Rent vs. Buy Comparisons: Have the excesses been removed?

Let’s try another rent vs. buy exercise to see if “all the excesses have already been removed” as some have claimed. Rather than delve into depth on a specific randomly-selected Seattle-area neighborhood, let’s instead look at what a specific type of house might cost you in multiple Seattle-area neighborhoods to rent vs. how much it would cost to buy.

Methodology
The prices quoted below are for a 3-bed, 2-bath single-family homes with 1,750 to 2,000 square feet. For the rentals, these are based on actual houses I found currently on the rental market. For the sales, I used sale records of actual prices that people have paid in the last three months. Where possible, I have located multiple samples that match the description above and taken the average price.

To calculate the monthly payment (principal + interest only), I’ll be using a 5.15% interest rate (roughly the average over the last three months), (generously) assuming 20% down on a 30-year mortgage. Keep in mind that the true cost of buying also includes insurance, taxes, maintenance, and a host of other costs generally not paid by a renter. For a more detailed breakdown of the total costs (and tax benefits) of buying, hit up this 2007 post.

I have also indicated the price to rent ratio, which is simply the home price divided by the total rent paid in a year.

Area For Rent P + I Home Price Ratio
Ballard \$1,595 \$2,070 \$473,661 24.7
Queen Anne \$2,000 \$2,686 \$615,000 25.6
Shoreline \$1,415 \$1,609 \$368,379 21.7
Kirkland* \$1,511 \$2,040 \$466,916 25.8
Redmond \$1,450 \$1,877 \$429,625 24.7
Renton \$1,250 \$1,428 \$326,938 21.8
West Seattle \$1,650 \$2,271 \$520,000 26.3

According to a table of data from Fortune Magazine, Seattle’s price-to-rent ratio just before the local peak in prices was at 38.0, compared to a 15-year average of 23.3. In our table above, the average price-to-rent ratio for a 3-bed, 2-bath home in a handful of Seattle-area neighborhoods comes out to 24.3. Unfortunately, the two are not directly comparable since Forbes’ calculation included houses, condos, and apartments all among the rentals (which would drive the rental prices lower and the long-term average price-to-rent ratio higher), while my data was drawn only from single-family homes.

While home prices have come down some since I first researched the rent vs. buy discussion in detail back in 2007, a growing oversupply of repartmenting condos and accidental landlords is also pushing down rents recently, so the price-to-rent ratio hasn’t actually changed as much as one might expect.

Overall, price-to-rent ratios in the low-to-mid 20s still seems a bit high. Not crazy out of control bubble high, but it still looks like there is room for a bit more correction. Especially when you consider that the current prices are being artificially propped up by unnaturally low interest rates and the \$8,000 tax credit in the midst of nearly 10% unemployment and a local economic scene that has yet to show any clear signs of turning the corner.

* [Updated, see comment #71 below.]

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

1. 1
S-Crow says:

I drive by an examples of this everyday. One sample: There is nothing quite more telling than having a for rent sign at “x amount/mo.” ALONG SIDE your for sale sign listed at “x amount”. The rental price is far less than it would be for paying on the mortgage, at this point. I can’t fathom why the listing agent would allow that sign next to the for sale post in the yard.

2. 2
Ray Pepper says:

Tim, haven’t we discussed this just WAY TOO MANY TIMES! Is it for new readers?

If anyone out there thinks its cheaper to buy ITS NOT! It is blatantly obvious to your educated readers.

However, if a family member buys you the home (with all the cash they made on this BULL RUN in the capital markets) then take it. It will be cheaper!!

Where is that Eleuha guy with the Quiet Riot face mask? Did he listen to the CC today for JPM Chase?? WOW up 166% from March!!!!…..Hope he didn’t go broke shorting the markets!

3. 3
patient says:

RE: Ray Pepper @ 2 – Ray, JPM, Goldman etc is making money since the market is going up, the market is going up since the banks are making money. It’s another crazy house of cards.

4. 4
Ray Pepper says:

RE: patient @ 3

I would like to add that the market is going up because of the FED and our stimulus dollars at work and backing the banks that truly matter at this time. The regionals will continue to go away and in time new ones will emerge.

The “House of Cards” will remain intact as long as rates remain this low. The Fed has indeed softened the landing and that was their goal. I applaud the 8k and further stimulus to continue to soften this landing but it must go on for a few more years.

The next 5 years will be remembered for short sales and foreclosures as we continue to unwind this Bubble.

5. 5

Doesn’t look like you included the deduction for mortgage interest – a big kickback to homeowners at the end of the year (assuming they do bring in income, which they should if they’re getting a mortgage).

Either way, owning is almost always more expensive. No surprise. There’s a reason for that–no landlord, no raising of rents, no one selling a building out from under you, no waiting for the landlord’s handyman to fix a toilet, etc. It’s apples and oranges.

6. 6
patient says:

The Tim, any chance you could add a mid tier to the rent-buy comparison? You have some high price areas in the table as Kirkland – Redmond where the prices in the table is for the bottom of the barrel so to speak.

7. 7
patient says:

” It’s apples and oranges.”

It doesn’t matter if yoyu compare with historical averages like The Tim does. Then it’s apples and apples.

8. 8
Back to basic says:

Tim, you should include added garage and reduced auto insurance in the calculation. In some area, rent is going up rather down. The lower quote of rent is just landlord lure you into the lease and next year they will raise your rent. The extra expense of moving in case you don’t agree with landlord should be included. Many landlord don’t even return you deposite when you leave. That’s 13th month payment. Rent future remains high considering the inflation horizon. Yes, if you stay in Seattle for 3 years, don’t bother to buy. If you serious considering stay in Seattle, still consider to buy. House price should be case by case. I see people buying foreclosed 70 for the dollar. I see people renting with on street parking and move every year losing deposit and moving expense. Rent and buying are two different life styles.

9. 9
Kary L. Krismer says:

RE: S-Crow @ 1 – Even in a hot market, I’ve always told clients that listing a unit for sale and for rent simultaneously is a good way to do neither. Why would a tenant want to rent a place knowing that the owner had an interest in selling? Perhaps someone wanting to rent to own, but most renters would be turned off. Similarly, many buyers would think the seller wasn’t that serious about selling.

10. 10
Kary L. Krismer says:

RE: Seattle Homes @ 5 – The last client I did a rough mortgage interest calculation for only obtained about a \$1,000 savings in taxes. At the lower values where renting would be more likely to be an option, the tax savings isn’t that great.

11. 11
patient says:

RE: Ray Pepper @ 4

“I would like to add that the market is going up because of the FED and our stimulus dollars”

The big gains for JPM comes from “investment banking”. This is due to the rally and the rally is due to the banks increased profits. It’s a bag of hot air.

