[quote=jpinpb]Thanks, dave, nsr and SDE. I think when I calculated a while ago I was pushing 2900 a month or so for the privilege of owning, minus tax write off, I’d still be out of pocket enough to not entice me w/the distress in the complex and economic uncertainty.
I agree w/TG that some areas have seen enough distress and rents are very close to mortgage. But more desirable areas still have a ways to go IMO. [/quote]
I agree that in your area it’s pretty clear it’s not close to rental parity.
If a fair market rent is about $1750 or so for your unit (assuming your water bill is $50 or so per month which is rolled into your rent right now), I think it would start making sense once the prices fall to about 305-310K, including the tax advantages. At 300K @ 4.875 (0 pt FHA on todays rate sheet from my builder, assuming 3.5% down but rolling the 1.75% up front MIP into the loan), you’re looking at a total payment of about $2250 including PITI, mortgage insurance, and a $250/mo HOA fee. Depending on income bracket, there’s probably around $400/mo in tax savings, so you’d be looking at a comparable payment of $1850 at that level.
BTW, while the financing rate is historically low, rental parity is usually determined by comparing the same unit purchased with 20% down. At 3.5% down, if you can get into a unit at a price only $100-200 higher than it would rent for, it’s a pretty decent deal historically. Once you can buy a unit with 20% down where the market rent is significantly above what the PITI and maintenance payments work out to be, investors step in pretty quickly and make a floor.
In my case, our townhome has low HOA’s (about $100/mo), a comparable market rent of $2200, and after figuring the tax advantages our net payment would only be about $2280 (w/3.5% down), so it made sense for us.
In your case, I think your complex has another 15-20% to drop. I suspect this is true of most of the higher end and coastal areas.
