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For the record and when people go back to these posts, you might want to change conscious to conscience.
In some ways and in some places owning is better than renting, especially with rates the way they are. The cost of the option of moving when a lease is up is non-zero, as well as other costs relative to owning. There are areas where today the cost to own is much lower than the cost to rent, and this is across property quality/size points. There is also the benefit of being able to customize a home you own - the people who bought our house finished the basement and have put > 10k into building a large backyard patio area.
That said, for many people renting is better than owning. Also for ALL people renting is better than owning when the cost to own is significantly higher than the cost to rent (some premium is justified).
There is also the issue of how long someone will live in an area. There are high mobility areas - lots of people move in and out CA & FL are two. There are also areas of lower mobility. If anything there should be less encouraging to buy in higher mobility areas than in lower mobility areas, but the opposite happened.
As far as I can tell, rents in what I call “non-prime” areas (for example, the Inland Empire) tend to (now) be higher than typical monthly expenses of owning (payments, insurance, taxes, HOA fees, repairs, minus tax benefits). If you live in such an area, have decent credit, enough money for at least a minimum FHA down payment, and plan on sticking around for a least a few years, renting just seems silly. This isn’t true in “prime” areas (Irvine, or even most of LA and Orange County), of course.
My area is central NC, so I’m not sure how the IE relates to us. However, with an area like the IE where you had significant overbuilding there can be renewed downward pressure on prices. This is less of a problem the longer your owning/residing horizon. But if someone is looking at a short-term residence, even at higher monthly costs, renting probably wins out.
I think a significant part of the country has reached rental parity, and some areas even a reverse parity. I just can’t seem to resist that 1300sf sfr with $20 HOA in Vegas that’s selling for $100K. Even at no down that comes out to $850/mo total outlay, whereas rental on it would be $1000+.
That said, mobility is obviously a large factor, and frankly I don’t understand the contradiction in public psychology that it is still preferable to own when the trend for years has been towards greater mobility.
My brother rents a house in Hesperia for $1350 per month. It was purchased for $140K. An identical house down the street can be bought for $115K right now. Monthly payments with 20% down would be ridiculous compared to the rent.
In those cases, if you plan on sticking around, it’s cheaper to buy.
Orange County… not so much.
chuck
Thats funny because the condo profiled is easily at or below rental parity in Irvine at $2130 a month.
With 20% down.
That’s 104K plus closing costs.
“at rental parity” to me is not good enough to invest money into. I need superior returns or I’d rather not commit my money.
But, you’re welcome to make an offer and get it done.
chuck
PR: “Thats funny because the condo profiled is easily at or below rental parity in Irvine at $2130 a month.”
Yep, it is. *IF* you’re willing to toss well over $100K of your own money at a 1970’s condo that backs onto Irvine Blvd, that is. How many people with that kind of money in the bank are willing to move into a condo? Even in Irvine, that’s a stretch.
If you move over to FHA financing, this property doesn’t hit rental parity until it drops to $480K.
We’re gradually reaching rental parity on the condo’s and less-desirable SFR’s *IF* you have 20% down. The rest of the market isn’t far behind, but 20% down isn’t the norm. FHA is the norm.
-Darth
Exactly,
You get rental parity on a dump like this throw-back from 1977.
Pay the premium for newer product and better location.
FHA is not the norm in Irvine. I haven’t seen an update on current DP statistics in Irvine, but last data set I saw had median Irvine DP at 28%. Maybe someone has an update, the norm in Irvine is definitely not FHA 3.5%. The norm is greater than 20%.
Interest on the down payment is reflected in the rental parity calculation.
DP’s are much greater than 20%
Those guys are delusional
Somebody who is trying to make a profit needs to be able to buy a place at a much lower price point than somebody just doing a rent vs. buy equation, obviously. Vacancy, tenants not paying, tenants trashing the place, advertising costs, etc., add to the costs of being a landlord beyond that of an owner occupier.
I’m sorry, but I don’t have much confidence in the “Monthly Cost of Ownership.” The ‘hidden equity in payment’ disappears when you factor in transaction costs when you sell and factor in the likely possibility that you won’t be able to sell for more than what you paid.
