Long Term Return on Owning is 0%

I have a 30yr fixed at 4.75. how does that change it ?

How many people have a 7% interest rate? Dumb article to use such an inflated number.

i'm confused about the annual depreciation rate. real property trades like any other commodity - in a market format with the potential for huge positive (or negative) returns. and there's no inflation adjustment?

The costs referenced above are the costs of living in the house. It's not free. Rent or buying. Not free. Not intended to be free.

I'm surprised it is that high...

I've rented and owned. I'm not a "one must buy" apostle because often it's not the right time to buy. I also agree if someone has a low rent, is extremely disciplined and invests well, one can do very well. But for the rest of us - I do think owning tends to work out a bit better. When I've left a rental it's usually been with my security deposit. And while I've never made a windfall, I've always sold and walked away with a check. The article makes some good points but I do think the average person comes out ahead. Just my opinion.

What is the long term return on renting?

Inversely related to my return on investments. Fking juiceman. Howz the baby ?

I find this rather funny - I posted it a long time ago:

http://streeteasy.com/nyc/talk/discussion/3410-real-estate-is-a-bad-investment

There is no return on renting, JuiceMan - just like there is no return on owning: it is simply a capitalized expense. Get it through your head. In the short term there can be spikes in prices, and spikes in rent, and dips in both as well; in the long-term, both move in tandem with changes in incomes.

Never have we ever seen a housing bubble like the one we are just coming out of. Unfortunately, the Monetarists among Our Great Leaders - Uncle Ben is #1 - keep on doing the same thing: inflating the money supply to pump up prices. Happened in 2000 with dot.com, leading to housing.bust, now about to lead to commodities / stock market.bust. Just look at this chart right here:

http://futures.tradingcharts.com/chart/CN/M

And every other chart of every other tradeable asset since QEII - exactly the same pattern, starting on exactly the same day.

It will lead to the exact same result, as it did in 2008.

The 7% mortgage rate is too high. Also unless the dwelling is a trailer park, it doesn't depreciate but rather appreciates. The last few years were an annomoly coming after years of excessive appreciation. The long term trend will still be positive albeit at a lower rate, once the REO stock is sold off.

so is it true you are selling your cream cheese portfolio, rivertard?

7% should be what I earn in the bank, and for the risk of me lending it to a retard who can't save enough to pay cash when renting is cheaper is 300%bps higher, but only if the US taxpayers all bend over and spread it wide. Please shave for heavens sake.

Real estate is a bad investment. (Just ignore the billionaire families who made their wealth in real estate)

Commerical RE, you know the stuff that all these PE, Cap rates, replacement cost, CPI APPLY TO. HOMES are an expense.

Commercial RE is what puts a Barnes and Nobles on 86th and 3rd.

Fktard.

RS, stop deceiving yourself. The key to the whole article is this: "Remember that 1.3 percent is the real rate of return of the national house-price index between 1975 and 2009."

That happens to be approximately the same real rate of increase of wages. Over the long-term, it doesn't matter what the mortgage rate is, and FYI the depreciation rate is accurate as it accounts for the amount of maintenance needed to keep up a home: new roof, new pointing, etc. The value ONLY of the structure is depreciated; not the value of the land.

Get this through your head, RS, O Great One of the Vienna "School" of Economics with an MBS hedge: it is IMPOSSIBLE for rents / home prices to exceed incomes over the medium- to long-term. Just as (and the articles says so) it is impossible for commodity prices to increase over time. In fact, since the dawn of mankind, commodity prices have actually FALLEN, and fallen considerably. Otherwise, we wouldn't be as rich as we are today.

None of this economics makes any sense. How anyone can think that home prices can increase faster than wages is just beyond my comprehension: WHERE DO YOU GET THE MONEY TO PAY FOR THE GODDAMNED THINGS?

Your turn to answer, JuiceMan and Riversider: Where do you get the money to pay for the goddamned real estate if its price increases faster than wages?

Oh, the building can only make money if people are in from 10am to 10pm, not from 6pm to 8am. Makes complete sense.

