Why would people buy condos/SFH in Texas?

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Derivative
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Why would people buy condos/SFH in Texas?

Post by Derivative » Fri Feb 09, 2018 8:25 pm

Why would people buy condos/single family homes (SFH) in Texas if they wanted to live there for work?

Let's say someone wants to live in Houston, TX near the medical centers for work. Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy? What would be the reasons to buy, and how would they beat the low rent prices in Houston, TX?

Again, I am not sure why people would buy condos or SFH if they were single and needed to work/live in Texas. Let's say there is a 1-bedroom, 1-bath condo in Texas selling for $200,000 in downtown Houston. The property taxes would be a little over $5,200/yr (2.6%) and the HOA fees might be something like $500/month*12 months= $6,000/yr. That's already $11,2000/yr. Together with mortgage interest and closing/selling costs and repair costs, maintenance, etc., why would someone buy a condo in Houston, TX *versus* renting a 1-br, 1-bath for $700/mo? It wouldn't even make sense financially if they paid all of the mortgage off right? I see condos and SFH's as money sinks in all of the large Texas cities. Doesn't the property tax alone wipe out any financial advantage of owning a home in Texas?

Bwlonge
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Re: Why would people buy condos/SFH in Texas?

Post by Bwlonge » Fri Feb 09, 2018 8:28 pm

Sometimes people don't make decisions because they make them financially independent faster.

Bet they have a nice view.

livesoft
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Re: Why would people buy condos/SFH in Texas?

Post by livesoft » Fri Feb 09, 2018 8:30 pm

Because they have 2 kids in school and want them to walk to school?

Virtually nobody lives in downtown Houston. It is not like NYC nor San Fran.

And property taxes are higher in New York on a square footage basis.

I wonder if you are seeing investment properties used for AirBNB, Superbowls, NCAA tournaments, World Series playoffs, etc.
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Lonestarz
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Re: Why would people buy condos/SFH in Texas?

Post by Lonestarz » Fri Feb 09, 2018 8:35 pm

You are not going to find a rental that rents below cost (owner subsidized your rent?) so you are probably not comparing apples to apples.

When you rent, it is usually a smaller space than when you buy.

You can get a 2400 sq ft townhome inside 610 for $350k and you can rent one for 2400/mo - so maybe slightly cheaper to buy but you lock up lots of money.

However 5 years ago would have been $300k vs $2500/mo - the rental market in Houston was so good they built out new apartment complexes galore. Who knows when that glut will work off

essbeer
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Re: Why would people buy condos/SFH in Texas?

Post by essbeer » Fri Feb 09, 2018 8:38 pm

Where you can rent a 200k downtown condo with a $500/month HOA for $700? I think it will cost more like $2000/month. Anything $700 for rent in central Houston is going to be "edgy" to say the least.

alex_686
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Re: Why would people buy condos/SFH in Texas?

Post by alex_686 » Fri Feb 09, 2018 8:40 pm

Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy?
There is a flaw in your argument someplace. If you rent you pay property taxes. Sure, it is indirect. The county charges a property tax, the owner pays it, you pay the owner. But the property tax is built into the rent. Now maybe the rent is lower because the property tax is lower because it is a cheaper property. But you want to compare apples to apples.

Derivative
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Re: Why would people buy condos/SFH in Texas?

Post by Derivative » Fri Feb 09, 2018 8:51 pm

alex_686 wrote:
Fri Feb 09, 2018 8:40 pm
Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy?
There is a flaw in your argument someplace. If you rent you pay property taxes. Sure, it is indirect. The county charges a property tax, the owner pays it, you pay the owner. But the property tax is built into the rent. Now maybe the rent is lower because the property tax is lower because it is a cheaper property. But you want to compare apples to apples.
Okay, so you are saying that the rent of a building will always be higher than the 2.6% Texas property taxes + mortgage + any HOA fees? So if I purchase any reasonable condo, townhouse, or SFH I will always be able to generate positive cash flow from the investment? I am trying to see if the 2.6% property tax and the HOA fees makes it nonsensical to buy and that people are buying for reasons other than financial/numbers.

Derivative
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Re: Why would people buy condos/SFH in Texas?

Post by Derivative » Fri Feb 09, 2018 8:55 pm

livesoft wrote:
Fri Feb 09, 2018 8:30 pm
Because they have 2 kids in school and want them to walk to school?

Virtually nobody lives in downtown Houston. It is not like NYC nor San Fran.

And property taxes are higher in New York on a square footage basis.

I wonder if you are seeing investment properties used for AirBNB, Superbowls, NCAA tournaments, World Series playoffs, etc.
What do you means virtually nobody lives in downtown Houston?

JBTX
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Re: Why would people buy condos/SFH in Texas?

Post by JBTX » Fri Feb 09, 2018 8:56 pm

Do you mean any home or just condos?

Yes property tax is higher here than average. But in general housing prices are a lot cheaper than most major metropolitan areas.

As to renting, somebody has to pay the property tax. The landlord will have to pay it so obviously that would be factored into your rent prices.

alex_686
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Re: Why would people buy condos/SFH in Texas?

