you can get is 2.875% for your money. Again, not a realistic assumption.
“That is the whole argument. The formula is NOT the same for everyone.”
You’re the one who keeps saying that there are TONS of places that are selling below parity–were you just saying that they would be cheaper for *you* to buy than for *you* to rent (presumably from the currtent owner, who lilely has a higher cost basis)?
YAWN!!
“That is the whole argument. The formula is NOT the same for everyone.”
Which is why I am letting chuk off the hook and only asking for a random 10% sample to prove his claims:
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
Where’s your math, chuk?
“So you are doing your math with a 5/1 arm? This whole thing started with a 10 year time frame”
You are getting your arguments confused. This had nothing to do with the 2001 buyer. This was a completely separate argument about places selling at rental parity NOW.
“This was a completely separate argument about places selling at rental parity NOW.”
So what is your time horizon now? If it’s 5 years you incur huge transaction costs, if it’s longer you incur huge interest costs if you refinance, or huge lost opportunity costs if you pay cash. This shit can’t be ignored, it makes an enormous difference in your actual monthly cost.
For what it’s worth, my monthly cost is about $100 more than the place rented for, and if I refinance at 4% it’ll be lower, so I don’t disagree with your overall message, but your math is fucked up.
What’s funny is that this IS a real world example. I own my first home. My taxes on my house alone are more than the standard deduction. I need a place in Chicago for 5+ years. So my choice is to “rent” or “buy”.
I can rent a place identical to what I am buying for $1800 a month.
I can put 40k down with a HELOC from my primary residence at prime -1% (with a floor at 3%). So, I will pay 3% interest only on 40k. I can get a 5/1 arm at 2.75% with no fees. I am buying a Fannie owned property that also allows up to 3.5% back in closing costs anyway.
So, my transaction costs on the buy side are minimal (transfer stamp). I already detailed the monthly costs about to be $911. Where I come from, $911 is MUCH less than $1800.
And if I don’t need the place any more in 5 years, I can rent it to some sucker for $1800, and he can help me pay down the principal.
Every other property that I considered was also well under “rental parity”.
“For what it’s worth, my monthly cost is about $100 more than the place rented for”
Are you including your full mortgage amount in your “costs”?
“and if I refinance at 4% it’ll be lower, so I don’t disagree with your overall message, but your math is fucked up.”
No it’s not. It is very real. Show me your math if you think mine is “fucked up”.
“If it’s 5 years you incur huge transaction costs”
Huge? 10-15k. I’d save that in around 1 year by owning instead of renting.
“So what is your time horizon now? If it’s 5 years you incur huge transaction costs, if it’s longer you incur huge interest costs if you refinance, or huge lost opportunity costs if you pay cash. This shit can’t be ignored, it makes an enormous difference in your actual monthly cost.”
Agreed. I’d add that if it’s longer you also incur significant repair and replacement costs, too.
“No it’s not. It is very real. Show me your math if you think mine is “fucked up”.”
For one, isn’t your lost opportunity cost really high, considering your much heralded stock market investment skills?
Mortgage interest deduction for a second home will be the first part to go away.
“For one, isn’t your lost opportunity cost really high, considering your much heralded stock market investment skills?”
Ha, what opportunity cost? The 200k is 100% financed. Now I know why you can’t show your math. You can’t even figure out the most basic parts of the equation.
“Mortgage interest deduction for a second home will be the first part to go away.”
Well, it is still here now. So, what multiplier do you assign to my tax deduction to account for the possibility it could go away?
“Agreed. I’d add that if it’s longer you also incur significant repair and replacement costs, too.”
What a weak argument. First of all, I get a 2 year warranty from Fannie on all appliances. Secondly, its a 200k condo with newish appliances. What kind of “significant repair and replacement” costs do you see? More than $900 per month?
You said you are using a $40k HELOC. What’s wrong, not confident you can turn that into a cash purchase in short time?
oh boy
“Are you including your full mortgage amount in your “costs”?”
No, but I do figure 5% lost opportunity cost on my transaction and down payment costs. Without that my costs are way lower.
You’re leveraging one asset to invest into another, that math is quite different from what your average guy looks at buying their primary residence, which is what everyone else has been talking about. You are using a very unusual scenario to “proof” that anyone in 2001 did well.
Although one could argue that a second residence, if not rented is a 100% waste of money anyways…
“You said you are using a $40k HELOC. What’s wrong, not confident you can turn that into a cash purchase in short time?”
Huh?
“More than $900 per month?”
Move those goalposts much, chuk? The point isn’t whether or not it’s at parity, it’s that you are not even including the basics in your overly-simplistic calculation. In other words, “You can’t even figure out the most basic parts of the equation.”
“You are using a very unusual scenario to “proof” that anyone in 2001 did well.”
Wrong argument! This has NOTHING to do with my 2001 scenario!!!!! Nothing!!!! Zero. Zilch. Zip. Nada.
I am merely saying that for me, it is much cheaper to buy now than rent. That is all.
“Huh?”
Can’t you just rent and invest the $40k with the profit paying off your rent and the HELOC? You claim to be a stock market genius, afterall.
“The point isn’t whether or not it’s at parity, it’s that you are not even including the basics in your overly-simplistic calculation.”
Sure I am. Interest. Taxes. Association fees. How much would you like me to add per month for “maintenance and repair not covered by HOA”? $900?
As a wise-ish man once said, I don’t even know what’s being argued with these 2 anymore.
