tag:blogger.com,1999:blog-4113767199444444516.post5051714040266223991..comments2023-10-03T04:34:39.407-07:00Comments on Portland Real Estate Outsider: When to Rent vs. Buy? Top 6 MisconceptionsPDX Outsiderhttp://www.blogger.com/profile/01596115115859601410noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-4113767199444444516.post-47756097320795774192008-08-27T08:40:00.000-07:002008-08-27T08:40:00.000-07:00PS, Another reason for having to sell is job loss....PS, Another reason for having to sell is job loss. With unemployment rising this will affect more & more people. Also based on a 10% loss my stock portfolio is now still worth $27,000 & I have lost only $3K. I can sleep a lot better in my rental house than someone who has lost $35,000 on their home.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-73549715751867521622008-08-27T07:35:00.000-07:002008-08-27T07:35:00.000-07:00Real estate traditionally has been a good investme...Real estate traditionally has been a good investment over longer periods of time, say 10 years. However, many people do not stay in the same house for 10 years. Reasons may include job transfers, divorce, having kids or most recently foreclosures. For those who bought in 2006-07 (which is a significant number) & now reach a point where they must sell, there is going to be some bloodletting. Also since the basis for residential real estate has always been leverage, this creates a problem. Say you put down 10% on a $300K home ($30,000)now your home is worth $282,000 ($18k or 6% decline as per CS). To sell you have to pay a 6% RE commission ($16,900). Now your $30,000 original invest is wiped out & you still owe $4,900. That does not include the 2% or so that you lost upfront in paying closing fees. That can not happen in stocks unless you bought on margin.<BR/><BR/>So if you don't have to move you could still live in your house & not worry to much about your lost investment. It may take many more years to recoup your losses but what the heck you are still making payments to the bank, the county for taxes & the insurance co. for fire insurance. Pretty good bet that that total PITI payment is much larger than renting a comparable home.<BR/><BR/>As for the people who refianced over the last 4-5 years. I believe there are a signifcant number who increased their loan balances to subsidize their lifestyle of living well beyond their means. Also apprx 25% of loans made in 2006-07 in the PDX market were Alt-A. These are showing signs of being just damn near as bad as subprime. Look for foreclosures to soar in PDX over the next 6-24 months as the parachute of appreciation in PDX has evaporated.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-5213475797278083692008-08-26T12:34:00.000-07:002008-08-26T12:34:00.000-07:00"We ended up with a 5br, 2ba in close in NE for $1..."We ended up with a 5br, 2ba in close in NE for $1500. They couldn't sell and needed income."<BR/><BR/>We saw a lot of these already back in Dec 2006 when we moved here. I can only imagine it's gotten worse (or better, depending on your take!).<BR/><BR/>That sounds like a pretty good deal to me.PDX Outsiderhttps://www.blogger.com/profile/01596115115859601410noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-17038184802520454712008-08-26T12:05:00.000-07:002008-08-26T12:05:00.000-07:00Yes, rental *house* prices are down!Yes, rental *a...Yes, rental *house* prices are down!<BR/>Yes, rental *apartment* prices are up!<BR/><BR/>I don't know how long these trends can continue before they begin to track together again.<BR/><BR/>I lived in a really nice 3 bedroom apartment in Vancouver that rented for $1125/mo. They raised the rent by $90 right about the time I was moving. I told the manager (Guardian Property Mngmt.) that the price was getting two steep and I was sure I could find better, but she replied that they were raising rent at ALL their apartments since they expected higher demand. I've since heard this echoed on blogs and in news stories: apartment management companies are making a calculated market bet that demand will go up.<BR/><BR/>On the other hand, I see house rentals going down, down, down in price. I was looking at a 3Bd, 1Ba being rented out by Fish Construction for $900 (what's the matter Jeff, couldn't sell it after the rehab?) when I realized I was a fool to still even be considering an apartment. House flippers, rehab-ers, and construction companies can no longer wait it out and bet on the market like the apartments managements. They are ready to rent NOW!<BR/><BR/>We ended up with a 5br, 2ba in close in NE for $1500. They couldn't sell and needed income.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-72883910239145784522008-08-26T10:17:00.000-07:002008-08-26T10:17:00.000-07:00I know the housing market is down right now but th...I know the housing market is down right now but the people feeling it most bought in during a period of fevered purchasing because 'prices only go up' or they withdrew too much equity during the same period.<BR/><BR/>If you bought a house ten years ago it is "down" in value too, compared to one year ago, but its irrelevant because over all its up a good deal. Say for example a For example, $150k home in 2000 now worth $260 now (valued at 300k a year ago). But I'm really not interested in it from a 'wealth generating' point of view because all that money the house 'made' is 'virtual' money since you can only access it by going into debt or moving out.