patrick.net

There are far too many assumptions made in most of the rent vs. buy calculators - even the better ones.

Yes, your payment will remain $3000 / month - for principal and interest. Property taxes will (in all probability) go up over time.

Putting that aside - lets say you have a choice of $3000 a month for a mortgage or $1300/month for rent. If you continue to rent, the calculators assumption is that you would invest the difference ($3000-$1300 = $2700).

That's where the real math gets tricky. If you can get a decent rate of return on the $2700, then you may be better of renting - but right now good rates are hard to come buy, and the higher the rate, the larger the risk of loss.

With rates as low as they are, it is reasonable to expect them to rise at some point in the future
But the calculators only allow for a fixed rate of return on the invested money.

In short there are too many unknowns.

IMO - a better metric (the one that I use) is to first look at the time frame in which the monthly cost of renting approaches that of owning, intentionally neglecting all other factors. In other words, if my rent is $1300/month increases at 4% per year. how many years will it take until my rent is $3000 a month. I don't have a spreadsheet with me, but it works out to something around 15 years.

A whole host of things can happen in that time. Prices can go down, prices can go up, jobs can change, family sizes and situations can change, I may be dead... the possibilities are endless.

So rather than try to project 15 years out, I next look at the next six to twelve months - a far more reasonable time frame. Prices will not go up much (if at all) - if they do, I certainly will notice as I regularly watch the MLS for my area.

Although rates maybe not at historic lows, all accounts are that they will not be appreciably higher then they are today (barring anything unforseen).

Unless I suddenly find myself with another mouth to feed I should be OK - and if that happens I will have roughly nine months to prepare myself for the leap into homeownership.

So, for me the best decision is to wait, continue to save the difference, and see how this all plays out - I have plenty of time to position myself so that I can buy below my means, rather than overextending myself. For my situation, saving $2700 per month (even at

I'm firmly in the camp that buying is the best strategic choice.

Back in 2000-2003 I made the mistake of comparing my $700/mo rent with a $2400/mo condo payment -- the main mistake was including principal repayment in the comparison.

But I also failed to understand the dynamic between interest rates and prices

Back in 2000-2001 rates were over 7%, which was serving to depress prices somewhat. Had I bought the $320,000 condo I was looking at, I could have refid down over the past 10 years to a 3.88% 15-year rate now, I would owe around $150,000, and have a monthly housing expense of $1600/mo, or $900/mo not counting principal repayment, and the monthly interest burden would be ~$200/mo in 2015 and $125/mo in 2020.

Oh, and the condo would be worth over $400,000 now.

But that was 2000-2002. Buying during the bubble 2003-2007 would have of course been a mistake.

Where prices go from here is difficult to know. I think interest rates are going to have another leg down in response to a real sh--ty economic outlook, which makes buying now not a bad strategy.

But that's not certain, interest rates could be pushed up by larger forces while incomes remain stressed (by unemployment, higher energy costs, higher taxes, and/or higher import prices).

My basic rule of thumb is as long as prices are falling the amount of my rent (5%/yr), renting is better.

Ideally I'd like to buy when rates are 8% again, but if the situation is anything like Japan's we won't see 8% mortgage rates in our lifetimes.

Um...East Coast Bubble Boy, sorry to be a persnickity school teacher, but $3000 - $1300 = $1700, not $2700. Not that that was your point, necessarily, and you do make some good points about how unexpected life and financial/economic events can alter future projections in the rent vs buy scenario.

Yeah, the payment will remain the same throughout the period.

Buying home as a hedge against inflation? Yes, it can be.

For instance, think about a Fairfax condo at 140K back in 1999~2000. Now it is selling for 320K, renting for $2000/mo. The owner who bought it in 1999 is now basically living at 1/2 the cost of renting. This happened because of the inflation in home price. Renters need to pay "current" rent which is $2000/mo due to inflation, but the owner is paying less than $1000, which is the same old rate.

Buying a home is smart decision when the price is low and the market trend is going upward. But it could be exteremely stupid if the situation is the opposite. You don't want to be ended up like those people who bought home at peak price back in 2008. For them, it's not a hedge against inflation. It's the debt hole they digged themselves.

