[SDEngineer]

[quote=FormerOwner]
One thing I’ve been noticing though is that the new home builders (the few that are still building) are charging approximately $100,000 more than the banks for the same types of houses. I don’t think the builder’s warranty and the $10,000 tax incentive is worth $100,000! What a rip. Plus, when you buy new, you’ve got to put in the yard, the pool (if you want one), the window treatments, etc. Buying a foreclosure or short sale is definitely the way I’m going to go. You just have to get a good inspector and check the place out during the inspection period.
[/quote]

Based on the prices I’ve seen in Temecula, I think the REO’s are selling well below what construction costs on them would run (even in a depressed construction market with labor and materials at relatively low cost). It’s basically impossible for the builders to compete there right now (probably why a lot of builders have simply mothballed their projects there).

[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.

[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.

[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.

[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.

[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.

[SDEngineer]

[quote=jpinpb]Thanks, davelj. I am paying less than 1900. I’m paying 1800 including water. Another unit is now renting for 1650, but less of an ocean view. I did do the math w/only putting the FHA 3.5%. Your calculations are close w/the interest rate of 5%. However you didn’t calculate the PMI, and I’m not sure how to do that, but that needs to be added, which will make the monthly cost of owning a little higher. And probably should include somewhere maintenance/upgrading, particularly if staying 10 years.

That said, if it were close, I’d consider it, but this market seems so volitile and w/NODs and distress going on in the complex, I figure we’re not going to skyrocket to 2006 prices any time soon. I’ll just enjoy renting for now.

Although we’re in San Diego, apparently rents are decreasing in NYC and the anecdotal data on the link on that site says rents are falling in other parts of the country.
[/quote]

PMI on a FHA loan (which I’m assuming since you mentioned 3.5% down) is 0.55% of the loan balance yearly. At 375K it’d be right around $170/mo.

There’s also a 1.75% upfront premium on FHA loans, which is normally rolled into the loan balance.

[SDEngineer]

[quote=jpinpb]Thanks, davelj. I am paying less than 1900. I’m paying 1800 including water. Another unit is now renting for 1650, but less of an ocean view. I did do the math w/only putting the FHA 3.5%. Your calculations are close w/the interest rate of 5%. However you didn’t calculate the PMI, and I’m not sure how to do that, but that needs to be added, which will make the monthly cost of owning a little higher. And probably should include somewhere maintenance/upgrading, particularly if staying 10 years.

That said, if it were close, I’d consider it, but this market seems so volitile and w/NODs and distress going on in the complex, I figure we’re not going to skyrocket to 2006 prices any time soon. I’ll just enjoy renting for now.

Although we’re in San Diego, apparently rents are decreasing in NYC and the anecdotal data on the link on that site says rents are falling in other parts of the country.
[/quote]

PMI on a FHA loan (which I’m assuming since you mentioned 3.5% down) is 0.55% of the loan balance yearly. At 375K it’d be right around $170/mo.

There’s also a 1.75% upfront premium on FHA loans, which is normally rolled into the loan balance.

[SDEngineer]

[quote=jpinpb]Thanks, davelj. I am paying less than 1900. I’m paying 1800 including water. Another unit is now renting for 1650, but less of an ocean view. I did do the math w/only putting the FHA 3.5%. Your calculations are close w/the interest rate of 5%. However you didn’t calculate the PMI, and I’m not sure how to do that, but that needs to be added, which will make the monthly cost of owning a little higher. And probably should include somewhere maintenance/upgrading, particularly if staying 10 years.

That said, if it were close, I’d consider it, but this market seems so volitile and w/NODs and distress going on in the complex, I figure we’re not going to skyrocket to 2006 prices any time soon. I’ll just enjoy renting for now.

Although we’re in San Diego, apparently rents are decreasing in NYC and the anecdotal data on the link on that site says rents are falling in other parts of the country.
[/quote]

PMI on a FHA loan (which I’m assuming since you mentioned 3.5% down) is 0.55% of the loan balance yearly. At 375K it’d be right around $170/mo.

There’s also a 1.75% upfront premium on FHA loans, which is normally rolled into the loan balance.

