It's not just San Diego either - it's worldwide. Rejoice renters, and owners who sold and now bubble-sit. Rejoice.
Hat-tip to HP'er Mark for the link
San Diego renters often express frustration at having missed the housing boom of a lifetime and fear that they will now never be able to purchase a home.
Well, I think they ought to buck up. Relatively speaking, they are getting an amazing deal.
Even as San Diego home prices headed to the stratosphere these last few years, local rents grew at a fairly subdued pace. The end result is that it costs quite a bit more to buy a given home than to rent that same home.
What arguments of this type fail to take into account is that homebuyers are themselves renters -- it's just that instead of renting homes, they are renting money from the bank. And when homes cost so much that the "rent" on the money required to purchase a home -- otherwise known as the mortgage interest -- is more than the rent required to simply live in that same home, aphorisms like these cease to apply.
Of course, when used in the manner above, the word "equity" does not refer to wealth that is saved by avoiding excessive carrying costs. It refers to wealth gained by owning a home that is increasing in price. That's a great plan, as long as homes are actually increasing in price -- but they are not, nor should they be expected to for years to come.
May 25, 2006
"San Diego renters getting an amazing deal"
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20 comments:
I guess the more times it is explained and the more WAYS it's explained the more people will understand.
And, once they understand, they can choose to buy or not to buy based on the REAL costs and benefits rather than the BS that has propelled this insanity to where we are today.
Here is Florida The numbers are a bit different
$500,000 homes 6.6% apr 35% fed tax rate -- Rent $2,100/ month
Principle $ 443
Mort Int. $2,750
Prop. Tax $ 950
Insurance $ 250
HOA $ 150
Mort Deduct $1,000
Monthy Cost $3,540
Owner Pays $1,440 - $440 Principal Pmt= $1,000 extra per month than renter = $12,000 per year
Hey, wait a minute, Jack Tripper lived in Santa Monica, not San Diego. Just showing my true geekdom.
I rent outside of Phoenix for about half of the carrying costs for the house at current "prices." Or rather, the peak late 2005 prices. On a positive note, the owner is not a f'd borrower because he bought 4 years ago and never heloced.
I plan to buy again when the bubble fallout has cleared; hopefully in '07.
Now THERE'S a way to make that high mortgage payment....you and two chicks all chip in. I'm pretty sure none of those three would understand the problems with an option ARM, especially Suzanne Somers.
Another parallel with the 80's housing boom ...
While flipping through television listings, I noticed that a movie called "Open House" (a late 80s horror flick) has been added to the rotation. Apparently, it's timely again.
Open House: A Los Angeles radio therapist and his real-estate agent girlfriend (Adrienne Barbeau)hear from a slasher with a housing problem.
IMDB User Comment: A serial killer kills wealthy real estate agents in weird, sadistic manners whilst complaining about the injustice of such people in society on the radio to an over-confident radio psychologist....
Replace "radio" with "blog" and "radio psychologist" with "blogger" and this movie would hit very close to home.
i should watch out for sadistic realtors?
In Three's Company, Jack Tripper was originally from San Diego. They make references to it frequently. Great pic!
I'm from San Diego. I pay 1300/mo for a completely renovated and remodeled 2/2 condo (granite, crown molding, plush carpet, custom paint, new appliances, pool, spa, fitness room, clubhouse, free cable, etc.) Just yesterday I got a "why rent when you can buy?" flyer that said I can get into a 1/1 for about 1500/mo and I'm sure that's with all kinds of creative financing and doesn't include the HOA fees and property tax. I want a house of my own but I'm young I can wait.
San Diego is at the heart of riduculousness - we have the lowest wages, smallest companies, and most illegal immigrants in the most highly inflated housing market. My whole generation is SOL...most of us missed the biggest housing boom ever and the ones who didn't bought a house that will send them into bankruptcy. It sucks wishing for a crash, but it's the ONLY WAY for people aged 24-34 to buy a place without risking our future. BURN, BABY, BURN!!!
"My whole generation is SOL...most of us missed the biggest housing boom ever and the ones who didn't bought a house that will send them into bankruptcy. It sucks wishing for a crash, but it's the ONLY WAY for people aged 24-34 to buy a place without risking our future. BURN, BABY, BURN!!! "
My thoughts exactly Anon. I too am in that age group and had just started my "high" paying job in San Diego when the housing boom took off. I will be forever priced out of the market (or so says my baby boomer idiot father) whoa is me. I just have one question...who's going to buy your overpriced s--tbox house and the other 2 properties you own when you retire in 3-5 years?? There aren't enough of us to go around. This will all end badly in a few years. Just wait...Meanwhile, my rent just went up $20, the first increase in 2 years and I locked in another lease for 9 months in my 2 bed, 2 bath townhome with a backyard for my dog, 5 minutes from work in La Jolla. I can't really complain.
San Diego appreciation has avearage only 5% in the past 2 years.
This is a great website to find info for the area:
http://piggington.com/
I love the picture of Three's Company. . .
NOW here is another thought. . .if people start to double and tripple up to pay mortgages, the number of households will decrease. We saw this during the dotcom meltdown in the Bay Area - people moved out of their aparments and condos and slept on sofas in friends apartments. . .the friends were glad to have the extra income. . .this means more rentals on the market, and fewer households to buy new homes.
Here in Westlake Village, CA there are several 4-bedroom homes on the market listed at $950K-$1.15M and a 4-bedroom rental in the same neighborhood that has been empty for a while. Asking rent is $3000/month and they'll probably take $2800 or so. Anybody care to do the math?
"My whole generation is SOL...most of us missed the biggest housing boom ever and the ones who didn't bought a house that will send them into bankruptcy. It sucks wishing for a crash, but it's the ONLY WAY for people aged 24-34 to buy a place without risking our future."
Are you serious? You'll have MORE opportunities than any generation in history. The boomers are retiring so there will be lots of cushy jobs that can't be outsourced opening up. They'll also be going bankrupt and dying soon and leaving all their absurdly overpriced toys, vacation homes, etc. around for the taking. Unlike them, you understand technology so you'll be able to live anywhere you want instead of having to go to an office in a city every day. Unlike them, you'll understand the degree of the boom bust nature of the new economy so you'll be able to profit from booms AND busts. Traders love instability; investors hate it. You'll be the trader generation. The biggest problem with twenty-somethings I see (and I spend quite a bit of time with them at a university) is a lack of basic education. Universities stopped teaching a couple of decades ago and rigor was replaced by the self-esteem religion. If you can overcome that, be a bit opportunistic while maintaining your ideals, you'll do fabulously well.... Oh yeah, sea levels will rise significantly, storms will wreak havoc, and Bu$hco has pretty much guaranteed WMD attacks on major US cities... but you'll deal with it.
I live in a 1.8 million dollar home and pay 3k in rent. Do THAT math! If this house sold today, the property tax, homeowners insurance and assoc. fees would just about equal my rent!
Nothing beats a good blogging trip, but I think I have to get back to work on my own real estate sites. May as well stop on a high note, which your blog seems to be. Thanks for the read. Visit my site if you have a chance.
they were in Santa Monica CA (LA) Not San Diego.
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