Rent or Buy? The Math Is Changing
http://www.nytimes.com/2014/05/22/upshot/rent-or-buy-the-math-is-changing.html
Billy Gasparino and Jenna Dillon-Gasparino were savvy enough to wait out the housing boom of a decade ago as renters. Not until 2010, well into the bust, did they buy a house in the Venice neighborhood of Los Angeles, less than a mile from the beach, for $810,000.
Only four years later, the couple see new signs of excess in the housing market and have decided to go back to renting. They are close to a deal to sell their house – for $1.35 million, a cool 67 percent gain.
“It just seems like the housing market came back so strongly, so fast, that maybe there’s a little bit of a bubble there,” said Mr. Gasparino, 37, an executive with the San Diego Padres.
Their decision reflects a new reality in many of the nation’s largest metropolitan areas. An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.
The Times also created an online calculator that enables prospective buyers and renters to analyze their own decision. For example, for a typical person considering the purchase of a $500,000 house who expects to live there seven years, it might make more sense to rent if a similar place is available for $1,956 a month or less.
“A lot of these coastal markets look overvalued compared to rents,” said Mark Zandi, the chief economist at Moody’s Analytics. “In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”
For example, Venice, where the Gasparinos are selling their house, has benefited from an influx of tech industry, including from the opening of Google’s Los Angeles office there in 2011. “You have engineers, visual effects artists, people making 2, 3, 400 thousand dollars a year coming in,” said Tami Pardee, principal of Pardee Properties real estate brokerage in Venice. “The problem I’m having is inventory. There isn’t enough of it.”
Thanks to low interest rates and home prices that remain 13 percent below their 2006 peak nationally, buying continues to look like a good deal in much of the country. In the once-frothy markets of Phoenix, Las Vegas and Orlando, Fla., for example, the typical home price is still 30 to 40 percent below 2006 levels, even more if one accounts for inflation.
But across much of California and the Northeast, prices are now high enough that the costs of owning a home – property taxes, repairs, fees to real-estate agents and mortgage interest – may outweigh the financial benefits, including the tax break.
It is the latest change in a yo-yo pattern over the past decade. From 2004 to 2006, the math overwhelmingly favored renting rather than buying across most of the country, even as many Americans mistakenly decided that home prices could never fall. From 2009 to 2011, buying was an extraordinary deal in most of the country. Even the markets that have experienced huge price increases are far from the clear-cut bubble conditions of the mid-2000s, but they’re inching closer with every bidding war.
Since the start of 2011, prices have risen 33 percent in the San Francisco area, 30 percent in Miami, 24 percent in Los Angeles — and even more in some of the most desirable neighborhoods within those areas.
In the San Francisco Bay Area, home of the sharpest recent price increases, the sale price of a home is about 20 times what it would cost to rent a home of the same size for a year. That ratio, based on an analysis of data from Zillow, is the same as in 2003, when the San Francisco real estate market had yet to become an out-of-control bubble but was well on its way there.
When low mortgage rates are taken into account, buying a home in San Francisco looks somewhat more attractive — but with a 10 percent down payment and prevailing interest rates, buying a home is 6 percent more expensive than renting a place of the same size, the same premium for buying as there was during the dot-com boom in 1999. Just two years ago, buying in the San Francisco area was 24 percent cheaper than renting an equivalent place.
The potentially overvalued markets are the result of three forces. They are taking place in local economies that suffered only minimally during the recession that began in 2008 and have experienced strong job growth since then.
They are fueled further by the low-interest rate policies that are aimed at bolstering the overall national economy but don’t discriminate based on geography. Even as San Francisco’s housing market is at risk of overheating, buyers there get the same ultralow mortgage rates engineered by the Federal Reserve as home buyers in depressed Detroit or Cleveland do.
And the new booms are taking place in markets where restrictions on building hinder developers from responding to rising demand by constructing more housing. That distinguishes the major California markets from the strong local economies in Texas and elsewhere. The Dallas area and the San Francisco area added similar numbers of jobs last year, but local governments in Dallas issued permits for nearly four times as many new housing units.
There are important caveats, of course. The wisdom of buying versus renting depends heavily on each person’s financial situation, plans and preferences. And the cliché about all real estate being local holds; each neighborhood can have its own unique dynamics in the for-sale and for-rent housing sectors that must be considered.