Do chuk and G actually disagree about the definition of rental parity? As opposed to how to actually do the comparison, what inputs to use, what simplifying assumptions are ok, and who did what to whom and whatev?
Also, starting to wish I hadn’t given my (absolutely mint b/c I never used it) HP-15C back to my sister, who had given it to me as a present in the first place, many, many years ago. Have you seen how much those things go for on ebay? (anon, don’t start on that real dollars nonsense.)
“Can’t you just rent and invest the $40k with the profit paying off your rent and the HELOC?”
No. That would require almost a 50% annual return. Man you are bad with numbers.
Omitting transaction costs and repairs and replacements makes your example incorrect. Has nothing to do with parity, since nobody has argued against that in your example. You missed them, which makes you wrong.
“No. That would require almost a 50% annual return. Man you are bad with numbers.”
Yes, but the point is how GREAT you are with them.
“Do chuk and G actually disagree about the definition of rental parity?”
Definition? No. Calculation? Yes.
“Omitting transaction costs and repairs and replacements makes your example incorrect.”
I also omitted any rent increase, moving costs, etc. I acknowledged that there were other expenses, and said that they didn’t add up to $900 per month extra:
“561 + 300 + 50 = 911. I don’t care how many misc expenses you come up with, you aren’t renting a 200k place for that.”
“Wrong argument! This has NOTHING to do with my 2001 scenario!!!!! Nothing!!!! Zero. Zilch. Zip. Nada.
I am merely saying that for me, it is much cheaper to buy now than rent. That is all.”
Yes, but you also said the following:
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
Now, where’s your math on these. Like I said, only a random 10% sample is acceptable.
” don’t start on that real dollars nonsense”
She probably used a Jim Baker C-Note to buy it.
Aren’t all those high buck ones flips of the new LE version? Waiting for someoen from Oklahoma to list one for $31,000 to pay for her daughter’s college.
“Yes, but you also said the following:”
Yes, in a completely different conversation. And I will be happy to show you the math, as soon as you show me YOUR math on my “rent vs buy” that I asked you about first.
“Like I said, only a random 10% sample is acceptable.”
Hint: It’s not that hard. Case-shiller is at 2001 levels, so you don’t even need to figure out any gain/loss on property. All you have to do is add expenses and opp cost over the last 10 years.
“Definition? No. Calculation? Yes.”
I thought you said before there were multiple definitions of rental parity, chuk? Glad to see you now agree with me that there is one. Also, glad to see you admit you left out items from your analysis, which made it incorrect.
“Hint: It’s not that hard. Case-shiller is at 2001 levels, so you don’t even need to figure out any gain/loss on property. All you have to do is add expenses and opp cost over the last 10 years.”
How is that applicable to your assertion (that agreed with mine)?
“That is the whole argument. The formula is NOT the same for everyone.”
“I thought you said before there were multiple definitions of rental parity, chuk?”
Definitions? Definitions of the meaning of rental parity or definitions of how rental parity is calculated? Splitting hairs aren’t you?
“Also, glad to see you admit you left out items from your analysis, which made it incorrect.”
I didn’t leave them out. I specifically mentioned them. I just didn’t itemize them. I merely said they were “less than $900 per month”. That’s not the same as “leaving them out”.
“Splitting hairs aren’t you?”
Pot, meet kettle.
“Aren’t all those high buck ones flips of the new LE version?”
There’s “vintage” mixed in with the LE. Both seem to sell for similar prices, although there’s a huge range and some crazy high prices for the LE (over $400).
There was also an alleged “NIB” (the B did not seem in that good of a shape) vintage unit that sold for over $700. Mine looked about as good as the NIB. Had used it for maybe 5 hours total though.
“I didn’t leave them out. I specifically mentioned them. I just didn’t itemize them. I merely said they were “less than $900 per month”. That’s not the same as “leaving them out”.”
Except for the fact that the argument was about the calculation, not the result.
“Except for the fact that the argument was about the calculation, not the result.”
Right. And I said they were included in the calculation. Under “misc expenses”.
” there’s a huge range and some crazy high prices for the LE (over $400). ”
How foolish will those buyers feel when HP releases all of it’s currently-embargoed inventory before christmas, and the value on the flip plummets?
Query: would I have been better off having bought a used 15c in 2001, buying a new 12c then and upgrading now, or just borrowing one or the other for the past decade? Whatever your answer is, please show your math.
“Right. And I said they were included in the calculation. Under “misc expenses”.”
So, your argument just boils down to your belief that I couldn’t do the math? Or, was it your way to continue to avoid my request for you to prove the following (remembering that you agree “That is the whole argument. The formula is NOT the same for everyone”):
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
Now, where’s your math on these. Like I said, only a random 10% sample is acceptable. Well, chuk?
“So, your argument just boils down to your belief that I couldn’t do the math?”
And you can’t. You said my math is wrong. You can’t show me the “right” math. Obviously you can’t do the math.
“Or, was it your way to continue to avoid my request for you to prove the following (remembering that you agree “That is the whole argument. The formula is NOT the same for everyone”):”
You are merging two arguments. But go ahead and show me the “right” math for my example first, and I will be more than happy to answer your question.
You omitted items, as you admit. Saying they “don’t equal $900” is irrelevant, since, as you also admit, the argument was about the calculation. With that standard you could have omitted mortgage interest and taxes. So, here’s the correct math:
Take a $200k condo.