12. 12
Back to basic says:

Generally, the area with many rentals are not quite comparable to many owner occupied area. Remember rental property need to make money out of you. In the long run, renter will still want to buy if they could. If you have a family and kids, you don’t want to live a confined space and don’t know who lives in your next door. No yard and no storage. Hey, space cost additional money too. If you are single or married with no kids, apartment may be good enough. The extra money you saved has risk too. The bank will pay you near zero interest, the wall street is full of scam and thief. I would rather put money in my house than let’s others handle it. It’s your life style and money, every situation is different. 2009 is different than 2007. 2010 looks even brighter to me.

13. 13
AMS says:

Doesn’t look like you included the deduction for mortgage interest – a big kickback to homeowners at the end of the year (assuming they do bring in income, which they should if they’re getting a mortgage).

How much does one pay for that “big kickback.” Once again let’s look at the net cost of capital, rather than playing these silly tax games.

Either way, owning is almost always more expensive. No surprise. There’s a reason for that–no landlord, no raising of rents, no one selling a building out from under you, no waiting for the landlord’s handyman to fix a toilet, etc. It’s apples and oranges.

Fine: No landlord.

Not so fine: “no raising of rents”

Comment: We must remember that taxes must be paid. Insurance cost go up.

This is just absurd: “no waiting for the landlord’s handyman to fix a toilet, etc.”

Fixed: “instead waiting for the landlord’s handyman to fix a toilet for no extra cost, you must hire your own handyman to fix the toilet, furnace, roof, etc.”

14. 14
wreckingbull says:

RE: Seattle Homes @ 5 – When I bought in 1998, the difference between owning/renting was very small. The spread has not always been what it it is today. Tim also did not include property taxes. Prior posts here have shown that the ‘kickback’ (good word by the way – I like the connotations) is not always as big as touted when compared to the standard deduction.

15. 15
Shaq says:

Doesn’t look like you included the deduction for mortgage interest – a big kickback to homeowners at the end of the year (assuming they do bring in income, which they should if they’re getting a mortgage).

Either way, owning is almost always more expensive. No surprise. There’s a reason for that–no landlord, no raising of rents, no one selling a building out from under you, no waiting for the landlord’s handyman to fix a toilet, etc. It’s apples and oranges.

Oh please. The mortgage deduction is about equal to what the property taxes would be – and that’s only if the mortgage interest is enough in excess of the standard deduction for them to fully take advantage of it.

16. 16
Back to basic says:

Many of these rentals are built before 1975 with lead paint which may cause brain damage to your kids. If the house is old, there are many things need to be remodeled or else may cause health problems. You can’t do these if you don’t own it. Even the probility is low, but it is still there. Since the owner will not live there, their purpose is just make profit out of you. You know the potential health problem will be many times you would save. So if you rent, you need a full disclosure of these potential from the owner. Neighbor public safety and school quality are also need to be considered. When rent is lower than own, you need always ask why. Many times, the answer is not just money, it is other.

17. 17
Ray Pepper says:

RE: patient @ 11

and what do you think fueled the investment banking???…3 letters…

F E D ……

18. 18
Fran Tarkenton says:

That’s the best reason to buy yet: buy or your kids will suffer brain damage. Someone contact Lawrence Yun.

As long as we’re offering suggestions on the methodology, comparing asking rent prices against actual sold home prices doesn’t line up great. However, I’m not sure how you’d go about getting actual rent prices.

19. 19

If you go back 40 years or so, and continue it to today, there is a historical home price to rent ratio, which is something like 12x the annual rent. At the height of the bubble, I think we were up to about 28?, and now it’s in the low to mid twenties. I don’t know if we’re going to fall back to the historical averages, but it sure seems as though there’s more room for home prices to fall.
As far as Back to Basic’s comment, it’s obvious he didn’t read the original post, which was comparing three bedroom two bath single family homes for sale to three bedroom two bath single family homes for rent.
He suggests that where you put the money you’ve saved by renting is risky, that banks are paying almost no interest and that the stock market is a gamble…..Do we know whether this guy is a real estate agent or not? Who wants to bet me on this. Double or nothing, Ray?
The fact is:
I’d rather receive 1/2 of 1% interest in an insured savings account than buy a home for investment purposes that’s been declining in value by about 1% per month.
Back to Basic kind of suggests that if you’re a renter, you just don’t know who your neighbors will be, you could be living next door to a pervert, but if I recall correctly, the Green River Killer was a homeowner.
There are actually lots of good reasons to buy a house, but it’s difficult for me to fathom that this tedious realtor pablum is convincing anybody.

20. 20

You should put a few more columns, such as
Interest Only, Income needed(P&I + \$630/ 40% DTI), Interest & tax writeoff, Tax bracket w/tax amount, Taxes paid by home owner (income – writeoffs), Tax savings yearly/monthly
\$1626 \$6750 \$24,248 25% \$20,250 \$14,188 \$6062/\$505
\$2111 \$8290 \$31,482 28% \$27854 \$16,999 \$10,855/\$904
\$1264 \$4975 \$18,848 25% \$14,925 \$10,213 \$4712/\$392
\$1432 \$6130 \$21,356 25% \$18,390 \$13,051 \$5339/\$445
\$1475 \$6267 \$21,996 25% \$18,801 \$13,302 \$5499/\$458
\$1122 \$5145 \$20,002 25% \$15,435 \$10,435 \$5000/\$417
\$1785 \$7252 \$21,940 28% \$24,366 \$16,271 \$8095/\$674

So in the first example you have \$444 going towards principal. And just using basic tax writeoffs, interest & prop tax you have an additional \$505 back.
By year 10 the owner owes \$308,128. In the first year the property dropped an additional 10% to \$426,295, then after that it appreciated annually at 3%. Year 10 value \$556,218.

Meanwhile the renter paid \$191,400 with rent control.
You are right it may not be for everyone

21. 21
Kary L. Krismer says:

There are actually lots of good reasons to buy a house, but it’s difficult for me to fathom that this tedious realtor pablum is convincing anybody.

For me the main reason is control. Knowing I’ll never have to move or pay more as the result of the decision of another person is worth a lot. I would actually be a pretty good tenant because I take care of things and like to say put at least 10 years at a time. But I’d rather own so that I can make my own decisions on those matters, without incurring the liability of a 10 year lease. ;-)

BTW, I would also add the cost of earthquake insurance to the own side. As those people over in Naches are learning, not having earthquake insurance can lead to financial ruin. Even with earthquake insurance the loss can be costly, due to the high deductibles.

22. 22
RottedOak says:

Any post about rent vs. own comparisons inevitably brings forth a flood of suggestions about this and that cost/benefit associated with renting or owning, typically trying to skew the comparison to the direction preferred by whoever is posting about that particular cost/benefit. It is possible to create much more complex comparisons, involving assumptions about inflation, investment returns, etc. But that simply leads to more argument over the validity of the assumptions and about personal preferences for things like whether someone fixes stuff for you vs. you having control over getting it fixed.

