What is a starter home in Portland? I pose the question because I don’t know the answer. I’m not even going to try to define what starter home means to me because I want to see what you think without leading the conversation. Discuss.Portland Real Estate Blog
I’m going to say
– A condo
– A two-bedroom, one-bath bungalow
– Anything that costs less than $300,000
A starter home is usually a couple ready to settle down but not yet with kids, and traded up from.
A rental.
JP beat me to it!
Anything less than $300K?! I am going to guess that a lot of ‘starter’ homes are bought w/ FHA meaning zero down. Can a young person/couple starting out afford a $250K mortgage which equates to about $2K per month in housing expenses? Most likely not. I am going to say a starter home’s price range is $150-200K unless, of course, there is assistance from relatives either with school and or a down payment.
Thanks for bringing the topic up. It cracks me up to see realtors on Craiglist advertise ‘starter homes’ w/ price tags above $300K.
In today’s market…JP is right on.
Well, in last week’s Willamette Week there was an ad for the Civic featuring a young man who recently purchased a unit. He’s a PSU student and bar back at the Heathman. And he was very cool looking, what with the curly hair and the alluring mixed race exotic-ness. Like all people in Portland he exuded that perfect blend of hip, casual, prosperity.
So I would say that a $280,000 studio condo is affordable by a student working at a bar. In essence a nice off-campus dorm. A starter home would be something up from that of course, say, a stunningly remodeled 3BR 2BA Laurelhurst charmer for the low low price of only $429,000.
Yes, that sounds about right.
Hey guys,
My starter home was a $165k (4 years ago) bungalow in NE. It needed a little work, mostly cosmetic, nothing major. 2 bed, 1 bath, 800 sqft w/ unfinished basement.
Perfect for my wife and I. Today it would probably be in the $230k-$250k range.
There are still plenty of them in our little area (Roseway).
Take care,
Jeff
We are looking for a (2) bedroom 800sf townhome or condo for 150k – 175k as a starter home. Realistically that is what we can afford.
Based on the responses here, I should probably be looking elsewhere huh?
“I am going to say a starter home’s price range is $150-200K….”
so, a 2 bedroom townhouse in Gresham perhaps? In my godawful experiences of the last 6 months, a starter home is not affordable in Portland without down-payment help from mom and dad, which leaves you SOL if they don’t have 50k to spare.
Here is Los Angeles, they call anything under $550k a starter home. What else are you going to call it when you market a 2br/1ba for $525k?
We bought what is considered a starter home (entry-level) for 250K in late 2006 (3 bed, 1 ba). It is our third home, but the first in Portland. The other two were on the east coast. The house was a fixer — unlivable. Our budget was up to 300K, but we found nothing significantly better. For less money we would have had to have moved to gresham or gotten a smaller condo.
I think for a starter, a person is unlikely to want to do the kind of work we had to do to live in this house. Unless they are carpenters/electricians/plumbers. So, perhaps people buying starters for 280K inside Portland are also independently wealthy? I see a true starter as being under 200K and not needing significantly work.
A starter home in this city is a completely diff animal than a starter home in the southeast of the US. I had one of those 10 years ago. 3 bed, 2 full bath for 115K. Now it is probably worth 140K.
Like all people in Portland he exuded that perfect blend of hip, casual, prosperity.
These people seemingly exist on air alone, but it is not truly so. Behind these priveledged few is a trust-fund or a family member supporting them.
The reality is most Tattooed and Pierced Gen-Xers and younger Millenials cannot afford to own expenive Portland property. The idea that Portland is full of hip, creative, and wealthy young people has all the qualities of an urban legend.
Baby Boomers control the lions share of the money and the property
What assumptions are being made in defining the starter home?
For example, assumptions about-
1. Income
2. Net worth (defined as Assets-Liabilities)
3. Family Situation
4. Preference to a living situation
There are probably some more, but maybe we could define our “starter home” consumer, and then examine the behavior of such.
JP, why not add availability to different loan programs to your list? As much as any of the assumptions, I believe that is what made the biggest difference in people buying over the past 5+ years.
kevbo-
We do need a willing and able “starter home buyer,” and the lack of financing does have an impact on the ability of a buyer. The cost of a loan impacts the willingness of the buyer.
If we looked through time:
What happens when you have cheaper and easier money coupled with a growing population who are willing to use it? What happens when that money isn’t so cheap and easy?