Interest only = $480
Taxes = $300
—————-
Mo. Int & Taxes = $780
Determine increased deductiblity based on effect of increased deductions (if any), Multiply by tax rate, then subtract from Int & Taxes to get after tax effect = $x
transaction costs = $y
repairs and replacements = $z
HOA = $300
Insurance = $25
——————————–
x + y + z + 300 + 25 = monthly rent equivalent.
There you go. Now it is your turn to show the math for these statements:
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
Remember, too, that we agree “The formula is NOT the same for everyone” due to differences in tax deductibility and holding periods. I expect you have them for the OVERWHELMING majority of people since, that is afterall, what is necessary to do the varying calculations. Like I said, though, I will accept a random 10% sample as representative of the entire data set.
“But go ahead and show me the “right” math for my example first, and I will be more than happy to answer your question.”
Thanks, I’m glad I can bring you happiness. Let’s see that math.
“Query: would I have been better off having bought a used 15c in 2001, buying a new 12c then and upgrading now, or just borrowing one or the other for the past decade? Whatever your answer is, please show your math.”
Will post answer when chukdc shows his math, or G stops asking him to show his math.
Also, I don’t really know what an upgrade to a circa 2001 12C would be necessarily. And would chukdc, G, and sabrina all have to agree it’s an upgrade?
this is starting to read like
‘who’s on first’
‘i don’t know’
‘3rd base’
“And would chukdc, G, and sabrina all have to agree it’s an upgrade?”
No, because they aren’t all necesarily in agreement on whether, with the “better off from 2001-2011” discussion, one should be looking at true equivalents, or actual behavioral choices (ie, when you buy, you buy something nicer than you were borrowing).
“Thanks, I’m glad I can bring you happiness. Let’s see that math.”
OK, here you go:
Interest only = $a
Taxes = $b
—————-
Mo. Int & Taxes = $a+$b
Determine increased deductiblity based on effect of increased deductions (if any), Multiply by tax rate, then subtract from Int & Taxes to get after tax effect = $x
transaction costs = $y
repairs and replacements = $z
HOA = $c
Insurance = $d
——————————–
Rent = $w
x + y + z + c + d
“this is starting to read like
‘who’s on first’
‘i don’t know’
‘3rd base’”
Oh, they split up years ago.
This got trunc’d
“x + y + z + c + d
Hmm, for some reason it doesn’t like the “less than” sign:
x + y + z + c + d LESS THAN w
I did illustrate the proper calculation. You appear to agree with it now and that yours was previously incorrect.
However, you failed to apply the calculation to prove your statements:
“You forget that they didn’t pay rent for 10 years. So what if you bought in 2001 for 300k, and are now selling for 250k. You’re still ahead of people that rented all that time.”
“I assure you that the OVERWHELMING majority of people that bought in 2001 were better off buying then than renting.”
You have not proven your “OVERWHELMING majority” claim. Let’s see the math.
This should be easy chuk, since you now have my correct formula down.
“You have not proven your “OVERWHELMING majority” claim. Let’s see the math.”
Sure I did. You’re just having trouble grasping the concept. All you have to do is pick your random 10% and plug the numbers in.
“Sure I did. You’re just having trouble grasping the concept. All you have to do is pick your random 10% and plug the numbers in.”
You lose. Thanks for playing.
“You lose. Thanks for playing.”
That was quick. You sure you got a full 10% sample?
I built a model to answer the “rent vs. buy” question, which I think is the same as the “rental parity” question.
I used cash flow analysis over a 5-year period (arbitrary), calculating “Net Available Cash [Income – Taxes – Housing Expense]” each year for each scenario (rent or buy) assuming a buy at year 0 and a sale at year 5.
I discounted the annual cash flows to calculate a Present Value for each scenario, with the larger PV being the winner.
———————————————————
| Net Available Cash = Income – Taxes – Housing Expense |
———————————————————
The difference between my calculation of rental parity and that of @G and @chuk is my calculation also includes the buy/sell costs and benefits.
Their definition will tell you parity on annual cash flow basis–“which costs me more out of pocket each year?” Mine will tell you parity on a total transaction basis–“am I better off financially a few years out if I buy now and cash out later?”
Both are equally valid considerations, depending on your primary concern and time horizon.
OWNING COSTS 30% LESS.
RENTER = SUCKER.
Chicago 1BR.
Just signed the deal for $105k.
This apt normally rents for $1100.
It was rented to a short-term sucker for $1400.
Monthly cost to own:
Taxes = $125
Condo Fee = $205
Mortgage = $405
Total = $750/mo
Let’s disregard the tax deduction … around $100/mo net
For me, owning is 30% less than renting.
Cash flow positive if I decide to rent it.
No brainer either way. Your mileage may vary. Good luck.
I feel so sorry for broke renters who will never have a property to sell at a massive profit when they retire. Or will be paying market rents until they die. I will have this paid off in 15 years, and will live RENT FREE FOR LIFE !!!
“I will have this paid off in 15 years, and will live RENT FREE FOR LIFE !!!”
You’re going to live in a 1-bedroom for your LIFE?
Wow.
Everyone should be so lucky.
“OWNING COSTS 30% LESS.
RENTER = SUCKER.”
Are you saying that because you found a dumpy one bedroom with low taxes (probably going to go up) you can extrapolate to the entire market the idea that owning is cheaper than renting? Oh wait, YMMV, so that’s how you qualify your nonsense.
“You’re going to live in a 1-bedroom for your LIFE?
Wow.
Everyone should be so lucky.”
well, she does seem like a real catch!
