On 6/11/13 5:29 PM, Walter Bright wrote:
> On 6/11/2013 2:19 PM, Steven Schveighoffer wrote:
>> Define financially better off :)
>
> You have mo' moolah. Is their any other definition?
>
>
>> And this is not even a fair conversation, because there are so many
>> variables to
>> consider.
>
> I'd like to pop that default conception that buying is financially
> better than renting. It's only true if real estate values appreciate
> faster than inflation plus taxes plus real estate commissions, which is
> hardly a sure thing.
>
> (A lot of people overlook property taxes and capital gains taxes when
> they make these calculations. I know one guy who cashed in his stock
> options and bought a house with the proceeds, only to be forced to sell
> it a year later because he couldn't pay the upkeep and taxes on his
> salary.)
>
> I can't even recall anyone remembering that selling a house costs you a
> 6% commission to the real estate agent. Poof! There goes a big chunk of
> your profits right off the top.
>
> Housing prices have to go up a lot to counter all that.

Whoa. I agree with all that, but this is well-known stuff, not obscure information going against common beliefs. There are a bunch of sites computing "buy vs rent" etc.

Andrei

On Tue, 11 Jun 2013 08:33:03 -0400
Andrei Alexandrescu <SeeWebsiteForEmail@erdani.org> wrote:

> Reddit: http://www.reddit.com/r/programming/comments/1g47df/dconf_2013_metaprogramming_in_the_real_world_by/
> 
> Hackernews: https://news.ycombinator.com/item?id=5861237
> 
> Twitter: https://twitter.com/D_Programming/status/344431490257526785
> 
> Facebook: https://www.facebook.com/dlang.org/posts/655271701153181
> 
> Youtube: http://youtube.com/watch?v=pmwKRYrfEyY
> 
> Please drive discussions on the social channels, they help D a lot.
> 
> 
> Andrei

Torrents/links up: http://semitwist.com/download/misc/dconf2013/

On 6/11/2013 2:55 PM, Adam D. Ruppe wrote:
> ...and if you sell it, unless you own multiple houses, you're now homeless. And
> housing prices are up, so getting a new house will erase the gains you got from
> selling the old house!

Yeah, I love that one.

> But I do feel the house is worth it financially because it erases an ongoing
> cost down the road. The sum of my taxes and homeowner's insurance are about 1/3
> what I was paying in rent,

Don't forget mortgage interest.

> so after the house is paid off, it is like erasing
> eight rent payments a year. It'll still take time for that to exceed the
> mortgage cost, but it eventually will, and when that happens, the house could
> have a $0 market value and that wouldn't matter to me because it still does what
> I need it to do.

On Tue, 11 Jun 2013 17:29:45 -0400, Walter Bright <newshound2@digitalmars.com> wrote:

> On 6/11/2013 2:19 PM, Steven Schveighoffer wrote:
>> Define financially better off :)
>
> You have mo' moolah. Is their any other definition?

Cash is not always the only consideration.  Equity has value.  Quality of living has value, and can increase your financial situation.  And depending on how much more "moolah", it might not be worth it.  Consider that while you are renting, you are paying someone else's mortgage on that property, and at the end of the day (lease), you have nothing and they have a property, worth hundreds of thousands.

Whether you succeed or not depends very much on the local market.

>> And this is not even a fair conversation, because there are so many variables to
>> consider.
>
> I'd like to pop that default conception that buying is financially better than renting. It's only true if real estate values appreciate faster than inflation plus taxes plus real estate commissions, which is hardly a sure thing.

I never said it was *always* better, but it's not always worse either.  Now is actually a very good time to buy, because prices are low.  A house is a very safe investment, if you can afford the mortgage.  Property will ALWAYS have value, even if almost everything else goes to shit.

> (A lot of people overlook property taxes and capital gains taxes when they make these calculations. I know one guy who cashed in his stock options and bought a house with the proceeds, only to be forced to sell it a year later because he couldn't pay the upkeep and taxes on his salary.)

Many people buy too much house for their salary.  It's even encouraged by the banks/government, it makes the government "look good" when more people can buy houses.  Then you get the market crash of '08.

