[quote=gzz]Millennial, rates do not need to fall to support appreciation.
Right now buy v rent comparisons strongly favor buying in SD, even without assuming rising rents making renting even worse and rising prices making buying better.
My Nov 2016 condo purchase is already rented out well above the mortage payment, and on top of that each payment reduces my balance and the tax and interest is deducted from expenses from ordinary income too. I got a pretty good price on it, but even if I paid 15% higher it would still not only be profitable, but more profitable than risk free gov bonds. I would happily buy a 4th property but I am close to tapped out on DP and current condo inventory in rental income. For first and 2nd home buyers, they can deduct these 92107 stands at a whopping 3. (In March 2011 condo inventory in 92107 was 53!).[/quote]
I said that rates are one of the major variables on the demand side of the equation. Regarding the rent vs. buy decision, although there is some correlation for investor owned properties that can cash flow (such as condos, apartments)where valuation is dictated by NOI/Cap Rate(ROI)it doesn’t lend itself well with Residential Real Estate which is determined by a different set of factors. The majority of homes, mine included, wouldn’t be able to cash flow for my purchase price; but would still appraise significantly more due to recent comps. Do I feel that the value of my home is going to continue to go up with increased interest rates? Probably not, but why do I care; it’s not like I bought my house as an investment, it’s a place for me to raise a family. If it was just me, I would probably sink the liquidity into another apartment building.
