Rent vs Buy in Bay Area: (my) number-driven approach
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Have you seen this calculator?
https://michaelbluejay.com/house/rentvsbuy.html
Also, I personally would have a baseline as 0/0 appreciation for both, then construct some worst case and best case scenarios.
https://michaelbluejay.com/house/rentvsbuy.html
Also, I personally would have a baseline as 0/0 appreciation for both, then construct some worst case and best case scenarios.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
We will be listing our BA home within the next couple of months. We've likely missed "the top" (?), but that's okay. The realtors are all saying that the housing market is cooling due to interest rates going up .5 the past month and may possibly go up again when the feds meet again. This just limits the pool of potential buyers. While there are still multiple offers (3-4) in my area, there are no longer 10-15 offers.
So if you can find a deal, I wouldn't make an all or nothing decision today. Keep renting, but keep looking.
I also think "the top" is never predictable. People have been saying that about the stock market forever. "The market is so high, I'm worried about investing in it" only to see it rise even higher and cycle down and back up.
I don't understand Bay Area housing even though I've lived here since 1988.
Rented a 2 bedroom duplex in Sunnyvale in 1988 for $995 a month. Bought first BA house in 1992 for 200K, sold it in 2000 for 325K and bought current house for 525K. We will list it for 2.1M and see what happens. Does that math make any sense to anyone? Not me.
I say rent until you find a deal. Pay as much cash down as you can. It's not just about money, but about lifestyle and housing security. Placing a value on that is personal.
So if you can find a deal, I wouldn't make an all or nothing decision today. Keep renting, but keep looking.
I also think "the top" is never predictable. People have been saying that about the stock market forever. "The market is so high, I'm worried about investing in it" only to see it rise even higher and cycle down and back up.
I don't understand Bay Area housing even though I've lived here since 1988.
Rented a 2 bedroom duplex in Sunnyvale in 1988 for $995 a month. Bought first BA house in 1992 for 200K, sold it in 2000 for 325K and bought current house for 525K. We will list it for 2.1M and see what happens. Does that math make any sense to anyone? Not me.
I say rent until you find a deal. Pay as much cash down as you can. It's not just about money, but about lifestyle and housing security. Placing a value on that is personal.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Prior to buying a home in the Bay Area, I did the usual comparing buying to renting, but once we decided to buy, I started to think about it in new ways. To me, buying a home in the Bay Area is in some ways like a whole life policy, but instead of bolting an investing component onto life insurance, it's bolting a home equity component on top of mortgage payments. Technically, the same can be said of homes anywhere, but with prices in the Bay Area being so high and supply being fundamentally constrained, the dynamic is more pronounced. Basically, instead of saving a standard 20% down payment and comparing total cost to renting, I think you save whatever down payment is required to get the payments you want, and the cost of getting that is having to tie up your down payment in a relatively dependable asset, which is analogous to the investment component of whole life.
I know lots of people are hesitant to consider Bay Area real estate valuations dependable, but the dynamic of a huge tech industry with highly-compensated young professionals and not enough housing would take a lot more than the current slowdown to fully reverse, so it's hard to imagine prices crashing. We saved up over 30% for our down payment, which got our mortgage payments to about the same level as our previous rent, so if we assume that the 30% tied up in equity is a reasonably safe investment, it kind of doesn't matter whether TCO is better or worse than renting if I would've just put that money in bonds (and housing has been doing way better than both stocks and bonds recently, for what it's worth).
Essentially, housing in the Bay Area is no longer about putting a roof over everyone's heads, it's about providing fancy piggy banks to the portion of the population than can afford them. I think trying to compare renting vs. buying with 20% down payments is kind of missing the point. Many of the people buying are able and willing to put more down or buy outright in cash because they'd rather own the local real estate than put the money in something else. That's why values can sometimes feel a bit disconnected from rents, although even then, rents usually end up following valuations eventually, that's how severe the housing shortage is. Even rentals are going to the portion of the population that can afford them.
I know lots of people are hesitant to consider Bay Area real estate valuations dependable, but the dynamic of a huge tech industry with highly-compensated young professionals and not enough housing would take a lot more than the current slowdown to fully reverse, so it's hard to imagine prices crashing. We saved up over 30% for our down payment, which got our mortgage payments to about the same level as our previous rent, so if we assume that the 30% tied up in equity is a reasonably safe investment, it kind of doesn't matter whether TCO is better or worse than renting if I would've just put that money in bonds (and housing has been doing way better than both stocks and bonds recently, for what it's worth).
