Renting is not better than buying

[patientlywaiting]

Ray, I think that the posts here are pretty rational. But the world is an emotional wreck. Financial counseling is like marriage counseling. If everyone were logical, the world would be simpler (and more enjoyable, imho).

Here’s a link to the BofA valuation tool. I think it’s more realistic than Zillow.

http://www.bankofamerica.com/modular/index.cfm?template=hc_home_worth_modular&app=oma&sitename=modular

[Raybyrnes]

PW

Appreciate the link. Will Bookmark that.

[Raybyrnes]

PW

Appreciate the link. Will Bookmark that.

[Raybyrnes]

PW

Appreciate the link. Will Bookmark that.

[Raybyrnes]

PW

Appreciate the link. Will Bookmark that.

[Raybyrnes]

PW

Appreciate the link. Will Bookmark that.

[JWM in SD]

JWM in SD

“Learned a lot form this exercise from the simple standpoint that there can often times be different objectives. For some such as the JWM’s of this board in might be profit maximization.”

Actually, no. I’m not trying to maximize profit from a personal residence purchase decision but rather minimize risk by engaging in prudent timing. You see, I really don’t disagree with every aspect of what you are saying, however, I just don’t think you are acknowledging the risk posed to the personal financial health of a buyer if they choose to buy today.

“Try and time the market. Might be righ or might be wrong.”
Timing the stock market and the real estate market are vastly different in my opinion. The latter is far easier than the former…at least for those of us who post on these RE blogs.

“For otehrs it might simply be to lower the amoutn of risk.”
I agree that that is a worthy goal, but have you really lowered your risk if you have taken on excess debt to make the purchase in the short term?? Not everyone has $500K in cash lying around you know.

[JWM in SD]

JWM in SD

“Learned a lot form this exercise from the simple standpoint that there can often times be different objectives. For some such as the JWM’s of this board in might be profit maximization.”

Actually, no. I’m not trying to maximize profit from a personal residence purchase decision but rather minimize risk by engaging in prudent timing. You see, I really don’t disagree with every aspect of what you are saying, however, I just don’t think you are acknowledging the risk posed to the personal financial health of a buyer if they choose to buy today.

“Try and time the market. Might be righ or might be wrong.”
Timing the stock market and the real estate market are vastly different in my opinion. The latter is far easier than the former…at least for those of us who post on these RE blogs.

“For otehrs it might simply be to lower the amoutn of risk.”
I agree that that is a worthy goal, but have you really lowered your risk if you have taken on excess debt to make the purchase in the short term?? Not everyone has $500K in cash lying around you know.

[JWM in SD]

JWM in SD

“Learned a lot form this exercise from the simple standpoint that there can often times be different objectives. For some such as the JWM’s of this board in might be profit maximization.”

Actually, no. I’m not trying to maximize profit from a personal residence purchase decision but rather minimize risk by engaging in prudent timing. You see, I really don’t disagree with every aspect of what you are saying, however, I just don’t think you are acknowledging the risk posed to the personal financial health of a buyer if they choose to buy today.

“Try and time the market. Might be righ or might be wrong.”
Timing the stock market and the real estate market are vastly different in my opinion. The latter is far easier than the former…at least for those of us who post on these RE blogs.

“For otehrs it might simply be to lower the amoutn of risk.”
I agree that that is a worthy goal, but have you really lowered your risk if you have taken on excess debt to make the purchase in the short term?? Not everyone has $500K in cash lying around you know.

[JWM in SD]

JWM in SD

“Learned a lot form this exercise from the simple standpoint that there can often times be different objectives. For some such as the JWM’s of this board in might be profit maximization.”

Actually, no. I’m not trying to maximize profit from a personal residence purchase decision but rather minimize risk by engaging in prudent timing. You see, I really don’t disagree with every aspect of what you are saying, however, I just don’t think you are acknowledging the risk posed to the personal financial health of a buyer if they choose to buy today.

“Try and time the market. Might be righ or might be wrong.”
Timing the stock market and the real estate market are vastly different in my opinion. The latter is far easier than the former…at least for those of us who post on these RE blogs.