Bethesda MD area is expensive place. $1300/mo sounds like one bedroom apartment, and $3000/mo mortgage sounds like 550~600K home, which is plain old home in the area. Comparing two is not fair though, I can see why since there're not much choices up there in Bethesda. As far as I know of, Bethesda home price has been high, and still high. Is it like 15% decline from the peak or something like that up there?

The question is, can you expect the same good things will happen to you in the future in this situation?

I kind of doubt about it.
For the area like Bethesda and Fairfax, I think about 2003 price level is fair, but it still is holding at near 2006 level. Not much differ from the peak price. I'd say wait if you don't have absolute reason to buy.

Of course, it won't be a big problem if you are one of those high income earners, since you can afford it anyway. But as you said, we either are slaves of the landlord or the bank. So why choose to pay more?

seaside says

We either are a slave of the landlord or the bank, we have to pay to the master. But why choose to pay more?

Being a slave to the LL is permanent, to the bank is just a 15 year commitment @ 3.88% (2.5% with the interest deduction) currently. The longer you plan on living past 2025, the more "paying more now" makes sense.

If history is any guide, rents will be $3000/mo in 2025.

Troy says

Being a slave to the LL is permanent, to the bank is just a 15 year commitment @ 3.88% (2.5% with the interest deduction) currently. The longer you plan on living past 2025, the more paying more now makes sense.

Opps. I was editing my post.

Yeah, that's one of the reason why buying is better.
But Navas, myself and you are renting for the same reason. Home price in the area like Bethesda and Fairfax is still high and the situataion is not clear enough to pull the trigger. In that case, we're gonna choose less expensive way and wait to see what's gonna happen. As we lost the chance to buy back in decade ago, and we won't miss next chance if it comes to the area where we live. Believe me, I am checking my ammo every now and then, and will tell local guys buy when the local situation is right. :)

Buying is clearly cheaper than renting now, especially if you can afford a 15 year mortgage and live in state and earn enough where the income tax deduction is valuable.

Now that doesn't mean investing in a house is a good idea now, it depends on facts and circumstance. A 15 year mortgage requires accelerated repayment in a situation that is pretty illiquid. Not evetone likes to put that much resource in housing and I think it is a good idea to wait. Interest rates and prices are not going anywhere soon anyway.

One of the big thing holding real estate transaction back is the difficulty in borrowing. Once lending standard eases and the job sitaution stabalizes, I see real estate taking off again in 2011. The pent up demand will be unleashed eventually.

Really, buying is cheaper than renting? I seriously disagree here. Lets look at some assumptions:
Housing prices "always go up"
Rent "always goes up"
Wages "always go up"
Standard of living "always goes up"
"My kids will have a better future than I did"
"I'll sell my house and retire!"

Really?
Housing prices traditionally went up in line with inflation. If we were to draw a line @ 2-3% from the early part of the century and trend it out, we still have 20-30% devaluation EASY to go until homes are back in line with that metric.
Rent is much more flexible in pricing. I've been seeing a LOT of rental properties here in Austin (where the economy is "GREAT") dropping in prices like a stone, housed and rental properties being foreclosed on and units sitting empty. Speculators drove up cost of living for everyone in the lower and middle classes. This means people are doubling up, moving back in with family and rental prices are sagging across the board.
Wages have remained stagnant for over 20 years. The only reason we were able to have the perception of better increasing wages were housing appreciation, transition of pension funds over to 401ks, offloading of insurance on to the employee, grain subsidies (cheaper food), and offshoring of expensive labor. This in turn increased corporate profits which made everyone think the system worked.
Standard of living has actually declined. Our parents were happy, felt the world was their oyster, could live WELL on a single income, energy was cheap and there was a sense of community. How is now better than then? How will a 22 year old college graduate w/50k in student loans, no job prospects, a crappy market describe his standard of living?
They have a dismal future indeed because their parents are making them pay for their HELOCs, corvettes, trips to Europe, yachts, second homes and retirement. How do you think they will react when they figure it out? How long do you think you'll be able to keep the unemployed, underemployed, formerly middle class from taking things into their own hands?
Hmmmm....

bluhat55 says

Really, buying is cheaper than renting? I seriously disagree here. Lets look at some assumptions:

Housing prices “always go up”

Rent “always goes up”

Wages “always go up”

Standard of living “always goes up”

“My kids will have a better future than I did”

“I’ll sell my house and retire!”
Really?

