Los Angeles

[NolanSame]

Inman News posted an article stating that it is cheaper to buy versus rent in about 72% of the nations largest cities.  What do you think?

[CRinLA]

I agree. My mortgage is under $1800. If I wanted to rent the same house in my neighborhood, I'm looking at spending about $700 more in rent.

[slowroller]

Not where we want to live.  The area we're interested in has houses for sale between $700K-900K.  We could rent in the same area for $3-4K but don't have to outlay $150K+ in order to get a comparable mortgage.

[xtine]

We would ONLY buy something where mortgage + taxes is equal to, or lower than our rent. (plus we had some difficult location challenges - we could only live in the center of the city) It took us over 2 years, and it's less house than we wanted, and we had to compromise on almost everything, but we got it.

Some people won't or simply can't make a compromises we did. For them, renting makes more sense.

[Rebeccah]

Not for me.  I'm renting an 1738sf, 4br/2ba house in a nice area of Santa Ana (they do exist), for $2095/mo.  Based on local comps, I'd estimate it could sell for $450K, which for the loan payment alone (20% down, 4.625% rate) comes to about $250/mo less per month.  But that doesn't count property taxes or a $90,000 downpayment and closing costs, nor does it factor in repairs and maintenance.

If I calculate using a "downpayment" that is equivalent to the amount I have to provide up-front to rent (security deposit + first month's rent, or $4190 - ignoring how unlikely it is that I could ever get a loan with < 1% down and no closing costs), and presume that the property tax will get cancelled out by income tax savings (big presumption), and ignore repairs and maintenance, then buying costs about $200/mo. more than renting, for me.

Rebeccah

[Tae]

According to Trulia, it is cheaper to Rent vs Buy in Los Angeles

http://trulia.movity.com/rentvsbuy/

[STARCHY]

agreed - much cheaper. my mortgage cost is a fraction of cost to rent same.

IMHO the problem (as we have often discussed) is that most of these calculations assume a first time buyer with only (or less than) 20% down, and/or (very?) aggressive returns for the "alternate investment" of the downpayment cash.

as well as the inability to accurately estimate the rental cost of "same".

sales comps are much easier to find then rental costs -thanks to sites like REDFIN

[Babak]

Well I paid off my last condo so my mortgage was zero and yeah, it was cheaper to buy.

However, certainly not for the places I've been looking at with 20% down on the westside.

The important question is, with what kind of down payment? And if one is taking a down payment into account, how to account for a large sum of money that you would have otherwise had in your disposal.

[shisha1999]

When factoring in the Buy vs. Rent calculation, how is the down payment treated? For example, is it always 20%, 10% or 0%?

If its say a $500K house, how many have 20% ($100K) to put down?. If buyers today dont have this amount, the only option is to rent. I wonder how this is factored into home prices today. Is everybody purchasing with 20% down payments?

[STARCHY]

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shisha1999 wrote:

When factoring in the Buy vs. Rent calculation, how is the down payment treated? For example, is it always 20%, 10% or 0%?

If its say a $500K house, how many have 20% ($100K) to put down?. If buyers today dont have this amount, the only option is to rent. I wonder how this is factored into home prices today. Is everybody purchasing with 20% down payments?

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Changes with buyer and loan product, but still need 20% down to avoid PMI (a killer)