The use of historical ratios, as done in this post, sweeps all those disputes aside, because it factors in the cumulative assumptions and preferences of the many folks who rent and buy. If the ratio is far off its historical average, then either something fundamental has changed, or the ratio is likely to move back towards the historical norm. During the boom, some folks were claiming that something fundamental had changed. The move of the ratios back towards the historical norms is strong evidence that those folks were wrong. In that context, if anyone wants to argue that the ratios won’t continue their move back towards the norm, they’ve got a tall mountain to climb to make a convincing argument.

23. 23
patient says:

RE: Ray Pepper @ 17 – Agree Ray, the FED is behind a lot of it due to the low interest rates but there is another hot air bubble which is feeding itself on top of that.

24. 24
singliac says:

RE: Seattle Homes @ 5 – You’re kidding, right? I call my building management about a problem, and it is fixed the next day, at no charge. They re-caulk the bathroom, shampoo the carpets yearly, fix any plumbing problems, replace refrigerator motors, fix garbage disposals, and even give me free lightbulbs. I’d like to compare my home depot receipts with yours sometime.

RE: Back to basic @ 8 – that’s odd, because I negotiated my rent down \$200 last time I renewed my lease. And as for the lead paint issue, my place was built in 2001.

25. 25
AMS says:

RE: Shaq @ 15 – To get the mortgage interest deduction, ignoring the fact that one must give up the standard deduction, you must actually pay interest. What good is it to spend \$100 to reduce tax liability by, depending on individual circumstances, ~\$15 to ~\$35?

26. 26
Kary L. Krismer says:

By AMS @ 24:

RE: Shaq @ 15 – To get the mortgage interest deduction, ignoring the fact that one must give up the standard deduction, you must actually pay interest. What good is it to spend \$100 to reduce tax liability by, depending on individual circumstances, ~\$15 to ~\$35?

That percentage is actually high in most instances after considering the “standard deduction.”

But ignoring the standard deduction, a lot of people seem to think that being tax deductible means free. It’s not. As mentioned, you pay a dollar to get a few cents back. It’s no way to make money.

27. 27
AMS says:

I hope it is obvious that on a cash operating basis, the return on capital investment is less than 5% when the Purchase Price-to-Rent ratio is in excess of 20. Yes, operations ignores finance, such as increases or decreases in market value, but I am not sure why anyone suggests it is cheaper to own when you can rent for less than 5%.

I’d love to rent a car for a purchase price-to-rent ratio of 20 or more. A \$20,000 car for \$1,000 per year? Sign me up!

28. 28
RottedOak says:

For the benefit of those who worry about the difficulties of comparing different properties for renting vs. owning, let me offer a relatively clean comparison. There is a condo complex in my neighborhood where I know some of the residents. I know the actual current rent of two rental units there, and the price of a unit for sale. These units are all virtually identical. After allowing for HOA fees and property taxes, the cost to buy the for-sale unit (at asking price, with 20% down and the 5.15% interest rate mentioned in this post) would be about 26% higher than the average of the two rents. You can decide for yourself about all the rest, because income tax benefits, insurance, maintenance, etc., all depend on assumptions. (Yes, the downpayment and interest rate are also assumptions, but without those it is impossible to compute even basic buying costs.)

29. 29
AMS says:

RE: Kary L. Krismer @ 25 – But Kary, you get all that cash at once! Sure it’s a free loan to the government, but in April, one can go on a spending spree that lasts about 3 days. Then they starve themselves paying all that interest looking forward to the next spending spree about 360 days later…

Life is wonderful!

…let’s forget the fact that so many people who take the mortgage interest tax deduction are underwater now.

30. 30
Kary L. Krismer says:

RE: RottedOak @ 27 – I’m not sure you can have a clean comparison. Even in a condo, there are other factors at play.

Let’s switch to cars. Buy a car on a 3 year lease compared to a 3 or 5 year purchase, and the lease probably looks better if you’re just looking at monthly expenses. The problem is, at the end of the 3 years you’re still leasing. Houses used to have that effect too before everyone started refinancing every two years to drag out equity. But ignoring that, even with a 30 year mortgage if you do it right, eventually you have both an asset and you don’t have to pay rent.

There’s another factor–time. I haven’t looked at what Microsoft stock is selling for, but let’s say it’s \$26 today. If you wanted to buy an option to buy Microsoft stock three years from now for \$25, you’d have to pay a lot more than a dollar for it. So in the house area, the idea of locking in your price has some value. I mentioned a 10 year lease on a house jokingly above, but if you wanted to enter into such a creature, you’d have to pay a rent premium.

31. 31
AMS says:

RE: Kary L. Krismer @ 29 – “The problem is, at the end of the 3 years you’re still leasing.” “There’s another factor–time.”

One must balance these two issues. If you could lease a \$20k car for \$1k per year (\$3k for the three years), you’d have \$17k cash at the end of the three years. In fact, one could lease at a 20:1 ratio for at least 20 years before one might worry about the ownership issue, and that excludes taxes, maintenance, and so on.

“I haven’t looked at what Microsoft stock is selling for, but let’s say it’s \$26 today. If you wanted to buy an option to buy Microsoft stock three years from now for \$25, you’d have to pay a lot more than a dollar for it.”

This option is in the money today to the tune of \$1. Sure avoiding putting out the extra \$25 in capital has some value.

32. 32
Cheap South says:

Generally, the area with many rentals are not quite comparable to many owner occupied area. Remember rental property need to make money out of you. In the long run, renter will still want to buy if they could. If you have a family and kids, you don’t want to live a confined space and don’t know who lives in your next door. No yard and no storage. Hey, space cost additional money too. If you are single or married with no kids, apartment may be good enough. The extra money you saved has risk too. The bank will pay you near zero interest, the wall street is full of scam and thief. I would rather put money in my house than let’s others handle it. It’s your life style and money, every situation is different. 2009 is different than 2007. 2010 looks even brighter to me.

Please!!! If you are really believe in “back to basics”, you live in a 1200 sqft unit where your kids share a room. Space?? You live in Seattle; 9 months of the year your backyard is useless, and during the summer, go to the park or go hiking in one the many gorgeous areas around.

33. 33
Kary L. Krismer says:

RE: AMS @ 30 – Good luck leasing a \$20,000 car for less than \$100 a month.

34. 34
AMS says:

RE: Kary L. Krismer @ 32 – Clearly easier with a house.

35. 35
b says:

Tim –

You should stop doing these calculations with 20% down, it is useless for real world comparison. Nobody puts 20% down anymore except for a handful of suckers or those at the top of the market. For an “entry level” comparison like this you should really be doing 3.5% down to match FHA loans, which basically make up the entire non-investor low end mortgage market right now.