<BR/><BR/>When you lose money in an investment fund you are losing actual money. When your house goes down in value 4%, you still get to live in it. Unless you're using your house as an ATM, a 4% drop (which is a hardly unforeseeable correction after ridiculous spike) shouldn't matter if all the other numbers work.<BR/><BR/>If my car were worth $10,000 one day and $5,000 the next I'd still have a car, and if I bought it for $4k I'd be pretty happy. Not as happy as if I'd cashed out at $10,000 but then I'd have been on the Max (or in a FlexCar) for a year waiting for the Ford-market to correct.<BR/><BR/>The market (housing and trading) is a bit bumpy at the moment. I wouldn't be keen to throw money into either unless the numbers worked. The stock market, if it crashes, you have less or nothing. If the value of a house crashes, you still have a house to live inside of. So as long as certain numbers pencil out, you're not looking for an ATM or to 'flip' the place, buying a house is not a bad idea...<BR/><BR/>**IF** the numbers work. We'll see what the numbers are soon. I'm getting really curious to see what PDX Outsider's methodology is.insomnibushttps://www.blogger.com/profile/06484301673820021424noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-55149715565706119842008-08-26T08:50:00.000-07:002008-08-26T08:50:00.000-07:00I drive through several residential areas to get t...I drive through several residential areas to get to work and I've seen many houses that have been taken off the market and are now for rent.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-47111142342044239092008-08-26T08:19:00.000-07:002008-08-26T08:19:00.000-07:00Around the holidays....portland will be a 'renters...Around the holidays....portland will be a 'renters market'. If you want to rent nice homes...hold off until the holidays and the turn of the new year. So many houses on the market right now. Sellers will get tired, need to move before their home sells etc. They will rent their home. The renters market will become saturated thus lowering rent prices across the seattle / portland area. Just an fyi...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-77500336207254085282008-08-26T03:24:00.000-07:002008-08-26T03:24:00.000-07:00"People losing thousands a month from their r..."People losing thousands a month from their retirement accounts". Yeah & if you have a house valued at $300,000 you are losing roughly $1,000 of value each month based of the declining values of roughly 4% reported by RMLS for PDX. Just because that doesn't show up on a monthly statement doesn't make it any less of a reality. Also I believe the RMLS figures are understated since sellers concessions of 2-3% are prevelant on most transactions. More like a 6-7% decline would be more realistic. Also most retirement accounts don't have a 6% commission to pay when converting securities into cash.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-22904210577998237372008-08-26T00:10:00.000-07:002008-08-26T00:10:00.000-07:00I didn't mean to compare buying a house to putting...I didn't mean to compare buying a house to putting money into a CD. In fact, I kind of agree with some people here who were talking about a house not quite as an investment in wealth-creation but rather as an 'investment' in a steady place to live vs. paying for a place to live monthly (forever).<BR/><BR/>Still, buying a house for whatever reason costs a lot of money. Timing and other factors affect how much money one might pay for the same house. Part of that money is the down payment, which you won't be able to use to generate income after you've handed it over to the bank.<BR/><BR/>The reason I like CD rates, or other accessible rates, is to establish some very basic measure of opportunity cost for down payment.<BR/><BR/>You can factor in 7% or 10% or even 20% interest if you'd like, as perhaps you know of some great investments that you'd rather put your money into. It just means that in your equation (that is, for you personally), it is less advantageous to own a home while for me, in my equation, it is a few percentage points more advantageous.<BR/><BR/>For example, if you have some niche investments that will net you a 20% return, its unlikely owning a house would ever be a good investment because 20% return + compound interest will pay rent forever and then some.<BR/><BR/>However, this gets into the merits of different investments (real estate, CDs, bonds, mutual funds, Vegas) which I think is a different kettle of fish all together. I'm curious about this too. Maybe PDX Outsider should follow up with a multi-post series on personal finance... I think that would be pretty cool actually.<BR/><BR/>As a quick aside, I have friends who are losing thousands a month from their retirement accounts this year. I'm sure things will turn around at some point (long term) but its not the environment I feel like tossing cash into at the moment.