Home buyers in even the highest-price markets can take some solace in the fact that prices aren’t as outlandishly high relative to rents as they were in 2006. But they should also know that homes are also priced richly enough to leave no room for error.
It’s a bit like the current consensus opinion of economists on the value of the stock market: not in a bubble, necessarily, but certainly expensive enough to make a buyer wary. While home prices may stay high for months or years to come, buyers are leaving themselves vulnerable to a decline toward more normal historical valuations. Renters avoid that risk, even if they also don’t get some of the upside if the bull market for houses in places like Santa Monica, Nob Hill and TriBeCa has longer to run.
“If you thought home values in the Bay Area or Southern California were such that we might see another housing correction, that radically starts to advantage rental housing,” said Stan Humphries, Zillow’s chief economist, who argues that current prices are reasonably well justified, while acknowledging that prices are high enough to leave buyers exposed.
The real estate market in Venice, where the Gasparinos are selling their house to lock in the gains, shows the forces shaping the new boom markets. Besides the tech employment there on Silicon Beach, as the local boosters put it, the supply of housing can’t expand to meet that rising demand. The area is filled with block after block of low-slung houses and apartments, and density restrictions stand in the way of constructing tall buildings.
That combination has been enough to send the median price per square foot of homes that are sold up 49 percent since late 2010 in the 90291 ZIP code, according to Zillow, and the median rent per square foot up 23 percent in the same span.
“When we bought four years ago after the crash, the market was dead, and it felt like everybody learned their lesson,” Mr. Gasparino said. “It just went back so fast.”
There are many causes of homelessness
http://culture.squidoo.com/Reasons_for_Homelessness
Many people feel that all homeless people are entirely to blame for their own miserable situation. Those same people tend to believe that under no circumstance could they find themselves without a home because they feel they are better than "those people" who have lost their homes. In reality, people from all walks of life can wind up on the street and almost no one is immune from the possibility.
I want to present a few reasons actual people become homeless, reasons often beyond their control or ability to deal with. By doing so, I hope to increase empathy towards those less fortunate. This is by no means an exhaustive list; please do not be offended if you know of something not mentioned on this page.
Most people become homeless due to circumstances that have overwhelmed them combined with the lack of a family support structure. Others, particularly teens, often lose their housing due to an actively hostile, perhaps even hazardous, abusive, or non-supportive family environment.
Average people without a good friend and family support structure can be overwhelmed by events such as domestic abuse, divorce, unemployment, or illness and find themselves without housing as well. There are many causes of homelessness and while this page covers a few there are almost as many causes as there are people with nowhere to live. If you've ever wondered, "Why do people become homeless?" you've found the right place to learn some of the possible answers.
Lack of a Living Wage
Inadequate wages cause homelessness
Many homeless people work. However, the minimum wage is often not up to the task of supporting a family.
In many areas, working full time for minimum wage does not earn enough to pay rent, utilities and food. While people can combine incomes to rent an apartment they often run into snags such as discovering that the number of working adults required to cover rent and bills combined with their minor children will exceed the number of occupants allowed by their lease. Additionally, many apartment complexes run credit checks which can prevent people with poor credit from renting; things like unpaid medical bills can prevent working people from finding a place to rent.
Parental Ideology
When parents' beliefs clash with teens' beliefs, sexual orientation, or behaviors this may result in teen homelessness
While few will admit it, some parents only love their children conditionally and these parents may discard their children once they reach their teens. These parents hold their beliefs as more important than their own children. Often the beliefs in question are religious.
As many as 40% of homeless teenagers are lgbt (lesbian, gay, bisexual, or transgendered) when it is estimated that less than five percent of teens are gay, bisexual, or transgendered. In my experience with lgbt homeless teens and young adults, they’ve come from families that refused to accept them or that began to actively abuse them after their orientation became known.
Perhaps it was a coincidence, but almost all of the gay and bisexual teens and young adults without homes that I’ve met came from religious fundamentalist homes – fundamentalist Christian, Jewish, and Muslim homes – where their parents’ beliefs were anathema to homosexuality or difference of any kind.
I also encountered teens living on the street whose problem stemmed from other religious differences. Some teens and young adults I met suffered homelessness because they were somehow at odds with their parents’ beliefs. In one case, the teenager had converted to Christianity from Islam, in another a teen was suspected of engaging in pre-marital sex which was in conflict with her parents’ religious beliefs. A number of Pagan teens that I met were expelled from their Christian homes.
