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Reader Feedback

Below are some of the emails that have been received from Priced Out Forever readers.

May 7, 2007

I am a renter that is waiting out the Real Estate bubble crash. I think this website is a great source of information. I only wish there was more. I am sending anyone that I talk to about my reasons for renting directly to your website. People are really brainwashed by those that say "it's a great time to buy." I always ask them if they hear about this from someone who knows for sure and isn't biased. Then I ask who they heard it from... and so on and it always gets back to a Realtor or someone from the NAR. As buyers, we should all be holding together and demanding prices to be lowered to affordability levels before we start to buy again. The more buyers who wait and let supply build larger and larger, the lower prices will get and the better off everyone will be financially. Good Luck, and thanks for the great info!

- Tom

April 18, 2007
The Excel spreadsheet posted on is so frought with errors its embarrassing. The expenses sum in home puchase model but not in the rental model, you're double-counting savings, and the there is no sense in the tax calculations. If you're going to present a model for evaluating rent vs own, please provide an accurate one.

- woody.
(U. Chicago MBA, Finance)
POF's emailed reply to "woody"
That's an interesting comment, Woody. I would appreciate it if you pointed out some specific errors, as in which fields do you believe are in error, and how exactly you think the is formula wrong. I think it is quite possible that you have simply misunderstood the purpose of some of the fields. I would be happy to explain it in detail to you if you are interested.

If you still believe that my spreadsheet is bogus, you should know that the results given by my spreadsheet are quite similar to this tool from the New York Times. Is their calculation also fraught with error?

Also, I feel I should tell you that no matter what letters you put after your name, it's difficult to take you seriously when you manage to stuff two spelling errors into an email that short.

- Tim
Woody's reply:
Ride that self-righteous horse buddy.

- w.

April 12, 2007
Your trading up chart seems a little bit naive. I think it would be good to expand on it a little.

The problem with your chart is that you just demonstrated that with equivalent (positive) percentage changes, the ratio in price doesn't change. This is of course true, but it suffers from some of the same sort of naive analysis real estate people tend to do.

The most obvious flaw in this analysis is that it assumes that appreciation is equal in all price brackets. This is, of course, not true. In a bubble economy, appreciation is highest on the properties that are most viable for speculators. Nobody buys a $20M house and expects to flip it, for example -- the people who can afford a $20M mansion are few and far between, and tend to have good accountants and lawyers.

Conversely, condo sales tend to be largely the domain of crazy speculators at the moment, so the short-term appreciation is extremely high.

What this means is that there's a lot of churn in the lower-end parts of the market, where speculators are able to raise enough capital to participate in the market, and where the bulk of non-speculative buyers are, to drive demand up further.

So, in the end, what this really means is that in a bubble market, prices tend to norm towards the top of the prime speculative region. The result is that, oddly enough, buying to trade up actually can work out ok, in some relatively narrow sections. If appreciation is 4% on that $750k luxury home, and 20% on that mid-range home, then you might manage to flip through houses in a few bubble years and end up with a huge jumbo mortgage on a fancy house... Which will never increase in value and costs your entire salary to keep up.

- J

March 13, 2007
Interesting site.
I don't understand this from the FAQ:
"The founder of this site is in fact neither a renter nor an owner, but lives debt-free and rent-free with his wife, two dogs, and four ferrets in a three-bedroom house."

So if you don't own your house ("nor an owner"), and you don't have debt, how did you get your house? Steal it? : )

I mostly agree with your stance on renting, but your comments are a bit optimistic for some locations:

"In most places where real estate prices have gotten out of hand, you can find a nice single-family home or condo to rent for around half the monthly expense of what you would pay to "own" a home (when you're really just renting money from a bank anyway)."

Real estate prices are out of hand in Seattle, but rental prices are too. (to a lesser extent perhaps). In certain neighborhoods, renters will be priced out too.

"Most of the time—especially with people on Craigslist—you will be able to negotiate a lower rent just by making a counter-offer."

Again, maybe true for small landlords advertising through craigslist, but in neighborhoods like Belltown (where I rent) the rental market is very tight and actually competitive. Rental prices are rising fairly fast, probably faster than the wage growth rate. This is a demand-driven growth and supply shortage that is pushing rental prices up. So if they keep converting rentals into condos, and demand keeps going up (likely for at least a few years), rental prices will keep going up.

The interesting question is what's the price point where rents get too high and cause renters to move to other neighborhoods, thus restoring balance to the supply/demand. It's basically at that point for me now where I'm considering moving to Capitol Hill in the fall.

- Patrick

I really appreciate your web site. I moved to Sacramento, CA almost 3 years ago and have been renting every since. I make well over the median income for Sacramento and could not figure out how people making a lot less then me were affording homes that I would not even attempt to buy. After months of research and reading about the current housing bubble forming in California, I decided to stay a renter until prices came down, which I knew was only a matter of time. Prices in Sacramento are now falling, and although I may be transferred to our Seattle office when I return from my current assignment overseas, I can see light at the end of the tunnel. (Maybe 2008 or 2009?)

Several people tried to tell me I was going to be “priced out” of the market and tried to talk me into purchasing a home instead of renting. I tried to pass on what I had learned from my research, but it fell on deaf ears.

One co-worker who knew she was going to be transferred in less then a year, bought a home in June of 2005 for $383,000.00, no money down, interest only, and figured she would sell it in a year for a healthy profit. I attempted to warn her, but my points went unheard. March 2006, she put her home on the market for $418.000.00. She moved to Texas in July 2006, March 2007, her home is still on the market, the new asking price is $350,000.00. Both her realtor and mortgage broker, whom both went to her church, convinced her to buy the house. I really wish people would stop listening to people whose financial well-being is dependant on the housing industry.

It’s good to see people take the time to further educated people on the current housing market condition, and how patience can truly pay off.

- Derek

March 12, 2007
Thanks for putting this site up. It's simple, but it's true.
Hopefully, you'll save a few FB's out there.

- Sarah

I love your site. Very clear and nice to look at. I hope you keep improving it.

- Patrick

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