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Comment by refurb | Hacker News Reader

The calculator is surprisingly accurate based on some math I did late last year when thinking about buying a house.

A small (1300 sq ft) house in SF can be bought for $750K in some neighborhoods in the south of the city. The ones in between the fancy ones and the crappy ones.

I did a pretty detailed analysis of what everything would cost. Loss of investment income on the down payment, insurance, property taxes, etc. And came out to around $4100.

You can rent the same house in SF for around $3750/month, so unless you're assuming a pretty spectacular rise in home values, it doesn't make sense to purchase.

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I might be missing something, but if house prices rise just 1% annually, your differential would shrink dramatically in favor of ownership.

So I live in rent controlled area in the bay area where I pay around $1500 for a 2 bedroom. Using this calculator, it seems like buying almost any kind of home in the bay area would be a very bad decision.

Sure, until you decide to move. Then you'd have to pay market prices. Rent control, in San Francisco at least, is an exception that favors the renter and "punishes" the landlord. Even though the owner can't increase their current tenant's rent, the owner is still making an increase on equity due to the home's value increasing.

In the scenario I modeled, I was assuming around ~3% growth.

Rent control definitely favors renting in a lot of situations. If you were at the whim of your landlord, then I could see buying being more attractive, especially in a market where housing prices are going up.

The real kicker about owning a house is that housing prices never go up a nice steady 2% or 3% per year. They go up 5% one year, then down 5% the next. If you don't have control over when you sell (loss of a job, etc), that can really hammer you.

There is no rent control on single family homes in SF, regardless of its age.

Rents tend to increase in normal markets at about the rate of inflation, in crazy NYC/SV markets they increase faster while mortgages will stay the same (or can be reduced or offset). In the long run, $4100/mo in 2014 dollars will still be $4100/mo in 2014 dollars 29 years later. Meaning they'll be a fraction of of 2043 dollars via inflation. The mortgage then de facto goes down while rent will continue to increase at least with inflation (or at least it does historically).

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