Which market will crash first? housing market or the comic market?

[The Black Hand ®]

Renting, on the other hand is like flushing your money down the toilet if it goes on for year after year

Not necessarily. It's a simple analysis: take the place you want to live in and do a simple calculation on mortgage payment (based on 30-year fixed, 20% down) if you bought the place vs. rent you'd have to pay to live there. Whichever one is lower is the way to go. I haven't bought a place here in Hong Kong because the monthly mortgage payment would be significantly higher than my monthly rental payment. It's a no-brainer.

 

Everyone assumes that by buying they're not flushing their money away because the money's going into the house, but that's based on the premise that prices go up. If prices go down they're paying into a declining asset, and run into that wonderful phenomenon of negative equity. Plus, the way most mortgages are structured most of what you're paying for the first 20 years of the mortgage is interest rather than principal.

 

There are exceptions, I guess. In my case it's worked out rather well. We paid it off in 24 years and it's valued at 15 times what we paid.

[tth2]

Glad I bought at the height of the bubble. Story of my life.

You should have been reading the Housing Bubble thread in the WC.

[tth2]

Renting, on the other hand is like flushing your money down the toilet if it goes on for year after year

Not necessarily. It's a simple analysis: take the place you want to live in and do a simple calculation on mortgage payment (based on 30-year fixed, 20% down) if you bought the place vs. rent you'd have to pay to live there. Whichever one is lower is the way to go. I haven't bought a place here in Hong Kong because the monthly mortgage payment would be significantly higher than my monthly rental payment. It's a no-brainer.

 

Everyone assumes that by buying they're not flushing their money away because the money's going into the house, but that's based on the premise that prices go up. If prices go down they're paying into a declining asset, and run into that wonderful phenomenon of negative equity. Plus, the way most mortgages are structured most of what you're paying for the first 20 years of the mortgage is interest rather than principal.

 

There are exceptions, I guess. In my case it's worked out rather well. We paid it off in 24 years and it's valued ar 15 times what we paid.

Sure, I'm not saying real estate is never a good investment. It's often a great investment, and despite the fact that I've not owned my own residence during the past 11 years, I've owned several rental properties during that time. I'm just saying that owning is not automatically better than renting, but most people don't do the calculations to figure out which one is better and just assume owning is better.

[kc120us]

Renting, on the other hand is like flushing your money down the toilet if it goes on for year after year

Not necessarily. It's a simple analysis: take the place you want to live in and do a simple calculation on mortgage payment (based on 30-year fixed, 20% down) if you bought the place vs. rent you'd have to pay to live there. Whichever one is lower is the way to go. I haven't bought a place here in Hong Kong because the monthly mortgage payment would be significantly higher than my monthly rental payment. It's a no-brainer.

 

Everyone assumes that by buying they're not flushing their money away because the money's going into the house, but that's based on the premise that prices go up. If prices go down they're paying into a declining asset, and run into that wonderful phenomenon of negative equity. Plus, the way most mortgages are structured most of what you're paying for the first 20 years of the mortgage is interest rather than principal.

 

Tim,

What about time frame? If a person is living at a place for a short period (say 5 years) and then moves on and does so repeatedly, then I would agree with you that renting is the way to go. But, if that person plans on setting roots and staying long term (15-20+ years) then IMO it would better to buy. Eventually, the mortgage will be paid off and the owner will only have tax and insurance payments to worry about while rent, which will also be going up during the same time period, will never end. Plus, if, after the mortgage is paid off, the owner sells their house they walk away with money. With a rented place, that is not the case.

 

Now there are risks to ownerships of course. A town could die off (ie Flint,MI ) and become undesirable. Taxes do go up. But, if a smart home buyer has done his homework, those risks can be reduced.

 

[JiveTurkeyMoFo]

Renting, on the other hand is like flushing your money down the toilet if it goes on for year after year

Not necessarily. It's a simple analysis: take the place you want to live in and do a simple calculation on mortgage payment (based on 30-year fixed, 20% down) if you bought the place vs. rent you'd have to pay to live there. Whichever one is lower is the way to go. I haven't bought a place here in Hong Kong because the monthly mortgage payment would be significantly higher than my monthly rental payment. It's a no-brainer.