Essentially, housing in the Bay Area is no longer about putting a roof over everyone's heads, it's about providing fancy piggy banks to the portion of the population than can afford them. I think trying to compare renting vs. buying with 20% down payments is kind of missing the point. Many of the people buying are able and willing to put more down or buy outright in cash because they'd rather own the local real estate than put the money in something else. That's why values can sometimes feel a bit disconnected from rents, although even then, rents usually end up following valuations eventually, that's how severe the housing shortage is. Even rentals are going to the portion of the population that can afford them.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
I agree w/ this. I think the VHCOL areas are a diffrent breed. Not to say there aren't risks, but there's no free lunch. If you want widespread 250-500k/yr jobs you're going to have to roll the dice on RE. You may come up aces(like the last 10 yrs), on you may get burned buying at the top or deciding to rent and missing out on huge appreciation.randomguy wrote: ↑Tue May 17, 2022 10:04 pmNot an opinion. Wrong mathematically. The person paying 500k in rent is far behind the person paying 700k for a mortgage and making 1 million dollars in appreciation. And that gap will keep growing for the rest of their lives...KlangFool wrote: ↑Tue May 17, 2022 9:14 pmrandomguy,
I disagreed. Wrong answer in your opinion. But, it is the right answer for me.
"It is a tough place to live where you can/have to make these bets."
1) Then, don't live there. If someone is not paid well enough to live in one area, why live there?
2) If they choose to live there, then, it is their choice.
KlangFool
1) They are paid well enough to live there. They still need to make the bet. You can easily afford that 1 million dollar house with a 400k salary. Doesn't mean you can avoid placing the bet
2) Sure. But who picks a place to live based on if a house is cash flow positive on day 1?
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Re: Rent vs Buy in Bay Area: (my) number-driven approach
I think you misunderstand. We’re on a board where we celebrate living within your means and investing the rest according to the principles set out by Jack Bogle. You already have more money in the bank than 90% of people have at retirement, and I suspect you’re on track to double that within the next five years. What is all that money for? What are your goals?deanmoriarty wrote: ↑Tue May 17, 2022 8:27 pmAren't we on a board where frugality is celebrated, as opposed to made fun of?
Money is a tool, not an end in itself.
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Re: Rent vs Buy in Bay Area: (my) number-driven approach
This is not necessarily on-topic, but I'll bite: I am in a career (tech) where both burnout and ageism are extremely real (I burned out at my last job, you can find lots of history in my previous posts, and nobody I work with is 40+), so I certainly do not expect to milk this kind of compensation into my 50s. As a matter of fact, I'm planning to quit at some point in my early 40s, travel the world with my partner for a few years while I have excellent health, and then probably take a low-paying (but fun!) job to pass my time, possibly remote while working from Europe, as I am a dual citizen US/EU born in a beautiful mediterranean country. Hopefully you can see why I am currently living well below my means, I don't count on my income to last forever.quantAndHold wrote: ↑Wed May 18, 2022 1:26 pmI think you misunderstand. We’re on a board where we celebrate living within your means and investing the rest according to the principles set out by Jack Bogle. You already have more money in the bank than 90% of people have at retirement, and I suspect you’re on track to double that within the next five years. What is all that money for? What are your goals?deanmoriarty wrote: ↑Tue May 17, 2022 8:27 pmAren't we on a board where frugality is celebrated, as opposed to made fun of?
Money is a tool, not an end in itself.
Regarding this specific house purchase, the asset that I most jealously value in life is my time, so I try to minimize the time I waste every day, and this includes time spent commuting and doing house chores/maintenance. Since I will not have kids, a 2bd modern condo close to work that I can leave for 6+ months a year without ever needing any time-consuming maintenance is the absolute best I could hope for and truly an optimal choice for my circumstances, far superior to blowing $4M+ for a large house close to work and a terribly uncomfortable mortgage payment.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
I've been thinking about this quite a bit lately and have been puzzled by the behavioral bias of posters (not really...since most people chase returns).
All in all, the usual rule of needing to live somewhere for x amount of years applies. After that, it's a matter of imprecisely assuming that the market has already set a fair price between rent and purchase.
This leaves one simple parameter open. Portfolio diversification. If it's a small fraction of your net worth, the diversification is probably worth it. If is creeping above 20 or 30% of net worth it's just adding uncessary risk to long-term net worth.
