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North County Jim.
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June 21, 2007 at 9:15 PM #61231June 21, 2007 at 9:15 PM #61269
Chris Scoreboard Johnston
ParticipantI am one of the recent buyers on this board, so apparently I am a dumbo as well. Also, I did an interest only loan fixed for 7 years after putting 20% down, another dumb move, oh wait a minute, I have over double the amount in cash that my mortgage balance represents. Maybe I am not so stupid, and actually am conservative?
The one thing that is lacking here is the concept that houses cannot be traded like stocks. I am in the camp that values will drop as most people know at this point, but that does not mean there are not deals to be had out there, and I found one, so I pulled the trigger.
It seems to me that some of the more bearish people should take note that in spite of the perfect storm of negative news, prices have not gone down that much.
My point – it is not stupid for everyone to buy a home right now, everyone’s circumstances are different. It would be stupid to buy a home right now trying to flip it.
June 21, 2007 at 10:02 PM #61234LA_Renter
Participant“I own a condo in LA that I bought in 1996 and I have tenants in it and they are paying 3-4x my mortgage and they rented when homes were selling much lower. Had they bought the same condo their payment would have been less than their rent”
That’s irrelevant now. If you bought that same condo today using a 20% down payment you would probably have a delta of at least 1K. Let me give you example why it is better to rent from a strict financial point of view. I live in a condo unit that could probably sell for 1 million but lets be conservative and say 850K, I pay 2k a month in rent (all of it going down a drain). if I were to buy this unit for 850K with a 20% down payment, here is how the cost break out AFTER tax benefit;
Property Tax: $566 (885 per month at 1.25%, 566 after deduction)
Interest: $2097 (3277 per mth at 5.9%, 2097 loss after deduction)
other cost $ 350 (insurance, maint, etc)Total $3013 (down the drain) verses 2k down drain renting
The price of that condo will more than likely fall. You are literally throwing money out of the window owning right now. This is called a home price to rent ratio. When you have ratios have like this it signifies that home values are too high and due for correction.
June 21, 2007 at 10:02 PM #61273Participant“I own a condo in LA that I bought in 1996 and I have tenants in it and they are paying 3-4x my mortgage and they rented when homes were selling much lower. Had they bought the same condo their payment would have been less than their rent”
That’s irrelevant now. If you bought that same condo today using a 20% down payment you would probably have a delta of at least 1K. Let me give you example why it is better to rent from a strict financial point of view. I live in a condo unit that could probably sell for 1 million but lets be conservative and say 850K, I pay 2k a month in rent (all of it going down a drain). if I were to buy this unit for 850K with a 20% down payment, here is how the cost break out AFTER tax benefit;
Property Tax: $566 (885 per month at 1.25%, 566 after deduction)
Interest: $2097 (3277 per mth at 5.9%, 2097 loss after deduction)
other cost $ 350 (insurance, maint, etc)Total $3013 (down the drain) verses 2k down drain renting
The price of that condo will more than likely fall. You are literally throwing money out of the window owning right now. This is called a home price to rent ratio. When you have ratios have like this it signifies that home values are too high and due for correction.
June 21, 2007 at 11:08 PM #61252sdcellar
ParticipantExactly. Perhaps you have a verb tense confusion, myito? Perhaps renting did suck? All I know is that it ain’t 1996 anymore.
June 21, 2007 at 11:08 PM #61291ParticipantExactly. Perhaps you have a verb tense confusion, myito? Perhaps renting did suck? All I know is that it ain’t 1996 anymore.
June 21, 2007 at 11:19 PM #61258myito
ParticipantThere is no confusion what-so-ever on my tense. Renting now while I await my home being completed and it SUCKS!
Aside from not getting any tax relief (regardless of how small) your money is being used to help someone else pay their mortgage and finance their future. On top of all that — your options of what you can do in a rental are very limited. As a renter and as someone who has tenants, I know what I speak.