(Response to the crazy dirty ape 67)

Wait, I have the answer! You do exactly what QEII has done, and flood the market with free money, right?

EXCEPT when you look at what happens to that "free money" and see that the money supply has actually NOT increased since QEII, as it has all be put into commodities and stocks, creating an impossible bubble that must crash, as the current prices have nothing to do with supply and/or demand.

The exact same thing that happened in housing: a huge bubble. Housing takes a longer time to deflate, but deflate it does.

Because you can't make money out of nothing for very long periods of time without the whole thing collapsing.

Thank you Mr. Greenspan, thank you Mr. Bernake.

And thank you, JuiceMan and Riversider, for putting your little minds together to work out that ever so difficult problem: WHERE DO YOU GET THE MONEY TO PAY FOR REAL ESTATE IF ITS PRICE INCREASES FASTER THAN WAGES?

QEII.

Is stevejhx channeling Rick Santelli, the father of the Tea Party, or Ron Paul the Fed fighter?

Neither, HBurg - they're both assh*les who know nothing about what they talk. Neither of them has any training in economics, and BTW I'm about as far from a Tea Partier as they come.

The government does have a role to play, and keeping interest rates at 0% or close thereto can be one of its tools. It doesn't necessarily cause a bubble. Increasing bank reserves doesn't necessarily cause a bubble, either. But what the Fed is currently doing has NEVER been done before, and to undertake an untested policy with such enormous amounts of money is just plain stupid.

Look at every chart since QEII, and compare them side-by-side, or overlaid, with June 2008. Tell me what you see.

steve never did grasp the equity / ownership concept. In steve's bizarro world, if you compare renting for 30 years with paying off your mortgage after 30 years the difference in "cost" is the difference in the monthly payments over the 30 years. In the mortgage scenario, he generally ignores the fact that you have an asset and that you own it.

Now is this really the guy you want to discuss real estate with?

Here is the reality:

The fact that I don't have to live around renters is return enough. Buyers self select because they are more responsible, care about their investment (even if it yields zero return), and allows for me (especially in a co-op) to ensure that noisy, dirty people who don't respect our shared property are not admitted.

That my friends, is worth a real premium.

YOu Fking racist pig. Coop owning white trash.

Does the dirty ape have to take the service elevator even when he's with his wife and kids? What are the rules for dirty apes on west 67th street?

definition of a cuntersburg; http://theoatmeal.com/comics/c_word

Hey columbia county, how are you and your cow getting along?

markznyc,
Congrats! you found the one building on this island that does not have it's municipally mandated 'owner-shit head trouble maker power obsessed unmediated tri-polar learning disabled disgruntled unloved gadfly' hell bent on making your coop virtually unlivable.

Could I get the address?

no way. we like to fly under the radar, and that keeps us nice and legal-like. ;)

you sound like just the kind of douche, markz, who tips the scale in favor of renting--if i were stuck owning next to you, it would be quite difficult/expensive to move away---as a renter, were i to end up with a douche like you next door, i would have much greater flexibility to move without much expense/difficulty

so for a discount i can easily get away from douches like you, if ever i am so unfortunate as to end up needing to

seems like a deal to me

Markz, what Wbottom really wants to know is if you'll relax the standards just a little bit to permit a sex offender.

lame, lame, lame.

work up some new material.

you love your audience.

Wow -- now I know why I haven't posted on here for 2 years. Too much anger (and free time).

Look, it's just true that transient apartment populations put more wear and tear on the building and have less concern about long term "neighborly" prospects because they have 100% flexibility to leave. being stuck has its advantages -- namely I will fight the good fight to keep a good place good.

I think that makes me pretty un-douchey, but hey, I am also not angry poster who uses profanity, so maybe that is the standard that I would be accustom to if I was renting ;)

That's an argument in favor of rent stabilization as well. I've never had neighbor issues, really, in many years of both owning and renting. Gross overgeneralization.

markz, good to have you back. Don't mind wbottom's windy verbiage - he does love getting into all these run-ins, but it's mostly a cry for help. Anyway, I get your point, but it's maybe a bit overstated. Renters do care less, but I find that only a few really are causing above and beyond the normal wear and tear. That can be enough, but it's hardly everyone.

douchebags are rarely aware of their own douchebaggery. that is part of what makes them douchebags.

