Buy vs Rent?

Now that the Spring home buying season is in full swing, I spoke with our real estate agent to see how the "surge" was going. She’s one of the good ones — charming, helpful, knowledgable, honest, a pleasure to work with.


That was her initial response. "Depressing" was the second word out of her mouth.

What seems to be the problem? I asked her. "Sellers haven’t gotten realistic yet. They are still pricing things as if it were 2005."

Granted, this is one agent, in NY, on the toney Gold Coast of Long Island’s North shore. She mostly sells houses from half a million up to quite a few million, but I would guess her sweet spot is from $500k to $800k. But her comments echo what we have heard from Home Builder CEOs recently, and I daresay they are probably typical across many areas.

That conversation put a few of today’s more interesting columns into perspective today. The first comes from the NYT’s David Leonhardt, with the inflammatory title A Word of Advice During a Housing Slump: Rent:

"With the spring moving season under way, The New York Times has done
an analysis of buying vs. renting in every major metropolitan area. The
analysis includes data on housing costs and looks at different
possibilities for the path of home prices in coming years.

It found that even though rents have recently jumped, the costs that
come with buying a home — mortgage payments, property taxes, fees to
real estate agents — remain a lot higher than the costs of renting. So
buyers in many places are basically betting that home prices will rise
smartly in the near future.

Over the next five years, which is about the average amount of time
recent buyers have remained in their homes, prices in the Los Angeles
area would have to rise more than 5 percent a year for a typical buyer
there to do better than a renter. The same is true in Phoenix, Las
Vegas, the New York region, Northern California and South Florida. In
the Boston and Washington areas, the break-even point is about 4

The interactive graphic belies the title, however: Its pretty clear that except under the worst circumstances (falling rents, high mortage rates, very high prices) and a short time line, its a better long term deal to own than rent:

click for interactive feature



Elsewhere, the coverage of the ongoing Housing mess continues. This WSJ column (Digging Out of Delinquency) noted the increasing delinquency rate of mortgage holders. The accompanying chart show former hot areas such as California, Florida and Las Vegas leading the way delinquency rate increases.

click for sortable map


Lastly, we come to this Washington Post article: Housing Boom Tied To Sham Mortgages. It discusses, in brutal detail, how a crooked mortgage broker was able to game the enire system to scam a $100 million dollars worth of bogus loans. He was able to accomplish this due to the lax lending standards, (especially the no-doc "liar loans"), scam appraisals, a lack of regulatory oversight, hungry real estate agents, and naive buyers. He drove up the prices in entire neighborhoods.

After the scam unraveled, prices collapsed as 100s of homes fell into foreclosure. Its an ugly
ugly tale.


As you can see, it is no longer Positivity Day here at The Big Picture. Sorry, Larry!


UPDATE: April 11, 2007 10:01am

The Times uses as an example a home in Hollywood Florida, that with a few changes in variables, makes owning much less desirable:


click for larger graphic


A Word of Advice During a Housing Slump: Rent
NYT, April 11, 2007

Digging Out of Delinquency
WSJ, April 11, 2007; Page D1

Housing Boom Tied To Sham Mortgages
Lax Lending Aided Real Estate Fraud
David Cho
Washington Post, Tuesday, April 10, 2007; Page A01

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  1. John commented on Apr 11

    Unfortunately, none of this matters. The bears will keep getting squeezed, and the market will keep rallying. (Look at China this morning. Ridiculous. And no end in sight.) Between the US government lying about economic figures and running the money presses at Warp 10, there’s absolutely no chance we see any sort of market decline unless there’s some sort of catastrophe. Don’t count on earnings season, either: the companies have figured out that they can stuff their pipelines silly, hide their losses with creative accounting and that the analysts won’t question it, nor will the buyers balk at it. I mean, WTF is “before charges”?! If we hadn’t had to write so and so off, we’d have made this much. If the dog hadn’t stopped to crap he’d have caught the rabbit, too…

    Ohh, eventually the game has to end; eventually the government and the corporate types will run out of lies to tell. Eventually the CNBC crowd won’t be able to spin this bullish/drink it pretty. The resultant decline will be horrific. But until then, fundamentals be damned; buy ’em to the sky, and never question why. The only way to make money right now is to be a Booyah Bozo Buyer.

  2. Chad commented on Apr 11

    I wonder how David Lareah will spin things in the next few months. Continue with the same old rhetoric? Or does he have something new in his bag of tricks?

  3. fat mary commented on Apr 11

    and this is why the market continues to power higher. Housing is getting worse but BigBen won’t let it get out of hand. He will cut interest rates sooner rather later, supply the system with more liquidity, and the markets anticipate this. Inflation can be assuaged one way or another for as long as it takes to keep housing from tanking the economy. Remember, Ben is in charge of the printing presses and the banking fractional reserves at an effective one percent will keep the juices flowing. Die housing die!

  4. tjofpa commented on Apr 11

    I heard this one last night.
    AA is in the crosshairs of Rio Tinto & BHP.
    May take a while to line up that much financing, so I’m goin for the June 40’s.

  5. jj commented on Apr 11

    from the NAR’s newest radio spot —–

    “This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”

    sounds credible to me !!!!!

  6. semper fubar commented on Apr 11

    I see the Kool-Aid has worn off from yesterday. :-)

  7. REW commented on Apr 11

    The observation from your agent is right on, but it is odd that she seems surprised by this. Housing is still used almost exclusively for shelter (as opposed to speculation). As such, when the market slows, sellers simply do not sell. Unlike a business owner, homeowners do not post firesale prices to clear their inventory. Homeowners sit on their properties, even if they leave them on the market, and wait for the market to recover.
    My sense is the housing slowdown will be longer, but less detrimental than most fear.