Housing prices traditionally went up in line with inflation. If we were to draw a line @ 2-3% from the early part of the century and trend it out, we still have 20-30% devaluation EASY to go until homes are back in line with that metric.

Rent is much more flexible in pricing. I’ve been seeing a LOT of rental properties here in Austin (where the economy is “GREAT”) dropping in prices like a stone, housed and rental properties being foreclosed on and units sitting empty. Speculators drove up cost of living for everyone in the lower and middle classes. This means people are doubling up, moving back in with family and rental prices are sagging across the board.

Wages have remained stagnant for over 20 years. The only reason we were able to have the perception of better increasing wages were housing appreciation, transition of pension funds over to 401ks, offloading of insurance on to the employee, grain subsidies (cheaper food), and offshoring of expensive labor. This in turn increased corporate profits which made everyone think the system worked.

Standard of living has actually declined. Our parents were happy, felt the world was their oyster, could live WELL on a single income, energy was cheap and there was a sense of community. How is now better than then? How will a 22 year old college graduate w/50k in student loans, no job prospects, a crappy market describe his standard of living?

They have a dismal future indeed because their parents are making them pay for their HELOCs, corvettes, trips to Europe, yachts, second homes and retirement. How do you think they will react when they figure it out? How long do you think you’ll be able to keep the unemployed, underemployed, formerly middle class from taking things into their own hands?

Hmmmm….

Best comment so far.

Here is a story about a kid like the 22 year old that bluhatt refers to.

http://www.nytimes.com/2010/07/07/business/economy/07generation.html?_r=1

Graduated from Colgate in 2008, recently turned down a 40K job in Boston.

Nivas: If you are asking your question to try and decide whether to rent or buy yourself, there is one more aspect to the calculation to consider: The payments you make on a mortgage are not the same as rent payments.

Rent is what you pay for housing while, on the other hand, a mortgage payment is what you pay to acquire the asset your home represents.

That is a critical distinction that is often overlooked but when it is ignored will skew the rest of the rent versus buy (RVB) calculation and it is left out of the equation by the NY Times calculator, as well.

Think of it this way: Say that, instead of buying a house with a mortgage, you take out a personal loan to finance the purchase of 100 pounds of gold. The payments you make on that loan are to acquire ownership of the underlying asset (the gold). That is the same transaction taking place when you finance the purchase of a home except that the bank lets you live in the house for "free" while you are paying off the mortgage.

So, somewhere in the RVB calculation, you need to account for the value of the rent you are NOT paying when you have a mortgage. That value that you receive in the form of free housing is known as imputed income and it is equal to what you would pay in rent for a similar place to live.

Of course, somewhere in the calculation you also have to account for the expenses you pay for maintaining a house and other costs you don’t have when you rent BUT a substantial portion of those costs are passed on to renters by the owners, as well; to think otherwise is not sound although there is something of a limit to how much of those costs can be passed on due to market constraints.

There are a few instances where buying might not be the most strategic move—if you plan to move in less than five years, for example, or prices are dropping like they were last year. But if you can afford the payments and plan to live in the house for at least five years, the imputed income of living rent-free will almost always offset the “savings,” if any, between renting and buying.

I am a writer and a publisher (tmgbooks). I have written extensively on financial and real estate topics and I sometimes provide coaching on issues related to personal financial management. The first point I make with those who come to me with the “should I rent or buy” question is that buying a house is like joining the military—not everyone is cut out to be a soldier and not everyone is cut out to be a homeowner. The decision to buy a house is like getting married—a big commitment not best undertaken lightly.

As a species, we often seem to want to be able to reduce big decisions to numbers when, in fact, the numbers are not the single most important consideration and they should not be for you, either. Like the decision to marry or have kids, taking on the care and feeding of a house is a big deal. Are you ready for that? Is this the right time for you? Walking away is always possible, of course, but always painful, as well. Good luck.

For you guys in west coast, Bethesda MD is like Maryland version of Palo Alto. Lots of corperate headquaters, lots of professionals and lots of over $3M houses in the area. Rockvile MD is not crazy like Bethesda though, it still is one of the expensive place in MD. Lots of research institutions and some big firms arround the area.

