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Real Estate Prices Always Go Up, They All Said

A weekend topic from the Tacoma Daily Index. “Home ownership is not for the faint of heart. If you have an older home, you will never lack projects to keep you busy – and you could easily spend every penny you thought you had saved for retirement or that ‘big’ vacation on updating plumbing or a new roof or restoring, updating, repairing or rescuing some element of your home’s ‘character.'”

“The good news is, once you take ownership of your own classic home, you will never be bored again – in fact you just might have more surprises coming your way than you ever could have imagined. In fact, based on my experience, once you move into your own place, you will never have spare time – or money – ever again in your life.”

“I grew up in an era where everyone (1*) agreed that a home was your best investment. The reigning assumption back them was that rent was literally throwing money away.”

“A home mortgage was building equity, they said. Real estate prices always go up, they all said. Nothing is better than owning your own home and fixing it just the way you want, they told me. Nobody mentioned the near infinite expenses of home ownership. (2*)”

“Renting, as much as I am almost hard-wired to hate it, (sometimes) strikes me as, in some ways, a better option. As I see it, renting has two great advantages – if you have to – or just want to – move – you give your notice, start packing and move out. You don’t need to sell your home or have any other contingencies.”

“You also know how much you will pay each month – if the plumbing explodes, or the roof leaks, or anything else fails, you contact your landlord and they fix it – and pay for it. A predictable budget for housing and a possibility of a quick exit sounds like the ultimate American Dream to me. Sometimes.”

“(1*) One thing I have learned from experience is that when ‘everyone’ agrees, they are certainly wrong. (2*) Even if they would have, those of us in the throes of love for our dream home would not have believed them anyway.”

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This Post Has 32 Comments

  2. I can think of few worse things than finding yourself deep underwater on a money pit. All of these “winning bidder” buyers who massively overpaid while waiving inspections are going to be cautionary tales for everyone who gets to watch their downward spiral into insolvency.

  3. Had some acquaintances buy a house in Burke Virginia. They were so excited to buy house to get the tax break, blah blah blah blah. They remodeled the kitchen, bathrooms, yard, he’s a Doctor Who has no skills whatsoever for housework or improvements so they paid a contractor for everything. They bought two years ago and they’re probably getting hammered right now with the drop in prices. Love to hear them talking now about how great their purchase was.

  4. “Real estate prices always go up, they all said.”

    It’s different this time…just like it was in the 2007-2009 episode.

  5. “Home ownership is not for the faint of heart. If you have an older home, you will never lack projects to keep you busy – and you could easily spend every penny you thought you had saved for retirement or that ‘big’ vacation on updating plumbing or a new roof or restoring, updating, repairing or rescuing some element of your home’s ‘character.’”

    This is known as the cost of physical depreciation, and somehow the ‘real estate always goes up’ crowd persistently neglects to factor this into their return calculations. I’m personally grateful to our landlords for bearing these crushing expenses during our years as tenants so that we don’t need to.

    1. As an adult, I’ve lived in fifteen different rentals and owned one house. I only regret the house.

      1. That’s awesome. Did you say you are renting now in UTC? I’m interested to hear about this.

        1. Yep. Renting a condo from a private owner. West of 5. I had my various searches set on $2500 max. Every day I would get new updates from price drops that now fell under my cap. Lots of $2750ish dropped into the sub $2500. Some going into $2300 range. We are totally satisfied since the place is big enough with a huge attached garage (fishing gear, etc) and very close to work in Torrey without freeway.

  7. “In fact, based on my experience, once you move into your own place, you will never have spare time – or money – ever again in your life.”

    With endorsements like this one, what is stopping Millenials from jumping into home ownership with both feet?

    1. ProfessorBear,
      Going slightly OT about Millenials, I wonder if we’re just not teaching people about basic maintenance anymore. That writer in the article linked sounds like he’s never gotten his hand dirty.

      I have had multiple conversations with both youngsters at work and teenagers over at our house who’s minds were blown at the concept that you don’t have to hire someone to do every last little repair or change. Not only are the basics of repair and maintenance seemingly missing from their education, but there seems to be an attitude that because they are supposed to grow up someday and become a professional javascript herder or get a masters degree, ‘trade-style’ skills are not just ignored but beneath them.

      Growing up, my father did a number of repairs and modifications to the two houses we lived in, as well as kept after the basic preventative maintenance. He knew when to hire a professional, but also knew that a lot of stuff he could do himself, from simple plumbing repairs to slightly larger things like installing a pocket door between two rooms, and even building a redwood deck with a brick BBQ.

      As eldest son, I was there as cheap labor, helping and learning. As a lad in school in our boondock town I had to take such now-obsolete classes like wood shop and metal shop when the idea of handling tools and building things was demystified.

      Taking on the maintenance and repairs is one of the tradeoffs of owning vs renting, but to make it sound like it’s some new scary or overwhelming thing is disingenuous.

