Price Discovery III

Published: Wednesday, April 9, 2008 5:55 PM PDT

E-MAIL STORY

Reader CD wrote me today, incredulous at the perspective of another reader last week who'd observed younger co-workers content to rent until they can "buy next to the beach on their 80k incomes." CD said he's still a real estate investor, here and elsewhere.

Here's what CD said:

Wow-what planet is that guy on? I'm a 58 year old born and raised in San Diego. My father was a private investor in multi-family rentals. ...

How could a rational person expect to buy next to the beach for $2,000 per month? Is the problem the incredible lack of knowledge of economics? If prices (not values), fell to that point there would be an amazing rush to buy which in turn would push prices back up.

As you know everything is interconnected; other than very short term housing prices must have a relationship to replacement costs. Aside from that, IF prices declined that much there would be significant economic costs to all of us with a declining standard of living.

Maybe the thought wasn't clear; if housing prices fell below replacement cost for a long period of time then there wouldn't be any more construction or construction-related manufacturing or jobs.

As I recall your original question was at what point would a person jump in to buy. I don't have an answer to that.

Here's a different take. Reader PD thinks I should change the question altogether. After counting upfront costs -- down payment, closing costs, taxes, insurance, escrow -- and monthly costs, and interest over the term of the mortgage, PD argues renting is a no-brainer.

The question should be: How much money can I save by not purchasing a home in San Diego? ...

The myth of housing inflation and savings on taxes was dreamed up by realtors. It is just

that, a myth.

Today or any day. If you need living quarters, lease. If you ever need a new bathroom,

you'll not have to pay the $3600.00, as I did not have to do because my dear landlord had to foot that bill and I was able to add to my bank account.

-- KELLY BENNETT

0 Comments so far on this story...

Reader feedback

Users may post more than one comment, but should not pose as multiple users. Multiple posts from the same IP address but with a different user name on each will be reviewed to determine whether abuse has occurred.
Posts with overly personal attacks or unsubstantiated allegations may be edited or deleted.
Please be patient with the posts -- there may be a delay before they appear on the site -- and make sure to enter the code in the "image verification" box.