Average Joe got confused with housing market in that area is quite natural because neither his usual math nor our bullish/bearish opinion is working in the area like that. He will start understand what's going on once he start to earn like VP level corperate lawyers. Till then, he'd better wait and save, or look for other places for home.

Rent vs. Buy is full of complexities that should not be applied in general terms. One huge point to consider, IMO, is the cost of the mortgage over the entire term. Example: a borrower will pay approximately 3X the amount borrowed on a 30 year mortgage, making that a very bad deal for a borrower. Think about that: borrow $300,000 and by the time your mortgage is paid off you will have paid approximately $900,000 just for the principle & interest! A 15 (or better yet 10, even better CASH) year mortgage is much better because, although the payments are higher, a much higher parentage of that payment is applied to principle, whereas with a 30 year the principle is applied at a much lower rate. With straight line depreciation, write-offs, etc., 15 year mortgages also work great for income properties (provided you have positive cash flow). In my opinion, if you can't comfortably handle a 15 year mortgage on your primary residence, you should not buy a home. Being in debt for the rest of one's life (or for 30 years) never had an appeal to me. The goal of everyone, IMO, should be to get out of debt as soon as possible. Unless you are debt free, you'll always have a sense of being a slave to your debts.

RayAmerica says

Think about that: borrow $300,000 and by the time your mortgage is paid off you will have paid approximately $900,000 just for the principle & interest!

This is incorrect with today's rates. Total interest paid on a $300K loan @ 4.5% for a 30 year is ~$260K (not counting $3500 in total tax savings over the standard deduction).

tmgbooks.com says

The payments you make on a mortgage are not the same as rent payments.

Rent is what you pay for housing while, on the other hand, a mortgage payment is what you pay to acquire the asset your home represents.

That is a critical distinction that is often overlooked but when it is ignored will skew the rest of the rent versus buy (RVB) calculation and it is left out of the equation by the NY Times calculator, as well.

No, that's wrong. The NY Times calculator does allow you to input what you could get on your capital if you were to put it in something other than housing.

I'm not saying it's always worse to buy, I'm just saying that under current conditions it is clearly worse to buy in most places. You have to put in numbers and do the math, but fortunately, the loss from owning is so huge these days that the math is very simple. Renting vs buying are not even close to equal where I live in California, where rent is 3% of purchase price for the same thing. Meaning you are merely paying property tax and maintance with your 3%, and getting the use of a million dollars of capital for free! Even a 4.5% mortgage rate doesn't seem low compared to a 0% mortgage rate that renters are enjoying.

The key is the renter has huge savings to invest in anything but housing. The owner may be investing in housing, but it's a bad investment at current prices.

Patrick: Here is the calculator at NY Times:

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

There are five inputs on the sample calculation: rent (which I guess means the rent you are presently paying while considering a purchase reflected in the other numbers); home price; down payment; mortgage interest rate, and; property taxes.

Where is there a place to input the value of imputed income from living rent-free? If I am missing it, I would greatly appreciate it being pointed out to me.

The input you are referring to, I think, is the third box from the top labeled , "Down Payment," which they use to calculate the opportunity cost and is added as a cost of ownership.

The calculation using the numbers supplied by the page give you a result of breakeven on ownership at year 6 but if you add in the value of rent assuming just 1% as the value of monthly rent, the annual total value of imputed income is $21,120 and you blow renting out of the water well w/i the first year!

Are we looking at different calculators?

As to the specific case you mention in California, all real estate, like all politics is local. Last year I sold a house in San Diego for $260,000 in the Clairemont neighborhood that I had purchased in 1980 for $35,000. That house (

Renting vs buying are not even close to equal where I live in California

If you're talking MP, then yeah. But I think in 2020 a mortgage payment locked in today will be less than the rents then.

The play as I see it would have been to have bought last year when rates were 5%, refi now to 4.0%, and refi again when rates go to 3% next year.

I think if you simply project a straight line from the 2000 price through the current price you'll get the 2020 price for fortress areas.

"There are five inputs on the sample calculation: rent (which I guess means the rent you are presently paying while considering a purchase reflected in the other numbers); home price; down payment; mortgage interest rate, and; property taxes.

Where is there a place to input the value of imputed income from living rent-free? If I am missing it, I would greatly appreciate it being pointed out to "

There's the advance setting on the top right corner to tweak the assumptions even more. For example, a 1M Menlo Park does not take 0.5% to insure, it's more like 0.15%. It cost less to maintain a 1M menlo Park bungalow home than a 250K Texas mansion. The tax deduction is worthless in Texas vs, Menlo Park may be the most valuable in the country.