    BR: Its not that she’s surprised — she thought that after a VERY SLOW winter, some sellers would have found religon already (not happening yet — for existing sells, as well as new listings).

    But you are correct — they are not highly motivated sellers (at least not yet).

  8. Craig commented on Apr 11

    I don’t think the Fed will come to the rescue at these mkt. levels. Add gas with a 3 or 4 handle and food skyrocketing, internationally fed inflation….no way.

    Notice the long rates on bonds lately?
    At least the bond guys see it. I wonder when those higher long rates might sink in to the U.S. equity mkts.

    Gotta love the USD against just about any currency. It’s getting to the point where old confederate money is worth more.

    I think we get one or maybe two more big pushes up, and then all the deals will have been done and it will be time for the big money to leave the building.

  9. Eclectic commented on Apr 11

    Here’s Michael Panzner on the subject of “Cliff Risk:”

    Here’s Rex Nutting doing the most concise piece I’ve seen on the potential systemic risk arising from “lemming loans:”

    Here’s a Google search result when the question is posed, “What are CDOs squared?:”

    Here’s the Big Pic topic and related comments from quoting David Malpass regarding his discussion of a “Global Boom:”

    Now, stick with old Eclectic, because I’m going to sort of discuss the above referenced material and hopefully ultimately derive one magical word that describes what ties all this together. Let’s start with Malpass.

    I read the Malpass excerpt, and I don’t agree that he is necessarily displaying any cognitive bias. Actually, what he says is well-grounded logically and is indeed pretty “Cog” in my opinion. It is true that (at least in the excerpt – I’ve not read the entire WSJ piece) he does move pretty easily through the Fed’s monetary expansion, post 9-11, and notes the positive results of that expansion without giving a hint of concern regarding the negative issues of that same expansion that are written about by Panzner and Nutting in the referenced pieces.

    However, let’s allow him the intellectual freedom to come to the conclusions he makes without simply assuming he is totally ignoring all the risks that (we) perceive. David Malpass is an intelligent and well-spoken man and I have no doubt he fully believes some of the utopian-like projections of his referenced remarks.

    For example, regarding Mexico, quoting Malpass: “Mexico, vital to U.S. immigration concerns and behind in global job creation, has the opportunity to take an economic leap forward, using today’s plentiful liquidity to expand housing, raise living standards, and transform energy exploration and development.” End quote.

    Mr. Malpass, what a magnificent statement! How true that is. What a wonderful economic shot in the arm for the Americas, and North America in particular, were we able to assist our great neighbor to the south in accomplishing such a transformation.

    So, instead let’s examine what the U.S. is indeed helping Mexico to accomplish: First I suppose is the drug traffic with its attending corruption and violence that we cause to be funneled through that enchanted land, while our own population is hell-bent-for-leather to stick the stuff up their noses, in their veins or inhale it through their lungs, all the while weighing the possibilities of substituting the imported fare with an ever growing domestic supply of crystal met, the same met of course that’s crippled our justice department and courts in most states, destroyed families, lives, and hung a millstone of economic malaise around the necks of our young people (and not so young) that will sink them in a world they already can’t compete in, and further help their chances of competing go from slim to zip.

    Next would be the trade in people from and through Mexico into the U.S., and the very same demand for them is being experienced in a similar fashion to the demand for drugs. Just like you can not prevent willing users and buyers from obtaining drugs, you likewise can not prevent the buyers of labor from obtaining the people they need, when they can get them in no other way than by hanging out a “workers wanted” sign and taking all comers, no questions asked.

    And third, rather than providing the leadership to our southern friend in the ways of responsible capitalism, we generally substitute for that leadership a kind of hocus-pocus gamesmanship of irresponsible accountancy, benevolent and politically based monetarism, and an ability to cast their desperate emigration to fill the jobs demanded by our people as their problem and not ours to solve.

    No, Mr. Malpass, the shoe is on the other foot. Never before has the U.S. had a better opportunity to change much of what it does to create its own problems, both internally and with Mexico and other Latin American cultures. Beginning to deal realistically with those problems would be a reason to buy into the U.S. economy and its corporations with reckless abandon.

    Here’s the fellow that changed my mind on the whole U.S. immigration picture with Latin America, Jorge Ramos:

    I changed my mind about the whole subject of U.S. immigration policy virtually overnight, with the completion of this one book. Reason – It’s a logical and eloquent debate that he wins, hands down. Read it and you’ll discover that, unless you’re the type who enjoys arguing with stop signs on street corners.

    So, what is it about all the pieces above that demonstrate how we may see the world so differently when we all are able to observe the same facts?

    The word that comes to mind with Panzner’s writing is not the final word I’ve looked for, but I see his work as an expression of: incredulity – his, experiencing absolute incredulity at the financial pickle we’ve gotten ourselves into, and incredulity that so few people can conceive of what the problems mean for us all.

    Now, my final word is: Fog. Simple fog, the type of fog that often long chains of drivers move through at 70-80 mph, on 6-lane superslabs, without the slightest regard for the danger they’re placing themselves and their fellow drivers in.