[SDEngineer]

[quote=jpinpb]Thanks, davelj. I am paying less than 1900. I’m paying 1800 including water. Another unit is now renting for 1650, but less of an ocean view. I did do the math w/only putting the FHA 3.5%. Your calculations are close w/the interest rate of 5%. However you didn’t calculate the PMI, and I’m not sure how to do that, but that needs to be added, which will make the monthly cost of owning a little higher. And probably should include somewhere maintenance/upgrading, particularly if staying 10 years.

That said, if it were close, I’d consider it, but this market seems so volitile and w/NODs and distress going on in the complex, I figure we’re not going to skyrocket to 2006 prices any time soon. I’ll just enjoy renting for now.

Although we’re in San Diego, apparently rents are decreasing in NYC and the anecdotal data on the link on that site says rents are falling in other parts of the country.
[/quote]

PMI on a FHA loan (which I’m assuming since you mentioned 3.5% down) is 0.55% of the loan balance yearly. At 375K it’d be right around $170/mo.

There’s also a 1.75% upfront premium on FHA loans, which is normally rolled into the loan balance.

[SDEngineer]

[quote=jpinpb]Thanks, davelj. I am paying less than 1900. I’m paying 1800 including water. Another unit is now renting for 1650, but less of an ocean view. I did do the math w/only putting the FHA 3.5%. Your calculations are close w/the interest rate of 5%. However you didn’t calculate the PMI, and I’m not sure how to do that, but that needs to be added, which will make the monthly cost of owning a little higher. And probably should include somewhere maintenance/upgrading, particularly if staying 10 years.

That said, if it were close, I’d consider it, but this market seems so volitile and w/NODs and distress going on in the complex, I figure we’re not going to skyrocket to 2006 prices any time soon. I’ll just enjoy renting for now.

Although we’re in San Diego, apparently rents are decreasing in NYC and the anecdotal data on the link on that site says rents are falling in other parts of the country.
[/quote]

PMI on a FHA loan (which I’m assuming since you mentioned 3.5% down) is 0.55% of the loan balance yearly. At 375K it’d be right around $170/mo.

There’s also a 1.75% upfront premium on FHA loans, which is normally rolled into the loan balance.

[SDEngineer]

[quote=nostradamus]I’ve often wondered who the heck would buy now as well.

People wouldn’t buy because homes are still overpriced. Give me as many incentives as you like, a lemon is still a lemon.

Having money or having a job does not mean you would or should throw money away buying a house.

Renting is cheaper. You can rent the average $500k crap shack in SD for what, $2k max per month? That’s being generous of course. In 1 year you paid $24k for rent then. Say you buy it instead. IMO you will lose at least 10% in one year. That’s $50k. Plus insurance, upkeep, tax, etc. etc. etc. Sure you might get a few thousand out of tax deductions (again being generous). Still doesn’t compensate for the difference.

I say if you’re on the fence, rent a house with just your *minimal* living requirements. Cheap. Re-evaluate buying in the winter. If not, wait tell next winter. Repeat. You’ll be happy you did.[/quote]

A year ago you would have been right on the money.

In coastal areas, I think you probably still are. If the areas you’re looking at buying in are places like 4S, CV, Encinitas, etc, I don’t think those areas are particularly close to bottoming out. But a 500K place in many areas now is well above 2K in rent. A lot of north and east county, mira mesa, and the other middle class areas I think are now pretty far down in terms of valuation.

The townhome we’re currently purchasing will cost us a net 360K (after incentives and tax credits are taken into account) and is just over 2200 sq. ft. Rent for a similarly sized townhome in the area would run $1/sq ft, or about 2200/mo. It’s not investment grade in terms of return, but it’s pretty much rent neutral at that price.

[SDEngineer]

[quote=nostradamus]I’ve often wondered who the heck would buy now as well.

People wouldn’t buy because homes are still overpriced. Give me as many incentives as you like, a lemon is still a lemon.

Having money or having a job does not mean you would or should throw money away buying a house.