That's the best calculator out there, but essentially it comes done to rent, inflation and cost assumptions over a long period of time.

The key is the renter has huge savings to invest in anything but housing

At 4.5% fixed interest rates, things are different. The cost of money on a $800,000 loan is $2000/mo, add in another $500/mo for property tax and you're still under the rent, so there's not going to be an immense pool of money saved by renting (edit: I see you're also characterizing principal repayment as the home-debtor's main form of investment, which is correct but I gotta say even at today's prices real estate in the fortress is going to be the best investment around still, unless we get higher interest rates without any area wage inflation, which is unlikely since fortress buyers have pricing power wrt wages).

After 5 years the interest cost is going to be $1600/mo and if 15 year rates go under 3.5% it would be possible to refi into a new 15 year loan for the same payment as the 30 year.

The central question is what's going to happen to rents over the next 10 years. I think Props 13 and 58 are simply going to screw renters looking at the fortress areas if/when area incomes start inflating.

Anybody serious about the buy vs rent projection needs their own spreadsheet.

S---t, I should make an iPad app of mine : )

I should make an iPad app of mine : )
Oh, that's right, the NYTimes Buy vs. Rent Calculator is a Flash app. I hate to think of all those iPad users making the decision to buy right now :-)

Nivas: To better understand the concept of imputed income consider this: Australia is considering taxing the imputed income of homeowners; that is, the the government of Australia is considering taxint the money homeowners don't pay in rent.

Here is an article on the subject:

http://www.knowledgeplex.org/programs/hpd/pdf/hpd_0501_bourassa.pdf

The article, itself, is over 15 years old and nothing much came of the idea but the government is still tossing around today and the debate rages on there. So the government entities understand the value of imputed income (rent you don't pay) but taxing it is like the third rail of Australian politics apparently! R/

Yes, Bethesda house prices haven't moved down much at all. At the peak, a crappy 1950's built split level with 3bd 2ba were selling for $650k. Now you can get them for 600k. People seem reluctant to sell for under 600k. 2001 to 2002 prices were about 400 to 450k.
Thanks for your comments!

seaside says

Yeah, the payment will remain the same throughout the period.
Buying home as a hedge against inflation? Yes, it can be.
For instance, think about a Fairfax condo at 140K back in 1999~2000. Now it is selling for 320K, renting for $2000/mo. The owner who bought it in 1999 is now basically living at 1/2 the cost of renting. This happened because of the inflation in home price. Renters need to pay “current” rent which is $2000/mo due to inflation, but the owner is paying less than $1000, which is the same old rate.
Buying a home is smart decision when the price is low and the market trend is going upward. But it could be exteremely stupid if the situation is the opposite. You don’t want to be ended up like those people who bought home at peak price back in 2008. For them, it’s not a hedge against inflation. It’s the debt hole they digged themselves.
Bethesda MD area is expensive place. $1300/mo sounds like one bedroom apartment, and $3000/mo mortgage sounds like 550~600K home, which is plain old home in the area. Comparing two is not fair though, I can see why since there’re not much choices up there in Bethesda. As far as I know of, Bethesda home price has been high, and still high. Is it like 15% decline from the peak or something like that up there?
The question is, can you expect the same good things will happen to you in the future in this situation?
I kind of doubt about it.
For the area like Bethesda and Fairfax, I think about 2003 price level is fair, but it still is holding at near 2006 level. Not much differ from the peak price. I’d say wait if you don’t have absolute reason to buy.
Of course, it won’t be a big problem if you are one of those high income earners, since you can afford it anyway. But as you said, we either are slaves of the landlord or the bank. So why choose to pay more?

@Eastcoastbubbleboy
Thanks for your post and calculation. You wrote $2700 as the difference, but I know you meant $1700 :-)
Yeah, you bring in those other, non-math related variables that I was not considering. Thank you!

