Irvine Dream said:
i1 said:
We are pretty close to rental parity on entry level / 1st time buyer products and that's usually a floor for irvine prices. Owning is cheaper in some cases. I think course correction is over.
I am not sure whether we have reached rental parity yet. We have given up (well almost, still hoping Standard Pacific Legacy homes will come in at around $1 million) on our move up primary residence since we couldn't really find anything we will be happy to live in within our price range. Then we started exploring purchasing rental properties. Even with 30% down I can't seem to find that will atleast break-even when allowing for management/repair etc
I'm pretty sure we're right around rental parity. You have to look at it as someone wanting to live in it owner-occupied.
650k resale townhome will rent for around ~$2,800/month in Irvine
20% down = $130k down and $520k mortgage
+$1,625/month = monthly interest payment based on 3.75% 30 yr fixed loan
+$625/month property taxes
+$250/month Mello Roos
+$275/month HOA
+$50/month homeowners insurance
+$325/month opportunity cost on your down payment assuming safe 3% return on $130k down
-$750/month tax benefits based on 30% marginal tax rate and deduction of interest, MR and property taxes
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=$2,400/month true cost of owning vs. $2,800/month to rent the same home
It makes sense to buy an entry level home vs. renting. IC is right though. It is too hard to get a mortgage, but I think entry level homes are a good buy right now.