Last year I owed about $10K in taxes (me alone not including my husband) and had I not owned property it would have been much worse.
Renting sounds like it works for you so more power to you. It does not work for me on multiple levels, though I am glad people are willing to rent as it pays the mortgage and gives me extra cash on my property in LA.
Cheers!
June 21, 2007 at 11:19 PM #61297ParticipantThere is no confusion what-so-ever on my tense. Renting now while I await my home being completed and it SUCKS!
Aside from not getting any tax relief (regardless of how small) your money is being used to help someone else pay their mortgage and finance their future. On top of all that — your options of what you can do in a rental are very limited. As a renter and as someone who has tenants, I know what I speak.
Last year I owed about $10K in taxes (me alone not including my husband) and had I not owned property it would have been much worse.
Renting sounds like it works for you so more power to you. It does not work for me on multiple levels, though I am glad people are willing to rent as it pays the mortgage and gives me extra cash on my property in LA.
Cheers!
June 21, 2007 at 11:40 PM #61264ParticipantOkay, guess I was confused. I feel eleven years younger already.
Taxes– Renters don’t have to pay the taxes you do in the first place. I’ll bet your tax savings for your new place don’t cover your property tax outlay. Paying taxes to save taxes doesn’t seem so great to me.
Options– Let’s see, I’ve painted my place, put up pictures, planted some plants. Oh, and my landlord think it looks great and, of course, doesn’t want me to leave.
Rentals I bought 11 years ago– Yes, I wish I had one. What’s that got to do with what you or I choose today?
Renting works for me because I let it. It sounds like it will never work for you. And that’s fine and fair. Just don’t kid yourself that your choice makes sound economic sense today.
June 21, 2007 at 11:40 PM #61303ParticipantOkay, guess I was confused. I feel eleven years younger already.
Taxes– Renters don’t have to pay the taxes you do in the first place. I’ll bet your tax savings for your new place don’t cover your property tax outlay. Paying taxes to save taxes doesn’t seem so great to me.
Options– Let’s see, I’ve painted my place, put up pictures, planted some plants. Oh, and my landlord think it looks great and, of course, doesn’t want me to leave.
Rentals I bought 11 years ago– Yes, I wish I had one. What’s that got to do with what you or I choose today?
Renting works for me because I let it. It sounds like it will never work for you. And that’s fine and fair. Just don’t kid yourself that your choice makes sound economic sense today.
June 21, 2007 at 11:47 PM #61266ParticipantYou are right, the tax savings don’t cover my costs, but it certainly helps.
Rental from 11 years ago used as an illustrative purpose to let you know that the suckers that pay my mortgage are paying much more than I do — which is likely the case with your $1 million condo as well. Do you really think they paid that much for it? Don’t kid yourself, you are covering their mortgage and likely more.
I am confident in my decisions today, because I am not waiting to get in on a goldmine because I missed it in the past. Sorry, but you are in that latter camp.
cheers!
June 21, 2007 at 11:47 PM #61305ParticipantYou are right, the tax savings don’t cover my costs, but it certainly helps.
Rental from 11 years ago used as an illustrative purpose to let you know that the suckers that pay my mortgage are paying much more than I do — which is likely the case with your $1 million condo as well. Do you really think they paid that much for it? Don’t kid yourself, you are covering their mortgage and likely more.
I am confident in my decisions today, because I am not waiting to get in on a goldmine because I missed it in the past. Sorry, but you are in that latter camp.
cheers!
June 22, 2007 at 12:05 AM #61268ParticipantI’m not the guy with the million dollar condo, but I can tell you that in my situation, I know for a fact that it is my landlord that’s got the negative cash flow situation. So, no, I’m not covering his mortgage, rather, he’s subsidizing my stay.
I’m also not looking for a goldmine, rather I’m not going to pay a premium for something I can rent cheaper today and purchase for less later. And sorry to disappoint you, but I didn’t miss out on the gold rush either (although I am sorry I have to bring it up). The gains from the sale of my last house are conservatively invested right now. Guess you don’t know as much about my camp as you thought you did.
