DConf 2013 Day 3 Talk 1: Metaprogramming in the Real World by Don Clugston

[Steven Schveighoffer]

On Tue, 11 Jun 2013 17:29:45 -0400, Walter Bright  
<newshound2 at digitalmars.com> wrote:

> On 6/11/2013 2:19 PM, Steven Schveighoffer wrote:
>> Define financially better off :)
>
> You have mo' moolah. Is their any other definition?

Cash is not always the only consideration.  Equity has value.  Quality of  
living has value, and can increase your financial situation.  And  
depending on how much more "moolah", it might not be worth it.  Consider  
that while you are renting, you are paying someone else's mortgage on that  
property, and at the end of the day (lease), you have nothing and they  
have a property, worth hundreds of thousands.

Whether you succeed or not depends very much on the local market.

>> And this is not even a fair conversation, because there are so many  
>> variables to
>> consider.
>
> I'd like to pop that default conception that buying is financially  
> better than renting. It's only true if real estate values appreciate  
> faster than inflation plus taxes plus real estate commissions, which is  
> hardly a sure thing.

I never said it was *always* better, but it's not always worse either.   
Now is actually a very good time to buy, because prices are low.  A house  
is a very safe investment, if you can afford the mortgage.  Property will  
ALWAYS have value, even if almost everything else goes to shit.

> (A lot of people overlook property taxes and capital gains taxes when  
> they make these calculations. I know one guy who cashed in his stock  
> options and bought a house with the proceeds, only to be forced to sell  
> it a year later because he couldn't pay the upkeep and taxes on his  
> salary.)

Many people buy too much house for their salary.  It's even encouraged by  
the banks/government, it makes the government "look good" when more people  
can buy houses.  Then you get the market crash of '08.

This is actually a pretty despicable practice IMO.  Mortgages and housing  
investments are not things to take lightly, but we use "pre-approval" from  
the bank, as if the bank says "Yes, you can afford that house!" when it  
really has nothing to do with what you can afford.  And then the  
government threatened to punish banks if they did not make sure low-income  
families were approved for houses they couldn't afford.

It sounds like your friend was not in that dire of straights though, since  
he bought his house with cash.  Cash that he didn't have before.  I'm  
assuming he got most of that back (unless he was careless about his choice  
of house).  As humans, we seem to consider loss of what we didn't know we  
had worse than never having gained it.

A very interesting study posed two questions to people:

1. You are given $1000, without having done anything to earn the money.   
You then are given the option to take an additional $500 guaranteed, or a  
50/50 chance at getting $1000 more.  Which would you choose?

2. You are given $2000, without having done anything to earn the money.   
You then are given the option to lose $500 guaranteed, or a 50/50 chance  
at losing $1000.  Which would you choose?

The vast majority chooses the safe route of gaining $500 on the first  
question, but then chooses to risk $1000 on the second question because  
they HATE to simply give up $500 for sure.

Most people don't notice that both questions are EXACTLY the same.

> I can't even recall anyone remembering that selling a house costs you a  
> 6% commission to the real estate agent. Poof! There goes a big chunk of  
> your profits right off the top.

My profit on my first condo, which I bought in '99 and sold in '05 was  
150% of the *purchase price*.  Minus the 6% commission :)  Although, it  
was only 3% because a family friend who is a real estate agent did not  
charge me her half.  And I only had about 5% equity of the purchase price  
invested when I sold.

Of course, in '05 prices were inflated, so the house I bought with that  
money has since gone down in value.  But I'm still pretty well off because  
of my profit from the first.  And I have a very nice house, one which  
would be tough to rent at the mortgage payment I currently have.

> Housing prices have to go up a lot to counter all that.

They can.  They don't have to go up as much as you think.  They can go  
down.  You have to be more aware of the market than with renting, that is  
for sure.  But that is true for any rent vs. buy situation when you are  
looking at a large purchase.

-Steve