Free rent for life. It’s nice to have that option. Some of us like to live frugal lifestyles and have financial independence. REnting will never give you that option, as your rent goes up year after year. Can you image being 70 and paying market rent? No thanks.
Buying means saving money each month (buying is often cheaper than renting)
AND getting a tax deduction
AND fixing your monthly cost for 30 years
AND dropping costs to $0 in year 31
AND getting a windfall jackpot when you retire.
If you want to focus on the last 3 years,
sure, lots of people are underwater,
but you’re sadly missing the forest for the trees.
And yes, if you buy and sell every few years, it’s a different story.
Are renters really so stupid as to assume they are immune to maintenance costs, just b/c they are not owners? Landlords pay for this from your rent.
looks like clio’s been busy with a sex change operation
wow bad grammar there, sorry
“If you want to focus on the last 3 years,
sure, lots of people are underwater,”
3 years? Try 10 years. That was one of the points of the discussion on this crazy thread (I think.) That there are people who bought in 2001 who unbenownst to them- 10 years later- would have to try and sell in the worst housing bust in modern times. Only to find out that they were also underwater and were going to lose money on the sale.
They did everything right. Put down some money. Paid off the loan. Lived there 10 years (not 1 or 2 or 3 years) and STILL they are losing money.
It’s just brutal out there right now. In some cases- people’s life savings vanishing.
Amy, you must be new to owning because there are a lot more expenses to keeping a home going than just PITI and assessments. And the expenses don’t go to zero once the mortgage is paid off. I’m not getting involved in the debate, but there’s more than meets the eye.
Dear homedelete,
Otherwise, your parents would be paying $8000/mo to rent today. Oh, and they wouldn’t be sitting on a multi-million dollar jackpot, like the owner from 1974. The whole argument about renters investing the difference is totally false. When you buy at the right time, owning is cheaper than renting, for the life of the property.
After you get past the downpayment (that $4000 back in 1974), the owner has better cashflow to invest for the next 50 years.
Owning is win/win. Lower monthly cost for your whole life and a million dollar payout at the end. And yes, this is not to be confused with some moron buying 2008 NYC real estate after a 5000% run up, only to see it tank.
If you’re not already sitting on a mountain of pre-2008 profit, then don’t bother. That ship has sailed. Owners should now just concentrate on paying off the mortgage, and living rent free for the rest of their lives. Renters, well, I guess can just keep paying off their master’s mortgage.
“Owners should now just concentrate on paying off the mortgage, and living rent free for the rest of their lives. Renters, well, I guess can just keep paying off their master’s mortgage.”
41% of those aged 60 to 69 have mortgages. So, apparently, the baby boomers didn’t plan very well.
“Otherwise, your parents would be paying $8000/mo to rent today. Oh, and they wouldn’t be sitting on a multi-million dollar jackpot, like the owner from 1974.”
My grandparents bought a house in 1955 in Olympia Fields. Lovely area (at that time.) They didn’t make millions when they sold in 2010. In fact, if I add up all the property taxes and maintenance they paid- they lost money. It happens to a lot of people. But they raised their family there- and that’s all that matters.
Why does everyone attack HD for being a renter? And why do you care?
It’s SO a sign that we aren’t at the bottom yet.
Right. Just ignore that retiree renting an apt for $10,000/mo. with $0 capital gains, vs. the retiree sitting on a $2 million profit, and living in the same apt for a fraction of the cost.
Oh wait, that $60 attorney fee from 1974.
You’re right. Real estate is a scam! There are some real idiots out there. It is laughably insane to think people don’t make money in real estate.
I’d say for for 9 out of 10 working class people, the majority of the net worth was created from real estate profits. In fact, for many, it is the only financial thing they ever get right. Buying, staying put, and enjoying make more money in appreciation than they’d ever dream of saving by hand.
Also, owning can be significantly cheaper than renting, when you don’t buy at bubble prices (or cities) NYC is a good example. Rest of the country, like Chicago, is a screaming bargain.
“I’d say for for 9 out of 10 working class people, the majority of the net worth was created from real estate profits.”
Yes- this is true. They don’t save into 401ks or buy stocks/bonds. Their house is all they have. That is why this bust is even more devastating for the middle and lower middle classes. In the boom, they could buy a house for $150,000 and sell it for $250,000 just 3 years later. They were rich! They could take out a HELOC and go to Disney World, buy a new car and get a new kitchen.
All of that is gone- and it’s not coming back. Ever.
What do you do when your house goes up simply 1% a year for a decade or more? Yes- it will build wealth (if you’re patient.) How many people are anymore? The average time most people own their homes is 7 years. Maybe that will change now (because they cannot sell- as they are underwater.) I don’t know. It’s a huge societal change.
In the meantime, many of those same working class people cannot afford their $300,000 mortgages. All you need to do is look at what is happening in Portage Park, Jefferson Park, Galewood, Belmont Cragin etc. etc. to see what is going on out there. Short sales and foreclosures as far as the eye can see.
Amy is likely an idle USED HOME SALESMAN. Amy you’re not fooling anyone you’re not rich. And with your realtwhore educatiom credentials you’ll be taking my Italian sub order at Arby’s in short time.
Sabrina, most people that put 20% down 10 years ago, and didn’t heloc their homes like idiots are fine as they have paid down their principal about 15%, are you saying that you expect home prices to get 35% below 2001 prices to become underwater?
I mean, it is a possibly but that really isn’t very likely unless some serious shit hits the fan. That would make us go back to ~1988 pricing!!!
