even more quiddities and agonies of the ruling class - a new rolling new york times thread

however, it does have a classic quid/ag setup of "I thought having my parents buy me an apartment would be perfect, but it turns out to have drawbacks"

always taken aback by expenses like monthly maintenance fees and property taxes; makes ownership overall not that much more attractive than renting

unless mom and dad are buying it for you

always taken aback by expenses like monthly maintenance fees and property taxes; makes ownership overall not that much more attractive than renting

yeah srsly

Yeah, that's a case-by-case thing, but it's often true in many parts of NYC. It's not quite as simple as monthly cost to rent vs. own bc there are factors like the tax deduction and the fact that at least some portion of your mortgage goes to equity (small amount in the first few years, more as you go). NYTimes Rent/Buy calculator is great, especially if you use the advanced features.

yeah i understand that the major appeal is that some portion of the money you pay each month goes into equity that you can later recoup. but $400 a month = 3600 a year, plus property taxes which I'm not really about in nyc but I can imagine easily being 7000-10,000+ on a $400,000 place in NYC, plus the monthly mortgage payment and interest on top of that...

I guess the benefits are never having to worry about getting kicked out/buying in to a good school district/whatever equity you can recoup when you decide to move

prob not as big an issue of nyc but the danger of your house's market bottoming out and your house being worth substantially less than the equity you have in it / have left to repay

yeah I mean regardless on what you do you are making a bet on the real estate market

regardless of

Renters pay property tax, it's just invisible to them because the landlord has factored it into the rent.

right

yeah i understand that the major appeal is that some portion of the money you pay each month goes into equity that you can later recoup. but $400 a month = 3600 a year, plus property taxes which I'm not really about in nyc but I can imagine easily being 7000-10,000+ on a $400,000 place in NYC, plus the monthly mortgage payment and interest on top of that...

I guess the benefits are never having to worry about getting kicked out/buying in to a good school district/whatever equity you can recoup when you decide to move

― 乒乓, Wednesday, 27 March 2013 16:19 (2 minutes ago) Permalink

Nah, property taxes aren't going to be anywhere near that high, plus there are some condos that (inexplicably, imo) have tax abatements. Anyway, I'm just saying if it's a matter of, like, $2000/month rent, none of which becomes equity, or $2300/mo total ownership costs, where even like $400 of that goes to equity and then you get another couple hundred bucks a month back at the end of the year in tax savings, it can still be beneficial even if it's more per month (assuming you can actually afford it). In a lot of NYC neighborhoods I think monthly costs of ownership tend to be much higher than rent though.

As far as betting on the RE market, yeah you're doing that. NYC has a low vacancy rate so it doesn't always seem like the riskiest bet, but at the same time, buying in some Brooklyn neighborhood where prices have doubled in the last five years still seems a little scary to me.

Having looked at a lot of co-ops in queens, there are definitely a good number of situations where the finances of buying are significantly better than renting even accounting for all the money you're flusing into monthly fees etc., and assuming price appreciation no better than inflation.

and that may be the most bougie post I have ever made on ILX

the benefit is that you can cash in your chips when you leave and take your 400k to like utah and buy a mcmansion

that assumes you paid off the mortgage in the first place

and that you bought a place in the first place

no i bought a place in the second place

in the first place, I bought my second place on 3rd Pl.

whos on ilx

Big HOOS aka the placebuyer

Nah, property taxes aren't going to be anywhere near that high, plus there are some condos that (inexplicably, imo) have tax abatements. Anyway, I'm just saying if it's a matter of, like, $2000/month rent, none of which becomes equity, or $2300/mo total ownership costs, where even like $400 of that goes to equity and then you get another couple hundred bucks a month back at the end of the year in tax savings, it can still be beneficial even if it's more per month (assuming you can actually afford it).

though in most cases over the long run if you take that $500 difference as a renter and invest it youll probably end up with more money

so have said the fashionable economic thinkpieces of the past several years, but you'd have to put the money into something more risky where you have less of an idea what you're doing.

in any case, in that story mom and dad are paying all that nonsense anyway so

i guess im suggesting putting yr 500 in an index fund and not looking at it or touching it for 25 years, basically

max's stock tips

max's stock tips are otm tho, basically the lazy person's guide to investing is something like:

1. Put your money in a Vanguard LifeStrategy fund.

I've only had a grown-up job for a few months tho so my major investment so far is my lack of children.

but what if you have a child now and train it to be the best human at sports?

i guess im suggesting putting yr 500 in an index fund and not looking at it or touching it for 25 years, basically

― max, Wednesday, March 27, 2013 1:19 PM Bookmark Flag Post Permalink

But it's more complicated than this. Over time, two things will happen: (1) the proportion of your mortgage payment going to equity vs. interest will gradually increase because of reverse amortization, and (2) the rent you would be paying will most likely go up (at least apace with inflation) while your mortgage cost remains fixed. If you're looking at staying somewhere, say, 10 years, your savings in ownership can wind up being quite significant assuming rent even keeps pace with inflation, especially considering that your home value in non-bubble or bust conditions (i.e. most of housing history) will also rise with inflation and thus your equity will increase. I would post some numbers but it's easier to see if you just use the nytimes rent/buy calculator and play with numbers. It factors in the "lost opportunity cost" of the investment return you could receive on your down payment and any savings from renting (minus cap gains tax).

Obviously there are lots of cases where renting is better, and ownership rarely works out better at less than five years in the place. Just saying I think the anti-ownership sentiment in the press has been overblown, just as the pro-ownership sentiment was pre-2008.

(I mean not overblown to anywhere near the same degree, but yeah)

that's all aside from stuff like the "forced savings" benefit of a mortgage payment (behavioral view that yeah you're probably not actually going to take the extra money and put it all into an index fund)

"yeah you're probably not actually going to take the extra money and put it all into an index fund"

yep

yah tbc I don't mean in all cases yr saving money... But assuming 8 pct avg annual return over 20 years (default in the nyt calculator is 4 pct) its p easy to construct scenarios where over that same horizon renting is "cheaper."

also yr mortgage being highly leveraged but not yr index fund has got to have something to do with it

8pct avg annual return!? good luck there.

over a 20 year time horizon i think thats an ok estimate?

its possible, but i wouldn't bet on it. if you want a more reasonable comparison to housing in terms of risk profile you shouldn't compare vs. the stock market, but vs. mid yielding bonds.

(first the artisan thread devolves into coffee talk, now this happens to the quid ag thread. oy vey)

iirc 8.5 as avg annual return for an index fun over the last 20 years is about right. maybe my facts are wrong

neway i think we should be interrogating the assumption that the left position should be to increase or make easy home ownership

yep

first against the wall, all of you

against the wall of my recently refi-d UWS 2BR with gorgeous light and WIC

yeah I'm fine with that, but otoh I would support a position along the lines of "we should still support homeownership for those who would benefit from homeownership and stronger renter protection for others" -- which is really what the left's position has been since the Great Depression. The period leading to the financial crisis is a relative blip in this history.

if you really want to end the left's favoring of homeownership, you should dismantle fannie mae and freddie mac altogether and end the 30-year-mortgage as we know it (which is only made possible by those GSEs). Leave ownership to people with huge amounts of cash and income to make large down payments and large monthly mortgage payments on 10 or 15-year mortgages.

dudes, take it to the suburbs thread.

The difficulty with a policy of ending the 30 year mortgage and leaving home ownership to people with huge amounts of cash and pushing far larger numbers of people toward rentals is that you put the nation's housing supply under the control of landlords. If you enact stringent renter protections, the natural reaction would be for capital to flow away from that market, creating a housing shortage. The present system has improved the nation's housing stock enormously compared to what prevailed before the advent of the 30 year mortgage.

take it to the suburbs thread

yeah. this is not something that frets the ruling class.

The difficulty with a policy of ending the 30 year mortgage and leaving home ownership to people with huge amounts of cash and pushing far larger numbers of people toward rentals is that you put the nation's housing supply under the control of landlords.

tried to make this point in the other thread, but apparently landlords are mostly cool guys so it's no biggie

http://nymag.com/thecut/2013/03/qa-princeton-mom-wishes-she-married-classmate.html

"He went to a school of almost no name recognition," she said, declining to name the institution. "Almost no name recognition. A school that nobody has respect for, including him, really."

Haha now I want to know the school