[SDEngineer]

[quote=Zeitgeist]I am very concerned about the rights of all Americans and how they are being rapidly eroded by this power grab in the name of emergency. Check out some of the postings on “The Big Takeover”. The links are a real eye opener. I have always been a huge supporter of women’s rights, especially the ones in Iraq who now are voting. Bush was widely maligned and yet in essence he freed an entire generation of women from an oppressive government.[/quote]

Actually, in Iraq, women were in a better situation (largely) under Hussein. The same can be said for religious minorities. In much of Iraq now (especially the Shia south), there’s been a resurgence of Islamic fundamentalism (that Hussein, being a secular Sunni, largely kept tamped down). It’s not as bad as Pakistan, Saudi Arabia, or Afghanistan was (and still is in many places), but it’s definitely placing women in second class status. Iraqis may technically be freer – but that also means they are freer to choose to live under severe Islamic laws which treat women as second class citizens. The fact that in many areas the local militias wield as much power as the local governments doesn’t help much.

Now Afghanistan is better than it was – if only because it couldn’t have been worse than it was. Unfortunately, it’s trending back towards Taliban fundamentalism in much of Afghanistan, at least for the moment. We took our eye off the ball there in order to concentrate on Iraq.

[SDEngineer]

[quote=jpinpb]The question is this: Will rents decline? That will make the ratio change. There’s a thread here in Piggs OC – rents in the crapper.

It of course makes sense that if you can buy less than rent, then buy. Not there on the coast yet. BUT housing is reeally low in Temecula. And yet declines continue there. So are the rents declining right along w/homes prices there? I’m sure by now the cost to rent must be the same as to buy over in Temecula. And you would think you’d start to see an increase in prices. Not so. [/quote]

This is a very good point. Rents probably will fall in the short term (driven by both economic conditions and the oversupply of housing). However, I don’t know how far it will fall – rents didn’t have nearly the amount of appreciation (they’ve basically increased at or near the rate of inflation). Remember as well, for every family kicked out by foreclosure, one more set of renters is added to the pool. I don’t think rent pressure to the downward side will be a hugely significant effect (unless, of course, we see a Great Depression scenario, which I’m betting against). Rents simply weren’t fundamentally in a bubble.

The problem with areas such as Temecula right now is that a lot of their building was driven to supply people priced out of the primary job locations in the area (like SD or OC) and were willing to commute. Now that primary job supply places are dropping drastically in price, there’s less pressure to push the commute up so far – so their demand is fairly low. If they were closer to major job centers, I’d think that they would in fact be already well into recovery. Just as a side note, TV homeowners who were foreclosed won’t be likely to be renting in TV unless that’s where their job was – they’d rent closer to their job – for a lot of them, that will mean taking up more rental stock in San Diego, O.C. or Riverside.

[SDEngineer]

[quote=jpinpb]The question is this: Will rents decline? That will make the ratio change. There’s a thread here in Piggs OC – rents in the crapper.

It of course makes sense that if you can buy less than rent, then buy. Not there on the coast yet. BUT housing is reeally low in Temecula. And yet declines continue there. So are the rents declining right along w/homes prices there? I’m sure by now the cost to rent must be the same as to buy over in Temecula. And you would think you’d start to see an increase in prices. Not so. [/quote]

This is a very good point. Rents probably will fall in the short term (driven by both economic conditions and the oversupply of housing). However, I don’t know how far it will fall – rents didn’t have nearly the amount of appreciation (they’ve basically increased at or near the rate of inflation). Remember as well, for every family kicked out by foreclosure, one more set of renters is added to the pool. I don’t think rent pressure to the downward side will be a hugely significant effect (unless, of course, we see a Great Depression scenario, which I’m betting against). Rents simply weren’t fundamentally in a bubble.

The problem with areas such as Temecula right now is that a lot of their building was driven to supply people priced out of the primary job locations in the area (like SD or OC) and were willing to commute. Now that primary job supply places are dropping drastically in price, there’s less pressure to push the commute up so far – so their demand is fairly low. If they were closer to major job centers, I’d think that they would in fact be already well into recovery. Just as a side note, TV homeowners who were foreclosed won’t be likely to be renting in TV unless that’s where their job was – they’d rent closer to their job – for a lot of them, that will mean taking up more rental stock in San Diego, O.C. or Riverside.

[SDEngineer]

[quote=jpinpb]The question is this: Will rents decline? That will make the ratio change. There’s a thread here in Piggs OC – rents in the crapper.

