Saturday, September 15, 2012

Buying a Home Is Now 45% Cheaper Than Renting

Here's another reason that the U.S. housing recovery is real and sustainable - buying a home is now 45% cheaper than renting, according to an analysis done by Trulia and reported here by its chief economist Jed Kalko:

Methodology: Trulia looks at homes listed for sale and for rent on its website, and compares the average rent and asking price for an identical set of properties in a metro area, for a direct apples-to-apples comparison. Then, Trulia factors in the total costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc) and total cost of renting (e.g., renter’s insurance and security deposit). 

The starting assumptions are that a prospective homebuyer can get a low mortgage rate of 3.5 percent, itemizes their federal tax deductions, is in the 25 percent tax bracket, and will stay in their home for seven years. To account for the opportunity costs, Trulia calculates the net present value of the payment streams for renting and owning.

Conclusion: With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, Trulia finds that homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, finance with a 3.5% mortgage, and itemize your tax deductions.  

Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average – that’s a monthly savings of $771. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again, it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.

MP: Trulia's analysis would indicate that the incredible affordability of buying a home today compared to renting will provide some support to the ongoing housing recovery over the next few years.  Of course, rising home prices and mortgage rates could eventually reduce some the current huge advantage of buying versus renting, depending on how fast rents rise compared to home prices.  And as Trulia's economist points out, many would-be homebuyers don't have the 20% down payment assumed in this analysis, and might not be able to save up that amount in the short run to take advantage of the historical affordability of homeownership.  But on the other hand, FHA is providing mortgages with only a 3-5% down payment, so the lack of a 20% down payment might not be much of a constraint.    

Also, the 45% advantage for homeownership versus renting is the average.  In metro areas like Oklahoma City, the monthly cost of owning a home ($590) is as much as 63% lower than renting a comparable home ($1,576).  It make sense that such a huge cost difference would have to start translating into increased demand for home purchases, and that's probably one of the factors contributing to increased home sales around the country.  Another example is Minneapolis - the monthly cost of buying a home there ($751) is 52% cheaper than renting ($1,558), which translates into monthly savings of $807 for homebuyers compared to renters (of a comparable house), and that huge savings is likely what is driving home sales higher in the Twin Cities (see CD post below).    

160 Comments:

At 9/15/2012 11:52 AM, Blogger Unknown said...

When money is counterfeited, the first recipient benefits the most.

Home purchasers are the current benefactors, locking in an unnatural interest rate (3.5%~) for 30 years.

Home Sellers are also benefiting with re-inflated prices and mortgage holders are having their assets protected the same.

Eventually renters will pay more. Inflation will prevail and interest rates will rise.

We will all be poorer as our dollars are destroyed.

 
At 9/15/2012 12:31 PM, Blogger David Johnson said...

It makes sense that renters pay more than owners. Landlords do not rent out their property at a loss. But government and central bank policies can make the difference larger than it would otherwise be.

 
At 9/15/2012 1:36 PM, Blogger Methinks said...

Well, technically, landlords do rent out property at a loss if they have no choice. Better a smaller loss with a renter in the property than maintaining a high fixed cost asset that isn't generating ANY cash flow.

 
At 9/15/2012 1:46 PM, Blogger Unknown said...

Actually, this is an argument to buy a rental house, using a 30 year fixed rate mortgage. You will be rewarded with cash flow, years ahead of schedule.

The cost of owning, historically has been higher, but the owner receives the benefit of ownership (eventually a paid for asset holding it's value against inflation). And if the property is rented, the tenant is making the majority of the payment towards free and clear ownership. Like buying gold with borrowed money, leverage, and then getting someone else to pay it back . The renter pays less then if an owner, but is free to move on at the end of the lease. Less responsibility, less reward, less cost.

 
At 9/15/2012 2:59 PM, Blogger Methinks said...

Unknown,

While it may seem attractive at some level now, you're making a very long term investment in a very illiquid asset with high transactions costs and the ever present price risk. Not to mention the risk of tenants destroying your property (if you've never rented out property, you're in for a shock). Over the life of the mortgage, these rental fluctuations balance out and there's usually no edge in the trade compared to other possible investments.

Assuming a reasonably efficient market and if you do the math correctly (accounting for opportunity cost of downpayment - that's often wrongly ignored), you'll see that over a 30 year time horizon the NPV's of owning versus renting are pretty much the same. You don't win either way and the value of owning vs. renting begins to depend on things individuals must calculate for themselves - the value of the option to easily move and the value of that feeling of ownership. Some people can win in the RE market, of course, but winning and losing depend on timing and so is pretty much random. Also, houses have sometimes been a good hedge against inflation, but not always.

My guess is that Mark Perry is making a different point.

One nit to pick about the ownership "free and clear": You never actually own your property free and clear. If you cannot come up with the money to pay property taxes, your house is history. You're always renting your property from the state. And you must always money for maintenance or your asset declines in value for that reason.

 
At 9/15/2012 3:12 PM, Blogger Ron H. said...

"Well, technically, landlords do rent out property at a loss if they have no choice. Better a smaller loss with a renter in the property than maintaining a high fixed cost asset that isn't generating ANY cash flow."

Absolutely. A vacant property isn't just a cashflow problem, it's a magnet for vandals and squatters, and requires maintenance normally provided by the occupant. It's easy to suffer large losses when a property remains vacant.

In addition, when buying a property to rent an investor may leverage the purchase with a fixed rate long term loan that raises their monthly costs above the amount of the rent. That strategy assumes that inflation will raise the prices of property and rent over the long term.

 
At 9/15/2012 6:30 PM, Blogger Hydra said...

A difference that big sounds like a market failure.

 
At 9/15/2012 6:35 PM, Blogger Hydra said...

A difference that big sounds like a market failure.

 
At 9/15/2012 6:56 PM, Blogger Ron H. said...

"A difference that big sounds like a market failure."

Yes indeed. There's no other possible explanation for such a wide difference. We must act at once to level the playing field through government regulation - our favorite remedy for any perceived problem - before renters become victims of unscrupulous house sellers.

LOL

 
At 9/15/2012 8:48 PM, Blogger PeakTrader said...

My parents bought a house in 1978 for $100,000. In 2005, it was worth over $900,000, and today it's worth about $700,000.

They refinanced twice at lower rates, for lower payments, and took out $150,000 in equity (much of it for home improvements).

They're living in that house for less than $1,000 a month, and the equity is around $575,000 (after paying-down the new mortgage).

 
At 9/15/2012 8:51 PM, Blogger George Phillies said...

However, most renters do not rent property as imposing as the house that they might buy. Indeed finding quality homes to rent is not entirely trivial. The comparison may be true but does not entirely correspond to human behavior.

 
At 9/15/2012 11:11 PM, Blogger Methinks said...

That CAGR on your parents' house is close to 5%, Peak. Considering the cost of financing (I remember double digit rates into about 1984 or so and that's when your parents' principal was highest on their loan), maintaining and updating the asset over 34 years, that CAGRE could easily be under 5% annually. Plus, to monetize the asset, your parents would have to sell the house and move somewhere else.

According to Moneychimp's S&P CAGR calculator the S&P 500 CAGR was just over 11% for the same time period.

I have always considered my dwelling as an expense.

 
At 9/15/2012 11:19 PM, Blogger Dave Thomas said...

What will banks do with 30 year loans locked up at under 4% if interest rates rise for an extended period over those three decades? Will the tazpayer eat it again?

 
At 9/15/2012 11:33 PM, Blogger Methinks said...

Dave,

They sell those loans to fan and fred. But if the bank keeps it on the books, it can hedge itself against interest rate risk by entering into swap agreements. That kind of hedging is very common.

The problem last time wasn't that the rate moved against banks' fixed rate loans. The problem was that marginal debtors took out floating rate loans and when interest rates rose, they couldn't make the higher payments and defaulted. Even if they could make the payments debtors often walked because the loan value was higher than the value of the asset and with no downpayment, they had nothing to lose. We got stuck with that bill. That's the short story :)

 
At 9/16/2012 1:41 AM, Blogger Henry H said...

This comment has been removed by the author.

 
At 9/16/2012 1:43 AM, Blogger Henry H said...

David,

There are plenty of people that rent out their property at a loss. My barber mentioned the the other day that he was forced to rent out his place at a loss, after a divorce. The property was so far underwater that he can't sell. He doesn't want a foreclosure on his record, so renting it was his only option. It was a conventional mortgage and the lender is not willing to do a loan mod.

There are a record number of underwater amateur landlords that can't sell and are losing money as landlords. During the housing boom, there plenty of get-rich quick amateur "real estate investors" that lost their shirt. I used to be in a real estate investor club and heard many stories of people failing at landlording. The experienced guys that have paid their dues laugh at the get-rich while landlording newbies. If it was easy, then everybody would be rich.

The cashflow and quality of tenants has definitely improved and helped experienced investors. Amateurs who overpaid in 2005-07 will still have problems with negative cashflow.

 
At 9/16/2012 1:50 AM, Blogger Henry H said...

David,

Here is a good article on being a reluctant landlord.

http://www.npr.org/2011/11/13/142241815/would-be-sellers-become-reluctant-landlords

You can google "reluctant landlord" to find more stories of underwater homeowners forced to rent at a loss.

 
At 9/16/2012 2:05 AM, Blogger PeakTrader said...

Methinks says: "CAGR on your parents' house is close to 5%... S&P 500 CAGR was just over 11% for the same time period."

Yes, but you won't be able to live at the NYSE.

My parents live in a very nice house.

 
At 9/16/2012 6:21 AM, Blogger Unknown said...