Ok, let me reorganize a bit:
ASSUMPTIONS: STARTER HOME BUYER
1. Ability(partial list)
A. Income
B. Net worth (defined as Assets-Liabilities)
C. Available Financing
D. Total Debt Payments (% & Gross)
E. Other Mandatory Payments
2. Willingness(partial list)
A. Family Situation
B. Preference to a living situation
C. Economic Outlook
Is this better?
I thought all the starter homes were snatched up by realtors and speculators who put in wood cabinets, granite counter tops, Pergo and some stainless steel appliances and flipped them to a price of 329K?
I’m serious. All the starter homes are gone. All that’s left in the starter range are converted $650/month apartments that are now $219,000 condos that will cost you $1500/ month after a 20% down payment. Such a deal!
I just ran a quick search in RMLS to see what was out there. Residential housing in the City of Portland under $200,000 that are conventionally financiable. This means they should be habitable as is (all the major systems work). There are 750 active/bumpable listings. I didn’t look at any of them.
Even a residential house with an asking price of under $200,000 may be still be over-priced!
I have to agree with Naysayer on this one…
Ever since the tax code was changed in 1997, people have been buying second and third homes as a source of unearned income.
Look at any graph of home prices and you will prices start ramping up in 1997.
Additionally, 41.65% of homes are rented in PDX as opposed to 52.37% owned. One way to look at this statistic is that a lot of PDX property owners, have more than one house.
And the houses that were bought were the starter homes because they make good rentals.
PDX_Renter-
“One way to look at this statistic is that a lot of PDX property owners, have more than one house.”
We need more to be sure this is indeed true. What we know is that a greater number of homes are owned by landlords, but we don’t have any information about the number of property owners that have more than one house. It could be that there are a few who own hundreds or thousands of homes, being most of the rentals. The idea that most landlords only own one or two extra properties needs further support than the single statistic given.
Yes, the tax law change spearheaded by the republicans set off a new “feudalism” that has wrecked havoc with our economic system and the housing market.
Now of course, they’ve teamed up with the democrats to bail everyone out at all of our expense. Charming. This morning’s news about the Fed taking bad loans as collateral is simply a back way to putting the losses on the backs of the public.
I’m still wondering what a starter home looks like…
We are a young family – no trust funds or family help here – two small children, dual income (mid-range for both salaries), drive older cars (13 and 9 years old). I’d say we are your “all-American” middle class family – and we have a stereotypical “starter” home.
We purchased it four years ago for $172,000 – it’s a 3 bedroom ranch in close-in Beaverton (217 & Allen) so not way out in the ‘burbs.
Today it’s appraised at $260,000. We have good credit so we’d be able to buy it today with our same income and still have it be within the starter range . . . but it’d be more of a financial stretch.
Tamar: maybe you can help me understand something I’ve been wondering about…
How does a young family with a couple of kids making the median income (it’s right around $60K for median family income in PDX) make the mortgage payment on a $260K house, plus about $200/month for prop tax & insurance while also contributing 10% of salary to retirement accounts (that’s about the minimum recommended amount these days) and also saving up for the kids’ college? Adding in food & vehicle maintencance, gas, utilities, clothes, etc… I can’t seem to make those numbers work at this point – I’m very glad I bought long ago.
TiP –
It’s not easy, that’s for sure. But to be honest, we have a combined income of more than the $60,000 median you mentioned – not a ton more – but more.
We have had our challenges – for example daycare for two children costs as much as our mortgage. We haven’t saved as much as we’d like and we drive older cars, like I mentioned, but once our son starts school in the fall we’ll be able to save more.
It comes down to juggling and prioritizing. There are days when I think I’d love to have a bigger house and a newer car and there also days when I’m thankful to be able to own a home at all.
for example daycare for two children costs as much as our mortgage.
Wow, seriously? This is a factor I had not even considered (I don’t have kids) OK, I don’t see how it’s possible.
There are days when I think I’d love to have a bigger house and a newer car and there also days when I’m thankful to be able to own a home at all.
Yes, good to be thankful for what you have. Don’t feel bad, I drive a 20 year old car myself. I make a good bit over the median myself (and that’s not counting what my wife makes) and I don’t think I can afford a $300K house nor a new car especially considering the costs of retirement that need to be saved for now.