Post by alex_686 » Fri Feb 09, 2018 9:01 pm

Derivative wrote:
Fri Feb 09, 2018 8:51 pm
Okay, so you are saying that the rent of a building will always be higher than the 2.6% Texas property taxes + mortgage + any HOA fees? So if I purchase any reasonable condo, townhouse, or SFH I will always be able to generate positive cash flow from the investment? I am trying to see if the 2.6% property tax and the HOA fees makes it nonsensical to buy and that people are buying for reasons other than financial/numbers.
Rental property should have a positive rate of return. That is it should be able to cover explicit expenses (property taxes, HOA), implicit expenses (deprecation), and profits. After all, if there were no profits why would people become landlords? Plus many properties have mortgages, i.e. leveraging your investment, so mortgage payment as well.

As for always - well that is a pretty strong word. Whacky situations can happen, like the housing crisis of 2008. But yeah, normally one can easily cover explicit expenses of property taxes and HOA. Covering the rental property's mortgage is a different matter.

Really, all I am saying is that rental property still has to pay property taxes and those property taxes have to come from the rent. Else the landlord is just giving you money.

runner540
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Re: Why would people buy condos/SFH in Texas?

Post by runner540 » Fri Feb 09, 2018 9:06 pm

JBTX wrote:
Fri Feb 09, 2018 8:56 pm
Do you mean any home or just condos?

Yes property tax is higher here than average. But in general housing prices are a lot cheaper than most major metropolitan areas.

As to renting, somebody has to pay the property tax. The landlord will have to pay it so obviously that would be factored into your rent prices.
This should be true in a rational market over the long term, but in the shorter term and/or irrational market, renting can be better for one's networth than renting.

This index has 3/23 cities as clearly favoring renting right now, and two of the 3 are in Texas! (Houston, Dallas, Denver).

https://business.fau.edu/departments/fi ... ent-index/

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unclescrooge
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Re: Why would people buy condos/SFH in Texas?

Post by unclescrooge » Fri Feb 09, 2018 9:12 pm

Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Why would people buy condos/single family homes (SFH) in Texas if they wanted to live there for work?

Let's say someone wants to live in Houston, TX near the medical centers for work. Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy? What would be the reasons to buy, and how would they beat the low rent prices in Houston, TX?

Again, I am not sure why people would buy condos or SFH if they were single and needed to work/live in Texas. Let's say there is a 1-bedroom, 1-bath condo in Texas selling for $200,000 in downtown Houston. The property taxes would be a little over $5,200/yr (2.6%) and the HOA fees might be something like $500/month*12 months= $6,000/yr. That's already $11,2000/yr. Together with mortgage interest and closing/selling costs and repair costs, maintenance, etc., why would someone buy a condo in Houston, TX *versus* renting a 1-br, 1-bath for $700/mo? It wouldn't even make sense financially if they paid all of the mortgage off right? I see condos and SFH's as money sinks in all of the large Texas cities. Doesn't the property tax alone wipe out any financial advantage of owning a home in Texas?
Your math is off.

I don't know anything about Houston, but my buddy bought a condo next to a medical center and he paid $95k for it. He AirBnB'd it for $2000/month.

Or at least he did until the Hurricane blew off his roof. :shock:

livesoft
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Re: Why would people buy condos/SFH in Texas?

Post by livesoft » Fri Feb 09, 2018 9:12 pm

Derivative wrote:
Fri Feb 09, 2018 8:55 pm
What do you means virtually nobody lives in downtown Houston?
Have you even visited the place or are you just browsing the internet?
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runner540
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Re: Why would people buy condos/SFH in Texas?

Post by runner540 » Fri Feb 09, 2018 9:16 pm

alex_686 wrote:
Fri Feb 09, 2018 9:01 pm
Derivative wrote:
Fri Feb 09, 2018 8:51 pm
Okay, so you are saying that the rent of a building will always be higher than the 2.6% Texas property taxes + mortgage + any HOA fees? So if I purchase any reasonable condo, townhouse, or SFH I will always be able to generate positive cash flow from the investment? I am trying to see if the 2.6% property tax and the HOA fees makes it nonsensical to buy and that people are buying for reasons other than financial/numbers.
Rental property should have a positive rate of return. That is it should be able to cover explicit expenses (property taxes, HOA), implicit expenses (deprecation), and profits. After all, if there were no profits why would people become landlords? Plus many properties have mortgages, i.e. leveraging your investment, so mortgage payment as well.

As for always - well that is a pretty strong word. Whacky situations can happen, like the housing crisis of 2008. But yeah, normally one can easily cover explicit expenses of property taxes and HOA. Covering the rental property's mortgage is a different matter.

Really, all I am saying is that rental property still has to pay property taxes and those property taxes have to come from the rent. Else the landlord is just giving you money.
Check out this rent vs buy index: it measures which is better for your net worth, by city. There are 3 cities that clearly favor renting right now (Denver, Dallas, Houston), and two are in Texas. Some landlords are willing to rent at a loss because they expect higher than usual appreciation, or they bought the house at a much lower price and thus have lower taxes than a new buyer would have.

https://business.fau.edu/departments/finance/real-estate-initiative/bhj-buy-vs-rent-index/bhj-data-and-graphs/

sailaway
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Re: Why would people buy condos/SFH in Texas?

Post by sailaway » Fri Feb 09, 2018 9:19 pm

Above and beyond the math, Texas has lousy protections for tenants. One might buy just for that reason.

stimulacra
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Re: Why would people buy condos/SFH in Texas?

Post by stimulacra » Fri Feb 09, 2018 9:19 pm

I live in Houston. Rent is not magically cheaper here.

There aren't any $700/month condos or lofts in downtown Houston. Maybe in the late 1990's.