This article is so full of crap It's hard to begin.
First home ownership bears the full cost of water,sewerage and all utilities, maintenance, insurance and replacement cost, taxes etc. Renters share joint expenses over the entire property. The economics are pretty strong. Renting has some disadvantages. parking, crappy neighbors just like homeowners. Renters do not cut the grass or shovel snow and if the AC is broken they call to the front office for a work order to be placed with the maintenace crew. If your 55000 BTU AC unit craps out and you have a 540 FICO score it's off to Home Depot for a couple of window fans. Renters have neither capital gains or underwater homes. Even in NYC where rents are astronomical try buying a condo with 3% down and a 650 FICO score. It ain't happening.

 
At 9/16/2012 7:34 AM, Blogger Mark J. Perry said...

Unknown: I think the comparison here is between: a) buying a single- family home and b) renting a comparable single-family home (not an apartment). In that case, it's possible the renter would pay for all utilities, and might even be responsible for the grass and snow removal.

 
At 9/16/2012 8:57 AM, Blogger Methinks said...

Isn't that lovely, Peak. My point is that houses are places where people live, not awesome financial investments.

 
At 9/16/2012 9:18 AM, Blogger PeakTrader said...

Methinks says: "My point is that houses are places where people live, not awesome financial investments."

However: "Home ownership is one of the main sources of wealth among families in the United States."

 
At 9/16/2012 9:24 AM, Blogger hancke said...

Unknown, All the points you mention are covered in the article. Read the part on including costs on both sides to make it an apples to apples comparison. The scenario is also based on selling the home in 7 years.

 
At 9/16/2012 9:27 AM, Blogger Methinks said...

I'm never really sure what point you're trying to make with your random sputterings, Peak.

So, most Americans buy into a myth and don't bother saving. This fact somehow transforms the family home into an awesome financial investment?

 
At 9/16/2012 10:28 AM, Blogger Richard Rider, Chairman, San Diego Tax Fighters said...

While the conclusion doubtless is true (thanks to interest rate and deductibility subsidies), I would quibble a bit with methodology (based on this summary).

1. Did the study include the average cost of home repairs and maintenance (including gardener or homeowner labor)?

2. HOA fees included? I would think so.

3. Double payments if home doesn't sell in a timely manner?

4. The fact that some of the deductibility of interest would be included in the "standard deduction" if below the itemizing threshold?

5. Risk of earthquake (seldom insured, even in California)?

As I said, I'm quibbling here. I agree with the conclusion, but have some doubts about the margin of difference.

 
At 9/16/2012 10:52 AM, Blogger Pulverized Concepts said...

What percentage of homes were and are currently purchased with a 20% or more down payment?

 
At 9/16/2012 11:41 AM, Blogger VangelV said...

Conclusion: With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, Trulia finds that homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, finance with a 3.5% mortgage, and itemize your tax deductions.

Let me see. You have to have a steady job to qualify and a 20% down payment. You have to be willing to stay where you are even if you find better employment opportunities elsewhere.

That would mean that less than 5% of the population would qualify. What about the other 95%?

 
At 9/16/2012 11:54 AM, Blogger Methinks said...

Vangel, illiquid markets with high transactions costs bastardized by endless government meddling tend to be more prone to more pronounced and longer lasting periods of inefficiency.

But, if you ca swing the mortgage and the value of the option to move quickly in the next seven years is not very valuable to you, this tells you that you should buy a house instead of renting one.

 
At 9/16/2012 12:03 PM, Blogger hancke said...

When the housing market went bust it would stand to reason that those former homeowners became renters. This resulted in a rental property shortage which in turn resulted in higher rents. I can see very easily where buying is cheaper than renting.

 
At 9/16/2012 12:23 PM, Blogger juandos said...

"Buying a Home Is Now 45% Cheaper Than Renting"

How much is your "irretrievable time' worth?

I've not wasted a pico second's worth of life mowing a lawn or any of the other myriad and mundane chores that come with homeownership...

 
At 9/16/2012 12:33 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 9/16/2012 12:38 PM, Blogger hancke said...

According to the article your time is worth $488-$1041 per month. Not bad for a little work. You could factor in the health benefits of the exercise.

 
At 9/16/2012 12:39 PM, Blogger Ron H. said...

"That would mean that less than 5% of the population would qualify. What about the other 95%?"

Exactly. That helps explain the 45% differential. Supply and demand.

Or perhaps those who do qualify are buying houses and then renting them to those who don't qualify. :)

 
At 9/16/2012 12:50 PM, Blogger Ron H. said...

juandos

"How much is your "irretrievable time' worth?

I've not wasted a pico second's worth of life mowing a lawn or any of the other myriad and mundane chores that come with homeownership...
"

You are spending your irretrievable time doing something you hopefully prefer more, to earn money to pay someone else to do those things.

Ultimately all costs are borne by the end user.

It's great to have so many choices of living arrangements, ain't it?

 
At 9/16/2012 1:10 PM, Blogger juandos said...

"According to the article your time is worth $488-$1041 per month. Not bad for a little work. You could factor in the health benefits of the exercise"...

Well on a personal level hancke that amount of money is something I can't buy 'more life' with but which of course can be said about any of money...

I would say in using my own shabby value system that Trulia who is in the house pimping business is pushing a philosophy of indentured servitude...:-)

 
At 9/16/2012 1:14 PM, Blogger juandos said...

"You are spending your irretrievable time doing something you hopefully prefer more, to earn money to pay someone else to do those things"...

Well ron h being the thoroughly lazy and unmotivated guy that I am I would rather watch paint peal instead of repainting the garage...

"It's great to have so many choices of living arrangements, ain't it?"...

Amen!

 
At 9/16/2012 1:41 PM, Blogger Ron H. said...

juandos

"Well on a personal level hancke that amount of money is something I can't buy 'more life' with but which of course can be said about any of money..."

Hmm. Opportunity costs. Let's see.
More life vs money - money vs more life.

Tough call. :)

 
At 9/16/2012 2:18 PM, Blogger juandos said...

"Tough call. :)"...

Yes indeed ron h its a real toughie...:-)

 
At 9/16/2012 2:46 PM, Blogger Ron H. said...

"Yes indeed ron h its a real toughie...:-)"

LOL

Thanks juandos. That's a great example of why "comparitive advantage" is so important.

Mrs. Money said: "-Paint is cheap but painting can take forever. I just worked on painting our master bedroom for over a month! "

Mrs Money should stay as far away as possible from any paint that isn't already dry.

Obviously her advantage is in writing articles for blogs, or whatever it is she does, so she would be better off doing what she does well and paying someone else to do what they do well - in this case painting.

You are correct that people should be aware of everything involved in home ownership, and be prepared to pay others to do those things they don't wish to do themselves.

Luckily for me, I bought my first house in my 20s, when *nothing* was too difficult to tackle.

Now there are very few of those pesky chores I wish to do myself, and I marvel at how cheaply others will do them for me, and how quickly they get those jobs done.

 
At 9/16/2012 4:15 PM, Blogger DeeBee9 said...

Does the Trulia study take into account the difference between the standard deduction and itemizing? Assume my mortage interest and property taxes come to $12K, I have $2K charitable = $14K. If I itemize, I forgo the $11,900 standard deduction, so my real itemization benefit is $2,100. If Trulia didn't take this into account (as I find so often in such studies) the results would be strongly biased, although not enough to offset 45%.

 
At 9/16/2012 4:18 PM, Blogger DeeBee9 said...

Does the Trulia study take into account the difference between the standard deduction and itemizing? Assume my mortage interest and property taxes come to $12K, I have $2K charitable = $14K. If I itemize, I forgo the $11,900 standard deduction, so my real itemization benefit is $2,100. If Trulia didn't take this into account (as I find so often in such studies) the results would be strongly biased, although not enough to offset 45%.

 
At 9/16/2012 4:49 PM, Blogger Ron H. said...

DeeBee9

"Does the Trulia study take into account the difference between the standard deduction and itemizing? "

The Trulia study assumes you itemize deductions.

"To calculate whether renting or buying costs less, we assume people can get a low mortgage rate of 3.5%, itemize their federal tax deductions and are in the 25% tax bracket, and will stay in their home for seven years.

(Below, we’ll show how changing these assumptions can affect the rent-versus-buy math.) We do the following calculations:
"

Your mileage may vary.

 
At 9/16/2012 5:02 PM, Blogger hancke said...

I wonder what stocks have to look like before it gets rated a "buy" from this crowd. ; )

 
At 9/16/2012 6:49 PM, Blogger aorod said...

You ignore real estate taxes. In Illinois real estate taxes run about 8% to 10% of a persons income. And the State wants to dump teachers pensions on homeowners to boot.

 
At 9/16/2012 7:21 PM, Blogger bart said...

hancke said...

I wonder what stocks have to look like before it gets rated a "buy" from this crowd.


I bought a pile of mining shares in May and July, and more lately. There's almost always a bull market somewhere.

 
At 9/16/2012 9:24 PM, Blogger VangelV said...

Vangel, illiquid markets with high transactions costs bastardized by endless government meddling tend to be more prone to more pronounced and longer lasting periods of inefficiency.

But, if you ca swing the mortgage and the value of the option to move quickly in the next seven years is not very valuable to you, this tells you that you should buy a house instead of renting one.


That would depend on what you expect to happen to the economy and you personally in the next seven years. Many people plan not to lose their jobs or get divorced but do so anyway. A friend of mine sent me some information about who did best during the Weimar Hyperinflation. It was the renters who paid around 3% of their income for rent. Homeowners did much worse even though their debt was forgiven because their home operational costs exploded.

