Ideal ski towns for the future factoring in all issues?

[Domeskier]

Because over 60 percent of real estate in the entire country, and notably for the vast majority of people that really need to generate the most wealth possible (aka not the trust finders), has a mortgage. Furthermore, everyone pays taxes, insurance and general maintenance. Whether you rent or own you are paying those costs.

Obviously there is nuance to this, and of course there are outliers like the screaming rent deal from your uncle or whatever, but let’s just agree that isn’t the norm.

Yes, agreed. The thing that's bugging me is the asymmetry in the costs. The real-estate investor has direct costs that the market-investor does not. The market-investor has opportunity costs that the real-estate investor does not. I think the better way to characterize the difference is that homeownership allows the leveraged real-estate investor to invest additional assets in the home. The market-investor, on the other hand, cannot invest additional assets in the market because he has rent to pay. So the superior return of the leveraged real-estate investor is attributable in large part to these additional investments, rather than the superior performance of the real-estate market vis-a-vis the stock market.

 

[deadheadskier]

My thoughts on improving the housing affordability situation.

Conversion of unused commercial real estate to residential. Though my understanding is sometimes converting these buildings is more pricey than starting from scratch.

Require a significant tax on foreign investors to limit that pool of buyers and have even greater discouraging financial penalties for speculation activities by foreign investors

Tax incentives for companies to build staff housing

Tax incentives for developers to build "starter homes." Seems like these were built in much greater volumes last century.

Zoning changes to encourage higher density housing, especially near public transportation hubs.

Simplify and expedite probate system to encourage faster transfers of family properties. I wonder how many homes are vacant now just waiting to go through this process.

Significantly increase investment in public affordable housing with priority given to local residents so they can remain in their communities. Many Western European countries do this at a higher level than the US. Perhaps the financial requirements of foreign investors can be used to help fund this development.

 

[deadheadskier]

I'm confused by #2. I looked at the prices of rentals in NJ recently and was shocked at how high they were. For similar monthly mortgage payments, I can buy a condo that in many cases would be superior to the rentals in that price range. And at the end...I own the condo whereas with rent I pay that money and own nothing.

Obviously it differs by region, but I could rent my home for 40% more than my mortgage + property tax + insurance and HOA fees.

 

[cdskier]

Obviously it differs by region, but I could rent my home for 40% more than my mortgage + property tax + insurance and HOA fees.

Yea...which is why I questioned BG's comment that in 99% of metro areas it is cheaper to rent than buy.

 

[Domeskier]

Yea...which is why I questioned BG's comment that in 99% of metro areas it is cheaper to rent than buy.

The primary benefit of renting is you don't need a down payment. So even if the monthly rental payments are greater than the monthly costs of home ownership, renting is still likely to be cheaper than buying in terms of total cost (especially with today's inflated housing prices). If you think can get a better return on the money you save by investing it in the stock market, renting makes sense. But as AR notes, you need to factor in the benefits of leverage and all the tax incentives for home ownership when making that determination.

 

[2Planker]

OK, Fidelity blows then. I'm firing my fund manager. Will you take over for me? No in all seriousness. You must have done well.

There has been one major correction over the last 20 years and another smaller one in the last 2 years. Those have have knocked down the percenages a bit. My house tripled in value in MA and my condo in VT doubled in value. I can't say my 401 K did.

Yup Inventory is low in the MWV and people are offering insane $$$.
We turned down 1M for a place that we paid 218K just 10y ago.

Our friend, the relator has a waiting list of CA$H buyers who want in before the snow flies.

 

[1dog]

Obviously it differs by region, but I could rent my home for 40% more than my mortgage + property tax + insurance and HOA fees.

You can/could, but if you do that, you trip a number of incentives that disappear - like $500K per couple tax free margin on sale of owner-occupied house ( 2 + years)

If you purchased for $300K sold for $600K thats tax free $300K. Not if its a rental property tho.

Too many regs and stipulations to make an easy/straightforward comparison.

Both federal and ( in MA anyway) state.

In the early 80's Carter-appointed Volker raised rates so high it broke the two smaller recessions and with combined Reagan tax cuts moved most all sectors higher.

It wasn't popular at the time - very few pols or unelected purveyors of decisions have enough courage to make short term unpopular choices like that.


So far, Fed Chief is starting to make similar moves - although nowhere near as high as Volker. Remember when your parents did something you hated and then later on realized it was for your own long term good? It;s rare in American politics or family these days . . . . .