“Sabrina, most people that put 20% down 10 years ago, and didn’t heloc their homes like idiots are fine as they have paid down their principal about 15%, are you saying that you expect home prices to get 35% below 2001 prices to become underwater?”
Well- how may put down 20%? That’s the question right. And how many didn’t HELOC?
Sure- there are some that didn’t. But I’ve even seen some of those who didn’t HELOC in trouble (but they only put down 5% or so in 2001.) When you add in the realtors fees/closing costs of around 8%- it doesn’t take much for those buyers to also be underwater even though they’ve been paying it off for 10 years.
Sonies- remember this 2-bedroom on George we’ve chattered about?
http://cribchatter.com/?p=11159
It is now listed 15% below the 2001 price. Add in the transaction costs- and that is 23% below the 2001 price. And it hasn’t sold yet.
“Well- how may put down 20%? That’s the question right. And how many didn’t HELOC? ”
11 years ago I’d say a fair amount. But an even 10…we’re entering the beginning of the exorbitant appreciation phase of the bubble which makes me suspect 10% and lower were starting to become the new normal.
When dot-bomb cratered the lemmings needed a place to stash their cash and 9/11 reinforced the misguided belief that “home is where the heart is”.
I bought in 2001 and put down 5% without any questions asked from the bank. I’m sure there were plenty of people who were doing what I was doing.
Goes a long way to explaining the start of the bubble then. The timid and meek put all their cash they had left from the dotbomb implosion into housing because they felt unsafe because of 9/11. And the low-down crowd was granted entrace into the “ownership caste”.
Little did they know this caste would wind up being financial indentured servitude.
ok.. Now back to the real argument. How Sabrinas 90 yr ol g’ma is a pathetic buy and hold style trader and how she needs to step up her game and get a seat on the exchange, stand in the pit, and start making markets in back month spreads on frozen concentrated orange juice.
‘i don’t give a fuck if she’s having a heart attack. Get back in there and sell, sell!!!
When? Ever since I’ve been on this planet. Oh, you bought 30 years ago? That means you have $x00,000 free and clear burning a hole in your pocket. Very simpler marker. By 2008, it was the level 1 status divider, outside of being able to say “I work in Finance”
This whole “opportunity cost of the downpayment” is trivial. The guy who bought a NYC brownstone in 1995 for $200k put down $40k. Now, the apt is worth $5 million, and that $40k is a rounding error. It’s laughable to think a typical investor would turn $40k into $5 million in the stock market. Not even close. It’s so easy to live rent free, I feel so bad for renters who will pay until they die.
Your anecdote about a couple losing money after only 3 years is not what I’m talking about. I am talking about owning something for 30 years vs. renting the same thing for 30 years. I know someone who is selling her NYC brownstone. The renter got a $0 payout, and the owner got a $2 mill. payout. SHE HAS 2 MILLION BUCKS the renter does not. How a dumb renter can’t see that difference is funny.
Citing a couple of people who lost money b/c they bought in 2008 is like saying stocks are always a horrible investment….right after a market crash. For the vast majority of people who buy an index fund and hold it for 40 years, it’s a good move. Same goes with owning your place. Also, in every other part of the country, it’s cheaper to own than rent.
A handful of morons who nailed the top in 2008 do not negate the general rule. What percentage of total owners does this make up? Can you find me ANY sliding 30 year period where owning was worse than renting? No, you can’t. Over a lifetime, owning is way cheaper by the month, and you get 800% of your buy price upon exit. Win/win.
Also, the entire crux of the renter fallacy is that the renter will compound his downpayment for 30 years in the stock market. Great on paper, but this has never happened in the real world. Does anyone know a multi-millionaire renter? Yea, I didn’t think so.
Renting is for poorz.
“General rule”?!
You mean like real estate always goes up, Amy?
Also the fact that renters don’t usually invest the difference doesn’t factor into the IRR for renting. And there’s tons of expenses associated with owning aside from P&I.
“The renter got a $0 payout, and the owner got a $2 mill. payout. SHE HAS 2 MILLION BUCKS the renter does not. How a dumb renter can’t see that difference is funny. ”
You’re an Aral sea fisherman in your current profession, Amy. You’re not going to hack it. You might not know this yet but the way you’re lashing out with your false arguments and half truths towards “dumb renters” is proof enough for me.
I like my Arby’s italian sub with extra onions.
Amy if real estate always goes up why do we have 51 months in a row of year over year price declines for SFHs in Chicagoland and 46 months of condo declines.
The media stays away from these numbers because they know if they were widely known sentiment would be completely crushed. Nobody wants to get in front of a trendline freight train like that.
“Level 1 status divider”? LMFAO what planet are you from Chet Coolio planet?
Bob, I never said real estate always goes up. Nice straw man. Real estate went parabolic in the last bull market leg. A few down years means jack sht to long term owners.
I know someone selling their house for $870,000. They bought it for $90k in the 1980s. It is so sad that renters can’t grasp something so simple: They lived in that house for LESS than renting AND are going to get paid over $600,000 in cold bard cash. Or they can just live there rent free for the rest of their lives and pay $1000/mo for taxes. The same house to rent will run some 65 year old renter $5000 a month. $60,000 a year. I feel really bad for some sucker renter who pisses $60,0000 a YEAR in rent. All for the honor of having NOTHING to show for your money.
Please, go buy a personal finance book, and learn about building wealth over the long term. Poor people are all about short term immediate gratification, but anyone who holds a property for 30 years (or more) has been rewarded by a windfall lottery. This is how the rich pay for their kid’s private college. Renters have to resort to state colleges with other poor renters.