This is actually a pretty despicable practice IMO.  Mortgages and housing investments are not things to take lightly, but we use "pre-approval" from the bank, as if the bank says "Yes, you can afford that house!" when it really has nothing to do with what you can afford.  And then the government threatened to punish banks if they did not make sure low-income families were approved for houses they couldn't afford.

It sounds like your friend was not in that dire of straights though, since he bought his house with cash.  Cash that he didn't have before.  I'm assuming he got most of that back (unless he was careless about his choice of house).  As humans, we seem to consider loss of what we didn't know we had worse than never having gained it.

A very interesting study posed two questions to people:

1. You are given $1000, without having done anything to earn the money.  You then are given the option to take an additional $500 guaranteed, or a 50/50 chance at getting $1000 more.  Which would you choose?

2. You are given $2000, without having done anything to earn the money.  You then are given the option to lose $500 guaranteed, or a 50/50 chance at losing $1000.  Which would you choose?

The vast majority chooses the safe route of gaining $500 on the first question, but then chooses to risk $1000 on the second question because they HATE to simply give up $500 for sure.

Most people don't notice that both questions are EXACTLY the same.

> I can't even recall anyone remembering that selling a house costs you a 6% commission to the real estate agent. Poof! There goes a big chunk of your profits right off the top.

My profit on my first condo, which I bought in '99 and sold in '05 was 150% of the *purchase price*.  Minus the 6% commission :)  Although, it was only 3% because a family friend who is a real estate agent did not charge me her half.  And I only had about 5% equity of the purchase price invested when I sold.

Of course, in '05 prices were inflated, so the house I bought with that money has since gone down in value.  But I'm still pretty well off because of my profit from the first.  And I have a very nice house, one which would be tough to rent at the mortgage payment I currently have.

> Housing prices have to go up a lot to counter all that.

They can.  They don't have to go up as much as you think.  They can go down.  You have to be more aware of the market than with renting, that is for sure.  But that is true for any rent vs. buy situation when you are looking at a large purchase.

-Steve

On Tue, 11 Jun 2013 17:51:08 -0400, John Colvin <john.loughran.colvin@gmail.com> wrote:

> On Tuesday, 11 June 2013 at 19:54:34 UTC, Steven Schveighoffer wrote:
>> On Tue, 11 Jun 2013 15:44:35 -0400, John Colvin <john.loughran.colvin@gmail.com> wrote:
>>
>>>
>>> It's not ready to roll out as the energy of the future, but in certain circumstances it's a good deal for an individual.
>>
>> It's not a good deal for the taxpayers who have to subsidize it to make it a good deal for the individual.  Would you buy it if it was full price?
>>
>> -Steve
>
> Probably not. However, the subsidies have done a great deal to get the technology real-world testing in a variety of settings, as well as providing cash-flow for practical R+D, especially with regards to more down to earth practicalities. I would say it is - at the very least - not a complete waste of money for the tax-payer.
>
> P.S. I'm not buying it at all, my parents did as it represented a much better investment than any bank accounts. In particular, the energy companies pay quite a high price to buy the spare energy.

For my day job, our company actually does energy saving retro-fits (all for refrigeration, but many companies do lighting and HVAC).  It's an interesting business.  Typically the utility pays for most of the cost, and part of it is from the government, but part of it is out of practicality.  If they can pay you to lower your energy costs, they avoid having to build more power-plants because energy consumption is continually growing.

But from what I've seen in Solar, it's more political than practical.  Our paybacks without subsidizing are usually in the 2-5 year range.  And our equipment is guaranteed for far longer.  The incentive just makes it a real easy sell (usually under 2 year payback).

We also sell to large companies that have humongous coolers/freezers (think like home-depot sized), and these places can have less than one year payback *without* incentives.

-Steve

On 6/11/2013 6:54 PM, Steven Schveighoffer wrote:
> On Tue, 11 Jun 2013 17:29:45 -0400, Walter Bright <newshound2@digitalmars.com>
> wrote:
>
>> On 6/11/2013 2:19 PM, Steven Schveighoffer wrote:
>>> Define financially better off :)
>>
>> You have mo' moolah. Is their any other definition?
>
> Cash is not always the only consideration.  Equity has value.

