Hey, thanks for taking all the time to write this up and all the calculations. It does put the numbers in perspective as to who can/will buy and if it’s worth it or if we’re in a bubble.
I really think if we put ourselves in the minds of a current buyer in general…they always include the tax deduction in their calculations since it’s just too big to ignore.
Also, for a lot of folks who make “good” incomes with a standard W-2 job, the downside is you really have very little ways to deduct taxes and this is sorta why the tax breaks on home loan interest sorta favor the rich since the higher their income, the bigger the deduction since it’s taken off their marginal tax rate.
From your monthly numbers and a standard buyer in the 37-42% (again, this is someone who’s Married Filing Jointly):
10% on taxable income from $0 to $18,150, plus
15% on taxable income over $18,150 to $73,800, plus
25% on taxable income over $73,800 to $148,850, plus
28% on taxable income over $148,850 to $226,850, plus
33% on taxable income over $226,850 to $405,100, plus
35% on taxable income over $405,100 to $457,600, plus
39.6% on taxable income over $457,600
37.3 – 42.3% tax bracket means these become after the tax deduction:
Del Sur: $4,900/month (3077.20 – 2827.30/month).
North 4S: $4,817/month (3025.08 – 2779.41/month).
South 4S: $4,450/month (2790.15 – 2567.65/month).
I think there are plenty of people making these incomes in the area since the home loan process is pretty much impossible without that high income and debt/income ratio levels to make it work. Note that for even HIGHER income people, they would be paying close to 49% in state and federal taxes so for doctors with private practices, tech millionaires, partnered law firm people, they would be paying even less that what you posted as the tax deduction is about 10% more…
I think one of the craigslist links I posted was in Del Sur and was close or over 4k / month so that would be at/more depending on your income. If you’re in south 4s, the numbers are even easier since pretty much all of the larger 4s ranch houses seem to rent for 3.6k+ or so.
I used to debate all the time about the MR fees, but the thing is with MR, you tend to pay less for the home overall so I just see it as balancing out.
Some people get all bent out of shape about MR, but at the end of the day, I think most people who buy shop for what the monthly nut is compared to renting and from the data, at least from all my calculations (and I believe yours as well), we’re not in a bubble right now based on current interest rates, what the rent is going for in the area, and prices being charged. I’d assume most of the buyers also aren’t looking to flip unlike the no-money down days of 2005…
Rent ranges from $4695 (4450 sqft – large in 4s) to
$3100 (2188 sqft (small in 4s)) so the 4.6k rent place is well cheaper to buy possibly.
Lastly, I think it’s overstated about the “cost” of owning a home. YES, there is a cost to fix stuff, landscaping for new homes, and all that, and people need to go in eyes wide open to those costs, etc
…but there is also a “cost” (maybe not as much monetarily) of renting such as getting rent raised, being forced to move and find a new place, total lack of control in whether rent goes up, limited options to customize, no tax deduction and paying “market” rates ALL the time since the landlord tends to charge market prices…you also “still have” a tax free option to sell the primary residence and move (one of the few tax frees still)…
We bought back in 2009 so things are up a lot from where we bought, but the price we are paying is still 2009 prices…Yes, prices can and do go down as well, but you can wait if the numbers don’t make sense financially and that was why I posted.
At the end, I guess it really depends on your situation, but knowing your housing cost for the next 30 years is very powerful as your income hopefully goes up and the mortgage stays the same…You also get a house after that 30 assuming you don’t cash it out and can live for relatively less (minus prop tax)…