    I’ve even caught myself doing something similar, and yet when I finally realize I’m moving down the road at over 90 or 95 feet per second, with only the barely visible lane marker outside the windshield to let me know I’m just competently where I’m supposed to be, notwithstanding some 18-wheeler or some young mother with an infant strapped in the back of her Honda stalled a mere few more feet in the white blindness, I do finally overrule my own denial and pull off the road. Even slowing to a crawl won’t protect you from the driver behind that has not faced down his denial yet.

    That’s the picture of Econo-Americana I want to leave you with right now. We’re merrily barreling down the superslab, all in the same fog, and until we have an accident to illustrate our folly to ourselves, we’re just a society ignorant of the growing risks.

  10. wally commented on Apr 11

    re: the interactive chart. I think a couple of the initial settings are not very realistic, leading to skewing in favor of buying. Specifically, I’d say rent would increase 3 percent annually (more in line with the cost of living) and investment returns should be greater than 5 percent (that is simply an interest-on-cash rate). Change these two things and the chart moves quite a bit. In short: the better you think you can do as an investor, the worse bargain a house becomes.

  11. John commented on Apr 11


    The fog analogy is spot on. The thing is, thanks to infinite liquidity and all-around dishonesty, the accidents never actually slow anyone down, because unlike a real stalled car, we can simply pretend that subprime or semi gluts aren’t a valid concvern, and barrel on by. No, we don’t have to ‘rear-end’ anyone any more; the powers that be have seen to this. Only when an earthquake breaks the slab apart in a yawning canyon too far to jump will this farce come to an end. And as I noted in my original post, the result is going to be rather horrific, as the broken bodies pile up at the bottom.

  12. cbk commented on Apr 11

    rent vs owning . . . get real. I wouldn’t want to live for very long in what I can rent in the city I now live when I can afford to finance a great place to live for not much more . . . . and I’m not talking about some shame mortgage. nope, renting is not an option for someone who doesn’t want to live in a “rental”!

  13. Nova Law commented on Apr 11

    In 2002 I purchased my principal residence for $940K. Last year my neighbor sold his substantially similar house for $1.55 million.

    Even if housing prices fall 15% a year for three years, I am still ahead of the game.

    Prices have to my knowledge never fallen 15% a year for three years running.

    Speculators and flippers are much more likely to be hurt than owners and true investors. It’s really no different from the stock market, where buy-and-hold investors like Warren Buffett and Benjamin Graham make the big bucks, while day traders and price-arbitrageurs usually lose most of the time.

  14. Richard commented on Apr 11

    timing the market is typically a losing proposition. when you’re fiscally and emotionally ready to buy than do so. over the long term you’ll make out.

  15. dave commented on Apr 11

    Here is an example of how bad it is. I works as a real estate attorney in Buffalo NY. There is very little being advertised for sale and very little being sold.

    Normally when I close a sale and record a deed it takes a month or more for the County Clerk’s Office to return the deed to me. I did a sale on March 30 and had the deed back on April 9.

    One week! The spring market is dead!

  16. Michael Schumacher commented on Apr 11

    In the last three weeks I have seen at least three bank repo’s (as advertised by the agent) in just my neighborhood alone. Wait until the sellers start dropping prices…this will cause another new glut of inventory to appear because the sellers will feel they are missing the boat, so to speak, and put it on the market in hopes they get a higher price.

    Nova…just because you’ve never seen it does’nt mean it’s not going to happen. Sellers are unrealistic about paper losses vs. real losses and I’m sure everyone is just so friggin happy for you about your house as only a wanker publishes what he paid for a house to try and impress others.

    And yes you’re little attack on my patriotism is classic neo-con…when in doubt question patriotism…as if that had anything to do with the subject matter. Are you John Ashcroft BTW….


  17. wally commented on Apr 11

    “where buy-and-hold investors like Warren Buffett and Benjamin Graham make the big bucks”

    Well, yes and no. Buffett sometimes buys and sells, too… and he does time the market. He calls it “buying at the right price”. Different words, same idea.

  18. wally commented on Apr 11

    “where buy-and-hold investors like Warren Buffett and Benjamin Graham make the big bucks”

    Well, yes and no. Buffett sometimes buys and sells, too… and he does time the market. He calls it “buying at the right price”. Different words, same idea.

  19. 23 commented on Apr 11

    worth noting that the default tax rate on the interactive feature is 20%…if mortgage interest is deductible at the marginal income tax rate (I’m not sure it is), buying becomes incrementally attractive.

  20. Michael C. commented on Apr 11

    BR said “What seems to be the problem? I asked her. “Sellers haven’t gotten realistic yet. They are still pricing things as if it were 2005.”

    I continue to say to these agents, get your darn clients to lower their prices. Who is the professional here?

    When we sold our home in 2005, every agent we interviewed provided us a nice work up of our home (neighboorhood comps, etc) and each had over 15 years experience, some over 25 years. Who is the professional here?

    In 2004, all I heard from friends who bought or wanted to buy was that their agents were telling them to counter counter counter with higher prices or someone else was going to get the house. And boy did they do that with insane offers.

    So what’s the problem this time? If you don’t price it at where they want you to then you won’t get the listing? What’s the point if the house won’t sell for 12+ months?

    Get your fucking clients to lower their fucking prices if you want this market to get moving!

  21. LAWMAN commented on Apr 11

    BR’s ancedote is similar to what I have been hearing. IMO, it means that we will have our housing slump for another quarter or so. We will not see a housing crash until the sellers start to really feel pain, and come to grips with reality and drop their prices. Then the proverbial excrement will hit the fan.

    I see the bull running (or at least hanging around) for another 4-6 months. End of the year might get ugly. That said, I’m already in semi-defensive mode.

