This was probably a little pricey. I’d like it better at 14 to 1 at current rates.

fyi, regular readers of CribChatter.com (dedicated to Chicago real estate) and SocketSite.com (SanFran real estate) know that when properties from those two cities are inputed into the NYT’s calculator it is NEVER better to buy instead of rent.

So I presume that means either rents will soon rise or prices will continue to fall.

But the Fed is doing everything it can to prevent asset values from falling further, just listen to Donald Kohn:

“I think our actions prevented an even more disastrous outcome,” said Donald L. Kohn, who was the Fed’s vice chairman during the crisis. Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”

http://www.nytimes.com/2010/12/02/busine ss/economy/02fed.html

So don’t worry Nouriel — the Fed’s got your back & will protect you from any downside.

This reminds me of the Cold War showdown with the Soviet Union under Reagan. The military buildup was costly for the US, but devastating for the Soviet economy. China’s economy is closer in scale to our own, however we still control the only printing presses that matter. Eventually they will have to concede and allow the yuan to appreciate against the dollar. (I would expect an appreciation of 50% or more over several years. A *huge* shift.)

And yes, I agree that 2% is way too low an estimate for inflation. I’ve been using 4% recently for my own long-term estimates. Of course I also use a 7% estimate for portfolio return (3% real return), which somewhat balances the equation.

To take Lady Godiva’s thought a bit further, consider if a generalized inflation across currencies. It didn’t take any crisis at all to get us to QE2. By currency fixing, China is matching us at every step, and they have major inflation. It seems like only a matter of time before their inflation is exported to us.

If we have substantial inflation ahead, its great to own. Methinks your inflation assumption of 2% is way too low, given the structural deficits around the world. The 2% figure is far below any historical averages even.

http://www.felixsalmon.com/2007/03/rent- vs-buy-redux-is-buying-a-useful-commitme nt-device/

I don’t think it applies to Nouriel, because he earns much more than he spends anyway.

@LadyGodiva, if the USD goes down, his rent would go down in euro or yuan equally. It doesn’t affect the rent-vs-buy calculation.

that said, let us welcome Roubinin to the neighborhood; his politics, attitude and intelligence will fit right in.

For an investment of 10x to 12x the equivalent rent we secured a supply of housing that has met our needs very well over the last decade and is likely to continue to meet them well for the next 10-15 years. The choice made sense with a 6% mortgage and made even more sense after refinancing. It will look even better when the mortgage is paid off fully in a few years and we can put the cash flow to work in other ways.

Most Americans don’t earn a substantial chunk of their income in other currencies. We don’t think like Roubini the Great.

If you have the mental discipline to invest the difference each month than I agree with you that you will be better off by far renting than owning in the current enviroment. That’s shocking given the massive subsidies doled out to homeowners.

The issue I have is that the financial pros fail to take into account that Americans (generally) and American renters (MUCH LESS generally) are among the LEAST disiplined people on Earth. As evidenced review our recent political exercise in the deficit comission saying to increase taxation and lower spending and democrats and rebublicans who can’t stand each other could agree on one thing TO DO THE OPPOSITE. Slash taxes and increase spending!

Most people I know would be better off buying a home if it depreciated at 2% annually in perpatuity because at the end of 30 years at least they’d have something. At the end of 30 years of renting you still owe the next months rent.

Do you see the difference there… In one case you made a bad investment that lost money every year for 30 years and you OWN SOMETHING worth much much less than you paid for it. You’re really dumb!

In the other case you made no investment and you OWN NOTHING AT ALL.

Both are bad… which is worse?

In the first six years of our marriage, we lived in four different apartments. (Two of the moves were essentially forced, the third was a relocation.) Since owning, we’ve lived in one place for ten years. Nice that we no longer have landlords forcing us to move (or jacking up the rent).

Simply put, if he feels that he will be in that apartment for 15+ years b/c he isn’t likely to leave NYC, buying is probably a decent idea. Any short term reduction in the value of the apartment will never be felt. As for long term prospects, his enjoyment of “that apartment” probably has enough value to him to make up for any investment losses he might have.

Do you get to stay in this stock, or you still have to pay rent?