Renting is for Suckers

Misconception: Renting is for Suckers. In Houston the market was such that it seemed silly not to buy. Here in San Francisco real estate is definitely another world, and I plan to rent for a while even though it does limit what you can do with the space in some frustrating ways.

14 thoughts on “Renting is for Suckers

  1. Many people have told me the same thing, but guess what, I like the have the flexibility to get up and go when I want and not have too much remorse if need be, I guess it’s a certain group of our generation who’s completely non-comittal as can be.

    I don’t want that responsibility.

    I never want to grow up!

    My landlord, in San Francisco, said the market there is just, out of control and now she buys all her property here in Greater Miami, but it’s nearly as hard to get something at a decent price without making a decision in 15 minutes or less.

    Cheers to the monthly rent check!

  2. In my town, Vancouver, Canada, we have the highest average price (by far) for a home in the country at around $500,000 (CDN). As a student (heck, even as a full time designer) I won’t be affording that anytime soon. But it still hurts to think that me and three friends sharing a rental home here for the next three years of our degrees will cost us $90,000 (CDN)–and we’ll have nothing to show for it.

  3. I went to college in San Fran and have lived my life in California, believe you me the real estate is out of control at pretty much every major metro area. L.A. County (where I live now) is approaching, if not already caught up to, S.F.’s ridiculously high prices. I wouldn’t be surprised if before the “bubble bursts” we see a major increase in homelessness, that’s how out of control it’s gotten these last years.

  4. It is not much easier in Great Britain. House prices here have risen and risen for the last 15 years or more (since the last correction) and there doesn’t seem to be any resaon that they will change any time soon. (Since the cost of money is at an all time low and while debt is out of control it is very easy to get more and more at really cheap rates!)

    There is a great deal of difficulty in entering the market as a first time buyer as event the smallest appartments are expensive. But once you have been a home owner it seems a little challenging to go back to renting.

  5. We have a house up for sale in the Bay Area for over a month now. So far, no takers. Real estate prices have not really come down dramatically. Just a little. There are plenty of homes up for sale this summer. Just drive around your neighborhood and have a look around. Real estate sales have slowed down and will continue to be slow as long as interest rates are high, but there are certain areas like the Bay Area that are exceptions to the rule since there is always a demand.

  6. Hi Matt,

    Thank you for posting this. I completely agree.

    I had to restrain myself from commenting on Scoble’s blog recently when he bought a house. Sure, they got it under the asking price, but unquestionably houses are still very overvalued here in the Bay Area, and with his BMW payment and a HDTV payment, that adds up to a lot of negative cash flow every month. I vastly prefer to live frugally, save my money, invest wisely, and increase my net worth consistently every year. (I haven’t bought a new TV, or a new car, in over 5 years, and I am not interested in owning a house here in the Bay Area… I’ve done the math vs. renting, and I’ll let the landlord take the negative cash flow.)

    Unfortunately, the American mindset (particularly recently with the low interest rates) has been “Buy, buy, buy”. I think that as people stop using their houses as ATMs, we will see a serious setback in consumer spending, which currently drives over 80% of our economy. This greatly concerns me. I’ve been tracking several different economic forecasts, and so far I like Harry Dent’s forecasts. He is predicting a recession that will hit this economy in 2010, and advises being very liquid in investments by 3Q 2009. Even if the predicted recession doesn’t hit, I think that’s wise advise.

    There is a great blog called The Housing Bubble Blog that tracks housing bubble stories from around the country. I have it on my Bloglines and read it every day. It’s a good resource to watch the bubble deflate day after day. Already, foreclosures are spiking and interest-only loans are resetting, causing homebuyers to default, some within the first year of owning a house! 87% of homes sold in CA in 2005 were purchased with interest-only loans, and it can only go down from here as more of those reset in 2007. Ouch!

  7. Another reason not to buy is if you’re staying some place for just a few years. Points, closing costs, the 6% seller’s fee and repair fees mean that you’ll have to have your house appreciate wildly to get any equity back when buying and selling within a three year period.

  8. But it still hurts to think that me and three friends sharing a rental home here for the next three years of our degrees will cost us $90,000 (CDN)”“and we’ll have nothing to show for it.

    Jeff Werner

    Sure you will. A roof over your head and a warm place to sleep for the next three years.

    KB

  9. I love living where I live (in a small town in northern Sweden, basically right on the arctic circle – in the middle of the forest and close to the mountains). Beside the most obvious reasons (lovely nature, no pollution, lots of space, aurora borealis, midnight son and the best snowmobile area in the world) it is really cheap. Where else can you buy a large (240 square meters) house (on your own 75.000 square meter ground with your own lake) for $30.000?

  10. even though it does limit what you can do with the space in some frustrating ways.

    Like what? I mean, are we talking knock out a wall and put a pool in your bedroom in the shape of the WordPress logo?

    Hey wait, that’d be kinda cool…

  11. I completely agree with all of you that the real estate market is going out of control. Here in NY (famous for its high rents), renting is by far the most popular option. In fact I’ve heard of people who actually profit by “selling” their rent-stabilized leases to other renters masked as a sublease.

    Overall though, if you have the cash and that is a big if these days, there are some positive advantages to buying:

    1) Every penny you spend on a mortgage payment is 100% tax deductable. You can’t deduct your rent payment – unless have a home business but legally you’re only supposed to deduct a portion of your rent that is used for your home office.

    2) Cash flow is actually a little more – because you have a large tax writeoff every month, you can lower your deductions so you get more of your paycheck and less goes to the IRS. Come tax time, you’lll probably break even due to the enourmous amounts of tax deductions you get off of your mortgage.

    3) On average, home prices tend to increase over time depending on the location of course and the economy. So if you buy and stay in one place (or even rent out to someone), you’ll see appreciation / equity in your investment even if you don’t sell. When interest rates start to head down you can take out this equity as cash in the form of a refinance on your mortgage.

    This is a good time to buy if you are interested because the market is getting soft and many sellers are getting desperate which means you have the negotiating power to ask for lower prices.

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