Some of these young people were brutally beaten, threatened with death, or thrown from their homes by force. Others were systematically abused – physically and emotionally – until they ran from their abusers, preferring homelessness to continued abuse.
This subject is practically taboo, the relationship between parental beliefs and teen and young adult homelessness. In fact, after including the concept on a couple of pages, I have received threats, death threats, and hate mail. It is true that child abandonment and abuse are counter to what the vast majority of religious people hold dear. But it is also true that a minority of religious people have a different view. While that minority may seem inconsequential it is anything but inconsequential to around 400,000 American teens and young adults each year.
Left Out in the Cold
From the page: "Family conflict is the most common cause of all youth homelessness. For gay and transgender youth, the conflict tends to be over their sexual orientation or gender identity, and the results aren't pretty: Half of all teens get a negative reaction from their parents when they come out to them. More than 1 in 4 are thrown out of their homes."
Injury or illness can result in job loss and debt or inability to work
Some people are on the streets due to injury or illness. Many of them had jobs and insurance but through the course of their medical problems, both were lost. Many people don’t realize that even “good” medical insurance is not a guarantee of medical care. They are then devastated to find out that their insurance will not cover their medical expenses or treatment. They are also shocked when they lose their health insurance due to illness or injury.
Hospitalization quickly consumes savings and too many absences from work due to injury or illness will result in the loss of a job. Once a person has a significant gap in his or her employment history and a bad credit score due to unpaid bills it becomes much more difficult for him or her to get a job even when completely recovered.
People in all stages of recovery from illness or injury lose their homes. Some never get well due to lack of treatment and are too ill to hold down a job. Others get well but get pulled down by their medical debt and illness or injury related job loss. And increasingly, medical bankruptcy can result in homelessness.
While many people in situations like these have strong friend and family support structures, many do not. They are the ones who fall through the cracks and find themselves living on the street due to illness, injury, or the resultant medical bills.
It is my sincere hope that this reason for homelessness may disappear through effective health care reform. The health care bill that passed is not even close to what is needed. Medical bills are currently the leading cause of bankruptcy in America, and by a very large margin. Surprisingly, over half of those claiming medical bankruptcy either have or had medical insurance at the time their debt was incurred.
http://www.nytimes.com/2014/05/22/upshot/rent-or-buy-the-math-is-changing.html
Billy Gasparino and Jenna Dillon-Gasparino were savvy enough to wait out the housing boom of a decade ago as renters. Not until 2010, well into the bust, did they buy a house in the Venice neighborhood of Los Angeles, less than a mile from the beach, for $810,000.
Only four years later, the couple see new signs of excess in the housing market and have decided to go back to renting. They are close to a deal to sell their house – for $1.35 million, a cool 67 percent gain.
“It just seems like the housing market came back so strongly, so fast, that maybe there’s a little bit of a bubble there,” said Mr. Gasparino, 37, an executive with the San Diego Padres.
Their decision reflects a new reality in many of the nation’s largest metropolitan areas. An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.
The Times also created an online calculator that enables prospective buyers and renters to analyze their own decision. For example, for a typical person considering the purchase of a $500,000 house who expects to live there seven years, it might make more sense to rent if a similar place is available for $1,956 a month or less.
“A lot of these coastal markets look overvalued compared to rents,” said Mark Zandi, the chief economist at Moody’s Analytics. “In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”
For example, Venice, where the Gasparinos are selling their house, has benefited from an influx of tech industry, including from the opening of Google’s Los Angeles office there in 2011. “You have engineers, visual effects artists, people making 2, 3, 400 thousand dollars a year coming in,” said Tami Pardee, principal of Pardee Properties real estate brokerage in Venice. “The problem I’m having is inventory. There isn’t enough of it.”
Thanks to low interest rates and home prices that remain 13 percent below their 2006 peak nationally, buying continues to look like a good deal in much of the country. In the once-frothy markets of Phoenix, Las Vegas and Orlando, Fla., for example, the typical home price is still 30 to 40 percent below 2006 levels, even more if one accounts for inflation.
But across much of California and the Northeast, prices are now high enough that the costs of owning a home – property taxes, repairs, fees to real-estate agents and mortgage interest – may outweigh the financial benefits, including the tax break.