EastCoastBubbleBoy says

There are far too many assumptions made in most of the rent vs. buy calculators - even the better ones.
Yes, your payment will remain $3000 / month - for principal and interest. Property taxes will (in all probability) go up over time.
Putting that aside - lets say you have a choice of $3000 a month for a mortgage or $1300/month for rent. If you continue to rent, the calculators assumption is that you would invest the difference ($3000-$1300 = $2700).
That’s where the real math gets tricky. If you can get a decent rate of return on the $2700, then you may be better of renting - but right now good rates are hard to come buy, and the higher the rate, the larger the risk of loss.
With rates as low as they are, it is reasonable to expect them to rise at some point in the future
But the calculators only allow for a fixed rate of return on the invested money.
In short there are too many unknowns.
IMO - a better metric (the one that I use) is to first look at the time frame in which the monthly cost of renting approaches that of owning, intentionally neglecting all other factors. In other words, if my rent is $1300/month increases at 4% per year. how many years will it take until my rent is $3000 a month. I don’t have a spreadsheet with me, but it works out to something around 15 years.
A whole host of things can happen in that time. Prices can go down, prices can go up, jobs can change, family sizes and situations can change, I may be dead… the possibilities are endless.
So rather than try to project 15 years out, I next look at the next six to twelve months - a far more reasonable time frame. Prices will not go up much (if at all) - if they do, I certainly will notice as I regularly watch the MLS for my area.
Although rates maybe not at historic lows, all accounts are that they will not be appreciably higher then they are today (barring anything unforseen).
Unless I suddenly find myself with another mouth to feed I should be OK - and if that happens I will have roughly nine months to prepare myself for the leap into homeownership.
So, for me the best decision is to wait, continue to save the difference, and see how this all plays out - I have plenty of time to position myself so that I can buy below my means, rather than overextending myself. For my situation, saving $2700 per month (even at

@Seaside
Thanks for your post again Seaside. You make a very valid point about areas like Bethesda. But I'm wondering if demand will ever go down. Yes the economy is crap, but little effect on Bethesda home price (and it's also surrounding areas of good neighborhoods in rockville, north potomac and the like). I got it, interest rates low help keep home prices up. Government meddling also helping to keep prices up. But really, in Bethesda area, I think there are so many professionals that can afford to pay that they don't think much about it, they just pull the check book out. Unless you can keep getting promoted so that your salary competes with the likes of 2nd rate scientists, young doctors and lawyers and the like (no offense intended to any of the parties mentioned, including the 2nd rate scientists) I feel that home prices might go through another booom period as soon as this lull is over (now, I'm talking local only here).....well, we can't see into the future I guess. Wait and see does make a lot of sense for now. Thanks.
seaside says

Troy says

Being a slave to the LL is permanent, to the bank is just a 15 year commitment @ 3.88% (2.5% with the interest deduction) currently. The longer you plan on living past 2025, the more paying more now makes sense.

Opps. I was editing my post.
Yeah, that’s one of the reason why buying is better.
But Navas, myself and you are renting for the same reason. Home price in the area like Bethesda and Fairfax is still high and the situataion is not clear enough to pull the trigger. In that case, we’re gonna choose less expensive way and wait to see what’s gonna happen. As we lost the chance to buy back in decade ago, and we won’t miss next chance if it comes to the area where we live. Believe me, I am checking my ammo every now and then, and will tell local guys buy when the local situation is right.

Well, in Australia property taxes are much, much, much lower than they are in the US. In Montgomery County, MD on a $600,000 house property tax can be from $5000 to $7000 per year! In Australia, the "property tax" (known as Council Rates) on a similarly price home is about $2200 per year. So even if the Australia gov was to impose such a tax, the Aussies are stilll better off (not that I'm advocating such an increase for those folks!!)

Here's a quote from the City of Hume (just north of Melbourne, Australia) site on rates:
http://www.hume.vic.gov.au/Page/page.asp?Page_Id=1685&h=0

Can you provide more information regarding calculating
general rates?

In order to calculate individual rates, the total CIV of all rateable properties in the municipality is divided by the rate revenue required by Council as detailed in the annual budget. This produces a ‘rate in the dollar’, which this year is $0.003901 for 2009/10.

For example, a property with a CIV of $295,000 will pay $1,150.80 in rates: $295,000 x 0.003901 = $1,150.80 excluding any extra waste service charges. This means that the higher the CIV, the higher the rates.