I pay $950/month for daycare for a toddler! That’s part of the reason we sold last May. And we plan on having a second one though I hear you get a discount;O) Imagine, $1600/month in childcare expenses! What are we getting ourselves into?
I may be a renter for a few more years!
bearlee-
It’s pretty clear that with children it’s much cheaper to rent than buy!!!
Good Lord! I’m going to get a vasectomy just in case!
Kidding. I love kids. Other peoples’. 🙂
Ok, I should read what I write before posting it. That last post is not as clear as it should be:
It should read something like: Children are cheaper to rent than buy. (I guess it’s more like timeshare, without charge)
That’s the irony. I would be great to be back in a 2000 square foot home vs the 1000 square foot apartment but not at that expense. We are always outdoors anyway or on the go to OMSI, etc.
Anyone see the articles in the Tribune discussing family housing in the Pearl. Only 3% of the condos being built are 3 bedroom. The reporters seemed to think that was the problem with families moving out when the kids reached school age. Who the heck can afford a 3 BR condo in the Pearl with a starting price around 900K when you have childcare expenses!?!?!
Too funny, JP. I think you could even get paid to ‘borrow’ folks’ kids…it’s called babysitting.
This was “seemed like a good idea at the time.” Totally off topic but my prerogative and totally not realistic. Ever taken a puppy for a walk? Everyone fawns over you. Ever taken an infant out? Total opposite-sex magnet. Not only do parents need child care, single folk need kids to attract… never mind. Other People’s Children (OPC) was the .com that never happened. Register your child, slap on a GPS unit and “rent” him out to screened individuals in need of a conversation starter.
Now your filling two needs with OPC’s brilliant management in the middle charging both sides. We never did figure out the liability part 🙂
Bearlee asks:
“Who the heck can afford a 3 BR condo in the Pearl with a starting price around 900K when you have childcare expenses!?!?!”
Well Bearlee, a couple bar backs from the Heathman could probably swing that, according to the developers of the Civic.
Charles-
Is it your turn to describe what a starter home is yet?
Yeah, Charles, you stated that your wife primarily works with first time home buyers. What’s the typical range of homes that she assists in purchasing or is this getting into client confidentiality issues;O)
Jenny was my agent when I bought my house (my first).
The 30 plus comments show that their is no stereotypical starter home or first time buyer. There are lots of reasons people enter the market for the first time at different stages of their lives. Last year we worked with clients that moved from a higher priced market that could could afford Portland (about our age (I’m 34 bearlee, not 32)). They spent in the $400s. We had a younger mid-twenties couple that spent less than $200,000 and the first house they found failed its inspections in stellar fashion. I worked with another couple that spent over $600,000 on their first home last year.
I’ll move a little off topic again and note that this time last year we were paying Google Adwords five figures quarterly. We’re not doing that now and tracking about the same.
“I’ll move a little off topic again and note that this time last year we were paying Google Adwords five figures quarterly. We’re not doing that now and tracking about the same.”
Elaborate for us. What does this mean. We? Tracking?
Thanks.
bearlee-
In one word: Marketing
Charles-
Is a “first home” the same as a “starter home?”
I thought they were different.
Charles-
Things are looking good over at Alexa too.
http://www.alexa.com/data/details/traffic_details/portlandrealestateblog.com
Did we ever get an update on how well your office did in February? And just out of curiousity, does the public have access to market share of local real estate offices, not individual offices but ‘names’ like Realy Trust, Exit (sorry, lame name!), Century 21? Can I assume Windemere is pretty big? ReMax? I have to admit I see very few Prudential signs though I just spotted one on my route to work in Sylvan Heights
bearlee-
That February discussion is here:
https://www.portlandrealestateblog.com/realestate/2008/03/oregon-real-est.html#comments
bearlee, Google Adwords is largely a source of buyers, not sellers, and very expensive. As our business matures the expense is not as necessary as we are looking at about the same number of clients that we were this time last year due to referrals, the strength of this blog and other marketing avenues. “We” usually means Jennifer and I unless otherwise noted.
JP- Starter Home V. First Home is a valid question. I agree their should be a distinction.
Hey JP, if I can learn how to post a link then YOU can learn, too:O)
[a href=”http://www.katu.com/news/business
/15734177.html”]text here[/a]
replace the ][ with ><
But to be honest, we have a combined income of more than the $60,000 median you mentioned.
