$225k at 6% interest rate will cost ~$1350/month with 0% down. Those houses can easily rent for $1700-1900/month depending on condition. PITI – Tax deduction will bring you to about $1200/month. If you put down 20%, you’re looking @ PI of ~$1100/month and PITI – tax deduction of about $1000/month. That seems too good to be true for a 3bed/2bath house when 2 bed/2 bath apartment rents for around $1400-1500/month. If rates goes to 8-9%, then I can see that happening, but not at today’s rate.
At the bottom of last cycle, ~1996, a 2 bed/2 bath apartment goes for $900/month and a 3bed/2bath house were selling for around $150k. Interest rate I think were around 9% back then. PI should be around $1000/month and PITI – tax deduction was about $800/month.
My point is that at the bottom of the last cycle, buying a home with 20% down will cost you 10% above the rent of a 2bed/2bath apartment. @ 10% above today’s rent with today’s interest rate, you’re looking at price of around $325k.