36. 36
Kary L. Krismer says:

RE: b @ 34 – I would disagree. I did an alternative calculation piece about a year ago where my example was a cash purchase.

http://blog.seattlepi.com/realestate/archives/156248.asp

The point of that was to show that a house actually gives a tax free return–the right to live in it. If the average rent for a given house was \$1,500 and your average tax rate was 20%, you’d need \$1,800 worth of pre-tax income to live in the house as a rental.

Anyway, about 2/3rds down the comments I ran Tim’s spreadsheet at someone’s suggestion and come up with buying being better than renting at 17 years down the road with an expected return of 5% as a cost of putting all that money down, but only 7 years with a 3% expected return.

There’s also lots of interesting “debate” between Eleua and me on the second page of comments.

37. 37
AMS says:

RE: Kary L. Krismer @ 35 – Cash is a good point to start, but one must consider the opportunity cost of the cash. Cash is never free.

With these purchase price-to-rent ratios of more than 20, then your opportunity cost had better be below 5%.

38. 38
Kary L. Krismer says:

RE: AMS @ 36 – I was addressing that with the 3% and 5% calculations. In one of the comments though I joked that my hypothetical investment would have probably lost 40%. ;-)

When I originally wrote that piece I did forget about that lost investment cost.

39. 39
AMS says:

RE: Kary L. Krismer @ 37 – It’s all about “magic equity.” Essentially there are people who think that taking an equity position (home ownership) will always produce favorable results, no matter the conditions of the purchase. “It’ll all work out, somehow.” It does not matter if there is a better option, as their home ownership will be better, somehow, just don’t ask how it all works. And if you do ask, be prepared for some scary answers. Do not question-BELIEVE! You must have some faith!

40. 40
pdxdave says:

These numbers are simply not reality based from what I see. I’ve lived (renting) in the kirkland area for a couple years now. The fact is, you can’t rent anything except the dumpiest of dumps on a busy road for the \$1380 you have listed as rental price on a 3 bed home. On the other hand 417k will at this time purchase quite a nice home.. there is simply no comparison between what is being rented and bought in this chart.

If you are going to use the 417k as the basis of purchase price, a more reasonable rent would be at LEAST \$1650, putting the p/r ratio at about 21.

On the other hand, the type of house you will be able to rent for \$1380, these days are listed low 300’s… an even lower p/r ratio.

41. 41
AMS says:

RE: pdxdave @ 40 – “If you are going to use the 417k as the basis of purchase price, a more reasonable rent would be at LEAST \$1650, putting the p/r ratio at about 21.

On the other hand, the type of house you will be able to rent for \$1380, these days are listed low 300’s… an even lower p/r ratio. ”

Where do you think the break-even point is for rent versus buy in terms of purchase price-to-annual rent ratio?

My answer is “somewhere around 10.” There probably isn’t an generalized exact amount that could be used on any specific property, but there would be an average ratio. Once we start getting below 10, it starts to get attractive to be a landlord and rent homes out on an operating basis. I cannot imaging being a landlord with a purchase price-to-annual rent ratio more than 20! What does this say about expectations regarding housing price appreciation?

42. 42
Drone says:

Anecdote: I’m a renter by choice. I’ve lived my rental house with my wife for 4 months now, only to be informed that the owner has sold it out from under us. Sucks, yes, but we’re going to rent again. The price difference to own just isn’t worth it.

43. 43
AMS says:

By Drone @ 42:

Anecdote: I’m a renter by choice. I’ve lived my rental house with my wife for 4 months now, only to be informed that the owner has sold it out from under us. Sucks, yes, but we’re going to rent again. The price difference to own just isn’t worth it.

Had the rent been high enough, the home would not have been sold, and even if sold, the new owner would probably rent it out. Why would any landlord want to keep any asset that produces a very low return?

44. 44
The Tim says:

By pdxdave @ 40:

These numbers are simply not reality based from what I see. I’ve lived (renting) in the kirkland area for a couple years now. The fact is, you can’t rent anything except the dumpiest of dumps on a busy road for the \$1380 you have listed as rental price on a 3 bed home. On the other hand 417k will at this time purchase quite a nice home.. there is simply no comparison between what is being rented and bought in this chart.

If you are going to use the 417k as the basis of purchase price, a more reasonable rent would be at LEAST \$1650, putting the p/r ratio at about 21.

That’s just off the first half page or so on a Craigslist search for Kirkland
3+ bedroom rentals
.

45. 45
AMS says:

RE: The Tim @ 44 – With the purchase price-to-annual rent ratio is so high, do we really need to debate whether it’s 18, 19 or 26?

46. 46
pdxdave says:

RE: The Tim @ 44

So tell me which exactly of these 5 houses fits the description in your original post ?

“The prices quoted below are for a 3-bed, 2-bath single-family homes with 1,750 to 2,000 square feet.”

Answer: 1 (the rest are below 1750 sq ft)

That is the one renting for \$1395. I know the house, it is ugly, run down and on a busy road where drivers typically exceed the residential speed limit by at least 10 mph. The house directly accross the street (which IMO is considerably nicer), recently sold for \$312,000.

\$312,000.
Not \$417,200.

47. 47
AMS says:

RE: pdxdave @ 46 – How about addressing the break-even point, in terms of purchase price-to-annual rent ratio?

48. 48
pdxdave says:

RE: AMS @ 47

Well I could address this “break-even point”, though I’m not an expert economist. The point I made (very clearly) is that the numbers provided in the opening post, in the region I am very familiar with were not close to reality. Make of it what you want, but it appears to me that we are below the 15 year average p/r ratio.

Break even point is a very subjective term, are you referring to break-even as a long term investment, cash flow investment, short term investment, or otherwise? The point at which buying is cheaper on a month to month basis is not here yet (I agree we’ll see more price declines), but it’s pretty close in some cases. In my opinion buying a house is alot more than simply a financial decision. For too many people it is and has been based purely on financial (greed), this being the reason that the housing market got so out of whack in the first place.

49. 49
Cheap South says:

RE: pdxdave @ 46

Please list the street names where the residential speed limit is respected.

50. 50
AMS says:

RE: pdxdave @ 48 – Place break even in terms of operational return on investment. These multipliers of 20 and more imply very high housing price appreciation, as there is no way one can justify being a landlord on an operation basis. There is the economic trap of covering short-term costs at long-term losses.

20:1 = 5%. The NET cost of capital is about that, and that’s not the fully loaded cost of ownership.

“In my opinion buying a house is alot more than simply a financial decision.”

This is fine, but when so many buyers borrow nearly 100% of the purchase price, one must consider the financial impact. On a cash purchase basis, the buyer can spend his or her money however he or she sees best.