Obviously I am also aware that in many non technical jobs and social circles, you will be an outcast and party pooper by not joining in on the risk game. This can have adverse effects on some people.
FYI, I'm that guy making no pass bets at the craps table to get free beers while my friends play.
All in all, the usual rule of needing to live somewhere for x amount of years applies. After that, it's a matter of imprecisely assuming that the market has already set a fair price between rent and purchase.
This leaves one simple parameter open. Portfolio diversification. If it's a small fraction of your net worth, the diversification is probably worth it. If is creeping above 20 or 30% of net worth it's just adding uncessary risk to long-term net worth.
Obviously I am also aware that in many non technical jobs and social circles, you will be an outcast and party pooper by not joining in on the risk game. This can have adverse effects on some people.
FYI, I'm that guy making no pass bets at the craps table to get free beers while my friends play.
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Re: Rent vs Buy in Bay Area: (my) number-driven approach
I was in tech until I retired at 53, so believe me, I understand. I found ageism to be oversold, but burnout was a real thing for me. And I agree, a 2 bedroom condo (or IMO, 3 bed townhouse with a little patio yard) is seriously underrated as a lifestyle choice. Before I married a woman who loves to garden, I was happily living in a 2 bedroom condo near work.deanmoriarty wrote: ↑Wed May 18, 2022 1:44 pmThis is not necessarily on-topic, but I'll bite: I am in a career (tech) where both burnout and ageism are extremely real (I burned out at my last job, you can find lots of history in my previous posts, and nobody I work with is 40+), so I certainly do not expect to milk this kind of compensation into my 50s. As a matter of fact, I'm planning to quit at some point in my early 40s, travel the world with my partner for a few years while I have excellent health, and then probably take a low-paying (but fun!) job to pass my time, possibly remote while working from Europe, as I am a dual citizen US/EU born in a beautiful mediterranean country. Hopefully you can see why I am currently living well below my means, I don't count on my income to last forever.quantAndHold wrote: ↑Wed May 18, 2022 1:26 pmI think you misunderstand. We’re on a board where we celebrate living within your means and investing the rest according to the principles set out by Jack Bogle. You already have more money in the bank than 90% of people have at retirement, and I suspect you’re on track to double that within the next five years. What is all that money for? What are your goals?deanmoriarty wrote: ↑Tue May 17, 2022 8:27 pmAren't we on a board where frugality is celebrated, as opposed to made fun of?
Money is a tool, not an end in itself.
Regarding this specific house purchase, the asset that I most jealously value in life is my time, so I try to minimize the time I waste every day, and this includes time spent commuting and doing house chores/maintenance. Since I will not have kids, a 2bd modern condo close to work that I can leave for 6+ months a year without ever needing any time-consuming maintenance is the absolute best I could hope for and truly an optimal choice for my circumstances, far superior to blowing $4M+ for a large house close to work and a terribly uncomfortable mortgage payment.
I think what I’m reacting to is the optimization of every penny on that spreadsheet, with no discussion of what would really be the best option for your happiness. With your income and assets, it kind of doesn’t matter whether you buy or rent. You have enough income and assets to meet your financial goals either way. If your lifestyle would best be served by a 2 bedroom condo near work, and you’re planning on keeping the place for at least ten years, now is as good a time to buy as any. Nobody can predict what’s going to happen in the short term to prices or interest rates or rents, but in the long run, housing inflation will probably be the winner.
So anyway, that was a verbose way of saying “don’t forget to live life while you’re making all your plans.”
Re: Rent vs Buy in Bay Area: (my) number-driven approach
The problem is you are playing the risk game either way. You are either
a) Keep on renting and risk having to pay 8k/month instead of 4k for housing in 10 years
or
b) Buy now and risk paying say 1 million for a house that is now only worth 800k
We have had threads for a decade now on if people should buy that bay area house. They are all the same. Half the people point out how much cheaper renting is short term. The other half point out how much cheaper buying will be long term. If you plan on being somewhere for 10+ years, I wouldn't market time and buy if you find something that meets your needs. Plan on leaving in 5 years? I wouldn't gamble.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Don't buy. If your lifestyle choices change or eventually evolve rethink home ownership.deanmoriarty wrote: ↑Wed May 18, 2022 1:44 pm ...As a matter of fact, I'm planning to quit at some point in my early 40s, travel the world with my partner for a few years while I have excellent health, and then probably take a low-paying (but fun!) job to pass my time, possibly remote while working from Europe, as I am a dual citizen US/EU born in a beautiful mediterranean country. Hopefully you can see why I am currently living well below my means, I don't count on my income to last forever.