I assure you, I am more confident in my confident in my choices today than you are in yours.
June 22, 2007 at 12:05 AM #61307ParticipantI’m not the guy with the million dollar condo, but I can tell you that in my situation, I know for a fact that it is my landlord that’s got the negative cash flow situation. So, no, I’m not covering his mortgage, rather, he’s subsidizing my stay.
I’m also not looking for a goldmine, rather I’m not going to pay a premium for something I can rent cheaper today and purchase for less later. And sorry to disappoint you, but I didn’t miss out on the gold rush either (although I am sorry I have to bring it up). The gains from the sale of my last house are conservatively invested right now. Guess you don’t know as much about my camp as you thought you did.
I assure you, I am more confident in my confident in my choices today than you are in yours.
June 22, 2007 at 12:40 AM #61270cyphire
ParticipantLet me chime in Myito…
First of all, I absolutely see that some people will buy now and that they are less concerned about equity loss then a perceived stability for their family. We have all been sold the ‘if you don’t own a home, you are a loser’ concept for so long, that it makes it tough to emotionally deal with it.
As you were so forthcoming with your finances, let me ask you a question… You have 300K in cash in the bank (lets disregard your 500K in 401k, etc. as it is for retirement and is only a couple (a few) years of retirement income (based on my guess about your home situation) how much will you have after the downpayment? or is that net of the downpayment?
The reason I ask is that I think everyone has a different level of risk exposure. I did own a home until December, and when I needed to sell (it was too far to commute for my daughter’s school), I decided not to buy at what I consider still very close to the top of the market.
We currently live in am amazing house in La Jolla. Instead of paying 2.5-2.8M for this house, we are renting it for over 6K/month. We have a years lease with a years option at the same price. We plan on being here for 2 years. If we really love it, we will stay longer. It has a pool, 5 bedrooms, ocean view, gated, compound, and was completely renovated with all granite, marble, body showers, etc. It is on a kid friendly street (why we moved here) and is just great.
By your logic, I should hate this place… After all we are renting. But so far I love it and my kids love it and have friends on the street already. So not every rental is hell, some are off the hook!
If I owned this house, and the market just stayed even for a few years (although I do expect it to go down significantly as the economy cools), at 6.5% & taxes that represents a monthly cost of 15,700/month vs. 6,500/month. I also don’t have to fix anything, pay for the pool guy and the gardener – only utilities. From a tax perspective, only the first 1.1 million is deductible so you can reduce the 15,700 to 12,700. So if the house doesn’t go up in value, I saved about 75K per year.
If the market goes down (personally I think that it is a house of cards) I could lose from 100-700K on this house if I owned it. While it would not hurt me badly financially I don’t want to lose that kind of money.
The overwhelming point for me is that I think we are in a bubble coming down and you don’t seem to feel that we are, or are being illogical in ignoring it. If you are guessing that prices will stay the same, or go up thats fine – you made your choice. You could be right, I am not an oracle. When I see what is going on the the mortgage markets, the price of homes relative to demand, the price of homes relative to the rate of inflation, and more importantly the lagging of the hit to the economy as things soften, I am betting that prices will come way down. I think that the economy will go in the crapper, and a lot of people will be holding on to mortgages (and having lost the equity they have put down) that they wish they did not have.
Myito…. could you imagine the economy softening, a recession / depression hitting and what the true value of these homes which were 1/3rd the price 10-12 years ago? What is the percentage chance that this will happen vs. the chance that prices will start increasing? All while the level of affordability has gone into the single digits?
Personally I will keep my extra 70-170K per year I am saving from renting if I have made the right call. I can’t imagine a scenario where it would be in my families best interest to buy a highly leveraged asset as prices are still falling. But if this makes you comfortable I wish you excellent luck!
p.s. Are you buying a new Carmel Valley, or 4S home which is being constructed? Just wondering.
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