“cold bard cash”
Amy’s a HUGE D&D fan. I got admit, between her bullish nature, her cutesy quotes (“Renting is for poorz”) I’m really starting to like this Amy character.
Don’t get me wrong. If you’re not already sitting on a mountain of pre-2008 profit, then don’t bother. That ship has sailed. Owners should now just concentrate on paying off the mortgage, and living rent free for the rest of their lives. Renters, well, I guess can just keep paying off their master’s mortgage.
Yea, if you bought in the last 2 years, you lost. And yes, it is headed down from these crazy prices. But, to be a lifer renter is to be a SUCKER.
Who would pay $900,000 for something that sold for 1/3 of that price just a few years before? An idiot, that’s who.
Sure, this is a stupid time to buy at inflated prices after prices have gone up x00% in the last x years.
Anyone who already bought from 1850 to 2008 has made out like a robber baron. That boat has sailed. Anyone who bought in 2009 or 2010 lost money. BUT, anyone who never EVER buys in their entire lifetime is a stupid f*cking renter idiot funding someone else’s retirement.
It’s an important clarification that some here are too dumb to understand.
“Who would pay $900,000 for something that sold for 1/3 of that price just a few years before? An idiot, that’s who.”
You just described the “green zone” in Chicago, with appreciation rates on the order of 300% since 1994. Check it out in the latest Chicago magazine to see the absurdity.
Oh and Amy…it’s going to be more than a few down years.
It’s going to be over fifteen. The distress will continue to fill the pipeline as owners can’t sell in time to stem the distress, because the volumes just aren’t there.
So some will suck it up and pay their mortgages..most of those that are able to. But for those who need to sell it’s going to be a distressed bonanza.
Take a look at Bank of America’s stock chart going back 20 years for good grasp of the enormity of the problem. BofA is toast: they’re sitting on hundreds of billions of dollars of shit mortgage paper.
The game is over. You may not want it to be over and everyone who profited from the bubble, via regular wages, commissions or appreciation might not want it to be over either. Heck even Bernanke doesn’t want it to be over. But this is so much bigger than you and all of those vested interests. And nothing you can do to try to change sentiment on this anonymous blog will affect the continuing decline one bit.
Amy you don’t understand what’s happening because it’s never happened in your life before and most people over-emphasize first hand anecdotes and experiences. But it is happening. And nothing can stop it from running it’s course short of World War 3.
Err maybe not “latest” Chicago magazine but a recent one. Read it before getting my hair cut the other day.
Yes, we’re in for a depression. But, you’re still an OCD mental patient. Go seek some help. You have probably destroyed your family’s finances with your doomsday thinking. That is, if any poor woman was stupid enough to marry someone like you. Get off the internet, and go live your life. That is, if your family hasn’t ditched your mentally ill ass already.
I live mortgage free in my primary residence.
After a long time, and seeing the insane bubble of 2002+, I just picked up another rental property that is once again cashflow positive. Sure, at $107k, it can go lower, but I am renting it out for a lot more than my cost. Every single one of my properties has enabled me to retire early (all bought in the 90s and early 2000s) Rents have been going up. It’s a great time to test the waters with all the cash I’ve saved in the last decade. My powderkeg is dry, and properties are cheap as fuck compared to rents. Poor renters. Meanwhile, I live for free, and then some !!
I doubt your persona “Amy”. From the way you post not only do I doubt you work in finance I can tell you don’t even read the WSJ.
Some of my friends on the street are actually quite worried about their jobs as of late.
Then again AP or AR doesn’t have quite the cyclicality of high finance does it Amy?
Again, you don’t read so good. I said I made my money in finance. I now work part-time.
Oh, and the WSJ is not a real finance journal. Rupert needs to sell product and has watered it down to a joke. What next celeb cheating? Please. No one making decisions uses that for anything more than commuting filler, if that. It something old retired dinosaurs read down in FL. By your statement, I can tell you’re just some idiot “permabear” who has been renting for 15 years. Bitter renter. You could have had 1/2 your mortgage paid off if you weren’t such a mental patient. Instead, midlife and still renting. And that keeps going up until they day you die. Try paying off a mortgage, renters. It’s an amazing feeling of liberation and autonomy.
Your Wall St. friends have nothing to worry about if they are owners. Most NYC owners are sitting on a shitton of capital gains, to the tune of $750k profit on a 2 or 3BR.
A handful of morons who nailed the top in 2008 do not negate the general rule. What percentage of total NYC owners does this make up? Can you find me ANY sliding 30 year period where owning was worse than renting? No, you can’t. Over a lifetime, owning is way cheaper by the month, and you get 800% of your buy price upon exit. Win/win.
Your anecdote about a couple losing money after only 3 years is not what I’m talking about. I am talking about owning something for 30 years vs. renting the same thing for 30 years. I know someone who is selling her NYC brownstone. The renter got a $0 payout, and the owner got a $2 mill. payout. SHE HAS 2 MILLION BUCKS the renter does not. How a dumb renter can’t see that difference is funny.
Citing a couple of people who lost money b/c they bought in 2008 is like saying stocks are always a horrible investment….right after a market crash. For the vast majority of people who buy an index fund and hold it for 40 years, it’s a good move. Same goes with owning your place. Also, in every other part of the country, it’s cheaper to own than rent.
“And that keeps going up until they day you die. Try paying off a mortgage, renters. It’s an amazing feeling of liberation and autonomy.”
