Who are the buyers in this market and economy?

[SDEngineer]

[quote=jpinpb]Thanks, dave, nsr and SDE. I think when I calculated a while ago I was pushing 2900 a month or so for the privilege of owning, minus tax write off, I’d still be out of pocket enough to not entice me w/the distress in the complex and economic uncertainty.

I agree w/TG that some areas have seen enough distress and rents are very close to mortgage. But more desirable areas still have a ways to go IMO. [/quote]

I agree that in your area it’s pretty clear it’s not close to rental parity.

If a fair market rent is about $1750 or so for your unit (assuming your water bill is $50 or so per month which is rolled into your rent right now), I think it would start making sense once the prices fall to about 305-310K, including the tax advantages. At 300K @ 4.875 (0 pt FHA on todays rate sheet from my builder, assuming 3.5% down but rolling the 1.75% up front MIP into the loan), you’re looking at a total payment of about $2250 including PITI, mortgage insurance, and a $250/mo HOA fee. Depending on income bracket, there’s probably around $400/mo in tax savings, so you’d be looking at a comparable payment of $1850 at that level.

BTW, while the financing rate is historically low, rental parity is usually determined by comparing the same unit purchased with 20% down. At 3.5% down, if you can get into a unit at a price only $100-200 higher than it would rent for, it’s a pretty decent deal historically. Once you can buy a unit with 20% down where the market rent is significantly above what the PITI and maintenance payments work out to be, investors step in pretty quickly and make a floor.

In my case, our townhome has low HOA’s (about $100/mo), a comparable market rent of $2200, and after figuring the tax advantages our net payment would only be about $2280 (w/3.5% down), so it made sense for us.

In your case, I think your complex has another 15-20% to drop. I suspect this is true of most of the higher end and coastal areas.

[jpinpb]

[quote=PadreBrian]
There’s the rub, the more desirable areas will always have higher rents.
[/quote]
? I just said my rent is lower than the cost to own and other places lower rent than mine and NODs in mine complex and prices have begun their decline from peak. I mean, I’m not in LJ, but it’s somewhat coastal.

I can’t speak for highly desirable CV, but the condos there seem to be taking a hit.

[jpinpb]

[quote=PadreBrian]
There’s the rub, the more desirable areas will always have higher rents.
[/quote]
? I just said my rent is lower than the cost to own and other places lower rent than mine and NODs in mine complex and prices have begun their decline from peak. I mean, I’m not in LJ, but it’s somewhat coastal.

I can’t speak for highly desirable CV, but the condos there seem to be taking a hit.

[jpinpb]

[quote=PadreBrian]
There’s the rub, the more desirable areas will always have higher rents.
[/quote]
? I just said my rent is lower than the cost to own and other places lower rent than mine and NODs in mine complex and prices have begun their decline from peak. I mean, I’m not in LJ, but it’s somewhat coastal.

I can’t speak for highly desirable CV, but the condos there seem to be taking a hit.

[jpinpb]

[quote=PadreBrian]
There’s the rub, the more desirable areas will always have higher rents.
[/quote]
? I just said my rent is lower than the cost to own and other places lower rent than mine and NODs in mine complex and prices have begun their decline from peak. I mean, I’m not in LJ, but it’s somewhat coastal.

I can’t speak for highly desirable CV, but the condos there seem to be taking a hit.

[jpinpb]

[quote=PadreBrian]
There’s the rub, the more desirable areas will always have higher rents.
[/quote]
? I just said my rent is lower than the cost to own and other places lower rent than mine and NODs in mine complex and prices have begun their decline from peak. I mean, I’m not in LJ, but it’s somewhat coastal.

I can’t speak for highly desirable CV, but the condos there seem to be taking a hit.

[jpinpb]

SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.

[jpinpb]

SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.

[jpinpb]

SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.

[jpinpb]

SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.

[jpinpb]

SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.

[an]

[quote=jpinpb]SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.[/quote]
Reality for who? I just bought and I put down 20%. I know a few people who just bought and one put as much down as 40% and they’re first time home buyers.

[an]

[quote=jpinpb]SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.[/quote]
Reality for who? I just bought and I put down 20%. I know a few people who just bought and one put as much down as 40% and they’re first time home buyers.

[an]

[quote=jpinpb]SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.[/quote]
Reality for who? I just bought and I put down 20%. I know a few people who just bought and one put as much down as 40% and they’re first time home buyers.

[an]

[quote=jpinpb]SDE – The 2000 price for this complex was about 200k. If it even came down to 280-300k, I’d probably do it and I think when the dust settles, it may go that low.

I know almost everyone still uses the 20% down when evaluating rents. But I’d speculate that over the past 9 years, very few purchases were made w/20% down. Yet we still use that value. I think that value was good to use b/c historically that’s what people did, was put 20% down. But I think nowadays that is archaic, IMO. But I understand that is the formula. I just think it should be updated to reality.[/quote]
Reality for who? I just bought and I put down 20%. I know a few people who just bought and one put as much down as 40% and they’re first time home buyers.

[Author]

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