My understanding is that sales volumes are low and a good number of the sales in Irvine are all cash. So wouldn’t the all cash sales inflate the DP number for Irvine. Could you break out the all cash sales from the sales requiring financing to see what the real DP % is?
“For the record and when people go back to these posts, you might want to change conscious to conscience.”
Done. Thank you.
The average inflation of home prices in Southern California over the past 50 years has been around 4.5 - 5.5%, not 3%.
This condo has an appreciation of 4.4% per year, yawn.
Up until 4-5 years ago that was at 9%+. Even before the kool-aid drinking it was around 7% in SoCal. I think IR’s point was that this can’t continue, and from now on we should expect more like 3%.
The 4.5% - 5.5% growth is in fact a reflection of job growth and income growth in Southern California over the past 50 years which has in fact been greater than almost every other region in the US.
This is not speculation it’s reality. The condo profiled is not over priced at or below rental parity, but it still could drop in price. Over the long haul I expect trends to continue as they have for the past half century. Hitch your wagon to a prime area with jobs.
I would not be speculating on Job growth in a region with little future promise, poor climate, poor education, and poor natural resources.
What pipe are you smoking?
show me a house that appreciates at 4.5-5.5% per year, every year over 50 years that doesn’t involve inflation at 4.5-5.5%.
I still haven’t found one that’s not a wishing price.
Chuck
Exactly, real inflation is reflected in that real growth.
Planet Reality, per usual, resides on planet imaginary. He will always believe that there is something “special” about Irvine. I have lived in NYC, Santa Monica, and Minneapolis, and spent significant time in Chicago and Miami. These places are indeed special. Irvine, au contraire, is not. It is a bland, oversized suburb of nothing. Keep drinking the kool-aid, though, because you’re the last of the entertaining deluded posters to this blog (after they used to flock here in hordes from 2006-2008).
Bottoms up!
I might as well buy powdered milk or guns. At least they appreciate respective to inflation, right? That seems to be a better investment than real estate.
Chuck
Irvine is a bland suburb.
It’s a bland suburb with a great climate, great schools, and wealth of good jobs. It’s a bland suburb that people choose to raise their kids when considering other regional suburbs.
It’s not NYC or SF. Both regions have more high paying jobs despite the fact that NYC has a lower median income and SF median income is close to the same. Of course SF and NYC both have much higher rents and much higher house prices compared to Irvine.
Irvine is special in it’s blandness in a sea of other regional suburbs. There are but a handful or regions in the US that have more high paying jobs than the Irvine / LA area.
These “Irvine is bland” arguments are tired. The market has spoken…
Could not agree more, well said. I just don’t get what is so special about Irvine that I would pay $520k for such a piece of crap. Please spare me the school and the safest place in the US PR that the Irvine Company is pushing to justify their ridiculous prices. There are hundreds of other regions in the US with the same benefits but half the price point! The only reason keeping me here is my career but I will leave as soon as I can get the next promotion somewhere else…I also don’t see where all the highly paid jobs are. Real estate and subprime financing imploded, leavening thousands of highly paid people unemployed. Law firms, accounting firms, banks everyone was and is laying off people. There are not enough $200k jobs (and that’s how much a household has to make in order to afford a $600k house without taking on too much risk) around here to support these price levels.
Home prices outpace inflation when interest rates fall from the high teens to the low 4%s over 30 years.
Inflation sends wages upward over time and last i checked, wages do not keep pace with the price of goods/cost of living. Real growth? mmmm.
Prior to the real estate bubble, it was .COM everywhere in Irvine. I remember in 1999 seeing all sorts of new signs popping up on buildings with company names all ending in .com.
I disagree that “Irvine is bland” argument is “tired” based on home sales, as there is a significant percentage of the population that is bland as well. If you’re talking culturally, aesthetically bland then it is a good observation. Plant R’s points on why Irvine is great are valid, though very “bland” points. I still disagree with the jobs thing. A lot of the jobs in the area have sort of an ambiguous importance…nothing critical, and times change quickly.
Rent vs. owning, or renting vs. borrowing.
With 3.5% or less down and walkaway loans, it makes financial sense to “borrow” instead of renting. If you can take the hit to your credit score, be a member of the squatter’s club…. I don’t know how long the govt/banks will allow continued squatting for those with govt backed loans and near break even equility.