The good news is that you will soon be able to buy your own home for 176K again!
Got the right link, JP?
bearlee-
I had some irl business to take care of…
I read the Economic Tide article.
Of particular interest is how the Baby Boomers will behave as they continue to age…
So the question was raised, who are the first time homebuyers I work with? I love first time homebuyers. I don’t see a difference between “starter” and “first time”. I like buyers who have never owned before. They will be clients for life if we treat then right, answer their questions, and keep them happy. Especially when down the road, they can sell their house and buy house #2, #3, and #4 from us. I would much rather sell a house for $200,000 to them than a client at a higher price who only will work with us once.
I think that what a first time home buyer buys totally depends on their situations. This year, I have sold $300,000 to a couple in Tualatin. They should have bought before but they haven’t. $300,000 is hard to find in Tualatin. But they bought a fixer and we gave the seller 2 years piano lessons to make it come together (good thing my buyer was a piano teacher!).
In the last 12 months, I sold a $435,000 house on Mt. Tabor to first time home buyers. She was a nurse and he was a dentist. They should have been on their second or third home but school came first.
I also sold a house for $187,000 out in Rose City Park. An adorable house with a 2 car garage. Great for my buyers. It won’t work forever for them but is perfect right now. They will be able to fix up and have a great investment down the road.
I have sold a lot of first time homes to friends. Then as they have kids and need larger spaces, we sell house #1 and find house #2. There is something very rewarding about the first time home buyer.
Jenny
They should have been on their second or third home
How exactly do you figure when someone should be on their second or third home? I never knew there was a timeline or schedule for this sort of thing.
Well TiP, only losers don’t buy real estate. No matter what the price or hardship, everyone must be part of the “ownership society” or face ridicule and derision.
That’s how the real estate industry brought us to the brink of economic collapse. Why our government is now taking worthless mortgages as collateral for our tax dollars. Nevermind the important priorities, we MUST save the granite counter tops and stainless appliances even if it means devaluing our currency and socializing the risk that people should never have taken.
But it’s all happy-talk in the world of the realtor……….
Something about that 6% fee with each house I ‘should’ sell to move up just hurts too much to think about it.
I bought my first home as a single female in 1998 when I was 24. I still own that home. I paid $147,000. It has been a rental for the past 9 years and is currently worth about $350,000. At some point we will fix it up and sell it. We will take the proceeds and buy 2 more houses. Thus increasing our retirement egg. At the time I bought it I could barely afford it. I saved for the down payment and had 2 roommates move in to help me with the mortgage. I wasn’t a Realtor yet. I was just out of college. I had student loans and a pretty low-paying job. I bought in a questionable neighborhood on a busy street so that I could at least buy. That neighborhood is no longer questionable.
Should “first time buyers” buy? Only if they want an investment for their future. I love renters. You pay my mortgages. Feel free to rent forever. But if you want to own, look for a good Realtor to help you make an intelligent purchase. And then when you are ready to buy again (not because I call you and tell you it is time but because you have some equity and desire some more space or a better neighborhood and you call me) call that Realtor back and have them help you again. Yes, you will pay 6% +/- but you will be represented by a professional. I do on average 5 transactions a month. Most people will do 5 in their lifetime.
Don’t bother arguing here. I wanted to post because I think it is important to hear the positive. Yes I am a Realtor. Yes that is how I make my money. But more than that I am a homeowner and have been for a long time. I should be able to share my opinion here as well without getting yelled at. Yes I think people should buy houses. And if you don’t own a house, you should consider it. That might mean saving for a down payment so that in 5 years you can buy. At least that is working towards the goal.
It discourages me that you ask for comments and then are rude about it. The responses are sarcastic and mean spirited. This is our blog and I consider not posting. What does that say? Be nice people please.
You’re confusing a home with an investment. We all need a place to live. An investment only has value when we sell it, so thinking of a home as an investment is foolish. So you sell it at a profit? Then what? You still need a home and for most average workers, you’re just trading whatever equity (and security) you have for real estate fees, an extended mortgage, etc. The greatest fraud perpetrated on Americans in the last 25 years is persuading average people that they can play the game like wealthy people. We can feel like big-time players through easy credit, but we’re all just small-time suckers who have mortgaged our futures to be able to claim that we’re high rollers. More than a few small-time housing speculators will end up holding the bag in the great real estate bubble. The big-time players were sucking up the bonuses and stock options at the back end. They don’t suffer, but benefit from the naivete of the people who play real estate at the local level…who now ARE suffering.