51. 51
pdxdave says:

RE: Cheap South @ 49

No thanks.

You would not want your family to be situated on this road. Most neighborhood houses do not deal with lines of cars flying down a narrow road at 35+ mph.

52. 52
AMS says:

RE: pdxdave @ 51 – Narrow roads do not have much capacity, so there must not be too much of a line, or else the cars couldn’t do the 35+ mph. There are times that I’d be happy to be doing 35+ down I-5!

53. 53
pdxdave says:

RE: AMS @ 50

The ratio is not 20:1.

In the 1 “qualified” example provided to me, the p/r ratio is 18.6

In this area, most reasonably inhabitable homes for sale (actually for sale, not bubble buyers hoping to cash out at a premium to cut their losses), fall below this ratio. As I initally stated \$1380, \$1395, whatever you want to call it, gets you a cute little slum to live in.

54. 54
AMS says:

RE: pdxdave @ 53 – Isn’t 20 close enough to 18.6? 20:1 is just a ‘nice’ ratio to use, as it’s clearly 5%. Let me pull out a calculator for 186:10–5.4%. Yes, there is a 0.4% difference (that’s less than 10% on a base of 20).

Is the break even point between 18.6 and 20, or is this just a trip around the barn?

55. 55
tomtom says:

In the first year the property dropped an additional 10% to \$426,295, then after that it appreciated annually at 3%. Year 10 value \$556,218.

Umm. Yeah. Sure.

56. 56
pdxdave says:

RE: AMS @ 52

No it’s not bumper to bumper I-5 traffic.

57. 57
AMS says:

RE: pdxdave @ 56 – How many cars pass per 24 hour period, and how wide is the road? Are there cars parked on the street? Go strategically, and legally, park a couple of cars on the street to discourage and or slow down traffic.

58. 58
pdxdave says:

RE: AMS @ 54

Sure, I’ll settle for 20 being the ratio. I think you’d be making a mistake to buy a house at this ratio, since the market abounds with properties below that ratio, but we’ll call it 20 anyway, you’re right it’s close enough.

However, it’s not 25.2. This is too large of a difference to gloss over, much the way it’s been frustrating to see a REA gloss over the fact that the market was ridiculously overpriced a couple of years ago.

Please refer to my initial post if you’ve forgotten. This was my entire point, unrealistic numbers are being provided.

59. 59
pdxdave says:

RE: AMS @ 57

Naturally, I don’t know the answer to any of the questions, thanks for asking though.

60. 60
AMS says:

RE: pdxdave @ 58 – I agree that a ratio of 25 is significantly higher than 20. The bigger issue is that I am looking for a ratio closer to 10. Anything over 18 is still simply too high–how much too high is another issue. I rented a place where the multiplier was just under 33 (approximately 3%).

Let’s take a piece of property. Clearly at 33 we can agree to rent (if that’s not enough, increase the multiplier until you agree). Clearly at 1 we will prefer to purchase (if this is not low enough, approach zero until you agree). There is a break-even point in the middle.

61. 61
Back to basic says:

62. 62
PNW11 says:

RE: AMS @ 60 – I know in my personal situation, and it will vary for everyone, the break-even for rent vs. buy is between 12 and 13. This includes all costs on both sides of the equation and all tax consequences. Granted, pretty much everything around where I live has very high HOA’s (usually 300/month min), and mello roos, which force the rent ratio/break even down even further (and are included in that 12-13 number).

63. 63
pdxdave says:

RE: AMS @ 60

Thank you for acknowledging my point ;) !

I think we pretty much agree. For me, personally I haven’t put any real thought into a ‘break-even’ point, as this discussion now is pretty much the first time I’ve considered this method of analysing and comparing prices.

What I can say, is that 2-3 years ago, I did my absolute best to discourage people I knew from jumping on the house-pyramid. Right now though, I’m looking at the market pretty closely, and finding that I could purchase something seemingly better than I’m renting, for not a whole lot more cost. For example, there’s a place that’s I’m entertaining an offer where I would estimate the p/r ratio of about 17 for what I’m willing to offer.

I think the market will continue a slow decline for several years, but I want a house I could live in comfortably for longer than that. The fact is, inflation is a reality of our economy. Collapse or not, give 10 years and inflation will occur. Maybe that’s what it will take just for housing to be back to TODAY’s level. The Japanese style housing crash I don’t believe is a valid comparison because it was inflated light-years beyond what the US market is inflated (ie prices in excess of \$100,000 / square foot, not a typo).

64. 64
Scott Weitz says:

Lets talk high end:

For easy math, lets use a 1 Million Sale price:

200k down (loss of any interest that you may be earning)
800k mortage @ 5% (generous) = 40k/ yr
12k in property taxes (also generous)
HIgher insurance
Repairs are my problem.

Total: 60k in debt service/ taxes/repairs with a 13k write off = 47k + 10k loss of interest on money = 57k

Renting: 3000/ mo = 36k year

And most importantly, you aren’t on the hook for depreciation… which is coming down the pipeline.

Its still an easy decision.

65. 65

I think it’s fair to assume that a 500,000 dollar house would rent for about 2000 per month right now. If you bought it FHA with 3.5% down, monthly payments including taxes and insurance would be about 3100 dollars per month, so if a 500,000 dollar home were renting for 3100, the ratio would be about 14.4. That would not be putting aside money for maintenance and repairs.

66. 66

Good Blog Discussion All

I’ll throw in my 2 cents worth:

These are approximate avg Seattle area numbers, albeit they do reflect today’s reality.

Avg Household income (1.2 workers, but its probably more like 1.4 today with more people per household in a recession): About \$50K

Net Pay per Seattle household:

Maximum Rent the avg household income can afford: 33% of net pay= \$1000/mo

Now, I can imagine the landlord types will shutter at these numbers, but they’re hard cold facts and to say the \$100K+ households can afford the \$2000/mo max rent is probably true, with a caveat. What percentage of \$100K+ household incomes are in the rental market? 2-5% is my guess, most of this elite crew already owns a house.

So where does that leave today’s Seattle area landlord, renting to ex-cons and crossing their fingers….LOL…or renting to \$50K households at \$2000/mo and hoping they don’t need to get eviction processes going from non-payment of rent. See Kary for legal help if this happens…LOL

Its a grim house of cards when wages are low (and getting lower) and housing (rent or buy) is completely unaffordable and off the richtor scale.

67. 67
Kary L. Krismer says:

RE: pdxdave @ 46

Please list the street names where the residential speed limit is respected.

In Fairwood Greens part of our HOA dues goes to paying off duty Sheriff officers. They wright a few tickets and give a few warnings.

68. 68
One Eyed Man says:

RE: The Tim @ 44

The above site will give you gross rent multipliers for the various areas of King Co (and other data like price per sq ft) based upon Craig’s List Rentals and single family home prices.