While I certainly think that given the headwinds for bonds and the fiat money system it makes sense to look at real estate as a way to hedge one's wealth I am not very hopeful for many people who are buying homes because of the huge problem with employment and the post election turmoil that we expect to see in the economy. While there should be some reasonably priced local markets that make sense I do not expect to see the big win for people that Mark has been predicting the past few years. It is a bit hard for me to get excited from the fifth call of a bottom since the crisis began, particularly when we look at the BLS reporting and the true picture in the real economy.

 
At 9/17/2012 2:14 AM, Blogger Ron H. said...

aorod

"You ignore real estate taxes. In Illinois real estate taxes run about 8% to 10% of a persons income. And the State wants to dump teachers pensions on homeowners to boot. "

From the Trulia Trends article:

"Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs."

 
At 9/17/2012 5:16 AM, Blogger Jet Beagle said...

vangeiv: "You have to have a steady job to qualify and a 20% down payment. You have to be willing to stay where you are even if you find better employment opportunities elsewhere.

That would mean that less than 5% of the population would qualify. What about the other 95%?"


Far, far more than 5% of the population meet those qualifications. Many households have family and social ties which inhibit relocation for employment. Many millions of us have steady jobs. Coming up with 20% down payments may be tough for younger folks, but not for middle-aged and senior households (who make up the majority of the population).

I'm not sure these qualifications upi listed reflect reality, anyway. A large percentage of homebuyers each year are workers who have recently found better employment opportunities elsewhere. Also, it is not a requirement that a prospective homebuyer have 20% available in cash for a downpayment. Homebuyers trading up or down generally use the existing equity in the home they are selling as down payment for the next home.

 
At 9/17/2012 6:55 AM, Blogger VangelV said...

Far, far more than 5% of the population meet those qualifications. Many households have family and social ties which inhibit relocation for employment. Many millions of us have steady jobs. Coming up with 20% down payments may be tough for younger folks, but not for middle-aged and senior households (who make up the majority of the population).

It is true that more than 5% of the population meets the qualifications but that includes all those people who already have homes. My point is about the marginal buyer who is looking for that first home or has just gotten into a home. The easy credit policies have already gotten many buyers into the market and many of them are trapped with homes that are worth less than the mortgage amounts. They certainly cannot afford the 20% down and neither can most of the people who are trying to buy a home for the first time.

I'm not sure these qualifications upi listed reflect reality, anyway. A large percentage of homebuyers each year are workers who have recently found better employment opportunities elsewhere. Also, it is not a requirement that a prospective homebuyer have 20% available in cash for a downpayment. Homebuyers trading up or down generally use the existing equity in the home they are selling as down payment for the next home.

The data shows that most of the newer jobs are lower paying than the jobs that were lost. And given the fact that there are so many mortgages underwater I don't see the justification for the optimism that you seem to suffer from.

 
At 9/17/2012 7:01 AM, Blogger Methinks said...

Many people plan not to lose their jobs or get divorced but do so anyway.

You're still going to need a place to live.

Look, Vangel, if you expect hyperinflation to start tomorrow and the fiat currency system to collapse quickly after that, then you're basically saying the option to move is very valuable to you. So, don't buy. We never make decisions with perfect knowledge of the future. All decisions are probabilistic BECAUSE we can't see the future. I mean, what can I tell you?

You can over-complicate everything to the point that you're completely paralyzed.

It's this simple: if you can swing a mortgage at the rates in the analysis and the moving option is of low value to you, buy your dwelling instead of renting it. Take advantage of the arbitrage.

Personally, I don't think civilization is going to collapse in the next seven years and houses can and sometimes aren't good inflation hedges even if inflation picks up.

 
At 9/17/2012 7:43 AM, Blogger Mark J. Perry said...

Note: Trulia
reported last week that:

"Asking prices on for-sale homes–which lead sales prices by approximately two or more months – increased 2.3% in August year over year (YoY) and rose in 68 of the 100 largest metros. Excluding foreclosures, prices rose 3.8% YoY. These are the largest YoY gains since the recession."

 
At 9/17/2012 9:45 AM, Blogger Jet Beagle said...

vangeiv: "My point is about the marginal buyer who is looking for that first home or has just gotten into a home."

Sorry, I thought you were referring to the entire population of potential homebuyers.

Mark's post is applicable to existing homeowners as well as first time buyers. As Boomers retire or become empty nesters, many choose to downsize. Those who do will face that rent vs buy decision.

 
At 9/17/2012 9:51 AM, Blogger Jet Beagle said...

methinks: "if you can swing a mortgage at the rates in the analysis and the moving option is of low value to you"

In my part of the nation - and in other parts as well - selling one's home is really not difficult. So even for those who highly value the moving option, buying a home still makes sense if one expects housing appreciation (I certainly do).

 
At 9/17/2012 9:55 AM, Blogger Jet Beagle said...

hancke: "I wonder what stocks have to look like before it gets rated a "buy" from this crowd."

Not sure what "crowd" you are referring to. I've been steadily investing in U.S. equities for 35 years. I've been a homeowner for all that time as well. I've never, ever tried to time either the equity markets or the housing market. I've also been very careful not to overextend myself.

 
At 9/17/2012 10:15 AM, Blogger morganovich said...

truila left somehting important out of the equation:

opportunity costs.

if you buy a $1 million home you'd put $200k down.

if you rented, you'd keep the $200k and invest it. they did not factor in the return on that.

if you got the historical 8% equity return, that's $16k a year (that compounds). that's well over half the $28k a year you'd expect to pay in mortgage interest.

leaving that out makes this a completely inaccurate analysis.

that opportunity cost looks to me like it accounts for pretty much the entire variance.


 
At 9/17/2012 10:21 AM, Blogger Methinks said...

Jet, it's against my religion to bet on market direction :)

Knowing that in super hot real estate markets properties usually appreciate 8% annually, I was wary when prices jumped 30% annually in the NYC area. Since buying a house (after what I considered madness stopped), it appears I bought at the low of the market. Accidentally. I bought my house because I wanted it and I was willing to shell out that amount of money to live there, not because I was making an investment. If it works out that I made a small profit, hey! What luck!

 
At 9/17/2012 10:24 AM, Blogger Methinks said...

Morganovich,

I'm waiting for the "renting is just throwing money out of the window" argument.

Because having a roof over your head is not valuable.

BTW, I didn't bother challenging Trulia's analysis. Are you taking your calculations out to seven years or for the life of the mortgage. It seems like a 45% difference would be hard to overcome in 7 years.

 
At 9/17/2012 10:28 AM, Blogger Mark J. Perry said...

From the Trulia website, it looks like they are are considering the opportunity cost of the tying up money in a down payment:

"Finally, we calculate the net-present-value of all those costs to capture the opportunity cost of tying your money up in a down payment."

 
At 9/17/2012 10:39 AM, Blogger Methinks said...

duh...thanks, Mark.

 
At 9/17/2012 10:46 AM, Blogger Robert said...

Everybody is wanting to know how they can make money in this situation. You can't in the long run. It is a rigged market - rigged by the Fed - and you can't make money in a rigged market for long. The Fed either changes the rules or the market goes back to real worth. You would think that after the last housing bubble, creating a new one would not be high on the Fed's list, but they go with what they've got. If you don't think the rules can change over night, try being a landlord like me and waking up one day to find that your newest, largest competitor is the federal government. And they own a printing press.

 
At 9/17/2012 11:12 AM, Blogger morganovich said...

mark-

i read through their methodology.

that's just an NPV of costs. it makes no return assumptions about the money you would not have put down.

they do, however, factor in price appreciation of the house. that makes this an egregiously slanted comparison.

this is the entire paragraph that you cited:

"Second, we estimated the total costs of renting and buying for the typical property in a metro over a seven-year period. We factored in all the costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc.), along with the tax benefit of deducting mortgage interest and property taxes, as well as the proceeds from selling the home after seven years with modest home price appreciation. On the rental side, we factored in renters’ insurance and the security deposit. Finally, we calculate the net-present-value of all those costs to capture the opportunity cost of tying your money up in a down payment. This gives us the total cost of buying versus renting. We then calculated the dollar difference and percentage difference between renting and buying."

there is absolutely nothing in it about return on the money you did not use for a down payment.

this is why the figures they are getting are so far off. there is simply no way that buying is 45% cheaper than renting. such a disparity is so wildly implausible that it could only be the result of bad methodology, in this case, leaving out the return you would get by investing what would have been your down payment.

this methodology is so biased as to be useless for discussion.

add in $1 k a month in return on your would have been downpayment, and the nyc, sf, sj, la, etc markets all flip over in the first year, much less in the compounded 7th one.

 
At 9/17/2012 11:32 AM, Blogger cactusKP said...

With disposable income at $38K/year (FRED) and savings a mere 4.2% (BEA), Americans on average will have to save for over 20 years just to make a downpayment on a median priced home.

 
At 9/17/2012 11:43 AM, Blogger Methinks said...

That would be a colossal oversight, Morganovich. For an economist, anyway. Are you sure that the opportunity cost of the downpayment isn't part of the "etc." in his costs of home ownership?

 
At 9/17/2012 12:00 PM, Blogger Mark J. Perry said...

If they did leave out the opportunity cost of the down payment, it could be relatively insignificant, given the fact that money markets and bank CDs are paying close to zero.

For a $150k house, the 20% down payment would be $30k.

Money market funds are paying about 0.07% yield now, or about $21 per year on $30k. 5-year CDs are paying about 0.78% per year on average, or about $234 per year, and less than $20 per month.

 
At 9/17/2012 12:05 PM, Blogger bart said...

Mark J. Perry said...

If they did leave out the opportunity cost of the down payment, it could be relatively insignificant


It could be very significant too.