Also downtown Houston proper is pretty sparsely populated. Maybe 6 or 8 thousand folks actually live in the high rises around there. The adjacent neighborhoods have a lot more people but actual downtown district is kind of empty after dark.

For a $200k condo expect to pay roughly $1,800 - $2,000 / month for rent. I think the rule of rent equaling 1% of purchase price still applies here.

$700 / month places are smaller older units, possibly garage or carriage apartments closer in to town… further out they're garden style complexes, predominantly working class in transitional parts of town.

There were some overdevelopment of luxury units that went vacant for a bit when oil prices cratered in 2014 that were rented out at a discount but those are largely gone now. I think when it was happening maybe $1,400 - $1,600 / month that usually rented out for $2,500.

WanderingDoc
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Re: Why would people buy condos/SFH in Texas?

Post by WanderingDoc » Fri Feb 09, 2018 9:28 pm

If investment properties weren't profitable in Houston, eventually no one would buy investment properties there. Its very simple. Aside from homeownership which is NOT about the numbers and NOT investing. Eventually, no one would buy income property if it wasn't profitable. I can tell you, the Houston, and DFW markets are VERY lucrative for real estate investors.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

randomguy
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Re: Why would people buy condos/SFH in Texas?

Post by randomguy » Fri Feb 09, 2018 9:29 pm

Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Why would people buy condos/single family homes (SFH) in Texas if they wanted to live there for work?

Let's say someone wants to live in Houston, TX near the medical centers for work. Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy? What would be the reasons to buy, and how would they beat the low rent prices in Houston, TX?

Again, I am not sure why people would buy condos or SFH if they were single and needed to work/live in Texas. Let's say there is a 1-bedroom, 1-bath condo in Texas selling for $200,000 in downtown Houston. The property taxes would be a little over $5,200/yr (2.6%) and the HOA fees might be something like $500/month*12 months= $6,000/yr. That's already $11,2000/yr. Together with mortgage interest and closing/selling costs and repair costs, maintenance, etc., why would someone buy a condo in Houston, TX *versus* renting a 1-br, 1-bath for $700/mo? It wouldn't even make sense financially if they paid all of the mortgage off right? I see condos and SFH's as money sinks in all of the large Texas cities. Doesn't the property tax alone wipe out any financial advantage of owning a home in Texas?
To help everyone else why don't you post a listing for a building that has both a unit for rent and for sale so we can look at real numbers. It can be tricky to keep everything the same (views, what floorplan and so on) but I would love to see a case where rent doesn't even cover property tax and HOAs.

North Texas Cajun
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Re: Why would people buy condos/SFH in Texas?

Post by North Texas Cajun » Fri Feb 09, 2018 9:34 pm

Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Why would people buy condos/single family homes (SFH) in Texas if they wanted to live there for work?

Let's say someone wants to live in Houston, TX near the medical centers for work. Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy? What would be the reasons to buy, and how would they beat the low rent prices in Houston, TX?

Again, I am not sure why people would buy condos or SFH if they were single and needed to work/live in Texas. Let's say there is a 1-bedroom, 1-bath condo in Texas selling for $200,000 in downtown Houston. The property taxes would be a little over $5,200/yr (2.6%) and the HOA fees might be something like $500/month*12 months= $6,000/yr. That's already $11,2000/yr. Together with mortgage interest and closing/selling costs and repair costs, maintenance, etc., why would someone buy a condo in Houston, TX *versus* renting a 1-br, 1-bath for $700/mo? It wouldn't even make sense financially if they paid all of the mortgage off right? I see condos and SFH's as money sinks in all of the large Texas cities. Doesn't the property tax alone wipe out any financial advantage of owning a home in Texas?
Well, Texas is a big state, and you seem to be using a single hypothetical example and trying to draw a sweeping conclusion from it.

I own a SFH in an upper middle class suburb of Dallas. Our property tax rate is 2.08%. Our HOA fee is $360 a year. There are very few rentals available in this highly desirable school district. If I had been able to rent a SFH here, I’m sure that my rent would have been more than the interest, property taxes and HOA fee. Further, had I rented I would have missed out on:

1. the tax deductions for interest and property taxes;
2. the 100% appreciation in value of my property;
3. the freedom to alter my property as I saw fit.

I have rented SFHs at different times of my long life. The hassles of getting repairs done quickly was a definite negative. The uncertainty about rent increases after the initial contract period
was uncomfortable for me.

I realize that the value of tax deductions I have enjoyed the past 20 years may have been reduced by new laws. I haven’t investigated because my mortgage is paid off.

I have never investigated condos. Condos would never have worked for my lifestyle (which includes woodworking, gardening, and highly energetic dogs).

I hope this helps you understand why one person in Texas decided to buy a SFH. I cannot speak for the other several million homeowners in our state.

JBTX
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Re: Why would people buy condos/SFH in Texas?

Post by JBTX » Fri Feb 09, 2018 10:22 pm

runner540 wrote:
Fri Feb 09, 2018 9:06 pm
JBTX wrote:
Fri Feb 09, 2018 8:56 pm
Do you mean any home or just condos?

Yes property tax is higher here than average. But in general housing prices are a lot cheaper than most major metropolitan areas.

As to renting, somebody has to pay the property tax. The landlord will have to pay it so obviously that would be factored into your rent prices.
This should be true in a rational market over the long term, but in the shorter term and/or irrational market, renting can be better for one's networth than renting.

