Why do you think they “go bananas”? It’s not logical to buy a house that costs WAY more to buy than rent. If it doesn’t pencil out as a rental then why the demand?
To me it’s just bubble conditioning. People think buying at 30% or so off the peak is a great deal. Never mind that it’s still double the price of 12 years ago.[/quote]
Probably because it doesn’t cost way more to buy than rent at 15GRM.
Lets take an example:
If the property (as above) rents for 1500 per month, then that is 18000 per year.
15 GRM would make the purchase price $270,000.
An 80% loan would mean that a buyer would be paying less than $1300 P&I.
Thats assuming 6% as an interest rate (which would be high).
Throw in another 300 or so for tax and insurance and the numbers make sense.
This does not yet take into account mortgage interest deductions and government purchase incentives (which make yet more sense).
