patrick.net

Gosh, someone in the mainstream press finally noticed!

But they still have the math wrong. It's never better to own at current prices relative to renting. Not after any number of years.

renting vs owning in san francisco (unless one is in a rent controlled apartment and has lived there for at least 8 years) is like deciding whether it's better to be torn apart by 4 horses or an 18 wheeler across 4 limbs.

I wanted to laugh at Burlingame being considered "fancier" than San Francisco, but after a few more thoughts decided that word actually works pretty well to describe some of the differences.

FunTime says

I wanted to laugh at Burlingame being considered "fancier" than San Francisco, but after a few more thoughts decided that word actually works pretty well to describe some of the differences.

Well, if "fancier" is defined as "not having mentally ill vagrants yelling at you and not having rivers of urine running down the streets" then sure, Burlingame is fancier than SF.

Love it!

It gos both ways in regards to SF: Is it better to rent or own? Neither because both options are obscenely high.

edvard2 says

It gos both ways in regards to SF: Is it better to rent or own? Neither because both options are obscenely high.

They are not equal though. Renting is starting to get close to lapping Owning in the race. They both have lapped common sense many times though. :)

Its pretty crazy how much rent is in SF these days. I've asked a few people and in some instances some are paying more to rent a 1 bedroom apartment than I'm paying for a mortgage- as in a LOT more.

RentingForHalfTheCost:

When did you move? I thought you were still in Foster City?

edvard2 says

some are paying more to rent a 1 bedroom apartment than I'm paying for a mortgage- as in a LOT more

A mortgage somewhere other than San Francisco, right? I figured that was well understood. For the rent I pay in a year, I could buy a house outright in other places. It's a fun statistic, but not at all compelling since I think it's understood that part of what you pay for by living in different places is the kind of life you will experience there. There is no requirement for that experience to be tied to bedroom counts and square feet. It is always tied to the space outside the dwelling.

FunTime says

A mortgage somewhere other than San Francisco, right? I figured that was well understood.

Yes. I live in the East Bay and over here its a whole nother' situation

I rent in San Francisco. I have a difficult time finding a place that is comparable to my apartment. To make a good comparison, it should be a similar space in the same neighborhood. I can't find a match.

edvard2 says

Yes. I live in the East Bay and over here its a whole nother' situation

I have close friends who own houses in three different areas of the East Bay. Still very expensive over there. I wouldn't mind living in Berkeley if I didn't work in San Francisco, but it would still be my second choice. I'd rent there too.

According to the article:
Median home price: $363,700

That's not SF city, with that price. It's got to be the SF-Oak-Fremont MSA, including some of the East Bay, and San Mateo county. And excluding Santa Clara county.

fwiw I used Patrick's handy calculator (http://patrick.net/housing/calculator.php) with this price, and the shown rent of $1951. I adjusted the assumptions. Mortgage is 3.25, not 5, and I set home price and rent inflation to 1%. Also set marginal tax rate to 35% to account for 10% CA tax. and adjusted the insurance down to 0.3%, $1k/yr should be sufficient for a 353k house, since most of the value is land and therefore you don't pay insurance on it. This excludes earthquake insurance. I left maintenance at 1%, $3.5k might be a bit high but it's not outrageous.

After 7 years, rent costs 148k, own costs 121k.

the wild card of course is rent and home price inflation. If you think prices will revert to 1975 or 1997, then owning is a terrible idea. If not, it's pretty darn close.

I reverted the home price inflation to -1%, and the own price is now $169k. still pretty close to renting, close enough that some might pay 3k/yr to own instead of rent, and beyond that the cost of owning declines. at 15 years it's cheaper to own.

Again this covers the SF MSA, not SF itself, and not Fortress, but it's interesting that it is slightly cheaper to own over several years.

By the way, fooling around with the calculator some more; even a Fortress house is ok to own over 15 years.
Set rent to $4200, price to $1.5m.

"Actual value is $1,402,176. Paying $1,500,000 is about the same as renting over 15 years. "

of course this assumes that we don't have the Zombie Apocalypse.

Patrick, a suggestion for the calculator would be to take the insurance cost and maintenance cost in $ instead of %. Especially in SFBA, where the land is a huge percentage of the cost, % doesn't make sense. Insurance and maintenance cost the same in Palo Alto as in SJ for the same size house, but would be a much smaller percentage in PA. So I end up calculating the % from what I know about the $ cost.

I do recognize that this is a labor of love for you, so feel free to ignore my suggestion!

SiO2 says

ven a Fortress house is ok to own over 15 years.
Set rent to $4200, price to $1.5m.

"Actual value is $1,402,176. Paying $1,500,000 is about the same as renting over 15 years. "

Its ok if your a realtor, not so tempting if your an employer who can skip employing in Palo Alto and rather go to Texas...

"In those two communities where their corporate headquarters are and where a lot of research and development takes place, the median resale price for a home in Palo Alto is about $1.6 million. In Round Rock, Texas, it's about $180,000, except the home and property are bigger.

We hear from HP all the time that a huge deterrent to the ability to recruit and retain people anywhere near Silicon Valley is the housing issue. We don't hear that from Dell, which is also a member company, about their operations in Round Rock. It does continue to plague us and we will continue to sound the alarm."

ON THE RECORD / CARL GUARDINO
Published 4:00 a.m., Sunday, May 13, 2007

Read more: http://www.sfgate.com/business/ontherecord/article/ON-THE-RECORD-CARL-GUARDINO-2574540.php#ixzz25km4Xh2F

rooemoore says

RentingForHalfTheCost:

When did you move? I thought you were still in Foster City?

Moved in June

thomaswong.1986 says

Its ok if your a realtor, not so tempting if your an employer who can skip employing in Palo Alto and rather go to Texas...

Yes. Those who believe that the jobs will move to TX would be better off selling their Fortress houses and renting.