This index has 3/23 cities as clearly favoring renting right now, and two of the 3 are in Texas! (Houston, Dallas, Denver).

https://business.fau.edu/departments/fi ... ent-index/
I looked at Dallas and right now their index shows strongly rent. But just 3 years ago it was buy and has gone back and forth over the years. I suspect the result is because home prices here are now appreciating substantially, while in the past Home price growth has somewhat lagged other markets primarily because of new Home Construction. Chances are rent prices will catch up.

There is a lot more than just the short term economics of rent vs buy. If you plan for this to be your home you don’t want to be at the whim of your landlord years down the road.

I looked at our neighborhood and the rental prices for homes roughly equals a 30 year mortgage on a 100% financed amount + property taxes. Short term that favors renting because there are other costs of ownership. But long term a rental is going to increase in price and your mortgage is fixed.

runner540
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Re: Why would people buy condos/SFH in Texas?

Post by runner540 » Fri Feb 09, 2018 10:40 pm

JBTX wrote:
Fri Feb 09, 2018 10:22 pm
runner540 wrote:
Fri Feb 09, 2018 9:06 pm
JBTX wrote:
Fri Feb 09, 2018 8:56 pm
Do you mean any home or just condos?

Yes property tax is higher here than average. But in general housing prices are a lot cheaper than most major metropolitan areas.

As to renting, somebody has to pay the property tax. The landlord will have to pay it so obviously that would be factored into your rent prices.
This should be true in a rational market over the long term, but in the shorter term and/or irrational market, renting can be better for one's networth than renting.

This index has 3/23 cities as clearly favoring renting right now, and two of the 3 are in Texas! (Houston, Dallas, Denver).

https://business.fau.edu/departments/fi ... ent-index/
I looked at Dallas and right now their index shows strongly rent. But just 3 years ago it was buy and has gone back and forth over the years. I suspect the result is because home prices here are now appreciating substantially, while in the past Home price growth has somewhat lagged other markets primarily because of new Home Construction. Chances are rent prices will catch up.

There is a lot more than just the short term economics of rent vs buy. If you plan for this to be your home you don’t want to be at the whim of your landlord years down the road.

I looked at our neighborhood and the rental prices for homes roughly equals a 30 year mortgage on a 100% financed amount + property taxes. Short term that favors renting because there are other costs of ownership. But long term a rental is going to increase in price and your mortgage is fixed.
Sounds like your neighborhood is more rational than mine. I'm not sure if you had the chance to look at the methodology. You're right that the index doesn't take into account the intangibles of renting/owning (stability, flexbility, etc.) but the index is much more than simply house price and current rent. It DOES take into account almost all the explicit and implicit costs of both renting and owning (increases in rent, transaction costs for buying/selling, etc.).

I look at the charts, and see Dallas, Denver and Houston following the pattern of other cities during the recent housing bubble (which was very muted in Dallas). This time may be different, though...

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Pajamas
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Re: Why would people buy condos/SFH in Texas?

Post by Pajamas » Fri Feb 09, 2018 10:44 pm

I think that there are rental properties in which the rent does not cover the expenses of the landlord. There are even posts on this site regarding these situations, usually from an "accidental" landlord who just wants out.

Sometimes laws that regulate rent even provide for rents to be increased in that event.

It is not generally the case and shouldn't be the case in a perfect market, but it does happen.

JStephens
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Re: Why would people buy condos/SFH in Texas?

Post by JStephens » Fri Feb 09, 2018 11:19 pm

One important thing to take into account is things get VERY sketchy in Houston street to street. For example, if you're seeing a place rent for $700 in "downtown" I bet that's actually just on the outskirts of downtown and you're actually in east Houston.

JBTX
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Re: Why would people buy condos/SFH in Texas?

Post by JBTX » Fri Feb 09, 2018 11:32 pm

runner540 wrote:
Fri Feb 09, 2018 10:40 pm
JBTX wrote:
Fri Feb 09, 2018 10:22 pm
runner540 wrote:
Fri Feb 09, 2018 9:06 pm
JBTX wrote:
Fri Feb 09, 2018 8:56 pm
Do you mean any home or just condos?

Yes property tax is higher here than average. But in general housing prices are a lot cheaper than most major metropolitan areas.

As to renting, somebody has to pay the property tax. The landlord will have to pay it so obviously that would be factored into your rent prices.
This should be true in a rational market over the long term, but in the shorter term and/or irrational market, renting can be better for one's networth than renting.

This index has 3/23 cities as clearly favoring renting right now, and two of the 3 are in Texas! (Houston, Dallas, Denver).

https://business.fau.edu/departments/fi ... ent-index/
I looked at Dallas and right now their index shows strongly rent. But just 3 years ago it was buy and has gone back and forth over the years. I suspect the result is because home prices here are now appreciating substantially, while in the past Home price growth has somewhat lagged other markets primarily because of new Home Construction. Chances are rent prices will catch up.

There is a lot more than just the short term economics of rent vs buy. If you plan for this to be your home you don’t want to be at the whim of your landlord years down the road.

I looked at our neighborhood and the rental prices for homes roughly equals a 30 year mortgage on a 100% financed amount + property taxes. Short term that favors renting because there are other costs of ownership. But long term a rental is going to increase in price and your mortgage is fixed.
Sounds like your neighborhood is more rational than mine. I'm not sure if you had the chance to look at the methodology. You're right that the index doesn't take into account the intangibles of renting/owning (stability, flexbility, etc.) but the index is much more than simply house price and current rent. It DOES take into account almost all the explicit and implicit costs of both renting and owning (increases in rent, transaction costs for buying/selling, etc.).