It of course makes sense that if you can buy less than rent, then buy. Not there on the coast yet. BUT housing is reeally low in Temecula. And yet declines continue there. So are the rents declining right along w/homes prices there? I’m sure by now the cost to rent must be the same as to buy over in Temecula. And you would think you’d start to see an increase in prices. Not so. [/quote]

This is a very good point. Rents probably will fall in the short term (driven by both economic conditions and the oversupply of housing). However, I don’t know how far it will fall – rents didn’t have nearly the amount of appreciation (they’ve basically increased at or near the rate of inflation). Remember as well, for every family kicked out by foreclosure, one more set of renters is added to the pool. I don’t think rent pressure to the downward side will be a hugely significant effect (unless, of course, we see a Great Depression scenario, which I’m betting against). Rents simply weren’t fundamentally in a bubble.

The problem with areas such as Temecula right now is that a lot of their building was driven to supply people priced out of the primary job locations in the area (like SD or OC) and were willing to commute. Now that primary job supply places are dropping drastically in price, there’s less pressure to push the commute up so far – so their demand is fairly low. If they were closer to major job centers, I’d think that they would in fact be already well into recovery. Just as a side note, TV homeowners who were foreclosed won’t be likely to be renting in TV unless that’s where their job was – they’d rent closer to their job – for a lot of them, that will mean taking up more rental stock in San Diego, O.C. or Riverside.

[SDEngineer]

[quote=jpinpb]The question is this: Will rents decline? That will make the ratio change. There’s a thread here in Piggs OC – rents in the crapper.

It of course makes sense that if you can buy less than rent, then buy. Not there on the coast yet. BUT housing is reeally low in Temecula. And yet declines continue there. So are the rents declining right along w/homes prices there? I’m sure by now the cost to rent must be the same as to buy over in Temecula. And you would think you’d start to see an increase in prices. Not so. [/quote]

This is a very good point. Rents probably will fall in the short term (driven by both economic conditions and the oversupply of housing). However, I don’t know how far it will fall – rents didn’t have nearly the amount of appreciation (they’ve basically increased at or near the rate of inflation). Remember as well, for every family kicked out by foreclosure, one more set of renters is added to the pool. I don’t think rent pressure to the downward side will be a hugely significant effect (unless, of course, we see a Great Depression scenario, which I’m betting against). Rents simply weren’t fundamentally in a bubble.

The problem with areas such as Temecula right now is that a lot of their building was driven to supply people priced out of the primary job locations in the area (like SD or OC) and were willing to commute. Now that primary job supply places are dropping drastically in price, there’s less pressure to push the commute up so far – so their demand is fairly low. If they were closer to major job centers, I’d think that they would in fact be already well into recovery. Just as a side note, TV homeowners who were foreclosed won’t be likely to be renting in TV unless that’s where their job was – they’d rent closer to their job – for a lot of them, that will mean taking up more rental stock in San Diego, O.C. or Riverside.

[SDEngineer]

[quote=jpinpb]The question is this: Will rents decline? That will make the ratio change. There’s a thread here in Piggs OC – rents in the crapper.

It of course makes sense that if you can buy less than rent, then buy. Not there on the coast yet. BUT housing is reeally low in Temecula. And yet declines continue there. So are the rents declining right along w/homes prices there? I’m sure by now the cost to rent must be the same as to buy over in Temecula. And you would think you’d start to see an increase in prices. Not so. [/quote]

This is a very good point. Rents probably will fall in the short term (driven by both economic conditions and the oversupply of housing). However, I don’t know how far it will fall – rents didn’t have nearly the amount of appreciation (they’ve basically increased at or near the rate of inflation). Remember as well, for every family kicked out by foreclosure, one more set of renters is added to the pool. I don’t think rent pressure to the downward side will be a hugely significant effect (unless, of course, we see a Great Depression scenario, which I’m betting against). Rents simply weren’t fundamentally in a bubble.

The problem with areas such as Temecula right now is that a lot of their building was driven to supply people priced out of the primary job locations in the area (like SD or OC) and were willing to commute. Now that primary job supply places are dropping drastically in price, there’s less pressure to push the commute up so far – so their demand is fairly low. If they were closer to major job centers, I’d think that they would in fact be already well into recovery. Just as a side note, TV homeowners who were foreclosed won’t be likely to be renting in TV unless that’s where their job was – they’d rent closer to their job – for a lot of them, that will mean taking up more rental stock in San Diego, O.C. or Riverside.

[SDEngineer]

[quote=BGinRB]I don’t know the area. I am looking at the numbers only. $2.2K rent for $285K place is not sustainable. Some piece of data is missing.

