Renting vs Buying, break even point for SF is 15 years (San Jose: real estate, 2015)

[shooting4life]

The problem with the rent v buy debate is that people think short term to medium turn. They think what they can afford now or where will they be in 10-15 years

What people fail to think about is how they will afford rent when they want to retire and your income is reduced. Are you willing to work into your mid to late 60's to keep your current quality of life? Are you willing to retire earlier and move to another part of the state/country where your money goes further? When you buy and actually pay off your home (that is the critical part) you can retire much earlier in life, you can stay in your current home if you so choose or you can rent/sell and fund your dream home (which you could either buy outright with cash or if you rent your current home, will pay your entire new mortgage and give you extra income).

Owning your own home provides you with options. Buying much less than you can get s lone for allows you to lay off said home much sooner. My wife and I will both be able to retire in our mid 50's solely because our home will be paid off by the time I am 45.

[WizardOfRadical]

The thing is, in a lot of those cities you can go to the suburban area and find tons of affordable housing.

The time get's nearly cut in half from OC to Riverside. Same thing for NYC even. Can't really do that in the bay unless you go essentially count Modesto and Stockton as the bay.

[Chuck5000]

Originally Posted by WizardOfRadical

The thing is, in a lot of those cities you can go to the suburban area and find tons of affordable housing.

The time get's nearly cut in half from OC to Riverside. Same thing for NYC even. Can't really do that in the bay unless you go essentially count Modesto and Stockton as the bay.

Yes, If one is willing to do a long commute, there are many, many more nice distant suburbs with decent schools and homes well less than 500k in the NY metro area than here, particularly in New Jersey and Long Island. Taxes are higher but still does not make up for the purchase difference.

[23windows]

Buy in West Oakland while you can.....

[sav858]

How much you must earn to buy a home and live comfortably in 78 US cities - finder US

Saw this story today that calculated how much you need to buy a home around the US. For SF it was $180K and for SJ it was $130K.

Obviously there are many factors that can affect this (childcare costs, student loan debt, etc..) and I think their estimate is too low (I don't get the monthly payments as they seem abnormally low and don't factor in property taxes it appears) but more in line with reality than the $300K-500K annually some on this site claim you need to live a upper middle class lifestyle here.

[Bisaro TMF]

Originally Posted by sav858

How much you must earn to buy a home and live comfortably in 78 US cities - finder US

Saw this story today that calculated how much you need to buy a home around the US. For SF it was $180K and for SJ it was $130K.

Obviously there are many factors that can affect this (childcare costs, student loan debt, etc..) and I think their estimate is too low (I don't get the monthly payments as they seem abnormally low and don't factor in property taxes it appears) but more in line with reality than the $300K-500K annually some on this site claim you need to live a upper middle class lifestyle here.

Yes that must be for a single person with no kids. Just Day care for one kid here is about 1000 per month and that's a deal. I've seen many going well into the 2-3k per month range. Especially in SF. I agree, in order to be able to BUY a house you need an income of 300+K so that you have enough to save for a down payment. If you're going to buy a house in SF you'll need 200K cash to put down. Not many people have that lying around just for a down payment. That's ridiculous, and even at that rate you'll be competing with people with more money who can put down more than that easy.

[sav858]

Originally Posted by Bisaro TMF

Yes that must be for a single person with no kids. Just Day care for one kid here is about 1000 per month and that's a deal. I've seen many going well into the 2-3k per month range. Especially in SF. I agree, in order to be able to BUY a house you need an income of 300+K so that you have enough to save for a down payment. If you're going to buy a house in SF you'll need 200K cash to put down. Not many people have that lying around just for a down payment. That's ridiculous, and even at that rate you'll be competing with people with more money who can put down more than that easy.

I guarantee the vast majority of people buying houses don't make nearly that much.

[Bisaro TMF]

Originally Posted by sav858

I guarantee the vast majority of people buying houses don't make nearly that much.

In San Francisco? How can they afford a 1 million dollar house making less? I'm pretty sure the individual or combined income is 300K +

[sav858]

Originally Posted by Bisaro TMF

In San Francisco? How can they afford a 1 million dollar house making less? I'm pretty sure the individual or combined income is 300K +

Oh I was thinking of the Bay Area in general, yeah in SF I'm sure there is a much higher % of people that make that much who buy houses.

[TR95]

Trouble with this is we bought our house a little over a year ago, and we can already rent our house out for more than the PITI payment. Assuming some repair costs, etc, it'a break-even slightly negative, but then principal is being paid down. So why we rent? I think that's the case for most people that have bought over the last 20 years. Will this be true in 3-5 years, who knows. Rents seem to always increase and stay stagnant or slight decline in a recessionary period. However, the opposite somewhat happened in 2008-2011 when people short sold their house and needed a place to rent, so they could afford the higher rent payments.

Interest rates are also only 3.625-4% right now, so that's a big difference from the 4.5% used. Sure over the long-term it might make sense to use 5-6% interest rates, but I'm assuming this article is focused on the current date.