I look at the charts, and see Dallas, Denver and Houston following the pattern of other cities during the recent housing bubble (which was very muted in Dallas). This time may be different, though...
Getting back to your thread title, if people shouldn’t buy a house in TX, what are you saying they should do? Rent? Honestly I don’t know anybody who thinks like that, apart from maybe first time homebuyers who may not have enough capital to buy.

Let’s play it out. Looking at the Dallas chart every few years the trend reverses. Is it because house prices are crashing every few years ? No. It is likely that rents start to catch up. I suspect rents are a bit sticky. Landlords rent based upon what they paid for the house. They keep good paying tenants. Only after a few years do you get some churn and rents start to follow the house price trend.

So if you buy the market favors rental, how do you take advantage of it? You rent a few years then the rent catches up. Does the house price go back down? Not likely. Maybe it flattens but interest rates may go up.

Housing in TX is very affordable compared to most states. Cheap labor. You can get bricks very cheap. Lots of land. If you move to TX chances are you’ll get more house than what you had. If you moved within TX you likely sold your other home at a gain which partially offsets the higher cost of your new home.

The fact that TX housing rents are 10% or 20% below where they should be, temporarily, plays zero into the decision of most homebuyers.

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Re: Why would people buy condos/SFH in Texas?

Post by oilrig » Sat Feb 10, 2018 6:17 am

livesoft wrote:
Fri Feb 09, 2018 8:30 pm
Because they have 2 kids in school and want them to walk to school?

Virtually nobody lives in downtown Houston. It is not like NYC nor San Fran.

And property taxes are higher in New York on a square footage basis.

I wonder if you are seeing investment properties used for AirBNB, Superbowls, NCAA tournaments, World Series playoffs, etc.

Actually I live in downtown Houston and I know a lot of others that do as well. It makes sense if you work downtown. They’re practically building new apartments downtown every month, and there’s tons of existing high rises. Downtown is the new hot spot to live now. Right now is a great time to rent as a lot of high rises are offering 2-3 months free rent to attract tenants.

I pay $1050/month for a high rise apartment in downtown. I’m very close to work, the light rail stops in front of my apartment, and Theres tons of nightlife/shops /restaurants within a half mile radius. If I can keep this rent then I will never own a home! A $1050/month mortgage for a home is either impossible or I’d be living in a tiny house way out in the suburbs.
Last edited by oilrig on Sat Feb 10, 2018 6:22 am, edited 1 time in total.

oilrig
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Re: Why would people buy condos/SFH in Texas?

Post by oilrig » Sat Feb 10, 2018 6:22 am

stimulacra wrote:
Fri Feb 09, 2018 9:19 pm
I live in Houston. Rent is not magically cheaper here.

There aren't any $700/month condos or lofts in downtown Houston. Maybe in the late 1990's.

Also downtown Houston proper is pretty sparsely populated. Maybe 6 or 8 thousand folks actually live in the high rises around there. The adjacent neighborhoods have a lot more people but actual downtown district is kind of empty after dark.

For a $200k condo expect to pay roughly $1,800 - $2,000 / month for rent. I think the rule of rent equaling 1% of purchase price still applies here.

$700 / month places are smaller older units, possibly garage or carriage apartments closer in to town… further out they're garden style complexes, predominantly working class in transitional parts of town.

There were some overdevelopment of luxury units that went vacant for a bit when oil prices cratered in 2014 that were rented out at a discount but those are largely gone now. I think when it was happening maybe $1,400 - $1,600 / month that usually rented out for $2,500.
Have you seen downtown on a Friday or Saturday night? Main Street is packed with bars and tons of people out and about. Downtown is the new hot spot and more people go out downtown than they do in midtown or any other nightlife district in Houston. Lots of people have misconceptions about living in downtown, but the reality is that downtown has changed a lot and is an attractive place for young professionals to live, work, and go out.

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Re: Why would people buy condos/SFH in Texas?

Post by livesoft » Sat Feb 10, 2018 7:30 am

Every night in downtown Houston there are probably more people sleeping in beds in hotel rooms than there are people sleeping in their own beds. I know people who have apartments in the city for convenience (and maybe as a speculative investment), but they actually live in the suburbs. Yes, people live downtown and yes, they have neighbors and friends.

I've also been to downtown Houston many times at night. And yes, downtown Houston is evolving.
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Re: Why would people buy condos/SFH in Texas?

Post by fasteddie911 » Sat Feb 10, 2018 9:43 am

I lived in Houston, worked in the med center, and my spouse and I rented a 1br apartment. We knew we'd only be there a few years so that was the driving factor. However, if we were to stay there long term and just be us (no kids), we'd strongly consider renting indefinitely. I really liked the rental market in Houston, especially compared to HCOL areas I've lived in. There's a ton of rental complexes, mostly mid-rise luxury types, where 1br can be had for less than $1500. There were move-in specials, good availability and I never had rent increases at all during my tenancy. Financially it's likely a wash, maybe an argument could be made one way or the other, but everyone's situation is different.

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Re: Why would people buy condos/SFH in Texas?