A renter with $10K down can get an FHA loan and pay $1.5K/month. With taxes, insurance, PMI, maintenance it is still likely cheaper to buy than to rent.

I suppose you could rent to people who cannot qualify for FHA, like day laborers, but the balance cannot depend on that.

[/quote]

I think that was kind of the point. You know you’re in “overshoot” territory once you start seeing houses that would cost less to buy than they would to rent on a month over month basis.

This happened in pretty much every housing boom/bust – for example, in the last one, from somewhere around mid 1996 to late 1997 it was cheaper to buy.

It’s no guarantee that prices will not continue to fall, but it is reasonable to assume that once we cross that point, that the bottom is not too far off – as investors will make certain of that.

[SDEngineer]

[quote=BGinRB]I don’t know the area. I am looking at the numbers only. $2.2K rent for $285K place is not sustainable. Some piece of data is missing.

A renter with $10K down can get an FHA loan and pay $1.5K/month. With taxes, insurance, PMI, maintenance it is still likely cheaper to buy than to rent.

I suppose you could rent to people who cannot qualify for FHA, like day laborers, but the balance cannot depend on that.

[/quote]

I think that was kind of the point. You know you’re in “overshoot” territory once you start seeing houses that would cost less to buy than they would to rent on a month over month basis.

This happened in pretty much every housing boom/bust – for example, in the last one, from somewhere around mid 1996 to late 1997 it was cheaper to buy.

It’s no guarantee that prices will not continue to fall, but it is reasonable to assume that once we cross that point, that the bottom is not too far off – as investors will make certain of that.

[SDEngineer]

[quote=BGinRB]I don’t know the area. I am looking at the numbers only. $2.2K rent for $285K place is not sustainable. Some piece of data is missing.

A renter with $10K down can get an FHA loan and pay $1.5K/month. With taxes, insurance, PMI, maintenance it is still likely cheaper to buy than to rent.

I suppose you could rent to people who cannot qualify for FHA, like day laborers, but the balance cannot depend on that.

[/quote]

I think that was kind of the point. You know you’re in “overshoot” territory once you start seeing houses that would cost less to buy than they would to rent on a month over month basis.

This happened in pretty much every housing boom/bust – for example, in the last one, from somewhere around mid 1996 to late 1997 it was cheaper to buy.

It’s no guarantee that prices will not continue to fall, but it is reasonable to assume that once we cross that point, that the bottom is not too far off – as investors will make certain of that.

[SDEngineer]

[quote=BGinRB]I don’t know the area. I am looking at the numbers only. $2.2K rent for $285K place is not sustainable. Some piece of data is missing.

A renter with $10K down can get an FHA loan and pay $1.5K/month. With taxes, insurance, PMI, maintenance it is still likely cheaper to buy than to rent.

I suppose you could rent to people who cannot qualify for FHA, like day laborers, but the balance cannot depend on that.

[/quote]

I think that was kind of the point. You know you’re in “overshoot” territory once you start seeing houses that would cost less to buy than they would to rent on a month over month basis.

This happened in pretty much every housing boom/bust – for example, in the last one, from somewhere around mid 1996 to late 1997 it was cheaper to buy.

It’s no guarantee that prices will not continue to fall, but it is reasonable to assume that once we cross that point, that the bottom is not too far off – as investors will make certain of that.

[SDEngineer]

[quote=BGinRB]I don’t know the area. I am looking at the numbers only. $2.2K rent for $285K place is not sustainable. Some piece of data is missing.

A renter with $10K down can get an FHA loan and pay $1.5K/month. With taxes, insurance, PMI, maintenance it is still likely cheaper to buy than to rent.

I suppose you could rent to people who cannot qualify for FHA, like day laborers, but the balance cannot depend on that.

[/quote]

I think that was kind of the point. You know you’re in “overshoot” territory once you start seeing houses that would cost less to buy than they would to rent on a month over month basis.

This happened in pretty much every housing boom/bust – for example, in the last one, from somewhere around mid 1996 to late 1997 it was cheaper to buy.

It’s no guarantee that prices will not continue to fall, but it is reasonable to assume that once we cross that point, that the bottom is not too far off – as investors will make certain of that.

[SDEngineer]

[quote=jpinpb]SDEngineer – thanks for all the info. With the way the economy stands right now, I’m thinking I may go the FHA way – if I do find something I like in my area or that add up/makes sense. [/quote]

I’d still wait if you are buying close to the coast – haven’t seen much there that would make sense.

