Housing Analysis

[zubs]

I've seen multiple cycles in my lifetime and I've seen people close to me try to time real estate and it's hit and miss. They buy high, sell low... buy low, sell high... buy middle, sell middle... etc... but in most cases, what I've seen is as long as they can afford it and wait it out, they will always come out positive. It's only when people overextend or use ninja financing they really get into trouble.

 

[Kenkoko]

There is a whole younger generation of people who disagree with this old school mentality of ignoring timing & just buy a home when you need to live in.

Actually... timing is probably more old school in my opinion. For decades people have been trying to time housing to the point of missing out on opportunities due to paralysis by analysis.

I've seen multiple cycles in my lifetime and I've seen people close to me try to time real estate and it's hit and miss. They buy high, sell low... buy low, sell high... buy middle, sell middle... etc... but in most cases, what I've seen is as long as they can afford it and wait it out, they will always come out positive. It's only when people overextend or use ninja financing they really get into trouble.

I myself have bought during peaks and lows... and either way, came out fine.

Rental parity matters to people who can distinguish the difference between their want (to buy a house) and their actual need (housing)

Therefore you see much higher % of younger people renting (especially when the rent vs. buy favors renting)

And investing their money in stocks, cryptos, NFTs etc

Rental parity is great just from a financial perspective. But as I've said before, if people aren't cognizant of their budget to recognize investing the difference, they are going to fall into pitfalls anyways (I see renters who drive really nice cars... so where is the smart money there?).

There are also non-tangibles (or maybe what some people refer to as emotional reasons) as to why people want to own vs rent, that needs to be taken into consideration too.

Buying vs renting can't just be X, Y, and Z... there are many factors that have to be considered... and because timing is so inexact, you can't easily say when is the best time to buy... esp when you want to be picky on where and what you live in.

I monitored the entire Irvine pricing movement from 2005 to 2015 for 3CG homes... when it was high, there was more to choose from, when it was low, the selection was crappy, so timing, rental parity and non-emotional decision trees don't always work.

IHO, we will probably never agree on whether one should try to time the market. We're probably both victims of our own success and subject to our own proximity bias. So it's ok we never agree on this

I understand and see the allure of your way. Buying a home is a decision you're not afraid to get wrong, because in the LONG run, you'll be ok.

It may not be the best financial decision, but it's a very human one to make. I get that.

But that's not a life philosophy I or increasing # of younger generation agree with.

Buying a home for most people, especially younger people, will be the biggest part of their financial investment.

Many are not ok with pulling the trigger just because "even if wrong, it will be ok in the long run"

Many younger people I mentor want to take active control of their financial investments and take on more risks, hoping to hit home runs not singles.

I agree with you on "Buying vs renting can't just be X, Y, and Z... there are many factors that have to be considered"

But I tend to look at that from a different perspective than you.

Americans are both getting married and having children at all-time lows. The rate of American children born to an unmarried mother is up to 40% from 15% in the 70s.

Home buying is increasingly a questionable fit to younger generation.

 

[irvinehomeowner]

I think we agree but are talking about different sets of people (as I had explained this to you before this last hiatus).

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

 

[Kenkoko]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

 

[Danimal]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

I am not sure who are these folks you mentor. I have 3 nephews and 1 niece  in their late 20, early 30 all with engineer/business degrees and working full time. They are all looking for starter homes in OC but keep losing out.  They and their friends consider owning the house is first priority.

 

[AW]

Many younger people I mentor want to take active control of their financial investments and take on more risks, hoping to hit home runs not singles.

Older generation folks with rental properties are just rubbing their mittens with that mindset.  Only a handful will make that home run. Most will strike out and rent forever.  I dunno.  Nothing wrong with hitting singles.  Go ichiro

 

[irvinebullhousing]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

Wait until the 20% rent increase this year when their rental lease up for renewal. They will give it a much deeper analysis/thoughts. Just ask them and see if you get a different response this time.

 

[CalBears96]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

Wait until the 20% rent increase this year when their rental lease up for renewal. They will give it a much deeper analysis/thoughts. Just ask them and see if you get a different response this time.

And in the meantime, your mortgage NEVER goes up if you borrowed on 30-year fixed. It can only go down when you refinance to a lower rate. And in the long run, the housing price WILL go up, regardless of if you bought at low or high because there's always a new high.

I mean, I understand the life style choice of owning vs. not owning. But as I said, if you want to own a house, then any time is a good time to buy...in the long run.

 

[Kenkoko]

Older generation folks with rental properties are just rubbing their mittens with that mindset.  Only a handful will make that home run. Most will strike out and rent forever.  I dunno.  Nothing wrong with hitting singles.  Go ichiro

Ichiro is actually a great example for the generational shift we're talking about.

A rare true five tool player who will be in the hall of fame. But in today's sabermetrics / advanced stats driven game, he will be severely undervalued.

There's nothing wrong with single hitting, especially at Ichiro's level.

But any clear eyed fan following today's game knows that single hitting is in the past.

Today's game is all about extra base hits and homeruns.

Not saying generational changes and shifts shouldn't be questioned, but we should at least acknowledge it's happening.