“For otehrs it might simply be to lower the amoutn of risk.”
I agree that that is a worthy goal, but have you really lowered your risk if you have taken on excess debt to make the purchase in the short term?? Not everyone has $500K in cash lying around you know.

[JWM in SD]

JWM in SD

“Learned a lot form this exercise from the simple standpoint that there can often times be different objectives. For some such as the JWM’s of this board in might be profit maximization.”

Actually, no. I’m not trying to maximize profit from a personal residence purchase decision but rather minimize risk by engaging in prudent timing. You see, I really don’t disagree with every aspect of what you are saying, however, I just don’t think you are acknowledging the risk posed to the personal financial health of a buyer if they choose to buy today.

“Try and time the market. Might be righ or might be wrong.”
Timing the stock market and the real estate market are vastly different in my opinion. The latter is far easier than the former…at least for those of us who post on these RE blogs.

“For otehrs it might simply be to lower the amoutn of risk.”
I agree that that is a worthy goal, but have you really lowered your risk if you have taken on excess debt to make the purchase in the short term?? Not everyone has $500K in cash lying around you know.

[Anonymous]

Raybyrnes,
I think your mom has a more rational view with regard to home values. If all owners decide to cash out their equities in their homes, multiple things could happen: profits will disappear because there are not enough buyers at the price they want; rents will go up and eliminate the rent vs own advantage; or home owners just end up swapping homes with each other and paying higher property taxes. Only relatively few people can take advantage of the timing (or be taken advantage of) in an illiquid market — mark to market gain or loss notwithstanding. So she might as well enjoy living peacefully than worrying about these fictitious gains and losses, unless she has a financial need for the home equity.
A similar view on the stock market does not hurt long term investment performance either. Financial market is a zero sum game. You can’t all profit at the same time. Real gain comes from owning good businesses long term.

[Anonymous]

Raybyrnes,
I think your mom has a more rational view with regard to home values. If all owners decide to cash out their equities in their homes, multiple things could happen: profits will disappear because there are not enough buyers at the price they want; rents will go up and eliminate the rent vs own advantage; or home owners just end up swapping homes with each other and paying higher property taxes. Only relatively few people can take advantage of the timing (or be taken advantage of) in an illiquid market — mark to market gain or loss notwithstanding. So she might as well enjoy living peacefully than worrying about these fictitious gains and losses, unless she has a financial need for the home equity.
A similar view on the stock market does not hurt long term investment performance either. Financial market is a zero sum game. You can’t all profit at the same time. Real gain comes from owning good businesses long term.

[Anonymous]

Raybyrnes,
I think your mom has a more rational view with regard to home values. If all owners decide to cash out their equities in their homes, multiple things could happen: profits will disappear because there are not enough buyers at the price they want; rents will go up and eliminate the rent vs own advantage; or home owners just end up swapping homes with each other and paying higher property taxes. Only relatively few people can take advantage of the timing (or be taken advantage of) in an illiquid market — mark to market gain or loss notwithstanding. So she might as well enjoy living peacefully than worrying about these fictitious gains and losses, unless she has a financial need for the home equity.
A similar view on the stock market does not hurt long term investment performance either. Financial market is a zero sum game. You can’t all profit at the same time. Real gain comes from owning good businesses long term.

[Anonymous]

Raybyrnes,
I think your mom has a more rational view with regard to home values. If all owners decide to cash out their equities in their homes, multiple things could happen: profits will disappear because there are not enough buyers at the price they want; rents will go up and eliminate the rent vs own advantage; or home owners just end up swapping homes with each other and paying higher property taxes. Only relatively few people can take advantage of the timing (or be taken advantage of) in an illiquid market — mark to market gain or loss notwithstanding. So she might as well enjoy living peacefully than worrying about these fictitious gains and losses, unless she has a financial need for the home equity.
A similar view on the stock market does not hurt long term investment performance either. Financial market is a zero sum game. You can’t all profit at the same time. Real gain comes from owning good businesses long term.

[Author]

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