Irvine Housing Blog

While she may understand that when you have a home 90% mortgaged, the bank owns most of it, she doesn’t understand that renters pay property taxes also - through their rent.

It is ironic that just as home prices were peaking, when renting made the MOST sense, there was the largest stigma associated to it.

Rent v. Buy depends very much on price.  A neighboring house is for sale for $525k and currently rented, I would guess for $4k/mo.  If you like that particular home, it’s an easy choice.  Per your calculator, renting is almost 2x as expensive.  Now, the flip side of the buy-rent equation: the home originally sold for $587k, so the current sellers are eating a $60k loss. 

It was one of the first homes sold in our neighborhood (blowing up the first-people into a new construction neighborhood seeing the most appreciation theory), in mid-2006.  Other homes in the neighborhood have re-sold at much smaller discounts than the 10% this one will probably see.  At $587k it was also above what comparable new homes were selling for - they were much closer to $525k.  If comparable new home costs are less than your asking price, you are in trouble.

If you think Miami is a good market to buy, you have to read this, Nearly 20% of Florida homes are vacant (thanks to CR for the pointer).

Vacancies will drive down prices.  Just as buying ‘made sense’ even with buying costs above renting when you could present-value appreciation, renting costs lower than buying might not make sense if you present-value price declines.

IR this homes history shows purchased for $79k in 1989.  Then foreclosed on in 1996 for $285k.

What do they say about history?

Now fast forward to 2011, it’s a “screaming deal” for $699k

Below rental parity, market fundamental pricing.

I have a pretty detailed excel spreadsheet that I use to compare buying vs renting. The closest calculater that I’ve found is the patrick.net one, but it isn’t there now. I haven’t tried yours. The main input that concerns me right now is the near-term depreciation that I see happening. I used the house from your post yesterday to do the numbers:

If someone bought that house in ‘97 at $236K with 20% down, their payment would have been $1,400 at 8% int. This is 28% of a $59K salary.

This year, say someone comes along to buy the house making 60% more which is $94K. They put 20% down on the $510K home which translates into a payment at 5% of $2,200 (28% of their income). If interest rates were still at 8%, however, that $2,200 would only buy a $300K mtg instead of a $408K mtg. With 20% down, the house would be “worth” $375K. So, if interest rates go back up to 8% at some point, there could be a drop of around 25% in order to maintain the same level of affordability.

There is just too much near-term (<5 years) risk to justify buying. If prices fall more this year without a dramatic rise in interest rates, though, I may buy again.

IR,
  Do you know the par for the “WII controller through the screen” hole? 

These calculators don’t take into account the fact that renting is very flexible even if you don’t relocate.

For example, one year you can rent a small place, save thousands that year; then you can afford to rent an apartment in Paris for couple weeks of your vacation.

The next year you rent something big on the beach with fountains and peacocks.

The third year you’re unemployed, you move to a tiny place and live on unemployment checks.

The fourth year you’re tired of commuting 5 miles and you rent something closer.

Something that doesn’t make sense to me…if Irvine Renter’s business is in LV, and the cost of living is much cheaper in LV, why continue living in OC with one of the highest rents and cost of living in the US, while commuting to LV with $4/gal gas?  Is it the weather/restaurants/cool factor?  Child won’t change schools?  Significant other refuses to relocate?  Seems thousands could be saved by living in LV for a couple of years.  Not that it’s any of my business, but just seems strange.  Sorry.

OT: No More Google Foreclosure Mapping

Oh well.

Words hardly suffice to describe the negativity and ISOLATION heaped onto me by SHEOPLE in 1999-2002 for being an HB renter. The problem is ... that’s nearly EVERYBODY WHO HAS A DECENT JOB, ergo ‘isolation.’

I worked with a lot of really nice people at Boeing plants around HB.

BACK THEN I would be met with an amalgam of feigned pity with the righteous finger-shaking at me for my misfortune brought about by an obviously [sic] pathological stupidity and lack of courage to MERELY sign a mortgage instead of pay off the debt from my second wife.

MID 2007-2009 the revelation of my rentership brought about an erie silence ... I would try shrugging it off saying “it used to be a curse, now it’s a good thing ... go figure.” most again people had so uncomfortably little in common with me ... I feel they stopped themselves from commiserating about their HELOCs and spec-houses.

Fortunately now I have another nice job and I rent this extra-nice house in Thousand Oaks—I moved so fast and easy, for the career, it blew everyone’s minds I knew in BOTH counties.

NOW when I say I’m renting ... but it’s a nice place and come over to our upcoming party ... I can see people seem VISIBLY JEALOUS about freedoms I enjoy. It’s like they are so screwed and trying soo hard to make ends meet.

THE 2011 LANDSCAPE AT AGE 59: the career longevity is very uncertain so I may keep saving and wait until salaried full employment becomes impossible, maybe try consulting, (jobless recession can’t last forever, can it?) maybe buy something in a cheap location, or maybe buy a motor home and be the happy itinerant couple. I might buy if inflation gets suddenly worse and somehow my career in this region becomes more solid.

Stepping back, I see that’s still a whole lot of “ifs.”

Dear IHB people I feel I know you better than family members. I rarely post because I work hard. I still read this blog and all your comments almost every single day since it started. I’m still renting an extra nice house in Thousand Oaks. I hope to make it to one of your mixers sometime soon.

Best regards

There is a small nugget of truth in PR’s comment above.

It is almost certain that governments the world over will make sure that SOME level of inflation will be maintained (although possibly not carrying over to wages), because deflation is so painful for them.

Bur/rent calculators (and Fixed/ARM calculators for that matter) should always factor in inflationary expectations over the life of the loan, even if this is only a ‘best guess’.

IR, can i win a special prize if I identify the location of the last photo, the one with the fellow standing on the tee box with the blue ball, and the club house in the background?