I just sold my house in Temecula and am now renting a similar house for about 1/2 of what it would cost to purchase it at current market prices. I put all of my tax-free profit in CD’s getting 5% interest – guaranteed – the interest will pay almost 1/2 my rent. I think the only logical reason one would buy a house at 2X the cost of renting is that they are expecting further appreciation and/or don’t want to be priced out of the market.
Another point: it seems to me that the people buying the large upscale houses in the Temecula Valley now are either (1)extended families with 3-4 wage earners or (2)investors who rent them out at a huge loss or (3) retired people moving from Orange County or San Diego who see Temecula prices as cheap.
There are all these 3000-4000 square foot houses going for 600K-700K and not much of a local job market that pays anywhere near enough to afford the housing. Gas prices and traffic jams no longer make it attractive to commute 100+ miles per day either. If you have 4 people workikng locally earning 30K-50K/year each, they can afford to 100% finance a 600K house and pay the $10K/year in property taxes as well. Or they can rent the same house for 1/2 the monthly cost and no risk. But owning a home is the american dream, so they choose to buy rather than rent. As long as there are enough of these people and they don’t get in over their heads, they can keep the housing market going. As for the investors…I haven’t quite figured out why there are soooooo many non-owner occupied houses around here. A lot of them are vacant – no one wants to rent them even at 1/2 the cost of owning. Things were getting too weird for me and I figured it was high time to cash in on what I feel is a once in a lifetime chance to make a a huge tax free profit. I don’t know what’s going to happen from here, but right now the only place I’d put my money is FDIC insured CD’s – period. I figure it’ll be 5+ years before I buy a house again, if ever. It’ll take a long time for all of the excesses of the market to work themselves out and I don’t want any part of the process!
