surveyor’s ROI spreadsheet

[CA renter]

Why can’t the MM house go to $250K?

If local incomes were high enough to afford higher monthly payments, the rents would be higher, no?

I think “price anchoring” has affected everyone — even the bears. Prices in 2005 were nowhere near normal. We need to look at numbers BEFORE the credit bubble (2001 and before) to really understand where prices should be.

Also, “inflation” numbers that focus on costs should not be considered WRT housing appreciation. As costs for other goods go up (especially food, energy, healthcare & other necessities), there is LESS money for housing. All that matters is **income** inflation, and that is not appreciating as fast a cost inflation…that is deflationary for housing.

[CricketOnTheHearth]

Going rental rates are more responsive to actual incomes, I think. You can’t get an 3/1 ARM with magical pony dust to cover your rent, it must come straight out of your paycheck.

So, someone who could afford a $2,000 rental payment could afford a $250,000 mortgage, assuming it’s an old school sane fixed-rate mortgage. The fact that $250K sounds unusually low to you just shows how out of whack prices around here are with peoples’ actual ability to pay.

FWIW, in 1996 I remember Rancho Bernardo houses going for $250K-ish. The MM house I’m renting in right now went for well under $200K. And to this day, comparable houses, with larger yards, in my Midwestern hometown go for closer to $100,000.

Yes, I know it’s California… but wherever you are, there’s only so much juice you can squeeze out of a grape.

[CricketOnTheHearth]

Going rental rates are more responsive to actual incomes, I think. You can’t get an 3/1 ARM with magical pony dust to cover your rent, it must come straight out of your paycheck.

So, someone who could afford a $2,000 rental payment could afford a $250,000 mortgage, assuming it’s an old school sane fixed-rate mortgage. The fact that $250K sounds unusually low to you just shows how out of whack prices around here are with peoples’ actual ability to pay.

FWIW, in 1996 I remember Rancho Bernardo houses going for $250K-ish. The MM house I’m renting in right now went for well under $200K. And to this day, comparable houses, with larger yards, in my Midwestern hometown go for closer to $100,000.

Yes, I know it’s California… but wherever you are, there’s only so much juice you can squeeze out of a grape.

[CricketOnTheHearth]

Going rental rates are more responsive to actual incomes, I think. You can’t get an 3/1 ARM with magical pony dust to cover your rent, it must come straight out of your paycheck.

So, someone who could afford a $2,000 rental payment could afford a $250,000 mortgage, assuming it’s an old school sane fixed-rate mortgage. The fact that $250K sounds unusually low to you just shows how out of whack prices around here are with peoples’ actual ability to pay.

FWIW, in 1996 I remember Rancho Bernardo houses going for $250K-ish. The MM house I’m renting in right now went for well under $200K. And to this day, comparable houses, with larger yards, in my Midwestern hometown go for closer to $100,000.

Yes, I know it’s California… but wherever you are, there’s only so much juice you can squeeze out of a grape.

[CricketOnTheHearth]

Going rental rates are more responsive to actual incomes, I think. You can’t get an 3/1 ARM with magical pony dust to cover your rent, it must come straight out of your paycheck.

So, someone who could afford a $2,000 rental payment could afford a $250,000 mortgage, assuming it’s an old school sane fixed-rate mortgage. The fact that $250K sounds unusually low to you just shows how out of whack prices around here are with peoples’ actual ability to pay.

FWIW, in 1996 I remember Rancho Bernardo houses going for $250K-ish. The MM house I’m renting in right now went for well under $200K. And to this day, comparable houses, with larger yards, in my Midwestern hometown go for closer to $100,000.

Yes, I know it’s California… but wherever you are, there’s only so much juice you can squeeze out of a grape.

[CricketOnTheHearth]

Going rental rates are more responsive to actual incomes, I think. You can’t get an 3/1 ARM with magical pony dust to cover your rent, it must come straight out of your paycheck.

So, someone who could afford a $2,000 rental payment could afford a $250,000 mortgage, assuming it’s an old school sane fixed-rate mortgage. The fact that $250K sounds unusually low to you just shows how out of whack prices around here are with peoples’ actual ability to pay.

FWIW, in 1996 I remember Rancho Bernardo houses going for $250K-ish. The MM house I’m renting in right now went for well under $200K. And to this day, comparable houses, with larger yards, in my Midwestern hometown go for closer to $100,000.

Yes, I know it’s California… but wherever you are, there’s only so much juice you can squeeze out of a grape.