The S&P is up well over 100% since 2009, and Treasury bonds and gold are up very substantially over almost any significant period during the last 10 years.

 
At 9/17/2012 12:20 PM, Blogger Methinks said...

Mark,

Why would you assume that the potential downpayment would be invested entirely in money market and CDs?

 
At 9/17/2012 12:22 PM, Blogger morganovich said...

consider a million dollar home.

put 20% down at 3.5% and your 30 year fixed payment is $4634 a month. you'll pay another $800 in taxes, $300 in insurance, etc.

you'll be out of pocket $5800 a month or so.

even with all the tax advantages etc, (you'd save about $575/mo in interest deduction at 25%) you're looking at $5000 a month.

that's a ton of rent.

factor in ab 8% return on $200k and that's $16k in year one. if you spend it on rent instead of reinvest (no compounding) that's still $1300/mo.

maybe the house goes up in value. traditionally, that happens at the rate of inflation, around 2-3%. but, of course, you pay 6% of final value when you sell.

7 years at 3% is a 23% increase. 6% of 1.23 million is $74k so you wind up making $156k.

that's about 1800/mo.

of course, houses need to be maintained. you need to pay for that as an owner (and not as a renter) this was left conspicuously out of the truila equation. (and we are assuming zero CCR, co op, homeowners assn etc which is very likely untrue)

a rule of thumb is that maintenance is 1% of value a year. at $1 million, that's 10k, $833/mo.

so, very roughly, it looks like the rental break even on a $1 million property for 7 years is about $5300.

you cannot rent a $1 million property for that in most places.

this is admittedly rough, but it shows just how wildly off the truila numbers are.

there is simply no way a 45% price difference like that could persist.

investors would be buying them up hand over fist to become landlords.





 
At 9/17/2012 12:28 PM, Blogger morganovich said...

mark-

that money market assumption is highly unrealistic, especially right now. who in their right mind would put their investment capital to work at a negative real rate?

if you have a 7 year horizon (as in the home being discussed) then you would not even consider a money market.

this math simply has to be wrong.

there is no way a 45% price differential could persist in a market where investors could by properties and become landlords.

the maintenance costs alone close a big part of this gap (and were left out by truila). they also left out condo fees, co op fees, homeowners assn fees etc which are huge in a metro area. my last SF apartment had $2300/mo in condo fees alone.

this truila study is badly incomplete and deeply slanted as a result.

 
At 9/17/2012 12:30 PM, Blogger Methinks said...

Morganovich, technically it is theoretically possible for large deviations like this to occur - but not to persist in the long run.

We're talking about a very illiquid market with high transactions costs and banks that are not keen to lend. that can easily create quite a large inefficiency as would-be buyers are prevented from buying and pushed into renting. Note that the analysis is on a middle class buyer's profile. If you change those inputs, the outcome changes.



 
At 9/17/2012 12:37 PM, Blogger VangelV said...

You're still going to need a place to live.


True. The trend now is to share accommodations with someone in similar circumstances or to move back in with parents.

Look, Vangel, if you expect hyperinflation to start tomorrow and the fiat currency system to collapse quickly after that, then you're basically saying the option to move is very valuable to you. So, don't buy. We never make decisions with perfect knowledge of the future. All decisions are probabilistic BECAUSE we can't see the future. I mean, what can I tell you?

But that is my point. Locking in yourself for seven years requires seeing a benign future and few penalties from shedding options.


You can over-complicate everything to the point that you're completely paralyzed.


True. But you can also oversimplify everything to the point where you become reckless.

 
At 9/17/2012 12:38 PM, Blogger Mark J. Perry said...

For the Minneapolis market with a median price of $179k, a 20% down payment would be $35,800 to buy the median price home. Buying there is $807 per month cheaper than renting. Therefore, it looks like the annual opportunity cost of your funds would have to 27.05% before renting would be better than buying ($807 x 12 / %35,800).

At any reasonable opportunity cost assumption for the average person (e.g. 1-15%), it would still be cheaper to buy than rent.

 
At 9/17/2012 12:42 PM, Blogger Methinks said...

Vangel,

I see no other option for you. You might as well bid farewell to this cruel world and then you won't have to make any decisions at all, avoiding the risk of making a mistake altogether.

My view is that losing money on a deal is not a catastrophe. Being paralyzed with fear is far worse.

 
At 9/17/2012 12:42 PM, Blogger morganovich said...

methinks-

in a very short run, maybe, but i have real doubts about a gap this large and this persistent.

this trulia study has left out a large number of salients and made bad assumptions.

in my experience, when you see a a modeled gap this big, first you suspect that you got the model wrong. you crawl all over it looking for what you might have left out or bad assumptions/bad math. such variances are very, very rare in a market of any size and bad models are a dime a dozen.

rather than get too bogged down in whether such a divergence could exist (though in a market with an arb this easy it does seem implausible) i think it's easier to just look at how much stuff the truila model leaves out.

just add in condo and co op fees to new york, the the model flips. same in sf.

this analysis left out many big costs associated with owning as well as the gains from investing your down-payment somewhere else.

i know the SF and NYC markets for RE pretty well. both are far better to rent right now.

this truila methodology would make anyplace look like a bargain to buy.

 
At 9/17/2012 12:45 PM, Blogger VangelV said...

Mark's post is applicable to existing homeowners as well as first time buyers. As Boomers retire or become empty nesters, many choose to downsize. Those who do will face that rent vs buy decision.

I don't think that it is applicable to many existing homeowners because many do not have anything in the way of equity or savings. My point is that a healthy housing market does not need intervention from the Fed or government guarantees for a huge portion of the transactions in the market. It also does not depend on zero percent interest rates as far as the eye can see acting to siphon off future sales so that the fallout from the correction can be avoided. The US homeowners have a very large balance sheet problem that will not be improved by having more homeowners destroying their own balance sheets to prop up the builders and the real estate sector. The proper free market response would be to let the markets do their jobs and liquidate the lousy investments made by people who were misled by the artificial rates and terms created by Congress, Treasury, Fed, and the GSEs. Repeating the Hoover/FDR or Japanese response does not seem to be a very good idea.

 
At 9/17/2012 12:57 PM, Blogger bart said...

Methinks said...

Vangel,

I see no other option for you. You might as well bid farewell to this cruel world and then you won't have to make any decisions at all, avoiding the risk of making a mistake altogether.



Well Done Vangel.

You have yet another personal attack from one who can't deal with a differing view of the future.

/sarc

 
At 9/17/2012 12:58 PM, Blogger VangelV said...

Money market funds are paying about 0.07% yield now, or about $21 per year on $30k. 5-year CDs are paying about 0.78% per year on average, or about $234 per year, and less than $20 per month.

Correct. The Fed's intervention is keeping rates artificially low and is supporting housing. It seems to me that you are assuming that the intervention can continue indefinitely and that investors should not worry about a manipulated market because the central planners can continue with the intervention for a very long time.

I disagree. I think that market manipulation creates dangerous conditions for the average retail investor and that if one would be willing to bet on the continuation of the manipulation there are much safer ways to invest. For example, one could rent and use the downpayment to purchase physical bullion, stocks in energy companies that have conventional reserves, fertiliser companies, food companies, etc. If you look at house prices in ounces of gold, you will find that there has been a bear market since the 2000 collapse in the tech bubble. I suspect that the market still has another 20% or more to go.

 
At 9/17/2012 12:59 PM, Blogger Methinks said...

in my experience, when you see a a modeled gap this big, first you suspect that you got the model wrong. you crawl all over it looking for what you might have left out or bad assumptions/bad math.

You tend to do that if you're about to commit your own capital. I agree that the difference looks very big, but it's possible. You know that we can spend a lot of time dissecting the assumptions, but even if we agree on a different set of assumptions, there's probably still a difference and there's probably still edge in buying - depending on your specific circumstances and the location.

I'm not willing to say this analysis left those costs out because I don't know what's listed under "etc.". It's possible the models included those costs (for instance, condo and co-op fees you mention are maintenance costs in multiple family dwellings). NOT saying it did, but I'm not willing to throw out an analysis that I haven't challenged in detail myself. To do that, we'd need access to his models.

Even if Trulia is spot on, it's NOT a substitute for doing your own analysis based on your specific circumstances. But, it may be saying something about the market - about inefficiencies resulting possibly from restrictive lending practices, for example.

 
At 9/17/2012 1:00 PM, Blogger Methinks said...

Bart,

Why is it you only speak up when you have something stupid to say? I'm just curious.

 
At 9/17/2012 1:00 PM, Blogger morganovich said...

mark-

"For the Minneapolis market with a median price of $179k, a 20% down payment would be $35,800 to buy the median price home. Buying there is $807 per month cheaper than renting. Therefore, it looks like the annual opportunity cost of your funds would have to 27.05% before renting would be better than buying ($807 x 12 / %35,800"

you have left out a number of salient issues, not the least of which is that mineappolis is still suffering 18% yoy drops in price per square foot. that's a nasty headwind to buy into.

also, most of the units in minneapolis are apartments. you need to facto in condo fees etc.

truila leaves that out. they leave out maintenance costs as well.

these numbers look way off.

finance 80% of 1790 at 3.5% 30 year fixed and you pay $833/mo. add in $200 in tax and $100 in insurance and you get $1133.

you'll pay another $200 in maintenance costs. you'll get a about $100 a month back in tax bennies at 25%.

this leaves you at about $1000/mo in costs after tax.

rental for a 2 br is $1200.

http://www.apartmentratings.com/rate?a=MSAAvgRentalPrice&msa=5120

that's a difference of $2400 a year which is 6.7% of the down payment, quite an achievable rate.

of course, if your price per square foot keeps dropping as it has been you'll really clean up renting.

http://www.trulia.com/real_estate/Minneapolis-Minnesota/

median price is very misleading here. it's showing a shift in mix. neighborhoods dropping in p/ft2 outnumber those rising by 3:1.

that might make me want to rent too.



