how low can it really go?

[(former)FormerSanDiegan]

Just watch the NODs and REOs in the area, once they start going down (a pattern not one or two months) that is the time to buy.

Prices are likely to have risen before NODs and REOs decline. These are lagging indicators. NODs start to decline after prices start rebounding.
But, it’s certainly not a bad idea to wait until then. You will definitely have a better chance of avoiding any depreciation.

FWIW, when we first bought in ’96 there were tons of crappy REOs. It was a great time to buy from regular sellers though because they had to compete with REO pricing, but owner-occupied houses tended to be in much better condition.

[Diego Mamani]

“I guess the amount of money lost to renting could be looked at as…”

You never lose money to renting unless you’re paying above-market rent! Do you “lose” money when you buy groceries? Of course not, you get valuable food in exchange for your dough. Same with rent: you get a roof over your head, which is valuable. At the same time, you reap the benefit of being able to move more easily in case a better job shows up (should you desire to do so). Rent also protects your family’s net worth by keeping you from buying a depreciating asset.

As to the original question, how low can they go? Figure out how much that house would rent for today, then multiply the monthly rent by 100. That is how low I think a house can possibly go, in the sense of being a floor. That doesn’t mean I believe houses will necessarily get that cheap. What I mean is that a 100x multiplier of monthly rent constitutes a “floor” from which the price will likely not drop further (at least not a lot further).

The reason is that at 100x monthly rent, investors will buy the house to rent it out at a profit.

I hope this helps, and I apologize for the rant at the beginning. It’s amazing how much we have been brainwashed to think that paying rent is “throwing money down the drain”. If anything, everyday we see examples of FBs who’ve been throwing down the drain in mortgage payments in exchange for the privilege of “owning” (ha!) a depreciating asset that has decimated their family’s net worth.

[Diego Mamani]

“I guess the amount of money lost to renting could be looked at as…”

You never lose money to renting unless you’re paying above-market rent! Do you “lose” money when you buy groceries? Of course not, you get valuable food in exchange for your dough. Same with rent: you get a roof over your head, which is valuable. At the same time, you reap the benefit of being able to move more easily in case a better job shows up (should you desire to do so). Rent also protects your family’s net worth by keeping you from buying a depreciating asset.

As to the original question, how low can they go? Figure out how much that house would rent for today, then multiply the monthly rent by 100. That is how low I think a house can possibly go, in the sense of being a floor. That doesn’t mean I believe houses will necessarily get that cheap. What I mean is that a 100x multiplier of monthly rent constitutes a “floor” from which the price will likely not drop further (at least not a lot further).

The reason is that at 100x monthly rent, investors will buy the house to rent it out at a profit.

I hope this helps, and I apologize for the rant at the beginning. It’s amazing how much we have been brainwashed to think that paying rent is “throwing money down the drain”. If anything, everyday we see examples of FBs who’ve been throwing down the drain in mortgage payments in exchange for the privilege of “owning” (ha!) a depreciating asset that has decimated their family’s net worth.

[Diego Mamani]

“I guess the amount of money lost to renting could be looked at as…”

You never lose money to renting unless you’re paying above-market rent! Do you “lose” money when you buy groceries? Of course not, you get valuable food in exchange for your dough. Same with rent: you get a roof over your head, which is valuable. At the same time, you reap the benefit of being able to move more easily in case a better job shows up (should you desire to do so). Rent also protects your family’s net worth by keeping you from buying a depreciating asset.

As to the original question, how low can they go? Figure out how much that house would rent for today, then multiply the monthly rent by 100. That is how low I think a house can possibly go, in the sense of being a floor. That doesn’t mean I believe houses will necessarily get that cheap. What I mean is that a 100x multiplier of monthly rent constitutes a “floor” from which the price will likely not drop further (at least not a lot further).

The reason is that at 100x monthly rent, investors will buy the house to rent it out at a profit.

I hope this helps, and I apologize for the rant at the beginning. It’s amazing how much we have been brainwashed to think that paying rent is “throwing money down the drain”. If anything, everyday we see examples of FBs who’ve been throwing down the drain in mortgage payments in exchange for the privilege of “owning” (ha!) a depreciating asset that has decimated their family’s net worth.

[Diego Mamani]

“I guess the amount of money lost to renting could be looked at as…”

You never lose money to renting unless you’re paying above-market rent! Do you “lose” money when you buy groceries? Of course not, you get valuable food in exchange for your dough. Same with rent: you get a roof over your head, which is valuable. At the same time, you reap the benefit of being able to move more easily in case a better job shows up (should you desire to do so). Rent also protects your family’s net worth by keeping you from buying a depreciating asset.

As to the original question, how low can they go? Figure out how much that house would rent for today, then multiply the monthly rent by 100. That is how low I think a house can possibly go, in the sense of being a floor. That doesn’t mean I believe houses will necessarily get that cheap. What I mean is that a 100x multiplier of monthly rent constitutes a “floor” from which the price will likely not drop further (at least not a lot further).

The reason is that at 100x monthly rent, investors will buy the house to rent it out at a profit.

