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(former)FormerSanDiegan
ParticipantFormerSanDiegan, you mean 1996 and not 2006, right?
Oops! you are right AN, it was 1996.
As for it’s value today … An identical house on a similar lot in the neighborhood sold for about 420K in March.
My best guess is that our old house (we sold it in 2001 after buyinmg another in 2000 and renting out the Clairemont house one out for a year) would sell quickly at 375K and possibly up to 400K.Assuming 375K I come up with about $2450 for PITI currently (assume 6%, 90% LTV, ignoring PMI since I don’t knowe what PMI rates are these days). It would rent for aroud $2000 per month.
Compare this to 1996 carrying costs of about 1250 for PITI (assuming 8% interest, 90% LTV and ignoring PMI). Back then would have rented for $1100 per month.
So, we’re still about 10% higher today in terms of relative monthly carrying costs of buying vs renting in Clairemont compared to 1996. Of course, if interest rates rise significantly or rents decrease we would be looking at a larger difference.
ParticipantHow much of the Euro-zone difference in gas prices is attributable to taxes ?
If the tax burden were the same, the dollar (as measured in gallons of gas) is overvalued by 50% or more.
ParticipantHow much of the Euro-zone difference in gas prices is attributable to taxes ?
If the tax burden were the same, the dollar (as measured in gallons of gas) is overvalued by 50% or more.
ParticipantHow much of the Euro-zone difference in gas prices is attributable to taxes ?
If the tax burden were the same, the dollar (as measured in gallons of gas) is overvalued by 50% or more.
ParticipantHow much of the Euro-zone difference in gas prices is attributable to taxes ?
If the tax burden were the same, the dollar (as measured in gallons of gas) is overvalued by 50% or more.
ParticipantHow much of the Euro-zone difference in gas prices is attributable to taxes ?
If the tax burden were the same, the dollar (as measured in gallons of gas) is overvalued by 50% or more.
ParticipantThis is not always in the case in all areas of San Diego, much less, California. If 10-14 is historic norm, area like Mira Mesa already have rent multiple as low as 13-14.
AN – When we bought in Clairemont in 2006 (within months of the last bottom) the rent ratio was about 12. House was 160K, rents were about 1100 per month for equivalent house.
That was in an interest rate environment where 30-year fixed rates were about 8%. The inverse of rent ratio (or gross yield if you will) was about 8%.
When these numbers equate, the rent vs buy monthly outlay becomes very close (when accounting for tax benefits).
Currently, in places like Clairemont and Mira Mesa the rent ratio ranges from 13-16. This corresponds to a gross rate of as low as 6.25%. There are some examples in these areas where the rent vs buy is getting pretty close to favoring a buy. Looking forward, I would assume that rates move up to upper 7% range or higher, so I expect another 10-15% downside in these areas as monthly carrying costs approach monthly rent costs.
As far as a bottom, there are many factors and it will only be known in retrospect. But in terms of buying, I consider the comparison of monthly rent to monthly carrying costs in bread-and-butter areas like Clairemont as my best metric.
Of course I am looking at other signs/metrics. I currently have my eye out for the next Money magazine article or Business section piece that clearly shows that it does not make sense ever to own in Southern California and that renting is always favorable from a strictly financial perspective. That will be our cue.
ParticipantThis is not always in the case in all areas of San Diego, much less, California. If 10-14 is historic norm, area like Mira Mesa already have rent multiple as low as 13-14.
AN – When we bought in Clairemont in 2006 (within months of the last bottom) the rent ratio was about 12. House was 160K, rents were about 1100 per month for equivalent house.
That was in an interest rate environment where 30-year fixed rates were about 8%. The inverse of rent ratio (or gross yield if you will) was about 8%.
When these numbers equate, the rent vs buy monthly outlay becomes very close (when accounting for tax benefits).
Currently, in places like Clairemont and Mira Mesa the rent ratio ranges from 13-16. This corresponds to a gross rate of as low as 6.25%. There are some examples in these areas where the rent vs buy is getting pretty close to favoring a buy. Looking forward, I would assume that rates move up to upper 7% range or higher, so I expect another 10-15% downside in these areas as monthly carrying costs approach monthly rent costs.
As far as a bottom, there are many factors and it will only be known in retrospect. But in terms of buying, I consider the comparison of monthly rent to monthly carrying costs in bread-and-butter areas like Clairemont as my best metric.
Of course I am looking at other signs/metrics. I currently have my eye out for the next Money magazine article or Business section piece that clearly shows that it does not make sense ever to own in Southern California and that renting is always favorable from a strictly financial perspective. That will be our cue.
ParticipantThis is not always in the case in all areas of San Diego, much less, California. If 10-14 is historic norm, area like Mira Mesa already have rent multiple as low as 13-14.