 

Everyone assumes that by buying they're not flushing their money away because the money's going into the house, but that's based on the premise that prices go up. If prices go down they're paying into a declining asset, and run into that wonderful phenomenon of negative equity. Plus, the way most mortgages are structured most of what you're paying for the first 20 years of the mortgage is interest rather than principal.

 

Tim,

What about time frame? If a person is living at a place for a short period (say 5 years) and then moves on and does so repeatedly, then I would agree with you that renting is the way to go. But, if that person plans on setting roots and staying long term (15-20+ years) then IMO it would better to buy. Eventually, the mortgage will be paid off and the owner will only have tax and insurance payments to worry about while rent, which will also be going up during the same time period, will never end. Plus, if, after the mortgage is paid off, the owner sells their house they walk away with money. With a rented place, that is not the case.

 

Now there are risks to ownerships of course. A town could die off (ie Flint,MI ) and become undesirable. Taxes do go up. But, if a smart home buyer has done his homework, those risks can be reduced.

 

Long term, buying is the way to go. But short to intermediate term (1-3 years), renting may be the better alternative before buying, especially when you factor in the cost of Insurance (which is a big additional expense in Florida) and Property taxes (which are going to be higher if the sale price of your home was more).

 

There are two ways to look at it, the short term benefits vs. the long term benefits:

 

Right now, I pay $850 in rent for a house that would have cost me about $1,500/month (with taxes and insurance) to own if I bought it last year. That's an obvious no-brainer. (Calculations are based on a $175k mortgage financed at 100% @ 6.5%....had to do it that way otherwise I would need to add in a ROI calculation for the downpayment money that I would get to otherwise invest while renting).

 

If I bought the same house right now in the current market, my monthly nut would be around $1075. Better, but I'm still holding out for more. (The calculation is based on a $125k selling price financed at 100% @ 6.5%, again just didn't want to include a downpayment/ROI calcualtion).

 

Over the long term though (30 years), the difference between buying the house right now and last year adds up to nearly $150,000 based just on the $50,000 difference in selling price, the extra interest you get to pay, and the higher insurance and taxes the more expensive house would cost.

 

So, in essence, the $10,000 I'm spending this year in rent would net me a savings of $150,000 because I didn't buy last year. $10,000 may be out the window, but better then paying out $150,000 more for the same house.

 

And since the market is heading lower every month, I have a feeling I won't be spending even that much for a real nice house. So the savings will be even more in the long run.

 

 

 

 

 

 

 

[whetteon]

I say the housing market will crash before comics.

 

 

Did I win?

[brasseye]

I say the housing market will crash before comics.

 

 

Did I win?

 

 

Lets hope so (thumbs u

 

 

...from the apartment renting SA HG collector

[kc120us]

Renting, on the other hand is like flushing your money down the toilet if it goes on for year after year

Not necessarily. It's a simple analysis: take the place you want to live in and do a simple calculation on mortgage payment (based on 30-year fixed, 20% down) if you bought the place vs. rent you'd have to pay to live there. Whichever one is lower is the way to go. I haven't bought a place here in Hong Kong because the monthly mortgage payment would be significantly higher than my monthly rental payment. It's a no-brainer.

 

Everyone assumes that by buying they're not flushing their money away because the money's going into the house, but that's based on the premise that prices go up. If prices go down they're paying into a declining asset, and run into that wonderful phenomenon of negative equity. Plus, the way most mortgages are structured most of what you're paying for the first 20 years of the mortgage is interest rather than principal.

 

Tim,

What about time frame? If a person is living at a place for a short period (say 5 years) and then moves on and does so repeatedly, then I would agree with you that renting is the way to go. But, if that person plans on setting roots and staying long term (15-20+ years) then IMO it would better to buy. Eventually, the mortgage will be paid off and the owner will only have tax and insurance payments to worry about while rent, which will also be going up during the same time period, will never end. Plus, if, after the mortgage is paid off, the owner sells their house they walk away with money. With a rented place, that is not the case.