Even though you can find rentals in Kirkand as you site above, pdxdave has a point. The rentals are probably not comparable to what you get for 417K in that area. While I acknowledge that in the current market one can always rent a comparable home cheaper than buying (unless you assume certain things like a GRM of about 20, an inflation rate applicable to all items of about 3% and a holding period of about 10 yrs or more) the rentals you listed generally don’t appear to be within the parameters you listed which included 1750 to 2000 sq ft. and are generally closer to Kenmore than Kirkland.

\$1349 rental is 1030 sq ft built in 1970 3bd 1bath

\$1400 rental is 1430 sq ft built in 1966 3bd 2bath

\$1395 rental is 2200 sq ft built in 1976 3bd 2.25 bath

\$1375 rental is 1500 sq ft 3bd 1.75 bath

\$1300 rental , sq ft not listed 3bd 1bath

The above houses are probably not representative of what sells for 400K in that area. The houses below are in the same area and the prices set forth are listing prices which would generally be several percent more than the sale prices.

29130746 \$269,900 1360 sq ft 3bd 1.5bath

29134008 \$324,950 1900 sq ft 3bd 1.5 bath

29144640 \$299,950 1300 sq ft 3bd 2 bath

29127889 \$342,000 1860 sq ft 3bd 2.75 bath

29122448 \$329,950 4bd 2bath

just to list a few. And you can get new presales between 2100 and 2600 sq ft for 350K to 380K a mile north in Kenmore at a couple different locations listed under 29118706 and 29135984.

Note: AMS has previously disagreed with me on whether rent vs own breaks even in 10 to 12 yrs on approximately the following assumed facts: a 20 GRM, 2.75% inflation on all items, 400K new house, renter maintains yard, 20% down, 5.5% 30yr loan, 5% return on cash investments. Unfortunately neither of us was willing to spend the extensive amount of time necessary to do the full math spread sheet for that long a period with all cash flows reduced to present values. My estimate says it breaks even at around 10 yrs, his says it doesn’t. In any event, the average younger person probably doesn’t have a 10+ year time horizon and the assumed facts don’t take into account any continued decrease in house prices for the near term.

In any event, unless you’ve found the only house you will want to buy, it probably doesn’t make sense to “fight the tape” and buy into what is likely still a falling market.

69. 69
AMS says:

RE: One Eyed Man @ 67 – Yes, we have disagreed as to the break-even point on the multiplier. The problem I had spending the time trying to sort out your work was that the situation was negatively leveraged. It’s all a waste of time to go through a bunch of technical computations when topologically the owner is in an unfavorable position. Going further, the payback period is infinite if you are negatively leveraged–you will never break-even. If we are going to run a situation, then we must assume positive leverage; otherwise we are going no where fast.

Here is where you put the situation into the negative leverage case: “20% down, 5.5% 30yr loan, 5% return on cash investments.”

There is no reason to go further–pay cash, or don’t buy.

70. 70
AMS says:

RE: Ira Sacharoff @ 64 – At 14.1 you still think the ratio is in the renters favor. My estimate was “about 10” as a break-even point. It’s tough to put an exact amount, as taxes, maintenance, HOA dues, and so on vary. When I hear numbers like 18.6, 20, 25, and so on, it’s an easy call: sell if you own, rent if you don’t.

Before expenses:

20 ==> 5%
25 ==> 4%

I’d much rather see 8-10% after expenses, but let’s not get into costing principles.

71. 71
The Tim says:

RE: pdxdave @ 46 – My bad. I was just doing a quick search over lunch, and was not on the same computer I wrote up the post on. Also, last night when I was writing this post I used only 3-4 homes for each average, and it is possible I may have mistakenly included one or two that did not meet the requirements.

Now that I’ve got a bit more time, I’ve done a new search for Kirkland, with slightly broader terms, to get as large a sample as possible. To qualify, homes must have a minimum 1,750 square feet (no max) and can have either 3 or 4 bedrooms.

Here’s a list of Kirkland area homes that meet or exceed the square footage requirements set out in the post, found via this search:

Average bedrooms: 3.5
Average rent: \$1,511

To be fair, we have to broaden the search similarly on closed Kirkland sales over the last three months (but I’ll add a maximum square footage of 2,250 to keep out the McMansions). See the search for yourself here (FYI, without the upper square footage limit the average is over \$700k). If you toss out the outliers (two sales over \$600k and one under \$350k), you get 13 sales with an average 3.4 bedrooms at an average price of \$466,916.

new Price to Rent ratio at \$466,916 sale price vs. \$1,511 rent: 25.8.

Hmm.

72. 72
rentRloser says:

Where does 5.15% interest come from? It’s 30 year fixed. Can you lease a place for 30 years? The real interest is just 3.875% ARM.

73. 73
AMS says:

One last comment:

I have looked at fundamentals in this thread. If someone wants to play the bigger fool game, where you buy high hoping to sell even higher, then just understand the risks. Just because something is priced quite high does not mean that it will return to a normal level in your lifetime, and you do some of your best work during this period. Buying after death does not provide much satisfaction, at least not for someone with my reference.

Did I pay too much for the bottle of Vanilla Cream Soda that I am consuming? Who knows, but I enjoyed it today, just as I enjoyed the product I purchased at Starbucks this morning.

If you buy into a negative leverage situation, but are willing to give something up elsewhere, is that bad? Not unless you are so over-extended in a single area. At this point, the loan-to-income ratios are also out of whack. What’s a good ratio? Three or less, if you ask me. What’s common in the area? I’m going to guess 5 to 6, and higher with some of the liar loans. If the interest rate is too high, then it should be paid off sooner, and if it is too high, then let’s reduce that multiple of three.

I think I will go back to studying hunger and starvation, psychological. For whatever reason when someone ‘hungers and starves’ to be what’s typically called ‘home owner,’ they will do just about anything to be one, much like the older woman who seeks to be a mother.

74. 74
rentRloser says:

Now take a look buy vs. rent. If a 300K house rent for 1500USD/month, interest of 300k is 11625USD/year, property tax is 3000USD plus 500 insurance so the Total is 15125USD then minus 8000k tax credit (say you live there for 5 years before) 1600USD=13525USD then divided by 12=1127USD. Now you tell me who wins? oh, forget mortgage tax rebate, property tax rebate, car insurance discount and manay many things. If you rent, you have a rent a Uhal every year to evade rent increase plus you may loose part of your 13th month deposit.

75. 75
The Tim says:

RE: rentRloser @ 72 a.k.a. “Back to basic” – How about you just choose one name and stick to it.

76. 76
The Tim says:

For me the main reason is control. Knowing I’ll never have to move or pay more as the result of the decision of another person is worth a lot.

I spotted an interesting comment today in an unrelated Seattle Times opinion piece:

My property tax now is more—a lot more—than my mortgage payment was when I bought my house 30 years ago.

