[quote=AN][quote=sunny88]In this environment renting makes a lot of sense. Let’s do the math:
Home price $700k, down payment $150k, mortgage $550k at 4% (30 yr fixed), property tax $8k, MR 3k. Monthly payments $3,500.
Possible drop in value over next 5 years: 10%=$70k.
Annual drop $14k or about $1,200 a month.
Actual cost of owning a $700k over next 5 years $4,700 per month.
Tax credit (25% bracket): $450 per month.
You can rent a comparable home for about $2,500-2,800 per month. Savings at least $1,400 per month or $80 k over 5 years.
Conclusion: Wait and buy a house in 5 years![/quote]
That’s some low rent numbers. Houses in the 400-500k range in Mira Mesa are renting between 2300-2500. Houses in the $700k range in Sorrento Valley with no HOA or MR are renting between 3000-3300/month. Are you sure those are the market rents? To truly afford a $700k house with those HOA + MR, shouldn’t those buyers be in the 28% or 31% bracket? You’d be stretched super thin if you’re in the 25% bracket at buy that type of house.
The only good argument to wait in your post is the expectation of a 10% drop in 5 years. Hopefully rates doesn’t go up 10% to offset that 10% decrease in price.[/quote]
Even if renter/buyer belongs to higher tax bracket savings are substantial when renting. Also, I didn’t consider maintenance which could easily add another $ 3,000 a year.
