Why is everyone obsessed about housing?
Why is everyone on blind so maniacal about buying a house? Especially in the Bay, you lock in hundreds of thousands of dollars for down payment and you ensure yourself a life of slavery by paying an insanely fat mortgage every month that puts so much stress on you, then 3 years from now you change job and your commute now becomes twice as long just because you can’t move closer to work because of your house. Why can’t you just rent a smaller place close to work and invest everything somewhere else? (E.g. rental real estate where it actually makes sense and reasonable price/rent ratio, or stock market index funds). Is it because you have big families and many kids? Age: 32 TC: 400k NW: 1.2M (all in vanguard)
It's the "American Dream" - to have McMansion in the suburbs with a white picket fence, 2.4 kids and 0.6 pets.
In previous years if you bought early you gaining money through appreciation and your housing payment was a fixed cost (outside of property tax increase) vs. rent changing depending on rental supply and demand. Now is not a good time as the buy vs. rent favors renting unless you need the space and have a large dog or kids and you don't want to take them to the park.
I think it makes more sense for people with families or thinking of starting one. would your kids have to move with you if you get a new job?
Because Bay Area housing has had incredible double digit returns over the last bull market. Oakland has done 70% or something. You won’t get that kind of ROI in vanguard unless you’re an options genius.
Beyond just speculation, if you like the Area and want to stay here it makes sense to lock in a mortgage before they go higher. Though maybe not this year.
Is that true? Total stock market has more than doubled in the last bull market. Perhaps you are referring to the fact that by owning a house you can get leverage much easier?
Rent is unstable and unpredictable; mortgages are the same for decades with a max yearly increase of 2% propery tax. Interest rates have been insanely low for over the past decade which made leveraging money almost free. People enjoy owning property as it is theirs improve or do what they want without any permission needed. Finally people are hopeful that appreciation continues to outpace the norm and real estate is a pretty low risk leverage leading to wealth. Not for everyone of course.
Rent is much more predictable than housing prices.
Incorrect. A mortgage payment is locked for 30 years. Rent changes anytime the owner wants and market allows. Buy a house today and your payment in year 1 and 25 is exactly the same (less property taxes). Rent on the other hand is likely to change every year. Even if housing values drop 50% one year over 30 it's likely to beat renting.
Why are you so obsessed with Vanguard?
By vanguard I mean index funds. I’m heavily diversified in domestic and international index funds, vanguard is just one of the cheapest options to obtain the exposure. I don’t give af about vanguard itself.
I don’t believe in index funds or equities in general. What should I buy? Plus real estates have favorable tax treatment.($500K tax free appreciation for primary residence. Depreciation deduction for rentals and 1031 exchange to defer capital gains indefinitely) And massive leverage for real estates.
are you all_in_vtsax on reddit?
Haha no. I also have significant holdings in vxus and some muni bonds waiting for the next crash
Because small places closer to work aren’t cheaper. The mortgage on a single family home in SF is about the same as what we currently pay to rent in SF. It is about quality of life. I don’t want to ask permission to do things and I can afford it.
Is it really though? The average price/rent ratio in SF is about 0.3, pointing at the fact that most of those properties would actually lose money if they were bought, mortgaged and rented to other people, after accounting for all expenses (maintenance, insurance, taxes, capex). It’s essentially an appreciation play. But by all means, if it’s a luxury one wants, it’s perfectly fine, I’m just pointing out my observations on your comment mortgage==rent
I don’t care about averages. I care about my actual costs.
I am up 1.2 million on my 2 houses. House is the best way to build equity. Rent is a waste.
I read in another thread someone was responding to why invest in real estate because the ROI in the stock market for the same time period was higher and they should have invested in stocks to get a higher ROI :facepalm: Most people on blind don't understand leveraging.
I mean, you can leverage in the stock market as well to some degree. But you’re right, you won’t be able to borrow $1 million to put into stocks. Otherwise, everyone will be putting money in REITs
I could have written this! Excellent question.