Posted by: Timothy Ellis (The Tim)

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.

131 responses to “Buy vs. Rent: A Real Life Pre-Peak Example”

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  1. One Eyed Man

    RE: Pegasus @ 93

    My politics, economics and other personal issues aside (I may be an ass and a cheap shot artist, but I’m hardly a defender of America), I may previously been a bit too cryptic so I’ll be more direct. In you’re comments, you seem to envision yourself as a defender of justice for the common man similar to a Woody Guthrie or a Tom Joad. But your rhetoric, coupled with personal attacks comes off at times, at least in my opinion, as bitter (if not hateful), paranoid, self-righteous, and bullying. Those attributes to your comments aren’t helping your cause. I acknowledge that it may be fun and emotionally satisfying to call Kary a gaping void surrounded by a sphincter, but unless done with a hint of whimsy it makes you appear insensitive and cruel, as opposed to a true champion of justice for the common man like a Woody Guthrie or a Steinbeck hero.

    Two further comments:
    1. This isn’t a defense of Kary. He’s contentious, pompous and arrogant, not particularily admirable qualities, which sadly, both you and I probably share to some degree.
    2. I may disagree with you in that I believe the millions of borrowers on the liar loans were every bit as bad as the bankers, but that doesn’t necessarily make me your enemy. I just disagree. Your real friends are the ones who tell you what they think, not the ones who blow smoke up your Krismer.

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  2. David Losh

    RE: One Eyed Man @ 1

    What are you talking about?

    Kary challenged me about home prices in the 1980s. His claim is that prices were higher in the 1970s, and I reminded him of the 17% interest rates. Then both you, and Kary began nit picking dates, and times that had nothing to do with the fact all three transactions I mentioned were able to be paid in cash.

    Cash was king. 17% interest also paid hefty returns on savings. In the 1980s there was cash in the hands of individuals. Stock portfolios were booming, savings rates were high, there was equity in housing. There was cash, that we don’t see today.

    So from the affordability point of view, how many people today can afford to pay cash? That’s the point. How many people can save up $250K to pay cash for a house.

    In the 1980s I was able to pay $36K cash for a house by Carkeek Park. I wouldn’t be able to pay cash for a house today, in a good neighborhood, and my income is considerably higher.

    How can you people not follow simple reasoning?

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  3. Ira Sacharoff

    RE: The Desponder @ 89
    It was on 17th, between Denny and John. So just a little south of Thomas. People moved to Capitol Hill in those days partly because it was cheap.

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  4. Pegasus

    RE: One Eyed Man @ 101 – Haha. I don’t envision myself as a defender of justice for the common man similar to a Woody Guthrie or a Tom Joad or any Steinbeck hero. Thanks for imagining some grandiose plan that I must have to save the world. I don’t and that is why I don’t try to be sensitive or do I feel the need to do things to ingratiate myself with the readers here to be thought of as a true champion of justice. I am well aware of what my posting persona is here and I choose to keep it that way for a reason. I simply like to dispel myths that seem to dominate and are purposely spread throughout our corrupt society to enrich a select few at the expense and detriment of our entire nation. If someone learns something along the way or it makes them cogitate so be it. And yes I like to push Kary’s buttons every few weeks. I know it is simple entertainment for me and annoying to others. We all have our vices.

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  5. One Eyed Man

    RE: Pegasus @ 104 – Fair enough, we’ve all got our vices and everybody’s entitled to their opinion. But to be clear, I wouldn’t suggest that anyone ingratiate themselves to anybody. However, its probably tough for people (especially arrogant people) to objectively evaluate what you post if you’ve not only challenged their opinion, but also emotionally charged the dialogue by baiting or belittling them, or otherwise making them defensive.

