Simple Economics

Having lived in the Bay Area for the last 10 years and buying homes at asking
price that needed $10-20k worth of fixing/improvements, I felt compelled to
write in and contribute my 2 cents worth.

I live in Livermore where a very modest 3 bed, 2 bath, 2 car garage home for
sale in a decent neighborhood is currently priced about $500,000.  The home I
am renting is that very same modest 3 bed, 2 bath, 2 car garage in a decent
neighborhood.  My rent is $1900 per month.  To purchase the same home for
$500,000 with 20% down ($80,000), with a 30 year fixed @ 6% is $2,518.11 per
month just for principal and interest.  Add property tax of $485 per month and
insurance of $100 per month for a total of $3,103.11 per month to own vs $1900
to rent!!

Plus if something breaks or goes out like the A/C did last summer, all I have
to do is call the rental management company and they sent someone out to
replace the A/C unit.
 
With the current indicators (Case Shiller index) showing no end in site for the
housing market contraction, why would I buy?  Yes I would get the tax benefits
as well as pride of ownership, but since the Livermore market dropped over 20%
since 2006 (Trulia and Redfin) I would really like to hold on to my $80k and
continue to make 5% in a rather conservative portfolio.  Otherwise using that
money for a down payment that may just depreciate to nothing if the market
continues to decline makes no sense to me.

It's just simple economics, once home prices drop to near the cost to rent
the same home on a monthly basis, the market will have bottomed and its time to
buy.  And at that point I will be in the market to purchase.   

Ross Wesner, Livermore CA