 
At 9/17/2012 1:04 PM, Blogger Mark J. Perry said...

Price per square foot in Minneapolis area is up by 9.3% over the last year.

 
At 9/17/2012 1:05 PM, Blogger VangelV said...

For the Minneapolis market with a median price of $179k, a 20% down payment would be $35,800 to buy the median price home. Buying there is $807 per month cheaper than renting. Therefore, it looks like the annual opportunity cost of your funds would have to 27.05% before renting would be better than buying ($807 x 12 / %35,800).

When I was young I was told that the realistic purchase price of a rental property would be 100 times the monthly rent. I think that a property that was rented for $1,800 a month would be worth more than the median price. And that makes other options still far more attractive.

 
At 9/17/2012 1:06 PM, Blogger morganovich said...

methinks-

it could be saying that, but i suspect that what it is really saying is that "we did this wrong".

they left too many things out of this model and made assumptions about price increases that may prove optimistic.

lots of people are doing their own analyses. there is no shortage of capital looking at real estate.

this is not the answer they (and i) have come up with. if the gap were really this big, lots of people would be noticing it. you simply cannot hide that big an elephant.

there are doubtless some markets that are better to buy right now. i do not dispute that. but saying that all 100 top metros are is just plain wrong and the size of this gap is totally implausible.

it's just a bad model.





 
At 9/17/2012 1:08 PM, Blogger bart said...

Methinks said...

Bart,

Why is it you only speak up when you have something stupid to say?


Whooopeee, I got a personal attack too!

 
At 9/17/2012 1:09 PM, Blogger Methinks said...

And that's where I bow out. I'm not in the investment business. You've done far more work on this than I have, Morganovich.

 
At 9/17/2012 1:11 PM, Blogger Methinks said...

bart,

I'm thinking at your age it's either grumpy old man syndrome or dementia. Eat more kale, eggs and turmeric and take some vitamin D.

 
At 9/17/2012 1:12 PM, Blogger VangelV said...

I see no other option for you. You might as well bid farewell to this cruel world and then you won't have to make any decisions at all, avoiding the risk of making a mistake altogether.

I did not say do not act. I said do not act as the promoters tell you to act because that usually ends up badly. I take risks that most of you wold never even consider in the first place. My biggest investment is in Haiti. I have invested in oil exploration and production in Kurdish Iraq, mineral exploration in Mali, mines in Tanzania, Serbia, Tibet, and Kyrgyzstan. I expect most of my investments to go to zero but to have the profits made on the few big hits to provide a very healthy total return. I have no bonds whatsoever and try to have as little 'cash' as I can get away with. But all my actions are based on an understanding of economics and monetary theory (and history) that most people are unfamiliar with. Running against the crowd most of the time is far less risky than you think.

My view is that losing money on a deal is not a catastrophe. Being paralyzed with fear is far worse.

My view is that there are times when people cannot afford to lose money on a deal because they can never recover the money and the loss will make them paralyzed with fear.

 
At 9/17/2012 1:14 PM, Blogger bart said...

Methinks said...

bart,

I'm thinking at your age it's either grumpy old man syndrome or dementia.


Only two personal attacks so far today, three if Vangel is included?



 
At 9/17/2012 1:17 PM, Blogger VangelV said...

Well Done Vangel.

You have yet another personal attack from one who can't deal with a differing view of the future.

/sarc


I don't think a personal attack was intended or made. I think that what we have is a failure of communications that is based on a very different understanding of the world. If you recall the old arguments on the DR site, there was no way to get through to Keynesians and neo-Keynesian monetarists who thought that they knew and understood far more than they actually did. It was like talking to a different species that had a totally different view of reality. The collapse in equities, housing, and the general economy did not change their views. They just stated that the things that they had advised and the Fed did were not implemented in a large enough scale. And they conveniently ignored the people who explained what would happen and why.

 
At 9/17/2012 1:21 PM, Blogger Methinks said...

Obviously it wasn't a personal attack, Vangel. But response were you expecting to "well, sure you can overcomplicate things and you can also oversimplify"? you still have to make a decision.

 
At 9/17/2012 1:23 PM, Blogger Methinks said...

This comment has been removed by the author.

 
At 9/17/2012 1:24 PM, Blogger Methinks said...

My view is that there are times when people cannot afford to lose money on a deal because they can never recover the money and the loss will make them paralyzed with fear.

Meh. You can avoid that by never investing more than you can afford to lose.

 
At 9/17/2012 1:25 PM, Blogger Methinks said...

That was helpful advice, bart.

 
At 9/17/2012 1:27 PM, Blogger bart said...


"You might as well bid farewell to this cruel world and then you won't have to make any decisions at all,"


Vangel, we sure do have a different opinion of personal attacks. What she said in my opinion is a clear invitation to commit suicide.

No question thought on all the DR Keynesian folk who totally blew it on the housing bubble and financial crisis, etc. Fixed and wrong ideas can be very costly and even deadly.

 
At 9/17/2012 1:40 PM, Blogger Jet Beagle said...

vangeiv: "I don't think that it is applicable to many existing homeowners because many do not have anything in the way of equity or savings."

Really? According to the Census Bureau households headed by those with a graduate degree have a median net worth of $246K. Those headed by persons holding a bachelor's degree had a median net worth of $142K. Not sure whether you consider the number of Americans with college degrees to be "many", but I do.

I am positive that "many" of us Boomers have both "many" thousands in home equity and "many" thousands in savings. As we retire, we are making some very significant real estate decisions.

 
At 9/17/2012 1:40 PM, Blogger morganovich said...

mark-

"Price per square foot in Minneapolis area is up by 9.3% over the last year."

not according to truila.

http://www.trulia.com/real_estate/Minneapolis-Minnesota/

i was just trying to use the source you were.

 
At 9/17/2012 3:42 PM, Blogger Hydra said...

I never suggested something be done about it ( market failure) merely pointing out an example. I would have expected someone to claim the difference is due to government interference, somehow.

 
At 9/17/2012 4:02 PM, Blogger Hydra said...

I bought a house in 1973, for $55k. I subdivided the lot and built another home for $90k. The two homes sucked down another $200 k in home improvements. Each is valued at $550k today, down from $650, but they are rapidly being surrounded by homes at $1.2 million. One of them throws off $3k per month in positive cash flow, which then hets invested elsewhere.

Your dwelling is an expense. However, you may not use up all that you put into it. The residual that you eventually extract represents the ivestment value over and above your housing expense.

Property tax is not the rent you pay to keep your property: it is payment for services tendered that add to its value.

 
At 9/17/2012 4:06 PM, Blogger Hydra said...

You can have a propety that is cashflow negative, but comes out ahead after taxes.

 
At 9/17/2012 4:08 PM, Blogger Hydra said...

My thoughts exactly.

 
At 9/17/2012 4:14 PM, Blogger Hydra said...

Methinks is taking a conservative view which disregards any gains made as merely an expense. For many people the discipline of paying the mortgage is all the savings discipline they can muster. The rest goes for seasons tickets, jet skis, daughters weddings and many other things that are expenses with little or no cash return.

 
At 9/17/2012 4:17 PM, Blogger Mark J. Perry said...

One benefit of homeownership possibly not accounted for by Trulia, is that a homeowner pays down some principal with each monthly payment. In the extreme case of 30 years, payments from buying a home would eventually go to zero (for principal and interest), whereas rental payments are forever (and rising).

 
At 9/17/2012 4:18 PM, Blogger Hydra said...

You can still move and convert your home to a rental. Even if you sell at a loss in order to move, that loss may well be less than the rent would have been.

 
At 9/17/2012 4:37 PM, Blogger Ron H. said...

"Property tax is not the rent you pay to keep your property: it is payment for services tendered that add to its value. "

Do you mean services like public education for other people's children? What if I had been allowed to make improvements or split my lot and build a second house as you did instead of paying taxes all those years for services I didn't need?

 
At 9/17/2012 5:23 PM, Blogger Methinks said...

There I have to disagree with you completely, Mark. About 15 years ago, just for fun, a friend and I did a comparative NPV analysis on buying vs. renting. The two NPVs consistently came out about even. If you run the numbers yourself, you'll see that the difference is insignificant.

The market can get out of whack, but it won't stay that way and it can get out of whack against you too. A 30+ year time horizon is very long. And don't forget that you still have maintenance costs and taxes to pay long after your mortgage is done and those rent payments discounted 30+ years are going to be rounding errors. Meanwhile, you've got the downpayment you've not made earning a return (which is never ever going to be a CD return for a 30 year time horizon).

 
At 9/17/2012 5:24 PM, Blogger Methinks said...

In addition to maintenance you have depreciation on the house. That's not just an accounting expense.

 
At 9/17/2012 5:30 PM, Blogger Methinks said...

The benefits of homeownership are mostly intangible. You may like the feeling, the ability to make significant changes, the convenience of no lease renewal. But, in exchange for that, you're also selling a put, you tie up a lot of capital and accept price risk.

What we found is that the intangibles and the put are the two things that skewed the decision one way or the other.

 
At 9/17/2012 6:42 PM, Blogger Methinks said...

Finally, Mark, you're basically describing a long term and persistent inefficiency in the real estate market. On what theoretical basis would you defend this? Why would market participants not move to correct the price gap?

In fact, I argue that they do. When the zero-down mortgage was introduced, that skewed the math to buy rather than rent. You basically rent to own. I think we can agree that the market moved pretty quickly to correct that inefficiency.