Post by stimulacra » Sat Feb 10, 2018 5:55 pm

oilrig wrote:
Sat Feb 10, 2018 6:22 am
Have you seen downtown on a Friday or Saturday night? Main Street is packed with bars and tons of people out and about. Downtown is the new hot spot and more people go out downtown than they do in midtown or any other nightlife district in Houston. Lots of people have misconceptions about living in downtown, but the reality is that downtown has changed a lot and is an attractive place for young professionals to live, work, and go out.
Yes. But the rest of the week the neighborhood is empty after dark.

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Re: Why would people buy condos/SFH in Texas?

Post by Tycoon » Sat Feb 10, 2018 6:18 pm

I live in Texas. I own in a desired school district. I could rent my home and pay the taxes on it with just two months rent.
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Re: Why would people buy condos/SFH in Texas?

Post by zimmer0 » Sat Feb 10, 2018 6:46 pm

North Texas Cajun wrote:
Fri Feb 09, 2018 9:34 pm

Well, Texas is a big state, and you seem to be using a single hypothetical example and trying to draw a sweeping conclusion from it.

I own a SFH in an upper middle class suburb of Dallas. Our property tax rate is 2.08%. Our HOA fee is $360 a year. There are very few rentals available in this highly desirable school district. If I had been able to rent a SFH here, I’m sure that my rent would have been more than the interest, property taxes and HOA fee. Further, had I rented I would have missed out on:

1. the tax deductions for interest and property taxes;
2. the 100% appreciation in value of my property;
3. the freedom to alter my property as I saw fit.

I have rented SFHs at different times of my long life. The hassles of getting repairs done quickly was a definite negative. The uncertainty about rent increases after the initial contract period
was uncomfortable for me.

I realize that the value of tax deductions I have enjoyed the past 20 years may have been reduced by new laws. I haven’t investigated because my mortgage is paid off.

I have never investigated condos. Condos would never have worked for my lifestyle (which includes woodworking, gardening, and highly energetic dogs).

I hope this helps you understand why one person in Texas decided to buy a SFH. I cannot speak for the other several million homeowners in our state.
Fellow North Texas Cajun checking in, and you've hit the nail on the head. The area of the metro i'm in has rental prices quickly catching up to or exceeding PITI payments all while getting an older home with the limitations youve listed. Some people just value those aspects of their living situation, others not so much.

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Re: Why would people buy condos/SFH in Texas?

Post by North Texas Cajun » Sat Feb 10, 2018 7:23 pm

zimmer0 wrote:
Sat Feb 10, 2018 6:46 pm

Fellow North Texas Cajun checking in, and you've hit the nail on the head. The area of the metro i'm in has rental prices quickly catching up to or exceeding PITI payments all while getting an older home with the limitations youve listed. Some people just value those aspects of their living situation, others not so much.
I also think that one’s priorities change as his situation changes through life. School districts are extremely important to patents, but not so much to singles and empty nesters. Change in employment in my 30s from center city to suburb made those inner city apartments not nearly as atractive as the tract housing clos to my job. Many who were a serious burglary, vandalism, or assault victim in a congested city likely have changed their priorities. Despite the reduction in city crime, suburbs such as McKinney, Flower Mound, and Southlake are still far safer places than Dallas.

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Re: Why would people buy condos/SFH in Texas?

Post by North Texas Cajun » Sat Feb 10, 2018 7:23 pm

zimmer0 wrote:
Sat Feb 10, 2018 6:46 pm

Fellow North Texas Cajun checking in, and you've hit the nail on the head. The area of the metro i'm in has rental prices quickly catching up to or exceeding PITI payments all while getting an older home with the limitations youve listed. Some people just value those aspects of their living situation, others not so much.
I also think that one’s priorities change as his situation changes through life. School districts are extremely important to patents, but not so much to singles and empty nesters. Change in employment in my 30s from center city to suburb made those inner city apartments not nearly as attractive as the tract housing close to my job. Many who were a serious burglary, vandalism, or assault victim in a congested city likely have changed their priorities. Despite the reduction in city crime, suburbs such as Allen, Flower Mound, and Southlake are still far safer places than Dallas.
[/quote]

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Re: Why would people buy condos/SFH in Texas?

Post by Helo80 » Sat Feb 10, 2018 7:49 pm

Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Again, I am not sure why people would buy condos or SFH if they were single and needed to work/live in Texas. Let's say there is a 1-bedroom, 1-bath condo in Texas selling for $200,000 in downtown Houston. The property taxes would be a little over $5,200/yr (2.6%) and the HOA fees might be something like $500/month*12 months= $6,000/yr. That's already $11,2000/yr. Together with mortgage interest and closing/selling costs and repair costs, maintenance, etc., why would someone buy a condo in Houston, TX *versus* renting a 1-br, 1-bath for $700/mo?


The $500 HOA fee is likely covering a lot that your typical apartment rental will not. Now, whether those services are worth it to you are another story. Also, if you have a complex (rental or condo) that has a $500 HOA, likely the barrier of entry keeps a lot of people out, so you get a different group of people in here. I'm not trying to stir the pot, but you cannot say the people who shop the Kia dealership are the same as the ones at Mercedes or Porsche --- there is likely no overlap even though the products produce functionally the same end result.

Also, 10 years ago, during the height of the recession, I had a friend in the Houston Med Center who was paying around $1k a month for a 1 br/1 ba and he looked a while for a "cheap place" that was safe. That place was dated by 2009 standards, and it's probably even more dated today.

I get what you're saying OP, but you cannot always look at apples to apples in housing. Renting is okay, but it's temporary... not permanent.