Lord and Lady Douchebag
http://www.youtube.com/watch?v=H61agOWWNE0&NR=1
classic

hey jm, you've spent plenty of time over the past few years discussing re with steve, both directly, or as in today's post, indirectly.

If being a guy who has worked hard the last 20 years to build a family, stable life and a long term stake in this city makes me a douche, then I proudly accept the bag.

>That's an argument in favor of rent stabilization as well. I've never had neighbor issues, really, in many years of both owning and renting. Gross overgeneralization.

I did some searching (midtownervirgin taught me how) and I found that you had complaints about your neighbors puking in the hallways or elevators. And you had some complaints about carpeting rules.

Listen, everyone has complaints, pretending your don't stink doesn't fly here in NY. Where are you from originally?

markzny... that's cause you rode the greatest re bubble known to man. It's not the "home" you love... it's the $. Just know thyself and to cunterburg be true to thyne own stinky self. Whichever many selves you wanna be truthful to...

hey, again a comment from the dirty ape dude who isn't even allowed to use the regular elevator in his building, unless he's with his wife and on a leash.

I sure do understand "equity," JuiceMan, and so does the 30% of the country that is underwater on their mortgage loans: they have $0 equity, and owe more on their properties than the properties will ever be worth during their lifetimes. No way out of that one, is there?

Really, you should get an award for Realtor Shill of the Century.

"In the mortgage scenario, he generally ignores the fact that you have an asset and that you own it."

Most people NEVER pay off their mortgages; the average home is owned for only 7 years.

Owning a property is capitalizing an expense; I've always said that if it's cheaper to capitalize that expense than to pay it over time, then that's the way to go.

You still didn't answer the question: HOW DO HOME PRICES GO UP FASTER THAN INCOMES OVER TIME? Because if they do, where does the money come from?

And if they don't, there is absolutely zero difference between owning and renting, except owning is higher risk.

Specifically addressing the question of how home prices might increase faster than incomes - the mix of household spending has and will continue to change over time. For example, U.S. households spend a smaller portion of income on food than we did 50 years ago (even though we eat more). Some of that excess money goes into leisure, doodads and whatnot that didn't exist 50 years ago, a second car, etc. But some of it also goes to housing.

That being said, there's unlikely to be additional significant upside in housing from that change in income mix, barring new technology that makes the cost of other things cheaper. Just pointing out that it's technically incorrect to assume a 1 to 1 relationship between increase in income and increase in price of housing, since the spending mix is not a constant.

juicy--so if, at the end of your mortgage, you have an asset; what does the renter have at that point?
seems he has assets too, no? just not real estate. he has invested the money you have tied up in your down payment, as well as that which he saved each month by not buying.

and at the end of the game, if leveraged equally into a balanced portfolio of financial assets (instead of real estate), the renter will hold assets of greater value than the real estate you will be holding

pringler, you're absolutely right about the changing spending mix over time. However, every example you gave was the result of cheap and plentiful energy, consumed in much greater proportion by the US and a few other countries.

Food (fertilizer, farm equipment, transportation, climate control) is basically a petroproduct these days. Goods are manufactured using vast amounts of fossil fuels, and are increasingly made OF petroleum, and are shipped all over the world via fossil fuels. Construction, climate-control of bigger ("cheaper") housing: energy. Second car, and all other transportation: energy to make, energy to run.

Can we expect that to trend to continue over the next few decades? More likely it will reverse, sharply, before we find satisfactory replacements. The easily extracted and easily processed oil is nearly gone, and the newer discoveries all carry much higher costs to bring to market.

Sorry to sound like a goddamn hippie. But I expect lots of competition for the wallet that will adversely affect housing spending.

If people get richer, they might be willing to pay more for housing, but in any moderately competitive economy, that won't make prices go up. Instead, usually they will be able to buy MORE house, not have to pay more for the same house.

