In the 1960s, “building costs were under $10 a square foot and monthly shell rents were 10 cents or less per month. Today we have the same land selling for over $100 a square foot, building costs of $300 or more per square foot.”
Building cost rises 30x since 1960s, about 6% p.a. comparable to property price appreciation of 6-8% p.a.
Why I keep telling everyone to get into MFH in the bay area… existing stock can be bought for less then what it costs to build new.
Still waiting for your post about your numbers.
Hey @Boolean what’s your take on Austin nowadays? Notice you seem to be placing bets in the bay instead of Austin nowadays?
What is MFH?
Answer it on Austin thread for prosperity.
From the article
Federal tax law changes also played a role. Homeowners can now deduct only up to $10,000 in property and income taxes combined. Plus, the amount of mortgage interest deduction folks can write off on their taxes was reduced. In pricey areas like San Jose, that can translate into a big financial hit.
I still question how big a hit it actually is for home buyers. Most people don’t buy until they have kids. Those Bay Area buyers used to earn too much for the child tax credit. Now most will qualify. That should offset the change in deductions.
It’s a huge impact for high income singles and couples without kids, but they aren’t a significant percent of home buyers.
I’m saying housing is no longer something you Have to buy immediately. All tax benefits are available to renters too. This applies more specifically to Bay Area where the advantages of housing and state tax deductions have been negated because of high prices of RE.
Precisely. It is not just about affordability before and after the tax law…it is about buy vs rent before and after the tax law. Renting has become more favorable relative to buying because of the increase in the standard deduction, reduction in the MID and SALT deduction cap.
Isn’t that good for landlords then? Plus, landlords can deduct all mortgage interest and property tax.
Tax deduction should not be a concern in home buying decisions. Many country has no tax deductions for homes, people are still buying houses and even speculate like crazy.
If any impact, it should be very short term and it’ll quickly back to normal. It’s only a one time effect
It is good for landlords and in principle should increase rents. Plus there is the 20% pass through deduction that some (larger) landlords can take advantage of.
Many folks in HCOL areas would actually be better off doing a house swap i.e. renting their houses to their neighbors and vice versa. It’s gets you around the SALT and MID limits so you can maximize your tax deduction.
New startup idea right there.
House swap is a fallacy. Landlord never had a mortgage/property tax deduction. Only a primary homeowner had and has a mortgage and property tax deduction.
A landlord can use mortgage interest and property tax as a business expense to offset rental income. For a higher income person, house swap will not bring any tax benefit, and will actually lose 500k/250k tax benefit when selling.
I think that house swap is a laughable idea that makes no sense. It can be talked about in a joke to express the disappointment with the limit of SALT deduction, but it’s making no sense actually
I see you had seriously explored this house swap idea
IMHO, the idea of renting in SV, buying moderately growing high cap rate out-of-state rental is a worthwhile idea to explore.
Certainly makes sense in Tahoe. Especially if you have a rent controlled apartment in SF. Can have a vacation home for free with tax savings and VRBO.