 

[2Planker]

You can/could, but if you do that, you trip a number of incentives that disappear - like $500K per couple tax free margin on sale of owner-occupied house ( 2 + years)

If you purchased for $300K sold for $600K thats tax free $300K. Not if its a rental property tho.

OR a vacation home....

 

[AdironRider]

You only have to prove 2 years of the last 5. So you could conceivably rent it out for three years then sell.

 

[cdskier]

The primary benefit of renting is you don't need a down payment. So even if the monthly rental payments are greater than the monthly costs of home ownership, renting is still likely to be cheaper than buying in terms of total cost (especially with today's inflated housing prices). If you think can get a better return on the money you save by investing it in the stock market, renting makes sense. But as AR notes, you need to factor in the benefits of leverage and all the tax incentives for home ownership when making that determination.

However my logic was always that you end up with equity buying vs renting. That down payment goes directly to the cost of the house. And eventually you own it and have an asset. I've always felt renting is sort of like flushing money down the toilet. You spend money and end up with nothing to show for it. And the longer you rent, the more the balance shifts because renting involves payments forever while with buying the mortgage payments do end at some point. Similar to why I've always preferred buying vs leasing a car.

Although I never really considered the idea of instead investing your "down payment" in the stock market. Then again, maybe I'm just not trusting enough of the stock market which is why I didn't think of that option.

 

[1dog]

However my logic was always that you end up with equity buying vs renting. That down payment goes directly to the cost of the house. And eventually you own it and have an asset. I've always felt renting is sort of like flushing money down the toilet. You spend money and end up with nothing to show for it. And the longer you rent, the more the balance shifts because renting involves payments forever while with buying the mortgage payments do end at some point. Similar to why I've always preferred buying vs leasing a car.

Although I never really considered the idea of instead investing your "down payment" in the stock market. Then again, maybe I'm just not trusting enough of the stock market which is why I didn't think of that option.

Agree with that logic. A few years ago a Stanford group did a study after the housing crash - stated that 67% of people only should own houses, rest are not considered good candidates for ownership for various reasons - can't maintain, or cant or don't want to bother, are not physically or socially able.

Re-watched The Big Short a while ago - great flick, and even better but less famed was 'Margin Call.'

In most cases, it is human/business reaction to government 'do-gooding'. Sure Countrywide and others were selling no doc, no income verification loans and bundling them w other mortgages, but they were forced to by government ( Freddie/Fannie)regs to get to more people to be homeowners - hence the Stanford study.

 

[Domeskier]

However my logic was always that you end up with equity buying vs renting. That down payment goes directly to the cost of the house. And eventually you own it and have an asset. I've always felt renting is sort of like flushing money down the toilet. You spend money and end up with nothing to show for it. And the longer you rent, the more the balance shifts because renting involves payments forever while with buying the mortgage payments do end at some point. Similar to why I've always preferred buying vs leasing a car.

Although I never really considered the idea of instead investing your "down payment" in the stock market. Then again, maybe I'm just not trusting enough of the stock market which is why I didn't think of that option.

Yeah, I'd rather be a homeowner than a renter with an index fund, too.

 

[ss20]

I see a setup for a short, but sharp recession and real estate correction. Americans ran out of savings and have put everything on credit. Credit card debt is through the roof. Delinquencies are slowly on the rise. Any kind of major purchase that's subject to interest rates (a new/used car) is also going to be extremely costly just in financing alone, forget purchase price. The one thing people DO have is the massive inflated value of their homes. And homes are still selling fast. If you have $50k in credit card debt at 20% interest.... you could sell your home in less than 30 days for 95%+ of the asking price, pay off your debt, and still get out of the home with your equity than you entered with. Rent prices are flatlining and the number of options today is infinitely greater than just 5 years ago. Renting a single family home is certainly reasonable now.

While we're on the topic... EVERYONE needs to get a high yield online savings account with interest rates so high. They're paying out 4.5-5% apy right now. I've had one for years and years now and I'm shocked more people still don't know about them.

 

[BenedictGomez]

Renting is a losing deal long term.

We'll see if the hoards who bought circa mid-2021 to mid-2022 feel that way 5 years from now.

As the warning goes, Past performance is not indicative of future results.

 

[AdironRider]

Sure bud, enjoy renting and your index fund.

