[quote=temeculaguy]Sd was listed in some study as the 7th least affordable of the 50 largest metros. LA and SF being the worst. That still doesn’t mean the quote from Keynes from a century ago isn’t true today “the market can stay irrational longer than you can stay solvent.”[/quote]
This is assuming that currently, what we have is irrational. I think it’s far from it. In my previous example, a 3/2 house in MM is going for about $600k today. Rent for such house would be about $2600-2800/month, depending on when you rent (summer vs winter). Assuming you have 20% down, mortgage of the house at 4% interest rate would be $2291/month (P&I). PITI would be $3386/month. But principal is you paying off your loan. So, we should compare ITI vs rent instead. Which would put you at $2695. Now, if you take in tax deduction, ITI – tax deduction = $2249/month. Which means, if you’re buying the house as a primary residence, it’s still cheaper to buy today than rent the same house.
In order for ITI – tax deduction to be about $2700/month, price would have to push to $800k at 4% rate or rate would have to be @ 6% with $600k price.