Regarding this specific house purchase, the asset that I most jealously value in life is my time, so I try to minimize the time I waste every day, and this includes time spent commuting and doing house chores/maintenance. Since I will not have kids, a 2bd modern condo close to work that I can leave for 6+ months a year without ever needing any time-consuming maintenance is the absolute best I could hope for and truly an optimal choice for my circumstances, far superior to blowing $4M+ for a large house close to work and a terribly uncomfortable mortgage payment...
Re: Rent vs Buy in Bay Area: (my) number-driven approach
The last 10 years were also historically exceptional at exacerbating the root causes of CA's hot housing market. Incomes and the number of jobs offering them rose dramatically, foreign investment increased, interest and mortgage rates plummeted, the population grew rather rapidly for a number of those years, and new housing continued to be severely under-built. I'm not saying the next 10 years won't be the same, considering many of those factors are still present to a large degree, but I also don't think it's a given that housing prices will have the same tailwinds going forward. Tech speculation has moderated, WFH has seen wide adoption, population growth has declined, housing starts have picked up, rates are rising, pandemic restrictions limited foreign in-flows, renter protections have made being an investor/landlord much less appealing, there are now state-wide ADU and rent control laws, and high-speed rail is under construction. All that is to say that whatever ends up happening to prices, the next 10 years will be a fundamentally different housing market than the last.randomguy wrote: ↑Wed May 18, 2022 7:45 pmThe problem is you are playing the risk game either way. You are either
a) Keep on renting and risk having to pay 8k/month instead of 4k for housing in 10 years
or
b) Buy now and risk paying say 1 million for a house that is now only worth 800k
We have had threads for a decade now on if people should buy that bay area house. They are all the same. Half the people point out how much cheaper renting is short term. The other half point out how much cheaper buying will be long term. If you plan on being somewhere for 10+ years, I wouldn't market time and buy if you find something that meets your needs. Plan on leaving in 5 years? I wouldn't gamble.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
To be honest, I felt the same 100%, when looking at the numbers. But having my own house is nice. The list of maintenance disadvantages are real though.
Anyway… things got skewed and now all the sudden it’s up 75% in 2 years. That changes things. Is it likely to continue at this pace? Definitely not. But there will be times in the future where it goes up quickly and dramatically changes your numbers. So it’s nice to own when that happens.
Long story short, it doesn’t matter at all, given your numbers on income and net worth. Housing movements in price of asset or rent will not be material for you.
Anyway… things got skewed and now all the sudden it’s up 75% in 2 years. That changes things. Is it likely to continue at this pace? Definitely not. But there will be times in the future where it goes up quickly and dramatically changes your numbers. So it’s nice to own when that happens.
Long story short, it doesn’t matter at all, given your numbers on income and net worth. Housing movements in price of asset or rent will not be material for you.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Maybe. Maybe not. Since at least the mid 90s people have been talking about what will stop the booming real estate market. In the core areas (i.e. not the towns 60+mins from SF in the exurbs) you had a pretty minor hick up for a couple years around 2008 but otherwise it has been rapid increases. As I said you can read the threads and how many people have thought the trend must end and buying was a bad idea. Some day they will be right. But it could be another 2 decades in the future for all we know. Or tomorrow..dboeger1 wrote: ↑Thu May 19, 2022 1:06 amThe last 10 years were also historically exceptional at exacerbating the root causes of CA's hot housing market. Incomes and the number of jobs offering them rose dramatically, foreign investment increased, interest and mortgage rates plummeted, the population grew rather rapidly for a number of those years, and new housing continued to be severely under-built. I'm not saying the next 10 years won't be the same, considering many of those factors are still present to a large degree, but I also don't think it's a given that housing prices will have the same tailwinds going forward. Tech speculation has moderated, WFH has seen wide adoption, population growth has declined, housing starts have picked up, rates are rising, pandemic restrictions limited foreign in-flows, renter protections have made being an investor/landlord much less appealing, there are now state-wide ADU and rent control laws, and high-speed rail is under construction. All that is to say that whatever ends up happening to prices, the next 10 years will be a fundamentally different housing market than the last.randomguy wrote: ↑Wed May 18, 2022 7:45 pmThe problem is you are playing the risk game either way. You are either
a) Keep on renting and risk having to pay 8k/month instead of 4k for housing in 10 years
or
b) Buy now and risk paying say 1 million for a house that is now only worth 800k
We have had threads for a decade now on if people should buy that bay area house. They are all the same. Half the people point out how much cheaper renting is short term. The other half point out how much cheaper buying will be long term. If you plan on being somewhere for 10+ years, I wouldn't market time and buy if you find something that meets your needs. Plan on leaving in 5 years? I wouldn't gamble.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Risk on a 1mil+ home purchase depends a lot on net worth.randomguy wrote: ↑Wed May 18, 2022 7:45 pmThe problem is you are playing the risk game either way. You are either
a) Keep on renting and risk having to pay 8k/month instead of 4k for housing in 10 years
or
b) Buy now and risk paying say 1 million for a house that is now only worth 800k
We have had threads for a decade now on if people should buy that bay area house. They are all the same. Half the people point out how much cheaper renting is short term. The other half point out how much cheaper buying will be long term. If you plan on being somewhere for 10+ years, I wouldn't market time and buy if you find something that meets your needs. Plan on leaving in 5 years? I wouldn't gamble.