Renting is cheaper. You can rent the average $500k crap shack in SD for what, $2k max per month? That’s being generous of course. In 1 year you paid $24k for rent then. Say you buy it instead. IMO you will lose at least 10% in one year. That’s $50k. Plus insurance, upkeep, tax, etc. etc. etc. Sure you might get a few thousand out of tax deductions (again being generous). Still doesn’t compensate for the difference.

I say if you’re on the fence, rent a house with just your *minimal* living requirements. Cheap. Re-evaluate buying in the winter. If not, wait tell next winter. Repeat. You’ll be happy you did.[/quote]

A year ago you would have been right on the money.

In coastal areas, I think you probably still are. If the areas you’re looking at buying in are places like 4S, CV, Encinitas, etc, I don’t think those areas are particularly close to bottoming out. But a 500K place in many areas now is well above 2K in rent. A lot of north and east county, mira mesa, and the other middle class areas I think are now pretty far down in terms of valuation.

The townhome we’re currently purchasing will cost us a net 360K (after incentives and tax credits are taken into account) and is just over 2200 sq. ft. Rent for a similarly sized townhome in the area would run $1/sq ft, or about 2200/mo. It’s not investment grade in terms of return, but it’s pretty much rent neutral at that price.

[SDEngineer]

[quote=nostradamus]I’ve often wondered who the heck would buy now as well.

People wouldn’t buy because homes are still overpriced. Give me as many incentives as you like, a lemon is still a lemon.

Having money or having a job does not mean you would or should throw money away buying a house.

Renting is cheaper. You can rent the average $500k crap shack in SD for what, $2k max per month? That’s being generous of course. In 1 year you paid $24k for rent then. Say you buy it instead. IMO you will lose at least 10% in one year. That’s $50k. Plus insurance, upkeep, tax, etc. etc. etc. Sure you might get a few thousand out of tax deductions (again being generous). Still doesn’t compensate for the difference.

I say if you’re on the fence, rent a house with just your *minimal* living requirements. Cheap. Re-evaluate buying in the winter. If not, wait tell next winter. Repeat. You’ll be happy you did.[/quote]

A year ago you would have been right on the money.

In coastal areas, I think you probably still are. If the areas you’re looking at buying in are places like 4S, CV, Encinitas, etc, I don’t think those areas are particularly close to bottoming out. But a 500K place in many areas now is well above 2K in rent. A lot of north and east county, mira mesa, and the other middle class areas I think are now pretty far down in terms of valuation.

The townhome we’re currently purchasing will cost us a net 360K (after incentives and tax credits are taken into account) and is just over 2200 sq. ft. Rent for a similarly sized townhome in the area would run $1/sq ft, or about 2200/mo. It’s not investment grade in terms of return, but it’s pretty much rent neutral at that price.

[SDEngineer]

[quote=nostradamus]I’ve often wondered who the heck would buy now as well.

People wouldn’t buy because homes are still overpriced. Give me as many incentives as you like, a lemon is still a lemon.

Having money or having a job does not mean you would or should throw money away buying a house.

Renting is cheaper. You can rent the average $500k crap shack in SD for what, $2k max per month? That’s being generous of course. In 1 year you paid $24k for rent then. Say you buy it instead. IMO you will lose at least 10% in one year. That’s $50k. Plus insurance, upkeep, tax, etc. etc. etc. Sure you might get a few thousand out of tax deductions (again being generous). Still doesn’t compensate for the difference.

I say if you’re on the fence, rent a house with just your *minimal* living requirements. Cheap. Re-evaluate buying in the winter. If not, wait tell next winter. Repeat. You’ll be happy you did.[/quote]

A year ago you would have been right on the money.

In coastal areas, I think you probably still are. If the areas you’re looking at buying in are places like 4S, CV, Encinitas, etc, I don’t think those areas are particularly close to bottoming out. But a 500K place in many areas now is well above 2K in rent. A lot of north and east county, mira mesa, and the other middle class areas I think are now pretty far down in terms of valuation.

The townhome we’re currently purchasing will cost us a net 360K (after incentives and tax credits are taken into account) and is just over 2200 sq. ft. Rent for a similarly sized townhome in the area would run $1/sq ft, or about 2200/mo. It’s not investment grade in terms of return, but it’s pretty much rent neutral at that price.

[Author]

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