Over time, prices in capitalist markets are determined by cost of production, not incomes. This is basic Adam Smith: If prices are above the cost of production, developers can make excess profits by building or renovating, or evicting tenants and converting rentals to sales. Some will. That increases supply. More supply tends to make prices drop. If it doesn't, then the excess profit opportunity will continue to entice builders, renovators and converters to make still more supply. Eventually, increased supply catches up with demand and drives prices down to the point where developers can't make normal profits anymore.

Of course, housing takes a long time to build while buyers can change their plans quickly. So in the short run demand can increase faster than supply or vice versa, which leads prices to go above or below production costs.

Also, as some people have noticed, bubbles happen. Rising housing prices can create their own demand as people decide to buy more than they want to consume because they think someone else will buy it from them for even more. If enough people think this way, they will create demand much faster than builders can meet it, and prices will go up at an accelerating rate (until supply catches up or expectations change or buyers hit their credit limits).

And the reverse is true, too: if people decide that a bubble is popping, they may decide to buy less than they would otherwise because they expect to be able to pay less later. So demand can collapse quite quickly without regard to incomes. If there were enough w67s and inonadas around, reduced demand would press prices well below replacement cost for a while.

So prices at any given time often deviate from production costs. But in the long run, production costs rule -- if prices deviate too much from costs, supply will eventually adjust.

And production costs tend to decline with technical progress as more processes are automated. So, a priori, you would expect prices for similar quality housing to rise at LESS than inflation.

The actual evidence, mainly from Shiller, is that over long enough periods, prices on the same house rise more or less identically with inflation (and so we should expect them to trail inflation significantly in the nearer future). However, Shiller's comparisons can't fully control for quality improvements (or depreciation). Even in NYC, washer/dryers and even A/C are no longer highly unusual luxuries; most of the housing stock is in significantly better shape than a decade or two ago. Since Shiller doesn't fully adjust for quality improvements, he probably overstates the rate of real price increases for constant quality during affluent periods and bubbles, and probably understates it during bad times (when people may be deferring maintenance).

In short, the expected real return for improved real estate is negative. It wears out and gets obsolete, while the (real) cost of building drops over time.

Why are we having this discussion on a NYC real estate website? It is commonly known that real estate, most particularly in Manhattan, does not follow any economic model. Prices can only go up and up. The long term return on ownership often approaches infinity and beyond.

Snarky comments aside ...

at the end of the day, the owner OWNS his apartment.

The renter has NOTHING.

And as pointed out to you earlier, the owner has the right and privilege of paying maintenance and taxes.

and to pay for attornies, agents, flip taxes, board applications, mortgage feees, and any and all repair bills, etc.

Pringler.... How do you explain wealth concentration over the last 30 years and housing bubble.

Ooohh let me answer it. It's called mulltiple homes. The need for 2nd 3rd homes driven by a bubble that earned you to house sit. What happens when that illusion is gone? It's called a complete and utter collapse of housing. Housing is an expense. Like boat owership. Vacations.

Attorney fees are a drop in the bucket, as are board applications. And you have to pay agents either way. But yeah, Mattie hasn't really addressed the fact that ownership never means free and clear.

"Building Wealth Through Renting
By DAVID LEONHARDT

I replied:

Yes, building equity is a good thing. But the advantages of it are exaggerated.

For one thing, how do you know you’ll be building equity, as opposed to making an investment that will lose money? People who bought in Florida, Las Vegas, Phoenix and much of inland California in 2006 thought they would be building equity. I interviewed some of them. But they did not. In many cases, they lost all of their equity. There is definitely some downside risk in the New York market today.

Second, by buying a house, you’re making a decision to tie up your capital in a specific sector — real estate. It’s entirely possible that the money you spent on a down payment would have earned more money in the stock market, for instance.

Finally, buying also involves throwing thousands of dollars down a hole: in mortgage fees and interest, in property taxes, in repairs and renovations, in tens of thousands of dollars of closing costs. Renting doesn’t involve the huge up-front costs that buying does. Owning also involves some continuing costs (e.g. repairs) that renting does not.