I know that. I took accounting, and know that any asset that can be exchanged for money is as good as money. Home equity can be quickly converted to cash via a home equity loan, or a bit more slowly by selling it.


> Property will ALWAYS have
> value, even if almost everything else goes to shit.

Unless you buy in Detroit! (And that's far from the only such example. Many small towns in America are like that.)


> Most people don't notice that both questions are EXACTLY the same.

Most people are math challenged. A friend of mine in the used car lot business told me that's how they make their money - off of people who simply don't understand how financing works, even when they're flatly told how it works.

Pick up a copy of the book "Influence". I bet you'll find it fascinating! I sure did.

On Tuesday, 11 June 2013 at 21:55:48 UTC, Adam D. Ruppe wrote:
> ...and if you sell it, unless you own multiple houses, you're now homeless. And housing prices are up, so getting a new house will erase the gains you got from selling the old house! So I don't think raising property values makes me wealthier at all.

But when housing cost goes up the government can take more from you on anything based on your "wealth." Just because you can't pay because your wealth is all chewed up in material things like a house, who cares!

On 6/11/2013 6:54 PM, Steven Schveighoffer wrote:
> My profit on my first condo, which I bought in '99 and sold in '05 was 150% of
> the *purchase price*.  Minus the 6% commission :)  Although, it was only 3%
> because a family friend who is a real estate agent did not charge me her half.
> And I only had about 5% equity of the purchase price invested when I sold.

Consider that you rode the real estate boom using leverage. But that lever works both ways, as many found out to their horror a few years later. You can lose a lot more than 100% of your investment when you lever.

I've ridden a couple booms successfully, too. I made the mistake of thinking that was business acumen. It wasn't, as I got a very rude comeuppance on the back slope of the boom.

I live in the land of the Microsoft zillionaires. It's fun talking to them about their wealth. Most of them realize that they're worth $20m because lightning struck them, and behave prudently. A few delude themselves into thinking they are wealthy because they are business geniuses, and wind up getting reset to zero. Microsoft stock has been flat for 13 years now, and it isn't going to happen again to them.

I don't mean to discourage anyone from shooting for the stars in building their investments, I just want to point out that owning a home is far from the sure path to wealth it is too often presented as. As always, caveat emptor.

On Tue, 11 Jun 2013 23:36:11 -0400, Jesse Phillips <Jesse.K.Phillips+D@gmail.com> wrote:

> On Tuesday, 11 June 2013 at 21:55:48 UTC, Adam D. Ruppe wrote:
>> ...and if you sell it, unless you own multiple houses, you're now homeless. And housing prices are up, so getting a new house will erase the gains you got from selling the old house! So I don't think raising property values makes me wealthier at all.
>
> But when housing cost goes up the government can take more from you on anything based on your "wealth." Just because you can't pay because your wealth is all chewed up in material things like a house, who cares!

In the US at least, only home sales (or transfers of ownership, like inheritance) are taxed.  As long as you live there, they will not (and I believe they cannot) tax you based on the "current value."

Property taxes are different, and you will be paying those no matter how you live (rent or own).

And you are allowed to transfer equity from your current home into a new home tax free, even if you gained, up to a certain amount.  I think there are limitations on how many times you can do this...

The tax system is definitely set up to favor the homeowner, not the renter.

-Steve

On Tue, 11 Jun 2013 23:29:17 -0400, Walter Bright <newshound2@digitalmars.com> wrote:

> On 6/11/2013 6:54 PM, Steven Schveighoffer wrote:

>> Property will ALWAYS have
>> value, even if almost everything else goes to shit.
>
> Unless you buy in Detroit! (And that's far from the only such example. Many small towns in America are like that.)

Correction, unless you BOUGHT in Detroit :)  If you buy in Detroit now, it's dirt cheap and you get what you pay for!

Certainly it pays to do research about the community, and not just look at the last year of sales.

My great uncle made his fortune during the great depression, simply because he owned land/property outright.  When everyone lost everything, so many newly homeless people needed places to stay, so he built very modest very cheap housing.  They were grateful to have a place to live, and he was able to avoid all effects from the depression because he had the one thing that everyone needs, and they're not making any more of :)

-Steve