  22. Fiver commented on Apr 11

    Nova, I think you need to break out your calculator again. And this time don’t forget to figure in transaction costs for sale of your home and three years of inflation.

    As for a 45% price decline over 3 years, yes, that has never happened before. Busts are usually more gradual and drawn out. But if you simply change your assumptions to a more realistic 5% nominal decline per year for 6 years, plus the effects of 3% inflation, you end up in the same place: underwater. Just ask a Japanese businessman who was a real estate tycoon in the late 80’s.

  23. Paul commented on Apr 11

    About the rent/buy chart.

    I changed the real estate commission to 1% based on me selling with Iggys House. (It is supposedly free, there are bound to be some costs) My buy side turned positive very quickly.

    When the time comes for me to sell, I’ll go with Iggy and I’ll put $25k in my pocket.

  24. Nova Law commented on Apr 11

    Michael Schumacher, thank you for calling me a wanker for making $600,000 on my house. I’m laughing at your joke all the way to the bank.

    Fiver – I think my math’s right. Let’s assume current value is 1.55 million. 15% off this year is 1.31 mil. 15% off next year is 1.12 mil. 15% off the year after that is 952K. I bought for 940K, so I’m still in the black. Yes, if I wanted to sell at the end of this, counting costs, I could in theory be slightly in the red. But that doesn’t include pay down of my mortgage, or the fact that I had to pay for a place to live anyway.

    The wealth creation for true investors and owners of real estate over the past five years has been nothing short of phenomenal. In 2005 I re-financed my mortgage for 30 years by paying two points, and have an interest rate of 4.875%. After tax deductions I’m really paying less than three percent to rent the money.

    People who are looking for a quick killing are almost always going to have something go wrong. When they fail at currency markets, day trading, precious metals speculation, or condo flipping, the fault will never be with them, but with somebody else: Bush, the Fed, the auditors, the Chinese, mortgage companies, take your pick.

  25. Jdamon commented on Apr 11

    Nova, you are a breath of fresh air here in an otherwise gloom and doom group. I think your thoughtful analysis is spot on.

    One thing I haven’t understood is if sellers are in that bad of shape, why won’t they lower their prices? If I’m in the bear camp, I would say that they will have to or be foreclosed on. I don’t think they are really in that bad of shape, but I could be wrong.

  26. Michael Schumacher commented on Apr 11

    Nogo Law

    I’m still laughing…since you have’nt made jack squat until you sell it. But I guess I have to point that out to you as well.

    Laugh all you want… the money then you can be an egotistical asshole about it.


  27. John commented on Apr 11


    He didn’t call you a wanker for making money, but rather for bragging about it in public (on a blog other than your own).

    Doing so has a certain ‘neener neener’ quality to it, don’tcha think?

  28. Michael Schumacher commented on Apr 11

    Does’nt matter to Nogo law as he is ALWAYS right…..just ask him.

    And if he disagrees with you and then fails to provide any reason why… he questions your patriotism………

    glad you “made over600k” while you still occupy the same house…..what did you “sell” it to Randy Cunningham??


  29. Aaron commented on Apr 11

    Nova, are you going to sell your house and buy a cheaper one?

  30. crystalball commented on Apr 11

    There certainly is a lot of emotion in the comments on this board.

    I at least seem to detect a consensus that real prices with drop over the coming years.

    Despite all the back and forth, the big picture question is still what BR originally posted at the top: When will sellers and agents face reality, and how far and how long will the decline go?

  31. wcw commented on Apr 11

    The key point on the NYT piece is above in the comments: the default tax rate on the interactive feature is 20%.

    A while back I wrote a toy monte-carlo simulation of owning versus renting and found that even at San Francisco prices, renting beats owning in only about 2/3rds of potential futures. The mortgage interest deduction is huge, the property-tax deduction is a nice fillip, you can take capital gains every two years and never pay tax on them, and last but not least, you never get taxed on the implicit income that is living in your own home rent-free while poor, benighted renters have to pay tax on their bond income at regular marginal rates.

    Absent taxes, there is no investment rationale to own in the current market, at least on the coasts. With those subsidies, however, I could see buying even in today’s market working out for most purchasers. A lifelong renter, I am indeed bitter that I cannot join homeowners in thus gorging at the public teat.


  32. costa commented on Apr 11

    I have a questions with a declining housing market and renting being smarter finanically then buying a home. Will this lead to rent increasing?

  33. Eclectic commented on Apr 11

    Per Barringo:

    “As you can see, it is no longer Positivity Day here at The Big Picture. Sorry, Larry!”

  34. matsuzakaday commented on Apr 11

    Thanks, Crystalball. Investor/flipper sellers and “agents” have faced reality, IMO. They’re just not going to go down without a fight. Tooth-and-nail all the way. When lay-homeowners take a closer look instead of listening to the “experts” we’ll start to see some sanity. Next year…

  35. tjofpa commented on Apr 11

    Well, according to this new Bloom/LA TImes poll;

    “Most Americans remain sanguine about home prices, the poll showed, with more than half expecting homes in their neighborhood to hold their value over the next six months. Twice as many respondents said home prices will increase as those who predicted a decline. A majority said slowing home sales nationwide will hurt the economy.”

    They’re still in denial.

  36. Nova Law commented on Apr 11

    John, you’re right that it has a “neener neener” quality. But the point that Barry made when opening up this thread is to discuss anecdotal stories, isn’t it? I don’t think my experience with investing and real estate is so atypical.