Like I said- 41% of people aged 60 to 69 have mortgages. So not everyone has that “amazing feeling” of liberation.
I also don’t think anyone here has ever said you should be a renter for forever. But for many people- renting makes more financial sense. They’re just not going to be in the property long enough.
I agree. It’s gonna get UGLY. That’s why this is the BEST time to be an owner. You RENT? What if you get laid off??? You’ve got to be NUTS to be a renter in such an unstable economy. Lose your job, you’ll be out on the street in 3 months. If you own, you can stop mortgage payments for YEARS!! Owning is SO much SAFER than crazy risky renters who can be evicted overnight! I paid off my mortgage, so it’s not even an issue. I love the recession. I hope it goes into depression!
“BUT, anyone who never EVER buys in their entire lifetime is a stupid f*cking renter idiot funding someone else’s retirement.”
Again- it’s comments like this that indicate we aren’t at a bottom yet in this housing market. Why does someone else care if someone rents? What does it matter to them? Why are they an idiot?
I don’t get it.
Sabrina,
Yea, well, that means 59% are sitting on a jackpot for housesitting, and living cheaper than rent for 20 of those 30 years.
It’s not my problem than 41% of people are idiots who tapped out their HELOC for $10,000 vacations and bullshit degrees for their mediocre kids. For me, owning has been a windfall. I live for 1/2 the cost of rent, for the rest of my LIFE. In 10 years, it might even be 1/3 the cost of rent, as rent keeps going up, while my mortgage stays at $0.
I’ve met 100s of people who sold their house to bank $100s of thousands, some even millions. I have never met a renter who walked away with a dime.
I agree that if you’re not going to stay put, renting makes sense. It’s costly to always move around. Living rent free is a great way to live. Opens up so many options, not having that massive rent payment to deal with EVERY month…. FOREVER. Till you DIE.
Sabrina, yes, you certainly don’t get it. Re-read all my posts, and maybe it will sink in. I will paste it all here, for your benefit:
OWNING COSTS 30% LESS. RENTER = SUCKER.
Chicago 1BR.
Just signed the deal for $105k.
This apt normally rents for $1100.
It was rented to a short-term sucker for $1400.
Monthly cost to own:
Taxes = $125
Condo Fee = $205
Mortgage = $405
Total = $750/mo
Let’s disregard the tax deduction … around $100/mo net
For me, owning is 30% less than renting.
Cash flow positive to rent it.
No brainer either way. Your mileage may vary. Good luck.
Buying means saving money each month (buying is often cheaper than renting)
AND getting a deduction
AND fixing your monthly cost for 30 years
AND dropping costs to $0 in year 31
AND getting a windfall jackpot when you retire.
If you want to focus on the last 3 years,
sure, lots of people are underwater,
but you’re sadly missing the forest for the trees.
And yes, if you buy and sell every few years, it’s a different story.
Are renters really so stupid as to assume they are immune to maintenance costs, just b/c they are not owners? Landlords pay for this from your rent.
Well, sure, if you’re going to play the welfare card (rent control), then it’s a different comparison.
Otherwise, your parents would be paying $8000/mo to rent today. Oh, and they wouldn’t be sitting on a multi-million dollar jackpot, like the owner from 1974.
The whole argument about renters investing the difference is totally false. When you buy at the right time, owning is cheaper than renting, for the life of the property.
After you get past the downpayment (that $4000 back in 1974), the owner has better cashflow to invest for the next 50 years.
Owning is win/win. Lower monthly cost for your whole life and a million dollar payout at the end.
And yes, this is not to be confused with some moron buying 2008 NYC real estate after a 5000% run up, only to see it tank.
Right. Just ignore that retiree renting an apt for $10,000/mo. with $0 capital gains,
vs. the retiree sitting on a $2 million profit, and living in the same apt for a fraction of the cost.
Oh wait, that $60 attorney fee from 1974.
You’re right. Real estate is a scam! There are some real idiots out there.
It is laughably insane to think people don’t make money in real estate.
I’d say for for 9 out of 10 working class people, the majority of the net worth was created from real estate profits. In fact, for many, it is the only financial thing they ever get right. Buying, staying put, and enjoying make more money in appreciation than they’d ever dream of saving by hand.
Also, owning can be significantly cheaper than renting, when you don’t buy at bubble prices (or cities)
When? Ever since I’ve been on this planet. Oh, you bought 30 years ago? That means you have $x00,000 free and clear burning a hole in your pocket. Very simpler marker. By 2008, it was the level 1 status divider, outside of being able to say “I work in Finance”
This whole “opportunity cost of the downpayment” is trivial.
The guy who bought a brownstone in 1995 for $200k put down $40k.
Now, the apt is worth $5 million, and that $40k is a rounding error.
It’s laughable to think a typical investor would turn $40k into $5 million in the stock market.
Not even close.
Your anecdote about a couple losing money after only 3 years is not what I’m talking about. I am talking about owning something for 30 years vs. renting the same thing for 30 years. I know someone who is selling her NYC brownstone. The renter got a $0 payout, and the owner got a $2 mill. payout. SHE HAS 2 MILLION BUCKS the renter does not. How a dumb renter can’t see that difference is funny.
Citing a couple of people who lost money b/c they bought in 2008 is like saying stocks are always a horrible investment….right after a market crash. For the vast majority of people who buy an index fund and hold it for 40 years, it’s a good move. Same goes with owning your place. Also, in every other part of the country, it’s cheaper to own than rent.