I can buy a temporary deviation in the market and that that deviation will last longer than ones in the financial markets, but I can't buy a persistent inefficiency.

 
At 9/17/2012 6:55 PM, Blogger Ron H. said...

"Property tax is not the rent you pay to keep your property:"

Let's see:

Rent:

If you pay it, you get to live in your house. If you don't, you will be forced out.

Property Tax:

If you pay it you get to live in your house. If you don't, you will be forced out.

Rent:

Some services are provided for you.

Property tax:

Some services are provided for you.

Sounds pretty much like the same thing.

 
At 9/17/2012 10:22 PM, Blogger VangelV said...

Meh. You can avoid that by never investing more than you can lose.

But that is hard to do when you are buying a home and use as much leverage as the typical buyer.

 
At 9/17/2012 10:23 PM, Blogger VangelV said...

Vangel, we sure do have a different opinion of personal attacks. What she said in my opinion is a clear invitation to commit suicide.

You are thinking of the old DR site. Drink a bit more coffee and relax. Life is too short to get all hyped up about a few simple arguments.

 
At 9/17/2012 10:34 PM, Blogger VangelV said...

Really? According to the Census Bureau households headed by those with a graduate degree have a median net worth of $246K. Those headed by persons holding a bachelor's degree had a median net worth of $142K. Not sure whether you consider the number of Americans with college degrees to be "many", but I do.

Cherry pick much? And given the fact that people with graduate degrees should have high paying jobs do you really think that a net worth of $246K is much? That is barely enough to pay for one kid going to a decent university. And I am not sure why you think that your citation is supportive of your side of the argument and damaging to mine. I guess that you forgot the statement, "However, excluding home equity, median household net worth actually increased to $15,000 from $13,859 between 2009 and 2010." That means that housing equity is negative.

Or how about the statement, "Median net worth of households 65 and older decreased to $170,128 from $195,890. For those under 35, median household net worth decreased to $5,402 from $8,528." Old people who had a lifetime to earn are doing OK. Young people just starting out have a net worth that is not distinguishable from zero.

And let me point out that the surveys include the value of pension plans that may not be fully funded or fully guaranteed. And probably the value of SS contributions. As such, it is very likely that the data overestimates net worth.

There is little doubt that this debate will be settled some time in the next two years. At that time we will see how well homeowners have done in real terms and how the real standard of living has changed for the average American family.

 
At 9/17/2012 10:37 PM, Blogger VangelV said...

I am positive that "many" of us Boomers have both "many" thousands in home equity and "many" thousands in savings. As we retire, we are making some very significant real estate decisions.

I wonder what you mean by 'significant.' When I was in my late 30s, about two years before I retired I asked a finance friend of mine what it would take for him to retire comfortably. He said $1.4 million in assets at age 55 and no debt. That seems reasonable. The problem is that many 'boomers' are very far from having that much in savings. As such their 'significant' decisions are inadequate.

 
At 9/17/2012 10:39 PM, Blogger VangelV said...

I bought a house in 1973, for $55k. I subdivided the lot and built another home for $90k.

You are looking at having spent around 2,000 ounces of gold. Those are worth around $3.5 million today.

 
At 9/18/2012 8:08 AM, Blogger bart said...

VangelV said...

You are thinking of the old DR site. Drink a bit more coffee and relax. Life is too short to get all hyped up about a few simple arguments.



We remain of very different opinions of what a personal attack is.

Fine with me if you want to blow it off though.

 
At 9/18/2012 12:43 PM, Blogger morganovich said...

"One benefit of homeownership possibly not accounted for by Trulia, is that a homeowner pays down some principal with each monthly payment. In the extreme case of 30 years, payments from buying a home would eventually go to zero (for principal and interest), whereas rental payments are forever (and rising"

sort of.

this is mostly irrelevant though. very few americans live in a home for 30 years. i'd bet it's not even 25%. the average duration is 7.

on the other hand, if you took your 20% downpayment and let it ride at 8% for 30 years, you'd have 10X your money. if you then got 6% interest in it, you'd be getting 12% of the value of the home you would have bought annually, which will pay a lot of rent.

unlike ownership where the % is small, this would be true of everyone.

 
At 9/18/2012 12:50 PM, Blogger morganovich said...

methinks-

"The benefits of homeownership are mostly intangible. You may like the feeling, the ability to make significant changes, the convenience of no lease renewal. But, in exchange for that, you're also selling a put, you tie up a lot of capital and accept price risk.

What we found is that the intangibles and the put are the two things that skewed the decision one way or the other."

i think you hit the nail on the head here.

it's more about security etc.

historically, nearly everyone loses money on their house as an investment. right now rates are so low, you might have a shot at making money, but at a 6% mortgage, almost everyone loses.

add in tax and upkeep etc and you are 8-9% in the hole every year. housing does not keep up with that.

we figured out manhattan once. if you take the money paid by the dutch to the indians and put it into bonds from then until now at prevailing interest, you would have enough cash to buy all of new york state and every structure in it.

but you do offset rent etc so it's not like the loss is unacceptable relative to other options, but it's still mostly a loss in nominal, much less real terms.

but the security of it being YOUR house and knowing you can modify it and the lack of worry about re uping a lease and having to move etc is worth a great deal. that seems to be the real decider.

if you want flexibility to move, rent. if you want security, buy.

buying and staying for less than 2-3 years is almost always a big loser. stay for 20 and you likely do quite well.

 
At 9/18/2012 1:05 PM, Blogger Methinks said...

Morganovich-

I think what our analysis showed is the market is relatively efficient in the long run - and that's as it should be.

My biggest problem with Mark's last comment is that it violates financial theory. Implicit in the comment is that this benefiting is not vanishing. Why would an arbitrage persist? This is one of the things you were getting at yesterday when you took issue with Trulia's numbers.

 
At 9/18/2012 1:06 PM, Blogger Methinks said...

"benefit is not vanishing."

I really need to slow down and proofread.

 
At 9/18/2012 3:16 PM, Blogger morganovich said...

methinks-

agreed.

the only way an arb this big could persist is if there was somehting outlandishly systemic preventing clearing and i do not think that that is the case here.

even if individuals are having trouble taking advantage of this trend because they have underwater/low equity in their home, the reits and funds would be all over this. a 45% return from buying assets that are a built in inflation hedge and highly leverageable would have SWARMS of buyers all over them.

it seems pretty implausible that all these sophisticated real estate specialists would be missing such a huge opportunity even if households could not see it and take advantage themselves.

that truila study seems to have left out a number of really major components of the cost/opportunity cost equation.

 
At 9/18/2012 3:22 PM, Blogger VangelV said...

We remain of very different opinions of what a personal attack is.

Fine with me if you want to blow it off though.


Suppose you are right. Where does getting hyped up about it get us? Neither you nor I can control the thoughts or opinions of others. As such the stoic approach may be the best one.

 
At 9/18/2012 5:39 PM, Blogger bart said...

VangelV said...

Suppose you are right. Where does getting hyped up about it get us? Neither you nor I can control the thoughts or opinions of others. As such the stoic approach may be the best one.


Who said I was getting hyped up about it?

I simply think we have quite different opinions about posting that or suggesting that someone else commit suicide, whether joking or not. It's beyond the pale to me.

 
At 9/18/2012 6:31 PM, Blogger Ron H. said...

Bart

"I simply think we have quite different opinions about posting that or suggesting that someone else commit suicide, whether joking or not. It's beyond the pale to me."

If it will help calm you down I will suggest that you NOT commit suicide. :)

Although as a libertarian I generally stop short of telling others what to do or not do with their own selves.

 
At 9/18/2012 6:35 PM, Blogger Andy said...

I only wish this were true in the SF Bay Area.

 
At 9/18/2012 6:36 PM, Blogger Andy said...

I only wish this were true in the SF bay area.

 
At 9/18/2012 6:41 PM, Blogger bart said...

Ron H. said...

If it will help calm you down I will suggest that you NOT commit suicide. :)


*rimshot*... you're too kind... and of course a kinder, gentler, 1000 points of lights kind of guy...

Except about velocity. :)



Although as a libertarian I generally stop short of telling others what to do or not do with their own selves.

I must admit that I have been known sometimes maybe perhaps to possibly tell someone what to do... like suggesting that Methinks go back to the potty training stage? :)

 
At 9/18/2012 9:06 PM, Blogger Hydra said...

But i would still need a place to live. The money i spent was only a fraction of that amount because it was highly leveraged. My 50k original investment was only $7k out of pocket. The gold investment is pure speculation: the gold has no utility, and it must be guarded. In order to follow your advice i would hsve needed $140 k plus rent money. It is not an equal investment. Besides, some of my investments do better than others. That does not mean the ones with lower returns are bad invstments. Both the risk profile and the interim utility must be addressed.

 
At 9/18/2012 9:10 PM, Blogger Hydra said...

Vange is correct that most americans are pitiful savers. There are a lot of people riding around on $20k harleys with no money in the bank.

 
At 9/18/2012 9:12 PM, Blogger Hydra said...

That is why you use leverage: reduce your investment, and the lender takes some of the risk.

 
At 9/18/2012 9:30 PM, Blogger VangelV said...

But i would still need a place to live. The money i spent was only a fraction of that amount because it was highly leveraged.

You could pay rent. The 20% downpayment can be invested. And if you wish you can use leverage to purchase your investments. Your interest payments would still be tax deductible and if you are not too careless you should be able to keep your risks manageable.

The gold investment is pure speculation: the gold has no utility, and it must be guarded.

But history has shown you to be wrong. What was spent on those homes would be worth far more than $2 million today.

In order to follow your advice i would hsve needed $140 k plus rent money.