    This is in fact my third house. As a new college grad in 1986 I bought my first one for 71K, owned it for 12 years, renting it out for the last three, and sold it for 105K after getting quickly tired of being a landlord. I broke even, essentially, and learned that housing prices don’t always go up at a fast clip.

    I went into a “move up” house in 1995, buying for 212K and sold it in 2002 for 420K, used the profit to pay my downstoke, and thence went into my current one.

    Yes, what I have now is a “paper profit” of 600K, but I don’t intend to sell, and expect that 20 years or so from now when I am ready to sell that I will have a very substantial nest egg (far in excess of today’s 600K) available to help pay for my retirement, in addition to the consistent investments I’m making in my stock mutual fund and retirement accounts. In fact, I’ll probably have a higher income in retirement than I have right now.

    Not bad for a regular guy, who started out with zero, and whom whom Michael Schumacher now calls an “asshole” instead of just a “wanker.” We should all be so lucky to have the kind of modest success which causes people like MS to get so angry – and frankly, there’s nothing magical or unusual to what I’ve been doing. And all along the way, people like MS have been saying the “Sky is Falling, GET OUT!”

  37. Mike_in_FL commented on Apr 11

    I did a less-detailed “rent vs. buy” analysis on just one house offered up for sale or rent here in my part of South Florida. The asking price? 985,000. The asking rent? $2,000 a month. Needless to say, monthly costs on a mortgage, plus insurance, plus taxes, etc., etc. are so far and away above the rental cost that the owner of this place should have his or her head examined. By the way, my original analysis and post was from September 2006. I doubt anyone is surprised that the house is still on the market today. What I am surprised about is the fact the asking price hasn’t budged. There’s your textbook case of denial.

  38. tjofpa commented on Apr 11

    Now, I know we’re all supposed to start buying when the FOMC says “HIckory, Dickory, Dock…”
    But is it OK if I sell into it this time?
    Cause I’m gettin a little nervous.

  39. John commented on Apr 11


    Perhaps in such cases you could discuss your transactions in terms of a percentage gain, with a rough buy-price range. That way, you can discuss your views on the intricacies of the market without seeming like you’re saying “look at me, I made big money!”

    I’m not one of those who thinks discussing one’s income is automatically in bad taste. I do, however, think that it behooves one to take pains to clearly delineate themselves from the braggarts that are an unfortunate by-product of the financal/investing/trading world.

    Because nobody likes a braggart (usually not even the braggart). I can see that you weren’t trying to be one, but from my own experience, given the cold, faceless nature of text on a computer screen, it’s better to craft your writings so as not to leave such an impression in the minds of others. It just saves you a lot of tiresome and misguided flaming from those who take you wrong.

    Best of luck to you.

  40. Lord commented on Apr 11

    The amount of time people will own a particular house may be relevant to a few, but ownership is usually a lifetime affair for most. Rents are cheap and they will increase, at rates greater than incomes in desirable places. That is what it means to be desirable. Better times to buy will come though.

    Sellers don’t want to be the first to cut prices. After all, they will generally have to buy also. Selling low to buy high is hardly a wise decision. Better to let the desperate go first. Agents should simply refuse listings that aren’t going to sell anyway, but hope springs eternal.

  41. Michael Schumacher commented on Apr 11

    Not an asshole but an egotistical asshole…get it right Nogo.

    The sky is not falling however if you choose to ignore the hundred’s of economic reasons as to why it’s not going higher (i.e. by your rationale it’s not ever going lower) that’s your problem. SImply pushing aside anyones attempt to argue with you is clearly your attitude. You seem to be the only one here who makes it a habit of telling all of us how “great” you’re doing while semmingly saying if the rest of you are not that good then you are bitching about it. Sounds like an ego problem to me.

    Engage or Ignore……insults about patriotism is not an arguement……and calling you a wanker/asshole is’nt either however I did’nt start this by proclaiming that I should go to Zimbabwe because I like the president much better there.

    Please kep your egotism to yourself…the world will be a better place for it.

    If you’re so wonderfully rich what in the hell are you doing here?? Oh right…you “made” 600k on your house that you still live in…..jerkoff.


  42. Nova Law commented on Apr 11

    MS, do you have access to some controlled substances that the rest of us don’t? Question your patriotism? Huh? Get a grip, buddy.

    So I’ve gone from “wanker” to “asshole” to “jerkoff.” Didn’t your fifth-grade classmates teach you any better curses than those?

  43. KirkH commented on Apr 11

    You can’t pick the top eh? That assumes that the vast majority of investors A> Know what they’re doing and B> That the media isn’t biased in favor of housing.

    As to A> There are now stories of huge numbers of homeowners not even knowing what type of loan they have. People who buy stocks are generally a bit more savvy.

    B> If you opened the newspaper in San Diego in 2005 you would have noticed two things. Tons of real estate, furniture, and mortgage ads… and a completely coincidental lack of stories about the biggest housing bubble in history.

  44. semper fubar commented on Apr 11

    The problem is that in many parts of the country (mine, for example) there are very limited rental properties suitable for families with children. Sure- if you’re single, you can find a nice rental apartment around here, but forget trying to rent a house.

    The only house rentals I’ve seen (and I’ve been looking) are also for sale. That last thing I want to do is move all our belongings, at substantial cost I might add, into a rental house and then find out it’s been sold (or perhaps in this day and age, foreclosed) 6 months later.

    So, for a lot of people, renting just isn’t really a good option. Which is what makes this housing market, and the long excruciatingly slow decline a real bitch.