Living somewhere is always going to involve costs, just as education, health care and food involve costs. Financially, the decision to buy is basically a decision that your investment will increase in value by an amount sufficient to make up for all the additional costs of buying. (Put it this way: you’d never buy an apartment if you were staying in a city for just a week, in an effort to build equity. You’d rent — a hotel room.)

Sometimes — often — the decision to buy works out. But it does not work out far more often than is commonly understood."

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)

Matthew will claim that EVERYONE pays down a mortgage to completion, just like his father did in Minsk in 1863, and it's only a few fools who move within 7 years of "buying" a place.

ByelorussianMattSr? Who knew? 1863 was a good time for those guys.

So 9 in 10 of working class people made most of their net worth in real estate and 29% of all people are underwater on their mortgages. So does your fraction include negative as well as positive net worth? Or is that the working class only composes a small fraction of those underwater (i.e. its a barbell type distribution)?

NYCMATT>>at the end of the day, the owner OWNS his apartment.
The renter has NOTHING.

Like everything else, it all depends on timing.

If you sold into the bubble and invested your money in the financial markets, you own quite a bit more than if you held onto your apt -- even when you factor in the rent needed to house your wealthy little self in a new abode. The stock market has doubled. RE prices have not. When you factor in the wise souls who short a falling market and go long when Bernanke is printing money, they are doing far better than 100% profit. Add in leverage for those who invest in hedge funds and the cash you OWN is considerably more than the apt.

Plus, those who sold received a generous tax free profit of $250K pp/$500 per couple which is a boon that will most likely be cut or disappear altogether. If you invested that tax free profit alone, you are doing better than owning your apt.

dealboy.... that person who's renting the $10K per month apt, is also the person who took the 10K in 1980 and invested it in a balanced portfolio.... now he can afford the rent. the guy who paid his mortgage off is stuck with paying $5K in maintenance/mortgage. his home is rundown and will not fetch the $2M, but more like $500K. if he did renovations, you have to add that to the $10K the other guy invested..... wow, economics 101 and you clearly failed it in junior high.

And, if you sold all of your silver on April 28 and then went triple short on April 29th with all of the money you made by going short equities in September 1987 and then again in February 2000 and October 2007, you'd be able to afford the rent to apartment 23. Like everything else, it ALL depends on timing.

The IRS lets real estate investors depreciate their property over time, in recognition of the fact that gravity and the elements destroy its value, until it's assumed to be zero. And the only reason it doesn't reach zero value is that additional capital is frequently injected in the form of rebuilding it, bit by bit: a new roof, a new furnace, new floors, windows, siding, etc.

But with the inexorable magical forces of homeownership, there's no IRS depreciation ... because the home actually APPRECIATES over time. Anyone can tell you that.

Nature is generous in maintaining statis, by causing unavoidable home appreciate to counterbalance the fact that homeowners have much more limited opportunities to make other, more nimble and carefully thought-out, investments over the course of a lifetime.

Land, though. That's another story. Buy land -- they're not making any more of it.

Also near Minsk, Woody Allen's great-great-great-great grandfather had a little piece of land that he hoped to build on one day.

Do all landlords have non-profit status? They sound pretty charitable.

Very interesting question Isle. We should ask a landlord. Maybe w67thstreet can tell us his motivations. He's a commercial landlord and in the past was a residential landlord.

http://youtu.be/tFCTx1PFchY

maybe someday unicef will get into the car impound business

Here we go again.....

You got peanut butter in my chocolate...

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.

We know it's not an investment.
You bought your house in 1968 for 48K. the same year you bought a snappy new car for 5.5K and took the family out 'over the top' for $78 (including tip).
You sell in 2000 for 455K and take your new found wealth and buy a snappy new car for 32K and take the family out 'over the top' for $389 (including tip).
Don't blow all you house money because your gonna need it to buy that condo in Florida. They grow oranges in Florida but orange juice is still gonna set you back $7.49/half gallon.

Dealboy, why is it so difficult for you and Matt to understand? Of course owning is better -AT THE RIGHT PRICE. NOT at current prices.

