[mrwrong]

I’m not qualified to give financial advice, but if you trust your financial advisor, I will suggest you to talk to this guy about exactly what you are uneasy about your portfolio and see if he can do anything to make you comfortable again. Investment involves risks and everyone’s risk tolerance is different. It is important that your asset allocation reflects that.

Mr. Wrong

[mrwrong]

Chris,

I visit your blog regularly and always enjoy your posts. You need to post more often, man.

Mr. Wrong

[mrwrong]

Chris,

I visit your blog regularly and always enjoy your posts. You need to post more often, man.

Mr. Wrong

[mrwrong]

Chris,

I visit your blog regularly and always enjoy your posts. You need to post more often, man.

Mr. Wrong

[mrwrong]

Chris,

I visit your blog regularly and always enjoy your posts. You need to post more often, man.

Mr. Wrong

[mrwrong]

Comparing today’s China to today’s US is not going to be very meaningful and trying to defend the obvious fact US is better than China only demonstrates US insecurity.

What’s more meaningful is comparing today’s China against itself 20/30 years ago. I think there is no doubt that tremendous progress has been made since the 1970’s, at least based on the Western standards for progress.

Mr. Wrong

[mrwrong]

Comparing today’s China to today’s US is not going to be very meaningful and trying to defend the obvious fact US is better than China only demonstrates US insecurity.

What’s more meaningful is comparing today’s China against itself 20/30 years ago. I think there is no doubt that tremendous progress has been made since the 1970’s, at least based on the Western standards for progress.

Mr. Wrong

[mrwrong]

Comparing today’s China to today’s US is not going to be very meaningful and trying to defend the obvious fact US is better than China only demonstrates US insecurity.

What’s more meaningful is comparing today’s China against itself 20/30 years ago. I think there is no doubt that tremendous progress has been made since the 1970’s, at least based on the Western standards for progress.

Mr. Wrong

[mrwrong]

Comparing today’s China to today’s US is not going to be very meaningful and trying to defend the obvious fact US is better than China only demonstrates US insecurity.

What’s more meaningful is comparing today’s China against itself 20/30 years ago. I think there is no doubt that tremendous progress has been made since the 1970’s, at least based on the Western standards for progress.

Mr. Wrong

[mrwrong]

This depends on your employer’s 401(k) plan. Most plans only have limited investment choices. My former employer’s plan allows you to transfer your contribution to a self-directed brokerage account. You can then invest in pretty much anything you like. Check with your employer.

Mr. Wrong

[mrwrong]

I agree with cooperthedog’s comments. There are simply too many variables. To answer the question to buy or to rent, you have to plug in your own expectations. If two people can not agree on the basic assumptions, it is impossible to have a meaningful discussion.

Mr. Wrong

[mrwrong]

Thanks again for all the responses and comments. Instead of responding individually, let me again summarize:

1. Not taking closing costs into consideration.
Good point. I’ll update the numbers using 4% of purchase price as closing costs.

2. Real estate is not liquid. You may change job to a different city, etc.
This is all true, but if you are worried about liquidity or changing your jobs every few years, I’m not sure you should ever buy a house. The fact that we are participating on this forum indicates we plan to stay in San Diego and are considering buying a house at some point in the future. Otherwise, why would you even care? In other words, other people might be leaving San Diego due to high housing price, but we are staying. 🙂

3. You took the entire PITI in your tax deduction.
I may be Mr. Wrong, but I’m not that wrong. 🙂 I’ve only used the interest portion of the mortgage and the property tax for tax deduction. Principle, Insurance, and HOA are not included.

4. You made up the number on the rent. It is too high and your HOA is too low.
This is a condo in Carmel Valley. Actually, it’s a townhouse. It’s a 3br and 2.5ba and over 1500 sqft. This craiglist link suggests the rent number is reasonable. I know the HOA is $200. They have a pool and a gym. HOA includes insurance, water, and waste.

5. Landlord uses GRM of 8.
I agree that it’s a lousy investment for a rental property at this price. My original post states this purchase is for primary residence and not for investment purpose.

6. You are double counting (counting equity and deducting it from the monthly cost)
Several people raised this point. I have to think about this one a bit more. This could defnitely be one of the places I was wrong.

7. Risk premium
Very interesting point. I think I can buy this argument. Can you suggest a quatitive number so that I can incorporate this into the monthly cost for buying?

Thanks again for all the comments. I’ll post the updated numbers later.

Mr. Wrong

[mrwrong]

Thanks for all the responses so far. Let me summarize:

1. Negative equity since housing price is going down.
Let’s say I’m going to stay in this condo for a long time and I’m going to ride out the ups and downs.

2. Opportunity cost of investing the $12,000 down payment.
I know someone suggested 10% annual return on investment. That seems optimistic. Let’s use a more realistic number, say 7%. Again assuming the 34% income tax bracket. The $12,000 will grow to $188,507 after 10 years. However, if you buy the house, you are also adding equity with every mortgage payment. Your equity actually grows to $190,555 over 10 years. Again, buying comes out ahead. I know some of you are going to say your equity is going to decline significantly for the next few years, but that is not a sure thing and also see #1 above. Plus if it’s cheaper to buy today, maybe it’s not overvalued.

3. Not taking the standard deduction into consideration.
Let’s say I already itemize. The state income tax along would make me itemize my return.

4. Not taking maitenance into consideration.
This is true, but this is a relative new condo and HOA takes care of all the exteriors. You may need to change a few bulbs and fix some leaky pipes. Let’s add $100 to the monthly expense to cover this. Note in my original post, I didn’t take rent increase into consideration. Buying still does not seem a bad idea.

Come on guys! You need to do better than this. 🙂

Mr. Wrong

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