  45. Michael Schumacher commented on Apr 11


    totally have seen that here in SD and I saw those same signs as well. Problem still exists as it does in other parts of the country just a bit more exacerbated because of our destination as a resort town. People unwilling to drop prices have forced several foreclosures as they struggle to handle a paper loss vs. cash loss and then they totally miss the boat and end up with the big loss-the actual house itself. I see this repeating itself throughout the country.

    PS. I would’nt want anything to do with all those condos downtown..totally overbuilt at the exact wrong time did’nt they?


  46. Greg0658 commented on Apr 11

    Nova and wcw thanks for the insightful posts

    Nova I figure your making 30K payments a year just for the house, before taxes and insurance (with 420K down) … for folks like you I hope the global economy continues to allow you and the guy whos gonna buy your place the wages for that mansion.

    I’ll bet the taxes bite with government entities looking for cash these days. Insurance, I’ll cross my fingers for your region.

  47. ndog commented on Apr 11

    so where/what are the vulture funds that are capitalizing on this issue. I found redbrick on the east coast but their fund is illiquid by my standards. are there others that people are moving into and if so any recommendations/references?

  48. Aaron commented on Apr 11

    FWIW and probably stupid: but I don’t buy the “my house is worth more” argument.

    A house purchased in 2002 for 940K USD was worth about 2685 oz of gold (350oz). Today valued at 1.5m USD it actually worth less at 2300 oz of gold (650oz).

  49. Peterpaul commented on Apr 11

    Nova Law,

    You stated you paid about 900k for the house. What will you have paid in total (Price of the house plus interest)?

    I read a chart last year that said in nominal terms housing was worth more than one paid for it 20 years later about 50 years of the last 100.

    That said I think the stability of having your own place is something one cannot put a price on. I have moved approximately 8 times in the last ten years (twice across the world) and I can tell you it is stressful. Not to mention hard on the wife, as it takes a couple of months to get a place in order…

  50. John commented on Apr 11

    Ahhh, Mr. Aaron sees through the ruse of fiat currencies quite lucidly. Bravo.

  51. CAMPION WALSH commented on Apr 11

    Realtors Predict Annual Price Drop,
    Lower Forecasts for Home Sales
    April 11, 2007 10:52 a.m.

    WASHINGTON — A real-estate trade group lowered its forecasts for U.S. home sales this year, while projecting what would be the first annual decline in the median national existing home price since it began keeping records in the late 1960s.

    In its latest forecast for the real-estate market, the National Association of Realtors projected that existing home sales will fall 2.2% this year to 6.34 million, compared with its previous forecast of a 0.9% decline. The NAR said new home sales are likely to fall 14.2% to 904,000, compared with the prior forecast of a 10.4% drop.

    “As home sales moderate, overall home prices will be essentially flat this year,” said NAR Chief Economist David Lereah.

    The national median existing home price will likely slip 0.7% to $220,300 in 2007, following a 1% gain last year, while the national median new home sale price is projected to rise 0.4% to $246,200 this year after gaining 1.8% last year.

    The trade group attributed the market softening to tighter lending standards and the fallout from troubles in the subprime mortgage market.

    Mr. Lereah said the housing market should still take support from inventories that remain well below levels of the last market downturn in the early 1990s and supplies that are close to balanced in many areas.

    As for 2007, the economist said price trends are being distorted for at least the first half of the year by a shift in sales activity to moderately priced regions and away from high-cost ones. “Within given markets, most areas can expect minor price gains,” he said.

    The NAR projects modest price growth next year, with the median existing home price expected to rise 1.6% and the median new home price foreseen up 2.0%.

    As homebuilders adjust to changing markets, the realtors group projects housing starts will slow further this year to register an 18% decline to 1.47 million, following last year’s 13% decrease. Housing starts are expected to recover somewhat next year, with a projected 5.1% increase.

    Write to Campion Walsh

  52. Nova Law commented on Apr 11

    PeterPaul, good question. Five years ago I paid 940K. I put down about 20% cash, let’s say 190K, and with a subsequent re-fi have a 30 year mortgage with a 750K face at 4.875%. My monthly payment is $3970, taxes are about $750 a month. So I’ve paid roughly $250K in interest and property tax over 5 years, I have a 38% federal and state income tax rate, so it’s cost me $155K net. I still owe about 725K. I could sell it for roughly double that, net of fees.

    I could rent a comparable place for about $3500 a month in my area. I feel very comfortable with homeownership, and haven’t done badly on an overall basis, have doubled my actual money (190K downpayment and 155K in payments) in 5 years. Not many investment gurus have been able to do what I’ve done, and it has been essentially brainless. Will it do that in the next 5 years? Probably not.

    But over the next 20? Barring a catastrophe I’ll be in excellent shape, still owing $300K but with a property, if it merely increases at 4% a year, worth $3.4mil. I’ll also have to pay 600K in additional interest over those years, maintenance, and whatever taxes would be (those numbers don’t include the tax deductions).

    Over the long term could the money be better invested in the stock market? Probably, but I have to live somewhere.

  53. Limejuice commented on Apr 11

    Re: buy vs rent calculator. One thing I find these
    calculators don’t seem to figure is that renters still get
    a standard deduction of $5,150 ( single) or $10,300 (
    married filing jointly) for TY2006. This standard deduction
    is indexed for inflation, so it increases each year. If a
    renter has no meaningful deductions, and so always takes
    the standard deduction, then if they buy a house,
    these calculators don’t factor in that the first
    $5,150 or $10,300 of the deduction just gets them to the
    standard deduction level which they already enjoyed as a
    renter. Only the incremental amount deducted above the
    standard deduction is a net gain for buying vs. renting. I
    think if the calculators factored that in, then renting
    would look much better for many people.