I agree with PR this time on job growth: “would not be speculating on Job growth in a region with little future promise, poor climate, poor education, and poor natural resources”
Quick money is made or lost in those area—boom and long bust. Look at all the ghost towns.
As for learning from the subprime and bad loans. The banksters did learn their lessons. It’s not my money at risk when the govt will bail me out. I collect from the top, the middle and the end. I don’t risk personal funds. It’s like going to Vegas and collecting all your winning and having the house cover all your losses.
We never considered the benefit of squatting when evaluating whether to purchase/finance a house.
We would only squat if we ran into serious financial difficulty; but the opportunity to live in your home for ~18 months for free is a huge benefit!
The 18 months of squatting can be viewed as additional unemployment insurance for helping the politicans and banksters. If you rent and don’t pay, you will be out in less than 2 months—your not helping the economy, i.e. banksters. Some of the high negative equility squatters that HELOC/Refin are going on 4 years with money to burn. Your money, so what the .....
Remember, buy before you’re priced out of the market. I’m waiting to be priced in the market.
Financially, it make sense to borrow at 96.5% to 100% finance with the walkaway option, but it just doesn’t sit well with me.
That’s why the world considers me Foolish.
Designer Handbags…
I used to scoff at the idea of buying my wife a $3000 purse until I saw this chart:
Chanel prices vs. US stock market
So, is there a way to collect ‘Mint’ handbags so that there is no depreciation? Kind of like mint coins? I think watches are in the same category, I bought one 8 years ago and now it goes for twice the price…
Irvine Renter, check this HB house out, 2 years on MLS before a price drop!
http://www.zillow.com/homedetails/16205-Whitecap-Ln-Huntington-Beach-CA-92649/25302470_zpid/
Ha ha ha.
I love when they list a house, it sits forever, then they get a new agent, then they list it at the exact same price, and it sits forever.
I think some people don’t really need to sell. They list at a high price and will sell it if somebody is willing to buy it at their dream price, but if not, no big whoop. How else can you explain all the listings that have been on the market for hundreds of days, even years?
Actually, it looks to me like someone who desperately underwater from buying near peak:
10/26/2010 Listed for sale $1,100,000
08/22/2008 Listed for sale $1,439,000
12/01/2006 Sold $1,435,000
It’s in the Harbor, but for over 1 mil I would want to be on the water with my own dock. The house is still listed at 2007 market vaule; in 2000 it was $750K and I think that’s what my strike point would be. It will take another three to four years to get there. Of course, after Jerry Brown gets electod, I expect the housing crash to really accelerate as he sucks up all the moonbeams holding prices up.
I agree with all of that, unfortunately, except for Brown. He doesn’t strike me as the ‘let the prices fall” guy.
I’m looking at 92649 but the volumes are so low, it could be a long wait to find my ideal place.
When will a group of people who are in foreclosure man up and say they were wrong as well, and that it wasn’t just the lender’s fault?
Simi family again locked out of their foreclosed home
By Stephanie Hoops
Posted October 26, 2010 at 4:18 p.m
Sheriff’s deputies evicted Jim and Danielle Earl’s family from their Simi Valley house Tuesday morning and turned it over to the new owner, Thousand Oaks-based Conejo Capital Partners.
The 11-member family claims they were wrongfully evicted after a foreclosure, and a few weeks ago they forced their way back into the house. Relying on advice from their lawyer, Michael T. Pines, the Earls have vowed to re-take the house again.
The family wasn’t at home when Ventura County Sheriff’s Department deputies arrived Tuesday and changed the locks. They had spent the night at a rental house. But Tuesday afternoon, Danielle Earl and two of her adult children— Michael, 23 and Shaundel, 18 — went to their house on Mustang Drive and spotted some of their things in the driveway. A sheriff’s eviction notice and a giant “no trespassing” sign hung on the gate.
They left to call their attorney, and when they returned, Danielle Earl said her things were no longer in the driveway. In their place was a big, white storage bin and she assumed their belongings were in it.
“Apparently we’re being re-evicted from our home,” she said, referring to the fact that they were evicted in July as well. “In my opinion, they’re stealing my stuff out of my house.”
Pines called the removal of the family’s belongings “completely illegal” and said he would send armed guards to assist a locksmith in helping them change the locks again. But no one came to the home and by 5 p.m. Danielle Earl said she was leaving.