      1. MGSpiffy,

        Count me as one of those millennials who has almost zero capacity for being able to do any of what you described above. I never took shop or metals and the extent of my handiman work would be hanging a picture on a wall. It’s not that I don’t think I have the capacity or capability to do these things, it’s that I’d rather hire someone who does it for a living. I kind of look at it like cutting one’s own hair: you can probably get by, but it will never be as good as a professional. Being a generalist is good in some instances, but the modern economy is all about specialization. Now, if you want me to start a perfect IV on your forearm or wrist, I’m happy and quite willing to do that and there are probably none better than I. But I’m just happy to hire a handiman to do stuff that I have no inclination for learning, since I will probably only do it at most once or twice in my life.

        1. “Being a generalist is good in some instances, but the modern economy is all about specialization.”

          Absolute balogna. The economy these days is MUCH more about diversification than it ever was. If, as a business or worker, you can’t wear many hats, you’re fooked.

          It’s why you see Home Cheapot selling foodstuffs, and bricks and mortar expanding product lines and moving into online sales, etc. The examples are endless.

          1. A hardware store selling food or an online retailer like Amazon entering Whole Foods is at the enterprise level. What I’m talking about is the individual-level economically marketable skills. There are some very specialized skills sets that can pay big bucks right now. They seem to be in data mining, AI programming, robotics, etc. I’m so far removed from those fields that my ignorance is stunning. But I do know that these types of highly specialized skills (they can be blue collar or white collar) do not lend themselves easily to transference.

            BlueSky, you are right that I have many other nursing skills besides starting IVs. In fact, some of the best IV starters in our ED are techs, who can start IVs in scope even though they are not licensed. It’s the sheer volume that they do that makes them good. The pharmacology, anatomy, and physiology comes in handy too. But I don’t think that obviates my point. A peds RN is going to be clueless running a dialysis machine. Not that there isn’t some level of transference, but they are both specialized subsets of an already specialized career. Pediatrics ICU is extremely specialized and worlds. I am not knocking the idea of trying to grasp knowledge wherever it can be found. But what I am discounting is the fact that they lay person can ever do what an expert does professionally half as good. This is why I will never buy a flipped house from someone who watched HGTV and thought, “Yeah, I bet I can do that. I’ll just watch a youtube video on how to do that.”

        2. OneAgainstMany,
          In our primary economic skill area, specialization is usually a way to maximize our earnings. i.e. be something hard to find in the marketplace to command a higher wage. I certainly resemble that remark.

          But that doesn’t preclude being well rounded in many other areas of life.

          So many of the things I’m talking about have a low skill barrier to entry. And it’s not just the being able to do them – it’s having the awareness to be able to spot the issues in the first place. for a lot of the stuff involved in keeping a house it, the labor is not highly skilled, but paying someone else to do it gets expensive fast.

          1. OAM,

            You’re probably not as specialized as you think. You may not be able to change a light bulb or tighten a door hinge but if all you knew was how to poke needles you would be one dangerous nurse.

  8. “A home mortgage was building equity, they said. Real estate prices always go up, they all said. Nothing is better than owning your own home and fixing it just the way you want, they told me. Nobody mentioned the near infinite expenses of home ownership. ”

    I’m hoping and praying that someone who knows how to create one of those “Hitler Discovers that Renting is Better than Owning” videos to these lines does so!

    1. I did yesterday but it is a great article. The question now is how much money can the rich get out of China before the country manages to shut down the flow.

  11. Buttonwood
    Why rising bond yields are playing on stockholders’ nerves
    Is the equity-risk premium too tight for safety?
    Print edition | Finance and economics
    Oct 20th 2018

    THE FIRST full-length film made by Steven Spielberg features an unusual lead. So indeed does much of his more celebrated work. But the star of “Duel”, his 1971 debut, is nothing as exotic as a man-eating shark or cloned velociraptor. It is a tailgating lorry. In a nerve-shredding journey across the California desert, it torments a middle-aged salesman driving a rickety Plymouth Valiant. That its driver is faceless adds to the air of malice.

    For investors in equities, bond yields are the juggernaut that looms menacingly in the wing mirror. Twice this year—first in February and again earlier this month—a jump in Treasury yields was followed by a sell-off in stockmarkets. There is reason for the jitters. A long bull market, driven in part by low interest rates, has left shares in America richly priced. And with interest rates still on the rise, nerves are rattled about the level of stock prices.
    …

      1. If you look at the chart you will see that Trump inherited a dangerously overvalued market from Obama with a forward PE over 25 just before the election. I am sure that the liberals were hoping for a market collapse during his first two years. Instead, due to strong growth and the tax cuts, the forward PE is just a little over the average PE. MAGA

        1. “You can’t use BS to reduce deficits.”

          True, if you could Obama would have run a surplus. No, what Trump is doing is growing the economy and even if it does not reduce the deficit it reduces the debt compared to the GDP. If you have 3% growth with 2% inflation and you compare it to the 21 trillion dollar debt, of which Obama owns 9 trillion, it means if the deficit is less than $1.05 trillion this year, we are in better shape. MAGA

          1. I admire your optimism Dan, but I think it is misguided. Take a look at the facts: debt as a % of GDP is increasing. It went from 3.5% of GDP to 3.9% of GDP. It will probably explode even further in the next year. Growth is not outpacing the debt.

  12. “A predictable budget for housing and a possibility of a quick exit sounds like the ultimate American Dream to me.”

    A lightbulb goes on!

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