Someone with a net worth above 3 or 5 mil can truly plan on living in the bay for 10+ years if they buy a house. They can absorb a 1 mil loss + a massive natural disaster / massive sector layoff / massive pull back in capital from Asian.
Someone with a net worth less than that but has the ability to purchase a 1 to 2 mil house can't rationally plan on living in the bay for 10 consecutive years without family assistance. It's truly a hope, not a plan.
There is a fundamental reason why the 49ers are a mascot in the bay.
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Re: Rent vs Buy in Bay Area: (my) number-driven approach
According to Mr. KF [OT comment removed by admin LadyGeek]
" B) I do not buy a house that I could not pay off the mortgage at any time.
C) Only buy a house when it is significantly cheaper than renting.
Hence, the mortgage is not significant and it is not a burden. To each its own.
KlangFool "
" B) I do not buy a house that I could not pay off the mortgage at any time.
C) Only buy a house when it is significantly cheaper than renting.
Hence, the mortgage is not significant and it is not a burden. To each its own.
KlangFool "
Re: Rent vs Buy in Bay Area: (my) number-driven approach
You will note how KF never mentions how much he saved by renting for a decade versus buying his house 10 years earlier. If you are a short term thinker who is only worried about the next 12 months, this is easy to figure out. When you care about the next 20 years, you are off in ouija board land. You place you bets and hope you win.carminered2019 wrote: ↑Thu May 19, 2022 9:24 pm According to Mr. KF [OT comment removed by admin LadyGeek]
" B) I do not buy a house that I could not pay off the mortgage at any time.
C) Only buy a house when it is significantly cheaper than renting.
Hence, the mortgage is not significant and it is not a burden. To each its own.
KlangFool "
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Hoping to be lucky is not a good strategy. We know how it turns out in every recession. The lesson will be taught again in the coming recession.randomguy wrote: ↑Thu May 19, 2022 10:19 pmYou will note how KF never mentions how much he saved by renting for a decade versus buying his house 10 years earlier. If you are a short term thinker who is only worried about the next 12 months, this is easy to figure out. When you care about the next 20 years, you are off in ouija board land. You place you bets and hope you win.carminered2019 wrote: ↑Thu May 19, 2022 9:24 pm According to Mr. KF [OT comment removed by admin LadyGeek]
" B) I do not buy a house that I could not pay off the mortgage at any time.
C) Only buy a house when it is significantly cheaper than renting.
Hence, the mortgage is not significant and it is not a burden. To each its own.
KlangFool "
KlangFool
P.S.: I always save 1 year of expenses every year. With or without the mortgage.
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Rent vs Buy in Bay Area: (my) number-driven approach
Making poor choices out of fear isn't a good strategy. I don't know your specific house but I am pretty confident you paid 50% more by waiting 10 years to buy. Market timing is really hard to do well. It is easy to say only buy stocks when they are off 50% as it will minimize your downside risks. The problem of course is that it is a losing strategy versus just constantly buying.KlangFool wrote: ↑Fri May 20, 2022 6:45 amHoping to be lucky is not a good strategy. We know how it turns out in every recession. The lesson will be taught again in the coming recession.randomguy wrote: ↑Thu May 19, 2022 10:19 pmYou will note how KF never mentions how much he saved by renting for a decade versus buying his house 10 years earlier. If you are a short term thinker who is only worried about the next 12 months, this is easy to figure out. When you care about the next 20 years, you are off in ouija board land. You place you bets and hope you win.carminered2019 wrote: ↑Thu May 19, 2022 9:24 pm According to Mr. KF [OT comment removed by admin LadyGeek]
" B) I do not buy a house that I could not pay off the mortgage at any time.