 

Now there are risks to ownerships of course. A town could die off (ie Flint,MI ) and become undesirable. Taxes do go up. But, if a smart home buyer has done his homework, those risks can be reduced.

 

Long term, buying is the way to go. But short to intermediate term (1-3 years), renting may be the better alternative before buying, especially when you factor in the cost of Insurance (which is a big additional expense in Florida) and Property taxes (which are going to be higher if the sale price of your home was more).

 

There are two ways to look at it, the short term benefits vs. the long term benefits:

 

Right now, I pay $850 in rent for a house that would have cost me about $1,500/month (with taxes and insurance) to own if I bought it last year. That's an obvious no-brainer. (Calculations are based on a $175k mortgage financed at 100% @ 6.5%....had to do it that way otherwise I would need to add in a ROI calculation for the downpayment money that I would get to otherwise invest while renting).

 

If I bought the same house right now in the current market, my monthly nut would be around $1075. Better, but I'm still holding out for more. (The calculation is based on a $125k selling price financed at 100% @ 6.5%, again just didn't want to include a downpayment/ROI calcualtion).

 

Over the long term though (30 years), the difference between buying the house right now and last year adds up to nearly $150,000 based just on the $50,000 difference in selling price, the extra interest you get to pay, and the higher insurance and taxes the more expensive house would cost.

 

So, in essence, the $10,000 I'm spending this year in rent would net me a savings of $150,000 because I didn't buy last year. $10,000 may be out the window, but better then paying out $150,000 more for the same house.

 

And since the market is heading lower every month, I have a feeling I won't be spending even that much for a real nice house. So the savings will be even more in the long run.

 

 

 

 

 

 

 

Very well said. And I agree with you based on your situation in FL and the current market. Those are factors any "smart" homebuyer or potential homebuyer must consider. Timing is everything. In the case you presented, If I was a current renter but planning to buy, I would hold off and continue to put any money I could into savings building a larger downpayment until the market showed signs of recovery.

[the blob]

Keep in mind, up until the Boom took hold here in 2003-2004, the average price for 3/2/2s was between $80k for a basic unit and $110 for a nice 2,000 sq ft model with a pool. Also, the average median income for my county is in the low 30s, which makes an asking price of $185k completely unsustainable for a single income/single parent family. Lastly, Insurance on a 3/2/2 is generally around $1,500-$2,000 a year, plus the Property taxes are about $2,200-$2,700 for a property in the mid $150s. Since there is no State Income tax, they get you on your Property tax.

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Sadly, I used to spend that much a month (enough to pay for a place like that) on restaurants/entertainment in my dating my wife/pre-government service days. I wish I had banked more, but then again, my mortgage payment back then on my apartment was a whopping $450 a month, so I had money to spare.

 

Now if my heating bill is too high it's a swift kick in the teeth. I need to get a real job!

 

You're talking about $80K for a house. People spend $80K renovating a kitchen. It's a whole different world down there! But I understand the median income in the $30Ks point. I just never would think of someone at that level even trying to buy a home unless it's like a $25K foreclosure. If you have a single income home, it is a brute at that salary even at those prices. I tend to think you don't buy a house unless you have two incomes (or one big one!), because a job loss would be an unmitigated disaster. It would be a brute, but my salary or my wife's would pay our mortgage/utilities/insurance if either of us got canned (with some ebay selling on the side so that we could eat more than spaghetti every night).

[the blob]

Well, the deducatability of mortgage interest and RE taxes should not be left out of the equation.

 

And while lost ROI is relevant to your down payment, all in all, averaged out over the long term, 2-5% price gains (even if it just follows inflation) on the entire value of the home, including the 80% you borrowed, are probably not terribly unrealistic. Granted, if you bought at the height of the market it might take a long time before you can average that out.