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  6. Pegasus

    RE: One Eyed Man @ 105 – Perhaps ingratiate was a poor choice of a word, I should have used endear. I purposely choose not to do that in order to win a reader’s approval. Maybe I just enjoy, too much, confronting the purveyors of myths by baiting them, whatever their motives; and watching them spit and hiss. Probably my best judge, my spouse, says I am an asshole by nature. Probably right…I am too old to change.

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  7. Blurtman

    RE: Pegasus @ 106 – Those whom the gods wish to destroy, they first make mad. Or was that Republican?

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  8. corndogs

    Dorothea @ 51. I’ve never sold a property so I’ve never payed a 10% transaction cost even once. Yes, I think I’m smart, I have a degree in Mechanical Engineering from the UW and yes I think I’m smarter than most people who have the term ‘playa’ in their vocabulary. I bought my first house in ’91 for $45K cash of my hard earned money. Bought my 2nd property for $155K cash again… and I’ve continued on from there…. so there’s no risk and I’m not juggling anything. It’s called wealth building. Now my $500K house I just bought was previously tax assessed for $1.1M, I put down $200K of my hard-earned cash… the remaining mortgage is small and paid for by the income off the other properties…. so i essentially have no mortgage and plenty left over… so still building on my wealth…. people are always looking for the downside when they see someone succeed… there is no downside, I just win….. I win buy collected rent from people like you…. there’s nothing else to the story….

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  9. One Eyed Man

    RE: Blurtman @ 107

    You have gods? And here I thought you were some kind of godless left wing radical.

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  10. Blue Moon

    Schadenfreude or is it, “we who are so wise and farseeing sneeringly pity the foolish masses?”

    Whatever, gets you through the day.

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  11. Scotsman

    RE: One Eyed Man @ 101

    Badda-Bing, Badda-Boom!

    I admire a man who can spell, something I still aspire to.

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  12. MichaelB

    Tim,

    If the bottom is here or near, do you believe home prices will increase at or above the rate of inflation for the next 7 years?

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  13. Hey

    The author is misinformed regarding rents circa 2005. We were considering renting vs buying at the time and there was nothing for rent in Ballard comparable to a $431k home for $1725/mo. Where those rents were available (e.g. White Center), house prices were $100k less. Which promptly blows the author’s equation apart.

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  14. Kary L. Krismer

    By David Losh @ 2:

    Kary challenged me about home prices in the 1980s. His claim is that prices were higher in the 1970s, and I reminded him of the 17% interest rates

    You need to learn to read too. Simply asking you when something occurred isn’t a challenge. And what I said was that I got priced out of houses between 1977 and 1978. Again, go back to the link and look at what was happening with prices at that time.

    I wasn’t in the market for property in the 80s, and I didn’t say I got priced out forever. Just that by not buying in 1977 I had to buy a condo rather than a house.

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  15. Kary L. Krismer

    By Pegasus @ 4:

    RE: One Eyed Man @ 101 – Haha. I don’t envision myself as a defender of justice for the common man similar to a Woody Guthrie or a Tom Joad or any Steinbeck hero. Thanks for imagining some grandiose plan that I must have to save the world. .

    I didn’t see you in that light at all. I see you more as someone too willing to accept anything that supports what you already believe, or anything that comes from certain sources. That’s why you think the recording of an assignment of deed of trust is important in Washington.

    Here’s a tip. Whenever someone says that the price of something would be X if Y were not the case, or the the “fair value” is X, they’re lying, or at least have more confidence in their abilities than they should.

    If they say the price would be higher or lower if Y were not the case, that is okay. But whenever someone tries to quantify a precise number as to the effect of something else, they can’t really do that in almost every instance.

    This is my favorite example of how gullible Americans are as a society.

    http://blog.seattlepi.com/realestate/2009/08/06/have-we-become-a-nation-of-the-extremely-gullible-its-on-the-internet-it-must-be-true/

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  16. Kary L. Krismer

    By Hey @ 13:

    The author is misinformed regarding rents circa 2005. We were considering renting vs buying at the time and there was nothing for rent in Ballard comparable to a $431k home for $1725/mo. Where those rents were available (e.g. White Center), house prices were $100k less. Which promptly blows the author’s equation apart.