It is the latest change in a yo-yo pattern over the past decade. From 2004 to 2006, the math overwhelmingly favored renting rather than buying across most of the country, even as many Americans mistakenly decided that home prices could never fall. From 2009 to 2011, buying was an extraordinary deal in most of the country. Even the markets that have experienced huge price increases are far from the clear-cut bubble conditions of the mid-2000s, but they’re inching closer with every bidding war.
Since the start of 2011, prices have risen 33 percent in the San Francisco area, 30 percent in Miami, 24 percent in Los Angeles — and even more in some of the most desirable neighborhoods within those areas.
In the San Francisco Bay Area, home of the sharpest recent price increases, the sale price of a home is about 20 times what it would cost to rent a home of the same size for a year. That ratio, based on an analysis of data from Zillow, is the same as in 2003, when the San Francisco real estate market had yet to become an out-of-control bubble but was well on its way there.
When low mortgage rates are taken into account, buying a home in San Francisco looks somewhat more attractive — but with a 10 percent down payment and prevailing interest rates, buying a home is 6 percent more expensive than renting a place of the same size, the same premium for buying as there was during the dot-com boom in 1999. Just two years ago, buying in the San Francisco area was 24 percent cheaper than renting an equivalent place.
The potentially overvalued markets are the result of three forces. They are taking place in local economies that suffered only minimally during the recession that began in 2008 and have experienced strong job growth since then.
They are fueled further by the low-interest rate policies that are aimed at bolstering the overall national economy but don’t discriminate based on geography. Even as San Francisco’s housing market is at risk of overheating, buyers there get the same ultralow mortgage rates engineered by the Federal Reserve as home buyers in depressed Detroit or Cleveland do.
And the new booms are taking place in markets where restrictions on building hinder developers from responding to rising demand by constructing more housing. That distinguishes the major California markets from the strong local economies in Texas and elsewhere. The Dallas area and the San Francisco area added similar numbers of jobs last year, but local governments in Dallas issued permits for nearly four times as many new housing units.
There are important caveats, of course. The wisdom of buying versus renting depends heavily on each person’s financial situation, plans and preferences. And the cliché about all real estate being local holds; each neighborhood can have its own unique dynamics in the for-sale and for-rent housing sectors that must be considered.
Home buyers in even the highest-price markets can take some solace in the fact that prices aren’t as outlandishly high relative to rents as they were in 2006. But they should also know that homes are also priced richly enough to leave no room for error.
It’s a bit like the current consensus opinion of economists on the value of the stock market: not in a bubble, necessarily, but certainly expensive enough to make a buyer wary. While home prices may stay high for months or years to come, buyers are leaving themselves vulnerable to a decline toward more normal historical valuations. Renters avoid that risk, even if they also don’t get some of the upside if the bull market for houses in places like Santa Monica, Nob Hill and TriBeCa has longer to run.
“If you thought home values in the Bay Area or Southern California were such that we might see another housing correction, that radically starts to advantage rental housing,” said Stan Humphries, Zillow’s chief economist, who argues that current prices are reasonably well justified, while acknowledging that prices are high enough to leave buyers exposed.
The real estate market in Venice, where the Gasparinos are selling their house to lock in the gains, shows the forces shaping the new boom markets. Besides the tech employment there on Silicon Beach, as the local boosters put it, the supply of housing can’t expand to meet that rising demand. The area is filled with block after block of low-slung houses and apartments, and density restrictions stand in the way of constructing tall buildings.
That combination has been enough to send the median price per square foot of homes that are sold up 49 percent since late 2010 in the 90291 ZIP code, according to Zillow, and the median rent per square foot up 23 percent in the same span.
“When we bought four years ago after the crash, the market was dead, and it felt like everybody learned their lesson,” Mr. Gasparino said. “It just went back so fast.”
There are many causes of homelessness
http://culture.squidoo.com/Reasons_for_Homelessness
Many people feel that all homeless people are entirely to blame for their own miserable situation. Those same people tend to believe that under no circumstance could they find themselves without a home because they feel they are better than "those people" who have lost their homes. In reality, people from all walks of life can wind up on the street and almost no one is immune from the possibility.
I want to present a few reasons actual people become homeless, reasons often beyond their control or ability to deal with. By doing so, I hope to increase empathy towards those less fortunate. This is by no means an exhaustive list; please do not be offended if you know of something not mentioned on this page.
Most people become homeless due to circumstances that have overwhelmed them combined with the lack of a family support structure. Others, particularly teens, often lose their housing due to an actively hostile, perhaps even hazardous, abusive, or non-supportive family environment.