<BR/><BR/>My main point though is that since we're talking generally, about some set of guidelines for *everyone* (regarding renting vs owning), it makes sense to use a baseline of measurement that anyone has easy access to. And anyone with a pulse can stumble into a bank tomorrow and get 4% savings account so that doesn't strike me as a bad place to start...insomnibushttps://www.blogger.com/profile/06484301673820021424noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-21588649374985171672008-08-25T23:39:00.000-07:002008-08-25T23:39:00.000-07:00Comparing a CD account to a house "investment" doe...Comparing a CD account to a house "investment" doesn't tell quite the same story. Apples and oranges. A better comparison to a CD would be the cliche' "living in Mom's basement".<BR/><BR/>There's nothing difficult in buying a mutual fund. No riskier than a house if you don't buy a potato farming sector fund or other such junk. Right now, less risky than a house.<BR/><BR/>Don't forget the magic of compounding, cap gains and reinvested dividends, etc.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-60309987405596236262008-08-25T22:09:00.000-07:002008-08-25T22:09:00.000-07:00Its true you can achieve higher rates of return by...Its true you can achieve higher rates of return by investing, especially over the long haul, but for the sake of debate I think its more conducive to leave that off the table. There are many ways to turn money into more money but anything outside of the most basic, universally available options would entail a debate of their merits which is outside the scope of what we're talking about.<BR/><BR/>However, 3.5% - 5% can be had by walking into any bank, at the drop of a hat, and its 100% insured. WAMU has a 5% 13 month CD at the moment. Banner will give you 4% on a standard savings account. So these are the numbers I factor with. (used to be over 5%)<BR/><BR/>Besides, over the long haul, lots of things are good investments, including houses. :) But again, this is a question of when and how to calculate the benefits (factoring in all sorts of crazy numbers) and detracting factors from buying vs. renting.insomnibushttps://www.blogger.com/profile/06484301673820021424noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-11066457538736004902008-08-25T18:36:00.000-07:002008-08-25T18:36:00.000-07:00Tell me about it. We sold in May 2007, long story...Tell me about it. We sold in May 2007, long story short: career change and baby made it unaffordable especially since we bought too much mortgage to begin with.<BR/><BR/>Anyway, my Mom in Iowa says I am now raising my child in a welfare apartment! She hasn't even seen the place and doesn't believe me when I say this Forest Heights' apartment is actually an upgrade from our old Buckman house. And now with baby #2 on the way the family is questioning when we are going to buy again. When I tell them my childcare expenses will likely be around $1500/month come next spring, more than my first mortgage, they tend to go quiet. Next time someone asks about buying I will be asking them to cover my childcare expenses!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-3509261405148989802008-08-25T17:56:00.000-07:002008-08-25T17:56:00.000-07:00I had a casual conversation with someone today abo...I had a casual conversation with someone today about my decision not to buy and he got this look on his face of horror. Then he went into that trance they go into where it's like you told them God or their puppy was killed.<BR/><BR/>The home ownership paradigm is one of the most durable in our culture. It's blasephemy to believe otherwise.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-17350989274148673252008-08-25T17:55:00.000-07:002008-08-25T17:55:00.000-07:00Regarding rents trending down (my prediction thoug...Regarding rents trending down (my prediction though depends on the 'hood)): it will interesting what the new apartments like the 2121 Belmont, the Wyatt, the Ardea (formerly known as 3720 Bond/SoWa), the Lovejoy, the Alexan, and likely the Encore and Atwater Place, will have on rent. Supply and demand thinking tells me that rents will drop, I mean, how long can they keep asking $2K+ and let them sit vacant? <BR/><BR/>Also, I can think of four conversions close in on the east side that aren't selling and will likely be converted back to apartments. Their conversions to condos likely caused rent to go up by decreasing supply and now we will see the vice versa.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-3624147397522240152008-08-25T17:54:00.000-07:002008-08-25T17:54:00.000-07:003.5-5% return on 60K? A dog mutual find will retur...3.5-5% return on 60K? A dog mutual find will return at least 7% over the long haul.