The monthly cost of buying a home — which includes mortgage payments, taxes and insurance — jumped 14% between July 2017 and July 2018, according to a report released Thursday by Realtor.com. Comparatively, it only became 4% more expensive to rent a home over that same period.
2 Likes
I heard this was the sign for peak. The cap rates have squeezed so much, makes renting a bargain.
Renting > owning for houses 2M and above.
Correction: 1M and above, not 2M.
1 Like
No I think for 1M buy still beats rent.
1 Like
Um… that’s because you haven’t bought anything over 1M yet. You need to experience it to get a good idea.
1 Like
If you put $1,000,000 house price with 20% downpayment 0.1% home insurance, monthly payment is about $5200.
Out of this, $1000 is principal (at the beginning). That means pure cost is $4200.
Most of $1,000,000 houses are rented at $3500 or less.
Thus, even after putting $200,000 downpayment, you are losing money ($700 per month) compare to rent.
Does this mean that rent price has room to grow?
I think it’s about 4k rent for a 1M house. But it’s close to break even.
3beds/2bath SFHs in 1-1.5M neighborhood are rented around $3500.
I wonder if rent would go up to $4000 in such neighborhood soon due to sluggish housing market.
1 Like
I’ve been thinking this for a while. As of today, buying a house in BA makes no sense if it were not for appreciation. If we think there’s room for appreciation, there should be room for rent price increase as well.
People are typically (in places like NY etc) used to paying 50% of take home pay as rent. The current rent in South Bay is nowhere near that level.
- Younger techies: can pay $3000 without touching the RSU.
- Mid level techies: can pay $5000 without touching the RSU.
But if they buy a house, most people use RSU money for downpayment, and some even use it for monthly expenses. If they’re getting mortgage with the expectation of using RSU money for monthly expenses, they shouldn’t have any problem doing so while renting. It’s much safer: i.e. you’re not stuck paying that rent for 30 years, and rent prices will go down if the market crashes.
FWIW, fancy condos in Rincon Hill rents for $3500 for 400sqft studio (plus $500 for parking). I see so many of these young techies renting there.
1 Like
Using RSU to pay down payment is the same as shorting the stock market to long the housing market.
I don’t think that makes financial sense.
1 Like
We like to think engineers are mathematically savvy, but I’ve observed the opposite. These techies are horribly trained in finance. 
1 Like
But most of techies to do this anyway and that’s why real estate market shot up past 5 years.
There are many people who just prefer real estate over stock (like me).
2 Likes
Because you are not factoring their future compensation. They are. Otherwise why would anyone buy 10M$ house 
I suspect we may be hitting the limit and that’s why we are seeing some sluggishness. Will see more data in the next 2 months.
Not everything is financial optimization. Marriage is an exampl3
What? Of course it is. Most divorces are due to financial woes. Should have done better planning before deciding to get married…
1 Like
That’s why so many marriages fail. 
Two biggest sources of disagreements among couples: kids and money.
1 Like
I agree there are more reasons to spend big money on a primary other than financial reasons. Pride of ownership is a real thing despite many people making fun of it. You feel like million bucks (literally) if you own. There’s a certain peace of mind that comes knowing where you will live in the next 10 years.
But even accounting for all that it’s difficult for me at least to justify spending 2M on a house. Either a big loan or a big down payment comes with too much financial sacrifice.