You would not be paying maintenance, mortgage interest, or taxes. And you would be a lot more mobile and able to take advantage of opportunities elsewhere.

It is not an equal investment. Besides, some of my investments do better than others. That does not mean the ones with lower returns are bad invstments. Both the risk profile and the interim utility must be addressed.

You may be right. But you clearly have no idea about the use of gold throughout history. That makes you a careless investor in my book.

I have no trouble if people want to hedge their bets by hiding in real estate when the fiat devaluation comes. But I would rather own a royalty company like Franco, Royal Gold, or even a little junior like Eurasian than a house over the next ten years.

 
At 9/18/2012 9:46 PM, Blogger Ron H. said...

Bart:

"*rimshot*... you're too kind... and of course a kinder, gentler, 1000 points of lights kind of guy..."

Wow. I don't know if I've ever been accused of being kind or gentle on this blog.

"Except about velocity. :)"

Yes, I'm probably a hopless case with respect to velocity.

"I must admit that I have been known sometimes maybe perhaps to possibly tell someone what to do... like suggesting that Methinks go back to the potty training stage? :)"

Listen. Methinks is a very smart lady with some unique perspectives, and I've learned a lot from her. She does have a very sharp tongue, however, and doesn't hesitate to use it.

If you insist on being prickly with her, you will continue to have the low value mudslinging contests you have had on this thread rather than high value discussions of economics and politics, subjects in which you are both knowledgeable.

Just sayin'.

 
At 9/18/2012 10:01 PM, Blogger Hydra said...

If you rent your real estate tax is buried in the rent. You still pay one amount for housing and another amount for government services that make the housing more valuable. If you cannot pay the real estate portion of your rent, your housing vanishes just as surely as if you owned it.

Yes i include the cost of educating other peoples childreen, having none of my own. Housing in an area with good schools and an educated work force is wortb more than otherwise.

 
At 9/18/2012 10:10 PM, Blogger Hydra said...

Were i a goldsmith i could invest in gold and increase its value through my labor, just as i did with my properties. Otherwise it is eithet pure speculation or a bet on inflation.

It is true that industrial uses for gold have some effect on its price. I prefer gold collectibles because you may experience both an increase in the gold value and an increase in the collevtible value. Plus the pleasure of owning something rare.

I have fone better with mines than with metals.

The gold eont keep the rain off your head. People will trade gold for shelter.

 
At 9/18/2012 10:26 PM, Blogger Hydra said...

Of course i would be paying maintenance and taxes, those costs are included in the rent. For your argument to hold i would need to put up the 2000 oz of gold up frontand the rent. It is not a fair vomparison.

My choice was paying on my condo and commuting, or buying an attractive property close to work. 2000 oz of gold was not an available choice.

I used the savings in commuting time, and my new back yard to build a nice sailboat. I rented the condo and later sold it at a nice profit. My out of pocket for yhe new place was near zero if i count the rollover from the previous investment.

I am sure that somewhere, somehow i might have made a better investment.
I did OK and had fun doing it. Just because i am not greedy does not mean im stupid.

I hope you enjoyed your gold as much as i enjoyed sailing the boat.

 
At 9/18/2012 10:38 PM, Blogger Hydra said...

At that time and that stage in my life borrowing money for a speculative gold investment eas not a realistic option. The brokers fees ( maintenance) on such an investment in those days would have dwarfed the expenses i took.

Rent, in my situstion was NOT a cheaper alternative. The 20% down payment WAS invested, and it was only 10 or 12%. I would habe been a sub prime loan. What we are talking about is the difference between whst i did with what i had to work with and what might have happened had i bought gold and lived some other way. That difference is not the 3.5 million you describe

 
At 9/18/2012 10:47 PM, Blogger Hydra said...

I could have taken other job opportunities and made mote money. But i would have had to uproot myself and move all my stuff, not a riisk free move or an insignificsnt cost.

I had an entertaining job where i hot to build stuff and blow things up. My pleasant home was a few blocks away. Someone would have had to offer a lot more money to get me to move into an unknown environment and unknown investment.

Opportunity costs cut both ways.

 
At 9/18/2012 10:49 PM, Blogger Ron H. said...

"If you rent your real estate tax is buried in the rent. You still pay one amount for housing and another amount for government services that make the housing more valuable. If you cannot pay the real estate portion of your rent, your housing vanishes just as surely as if you owned it."

Good. Then you agree that property tax is the rent you pay the county to keep your house.

"Yes i include the cost of educating other peoples childreen, having none of my own. Housing in an area with good schools and an educated work force is wortb more than otherwise."

Neither of which require the state, or taxes.

 
At 9/18/2012 10:50 PM, Blogger Hydra said...

I am not blind to the benefits of property ownership, or the drwbacks. It does seem to me that a 45% rent premium is either unrealistically calculated or else unsustainable.

 
At 9/18/2012 11:00 PM, Blogger Hydra said...

What was spent on those home would be worth far more than $2 million today.

But i would still need a place to live. I did not have thr choice of both.

Without.an analysis of the cash expenditures i made vs the price of gold over time, you have no way to make such a claim.

Gold is one kind of investment eith its own costs and risks. Housing is another. But one is not a replacement for the other in any meaningful sense. I might have mafr a different mix of choices, lived cheaper and differently and bought more gold.

Depending on when i bought gold and what kind of dump i lived in, it might have worked out or not.

 
At 9/18/2012 11:11 PM, Blogger Ron H. said...

"Of course i would be paying maintenance and taxes, those costs are included in the rent. For your argument to hold i would need to put up the 2000 oz of gold up frontand the rent. It is not a fair vomparison."

His comparison requires that you bought gold in the same dollar amounts and at the same times you bought property or paid for improvements. If you leveraged your investments in RE you would have leveraged your investments in gold at the same time. apples to apples.

While you are correct to spend and invest your money in whatever manner you choose, as it is your money...

...let me re-word that: That portion of the State's money they allow you to keep...

...and you are correct to claim you did well based on your personal needs and priorities, (ain't choice great?) Vangel is also correct that the gold, as an investment, outperformed your property by a long shot.

"I hope you enjoyed your gold as much as i enjoyed sailing the boat."

Actually, with his great returns on his gold investment, Vangel bought a sailboat at about the time you began sailing yours, but his is much bigger and nicer, and he still has plenty of gold left over.

Yes, people will trade gold for shelter, and shelter for gold as they have done throughout history when the fiat currency you prefer to measure everything in is long gone.

 
At 9/18/2012 11:26 PM, Blogger Hydra said...

No. You pay one amount to keep your housing and another amount to keep the services that help make it worth having.

You have a choice to move to a place with little or no services. Most people dont make that choice, and the ones that do are not necrssarily better off.

As a day trader you could live in a tent with a satellite dish and pretend you dont need or use any government services. Theoretically schools and an educated work force dont need government to make them happen.

But from a practicsl standpoint, for now, you will pay for them throgh rent or taxes. Given that reality one makes economic decisions accordingly, and not according to some theoreticsl construct..

 
At 9/18/2012 11:35 PM, Blogger Hydra said...

The county provides services that benefit your house and your business. It expects those services to be psid for. If the services were paid for some other way, the costs would still come out of the economy. The distribution of costs and benefits would be different. Whether any individual would be bettet off or wether the sum of individuals would be better ooff is yet to be seen, since we have no examples of an economy with no government.

 
At 9/19/2012 12:15 AM, Blogger Hydra said...

Vange made his trades and i mafe mine. His opportunities were different than mine.

Maybe he has a bigger nicer boat, and a bigger nicer home, and more people to maintsin them and more gold to pay the taxes on them with.

Good for hhim. I have a neighbor eith a lot more money and toys thsn i have. From what i can tell from his litany of complaints he is working his ass off and terrified thst this vountry is going to hell.

When he come to a stop sign in his bentley or his porsche, he still had to stop, same as me. I get calls from investment advisors every day. Dont you want to make more money? Sure, but not enough to pay to listen to bullshit. If you are so good at making money, why arent you doing that instead of selling advice. That goes double who give away advice for free. Triple for people giving advice on a one trick pony.

Buy gold.
Buy real estate
One word, my son, plaztics.

I know people who git very rich on each of them, and people that lost their shirt.

I will say this, the people that i know who mafe the most money on real estate were slumlords. They would tell you as much. Peopleneed shelter. Cheap properties dont cost you as much when they do go empty. And there is a steady stream of rent money that comes from the government.

It is good money. Im just not interested in that line of work. Not al that interested in hoardng gold, either.. Of course you can be a gokd trader, but then you have a problem with government currency.

 
At 9/19/2012 12:26 AM, Blogger Hydra said...

Vange made his trades and i mafe mine. His opportunities were different than mine.

Maybe he has a bigger nicer boat, and a bigger nicer home, and more people to maintsin them and more gold to pay the taxes on them with.

Good for hhim. I have a neighbor eith a lot more money and toys thsn i have. From what i can tell from his litany of complaints he is working his ass off and terrified thst this vountry is going to hell.

When he come to a stop sign in his bentley or his porsche, he still had to stop, same as me. I get calls from investment advisors every day. Dont you want to make more money? Sure, but not enough to pay to listen to bullshit. If you are so good at making money, why arent you doing that instead of selling advice. That goes double who give away advice for free. Triple for people giving advice on a one trick pony.

Buy gold.
Buy real estate
One word, my son, plaztics.

I know people who git very rich on each of them, and people that lost their shirt.

I will say this, the people that i know who mafe the most money on real estate were slumlords. They would tell you as much. Peopleneed shelter. Cheap properties dont cost you as much when they do go empty. And there is a steady stream of rent money that comes from the government.

