Portland: Owning vs Renting-Price is so different! (Dallas: sale, real estate)

[curlytop]

I live in Dallas, TX and I'm planning a move out to the Portland area. I've sold an investment property here and thought, hey I'll save capital gains and reinvest in a home in the northwest and then move into it in a couple years. I'll rent it out...only HEY! a home costs $300,000 but would only rent for $1,300 which wouldn't cover costs even with a large downpayment. What gives? Any idea why rental incomes are depressed compared to home costs?

[RodFarlee]

Originally Posted by curlytop

...only HEY! a home costs $300,000 but would only rent for $1,300 which wouldn't cover costs even with a large downpayment. What gives? Any idea why rental incomes are depressed compared to home costs?

This is a nationwide phenomena, not at all unique to the northwest.

It made sense when home appreciation was high, and interest rates were at historic lows. It doesn't now. But it takes time for the market to adjust to changing conditions. This is why it is widely predicted that rents will rise, and housing prices fall.

The fundamentals are clear: as a nation, we have maxxed out our home equity loans and our credit cards, the home affordability index is now at record lows, and a correction is overdue.

[nancy thereader]

That is even true in San Francisco with its extremely high housing costs. (a teeny studio would sell for about $500k in any nice area).

[CHEWY12]

Originally Posted by curlytop

I live in Dallas, TX and I'm planning a move out to the Portland area. I've sold an investment property here and thought, hey I'll save capital gains and reinvest in a home in the northwest and then move into it in a couple years. I'll rent it out...only HEY! a home costs $300,000 but would only rent for $1,300 which wouldn't cover costs even with a large downpayment. What gives? Any idea why rental incomes are depressed compared to home costs?

Do a google search for housing bubble and all of your questions will be answered. You can find a lot of good common sense info on this subject and then you can make an informed decision for your self as to when to reinvest in real estate. If it won't have a positive cash flow don't do the deal.

The bottom line is rents are not depressed they are more in line with what local wages will support. On the other hand ownership of housing is not in line with what local wages will support.

Here is some data that will support my position. (source city-data.com)


Estimated median household income in 2005: $42,287 (it was $40,146 in 2000)

Portland $42,287
Oregon: $42,944


Estimated median house/condo value in 2005: $225,900 (it was $154,900 in 2000)
Portland $225,900
Oregon: $201,200


Median gross rent in 2005: $696.

As you can see income has not increased in line with housing values. Its just simple math.

[nancy thereader]

In Manhattan, rents can be over $14,000 (that is per month). Can you imagine ???

[Supernova7]

Originally Posted by CHEWY12

Do a google search for housing bubble and all of your questions will be answered. You can find a lot of good common sense info on this subject and then you can make an informed decision for your self as to when to reinvest in real estate. If it won't have a positive cash flow don't do the deal.

The bottom line is rents are not depressed they are more in line with what local wages will support. On the other hand ownership of housing is not in line with what local wages will support.

Here is some data that will support my position. (source city-data.com)


Estimated median household income in 2005: $42,287 (it was $40,146 in 2000)

Portland $42,287
Oregon: $42,944


Estimated median house/condo value in 2005: $225,900 (it was $154,900 in 2000)
Portland $225,900
Oregon: $201,200


Median gross rent in 2005: $696.

As you can see income has not increased in line with housing values. Its just simple math.

I work in the financial sector so I've been keeping up with the rising costs. Good info! Unfortunately, Portland is NOT a cheap place to live, at least not now. I would rate Chicago and Portland on par as far as cost of living goes and cheaper than Seattle. Obviously if you're coming from CA or NY Portland is cheaper but still you have to have a good job and make a reasonable income to live in the city. I suggest to start with an apartment and learn the city, figure out if you want to spend the rest of your life there before making a large purchase. That just seems like a more rational option.

[MtnSurfer]

Isn't this normally the case with residential real estate?

If renters could afford a mortgage payment it would only make sense to buy vs. rent. In both places I've lived this has been the case, highly over priced So. Calif. beach communites and much more affordable Colorado Springs.

We couldn't afford to buy in California so we rented as did and still do many of our friends there. Where as in Colorado the home prices are reasonable so more people buy and rents are lower than a comparable mortgage payment.

[JinLA]

Originally Posted by Supernova7

I work in the financial sector so I've been keeping up with the rising costs. Good info! Unfortunately, Portland is NOT a cheap place to live, at least not now. I would rate Chicago and Portland on par as far as cost of living goes and cheaper than Seattle. Obviously if you're coming from CA or NY Portland is cheaper but still you have to have a good job and make a reasonable income to live in the city. I suggest to start with an apartment and learn the city, figure out if you want to spend the rest of your life there before making a large purchase. That just seems like a more rational option.

Been reading these posts and it's good information. We may be relocating to Portland from CA and I'm not sure if we should sell our house NOW, or rent it out first down here until we decide if we are going to stay in Portland. If we listed that house right now, we could possibly get about $100k out of the house, but who knows what kind of correction is due down the line. 2 years ago, a sale would have increased that number to $160k!!!! It's dropped that much!

So, my question is, if my husband gets a job in Portland, I think we'd plan to rent in Portland first, but should we try and sell our house now, or rent it out for a year and make sure we like Portland (thus giving us an option to come back to a house in SoCA that we'd otherwise be unable to afford). Do we put on market now to try and get more for the sale now, and chance not being able to buy in Los Angeles again, or rent out for a year and try and sell the house later, but lose some equity possibly... if we determine we'd be staying in Portland and need to sell to get the down payment for our next house. We're sooooo confused!!!!

Any views would be welcomed! What would you do?

[Supernova7]

Originally Posted by JinLA

Been reading these posts and it's good information. We may be relocating to Portland from CA and I'm not sure if we should sell our house NOW, or rent it out first down here until we decide if we are going to stay in Portland. If we listed that house right now, we could possibly get about $100k out of the house, but who knows what kind of correction is due down the line. 2 years ago, a sale would have increased that number to $160k!!!! It's dropped that much!

So, my question is, if my husband gets a job in Portland, I think we'd plan to rent in Portland first, but should we try and sell our house now, or rent it out for a year and make sure we like Portland (thus giving us an option to come back to a house in SoCA that we'd otherwise be unable to afford). Do we put on market now to try and get more for the sale now, and chance not being able to buy in Los Angeles again, or rent out for a year and try and sell the house later, but lose some equity possibly... if we determine we'd be staying in Portland and need to sell to get the down payment for our next house. We're sooooo confused!!!!

Any views would be welcomed! What would you do?

Your post has too many "if's and May's" with no definetes. I would suggest that you visit Portland to see if you like it. If you chose not to visit and move direct than I would "rent" your home in CA. It would be foolish to sell a property and not know where you're going to be living and if in fact you'll be happy there. Too many variables and few absolutes with your situation. Rent your home for 6 months to start. This will give you an opportunity to get a feel for Portland, you should know in your first 3 months whether or not you like the city. Obviously, rent first. Also, see how your husband's job situation pans out. Take it slow and assess the situation throughout your progression.
Good Luck!

[JinLA]

Thank you, SuperNova... do you get a sense I get ahead of myself? (LOL) I think my fear was we'd lose even more equity in our home if we waited, but in all honesty, how far back could 1-year set us? Great feedback and advice.
Thank you.