Average people without a good friend and family support structure can be overwhelmed by events such as domestic abuse, divorce, unemployment, or illness and find themselves without housing as well. There are many causes of homelessness and while this page covers a few there are almost as many causes as there are people with nowhere to live. If you've ever wondered, "Why do people become homeless?" you've found the right place to learn some of the possible answers.
Lack of a Living Wage
Inadequate wages cause homelessness
Many homeless people work. However, the minimum wage is often not up to the task of supporting a family.
In many areas, working full time for minimum wage does not earn enough to pay rent, utilities and food. While people can combine incomes to rent an apartment they often run into snags such as discovering that the number of working adults required to cover rent and bills combined with their minor children will exceed the number of occupants allowed by their lease. Additionally, many apartment complexes run credit checks which can prevent people with poor credit from renting; things like unpaid medical bills can prevent working people from finding a place to rent.
Parental Ideology
When parents' beliefs clash with teens' beliefs, sexual orientation, or behaviors this may result in teen homelessness
While few will admit it, some parents only love their children conditionally and these parents may discard their children once they reach their teens. These parents hold their beliefs as more important than their own children. Often the beliefs in question are religious.
As many as 40% of homeless teenagers are lgbt (lesbian, gay, bisexual, or transgendered) when it is estimated that less than five percent of teens are gay, bisexual, or transgendered. In my experience with lgbt homeless teens and young adults, they’ve come from families that refused to accept them or that began to actively abuse them after their orientation became known.
Perhaps it was a coincidence, but almost all of the gay and bisexual teens and young adults without homes that I’ve met came from religious fundamentalist homes – fundamentalist Christian, Jewish, and Muslim homes – where their parents’ beliefs were anathema to homosexuality or difference of any kind.
I also encountered teens living on the street whose problem stemmed from other religious differences. Some teens and young adults I met suffered homelessness because they were somehow at odds with their parents’ beliefs. In one case, the teenager had converted to Christianity from Islam, in another a teen was suspected of engaging in pre-marital sex which was in conflict with her parents’ religious beliefs. A number of Pagan teens that I met were expelled from their Christian homes.
Some of these young people were brutally beaten, threatened with death, or thrown from their homes by force. Others were systematically abused – physically and emotionally – until they ran from their abusers, preferring homelessness to continued abuse.
This subject is practically taboo, the relationship between parental beliefs and teen and young adult homelessness. In fact, after including the concept on a couple of pages, I have received threats, death threats, and hate mail. It is true that child abandonment and abuse are counter to what the vast majority of religious people hold dear. But it is also true that a minority of religious people have a different view. While that minority may seem inconsequential it is anything but inconsequential to around 400,000 American teens and young adults each year.
Left Out in the Cold
From the page: "Family conflict is the most common cause of all youth homelessness. For gay and transgender youth, the conflict tends to be over their sexual orientation or gender identity, and the results aren't pretty: Half of all teens get a negative reaction from their parents when they come out to them. More than 1 in 4 are thrown out of their homes."
Injury or illness can result in job loss and debt or inability to work
Some people are on the streets due to injury or illness. Many of them had jobs and insurance but through the course of their medical problems, both were lost. Many people don’t realize that even “good” medical insurance is not a guarantee of medical care. They are then devastated to find out that their insurance will not cover their medical expenses or treatment. They are also shocked when they lose their health insurance due to illness or injury.
Hospitalization quickly consumes savings and too many absences from work due to injury or illness will result in the loss of a job. Once a person has a significant gap in his or her employment history and a bad credit score due to unpaid bills it becomes much more difficult for him or her to get a job even when completely recovered.
People in all stages of recovery from illness or injury lose their homes. Some never get well due to lack of treatment and are too ill to hold down a job. Others get well but get pulled down by their medical debt and illness or injury related job loss. And increasingly, medical bankruptcy can result in homelessness.
While many people in situations like these have strong friend and family support structures, many do not. They are the ones who fall through the cracks and find themselves living on the street due to illness, injury, or the resultant medical bills.
It is my sincere hope that this reason for homelessness may disappear through effective health care reform. The health care bill that passed is not even close to what is needed. Medical bills are currently the leading cause of bankruptcy in America, and by a very large margin. Surprisingly, over half of those claiming medical bankruptcy either have or had medical insurance at the time their debt was incurred.