A handful of morons who nailed the top in 2008 do not negate the general rule. What percentage of total NYC owners does this make up? Can you find me ANY sliding 30 year period where owning was worse than renting? No, you can’t. Over a lifetime, owning is way cheaper by the month, and you get 800% of your buy price upon exit. Win/win.
The entire crux of the renter fallacy is that the renter will compound his downpayment for 30 years in the stock market.
Great on paper, but this has never happened in the real world. Does anyone know a multi-millionaire renter outside of NYC?
Didn’t think so.
RENTER = SUCKER, REASON #23: 5 YEARS FREE LIVIN’
http://money.cnn.com/2011/06/09/real_estate/foreclosure_squatter/index.htm?iid=HP_Highlight
If they’ve been saving up their rent checks for 5 years,
they might be able to buy a house with a massive downpayment,
and live for 1/2 the cost of renting for the rest of their lives.
Paid $135k
Now owes $600k
In other words, in addition to 5 years of free living,
she got PAID over $400,000 to live there.
Holy jackpot lottery, Batman!
Sorry, but cashing out $400k and never paying it back, and living for free for 5 years simply beats the living daylights out of renting. If they rented, they’d have the same problems, except none of the benefits.
You’re not very bright, are you? They got one hell of a free ride that could never be pulled off as a renter.
Who would pay $900,000 for something that sold for 1/3 of that price just a few years before? An idiot, that’s who.
If you’re not already sitting on a mountain of pre-2008 profit, then don’t bother. That ship has sailed. Owners should now just concentrate on paying off the mortgage, and living rent free for the rest of their lives. Renters, well, I guess can just keep paying off their master’s mortgage.
Sure, this is a stupid time to buy at inflated prices after prices have gone up x00% in the last x years.
Anyone who already bought from 1850 to 2008 has made out like a robber baron. That boat has sailed. Anyone who bought in 2009 or 2010 lost money.
BUT, anyone who never EVER buys in their entire lifetime is a stupid f*cking renter idiot funding someone else’s retirement.
It’s an important clarification that some here are too dumb to understand.
Yea, if you bought in the last 2 years, you lost.
And yes, it is headed down from these crazy prices.
But, to be a lifer renter is to be a SUCKER.
I am 100% agreement that prices are headed down.
BUT………OWNING WAY CHEAPER THAN RENTING: CHICAGO.
“I know someone selling their house for $870,000. They bought it for $90k in the 1980s. It is so sad that renters can’t grasp something so simple:”
This is like the stock example. For every person who bought for $90k in the 1980s and sold for $870,000 there is the person who just sold for $50k. Yes- it happens. Neighborhoods change. Real estate doesn’t go up in all areas in the same way.
Chicago’s “gold coast” used to be on the South Side on Prairie then it went to hell. Then it came back again in the last 20 years. Check out the mansion houses near Garfield Park. Many of them boarded up. Rich people lived there once. Bucktown and Wicker Park were the ghetto just 25 years ago. North Lawndale was solidly middle class. Those $90k houses aren’t $870k today.
It’s a crapshoot in many cases. Luck plays a large part.
“BUT………OWNING WAY CHEAPER THAN RENTING: CHICAGO.”
I’ll feed the troll: you’re wrong. It costs me much more to buy my current place than to rent it. So why would I buy it?
“It costs me much more to buy my current place than to rent it. So why would I buy it?”
I still call B.S. on that one.
“It costs me much more to buy my current place than to rent it. So why would I buy it?”
I still call B.S. on that one.”
Why do you care if I rent and spend my money on other things? WHY???? Yes- it costs me $600 LESS PER MONTH to rent versus to own the exact same apartment/condo. AND- I don’t have to worry about a damn thing. I didn’t pay for the new furnace. I didn’t pay for the new stove that was just put in. I didn’t pay to have the basement fixed when it flooded. I don’t have to pay to tuckpoint. I don’t have to pay for the gardener. I don’t pay for any of it.
Yay! I save a ton of money and time by renting. Why is this so hard to believe? And- better yet- I don’t have to put a big downpayment down. Even better!
Actually, I don’t give a flying fig what you do with your money. I just feel bad for lifelong renters who are financially illiterate. They’ve read too many “permabear” gloom and doom forums and blogs, and have ignored the most obvious basics b/c they are bad at math. I wish these renters would just take the time to learn some basic finance. Can you imagine paying MORE to live somewhere your entire life, and walk away with nothing…compared to paying LESS your whole life, and then getting paid $800,000 when you decide to leave? It’s sad.
And for the last time, Your anecdote about a couple losing money after only 3 years is not what I’m talking about. These lazy renters can’t see past a few recent years. I guess poor people have short term thinking. I wish they would learn to plan their lives and their futures. It’s soooooo easy! I am talking about owning something for 30 years vs. renting the same thing for 30 years. Who would pay $900,000 for something that sold for 1/3 of that price just a few years before? An idiot, that’s who. A handful of morons who nailed the top in 2008 do not negate the general rule.
Are renters really so stupid as to assume they are immune to maintenance costs, just b/c they are not owners? Who do you think pays for this shit? The magic fairy? Landlords pay for this from your rent, you dummy! I wish renters would learn about money basics. It’s so easy. I feel so bad for them. Overpaying their whole sad lives while others retire with a jackpot. Some more than one jackpot!
How do ypu explain all the foreclosures amy? Dum dum. Pay too much for a house, fqll on hard time and owning does not ewual the cost of renting. But you to dum dum ti realize this. Hahahahahha