WTE, I just used an interest-only, zero down payment loan to make an apples-to-apples comparison with rent. Otherwise, you have to take into account paying down principal each month and the opportunity cost of lost interest on the down payment. I just wanted to simplify the math and thought process. But, yeah, the “renting with benefits” captures the same idea.
Patientlywaiting, yeah the break-even holding period expands if you have to sell. No doubt about it. I didn’t include that in the analysis because that’s always the case if you buy, regardless of what you pay. Selling expenses are part of every sale transaction. But, yeah, I’m assuming that the buyers have a long term orientation.
My real objective here was merely to point out that if you think you’re going to live in a place for a long time, then timing the ultimate bottom along with its corresponding trough price is probably not as important financially as merely getting within 10%-15% or so because the advantage to renting declines with each passing year as housing price declines move toward that lower asymptote with a negative second derivative, in calculus terms. That is, as prices decline at a decreasing rate, the marginal benefit to renting declines as well.
Anyone who wants to live long-term in Chula Vista or Murietta, to use two examples, and can buy a house or condo for (a) less than it would cost them to rent the same place, and (b) 50% off peak pricing, probably won’t have many regrets five years down the road, despite the fact that there may be some modest declines still ahead and that prices may not actually turn up for many years.
For most of SD, however, this doesn’t apply (yet). Most SFRs are still too expensive, albeit less so with each passing month. But we already know that.