  54. Aaron commented on Apr 11

    Whoa Limejuice, great observation.

    BTW – I closed the sale of my house today (Virgina) and I’ll be renting in SoCal. I feel very lucky this happened when it did.

  55. j d ess commented on Apr 11

    wow. i gotta second the kudos of limejuice’s observation. just read the methodology of the times calculator and there’s nothing in it about the standard deduction. i’ve never seen it mentioned in any mortgage calculator. but then again, i’ve never looked before. interesting…

  56. Shrek commented on Apr 11

    The one thing everyone needs to remember about our economy and housing is that we still have very low interest rates. No one seems to be taking into account any kind of less than stellar interest rates environment or other unforseen events. How long is the rest of the world going to be our providers? I don’t know the answer, but once there is a shift everyone will want out quickly.

  57. fat mary commented on Apr 11


    “In 2002 I purchased my principal residence for $940K. Last year my neighbor sold his substantially similar house for $1.55 million.”

    I got news for you honey, that was last year, you aint gettin $1.5 million this year!

  58. Troy commented on Apr 11

    yes, Nova, if I had a time machine I would go back to 2002 and buy those houses I was looking at. Between 2002 and 2007, however, there were some rather unique market forces that are now making their exit-stage-rights: alt-a suicide loans and the whole subprime lender BS.

    2007 is NOT 2002 however; the next n years look to be working off the speculative and unsustainable excesses of the recent boom times, much like 1991-1997 worked off the late 80s boom times.

    But I will say there’s going to be a struggle between inflation and home valuations — I’d say it’s a 50-50 proposition that rents will inflate up to make present housing levels a no-brainer again. How this will happen is above my pay grade, but if there’s a will, there’s a way.

  59. Samuel commented on Apr 11

    Hilarious that some obnoxious clown brags about how he has made money by buying into the biggest housing/debt boom in world history and then talks about it as if he is an investing genius!

    You are in for a rude shock if you believe the asset price inflation bubble is going to continue indefinitely. There is an actual limit to how much debt people can take on as the subprime mess has indicated. 30 years from now your house may be worth less or even the same as it is now. It has happened before.

  60. robert campbell commented on Apr 12


    >>> My sense is the housing slowdown will be longer, but less detrimental than most fear.

    You make a reasoned point for the non-bubble housing markets.

    Most of the bubble markets, however, are going to get beat up pretty good.

    It’s all about income.

  61. wunsacon commented on Apr 12


    >> Question your patriotism? Huh? Get a grip, buddy.

    Uh, yes, you did question MS’s patriotism, by saying you hope he moves to Zimbabwe because he’ll probably like that country’s leader better than the US’s Prez.

    The US prez works for the citizens. Not the other way around. No US citizen should leave because he doesn’t like the president.

    When the Yahoo boards were around, I sure was tired of reading suggestions that members of the minority viewpoint leave the country. Where would the former Soviet republics be now if Gorbachev’s supporters had left the country while Gorbachev’s predecessors were still in power? Many majority viewpoints at first start off as minority viewpoints.

    And, if someone were to leave, why Zimbabwe? Why not Europe or Canada? Why is the suggested alternative to the US always some country in the midst of problems?

    I was disappointed by your remark yesterday and now by what appears to be denial.

  62. Greg0658 commented on Apr 12

    I looked into Canada. If you don’t come with a pile of money or a degree in electronics engineering or have a medical diploma then you need to be fleeing political opression. I don’t think America fits that category yet.

    A guy like me, to them, is just another refugee looking for health care and no country needs that.

  63. Nova Law commented on Apr 12

    wunsacon, that thread was about the 1000% return of the Zimbabwe stock market – what I said was that I hope MS takes his money to Zimbabwe and invests it. That has nothing to do with “questioning his patriotism.” As I see from his name, he’s German. From his email address, he’s Italian. From his posts, he’s Demented.

    This guy has called me an “asshole,” a “wanker,” a “jerkoff” and a number of other invectives over the last several weeks. Sorry if I gave him a bit of a zinger, he really doesn’t deserve it, he’s such a kind and meek person. I bet I would have been more accurate if I would question his basic sanity.

    And since MS’s posts are often filled with Bush-hating rants, I think he might well prefer Mugabe to Bush. Moreover, he has posted that he believes people should not be allowed to petition their government for redress of grievances because he doesn’t like what they’re asking Congress to do – in other words: “to hell with the First Amendment.” Quite the belief of a patriot!

  64. Michael Schumacher commented on Apr 12

    Now who is delusional???

    To correct your woeful inaccuracies I’only called you those three names AFTER you have insulted me.

    “And since MS’s posts are often filled with Bush-hating rants, I think he might well prefer Mugabe to Bush. Moreover, he has posted that he believes people should not be allowed to petition their government for redress of grievances because he doesn’t like what they’re asking Congress to do – in other words: “to hell with the First Amendment.” Quite the belief of a patriot!

    They are….wow you seem to be the only one who thinks so and furthermore if you don’t like it then IGNORE IT. Blowhards like you are always trying to “convince” people they are right. Why does it take you 5 or more paragraphs to “explain” your original position??? Makes sense to include it in the original thought. Originality seems lost on you as I had to tell you that you have’nt made anything on your house other than your own self-satisfaction (which I’m sure is at an all time high).

