XXX Worth $175/sqft. Asking $978,000.
IrvineRenter was one of the first people to publicly announce in 2007 that the housing market was in a bubble. That's when he started his blog, at least. His basis for this conclusion was that it was cheaper to rent than to own. Properties in Irvine had inflated to a point that the monthly mortgage payments were more than the properties could fetch as rentals. Home owners (home debtors) were the ones throwing their money away.
The price point at which IrvineRenter stated he would enter the market was rental parity. Rental parity denotes the price at which it is equivalent to rent or own the property; a break-even point. If you're thinking in terms of "monthly payment" where you factor in the tax incentives and the upkeep costs into the mortgage payments and the home owners insurance payments, then that monthly cash outlay would be equal to the monthly rent someone would be willing to pay.
Since figuring out what the monthly payment is on a house is complicated, IrvineRenter has created a calculator to crunch the numbers for you.
Today's property is both for sale and for rent.
It's really a beautiful property, though, I don't know what a million dollar house should look like.
You could either rent at $3,800/month or buy for $5,438/month*. Plug in the numbers into the calculator. It's cheaper to rent this property than to buy. If you buy this home at this price, you're throwing away your money.
*Assuming a 5.5 30-year fixed rate mortgage.
This house is in Chatham county, so I don't have access to the property records. At least, I haven't started trying to figure out the Chatham county records yet.
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We're at an interesting point in the deflation of this housing bubble. Some properties I've looked at have deflated to rental parity. The reason seems to be that interest rates are at historic lows. In my next post, I'll run the numbers on a house that's currently at rental parity with a 5.5% mortgage, but that would not be at rental parity at a higher mortgage rate.
1 comment:
You'd need a jumbo for that, so 6-6.5% is a better bet. At that and at $3800/mo, rental parity is around $620k. Offering it for rent should seriously discourage someone from paying nearly 50% extra. Out-of-pocket expenses would be nearly $7k, 80% higher. IR's calculator includes the mortgage interest deduction, which if you can afford a $7k mort. payment, you're prob getting hit with the AMT or the future deduction phase-out.
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