Comments on: What Should a California Home Cost? Price and Income Ratios. Various Market Ratios to Determine Real Estate Valuation. http://www.doctorhousingbubble.com/what-should-a-california-home-cost-price-and-income-ratios-various-market-ratios-to-determine-real-estate-valuation/ How I Learned to Love Southern California and Forget the Housing Bubble Tue, 16 Mar 2010 20:25:09 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: dimwit http://www.doctorhousingbubble.com/what-should-a-california-home-cost-price-and-income-ratios-various-market-ratios-to-determine-real-estate-valuation/comment-page-1/#comment-39935 dimwit Sat, 12 Sep 2009 18:52:44 +0000 http://www.doctorhousingbubble.com/?p=2330#comment-39935 wait till the playing field is leveled,and you are working for the same wage as the chinese. might mean the recalculation of your cherished money pit of a house. since the only sure thing in this country is playing the lottery, i think ill stay mobil and let the landlord worry about the roof leaking or the hwh taking a crap. wait till the playing field is leveled,and you are working for the same wage as the chinese. might mean the recalculation of your cherished money pit of a house. since the only sure thing in this country is playing the lottery, i think ill stay mobil and let the landlord worry about the roof leaking or the hwh taking a crap.

]]> By: jammr http://www.doctorhousingbubble.com/what-should-a-california-home-cost-price-and-income-ratios-various-market-ratios-to-determine-real-estate-valuation/comment-page-1/#comment-39857 jammr Wed, 09 Sep 2009 21:06:59 +0000 http://www.doctorhousingbubble.com/?p=2330#comment-39857 "Another way of looking at it is to ask, “who rents?” The answer is that it is people who are unable to or unwilling to buy. In both cases, the proper line of thought should be that renting should cost more than buying — a renter remains a renter because of the lack of the ability and/or desire to remain tied to a property for the amount of time required to pay a mortgage. This is a convenience with a value above and beyond the value of the use of that property." Another factor in the history of renting as a choice was the lack of a down payment to qualify for a loan. Many people rented for years to save up the required 20% down in order to get into a home when the housing industry was tied to financial fundamentals. Landlords also put down 20 or even 30% and calculated the value of a "real" asset (the home and property) in holding that money while they calculated expense to rent ratios based on their mortgage payment (figuring in of course depreciation and deductions for business costs). The world got out of wack with real estate joining in the financing gimmicks of consumer and auto loan credit tactics made possible by the de-regulation of laws protecting the fundamentals of mortgages. And they don't want to put it back to same practices. Their goal (govt and banks) is to survive ergo TARP and stimulus which we all know is debt forever. God help us all cause I think we are stuck in the Woody Allen quote. “Another way of looking at it is to ask, “who rents?” The answer is that it is people who are unable to or unwilling to buy. In both cases, the proper line of thought should be that renting should cost more than buying — a renter remains a renter because of the lack of the ability and/or desire to remain tied to a property for the amount of time required to pay a mortgage. This is a convenience with a value above and beyond the value of the use of that property.”

Another factor in the history of renting as a choice was the lack of a down payment to qualify for a loan. Many people rented for years to save up the required 20% down in order to get into a home when the housing industry was tied to financial fundamentals. Landlords also put down 20 or even 30% and calculated the value of a “real” asset (the home and property) in holding that money while they calculated expense to rent ratios based on their mortgage payment (figuring in of course depreciation and deductions for business costs).

The world got out of wack with real estate joining in the financing gimmicks of consumer and auto loan credit tactics made possible by the de-regulation of laws protecting the fundamentals of mortgages.

And they don’t want to put it back to same practices. Their goal (govt and banks) is to survive ergo TARP and stimulus which we all know is debt forever.

God help us all cause I think we are stuck in the Woody Allen quote.

]]> By: dimwit http://www.doctorhousingbubble.com/what-should-a-california-home-cost-price-and-income-ratios-various-market-ratios-to-determine-real-estate-valuation/comment-page-1/#comment-39856 dimwit Wed, 09 Sep 2009 20:38:19 +0000 http://www.doctorhousingbubble.com/?p=2330#comment-39856 a renter doesnt own the home hes renting, and the same goes for the "home owner" until the mortgage is paid off. a renter doesnt own the home hes renting, and the same goes for the “home owner” until the mortgage is paid off.