 

For me it was pretty simple. We owned a 1 bedroom apartment. With a toddler that's undoable for long term. I sold it. Bought a big house (which cost me the same as a 2B apartment would have cost). I transferred equity from one overvalued asset to another. My mortgage is larger and my savings went into improvements, true. I seriously considered banking that equity and earning some conservative return while the market "cooled off", but renting a suitable place would have cost us $4000 a month, more than my current mortgage/taxes/insurance are (yes, true, I am losing interest on about $450K in equity I sunk into this place). I'm hoping the $60K in cushion between the PP and the appraisal at the time gives me some cushion, plus the fact that prices seem to have gone up since we went to contract a year ago. Not to mention, I locked in at a nice 6% rate which might not be around once the market has cooled off. Oh well, what's done is done, can't cry about it now. I can cry about not buying HG DC SA and BA when it was worthless!

[The Black Hand ®]

Many good comments and explanations here but I'm still sad that it has become so difficult for young couples with and average income to get into a home in many parts of the country, let alone here in Northern California, where the climate is so mild and the living is easy. The price of homes here is ridiculous, but it is relatively inexpensive to heat your home. Our utility bill, average out over a year would be around $85.00 a month. Our water quality is the best in the state, we can drink it right out of the faucet and it taste great.The ocean breeze keeps the air clean and fresh. Proposition 13 keeps our property taxes at a cheap rate for a four bedroom victorian farn house on two acres of land. The school my grand children attend was declared the best in the state.

But....had it not been purchased when it was, at the price it was purchased at, we never would have been able to get into it. It was sheer luck and timing. If we had a comparable adjusted income today, we'd be renting.

[Mr. Zipper]

Many good comments and explanations here but I'm still sad that it has become so difficult for young couples with and average income to get into a home in many parts of the country...

 

... but....had it not been purchased when it was, at the price it was purchased at, we never would have been able to get into it. It was sheer luck and timing. If we had a comparable adjusted income today, we'd be renting.

 

Sounds like you are living in a great place.

 

We love where we live... nice semi-rural neighborhood with big lots and great neighbors. The best schools around. We did not want to move into a cookie cutter McMansion development... we wanted an established neighborhood with some character. At 40 years, our home is the new one in the neighborhood. Most of our neighbors have well-maintained 100+ year old Sears homes.

 

I suppose if we stay long enough, it will seem like a bargain someday.

[FlyingDonut]

I bought my house in 1999. It has quadrupled in "appraised" value, and I could probably sell it for three to 3.5x what I paid for it. Of course, if I did sell, I'd have to move to West Virginia, because there's no way I could get the quality of life we have now for that price again.

[The Black Hand ®]

I bought my house in 1999. It has quadrupled in "appraised" value, and I could probably sell it for three to 3.5x what I paid for it. Of course, if I did sell, I'd have to move to West Virginia, because there's no way I could get the quality of life we have now for that price again.

 

It sounds like you got into your home right before this latest bubble started rising at the accelerated rate that it rose.

[kc120us]

I bought my house in 1999. It has quadrupled in "appraised" value, and I could probably sell it for three to 3.5x what I paid for it. Of course, if I did sell, I'd have to move to West Virginia, because there's no way I could get the quality of life we have now for that price again.

 

It sounds like you got into your home right before this latest bubble started rising at the accelerated rate that it rose.

 

I was in a similar sitaution but I sold my place. Bought a townhouse in 1999 on a 15 year mortgage, sold it last year for 2.5 times what I paid for it and it sold in less than a week. It really is timing. Some of the similar units that were for sale when I sold mine are still for sale now.

[nik]

Bought my first home in 1989, sold it in 1999 for 2 1/2 more then I paid for it. Bought my second home in late 2000 which I sold in the summer of 2006 for 60% more then what I paid for it. Both homes sold in less then 48 hours.

 

My third home will be my final resting place as I got it for a sweet deal. Its all about timing and what situation the seller is in. For me the seller of my current home moved to the Cayman Islands and was footing 2 mortgages. He actually took a $30k loss when I bid on his home.

[That Ron Dude]

Comics will crash.

 

In Toronto housing prices have become obscene but there are real reasons for it, the biggest one being 100,000 immigrants coming to town every year. They have to live somewhere. Interests rates are low giving people a chance on paying back borrowed money. Either of those things can change and given enough time will change. However there is little sign of a change now.

