Price Estimations - San Jose Edition

[hanera]

@zensri

@hanera, we are back to the rent vs buy argument from that Dropbox engineer. In that calculation, I saw that if housing goes up by 5% a year, it beat renting a Fremont home worth $950K. That time all of you said that it’s not realistic to expect 5% growth in housing. This particular home that @Jane is referring to grew at a rate of almost 9-10% a year in the last 24 years. With that kind of growth, renting is a loser proposition. It also beat index funds.

Computation of gain for RE is wrong. I have shown the computation twice.

[tomato]

Yeah, involves cost on the loan, etc.

[hanera]

@Elt1

I invested from 1990 till now didn’t get anywhere near that return in index funds.

Using this S&P 500 Return calculator,
No drip 845%
Drip 1560%
Is your index fund, S&P 500 index?

[Elt1]

SP 500 with Drip.
The stock market went nowhere from 2000-2012

[hanera]

@hanera

10 year timeframe of S&P index,

Oct 2008 to Oct 2018, no drip 199%, drip 267%
Mar 1999 to Mar 2009, no drip -41%, drip -30% You actually get negative

Critical to just hold (or do DCA purchasing)
Mar 2009 to Mar 2018, no drip 257%, drip 329%
Mar 1999 to Mar 2018, no drip 111%, drip 200%
Mar 1999 to Oct 2018, no drip 283%, drip 363%

Mar 1990 to Mar 2009, no drip 124%, drip 232%
Mar 1990 to Oct 2018, no drip 757%, drip 1437%

Mar 2000 to Mar 2012, no drip -3.7%, drip 20% I see, bad experience

Oct 1994 to Oct 2018, no drip 525%, drip 876%, 24 years

DRIP unless you need the money for living.

Idea of investing in index fund is decades or multi-generation. If invest for yourself, may not be that great as the timeframe might be too short.

[zensri]

That spreadsheet takes the cost of the loan into account. The key point is that, even if the house appreciates 3x or 10x, the loan is still 80% of the original x. So the whole 5% PITI is just on a fraction of the property value after a few years, but the rent is 3% of 3x or 10x (in Fremont today). I understand this is a simple view compared to the spreadsheet. The key here is appreciation. That’s why buying in the bay area matters.

[tomato]

wow…

https://www.redfin.com/CA/San-Jose/1904-Creek-Dr-95125/home/1440655#property-history

Not a lot of appreciation, huh. from the images looks like terrible use of that lot size - backyard looks tiny. Redfin shows it kind of like river is part of the lot. maybe that’s why.