I’m not saying that the cost of higher property tax doesn’t get passed on to a renter. I just think that taxes and insurance are something that people almost always overlook when they make the “my costs are fixed” argument in favor of home buying.

77. 77
AMS says:

RE: rentRloser @ 74
RE: rentRloser @ 72

One thing we have not agreed on is the methodology. The standard way to handle the tax benefit is to use net cost of capital, which also simplifies many of the computations.

Then there is the problem of accounting, discrete entries, versus the continuous nature of time. This can be solved with the correct use of math, but there are still other problems.

Since the \$8k is a one time credit, it should come off the purchase price, not operating costs. It’s not an operational issue. If you buy a \$300k home, and you qualify for the \$8k first-time home buyer credit, then your net cost is \$292k.

If you are going to make the argument that the \$8k is to live in the home for 3 years, then maybe we should amortize the \$8k over the 36 months, but we should not do both amortize the \$8k and consider the purchase price to be lowered. [\$8k=\$225/mo SL-36]

78. 78
AMS says:

RE: The Tim @ 76 – And 100% of the landlord’s costs are tax deductible, without giving up the standard deduction, and the landlord is probably in a high tax bracket, so the tax benefit is much greater.

79. 79

RE: rentRloser @ 74
I don’t think a 300,000 dollar home would rent for 1500. more like 1200 at the most.. And I think taxes would be closer to 3600, and insurance closer to 700. Add the cost of title insurance, escrow, loan fees, inspection, and appraisal, and guess what? You’re bringing in less than your costs, and that doesn’t include reserves for maintenance or repairs.
In some cities, rents more than cover the mortgage and homes are a good investment. Maybe there are a few instances like that in Seattle, but not for the most part. You can’t just pull some numbers out of butt and call them facts.

80. 80
rentRloser says:

RE: Ira Sacharoff @ 79
\$1200/month to rent a 3brd house in good area in Seattle? The 13th month rent deposit most likely be taken by landlord to cover the tear and wear repair. Landlord will also run a credit report on you. low credit score, no problem, prepaid 12 months rent 1st. as a renter, you also need to buy rental insurance. Moving around chasing low rent every year is not a fun thing.

81. 81
AMS says:

RE: The Tim @ 75 – Don’t you have a handle policy that prohibits his handle?

82. 82
2kt says:

The reality of the matter is that rents in good areas are not that far apart from less attractive areas. In Northgate/Lake City \$1,500 rents about 3bed, 2ba house that sells for about \$350K and for may be \$1,600 you can rent similar home in Ballard or Bryant, but that house would sell for \$450,000 to \$500,000.

There’s no point in running rent vs buy comp for \$1 million dollar homes, very few such homes are rented out.

With 20%-25% down and current loan rates homes in Seattle now cash-flow with I/O mortgage and are close to break-even on traditional products. If you take depreciation into account, for an investor with cash it’s not a bad alternative vs bank’s 1% CD rates.

83. 83
shawn says:

I saw a condo for sale on ZipRealty for the same building I live in. It was asking 190k with some down payment, and with the assocication fees it comes out to about what I am paying for rent to live here. So, in some cases it is getting closer. Best part of living in this condo is that I now know that I don’t want to buy a condo and have tyrants with nothing better to do than snoop through my garbage to see if I have not properly flattened a cardboard box to level a \$50 fee on me. A year ago some sap bought the condo above me for 330k. I am still on the fence, but I think prices are going down this winter. I will be shocked if they don’t.

84. 84
shawn says:

RE: AMS @ 81 – why have a handle policy? I think it each person’s right to pretend to be any persona they want if they feel it will help them achieve a better level of falliciousness.

85. 85

RE: Ira Sacharoff @ 79
\$1200/month to rent a 3brd house in good area in Seattle? The 13th month rent deposit most likely be taken by landlord to cover the tear and wear repair. Landlord will also run a credit report on you. low credit score, no problem, prepaid 12 months rent 1st. as a renter, you also need to buy rental insurance. Moving around chasing low rent every year is not a fun thing.

You were the one who brought up renting a 300,000 dollar house for 1500. I said it wouldn’t rent for that much. I never stated a location.
You’re right, it’d be hard to rent a three bedroom house in a nice area in Seattle for 1200, and it would be even harder to BUY a 3 bdrm house in a nice area of Seattle for 300 thousand.
I don’t have a problem at all disagreeing with people. I’ve had good discussions with people here who I disagree with. You’re not one of them. If you are a real estate professional, you don’t make any persuasive arguments, don’t display any creative thoughts, and really aren’t contributing anything worthwhile here.

86. 86
stevepdx says:

Tim,

I almost don’t know why you bother trying to convince people.

I rent a condo that was built in the late 1990s and renovated in 2007. I had no problem getting the landlord to agree to a 18 month lease, which also convinced them to drop the asking rent. The previous renter had lived here for over 5 years. Based on the rental vs. sold prices of other units in the building the current price rent is about 25. This is a similar ratio to other area houses and condos on craigslist, many of which were simultaneously for rent and for sale, making the calculation very easy.

Why buy now? That’s what this site is about, right? If prices go down, great. If prices go up or stay flat, it will be better to rent by an even better ratio. Also, high unemployment and stagnant wage growth makes rent increases difficult even as landlord costs rise.

87. 87
David Losh says:

RE: 2kt @ 82

That is true. A cash purchase of \$300K at 4% is \$12000 per year or \$1000 per month. \$400K at 4% is \$16K or \$1333 per month. Tax, insurance, and dealer prep still makes this a good return.

The problem is that if prices decline 10% you need to make that up in rent. A bigger problem is if other properties drop 10% new investors can rent for less. If there is no appreciation rents stay flat without inflation. Let’s remember the Fed has promised to fight inflation, but a slight interest rate increase would knock the stuffings out of any inflationary activity at this point or even for years to come.

Using the 30% rule of income spent on housing your renter is making between \$36K to \$47999 per year to afford these low end housing units.

\$63K as the median household income is making that a tight fit. \$300K gets you the 2 bd 1bth, \$400K is the 3 bd 2 bth.

So for me the equation is tipping to a negative. That 4% return is predicated on a lot of luck, of no vacancy, or repairs.

88. 88
David Losh says:

As another point; there is always a deal that can be done. As you drive around the city you see project houses being completed; big money is being spent on renovations.

You need to remember that there is a segment of the population that is recession proof or are actually making good money right now. Bad news is good news for investors.

What is bothering me about the Board of Realtors putting out this propaganda is that most people are not in the “business” of Real Estate.

Most real Estate agents aren’t in the business. They go to some Real Estate boot camps, take some Mike Ferry coaching, take a Mike Watson seminar and off they go with half told tales of how things used to be.