 

[cdskier]

I see a setup for a short, but sharp recession and real estate correction. Americans ran out of savings and have put everything on credit. Credit card debt is through the roof. Delinquencies are slowly on the rise. Any kind of major purchase that's subject to interest rates (a new/used car) is also going to be extremely costly just in financing alone, forget purchase price. The one thing people DO have is the massive inflated value of their homes. And homes are still selling fast. If you have $50k in credit card debt at 20% interest.... you could sell your home in less than 30 days for 95%+ of the asking price, pay off your debt, and still get out of the home with your equity than you entered with. Rent prices are flatlining and the number of options today is infinitely greater than just 5 years ago. Renting a single family home is certainly reasonable now.

While we're on the topic... EVERYONE needs to get a high yield online savings account with interest rates so high. They're paying out 4.5-5% apy right now. I've had one for years and years now and I'm shocked more people still don't know about them.

I must live in a bubble. The concept of $50K credit card debt seems insane to me.

And high yield online saving accounts are definitely something everyone should have. I've had one since the ING Direct days probably 20+ years ago...

 

[BenedictGomez]

Yea...which is why I questioned BG's comment that in 99% of metro areas it is cheaper to rent than buy.

Because you're not thinking about it from a complete economic picture. There are other real costs as well, for instance, most people dont think about annualized upkeep (about 2.5% of value per year) & other ancillary costs. But the biggest thing people leave out (and it's huge) is the variance between interest payments on debt + collecting risk-free interest returns on cash.

The mortgage rate today is over >7%, while it's simultaneously simple to get >=5% risk-free on your cash position right now. So in a very real world example where a person who puts down $150,000 on a $750,000 house (20% to avoid PIPP) is not only losing out on $7,500 in risk-free return, but they're also now paying over $40,000 in interest ($40k + $7.5k = $48k). $48k / 12 months = $4,000. And that's not even factoring in other costs like insurance, HOA, and all the small stuff typically "included" in rent (garbage, water, yada, yada), which likely take you over $5,000 in real financial cost. You can rent a $750,000k house for less than $5,000k almost everywhere. To simply look at "rent I pay" versus "what would my mortgage & taxes be" is a very badly flawed view, though somewhat surprisingly it is the view a majority of people take (thankfully for real estate agents everywhere!).

TLDR: if you do a correct apples-to-apples financial analysis, it becomes rather apparent why it's cheaper to rent today than buy today in almost all of America. As I mentioned, last time I checked it was like 396/400 places, and this is highly unusual as it should normally be cheaper to buy than to rent.

 

[BenedictGomez]

I see a setup for a short, but sharp recession and real estate correction. Americans ran out of savings and have put everything on credit. Credit card debt is through the roof. Delinquencies are slowly on the rise. Any kind of major purchase that's subject to interest rates (a new/used car) is also going to be extremely costly just in financing alone, forget purchase price.

Cars - also at historically high prices right now, and likely subject to a correction. There's some good recent economic research on this as topic as well.

 

[BenedictGomez]

The one thing people DO have is the massive inflated value of their homes. And homes are still selling fast.

With the caveat that this is now solely due to low supply, partially because even people who dont love their home arent (or simply cant) trading their 3% mortgage rate for a 7% mortgage rate. And even this, "selling fast" perception is somewhat skewed, because home sales right now are at historic lows, which very few people realize. Everyone still thinks homes are selling like hot cakes, but the reality is the real estate market is largely gridlocked. New homes are selling fairly briskly, but existing homes are not. Huh? Why?

Because new home builders are dropping prices, offering extra incentives (i.e. free money in upgrades), and expensive mortgage rate buydowns to move their inventory. The buydowns are a favorite tactic, because it effectively lowers the price of the home without them actually "dropping" price. This may seem like just semantics to you or I, but it's not to them because it artificially props up their comps (I'd argue the lack of transparency shouldn't be legal). Simultaneous to new home builders doing all sorts of things to entice buyers, Mom & Pop existing home owners who just own the house they live in are simply looking at their Zestimate or Redfin Estimate and holding out for top dollar. They're being undercut by the homebuilders to such an extent it's actually CHEAPER or not too much more expensive to buy a new house than an older home in many places in America. In fact, the builders are posting strong earnings lately! This is another red flag to me - when the experts are lowering price to move product below that of John Q. Public. Historically about 10% of homes sales are new homes, but what is that figure right now? A whopping 30%.

 

[jimmywilson69]

LOL if there are a lot of people rolling $50k in credit card debt and huge mortgages, our economy is FUCKED