 

[sleepy5136]

I was those millennials that refused to buy a house despite having the ability to do so for the longest time. Granted I was in LA and I didn't want to buy there. Always wanted to move to OC but due to lack of tech companies there at the time besides FANG, I decided to stay in LA. I got the typical asian parent lecture to get a home blah blah. But I refused to do so for the longest time because I don't want to use mommy/daddy $, I was able to travel anywhere and anytime if I wanted to, and I had investments that made me more $$ than owning a home ever could return. I could also be laid off and still have saving for years as my rent was $1700 in west LA. Not all millennials are in high paying jobs. Some are, but I would argue the majority are not. So then it comes to the point of how the heck are you going to come up with the down payment $$? And if you don't put that much down payment, your mortgage will be high, will your income qualify? Most likely not. Lots of millennials now are getting assistance from mommy/daddy and that's how they are able to buy homes. I have a bunch of friends that are my age that have homes and they all mentioned it's their parents $. Not to mention a majority of them have student loan debt that is the highest ever in history. Don't even get me started with the current housing market and how FTHB are being outbid by investors/foreign $...

Plus, people that think paying rent is wasting $ because it's $ going to a landlord is completely ignorant. For example, If I pay $1700 a month for a 1bed in west LA, what makes you think I don't have $$ invested in the stock market which is returning more than what a home normally returns? Passive income is powerful. A primary residence doesn't give you that. Also, homeowners have to pay property taxes. That is $$ that you will never see returns for either. And with renting, if repairs come in, I don't have to do anything. That's the landlords problem. That obviously doesn't mean I go and wreck things, but things do come up and when they do, I just let the landlord know about it. Tax benefits are also reduced with SALT cap + mortgage interest deduction limit until the law expires which I think is 2026?

Buying a home isn't for everyone. And there are no issues not buying as long as you are ensuring you are beating inflation consistently each year and have a healthy stream of passive income on top of your normal day job. The lack of financial education is a concern in this country and should be fixed.

 

[AW]

I was on the fence about purchasing more investment properties, sounds like there won?t be any shortage of renters!

 

[irvinebullhousing]

I was on the fence about purchasing more investment properties, sounds like there won?t be any shortage of renters!

Ha ha.  . You got to find one first. Tough these days.

 

[bones]

I?m currently a renter after owning and living in 4 different homes. And it?s been the best ?living? situation/experience I?ve had. We love where we rent, love the neighborhood, etc. My rent went up 6% this year. I thought about buying in the neighborhood but chose not to. Renting is cheaper and if I NEED to buy a house at any point because owning a house is important to me, I can. There?s really no right or wrong here - people prioritize/want/need diff things.

 

[bones]

P.S Today's game IS all about extra base hits and homers even at the youth level. Old school coaching = tap out a hit, hit the top of the ball, rely on a fielding error, just get on base. New school coaching = drive the ball.

 

[irvinebullhousing]

Carefree life. This what will happen to me in 30 years when I am retired.

Congrats on your move.

 

[Ready2Downsize]

Many younger people I mentor want to take active control of their financial investments and take on more risks, hoping to hit home runs not singles.

Older generation folks with rental properties are just rubbing their mittens with that mindset.  Only a handful will make that home run. Most will strike out and rent forever.  I dunno.  Nothing wrong with hitting singles.  Go ichiro

Lots of old people now who were forever renters, now on fixed incomes hurting badly with rent increases.

Maybe they never saved. Maybe they did but had unexpected expenses, like alimony, child support, medical bills, car accident that left them unable to work, etc. Maybe they would have lost their house and been homeless. Who knows? All I know is I own my home free and clear, haven't had a mortgage in over 10 years and no one will ever take it from me as long as I pay my property taxes, HOA, insurance and utilities which I can do on my own meager social security when I take it, even without my 401K or other investments.

What are those old people going to do? I don't know, maybe become homeless.

 

[irvinebullhousing]

Many younger people I mentor want to take active control of their financial investments and take on more risks, hoping to hit home runs not singles.

Older generation folks with rental properties are just rubbing their mittens with that mindset.  Only a handful will make that home run. Most will strike out and rent forever.  I dunno.  Nothing wrong with hitting singles.  Go ichiro

Lots of old people now who were forever renters, now on fixed incomes hurting badly with rent increases.

Maybe they never saved. Maybe they did but had unexpected expenses, like alimony, child support, medical bills, car accident that left them unable to work, etc. Maybe they would have lost their house and been homeless. Who knows? All I know is I own my home free and clear, haven't had a mortgage in over 10 years and no one will ever take it from me as long as I pay my property taxes, HOA, insurance and utilities which I can do on my own meager social security when I take it, even without my 401K or other investments.

What are those old people going to do? I don't know, maybe become homeless.

This is what I mean by CARE-FREE.

 

[irvinehomeowner]

I?m currently a renter after owning and living in 4 different homes. And it?s been the best ?living? situation/experience I?ve had. We love where we rent, love the neighborhood, etc. My rent went up 6% this year. I thought about buying in the neighborhood but chose not to. Renting is cheaper and if I NEED to buy a house at any point because owning a house is important to me, I can. There?s really no right or wrong here - people prioritize/want/need diff things.

What? You must have cashed out.

If you are renting a house, not really the same as "renting renting" as some of these youngsters can only afford apartments, although they may split a house rent.

We rented a house for a year between homes... and while the house and the hood was nice... dealing with my landlord was not... so it does really depend.

 

[irvinebullhousing]

I?m currently a renter after owning and living in 4 different homes. And it?s been the best ?living? situation/experience I?ve had. We love where we rent, love the neighborhood, etc. My rent went up 6% this year. I thought about buying in the neighborhood but chose not to. Renting is cheaper and if I NEED to buy a house at any point because owning a house is important to me, I can. There?s really no right or wrong here - people prioritize/want/need diff things.

What? You must have cashed out.

If you are renting a house, not really the same as "renting renting" as some of these youngsters can only afford apartments, although they may split a house rent.

We rented a house for a year between homes... and while the house and the hood was nice... dealing with my landlord was not... so it does really depend.

You must have rented from me before.  >

 

[usctrojancpa]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.