paperboyNC said:
Can you link to the analysis? Right now interest rates for 5/1 ARMs are so low that buying makes a lot of sense. If interest rates go up hopefully inflation will go up too to keep the real interest rates lower.
Shevy/Larry's site has changed so much I can't even find it any more; everything seems to lead to a home search page. He used to profile one property in a given city then compare that to the surrounding market ("Posted Under Huntington Beach Housing News") etc. with red/yellow/green scoring the market value on a own-vs-rent basis.
At a micro level, I found Larry's analysis to be pretty accurate -- he calcs just about everything and spits out the appropriate info relevant to that property (cap rates, cash required at close, monthly costs, comparison of FHA to traditional financing, etc) vs other rentals.
On a macro-market basis, though, all he essentially did was take median rents vs. median sales price then evaluated the delta.
The flaw, of course, is there is noise in HOAs and Mello Roos that significantly changes the total cost of ownership of an Irvine home. That data is not readily accessible en masse so it is harder to disaggregate relative values.
In my analysis, mello roos and HOAs are as or more significant factor in ownership cost than interest rates.
1) MR and HOAs don't change (most MR expire but generally that's many years away, assuming there's no renewal).
2) HOAs aren't deductible and often increase over time.
3) MR may or may not be deductible, depending if you are subject to AMT and the MR are for infrastructure.
4) As/when interest rates float down, buyers can take advantage and lower the cost basis.
5) On an absolute $$ basis, MR and HOAs can be equal to .25% - 1% difference in interest rates (depending on loan amount).
6) Irvine's HOA and MR vary greatly; some are among the most expensive in the county, if not the state.
It's the most under-reported, under-appreciated factor in owning a home in Irvine - and since it's a nuance to specific communities, it's often missed in the macro-analysis and calculators that attempt to grade rent-vs-own analysis. Too many folks are hell-bent on "how much home they can afford" backing into size based on $4xx/square foot and 4.x% 30 year fixed. The reality is between a 5/1 ARM (which I don't have) and a low MR/HOA community (of which I'm mid-pack) the cost basis changes quite a bit.