    If you don’t like what I say……tough shit…ignore it.

    Paul and Fat Mary have your number as well…but I guess you did’nt know that….now you do


  65. Michael Schumacher commented on Apr 12

    Here’s something you can do to “improve your seriously lacking credibility:

    “Moreover, he has posted that he believes people should not be allowed to petition their government for redress of grievances because he doesn’t like what they’re asking Congress to do – in other words: “to hell with the First Amendment.” Quite the belief of a patriot!”

    prove it…….

    If I posted anything close to what you are saying(which I most certainly did not) it should be here on the comment board. Find it and repost it….

    Thought so…


  66. Nova Law commented on Apr 12

    Nice tough words there, Michael. You’ve left off the f-word, and the c-word. Surely those will be coming my way soon enough. How about throwing in something about my mother, just to round things out?

    You’re like the fifth-grade bully, when you can’t get your way by shouting other people down, you get louder and ever more obscene. I can imagine you sitting at your keyboard, veins popping out of your forehead, rousing yourself to even greater heights of angry invective.

    You make me laugh. I enjoy watching you implode. I really do!

  67. Michael Schumacher commented on Apr 12

    the perfect Neo-con… NOGO law does’nt read anything or even attempt to prove his false accusations. You still have to PROVE what you accuse me of writing

    But I did’nt expect you to since they don’t exist..they only exist, like alot of your beliefs, in your mind.

    Implode?…moi? not a chance nogo as that would give you exactly what you want….

    Like I said…ignore it if you don’t like it.


  68. tjofpa commented on Apr 12

    Man, this is better than Seinfeld reruns!

    C’mon Nova, u’re not gonna let him have the last word, ru?

  69. Nova Law commented on Apr 12

    tjofpa, the email server at Halliburton is down. I’m still waiting for my instructions from Chimpy McHallibushrove as to what I should say in reply. ;-)

    Ooops…… The email is now in.

    “Those neo-cons are a sneaky bunch. They even roped in a guy like me, who voted twice for Bill Clinton.”

    How’s that? Do you think that will earn me another new obscene phrase from everybody’s favorite F1 driver?

  70. Michael Schumacher commented on Apr 12

    Now you’re just reaching and focusing on some name calling…which if you did’nt insult me would have never happened.

    BTW I’m still waiting for the proof of what you accuse me of saying……..

    Still waiting……..




  71. Nova Law commented on Apr 12

    8:40am this morning is the answer to your question, which was answered even before you asked it. Of course you skipped right by that to focus on your usual jumble of non-sequiturs and obscenities.

    More to the point, we’re still waiting for you to get back on your meds. Let me know if I can help you out with a check to pay for them for you. A poor guy like you who has lost money at every investment he’s ever made probably is scraping by and can’t afford those prescriptions.

    On the other hand Dick Cheney has been sending me $100 bucks in sympathy money every time I get called a dirty name by you, so I’ve got plenty of dosh to use to help out the less fortunate.

  72. Michael Schumacher commented on Apr 12

    and so you know…..we’re talking about the comments that you attributted to me AT 8:40am….

    that’s what I’m waiting for….

    and you’re $100 per “nasty” comment….you should feel good that you have a grand total of $300 from yesterday as you’ve already used those words far more than I have at this point. Does he take the money away when you use them? I think you owe him about $1200 about now.

    Waiting for proof…….I’ll be waiting here for you Nogo…


  73. Michael Schumacher commented on Apr 12

    about what I thought..

    I guess he has “lost” those comments when looking at his private email account.


  74. Thomas K. Landry commented on Apr 12

    As a real estate broker in Florida (and NY), I would caution anyone relying on the assumptions underlying the Hollywood rent-versus-own example.

    The Times lists average property taxes in Florida as 1.2% of the purchase price. Their calculator also appears to plug in a 0.46% insurance rate. If those are the assumptions underlying the Hollywood, FL example, then the costs of ownership are significantly understated.

    It is terribly misleading to use Florida’s statewide average for property taxes in estimating ownership costs. Florida’s property tax system is governed by Amendment 10 to the state constitution, popularly known as the Save Our Homes Amendment. It is a version of California’s Proposition 13. In effect, voters long ago capped their own property taxes (max. 3% annual increases) while allowing future buyers’ homes to be assessed at purchase price. Hollywood, like most cities in that area, has a millage rate of about $23 per $1000 of value. A new buyer will therefore pay about 2% a year in property taxes. (A next-door neighbor in an identical house might pay 1/4 as much — one reason the state legislature is in the midst of a turbulent effort to solve the property tax “crisis”.)

    If 0.46% is used for insurance, that further understates ownership costs. The rule of thumb in South Florida is more like 1%.

    Together, the tax and insurance costs in the Hollywood example appear to be understated by about 1.25% of the purchase price. Buyer beware.

  75. Vietnam tour operator commented on Apr 15

    Exotic Ho Chi Minh City, still referred to as ‘Saigon’ by many, has preserved its distinctly Asian feel and ancient culture, where monks pray in the numerous pagodas, temples and mosques. The capital Hanoi, is a pleasant and charming city of lakes, shaded boulevards and public parks. The old quarter, built around the Hoan Kiem Lake, is an architectural museum-piece characterised by its narrow streets. Ha Long Bay, with its 3000-plus islands rising from the clear, emerald waters, dotted with beaches and grottoes created by waves, is one of Vietnam’s natural marvels.

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