I hope this helps, and I apologize for the rant at the beginning. It’s amazing how much we have been brainwashed to think that paying rent is “throwing money down the drain”. If anything, everyday we see examples of FBs who’ve been throwing down the drain in mortgage payments in exchange for the privilege of “owning” (ha!) a depreciating asset that has decimated their family’s net worth.

[Diego Mamani]

“I guess the amount of money lost to renting could be looked at as…”

You never lose money to renting unless you’re paying above-market rent! Do you “lose” money when you buy groceries? Of course not, you get valuable food in exchange for your dough. Same with rent: you get a roof over your head, which is valuable. At the same time, you reap the benefit of being able to move more easily in case a better job shows up (should you desire to do so). Rent also protects your family’s net worth by keeping you from buying a depreciating asset.

As to the original question, how low can they go? Figure out how much that house would rent for today, then multiply the monthly rent by 100. That is how low I think a house can possibly go, in the sense of being a floor. That doesn’t mean I believe houses will necessarily get that cheap. What I mean is that a 100x multiplier of monthly rent constitutes a “floor” from which the price will likely not drop further (at least not a lot further).

The reason is that at 100x monthly rent, investors will buy the house to rent it out at a profit.

I hope this helps, and I apologize for the rant at the beginning. It’s amazing how much we have been brainwashed to think that paying rent is “throwing money down the drain”. If anything, everyday we see examples of FBs who’ve been throwing down the drain in mortgage payments in exchange for the privilege of “owning” (ha!) a depreciating asset that has decimated their family’s net worth.

[temeculaguy]

pd, what diego mentioned about the 100x rent multiplier as a floor is good advice. I am in a similar boat and have analyzed it to death. We are coming into a home stretch of sorts, perhaps not the overcorrection phase but the very reason you mentioned you feel like buying is why the fundamentals work. The same was true for the bubble, why that house you like wasn’t worth $200 or $300 a sq ft., you have to ignore the anectodal advice and look at the fundamentals. You can pay 200k for a place you would be happy with and it costs the same or more to rent, do you honestly think that it will soon cost twice the money to rent than to buy? So there’s your answer, it will fluctuate a little above and below rent, take the place you like, take the tax deduction and screw it, count yourself a genius for waiting until now. Nobody can guarantee you appreciation, depreciation or interest rates. If you can easily afford it, it’s time.

I can tell you inventory is not rising in our valley, well priced places are moving quickly, I think another month or two and the competition will thin so we will have a bit more negotiating power. But this 2011 or 2012 stuff is not applicable here, we are ahead of the cycle.

The trouble with taking advice from san diegans is they have an entirely different paradigm. If they make 100k and a nice house is 400-700k, they have some waiting to do. If you make 100k and can buy a nice house for 200-300k, especially 200k like you mentioned, who the hell cares, that’s a freaking car payment. How much sleep should we lose?

[temeculaguy]

pd, what diego mentioned about the 100x rent multiplier as a floor is good advice. I am in a similar boat and have analyzed it to death. We are coming into a home stretch of sorts, perhaps not the overcorrection phase but the very reason you mentioned you feel like buying is why the fundamentals work. The same was true for the bubble, why that house you like wasn’t worth $200 or $300 a sq ft., you have to ignore the anectodal advice and look at the fundamentals. You can pay 200k for a place you would be happy with and it costs the same or more to rent, do you honestly think that it will soon cost twice the money to rent than to buy? So there’s your answer, it will fluctuate a little above and below rent, take the place you like, take the tax deduction and screw it, count yourself a genius for waiting until now. Nobody can guarantee you appreciation, depreciation or interest rates. If you can easily afford it, it’s time.

I can tell you inventory is not rising in our valley, well priced places are moving quickly, I think another month or two and the competition will thin so we will have a bit more negotiating power. But this 2011 or 2012 stuff is not applicable here, we are ahead of the cycle.

The trouble with taking advice from san diegans is they have an entirely different paradigm. If they make 100k and a nice house is 400-700k, they have some waiting to do. If you make 100k and can buy a nice house for 200-300k, especially 200k like you mentioned, who the hell cares, that’s a freaking car payment. How much sleep should we lose?

[temeculaguy]

pd, what diego mentioned about the 100x rent multiplier as a floor is good advice. I am in a similar boat and have analyzed it to death. We are coming into a home stretch of sorts, perhaps not the overcorrection phase but the very reason you mentioned you feel like buying is why the fundamentals work. The same was true for the bubble, why that house you like wasn’t worth $200 or $300 a sq ft., you have to ignore the anectodal advice and look at the fundamentals. You can pay 200k for a place you would be happy with and it costs the same or more to rent, do you honestly think that it will soon cost twice the money to rent than to buy? So there’s your answer, it will fluctuate a little above and below rent, take the place you like, take the tax deduction and screw it, count yourself a genius for waiting until now. Nobody can guarantee you appreciation, depreciation or interest rates. If you can easily afford it, it’s time.

I can tell you inventory is not rising in our valley, well priced places are moving quickly, I think another month or two and the competition will thin so we will have a bit more negotiating power. But this 2011 or 2012 stuff is not applicable here, we are ahead of the cycle.