The rule of thumb we were using was the house price should be no more than 180x the monthly rent (gross rent multiplier) it would bring in (for a 380K place, you should at least be able to rent it for 2100+ – at $1800 a month fair market rent, it’s a GRM of about 210, well above historical ratios still). Preferably lower, 180x is a bit on the high side historically, but manageable (especially with the low rates today). It would be better to get it around or below 150x. Typically, I believe investors look for a 100x-150x gross rent multiplier (lower bounds cash flow immediately, higher bounds largely pay for themselves as long term investment properties).

Ours is new construction, which is usually more expensive to buy (but cheaper for quite a few years to maintain, and will also be more energy efficient as well). Our gross rent multiplier is about 165-175 (depending on whether you count the substantial incentives the builder is throwing in). Still a bit on the high side, but no longer on the ridiculously high side, and given the low rates, we decided it was reasonable to buy at this point.

Two years ago, the GRM on what we are buying would probably have been around 260.

[SDEngineer]

[quote=jpinpb]SDEngineer – thanks for all the info. With the way the economy stands right now, I’m thinking I may go the FHA way – if I do find something I like in my area or that add up/makes sense. [/quote]

I’d still wait if you are buying close to the coast – haven’t seen much there that would make sense.

The rule of thumb we were using was the house price should be no more than 180x the monthly rent (gross rent multiplier) it would bring in (for a 380K place, you should at least be able to rent it for 2100+ – at $1800 a month fair market rent, it’s a GRM of about 210, well above historical ratios still). Preferably lower, 180x is a bit on the high side historically, but manageable (especially with the low rates today). It would be better to get it around or below 150x. Typically, I believe investors look for a 100x-150x gross rent multiplier (lower bounds cash flow immediately, higher bounds largely pay for themselves as long term investment properties).

Ours is new construction, which is usually more expensive to buy (but cheaper for quite a few years to maintain, and will also be more energy efficient as well). Our gross rent multiplier is about 165-175 (depending on whether you count the substantial incentives the builder is throwing in). Still a bit on the high side, but no longer on the ridiculously high side, and given the low rates, we decided it was reasonable to buy at this point.

Two years ago, the GRM on what we are buying would probably have been around 260.

[SDEngineer]

[quote=jpinpb]SDEngineer – thanks for all the info. With the way the economy stands right now, I’m thinking I may go the FHA way – if I do find something I like in my area or that add up/makes sense. [/quote]

I’d still wait if you are buying close to the coast – haven’t seen much there that would make sense.

The rule of thumb we were using was the house price should be no more than 180x the monthly rent (gross rent multiplier) it would bring in (for a 380K place, you should at least be able to rent it for 2100+ – at $1800 a month fair market rent, it’s a GRM of about 210, well above historical ratios still). Preferably lower, 180x is a bit on the high side historically, but manageable (especially with the low rates today). It would be better to get it around or below 150x. Typically, I believe investors look for a 100x-150x gross rent multiplier (lower bounds cash flow immediately, higher bounds largely pay for themselves as long term investment properties).

Ours is new construction, which is usually more expensive to buy (but cheaper for quite a few years to maintain, and will also be more energy efficient as well). Our gross rent multiplier is about 165-175 (depending on whether you count the substantial incentives the builder is throwing in). Still a bit on the high side, but no longer on the ridiculously high side, and given the low rates, we decided it was reasonable to buy at this point.

Two years ago, the GRM on what we are buying would probably have been around 260.

[SDEngineer]

[quote=jpinpb]SDEngineer – thanks for all the info. With the way the economy stands right now, I’m thinking I may go the FHA way – if I do find something I like in my area or that add up/makes sense. [/quote]

I’d still wait if you are buying close to the coast – haven’t seen much there that would make sense.

The rule of thumb we were using was the house price should be no more than 180x the monthly rent (gross rent multiplier) it would bring in (for a 380K place, you should at least be able to rent it for 2100+ – at $1800 a month fair market rent, it’s a GRM of about 210, well above historical ratios still). Preferably lower, 180x is a bit on the high side historically, but manageable (especially with the low rates today). It would be better to get it around or below 150x. Typically, I believe investors look for a 100x-150x gross rent multiplier (lower bounds cash flow immediately, higher bounds largely pay for themselves as long term investment properties).

Ours is new construction, which is usually more expensive to buy (but cheaper for quite a few years to maintain, and will also be more energy efficient as well). Our gross rent multiplier is about 165-175 (depending on whether you count the substantial incentives the builder is throwing in). Still a bit on the high side, but no longer on the ridiculously high side, and given the low rates, we decided it was reasonable to buy at this point.

Two years ago, the GRM on what we are buying would probably have been around 260.

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