Simi Valley Police Lt. Joe May said that since the property had been foreclosed and turned over to the legal owners, the Earls will be considered trespassers, and if they try to re-enter the home they will be arrested.
The house is in the 5800 block of Mustang Drive. The Earls bought it in 2001 for $539,000 and refinanced in subsequent years, pulling the equity out and resulting in debt of more than $1 million, according to county records.
Bravo!
It’s probably time for these folks to stop listening to Mr. Pines!
LOOK! They managed to find a rental! GASP!!! These idiots do know how it works after all!
could i shoot these people if they trespass on my property trying to break in?
just a grazing shot to the behind.
520k is highly unlikely for this one. The neighbors under contract in the area are both listed in the low 300’s with another one that can’t sale in the high 300’s. The last sale in the area was 406k. Granted this one is a little bigger but they probably won’t make much more (if any) than their last refinance amount.
Why is Jacob Kosoff best represented by a dog-headed chimpanzee?
IR writes:
“All the online rent versus buy calculators—with the exception of ours—are designed to ignore costs and exaggerate benefits in order to induce people to buy.”
Yes, but your calculator is still broken (see the comments on http://www.irvinehousingblog.com/blog/comments/last-remaining-hopes-crushed-homedebtors-defend-home-ownership/).
Attorney Michael T. Pines is DESPERATE to get his failing law practice (1 year old) on the map and get more business. Michael T. Pines is calling the MEDIA to come to the properties he’s breaking into to PROMOTE himself and make a spectacle of his unsuspecting clients.
Michael T. Pines is bankrupt, he can’t save HIS OWN 6 (possibly 7, per the North County Times) foreclosed properties, and it’s important to note: he’s not breaking into his OWN foreclosed properties. Attorney Michael T. Pines LOST HIS OWN HOME and LAWSUIT against EMC Mortgage (see decision below); and is about to lose his 6 other properties which he’s trying to protect in BK. Michael T. Pines not a foreclosure RELIEF expert, he’s a FORECLOSURE expert.
—-
I just read this online via this link:
http://gadblog.srcar.org/2010/10/29/another-real-estate-scam-to-beware-of/
“Recently, a judge called him out for filing frivolous lawsuits and slapped him with a $16,000 judgment that he owes one of his clients for wasting their time and money.”
—-
Michael T. Pines filed Chapter 11 Bankruptcy on January 11, 2010, he miserably represented himself and it was converted to a Chapter 7 Bankruptcy. Just GOOGLE “MICHAEL T. PINES” to see his background. To date, Pines has NEVER won a case against a mortgage company. Pines sued EMC mortgage regarding his own foreclosure and LOST. The judgments can be found online under UTAH COURTS or these links:
ecf.utd.uscourts.gov/cgi-bin/show_public_doc?2008cv0137-305
and here:
ecf.utd.uscourts.gov/cgi-bin/show_public_doc?2008cv0137-178
MICHAEL T. PINES has TWO Restraining Orders against him in San Diego County. You can find his Restraining orders on the San Diego County Sheriff’s website. Just type in “PINES” under *Restrained Last Name*. This is the Sheriff’s website:
https://apps.sdsheriff.net/tro/tro.aspx
Pines’ foreclosed properties are as follows:
1. 5 South 500 West Unit #1216, Salt Lake City UT 84101
2. Case # 09-81657 - 1273 22nd Street, Ogden, UT
3. Case # 09-81658-1246 South Meadow Run, Saratoga Springs, UT
4.Parcel #010610036- 2336 Madison Ave. - Utah
5.732 N. Coast Highway 101, Encinitas, CA 92024 – Law office building!
6. Case # 1171481-21 Murphy Drive, Bella Vista, Arkansas
Advice to the Zepeda, Bolanos, Earl & Rocha families:
1- STOP drinking the Michael T. Pines Kool-Aid and SUE MICHAEL T. PINES for his insane legal advice.
2- File a California Bar Complaint against Pines. His bar # is 77771. You can get the form here: http://www.calbar.ca.gov/Attorneys/LawyerRegulation.aspx
3- File a FEE DISPUTE with the State Bar of California:
http://www.calbar.ca.gov/Attorneys/MemberServices/FeeArbitration.aspx