 

Comics on the other hand are catering to less and less people every year. As the older male collectors kick the bucket, there will be fewer people to replace them. Our surviving wives will sell our to the local comic store (if there are any left) to pay for the funerals. Ebay will be flooded with all kinds of copies of Tales to Astonish and The Atom, and nobody will want them or even care.

 

Furthermore, while my house is rapidly degenerating the land is still worth something. Soon, all that will remain of the old comics is the staples.

[rjpb]

Well, the deducatability of mortgage interest and RE taxes should not be left out of the equation.

 

True, but this savings is often overstated by real estate professionals. Any tax deduction gains from filing a Sched. A have to be offset by the standard deduction available (roughly 10K for a couple filing jointly) - A two earner household earning the median (67K) with two kids is only paying about $5700 in fed income tax without the benefit of itemized deductions. So the old rule of of figuring that 30-40% of your mortgage and RE taxes come back to you in the form of a tax deduction has to weighed against this. And we haven't even considered maintenance.

 

In many markets one can rent a property for 50-75% of what a mortgage would run (borrowing 80%). So if the market is stagnating ( a loss in inflation adjusted dollars), let alone dropping, one is not only paying more to buy even with the added deductions, but is not seeing an equity gain either.

 

Most of the time , yes, buying makes sense, even with marginal appreciation, but in a market where even a 10% "correction" can mean a 50% loss of equity (putting 20% down today), now may not be the best time. Though one does not always need to wait for the "bottom" to find the best deal, so if you must buy now - look for the desperate seller.

[the blob]

Any tax deduction gains from filing a Sched. A have to be offset by the standard deduction available (roughly 10K for a couple filing jointly)

 

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True enough, but I live in NYC, so I'm already deducting the double wammy of state and city income taxes that combine to over 10% of our income, more or less, so I wouldn't be taking the standard deduction anyway. Obviously every tax situation is different. And the mortgage gets a little less deductable above some income point (I think like $115K) and the A.M.T. also impacts things, so yeah, I never really think of it as a genuine 35% deduction. It is if you're making $500K maybe and aren't hitting up against the A.M.T.

 

Yes, true, if you can time the market and think there's a 10% drop and everything else will be constant (e.g., prices might be down 10%, but will you be better off if interest rates are at 10%?).

 

One problem here in NYC is rents have been going up to offset the attractiveness of renting vs. buying. A friend of mine had his rent jacked up to $5600 a month from like $3200 when the landlord decided he was charging too little. He wound up going to a somewhat less nice area and is paying $4000+. 2 years ago I was more inclined to sell and bank the money and rent when it seemed like there were a lot of decent $2500 rentals, but those are gone and $4000 is the norm.* Granted, in a Florida type situation where "for sale" signs are flooding the market and people's mortgages are adjusting upward to absurd levels, I don't think the rental market is going to help prop up prices. If anything, cheap rents will drag them down further as people make the analysis you're describing.

 

While national trends certainly have an impact, there are a lot of local issues at play too. But mind you, I'm not blind to history. I was here in 1991 when things were pretty bad (though not a bad time to rent or buy --- if you had money and IF you could get financing).

[tth2]

Well, the deducatability of mortgage interest and RE taxes should not be left out of the equation.

 

True, but this savings is often overstated by real estate professionals. Any tax deduction gains from filing a Sched. A have to be offset by the standard deduction available (roughly 10K for a couple filing jointly) - A two earner household earning the median (67K) with two kids is only paying about $5700 in fed income tax without the benefit of itemized deductions. So the old rule of of figuring that 30-40% of your mortgage and RE taxes come back to you in the form of a tax deduction has to weighed against this. And we haven't even considered maintenance.

 

In many markets one can rent a property for 50-75% of what a mortgage would run (borrowing 80%). So if the market is stagnating ( a loss in inflation adjusted dollars), let alone dropping, one is not only paying more to buy even with the added deductions, but is not seeing an equity gain either.

 

Most of the time , yes, buying makes sense, even with marginal appreciation, but in a market where even a 10% "correction" can mean a 50% loss of equity (putting 20% down today), now may not be the best time. Though one does not always need to wait for the "bottom" to find the best deal, so if you must buy now - look for the desperate seller.

(thumbs u Very well said!