First Up! Aptos, CA

Aptos, CA is my hometown. I am currently renting a beautiful 4 bedroom house within walking distance of the beach. It has 2 master bedrooms and one with a nice jacuzzi tub. The houses on either side of me are beautiful second homes for people that live in the valley. Their families spend their weekend here, while I live here every day...

Not bad huh? Obviously real estate is in demand in grand ol' vacation home Aptos. Prices must be very expensive right? You bet! Way to high!

You know how I know the prices are too high? I pay only $2600 per month to rent my house nestled in all those vacation homes, close to the beach. Do you know how much $2600 per month in a mortgage would get me (6.5% interest BTW)? A home worth $387,500, after I drum up $77,500 in savings for the 20% down (Forget the closing costs! How many first-time buyers have $77,500 for a down payment?) . If I moved to crime-infested Watsonville I could probably find a 4 bedroom for that much. But in Aptos... hah! $387,500 maybe for a one bedroom next to the railroad tracks. Or a mobile home!

Let's take a look at a 4 bedroom for rent in Aptos... more expensive than mine. I don't want to be accused of getting too good a deal on my jaccuzi-tubbed home:
$3000 per month 4 bedroom / 3 bath in Aptos on 1+ Acre


Now take a peak at a comparable property to buy...
$769,000 for 4 bedroom / 3 bath in Aptos on only .35 acres

I know both of the areas of Aptos fairly well as I have live here most of my life. They are both fairly secluded areas, not to far from schools and stores. Both are about 5 minutes from the beach.

Let's take a quick look at what you would be paying for the RENTAL:
$3000/month + renters insurance $50/month (I pay less for mine so I am being generous)
TOTAL/MONTH = $3050/month

This is what you would pay for the MORTGAGE per month after you cough up $153,800 in closing costs (cough, cough. You can almost buy a house outright anywhere else). Standard 30-year mortgage, 6.5% interest:
$3888.48/month mortgage + $961.25 property tax/month + $100 insurance/month
TOTAL/MONTH = $4949.73!!

You are saving $1949.73 per month renting!! That is $23,396.76 per year. Your house would have to appreciate 3% per year just to break even on this deal. Pop Quiz: Are housing prices appreciating or depreciating right now.

I did not even throw in maintenance costs, which could be small or larger depending on what needs to get done. A renter just needs to pick-up the phone to get their dwelling fixed.

OK, I am done for today. I will find more comparisons in other parts of the Bay Area soon. I will start with Santa Cruz County because that is local for me.

Welcome Smart Renters

This blog is here to point out the price of Bay Area California homes are still way, way too high. You can rent a nice house for about 1/2 of what it would cost you to purchase a house... even AFTER the historic fall in prices already. Still the Bay Area is holding strong to it's misplaced notion that this is the most expensive place to live because it is the best place to live.... Bullshit! Realator and homeowners are still high on the Fed induced credit-bubble drugs they have been given since 2001.

There are plenty of blogs and websites that explain the housing and credit bubble in detail, so I am not going to rehash any of that here. Every once in awhile I wil throw a link or two to some of my favorite sites and articles.

I want this blog to illustrate just how F***ING ludicrous prices still are in the Bay Area compared to the price of rent.

I have held the view that it will be time to buy when the standard mortgage payment of a comparable house in a comparable location are equal. That includes taxes and insurance.

Here are the assumptions I will be making:
*20% down is used for the mortgage and the closing costs are covered. (Not a 3% down FHA approved loan, which is the only way a first-time buyer could ever get into a house in the Bay Area.)
*1.5% property tax on the full purchase price (That is the Santa Cruz County tax I believe)
*I am ignoring the benefits of a tax deduction for interest. That changes over time as less interest is paid and taxes are too dependent on income. (If you want to argue this with me after what I will present to you, feel free and show me some numbers. I will be more than happy to include accurate work by others.)