]]> By: dangermike http://www.doctorhousingbubble.com/what-should-a-california-home-cost-price-and-income-ratios-various-market-ratios-to-determine-real-estate-valuation/comment-page-1/#comment-39855 dangermike Wed, 09 Sep 2009 19:18:38 +0000 http://www.doctorhousingbubble.com/?p=2330#comment-39855 Hey DHB, it's been a while since I've dropped a comment 'round here (web monitors at work got notched up a bit this summer) but I've been been and enjoying the whole time. - One line in this article really rubs me the wrong way, though: - "Yes, owning a home will always be more expensive than renting" - This truly should not be the case. The only reason it was, was because people saw that houses had been repainted as equity-building assets. This idea is perverse. In the long term, house prices stay somewhat constant. This is why a rule of thumb like 1/3 of gross pay for house payment can and has worked for so long. - I suppose the way to really look at it is as such: If it costs more to buy a house than rent one, it is impossible to rent one out without losing money on the deal. *Somebody* has to own that house. And that means they have payments and a bottom line. The crackpot lending schemes and self-voted dollars of prop-13's unfettered democracy in action are all that have allowed this perversion to subsist. - Another way of looking at it is to ask, "who rents?" The answer is that it is people who are unable to or unwilling to buy. In both cases, the proper line of thought should be that renting should cost more than buying -- a renter remains a renter because of the lack of the ability and/or desire to remain tied to a property for the amount of time required to pay a mortgage. This is a convenience with a value above and beyond the value of the use of that property. - This serves as just yet another point where we need to look at history and understand the cultural mentalities that raised this current fiasco of an economy and hope that we're not too late or too impotent to change it. Hey DHB, it’s been a while since I’ve dropped a comment ’round here (web monitors at work got notched up a bit this summer) but I’ve been been and enjoying the whole time.
-
One line in this article really rubs me the wrong way, though:
-
“Yes, owning a home will always be more expensive than renting”
-
This truly should not be the case. The only reason it was, was because people saw that houses had been repainted as equity-building assets. This idea is perverse. In the long term, house prices stay somewhat constant. This is why a rule of thumb like 1/3 of gross pay for house payment can and has worked for so long.
-
I suppose the way to really look at it is as such: If it costs more to buy a house than rent one, it is impossible to rent one out without losing money on the deal. *Somebody* has to own that house. And that means they have payments and a bottom line. The crackpot lending schemes and self-voted dollars of prop-13’s unfettered democracy in action are all that have allowed this perversion to subsist.
-
Another way of looking at it is to ask, “who rents?” The answer is that it is people who are unable to or unwilling to buy. In both cases, the proper line of thought should be that renting should cost more than buying — a renter remains a renter because of the lack of the ability and/or desire to remain tied to a property for the amount of time required to pay a mortgage. This is a convenience with a value above and beyond the value of the use of that property.
-
This serves as just yet another point where we need to look at history and understand the cultural mentalities that raised this current fiasco of an economy and hope that we’re not too late or too impotent to change it.

]]> By: AnnS http://www.doctorhousingbubble.com/what-should-a-california-home-cost-price-and-income-ratios-various-market-ratios-to-determine-real-estate-valuation/comment-page-1/#comment-39843 AnnS Wed, 09 Sep 2009 04:04:41 +0000 http://www.doctorhousingbubble.com/?p=2330#comment-39843 To DS and JimAtLaw who wrote: >> "Comment by JimAtLaw September 6th, 2009 at 1:39 pm One question about the methodology – if the bottom 40% of incomes are not owners, doesn’t the median home price need to be affordable to the 70th percentile owner rather than the 50th? Of course, I believe that many areas, including the ones you cite, ARE dramatically overpriced, but we may overestimate the required correction if we are aiming for the median household to be able to afford the median home without excluding all the people in a given area who are not realistic potential buyer/owners." >> Nope. The price of housing has to be distributed so that ALL the population can afford housing. If they don't buy it, they have to rent it. >> The cost of buying a house which is to be rented as an income property MUST be low enough so that the rent covers the mortgage (principal & interest), earnings value of a downpayment, repairs, and some profit. Even if the idea is only to break even, the rent still has to cover the PITI & repairs. >> Ergo the average 'house' (Single family or condo) has to be priced so as to be affordable for the median population. Everyone needs housing. To DS and JimAtLaw who wrote:
>>

“Comment by JimAtLaw
September 6th, 2009 at 1:39 pm

One question about the methodology – if the bottom 40% of incomes are not owners, doesn’t the median home price need to be affordable to the 70th percentile owner rather than the 50th? Of course, I believe that many areas, including the ones you cite, ARE dramatically overpriced, but we may overestimate the required correction if we are aiming for the median household to be able to afford the median home without excluding all the people in a given area who are not realistic potential buyer/owners.”

>>

Nope. The price of housing has to be distributed so that ALL the population can afford housing. If they don’t buy it, they have to rent it.
>>

The cost of buying a house which is to be rented as an income property MUST be low enough so that the rent covers the mortgage (principal & interest), earnings value of a downpayment, repairs, and some profit. Even if the idea is only to break even, the rent still has to cover the PITI & repairs.
>>
Ergo the average ‘house’ (Single family or condo) has to be priced so as to be affordable for the median population. Everyone needs housing.

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