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Re: Why would people buy condos/SFH in Texas?

Post by ny_knicks » Sat Feb 10, 2018 8:04 pm

Stayed in downtown Houston for a few nights recently. Distinctly remember the downtown being eerily quiet at night.

Would be interested to see a situation where rentals are going for less than just property taxes. Have to imagine a scenario like this indicates a very distressed housing market where individuals are stuck with properties they are unable to sell and so desperate for cash flow that they are willing to take huge significant losses.

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Re: Why would people buy condos/SFH in Texas?

Post by need403bhelp » Sat Feb 10, 2018 8:08 pm

FYI, as a Houstonian, med center and downtown are two completely separate areas.

Also I own in med center area (condo), PITI is $1000/month or so (a little less) with $200/month HOA. Someone I know who rents in same complex pays about same total amount. I did buy in 2003 though.

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Re: Why would people buy condos/SFH in Texas?

Post by livesoft » Sat Feb 10, 2018 8:09 pm

Some areas around downtown flooded during Harvey, so one has to take that into account.

I know of some places that routinely flood and the owners will never be able to sell their homes. So they rent them out to unsuspecting folks. Of course, those renters become victims of flooding, the homes are repaired, and the owners find new victims renters who think they got a deal on renting.
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Re: Why would people buy condos/SFH in Texas?

Post by Lonestarz » Sat Feb 10, 2018 8:22 pm

stimulacra wrote:
Sat Feb 10, 2018 5:55 pm
oilrig wrote:
Sat Feb 10, 2018 6:22 am
Have you seen downtown on a Friday or Saturday night? Main Street is packed with bars and tons of people out and about. Downtown is the new hot spot and more people go out downtown than they do in midtown or any other nightlife district in Houston. Lots of people have misconceptions about living in downtown, but the reality is that downtown has changed a lot and is an attractive place for young professionals to live, work, and go out.
Yes. But the rest of the week the neighborhood is empty after dark.
I wouldn’t call downtown a neighborhood but there are always people there after dark! Usually rolling out their sleeping bags. No way I would want to live downtown and I don’t think anyone can seriously say that lots of people live downtown compared to the surrounding area. If for no other reason than downtown is maybe 5% of the houston area.

People may rent out for less than you can buy for now (house prices went up ~30% in the last 6 years) but not less than property tax for sure.

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Re: Why would people buy condos/SFH in Texas?

Post by scfr » Sat Feb 10, 2018 10:11 pm

Where are you getting 2.6% as the property tax rate? I live in Texas and my overall property tax rate is 1.6%. (And a quick Google search says that the average in the state is 1.9%.) Six different entities levy a tax where I live. Five of those six entities offer exemptions, so I pay tax to those entities on less than the full value of my property. I applied for the Homestead Exemption the same day I closed on my house.

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Re: Why would people buy condos/SFH in Texas?

Post by oilrig » Sat Feb 10, 2018 10:16 pm

stimulacra wrote:
Sat Feb 10, 2018 5:55 pm
oilrig wrote:
Sat Feb 10, 2018 6:22 am
Have you seen downtown on a Friday or Saturday night? Main Street is packed with bars and tons of people out and about. Downtown is the new hot spot and more people go out downtown than they do in midtown or any other nightlife district in Houston. Lots of people have misconceptions about living in downtown, but the reality is that downtown has changed a lot and is an attractive place for young professionals to live, work, and go out.
Yes. But the rest of the week the neighborhood is empty after dark.
Yes, but that’s true for all Houston nightlife districts and neighborhoods. There’s not much going on during the week in midtown, Washington, heights, city center etc.

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Re: Why would people buy condos/SFH in Texas?

Post by oilrig » Sat Feb 10, 2018 10:19 pm

Lonestarz wrote:
Sat Feb 10, 2018 8:22 pm
stimulacra wrote:
Sat Feb 10, 2018 5:55 pm
oilrig wrote:
Sat Feb 10, 2018 6:22 am
Have you seen downtown on a Friday or Saturday night? Main Street is packed with bars and tons of people out and about. Downtown is the new hot spot and more people go out downtown than they do in midtown or any other nightlife district in Houston. Lots of people have misconceptions about living in downtown, but the reality is that downtown has changed a lot and is an attractive place for young professionals to live, work, and go out.
Yes. But the rest of the week the neighborhood is empty after dark.
I wouldn’t call downtown a neighborhood but there are always people there after dark! Usually rolling out their sleeping bags. No way I would want to live downtown and I don’t think anyone can seriously say that lots of people live downtown compared to the surrounding area. If for no other reason than downtown is maybe 5% of the houston area.

People may rent out for less than you can buy for now (house prices went up ~30% in the last 6 years) but not less than property tax for sure.
Have you been downtown recently? Have you seen all of the apartments and high rises that are being built? They’re being built for a reason. Because people want to live there. There’s tons of big companies downtown that employ thousands of people, people want to live close by.

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Re: Why would people buy condos/SFH in Texas?

Post by j0nnyg1984 » Sun Feb 11, 2018 12:19 am

After reading this:
The property taxes alone are more than the rent so how can it even make sense money wise to buy?
I decided that I can't stay in this thread.

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Re: Why would people buy condos/SFH in Texas?