The ‘rate in the dollar’ is based on Council’s calculation of the total rate revenue it needs to generate to ensure that it can meet and satisfy its service delivery objectives and expansion plans, whether in the provision of new facilities or improved access to existing services.

bluhat55 says

happen. As we lost the chance to buy back in decade ago, and we won’t miss next chance if it comes to the area where we live. Believe me, I am checking my ammo every now and then, and will tell local guys buy when the local situation is right.

tmgbooks.com says

Nivas: To better understand the concept of imputed income consider this: Australia is considering taxing the imputed income of homeowners; that is, the the government of Australia is considering taxint the money homeowners don’t pay in rent.
Here is an article on the subject:
http://www.knowledgeplex.org/programs/hpd/pdf/hpd_0501_bourassa.pdf
The article, itself, is over 15 years old and nothing much came of the idea but the government is still tossing around today and the debate rages on there. So the government entities understand the value of imputed income (rent you don’t pay) but taxing it is like the third rail of Australian politics apparently! R/

time for some apples vs apples .....
are loans for homes supported by gov over there?
are loans over there non-recourse?
is intrest a tax deduction?
is there an estate tax or gifting law?
do they assess per district for public services?
do they have a strict building code?
can a non-resident own property?

since there is no welfare or immigration issue there, we can just skip that part of the whole taxing-to-support-others issue.

Actually, it does consider that. It asks you to estimate the rate of return on all the money you save every month by not buying.

So at the end of 15 years, you will probably have much more money in the bank than the value of the house you paid off.

So you're rewarded with gobs of cash, which is actually better than a house in many ways, like liquidity.

Ask yourself if you want to live in that house for 10 years every day? If yes, buy it.

No! You need to consider the PRICE of the house above all else. That's what really matters. If the house is grossly overpriced like now, then it's a big mistake to buy it.

If the house is grossly overpriced like now

That's the key. I don't think houses are grossly overpriced in the fallen areas.

$330,000 can buy a decent house in Fresno or Salinas now.

Here's one example:

http://www.redfin.com/CA/Salinas/222-San-Miguel-Ave-93901/home/14955586

(my parents rented this house in the 70s from a nice doctor living a couple of doors down)

A 15 year 3.88% loan has a starting nominal cost (PITI less the P) of $1400/mo and an actual cash outgo of $2800.

Let's say rent on this for the next 15 years is $1500/mo, that's $270,000 in rent.

A purchase would be:

$330,000 in principal.
$175,000 in property taxes and interest (the $7000 tax benefit on this vs ~5 years of PMI are a wash so I'll leave it out).
$50,000 in other expenses

Total: $550,000 for a house free and clear (other than $4000/yr prop tax) in 2025.

for a ~$300,000 cash difference (over renting) in 2025, a $20,000/yr cash outgo differential.

Buy case in 2025: Have a ~$400/mo housing cost and a house that cost $330,000 in 2010 paid off.
Rent case in 2025: Have $400,000 ($300,000 + compounding interest) in the bank but no house.

$400,000 @ 4% is good for $1300/mo in interest but I think the security of the buy case wins out here.

The rent on that example house in Salinas was $400/mo 30 years ago.

My estimate of $1500 was an attempt at an average for the next 15 years, but looking at Craigslist perhaps $1500 would be the rent now.

I don't know what normal rent increases are going to be in the next 15 years. $10 gas wouldn't do nice things for the Salinas property market. Salinas is already halfway into the mad max scenario wrt gangs, perhaps even their fortress areas will be lost.

But overall, it wouldn't be surprising to see that this place rents for $3000/mo in 2025. Picking up a free put option now doesn't look like a risky investment.

it gets mighty hot in Fresno.

the stupid thing is that it's only hot when the sun's blazing overhead. Perfect for 1) pools and 2) rooftop PV to run the A/C. Plus after work in the evening it's quite nice in a leafy backyard. The established rich parts of Fresno (maybe three square miles all told) are actually nicer than Los Altos if you ask me. Bigger lots, bigger trees, just as good neighbors.

Fresno actually sucks more in the winter. Cold, foggy, dreary. That's when the South Bay shines.

$330 is Fresno gets you a very nice nice nice home/area .. maybe even Clovis/Bucanan area. $330 is stout for the valley.

$160 gets you a nice tract home in a good location in Fresno. ..."reporting to you live, from the central valley for the 10 o clock news ...."