I’d never quite looked at it like this. I modeled what it would take economically for a $600K house in 4S to be equivalent to rent or buy. Obviously there are a host of assumptions inherent in any kind of analysis like this. One key one I made is that the housing market would be flat for the foreseeable future.
If that were the case, a $600K house in 4S that currently would rent for $2,300/month would have to fall to $310K for buying and renting to be equivalent. If you move assumptions a bit and assume a 3% annual appreciation rate, that number goes up to $626K. Regardless, the mello-roos there is an absolute killer to the equation.
Bottom line is that it’s all very dependent on what you think will happen to appreciation/depreciation.
There are some simplifications in the model that if fleshed out would change the picture a bit. Regardless, given the current situation in the market, that $310K figure surprised me. Tells me that you could easily make the case that a $150K drop in 4S is very possible.
Here is the link to the file I used (excell 2007, so hopefully it’s openable):