    I’ve been wondering about that, but haven’t had the time to check it out.

    Just because some rents have been going up, that doesn’t mean that all rents have been going up at the same rate.

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  17. David Losh

    RE: Kary L. Krismer @ 114

    I can read, and you are again nit picking phrases, for reasons that make no sense.

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  18. kfhoz

    RE: J Hammy @ 108

    That much real estate handling sounds like a lotta work. If you enjoy that then you are lucky! If you do not enjoy it, then I would caution that life is short. If you have a spouse who likes that kind of lifestyle, then you are even more lucky!

    For most people, time spent on other parts of their lives preclude the scenario that you describe.

    (Just so that you don’t think I am coming from a totally different background, I have undergrad Mechanical Engineering degree from MIT and Masters in Mech Eng from Carnegie-Mellon.)

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  19. Kary L. Krismer

    By David Losh @ 118:

    RE: Kary L. Krismer @ 114

    I can read, and you are again nit picking phrases, for reasons that make no sense.

    You call it nitpicking. I call it lack of reading comprehension. Learn to read, and then it will make sense.

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  20. ARDELL

    RE: Kary L. Krismer @ 116

    Seriously? Your favorite article on the subject…was written by you? I almost choked on my coffee. :) I guess I should have expected that when I clicked on the link, but for some reason it took me by surprise.

    Thanks for the Monday morning chuckle.

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  21. Kary L. Krismer

    RE: ARDELL @ 122

    Seriously? Your favorite article on the subject…was written by you?

    WTF. Why cannot people here read simple English? I did not say something was my favorite article. I said something was my favorite example of how Americans are gullible. That something was the bank study referenced in my blog piece. Rather than repeating the entire story, I linked to my piece which told the story.

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  22. Kary L. Krismer

    By kfhoz @ 19:

    That much real estate handling sounds like a lotta work. If you enjoy that then you are lucky!

    Some people do enjoy that sort of thing. Some buyers look for fixers just so that they do the work fixing them up. Sometimes with early 20th century houses those projects can last over many years. Fun, fun, fun–if you enjoy that sort of thing.

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  23. Steve

    By whatsmyname @ 69:

    Seller of this property would have to be the biggest mutt in the world to pay anything remotely close to $26,000 for a refinance. He could have paid nothing out of pocket, or more likely $4-5,000. I was stunned by reading this after years of “housing as ATM” complaints. Overstated cost that really went into his pocket: $21,000.

    Where did you get $26000? TheTim estimated costs at $3,600, and the owner refinanced for $23,383 than their mortgage balance, neither of which is the number you quoted.

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  24. whatsmyname

    RE: Steve @ 125
    From Tim’s post:

    “In February 2008, the two loans were refinanced into a single loan with a new balance of $412,500. Since that sum is $23,383 more than what the balance of the two separate loans would have been by that time, I’ll assume the closing costs (and maybe a vacation?) were simply financed in.”

    The $3,600 appears to be closing costs for the original loan. I’ll cop to being off nearly $3,000i; but Tim treats the $23,383 higher refi number as an expense when he does the math. So that overstated cost is only $18,000 – Thanks for noticing.

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  25. tina

    you just LOVE kicking a guy when he’s down. sheesh. that seems to be what this site is all about. a whole lotta “i told you so” and “you’re an idiot.” nice.

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  26. Kary L. Krismer

    RE: The Tim @ 28 – Perhaps a link would help. I’ve been here a while, but I don’t know what you’re talking about.

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  27. Scotsman

    RE: tina @ 127

    Karma for all the snooty quips about idiot renters who were too dumb to start climbing the equity ladder. You remember that, right? Remember “oh- you rent?” said with perfected superiority and more than a little derision? It’s like the circle of life . . .

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