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July 28, 2007 at 7:54 AM #68315July 28, 2007 at 7:54 AM #68384BugsParticipant
Cashman,
Two things….
Firstly, your rent is not “wasted”, nor did you receive nothing in return for it. You’d have still spent at least that amount on your housing no matter how you slice it. The big question here is how much extra would you have spent on your mortgage and what returns would you have gotten in exchange for the investment value of the equity that you had accrued prior to pulling out? Now balance those returns with how much risk tolerance you had for the entire amount of your equity. If you were up by $300,000 and you spent another $25,000 in additional mortgage payments to “earn” another $50,000 on top of that I don’t know that the risks involved would have been worth it to you. I interpret your handle (Cashman) to convey a healthy amount of conservatism with respect to your investments.Secondly, if you pulled your Diamond Bar trigger in part as a result of following SD-centric Pigginton’s then I’m afraid you may have acted a little premature. But that’s all hindsight right now. Just as the people who didn’t pull out of the Riverside markets while they were still up have to put those decisions behind them and move forward from this point I think you should also be looking forward. And I think you are looking forward.
You did avoid losing any of your equity – you should be quite pleased with that. You are now lamenting some lost opportunity, but so what? Coulda-shoulda-woulda doesn’t count; what you keep is the only thing that really counts. You’ll live to ride the next cycle and when it comes your position will be better than ever.
July 28, 2007 at 11:27 AM #68349beanmaestroParticipantTo put “your rent is not wasted” in perspective, I’ll share the situation my wife and I are in. We pay $1700 in rent up here in Santa Barbara, but would have to cough up $5000 a month for an acceptable house (my wife demands a proper garden). We’re sitting on a nice down payment, but right now we’re saving $50k (including 401k, Roth, etc) a year, and growing our $100k+ down payment. When we pull the trigger, we’ll only be able to save about $15k/year, and the down payment stops growing money. When my wife stops working to make babies and eggplants, I’ll be docking my savings to keep my 401k match… All that roughly adds up to at least $50k/year incentive to keep renting. So, looked at in a certain way, my $21k annual rent pays for a roof and a yard and $50k of cash. Meanwhile, my landlord lost $30k of paper equity on the house this year. Pretty good deal, eh?
Now, if housing prices were going up, I’d be happy to give that up… that’s what the money is for, after all. But as long as prices are nominally flat, we’re doing much better renting. So for me, it isn’t a question of whether prices are falling yet, but whether they’re likely to grow 6%/yr anytime soon. And the answer to that is obviously not.
July 28, 2007 at 11:27 AM #68418beanmaestroParticipantTo put “your rent is not wasted” in perspective, I’ll share the situation my wife and I are in. We pay $1700 in rent up here in Santa Barbara, but would have to cough up $5000 a month for an acceptable house (my wife demands a proper garden). We’re sitting on a nice down payment, but right now we’re saving $50k (including 401k, Roth, etc) a year, and growing our $100k+ down payment. When we pull the trigger, we’ll only be able to save about $15k/year, and the down payment stops growing money. When my wife stops working to make babies and eggplants, I’ll be docking my savings to keep my 401k match… All that roughly adds up to at least $50k/year incentive to keep renting. So, looked at in a certain way, my $21k annual rent pays for a roof and a yard and $50k of cash. Meanwhile, my landlord lost $30k of paper equity on the house this year. Pretty good deal, eh?
Now, if housing prices were going up, I’d be happy to give that up… that’s what the money is for, after all. But as long as prices are nominally flat, we’re doing much better renting. So for me, it isn’t a question of whether prices are falling yet, but whether they’re likely to grow 6%/yr anytime soon. And the answer to that is obviously not.
July 28, 2007 at 12:11 PM #68357temeculaguyParticipantbeanmaestro, you just wrote the 2007 version of the get rich quick in real estate book and could start charging for seminars in hotel ballrooms. Your situation and plan is more than just intelligent, it is magical. Your scenario illustrates why the market isn’t just likely to shift, it’s guaranteed.
fearful, good explanation and I feel the same way looking at the graph, lets just say there is a 90% chance the slope will not be affected but the NOD anomoly is a 10% X factor.
Bugs, another blend of market analysis and psych analysis, that’s why I dig your posts becuase there is always an understanding beyond the math and into the mind.
July 28, 2007 at 12:11 PM #68426temeculaguyParticipantbeanmaestro, you just wrote the 2007 version of the get rich quick in real estate book and could start charging for seminars in hotel ballrooms. Your situation and plan is more than just intelligent, it is magical. Your scenario illustrates why the market isn’t just likely to shift, it’s guaranteed.
fearful, good explanation and I feel the same way looking at the graph, lets just say there is a 90% chance the slope will not be affected but the NOD anomoly is a 10% X factor.
Bugs, another blend of market analysis and psych analysis, that’s why I dig your posts becuase there is always an understanding beyond the math and into the mind.
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