You can talk yourself into anything. People lie with statistics all the time. In my opinion the Board of Realtors should be taking the higher road and warn people about the dangers of owning a home right now.

89. 89

rentRloser’s a.k.a. “Back to basic” entries have been seriously entertaining to read. Rarely do I laugh out loud while reading blogs. More please

90. 90
Poetrywater says:

Well, it’s over. We had fun for 3 non-working years (living frugally on our home profits in Port Townsend) and now we are one of those who are choosing to buy a home. The fact is, on Bainbridge (where we sold our home top of the market 3 years ago and will move back to for work in Seattle), rents for an in-town family home is \$2000- \$2500 or even a whole lot more++++

We were not ready to buy quite yet as I agree prices will still go down, but we found a large, practically maintenance-free metal (walls and roof) contemporary home walking distance to everything in town(except some friends’ homes) with land for our boys to play on and where we are going to build a guest home to rent for retirement (and frugal) years. With the current interest rates and the large down payment (that came from the sale of our last home) we can live month to month the same price as a much smaller home in the area to rent and pay our home off in 15 years.

I know we may lose value over the next couple of years or maybe forever, but we also will gain:
–A green environment (no more toxic carpets and paints.)
–A healthier lifestyle (One less car, more biking and walking.)
–A place to let my creative side shine (I love to mosaic tile, paint murals and other interior artistic design , which I have missed in the past 3 years of renting.)
–Give our boys the final home they will live in before they grow into adults over the next 10 years (which they are thrilled about.)
–Be able to grow a huge garden and plant fruit trees to enjoy for years to come.

Yes, I know this isn’t an investment in money, but a choice to stay in one place for the next 10-15+ years, create it as our own and enjoy living in town and close to the ferry to Seattle.

Anyone think I am crazy? Think I should wait?
I would love to hear from you…

(It was this blog that prompted me to sell at the end of 2006… and I am most grateful…)

91. 91
S-Crow says:

RE: Poetrywater @ 90 – Cheers to your decision and family.

92. 92
Poetrywater says:

RE: S-Crow @ 91

Thank you S-Crow! I am practicing a lot of deep breathing today before we sign our P/S Agreement tomorrow…

93. 93
David Losh says:

RE: Poetrywater @ 90

You are averaging from the last sale into this purchase. That’s fine and you have wrung out those two years of price declines. You could wait and maybe lose a location you want or need to have. Location is everything to life style, no matter what the price.

The cautions here are for those people who are just entering the market who will never have the benefit you have had. It’s unfair, knowing what we know today about national and international financial markets, to encourage people to go out and buy a home.

Today the reports of the defaulting commercial loans are making their way into the news. These loans are expected to continue to default for the next several years. The government is now gearing up to bail out commercial lending.

As a home buyer you would not be that interested, but for some one like Mr. Yun, an economist, those loan defaults mean falling residential prices. That’s what should be made clear.

94. 94
Sniglet says:

One key point to make on these rent/buy calculations is that the historical data used to determine what is “normal” may itself be flawed. As Tim pointed out, Forbes only went back 15 years to determine what the normal rent to buy ratio should be.

This reminds me so much of the way investment bankers and ratings agencies assed mortgage securities during the boom years. Moody’s would look at housing data over the last 40 years and assume that default rates would never exceed a certain average. As well all know, this was a wildly optimistic assumption, and the decades of “data” proved to be worthless in evaluating risk.

To a huge extent I believe that most of the data we have in the post world-war II era is anomalous, and largely the result of government manipulation of the economy (e.g. Fed with interest rates, mortgage tax deductions, GSEs, etc). On top of that, we were in a multi-generational cycle of bullishness (look at Kondratieff theory to see what I mean).

Thus, the very data, and life experiences of most Americans, are not relevant in helping us assess future trends, and what the risk of owning real-estate might be. If we are entering a long-term deflationary depression (as I believe), then there is a new reality altogether, and we will see things happen to prices/earnings/unemployment, that few alive have any experience with.

bit.ly/YlmXD

95. 95
Poetrywater says:

RE: David Losh @ 93

Yes, I can’t imagine trying to buy our first home right now… we feel truly blessed.
Yes commercial upheaval and Alt-A’s are also coming up early next year. It is a big part of why I am questioning this. We will only have about 6 months saved after this purchase. One can’t know the future, but you can be smart about it….

Thank you for your thoughts.

96. 96
AMS says:

RE: shawn @ 84 – I thought The Tim put an end to handles like, “Renters Are Losers.” How much clearer can the handle be: rentRloser

I thought it was this particular blog that had the problem, but I could be wrong.

97. 97
Fran Tarkenton says:

rentRloser’s a.k.a. â��Back to basicâ�� entries have been seriously entertaining to read. Rarely do I laugh out loud while reading blogs. More please

I read all of them in the voice of Kahn from ‘King of the Hill,’ which adds to the enjoyment.

98. 98
David Losh says:

RE: Poetrywater @ 95

I met with a gentleman this afternoon who is preparing his property for sale. Out of about a dozen people I have met with in the past couple of months, and some we have done work for, he was the most realistic. He has been in his home for 24 years and knows the market is fickle. He is prepared to go on the market at \$650K, 2700 sq ft, 5 bds, 3.5 bths, cul de sac, and sweeping views. He’ll do whatever the Real Estate agent tells him and will go lower if the comps show it. The house is in great condition.

There are good properties out there, selling for fair prices. It all depends on the deal.

Best of luck and whatever you decide, never look back.

99. 99
voight-kampff says:

rentRloser’s a.k.a. Ã¢ï¿½ï¿½Back to basicÃ¢ï¿½ï¿½ entries have been seriously entertaining to read. Rarely do I laugh out loud while reading blogs. More please

I read all of them in the voice of Kahn from ‘King of the Hill,’ which adds to the enjoyment.

how about civility?… how many languages can you speak and write in?

100. 100
what goes up must come down says:

vk apparently FT can at least speak and write in one I am not so sure that is true of rentRlosers

101. 101
Fran Tarkenton says:

Two. I am functionally literate in two languages. I’m even able to properly capitalize letters and use ellipses. That’s also beside the point. The Kahn reference is in regard to the shared attitude between that character and our poster. Specifically, their remarks both have an underlying “You people are so lazy. You should work hard like me” vibe to them.

The lesson here is, if you want to call someone out, make sure you’re not going off half-cocked.

-Fran

102. 102
voight-kampff says:

RE: Fran Tarkenton @ 101
Oh the many life lessons that can be gleaned from king of the hill ( as I read your post in the voice of Sean Hannity :-)

I love Hank Hill, a true patriot!

103. 103

[…] averages). Also, if you’re just interested in how things look around the Seattle area, hit this October post that breaks down seven neighborhoods in the area (note that the method used in that post is […]