Perhaps a “starter” home should be what they were 50 years ago: the place where you stay, pay off the 30 year mortgage, and live simply but securely.
Jenny,
You weren’t being yelled at by anyone (even Naysayer was only going on about Socialism). You simply made the statement that someone “should” have been purchasing their third home. We are curious how you quantify when someone should have made a purchase. I’m a renter, 35, DINK, low six-figure salary, never owned, have 20% down sitting in the bank. How many houses should I have owned by now?
And if you don’t own a house, you should consider it. That might mean saving for a down payment so that in 5 years you can buy. At least that is working towards the goal.
What stops me from buying is the idea of my 90K DP being erased by a 20% decrease in nominal prices. I will not buy until I have reasonable confidence that real estate will return earnings slightly above inflation. I expect to wait a long time.
Only if they want an investment for their future.
Real estate is currently deflating from the largest speculative asset bubbles in US history. Do you really believe a home in PDX today will be worth more 5 years from now?
We will take the proceeds and buy 2 more houses. Thus increasing our retirement egg.
In my experience anyone who invests with this type of certainty is not assessing risk properly.
“Real estate always goes up!”
“They should have bought before but they haven’t. $300,000 is hard to find in Tualatin.”
I have a few neighbors who should have sold by now, but haven’t. There is one home that after four agents, it still has not sold and remains on the market. If you ask the owners, I am guessing that they would suggest that $300,000 is hard to find in Beaverton. The original asking price was about $300,000.
They should have sold by now.
Heading back to that “starter home”…
I don’t see why a 2br/1ba house is a problem for a young family with median income. I grew up in a 2br flat, shared a bedroom with my brother. Loved it. My parents upgraded when I was in 3rd grade and I got my own bedroom. Hated it.
There are a couple homes in North Portland right now that are well under $200k. Looking at a couple 2br/1ba’s hitting the $185k mark. And thats just asking price…
If you go with an Oregon Bond loan and 5% down, you are breaking the $1000k a month mark with tax/insurance, but not by much.
Thats just about what you would pay to rent one.
Well, speaking of snide comments, saying you love tenants because they pay your mortgage is about as classist and snide as you can get. How would it sound if they care salesman said, “Hey, I made a huge profit off you! Thanks!” Or when you close on a house the banker says, “Thanks, sucker, you just paid for my kid’s orthodontia!”
The problem here is so many people became wannabe land barons they’re now bleating for bailouts and will probably get it. They’re worse than welfare cheats.
If you can’t stand the criticism you shouldn’t have a blog.
george-
Let’s consider the ratio that has market value of the home rented in the numerator and annual rent in the denominator as an indicator of rental value.
Using the $185k and the $12k numbers given, the ratio is a little over 15, or in a static environment, it would take over 15 years of rental payments to equal the interest free cost of the home.
In my neighborhood there is a home for rent. While I am not about to try and specify an exact market value, it was purchased about a year ago for $320k. The asking rent is $1,295. The ratio on this place is over 20, and it includes taxes, maintenance, normal wear and tear, and so on. Is there any incentive to purchase?
“I paid $147,000. It has been a rental for the past 9 years and is currently worth about $350,000.”
Note how long it took the home’s market value to double. I have had plenty of investments double far sooner, but I suppose risk must be considered too. Considering what’s happening in the lending markets, it appears that homes are far more risky than originally thought. I am glad I have not found a combined sewer in my investments that needs to be immediately replaced.
If you think Jenny needs me to stick up for her you’re so far from wrong that it isn’t worth debating. If we have any sort of good cop/bad cop relationship I’ve got the white hat on.
That said, some of the comments drip with sarcasm. None of us were there to get the impression that the client “should be on their second or third home.” Maybe the client flat out said it.
Florabelle makes the public sound like lemmings, jumping off the real estate cliff without looking forward.
Real estate, once purchased, is an investment. Investments have risks.
Naysayer, think about it. Renters pay mortgages for their landlords. It is a fact of life and not a form of social welfare where owners are doing renters a favor. I’d like the name of your car dealer that wholesales cars to you so he makes no money. I can’t quote the number of landlords that have no debt so spend their time on tropical beaches using rental income to pay the way but I can be pretty sure that the majority are using rental income to pay mortgage debt. C’est la vie.