C) Only buy a house when it is significantly cheaper than renting.
Hence, the mortgage is not significant and it is not a burden. To each its own.
KlangFool "
KlangFool
P.S.: I always save 1 year of expenses every year. With or without the mortgage.
PS. I was saving 3x of expenses every year when working. And I don't exclude 1 time expenses like college either. Doesn't make me a better person. It was just the result of a high income and not feeling the need to inflate my lifestyle.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
randomguy,randomguy wrote: ↑Fri May 20, 2022 7:31 amMaking poor choices out of fear isn't a good strategy. I don't know your specific house but I am pretty confident you paid 50% more by waiting 10 years to buy.KlangFool wrote: ↑Fri May 20, 2022 6:45 amHoping to be lucky is not a good strategy. We know how it turns out in every recession. The lesson will be taught again in the coming recession.randomguy wrote: ↑Thu May 19, 2022 10:19 pmYou will note how KF never mentions how much he saved by renting for a decade versus buying his house 10 years earlier. If you are a short term thinker who is only worried about the next 12 months, this is easy to figure out. When you care about the next 20 years, you are off in ouija board land. You place you bets and hope you win.carminered2019 wrote: ↑Thu May 19, 2022 9:24 pm According to Mr. KF [OT comment removed by admin LadyGeek]
" B) I do not buy a house that I could not pay off the mortgage at any time.
C) Only buy a house when it is significantly cheaper than renting.
Hence, the mortgage is not significant and it is not a burden. To each its own.
KlangFool "
KlangFool
P.S.: I always save 1 year of expenses every year. With or without the mortgage.
You are simply wrong. The houses in my area reached a peak in 2004/2005. It did not recover to that nominal price level until 2019. I bought near at the bottom by waiting.
"Making poor choices out of fear isn't a good strategy."
I had been facing quarterly and annual laid off for the last 10+ years. I was unemployed for more than 1 year a few times. You may be a very lucky person. But, I know that I am not. I have to be realistic.
KlangFool
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Re: Rent vs Buy in Bay Area: (my) number-driven approach
Cool you bought at the bottom. I bought 10 years before. Let's compare using the housing index: https://fred.stlouisfed.org/series/ATNHPIUS51059A . Feel free to use other data.KlangFool wrote: ↑Fri May 20, 2022 7:49 am
randomguy,
You are simply wrong. The houses in my area reached a peak in 2004/2005. It did not recover to that nominal price level until 2019. I bought near at the bottom by waiting.
"Making poor choices out of fear isn't a good strategy."
I had been facing quarterly and annual laid off for the last 10+ years. I was unemployed for more than 1 year a few times. You may be a very lucky person. But, I know that I am not. I have to be realistic.
KlangFool
You paid 174 in 2009. I paid 89 in 1999. How much money did waiting cost you? It is easy to avoid downside risk. But it can be very expensive. That is the problem the OP finds. I am sure some time in the next 30 years prices will be off by 15% and it will be a buying opportunity. Problem is the house price might be 3x of the current value by then...
I am not lucky. But I do plan. I wouldn't live in an area where I would be unemployed for a year. Instead I chose to live in area with 100's of employers willing to hire me and I counted on having enough exCoworkers at those companies that I would move to the top of the resume pile when the back up plan was needed. It definitely helps you sleep at night when you got a half dozen phone calls from friends asking if you were looking for opportunities every time a lay off was announced.
Re: Rent vs Buy in Bay Area: (my) number-driven approach
randomguy,
You are lucky enough to stay in one location from 1999 to 2009. Aka, 10 years.
"I am not lucky. But I do plan. I wouldn't live in an area where I would be unemployed for a year. Instead I chose to live in area with 100's of employers willing to hire me"
You are lucky enough that you have not encountered a recession that the whole area goes to hell.
Do not confuse lucky outcome with a good strategy.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Rent vs Buy in Bay Area: (my) number-driven approach
The nytimes rent vs buy calculator is very useful:
https://www.nytimes.com/interactive/201 ... lator.html
https://www.nytimes.com/interactive/201 ... lator.html