FormerSanDiegan, that all makes sense, and it leads me to question the whole rent/home price ratio. If the condo drops 50% from the peak price of $350K to $175K, then reasonable rent would be $1458/mo ($1458 x 12 = $17,500; $17,500 x 10 = condo price). Is it hard to imagine his condo will rent for $1458/mo in 5 years? What is the rent now in that building?
I’d like to again give my opinion on who should NOT sell. Do not sell if you meet these 3 conditions:
1. Your mortgage payment is less than rent (i.e. your place is so cheap or you bought so long ago, that your mortgage is under $2K/mo). Renting would increase your monthly expenses.
2. You won’t be forced to sell in the downturn, because
a) you can afford your mortgage (it’s fixed rate or you can manage the payment shock)
b) your job is recession proof
3. You don’t mind that your house could possibly maybe lose 30% – 50% of its value.
