patrick.net

tatupu70 says

donny says

It does. You mentioned that higher interest rates mean the economy is doing well. Does that mean really low interest rates (like what we have today) signify a poor economy?

Yep--in general.

So is it fair to say that really low interest rates have artificially propped up housing prices then? If rates are low and that means the economy is bad, why else would house prices be so high?

donny says

So is it fair to say that really low interest rates have artificially propped up housing prices then? If rates are low and that means the economy is bad, why else would house prices be so high?

I don't know what you mean by "artificially". House prices fell as rates fell in 2008/9, probably too far as asset prices usually do after a bubble. They've recovered as the economy has improved.

There's nothing to indicate that anything "artificial" is going on now. Prices are about in line with rents.

Prices and rents are high because there's not enough supply.

donny says

So is it fair to say that really low interest rates have artificially propped up housing prices then?

It would be more accurate to state - low interest rates prevented a complete collapse in the economy and housing market in 2008.
Home prices were low compared to the cost of construction, which is why home building dried up. Home prices are still low, but making a comeback.

tatupu70 says

Prices are about in line with rents.

Maybe in some locations, but certainly not California.

donny says

Maybe in some locations, but certainly not California.

I think CA is the exception. And I bet even in CA, prices are in line with rents for most of the state.

Post a few examples and let's examine them

tatupu70 says

Post a few examples and let's examine them

Here's a few in a nice area of north San Diego:
https://www.redfin.com/CA/San-Diego/18122-Chieftain-Ct-92127/home/6266619
https://www.redfin.com/CA/San-Diego/10266-Prairie-Springs-Rd-92127/home/6456004
https://www.redfin.com/CA/San-Diego/11924-Acacia-Glen-Ct-92128/home/4782268

My guess is these would likely rent for around $3500-$3800/month, but I'm not 100% sure.

Just ran the numbers on NYT rent vs buy calculator (assume 2% growth in rent, home price and inflation, 4% investment gains, 10 years in the house) and an $850K house should rent for $3200/mo. If you pay $3500-3800, it's better to buy.

tatupu70 says

Just ran the numbers on NYT rent vs buy calculator (assume 2% growth in rent, home price and inflation, 4% investment gains, 10 years in the house) and an $850K house should rent for $3200/mo. If you pay $3500-3800, it's better to buy.

I have to question 4% steady gain which maybe the case however most will finance so how much does that figure
when the interest cost are calc.?

No opinion on this, but this is interesting:
http://www.cnbc.com/2016/03/21/national-association-of-realtors-reports-existing-home-sales-for-february-2016.html

Graybox says

I have to question 4% steady gain which maybe the case however most will finance so how much does that figure

when the interest cost are calc.?

I'm not sure what you're asking. The 4% is gain on investments made--money NOT used to buy a house. Opportunity cost.

House appreciation is assumed to be 2%/year

Interest costs are included in the calculation.

donny says

So is it fair to say that really low interest rates have artificially propped up housing prices then? If rates are low and that means the economy is bad, why else would house prices be so high?

Low rates aren't just propping up prices, but allowing real per-capita consumer debt:

to be bearable.

donny says

My guess is these would likely rent for around $3500-$3800/month, but I'm not 100% sure.

This is a good site in figuring rent.
rentometer.com

tatupu70 says

House appreciation is assumed to be 2%/year

It's been 6%+ in California for the last 50 years.

Crash no, pullback in some markets, yeah.

I would like a pullback. I don't know if Austin will be one though, however, I did see a sign for a crawfish boil at a housing community on 183. That's a sign of fishing for buyers.