Wow. A lot of "I'm right"; no, "I'm right" in this thread. Obviously, both sides are right, but are not speaking quite the same language.

A house purchase has 2 elements. A "consumption" element and an "investment" element.

Consumption is the annual cost of inhabiting the house (i.e. the cost of the interest on the mortgage + the maintenance costs - to be compared with the rent). The investment is a leveraged, highly illiquid bet on real estate prices, with high transaction costs (i.e. the typical 20% downpayment, geared 5x, with 6% transaction costs on both the purchase and the sale).

Without substantial appreciation, the "investment" element sucks. With 6% closing costs on purchase and 6% brokerage costs on exit, you've "lost" more than half your downpayment on the day you close. So you hope rising prices + gearing will dig you out of a massive day 1 loss. Its also probably your biggest investment by far (for most, their only meaningful investment) - so you're going against all accepted principles of asset allocation. Add the illiquidity and my rational side wonders why any of us buy real estate at all.

To the Rent vs/ Buy crowd above who say the Buyer "owns" the apt - they are missing the point that the renter is investing that 20% elsewhere, and is not losing 10-12% (i.e. half the downpayment) on Day 1. They might not own their house, but they sure as hell own something else pretty large.

Compare the costs of renting with the "consumption" element of a house purchase, and you're making the right comparison.

I've not advocating one way or the other, just trying to clarify the debate. I own my apt.

how come you decided to move from

long time listener

to first time caller?

If there is such a thing as the opposite of "snarky", then that's jeremy's post- where you been?

Dealboy, the problem of your comparison of the person renting and owning in 1974 is that you don't understand how things have changed since. My parents actually rented an apartment on the Upper West Side in the year of 1974 just like your example. That Classic Six still rents under $2000, approximately 1/4 of what similar apartments rent for in that building area.

At the same time, many people did buy brownstones etc. at that time (The large buildings used to be 95% renters - coops and condos were few and far between) and are sitting on top of a goldmine if they sell.

However, many of those people need to rent out apartments in their buildings to keep up with maintenance of the property, taxes etc. because they aren't wealthy enough to pay for it on their salaries or retirement funds.

So if someone rented their apartment before 1990 and held onto that apartment, they can be doing really well because they are very possibly protected by rent stabilization.

Other renters who had the money to buy their apartment fairly cheap when their building went condo/coop still have to pay ever increasing maintenance and taxes that are very close to the rents of their neighbors who decided not to buy. They also have to pay for their own repairs etc.

So at this moment, they probably have spent a lot more money on their apartments over time than the renters, especially if you factor in their down payment. But if those owners ever decide to sell, especially at the right time, they can realize a lot of money for their investment.

And something tells me you may not be aware of how many NYC homeowners lost their ass in the late 1980s. Don't think that can never happen again. So it is all about timing just as other people said.

Right now, if you ask me, renting or purchasing in Manhattan are both bad options. You pay way too much for way too little. the only reason I stay here is that I am Manhattan born and bred New York is in my blood.

Well, the rent/own ratios made it clear at the above times when it was or was not a good time to buy. And now the buy/rent ratio is very skewed towards renting.

"Most people NEVER pay off their mortgages; the average home is owned for only 7 years."

7 years or 30 years, doesn't matter. You still ignore principal, equity at the time of sale, the tax benefit, etc etc. There is an entire 300 post thread where you argued that there was no such thing as a principal payment.

I ask again, is this the guy you want to discuss real estate with?

jeremy... its like kindergarten right??? & its always the same people. they just love to flex their little muscles behind the security of their screens. i would love to throw a giant SE shin dig ....add some alcohol to the mix & really c where things go. i have a feeling it would end up a giant orgy. w 67 at the receiving end of things...

true all that, jeremy, and there is another consumption component:
one buys/moves into a freshly renovated, new apt or house, lives there for 7 or more years.

he has consumed the renovation value imbedded in the property, at very least to the extent that the apt/house will sell with consideration of need for update; and often to extent that the apt/house needs a full gut to be rendered mint and current (as in after 10+ years raising a couple of kids--unless you a

i figure, on avg, a property in need of a gut trades, generally, with a 30% discount to a fresh daisy

put that in your rent/buy blender

helphome, interesting notion -- turning the virtual into the real -- but the posters on this entire board are notorious teatotalers.

helphome--youve barely cut your teeth--

exactly, Wbottom ... in fact, that's best exemplified on the mainland by the trend during (and even after) the last boom in which most middle-class people adamantly refused to buy anything but a brand-new, never-occupied developer-built house (forget about renovated).