Each individuals situation determines if they are going to be an owner, a renter, or homeless. It may not be their choice but if they have the ability to make the choice you have to understand the ramifications of the decision. Your view of the market drives a lot of that.
And to be clear, there have been no calls for bailouts from this camp.
Don’t forget a house is only worth what it SELLS for. Lots of people are throwing around valuations that they’d find difficult to get someone to actually pay for.
“You are confusing a home with an investment”. No I am not. They can be the same thing but they are not always. My brother owns an INVESTMENT (small house in the Hillsdale neighborhood). But he rents an apartment in San Diego. Prices are high there. He is single and doesn’t need much space. But he has an investment. Our neighbor rented a room in a large house but owns a house on Mt. Tabor that he rents out. Same thing – he didn’t need much space and his girlfriend had a house. But he has an investment.
Other people have homes that they love. I love the house we live in. If I was looking at it solely as “Investment” we would sell every 2 years, take the gains tax free and go forward. But the emotional side is important too. Sometimes you just love where you live. And house can mean family and memories and stability. I sold a house to a couple in Vancouver this winter. They were first time home buyers. She cried at the closing. She later told me that as a child they were often homeless and lived in motels. Having a house was so much more than an investment for her. It was “family”. She is actually the reason that I state I love first time home buyers. She loves her house and I helped her reach her goal.
Yes. Real Estate in Portland, Oregon will go up in value over the next 5 years. Yes that is only my opinion and we are all (thankfully) entitled to their own. I watch the market every day. I will buy another house this summer. There are no guarantees and there are no rewards without risks. I don’t play the stock market much because I don’t understand it. I understand Real Estate. — well, as much as you can 🙂
The reason I said that people “should” have bought before was actually because those specific clients said it to me. They regretted not buying 2 years prior. They had been in contract on a house (not with me) and got scared off by the inspection. Then they decided to go to grad school. So all worked out in their world and they bought a nice house in Hawthorne. But at 33 they were behind most of their friends who had already bought and sold at least once. Is that important? No. It was just a comment. You can buy at 23 if you want. You won’t live in the Pearl. But you can have a nice little house. A couple from Eastern Oregon bought a 2 bedroom 1 bath house with a 2 car garage off NE 84th. Is that the nicest neighborhood? Nope. Was the house perfect? Not by a long ways. But it is theirs. And they are proud because it was important to them.
If buying isn’t important to you, don’t buy. Historically it has made sense to most people. And it has proven a good return on investment. But it isn’t right for everyone. We have a friend who got his earnest money back on a $900,000 condo and bought a fancy car. That was more important to him at the moment. Good for him. He loves his car. And he will buy someday.
Classist, huh? Hm. Nope, sorry I don’t agree. I make money through Real Estate. Other people make money by being a teacher or an engineer or a doctor or a dentist. We all make money in whatever way we like, enjoy and are qualified to do. It is a cool thing about our country. You too can do whatever you want. I went to graduate school because I didn’t know what I wanted to be when I grew up. I stumbled into Real Estate and for me it is a good match. You certainly don’t need an MBA to be a Realtor. You don’t need a college degree. I love that every day is different. Speaking of, I need to go back to work. 🙂
Don’t forget a house is only worth what it SELLS for. Lots of people are throwing around valuations that they’d find difficult to get someone to actually pay for.
Finally I agree with Naysayer. Let’s move to today’s post and discuss blowing sunshine up your skirt.
https://www.portlandrealestateblog.com/realestate/2008/03/real-estate-rea.html
Jenny-
You probably should have wrote something like, “I’ve had clients suggest that they should have bought before but they haven’t.”
There may have been no call for bailouts but they’re occurring. And who will benefit? The people who either defrauded their way or overextended to loans and the real estate industry. Right now Yun is trying to get a tax credit for homebuyers.
Yes, profit is part of life. But if your doctor greeted you with “Hello sucker” or left you with, “Thanks for paying my BMW payment” it would piss you off.