AN – When we bought in Clairemont in 2006 (within months of the last bottom) the rent ratio was about 12. House was 160K, rents were about 1100 per month for equivalent house.
That was in an interest rate environment where 30-year fixed rates were about 8%. The inverse of rent ratio (or gross yield if you will) was about 8%.
When these numbers equate, the rent vs buy monthly outlay becomes very close (when accounting for tax benefits).
Currently, in places like Clairemont and Mira Mesa the rent ratio ranges from 13-16. This corresponds to a gross rate of as low as 6.25%. There are some examples in these areas where the rent vs buy is getting pretty close to favoring a buy. Looking forward, I would assume that rates move up to upper 7% range or higher, so I expect another 10-15% downside in these areas as monthly carrying costs approach monthly rent costs.
As far as a bottom, there are many factors and it will only be known in retrospect. But in terms of buying, I consider the comparison of monthly rent to monthly carrying costs in bread-and-butter areas like Clairemont as my best metric.
Of course I am looking at other signs/metrics. I currently have my eye out for the next Money magazine article or Business section piece that clearly shows that it does not make sense ever to own in Southern California and that renting is always favorable from a strictly financial perspective. That will be our cue.
ParticipantThis is not always in the case in all areas of San Diego, much less, California. If 10-14 is historic norm, area like Mira Mesa already have rent multiple as low as 13-14.
AN – When we bought in Clairemont in 2006 (within months of the last bottom) the rent ratio was about 12. House was 160K, rents were about 1100 per month for equivalent house.
That was in an interest rate environment where 30-year fixed rates were about 8%. The inverse of rent ratio (or gross yield if you will) was about 8%.
When these numbers equate, the rent vs buy monthly outlay becomes very close (when accounting for tax benefits).
Currently, in places like Clairemont and Mira Mesa the rent ratio ranges from 13-16. This corresponds to a gross rate of as low as 6.25%. There are some examples in these areas where the rent vs buy is getting pretty close to favoring a buy. Looking forward, I would assume that rates move up to upper 7% range or higher, so I expect another 10-15% downside in these areas as monthly carrying costs approach monthly rent costs.
As far as a bottom, there are many factors and it will only be known in retrospect. But in terms of buying, I consider the comparison of monthly rent to monthly carrying costs in bread-and-butter areas like Clairemont as my best metric.
Of course I am looking at other signs/metrics. I currently have my eye out for the next Money magazine article or Business section piece that clearly shows that it does not make sense ever to own in Southern California and that renting is always favorable from a strictly financial perspective. That will be our cue.
ParticipantThis is not always in the case in all areas of San Diego, much less, California. If 10-14 is historic norm, area like Mira Mesa already have rent multiple as low as 13-14.
AN – When we bought in Clairemont in 2006 (within months of the last bottom) the rent ratio was about 12. House was 160K, rents were about 1100 per month for equivalent house.
That was in an interest rate environment where 30-year fixed rates were about 8%. The inverse of rent ratio (or gross yield if you will) was about 8%.
When these numbers equate, the rent vs buy monthly outlay becomes very close (when accounting for tax benefits).
Currently, in places like Clairemont and Mira Mesa the rent ratio ranges from 13-16. This corresponds to a gross rate of as low as 6.25%. There are some examples in these areas where the rent vs buy is getting pretty close to favoring a buy. Looking forward, I would assume that rates move up to upper 7% range or higher, so I expect another 10-15% downside in these areas as monthly carrying costs approach monthly rent costs.
As far as a bottom, there are many factors and it will only be known in retrospect. But in terms of buying, I consider the comparison of monthly rent to monthly carrying costs in bread-and-butter areas like Clairemont as my best metric.
Of course I am looking at other signs/metrics. I currently have my eye out for the next Money magazine article or Business section piece that clearly shows that it does not make sense ever to own in Southern California and that renting is always favorable from a strictly financial perspective. That will be our cue.
ParticipantIt is not just to have it in the bank. It is so that it is in the bank to enable buying one or several properties at a huge discount instead or sitting on the sidelines while other people buy them up.
This is a good point. It’s not like someone would borrow money at 6% and stash it in savings at 3% indefinitely. They should obviously have an exit strategy or a planned use of those funds in the future that will pay off.
ParticipantIt is not just to have it in the bank. It is so that it is in the bank to enable buying one or several properties at a huge discount instead or sitting on the sidelines while other people buy them up.
This is a good point. It’s not like someone would borrow money at 6% and stash it in savings at 3% indefinitely. They should obviously have an exit strategy or a planned use of those funds in the future that will pay off.
ParticipantIt is not just to have it in the bank. It is so that it is in the bank to enable buying one or several properties at a huge discount instead or sitting on the sidelines while other people buy them up.
This is a good point. It’s not like someone would borrow money at 6% and stash it in savings at 3% indefinitely. They should obviously have an exit strategy or a planned use of those funds in the future that will pay off.
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