The trouble with taking advice from san diegans is they have an entirely different paradigm. If they make 100k and a nice house is 400-700k, they have some waiting to do. If you make 100k and can buy a nice house for 200-300k, especially 200k like you mentioned, who the hell cares, that’s a freaking car payment. How much sleep should we lose?

[temeculaguy]

pd, what diego mentioned about the 100x rent multiplier as a floor is good advice. I am in a similar boat and have analyzed it to death. We are coming into a home stretch of sorts, perhaps not the overcorrection phase but the very reason you mentioned you feel like buying is why the fundamentals work. The same was true for the bubble, why that house you like wasn’t worth $200 or $300 a sq ft., you have to ignore the anectodal advice and look at the fundamentals. You can pay 200k for a place you would be happy with and it costs the same or more to rent, do you honestly think that it will soon cost twice the money to rent than to buy? So there’s your answer, it will fluctuate a little above and below rent, take the place you like, take the tax deduction and screw it, count yourself a genius for waiting until now. Nobody can guarantee you appreciation, depreciation or interest rates. If you can easily afford it, it’s time.

I can tell you inventory is not rising in our valley, well priced places are moving quickly, I think another month or two and the competition will thin so we will have a bit more negotiating power. But this 2011 or 2012 stuff is not applicable here, we are ahead of the cycle.

The trouble with taking advice from san diegans is they have an entirely different paradigm. If they make 100k and a nice house is 400-700k, they have some waiting to do. If you make 100k and can buy a nice house for 200-300k, especially 200k like you mentioned, who the hell cares, that’s a freaking car payment. How much sleep should we lose?

[temeculaguy]

pd, what diego mentioned about the 100x rent multiplier as a floor is good advice. I am in a similar boat and have analyzed it to death. We are coming into a home stretch of sorts, perhaps not the overcorrection phase but the very reason you mentioned you feel like buying is why the fundamentals work. The same was true for the bubble, why that house you like wasn’t worth $200 or $300 a sq ft., you have to ignore the anectodal advice and look at the fundamentals. You can pay 200k for a place you would be happy with and it costs the same or more to rent, do you honestly think that it will soon cost twice the money to rent than to buy? So there’s your answer, it will fluctuate a little above and below rent, take the place you like, take the tax deduction and screw it, count yourself a genius for waiting until now. Nobody can guarantee you appreciation, depreciation or interest rates. If you can easily afford it, it’s time.

I can tell you inventory is not rising in our valley, well priced places are moving quickly, I think another month or two and the competition will thin so we will have a bit more negotiating power. But this 2011 or 2012 stuff is not applicable here, we are ahead of the cycle.

The trouble with taking advice from san diegans is they have an entirely different paradigm. If they make 100k and a nice house is 400-700k, they have some waiting to do. If you make 100k and can buy a nice house for 200-300k, especially 200k like you mentioned, who the hell cares, that’s a freaking car payment. How much sleep should we lose?

[CA renter]

Agree with TG.

If you are in a comfortable position to buy, and find a wonderful house that you can live in for the rest of your life, have at it!

However…consider that rents might go down, neighborhoods might deteriorate further, the economy could collapse, etc.

If you are looking at 2X annual income, and have a nice cash cushion (minimum 6-12 months, AFTER all purchasing costs), and you have a relatively safe job or highly-desired job skills, you could certainly consider buying when buying is cheaper than reasonable rents, IMHO.

Good luck with whatever you choose to do! 🙂

[CA renter]

Agree with TG.

If you are in a comfortable position to buy, and find a wonderful house that you can live in for the rest of your life, have at it!

However…consider that rents might go down, neighborhoods might deteriorate further, the economy could collapse, etc.

If you are looking at 2X annual income, and have a nice cash cushion (minimum 6-12 months, AFTER all purchasing costs), and you have a relatively safe job or highly-desired job skills, you could certainly consider buying when buying is cheaper than reasonable rents, IMHO.

Good luck with whatever you choose to do! 🙂

[CA renter]

Agree with TG.

If you are in a comfortable position to buy, and find a wonderful house that you can live in for the rest of your life, have at it!

However…consider that rents might go down, neighborhoods might deteriorate further, the economy could collapse, etc.

If you are looking at 2X annual income, and have a nice cash cushion (minimum 6-12 months, AFTER all purchasing costs), and you have a relatively safe job or highly-desired job skills, you could certainly consider buying when buying is cheaper than reasonable rents, IMHO.

Good luck with whatever you choose to do! 🙂

[CA renter]

Agree with TG.

If you are in a comfortable position to buy, and find a wonderful house that you can live in for the rest of your life, have at it!

However…consider that rents might go down, neighborhoods might deteriorate further, the economy could collapse, etc.

If you are looking at 2X annual income, and have a nice cash cushion (minimum 6-12 months, AFTER all purchasing costs), and you have a relatively safe job or highly-desired job skills, you could certainly consider buying when buying is cheaper than reasonable rents, IMHO.

Good luck with whatever you choose to do! 🙂

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