I’m sorry to be a bummer, but this little real estate orgy of the past decade is bringing us all down close to financial ruin. There’s little reason why we who didn’t participate in the madness and even warned against it should remain silent and pay up so the real estate industry feels no pain and to support artificially inflated housing prices. The cheerleaders can accuse us of sour grapes till the cows come home, we’re not shutting up. If you think I’m alone you haven’t been reading. Opposition to supporting this insanity is very high. I may be the only one with the balls to come here and point out the emperor has no clothes (or Florabelle) but there’s many more like me.
As long as this discussion is stimulating and I can offer a different perspective, I will. I am neither profane nor rude. Perhaps it’s a form of therapy where I can work out my frustrations with a system gone mad. Isn’t that what blogs are about?
“As long as this discussion is stimulating and I can offer a different perspective, I will. I am neither profane nor rude. Perhaps it’s a form of therapy where I can work out my frustrations with a system gone mad. Isn’t that what blogs are about?”
Certainly blogs provide an avenue for many different perspectives, and I must say, I have appreciated just about every post that Naysayer has made.
JP – you are right. Better stated.
“None of us were there to get the impression that the client “should be on their second or third home.” Maybe the client flat out said it.”
I don’t know what you mean by this. Jenny’s post explicitly said: “They should have been on their second or third home but school came first. “
Telling someone whether they “should” spend hundreds of thousands of dollars just reeks of arrogance and condescension. (Not that some posters on this forum don’t deserve a dose of their own medicine.) Who are you to tell someone else how to spend their money? Perhaps “could” would’ve been a wiser choice of words.
I won’t make any assumptions about how your business is doing, but I can tell you that I’ve rejected several real estate agents for past transactions based on exactly this type of attitude. If an agent cannot exercise awareness in his communication with me, how can I be sure he won’t say something stupid during negotiations?
Actually, until the Fed stepped in and created ridiculously low interest rates and the republicans changed the tax laws to encourage flipping (at the request of the RE industry) real estate was a pretty poor investment unless you owned whole city blocks a la Trump.
JP-
So whats your conclusion regarding the static purchase price/rent ratio you set up above in regards to a first time home buyer looking for a primary residence?
Leo’s comment is exactly what I have been trying to make explicit. The experienced bloggers pounce on the newbies (sometimes reeking of arrogance and condensation). Why would a newbie want to post?
If one takes time to read all of the above comments, by going for the jugular a mountain is being created out of a molehill. It has been clearly explained what was intended and there was more than one way that it could be taken. No one asked, “did the client say that or is that your impression of what the client SHOULD have done?” Much easier to assume the worst and start namecalling, without getting the rest of the story.
george-
It’s very clear that at when the ratio is 1, a person should buy (i.e. rent for one year equals purchase price).
When the ratio is 20 or more, I think it is clear that renting is the better way to go.
Where the critical point is will depend on individual discount rates and irrational factors, like love of an inanimate object.
Personally, I look to rent when the ratio is over about 10, and this market is far over 10. In my opinion, this indicates that landlords have an expectation of high levels of housing price appreciation. If this expectation is not realized, well, then there are problems. There are some other risk factors too. For example, Katrina or any other major storm was not considered a major risk until just a few hours before the disaster.
Charles-
This question was not asked: “did the client say that or is that your impression of what the client SHOULD have done?”
I had no idea to ask the question. I believed the information on face value. I cannot get into Jenny’s head and guess what she might mean.
There is great debate about haze on college campuses, often called “freshman haze.” Maybe freshman haze is justified? We also hear about it in the military. Now it’s replicated in blogs.
But at 33 they were behind most of their friends who had already bought and sold at least once.
Hey, the Real Estate money machine worked pretty well for several years until about 12 months ago… then Wile Coyote (the credit markets) looked down and noticed that there was nothing there. Debt built upon debt.
People who are 33 and have been buying and selling houses for 10 years don’t have any other frame of reference. To them the economy has always been like this. The recession they did experience in 2001 wasn’t a serious one (unless you worked in tech – then it was close to a depression). They have no memory of the early 80’s deep recession, nor the rolling recessions of the 70’s. They got the idea that you could make lots of money by borrowing lots of money… and it did work for a while. But now Wile Coyote, having noticed that he ran off the cliff and there’s nothing supporting him, is in freefall.
There’s no free lunch kids. Eventually the laws of economics catch up with you.
I think this convesation is dead and no longer real estate related. I am going to close the comments so that we can move onto something more real estate productive.
TiP gots the last word just before I hit post myself.