It is good money. Im just not interested in that line of work. Not al that interested in hoardng gold, either.. Of course you can be a gokd trader, but then you have a problem with government currency.

 
At 9/19/2012 12:43 AM, Blogger Hydra said...

When i want to sail a big nice boat, i sail someone elses. I am generally apalled at the money and grief they put up with to have all those electronics and the equipment to power them. I once had an occasion to be on Jimmy Cagneys schooner. He told me that the amount of fun you have with a boat is "reversely" prportional to its size.

Some thing i thought about every time i considered trading up. And something that probably applies to most investments.

Last summer, on a big nice yacht, we had a close encounter with a ratty fishing biat that came barreling out of the fog. Someone was fiddling with the chart plotter and the radio, so we did not see it on the radar or hear the engines. Call it human errorin spite of big and nice, but the right information is better than too much information.

 
At 9/19/2012 1:36 AM, Blogger Ron H. said...

"Of course i would be paying maintenance and taxes, those costs are included in the rent. For your argument to hold i would need to put up the 2000 oz of gold up frontand the rent. It is not a fair vomparison."

His comparison requires that you bought gold in the same dollar amounts and at the same times you bought property or paid for improvements. If you leveraged your investments in RE you would have leveraged your investments in gold at the same time. apples to apples.

While you are correct to spend and invest your money in whatever manner you choose, as it is your money...

...let me re-word that: That portion of the State's money they allow you to keep...

...and you are correct to claim you did well based on your personal needs and priorities, (ain't choice great?) Vangel is also correct that the gold, as an investment, outperformed your property by a long shot.

"I hope you enjoyed your gold as much as i enjoyed sailing the boat."

Actually, with his great returns on his gold investment, Vangel bought a sailboat at about the time you began sailing yours, but his is much bigger and nicer, and he still has plenty of gold left over.

Yes, people will trade gold for shelter, and shelter for gold as they have done throughout history when the fiat currency you prefer to measure everything in is long gone.

 
At 9/19/2012 2:01 AM, Blogger Ron H. said...

"The county provides services that benefit your house and your business. It expects those services to be psid for."

Who decides what benefits your house and your business?

Look. You are making 2 different arguments in this string of comments and you don't even know it. One is the bizarre idea as stated above that someone knows better than you do what services you need and how much you should pay for them. Only the mafia extorts protection money in this manner.

"If the services were paid for some other way, the costs would still come out of the economy. The distribution of costs and benefits would be different. Whether any individual would be bettet off or wether the sum of individuals would be better ooff is yet to be seen, since we have no examples of an economy with no government"

If the services were paid for in some other way we would chose what services we want, and providers would compete for our business just as they do for most other things in life.

And THAT is the second argument you keep making when you claim that you have a right to make your own choices about how and where you want to live your life, what type of living arrangements you wish to have, what investments are best for you, and what size sailboat is best for you.

You are absolutely correct, and that is MY argument every time that we should all have choice in all things.

I'm assuming you don't mean that you should have choice but others shouldn't.

 
At 9/19/2012 8:12 AM, Blogger VangelV said...

But i would still need a place to live. I did not have thr choice of both.

Sure you did. You could invest the downpayment and rent instead of own. If you wished you could use leverage when you invested.

Without.an analysis of the cash expenditures i made vs the price of gold over time, you have no way to make such a claim.

The data shows that over time an average house goes up by the rate of inflation. Much of the increase in house prices does not have anything to do with appreciation but is due to the increase in size, and the inclusion of more expensive appliances and finishes. In 1945 the average Canadian house was the same area as today's three car garage. That same house built to the same standard would be priced around the same level in constant dollars. Gold would have done better because its levels were artificially kept low by central banks. And for the record, I consider gold to be money, not a long term investment.

 
At 9/19/2012 8:19 AM, Blogger VangelV said...

Vange made his trades and i mafe mine. His opportunities were different than mine.

We are all given a hand that we must play to the best of our abilities. And we all have preferences and choices to make. In my case I chose to retire in my early 40s and live off the savings I accumulated over my 15 years of post-university employment. While I have spent a lot of money I still have far more than when I began my retirement 11 years ago. During that time I had the free time to look after a dying father and to spend more time with my young children. The irony is that when I did my back of the envelope calculations I figured out that had I taken a minimum wage job during that period I would have around $1 million more in my retirement accounts than I do today. That blows the 'opportunities' argument out of the water as any knowledgeable individual who can see reality for what it is should be quite capable of becoming very rich as long as s/he accumulates modest savings that can be invested.

 
At 9/19/2012 8:25 AM, Blogger bart said...

VangelV:
...
Gold would have done better because its levels were artificially kept low by central banks. And for the record, I consider gold to be money, not a long term investment.


And gold as money has blown the performance of currencies into the weeks for over 100 years.


http://www.nowandfutures.com/images/purchasing_power_us_gold_etc.png

 
At 9/19/2012 8:30 AM, Blogger bart said...

VangelV:

That blows the 'opportunities' argument out of the water as any knowledgeable individual who can see reality for what it is should be quite capable of becoming very rich as long as s/he accumulates modest savings that can be invested.


Which shows how many actually aren't knowledgable and/or can't see reality with clarity.

 
At 9/19/2012 8:34 AM, Blogger VangelV said...

Were i a goldsmith i could invest in gold and increase its value through my labor, just as i did with my properties. Otherwise it is eithet pure speculation or a bet on inflation.

Gold is the market's choice of a monetary medium. It does not grow on trees as fiat currencies do and can't be created out of thin air. It is durable and fungible. It protects savers from a loss of purchasing power and gives them time to make rational investment/savings decisions. And it does not need government mandates and legal tender laws for its acceptance.

 
At 9/19/2012 8:37 AM, Blogger VangelV said...

I am not blind to the benefits of property ownership, or the drwbacks. It does seem to me that a 45% rent premium is either unrealistically calculated or else unsustainable.

I agree. But the premiums may be due because potential buyers do not see the artificial support needed to keep the housing market afloat as sustainable over a sufficiently long period of time to remove the risks of buying.

 
At 9/19/2012 8:37 AM, Blogger bart said...

Ron H.:

Listen. Methinks is a very smart lady with some unique perspectives, and I've learned a lot from her. She does have a very sharp tongue, however, and doesn't hesitate to use it.

If you insist on being prickly with her, you will continue to have the low value mudslinging contests you have had on this thread rather than high value discussions of economics and politics, subjects in which you are both knowledgeable.



Are you really asserting that because someone is smart or sometimes helpful that it's ok to attack someone and suggest that they commit suicide, whether joking or not?

Do you honestly condone those type of partially anti-social comments?

Or that it's not ok for me to be "prickly" or sling mud, but it is ok for her?


Those are real questions, no spin intended.

 
At 9/19/2012 8:42 AM, Blogger bart said...

Jet Beagle said...

I do not believe that either banks or credit unions are being reckless right now.


Most banks perhaps, but the size and growth of both OCC and BIS derivatives say otherwise for the TBTF banks.

 
At 9/19/2012 9:28 AM, Blogger Methinks said...

I cannot believe you're still trolling.

bart, you're a man (supposedly) in your 7th decade of life and you're fast closing in on your 8th. It's high time you found your way out of the Junior High girl's bathroom. Clearly, the natives aren't interested in going in there with you.

I think you're dumb as a box of rocks and that's not going to change no matter how much you sputter and pout. Your opinion of me matters less to me than the opinion of a spatula. And nobody else cares what either of us think of each other.

Now, put your big girl panties on, stop whining and try to mend as much of your shattered dignity as you can before it's too late.

 
At 9/19/2012 9:35 AM, Blogger bart said...

Methinks said...

I cannot believe you're still trolling.


Pot. Kettle. Black.


And for the dain bramaged, just more useless spew but at least she didn't suggest I commit suicide or sometjhiomng else anti-social

Your opinion of me matters less to me than the opinion of a spatula.

If that were really true, you'd just STFU and stop attacking people.

Nice job though on continuing to follow my orders about personal attacks.
Good boy!

 
At 9/19/2012 9:40 AM, Blogger Methinks said...

Sweet Lord, you're an even bigger idiot than I originally thought.

 
At 9/19/2012 9:56 AM, Blogger bart said...

Methinks said...

Sweet Lord, you're an even bigger idiot than I originally thought.


Please continue with the foot bullets personal attacks, etc. as ordered.

You lose.

 
At 9/19/2012 1:29 PM, Blogger Ron H. said...

Bart

"Are you really asserting that because someone is smart or sometimes helpful that it's ok to attack someone and suggest that they commit suicide, whether joking or not?"

No. I'm suggesting that I and hopefully others learn from you and Methinks on the subject of economics, but I learn nothing from mudslinging, in which I have a masters degree, as well as graduate studies in prickly.

"Do you honestly condone those type of partially anti-social comments?"

It doesn't actually matter whether I condone them or not, as it's not my blog, and as you must have noticed I often insult people myself. I'm only suggesting that trading insults is a low value activity compared to discussions of economics and ideology.

Being generally anti-social myself, I tend to ignore insults when I don't have time or inclination to respond to them. If you feel they are important, you should respond in whatever way you prefer.

"Or that it's not ok for me to be "prickly" or sling mud, but it is ok for her?"

Not at all. I'm only suggestion that it may be a waste of time. I can't afford to be upset by anonymous writers on the internet. Also it's my observation that you are upset by your exchanges with Methinks, while she seems to enjoy them.

"Those are real questions, no spin intended."

As are my answers :)

 
At 10/31/2012 8:50 AM, Blogger 0s0-Pa said...

Sure is crazy to think that home ownership is 45% less money than renting... makes you wonder why so many people continue to rent!
-Jon

 

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