In some cities, this meant such a flight (not based on race) to the new outskirts that the older rings of suburbs are dying. Quite unnecessarily.

And in some cases, suburban annexation being what it is, both the dying and the new parts are within the same town.

dealboy=dopeboy

The renter is only left with nothing only if the renter is undisciplined, and fails to save/invest the same amount that would have gone towards downpayment and mortgage principal.

Over the long term, unless you are lucky on timing, real estate merely tracks inflation. Investing in something else (like a basket of stocks), unless you are unlucky on timing, tends to beat inflation by at least a little bit.

So unless you need a "forced savings" program, you most likely end up with more, not less, after renting instead of buying.

"The renter is only left with nothing only if the renter is undisciplined, and fails to save/invest the same amount that would have gone towards downpayment and mortgage principal."

This is only true if you are talking about the sum of money left over after you pay rent. Also assumes that rent is always less than what your amortized monthly mortgage cost is, which is a bad assumption.

"The renter is only left with nothing only if the renter is undisciplined, and fails to save/invest the same amount that would have gone towards downpayment and mortgage principal. "

agreed.

If buying is the only way you have to save, I consider that a problem. For similar reasons folks get ripped off with bank holiday club accounts and such.

Try an auto withdrawal or something.

If its the ONLY way you can save, ok.... but that doesn't mean its a good way to save.

Here's something the renters never consider: do you honestly expect to be able to afford to pay market-based rents into your retirement?

Seriously?

Here's something the renters never consider: do you honestly expect to be able to afford to pay market-based rents into your retirement?

Seriously?

Yes, seriously, because they'll have a huge treasure chest and/or income streams from their lifelong diversified investment of all the money they didn't throw away on owning overpriced corroding bricks and mortar.

and if you take your money and retire elsewhere your rent in retirement may very well be quite a bit less than your maintenance payments in NYC.

this renter has spent a great deal of time considering such things.

Serious Question: WHat percentage of renters save the difference between what their rent is and what the cost of owning is? I would bet that number is very small.

98.6%

What's with the assumption that buyers don't invest elsewhere as well as pay their mortgages? Not everyone gets into mortgages that make us house poor.

I pay less in mortgage than I would to rent my place AND I invest in other diversified things like stocks, 401K, etc.

This isn't an either/or thing for buyers.

This comes right back down to renters who can't afford to buy defending their poor decisions.

that's such bs stencil. renting/buying both have specific benefits, and they are not necessarily the same depending on when one buys/rents. but to say that those who rent are all those who can't afford to buy who are defending their poor decisions is just as stupid as saying all purchasers get the largest mortgage they can possibly qualify for and subsist on a diet of rice and beans. neither is supportable.

stencil, you idiot--this is clearly not about whether you have investments other that your real estate

"I pay less in mortgage than I would to rent my place"
There are always gonna be people like that assuming they bought at some point in the late 20th century.

> My parents actually rented an apartment on the Upper West Side in the year of 1974 just like your example. That Classic Six still rents under $2000, approximately 1/4 of what similar apartments rent for in that building area

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.

Stencil: I'm not saying buyers don't necessarily save/invest outside their home. But, having invested so much in a home, they clearly have less other money available to save and invest. The same analysis would apply.

JuiceMan: "Also assumes that rent is always less than what your amortized monthly mortgage cost is, which is a bad assumption." I actually think it's a pretty good assumption that the cost of rent will be less than the cost of mortgage plus maintenance on a similar apartment. Throw in the opportunity cost occasioned by tying up a significant amount of savings in the downpayment and it won't even be close.