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-33708226403351298762008-08-25T13:27:00.000-07:002008-08-25T13:27:00.000-07:00correction, that should have been $60,000 x 0.04 =...correction, that should have been $60,000 x 0.04 = 2400.insomnibushttps://www.blogger.com/profile/06484301673820021424noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-42313467898168881242008-08-25T13:15:00.001-07:002008-08-25T13:15:00.001-07:00Lots of good comments. I'm glad to see that some ...Lots of good comments. I'm glad to see that some people picked up on the opportunity costs of the down payment on a house. It's even more important in a declining market due to the effects of leverage. This opportunity cost is included in my calculator, which I will post shortly.PDX Outsiderhttps://www.blogger.com/profile/01596115115859601410noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-63680609700403049172008-08-25T13:15:00.000-07:002008-08-25T13:15:00.000-07:00Lots of good comments. I'm glad to see that some ...Lots of good comments. I'm glad to see that some people picked up on the opportunity costs of the down payment on a house. It's even more important in a declining market due to the effects of leverage. This opportunity cost is included in my calculator, which I will post shortly.PDX Outsiderhttps://www.blogger.com/profile/01596115115859601410noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-20214627010142685652008-08-25T11:45:00.000-07:002008-08-25T11:45:00.000-07:00I agree with the opportunity cost of putting 40k -...I agree with the opportunity cost of putting 40k - 60k as a down payment but, not being much of an investor, I figure about 3.5% - 5% on that annually.<BR/><BR/>60,000 x 0.4 = $2400<BR/><BR/>$2400 / 12 = $200 / monthinsomnibushttps://www.blogger.com/profile/06484301673820021424noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-68483719725197947422008-08-25T08:06:00.000-07:002008-08-25T08:06:00.000-07:00I was hoping someone would mention the lost opport...I was hoping someone would mention the lost opportunity on the $36K down payment.<BR/><BR/>I put $5K into a typical mutual fund in 84 and it is worth $100K today, even in a down market. Can you imagine what $36K would have done over that time? Granted, that doesn't guarantee the next 24 years will produce the same result, but the fund has a consistent track record since 74.<BR/><BR/>I think it's funny how people say, "Well, you put $36K down....." like it's couch change.<BR/><BR/>And I can get that $100K in 24 hours with a phone call or the push of the send button.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-55443253097256968782008-08-25T05:03:00.000-07:002008-08-25T05:03:00.000-07:00Check out craigslist, there are some good deals on...Check out craigslist, there are some good deals on rental houses showing up more frequently. Noticed a very nice newer house in Garden Home with around 2,200 SF which was advertised for $1,595 recently. Rents for 1-2 bedroom apartments & houses may be holding steady or increasing slightly. This is probably due to the demographics of the people moving to PDX (many of whom are young hipsters with little or no personal wealth & many with lower wage jobs). Good deals on larger homes are showing up more frequently.<BR/><BR/>The above noted demographics does not bode well for RE prices in PDX, as most new residents can not afford or qualify for most of the overpriced homes that are on the market.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-51199320841838926932008-08-24T23:48:00.000-07:002008-08-24T23:48:00.000-07:00I've noticed people repeat that 'rents are down' b...I've noticed people repeat that 'rents are down' but from what I've found so far, for a 'nice' apartment the going rate seems to be about 800-900. There are some in the 700-800 range as well but, generally speaking, its closer to 800 or 850.<BR/><BR/>When I hit the $900/month mark I start thinking about purchasing instead of renting -- though I'm not sure if that's logical conclusion to reach. So I'm eagerly anticipating part two of this post.<BR/><BR/>But on that note, I think all the rents I've seen are a bit more than they were last year, and two bits more than two years ago.<BR/><BR/>If you guys know of some great deal I missing, I'd be keen to know where they are.insomnibushttps://www.blogger.com/profile/06484301673820021424noreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-83914117135384141572008-08-23T07:33:00.000-07:002008-08-23T07:33:00.000-07:00Geez, what do expect to get for only $365/SF. It e...Geez, what do expect to get for only $365/SF. It even has running water & electricity. Glad it is located near restraunts since there does not appear to be any place to eat other than sitting on the couch. Used the mortgage calulator in the listing & came up with $1,132 monthly payments at 10% down & $1,219 at 3% down. Doubt if this shack could rent for more than $700/month.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-66515413552232792362008-08-22T17:39:00.000-07:002008-08-22T17:39:00.000-07:00Bulldozer?!?!?! I could have that shack down with...Bulldozer?!?!?! I could have that shack down with a sledge hammer in a day or less!<BR/><BR/>Or we could salvage everything and build a nice doghouse for the previous anon posterAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4113767199444444516.post-84259639320872520932008-08-22T17:09:00.000-07:002008-08-22T17:09:00.000-07:00Let's see now, if you put down 20% (36K of you...Let's see now, if you put down 20% (36K of your hard earned money)you would have a house payment of around $900-950/month. That does not take into consideration the income you lost by taking the 36K out of savings. <BR/><BR/>Since rents appear to be falling I am quite certain you could find a better shack to rent for less monthly payments & still have access to your $36K. I would let my dog live there but he can no longer qualify for a loan.Anonymousnoreply@blogger.com