Post by Smorgasbord » Sun Feb 11, 2018 12:35 am

Here's a more apples to apples comparison in the same building.
Buy for 200k plus $700/month condo fee, and ~$300 a month property taxes.
http://www.har.com/5150-hidalgo-street- ... e_29326995

Rent for $1800-$2,000 a month:
https://www.zillow.com/homes/for_rent/H ... ect/15_zm/

Unless I was expecting increases in property values to vastly exceed inflation, I'd probably take the rental.

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Re: Why would people buy condos/SFH in Texas?

Post by stimulacra » Sun Feb 11, 2018 2:07 am

oilrig wrote:
Sat Feb 10, 2018 10:19 pm
Have you been downtown recently? Have you seen all of the apartments and high rises that are being built? They’re being built for a reason. Because people want to live there. There’s tons of big companies downtown that employ thousands of people, people want to live close by.
You might be confusing areas around downtown Houston with downtown Houston proper… I see a lot of high-rise hotel development in downtown. I don't see much residential development outside of some loft conversions near the north end of downtown.

Yes minutes away there are a ton of development in adjacent neighborhoods, EaDo (East downtown), Eastend, Midtown, neartown, Montrose, sixth and third ward etc… but in the areas constrained by I-45, US 59 and I-10 I would wager there's only 10-12k people who actually reside there.

Each high-rise development built can only handle so many units (I'm guessing 100-150 condos per single tower) and requires a sizable amount of square footage for resident parking; they're not shoehorning many of these developments in downtown Houston. It's mostly happening outside the boundaries.

The residential makeup of downtown Houston will definitely change when they reroute I-45 to make it parallel with US-59 near Minute Maid Park since it opens up the southern and western end of the district and you won't have as sharp of a boundary once the Pierce Elevated gets torn down or turns into an elevated park or whatever they're going to do when they repurpose it.

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Re: Why would people buy condos/SFH in Texas?

Post by Derivative » Sun Feb 11, 2018 3:33 am

j0nnyg1984 wrote:
Sun Feb 11, 2018 12:19 am
After reading this:
The property taxes alone are more than the rent so how can it even make sense money wise to buy?
I decided that I can't stay in this thread.
Explain? What is wrong with this statement?

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Re: Why would people buy condos/SFH in Texas?

Post by samsoes » Sun Feb 11, 2018 7:49 am

Derivative wrote:
Fri Feb 09, 2018 8:55 pm
livesoft wrote:
Fri Feb 09, 2018 8:30 pm

Virtually nobody lives in downtown Houston. It is not like NYC nor San Fran.
What do you means virtually nobody lives in downtown Houston?
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Re: Why would people buy condos/SFH in Texas?

Post by runner540 » Sun Feb 11, 2018 8:18 am

scfr wrote:
Sat Feb 10, 2018 10:11 pm
Where are you getting 2.6% as the property tax rate? I live in Texas and my overall property tax rate is 1.6%. (And a quick Google search says that the average in the state is 1.9%.) Six different entities levy a tax where I live. Five of those six entities offer exemptions, so I pay tax to those entities on less than the full value of my property. I applied for the Homestead Exemption the same day I closed on my house.
All the Dallas properties I've seen have 2.7% rates (tax/assessed value).

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Re: Why would people buy condos/SFH in Texas?

Post by runner540 » Sun Feb 11, 2018 8:20 am

need403bhelp wrote:
Sat Feb 10, 2018 8:08 pm
FYI, as a Houstonian, med center and downtown are two completely separate areas.

Also I own in med center area (condo), PITI is $1000/month or so (a little less) with $200/month HOA. Someone I know who rents in same complex pays about same total amount. I did buy in 2003 though.
What would the PITI be for someone buying now?

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Re: Why would people buy condos/SFH in Texas?

Post by runner540 » Sun Feb 11, 2018 8:24 am

Derivative wrote:
Fri Feb 09, 2018 8:51 pm
alex_686 wrote:
Fri Feb 09, 2018 8:40 pm
Derivative wrote:
Fri Feb 09, 2018 8:25 pm
Would it be a logical argument that renting is almost always better than buying a condo/SFH? The property taxes alone are more than the rent so how can it even make sense money wise to buy?
There is a flaw in your argument someplace. If you rent you pay property taxes. Sure, it is indirect. The county charges a property tax, the owner pays it, you pay the owner. But the property tax is built into the rent. Now maybe the rent is lower because the property tax is lower because it is a cheaper property. But you want to compare apples to apples.
Okay, so you are saying that the rent of a building will always be higher than the 2.6% Texas property taxes + mortgage + any HOA fees? So if I purchase any reasonable condo, townhouse, or SFH I will always be able to generate positive cash flow from the investment? I am trying to see if the 2.6% property tax and the HOA fees makes it nonsensical to buy and that people are buying for reasons other than financial/numbers.
OP, the current housing prices in Houston and Dallas make financial sense only if the buyer is expecting appreciation to continue significantly in excess of historical norms. That's what you've figured out, and what the FAU index I posted above indicates.

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Re: Why would people buy condos/SFH in Texas?

Post by chevca » Sun Feb 11, 2018 8:25 am

Derivative wrote:
Sun Feb 11, 2018 3:33 am
j0nnyg1984 wrote:
Sun Feb 11, 2018 12:19 am
After reading this:
The property taxes alone are more than the rent so how can it even make sense money wise to buy?
I decided that I can't stay in this thread.
Explain? What is wrong with this statement?
You said property taxes were $5200/year, which others said is likely too high. That's $433/month. You're saying a condo in Houston can be rented for less than $433/month.... Doubt it.

There must be some very generous landlords in Houston?

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