[an]

Around the bottom of the last cycle, a 3/2 1500 sq-ft house rent for around $1200/month and price were around $160k. That’s with ~9% interest rate. You’re talking about $1030/month in mortgage with 20% down. If interest rate stay where it is today, a 3/2 1500 sq-ft houst rent for around $1900/month. If price goes to $250k, you’re talking about mortgage of $1200/month with 20% down. If mortgage payment stays the same ratio to rent as 1997, price should be around $340k. That 100/125/150 ratio does not take interest rate into consideration.

[an]

Around the bottom of the last cycle, a 3/2 1500 sq-ft house rent for around $1200/month and price were around $160k. That’s with ~9% interest rate. You’re talking about $1030/month in mortgage with 20% down. If interest rate stay where it is today, a 3/2 1500 sq-ft houst rent for around $1900/month. If price goes to $250k, you’re talking about mortgage of $1200/month with 20% down. If mortgage payment stays the same ratio to rent as 1997, price should be around $340k. That 100/125/150 ratio does not take interest rate into consideration.

[an]

Around the bottom of the last cycle, a 3/2 1500 sq-ft house rent for around $1200/month and price were around $160k. That’s with ~9% interest rate. You’re talking about $1030/month in mortgage with 20% down. If interest rate stay where it is today, a 3/2 1500 sq-ft houst rent for around $1900/month. If price goes to $250k, you’re talking about mortgage of $1200/month with 20% down. If mortgage payment stays the same ratio to rent as 1997, price should be around $340k. That 100/125/150 ratio does not take interest rate into consideration.

[an]

Around the bottom of the last cycle, a 3/2 1500 sq-ft house rent for around $1200/month and price were around $160k. That’s with ~9% interest rate. You’re talking about $1030/month in mortgage with 20% down. If interest rate stay where it is today, a 3/2 1500 sq-ft houst rent for around $1900/month. If price goes to $250k, you’re talking about mortgage of $1200/month with 20% down. If mortgage payment stays the same ratio to rent as 1997, price should be around $340k. That 100/125/150 ratio does not take interest rate into consideration.

[an]

Around the bottom of the last cycle, a 3/2 1500 sq-ft house rent for around $1200/month and price were around $160k. That’s with ~9% interest rate. You’re talking about $1030/month in mortgage with 20% down. If interest rate stay where it is today, a 3/2 1500 sq-ft houst rent for around $1900/month. If price goes to $250k, you’re talking about mortgage of $1200/month with 20% down. If mortgage payment stays the same ratio to rent as 1997, price should be around $340k. That 100/125/150 ratio does not take interest rate into consideration.

[(former)FormerSanDiegan]

AN – My experience was similar. We purchased a Clairemont house for 160K in spring 1996. Rent for equivalent properties was 1000-1100 per month. Our mortgage rate was 8.25%.

SFH rents were about mortgage rates + 0 to 1% at the bottom of the last cycle.

P.S. – If rates go back up to the 8% range as I expect, I would expect prices in the same area would drop to somewhere in the 320K range. (I’m assuming real rent growth rates of negative 4 %, i.e. flat rents and 4% inflation).

[(former)FormerSanDiegan]

AN – My experience was similar. We purchased a Clairemont house for 160K in spring 1996. Rent for equivalent properties was 1000-1100 per month. Our mortgage rate was 8.25%.

SFH rents were about mortgage rates + 0 to 1% at the bottom of the last cycle.

P.S. – If rates go back up to the 8% range as I expect, I would expect prices in the same area would drop to somewhere in the 320K range. (I’m assuming real rent growth rates of negative 4 %, i.e. flat rents and 4% inflation).

[(former)FormerSanDiegan]

AN – My experience was similar. We purchased a Clairemont house for 160K in spring 1996. Rent for equivalent properties was 1000-1100 per month. Our mortgage rate was 8.25%.

SFH rents were about mortgage rates + 0 to 1% at the bottom of the last cycle.

P.S. – If rates go back up to the 8% range as I expect, I would expect prices in the same area would drop to somewhere in the 320K range. (I’m assuming real rent growth rates of negative 4 %, i.e. flat rents and 4% inflation).

[(former)FormerSanDiegan]

AN – My experience was similar. We purchased a Clairemont house for 160K in spring 1996. Rent for equivalent properties was 1000-1100 per month. Our mortgage rate was 8.25%.

SFH rents were about mortgage rates + 0 to 1% at the bottom of the last cycle.

P.S. – If rates go back up to the 8% range as I expect, I would expect prices in the same area would drop to somewhere in the 320K range. (I’m assuming real rent growth rates of negative 4 %, i.e. flat rents and 4% inflation).

[Author]

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