When prices go down, the less desirable areas go down first. This is why ocrenter said the following:
“Assuming $24,000 loss in rent, had we bought in 4S, we would have been looking at $100,000 loss in equity over the same period. had we bought in Temecula like a friend of mine did, that $24,000 loss in rent would be comparable to $200,000 loss in equity.”
This is because Temecula is much less desirable than 4S.
Relatively, 4S is less desirable than Carmel Valley. This is why prices in CV have held up better than 4S. When the dust settles, all areas (desirable or not) will have gone down by the same percentage. The difference is that the least desirable areas will hit the “bottom” first.
With that said, CV is further from the “bottom” than 4S. So, if you must buy right now, 4S is probably better b/c it is closer to the bottom. You’ll still lose a lot of money because 4S is still a long way from the bottom.
ocrenter made an excellent point. Financially speaking, the decision to buy does NOT depend on the rent vs. the mortgage payment. It depends on the money spend on rent vs. the equity loss.
I would suspect that: ocrenter would have paid $3k/month to rent that same house because the $36k spent on rent would still be far less than the equity loss.
“we think the biggest yearly drop in price in this cycle has happened”
Real estate is the ultimate momentum market. The price declines of the last 18 months has only began to pickup speed. So, the biggest yearly drop in price has not happened yet.
