San Francisco Recorded Sales Median and Volume: January 2010 (www.SocketSite.com)
According to DataQuick, recorded home sales volume in San Francisco was up 20.2% on a year-over-year basis last month (327 recorded sales in February ’10 versus 272 sales in February ‘09) and up 5.1% compared to the month prior.
For context, February sales figures for San Francisco from 2004 to 2008 were 537 (2004), 526 (2005), 429 (2006), 375 (2007), and 431 (2008) while the average January to February sales volume gain was 14% from 2004 to 2009.
San Francisco’s median sales price in February was $627,500, down 2.0% compared to February ’10 ($640,000) and down a nominal 0.2% compared to the month prior.
For the greater Bay Area, recorded sales volume in February was down 0.9% on a year-over-year basis but up 2.8% from the month prior (4,987 recorded sales in February ’10 versus 5,032 in February ’09 and 4,853 in January ’10), while the recorded median sales price rose 20.0% on a year-over-year basis, up 1.1% compared to the month prior. Continue to think mix (and seasonality).

Last month’s median rose 20 percent above February 2009 largely because a year ago low-cost foreclosures were far more plentiful, lower-cost inland areas represented a substantially larger portion of total sales, and high-end sales were very sluggish. That made for an unusually low February 2009 median of $295,000.

Sales over $500,000 made up 31.9 percent of all transactions last month, compared with 23.6 percent a year ago. High-end sales have risen in part because more distress has crept into that segment of the market, creating more motivated sellers. Other sellers have simply given up on holding out for yesterday’s higher prices, which were supported by what was then a relative abundance of financing, some quite creative, for high-end homes.

At the extremes, Marin recorded a 37.8% year-over-year increase in February sales volume (a gain of 42 transactions) on a 7.3% increase in median sales price, while Solano recorded a 19.2% decline in sales volume (a loss of 107 transactions) on a 6.9% increase in median sales price. Only San Francisco and Napa (0.8%) counties recorded year-over-year decreases in their median sales price.
As always, keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded).
Bay Area home sales down slightly from last year, median sale price rises [DQNews]
San Francisco Recorded Sales Activity In January: Up 35.8% YOY [SocketSite]

56 thoughts on “San Francisco Recorded Sales Activity In February: Up 20.2% YOY”
  1. The sales activity in February was expected if you knew what was happening out there (i.e multiple offers, etc.). As always, the better places sold fast, the less desirable are taking more time.
    I’m ready to hear now about how it was the expiring tax credit, people getting their bonuses (if they are lucky), at lower prices (which is true), etc. The fact remains that there is money waiting to get into SF, right or wrong, and that at these price levels many people (not necessarily me), feel that much of the risk has been priced out of the market, and they are not waiting for the often predicted $400psft price.

  2. What I found interesting about the DQ report verbiage (see the link) is how cautionary their tone is about the remaining risks (potential foreclosures/shadow inventory, stress on higher valued properties, etc). Maybe I haven’t actually read the DQ report in a while, but I thought it used to more cut and dried reporting the data.
    To me, they seem to be saying “things seem stable right now, but watch out!”

  3. “Sales over $500,000 made up 31.9 percent of all transactions last month, compared with 23.6 percent a year ago. High-end sales have risen in part because more distress has crept into that segment of the market, creating more motivated sellers. Other sellers have simply given up on holding out for yesterday’s higher prices, which were supported by what was then a relative abundance of financing, some quite creative, for high-end homes. “
    This is exactly what we’ve been seeing on this site. Higher end home sellers getting more realistic about pricing, the most extreme appears to be the home in Sea Cliff that just sold for nearly half its initial listing price.

  4. Sales over 500K it reads. That’s i.e., every scrap of land in San Francisco by and large. But you want to talk about that’s evidenced by highest of the high end, such as the Sea Cliff property. Not following that leap in logic.

  5. @tipster: agreed. The prices of the higher end stuff were so outrageous, and nothing could really justify those prices in the long term.
    The comment was “sales over $500k…”, which I don’t consider “higher end”. Since its hard to get anything decent for $500k in the city (definitely not a 2/2).
    I always thought for a good 2/2 in a good location, pricing should be around low-mid $600s, and for 1/1 the pricing mid/upper $400k.

  6. Another pretty solid month.
    Nice to see the 12 month average moving up for both sales and medians still.
    There was a pretty big spring bounce last year, be interesting to see what this year brings.

  7. I always thought for a good 2/2 in a good location, pricing should be around low-mid $600s, and for 1/1 the pricing mid/upper $400k.
    I always thought owning should be cheaper than renting, because renting is supposed to be for losers who cannot scrape any cash for a downpayment and get into the savings homeownership is supposed to provide.
    At least that’s what you see in the real USA. I call it the “loser flask syndrome”. Someone doesn’t have the $10 for the full bottle but he has $5 for a flask, paying $20 for the same amount of liquor. Renting is supposed to be similar. Prudent smart hard-working people get into homeownership while renters live month-to-month and end up being fleeced by the first category.
    But what you see in SF is the opposite. Renters socking away 1000s month after month (and sleeping very well) while homeowners juggle with financing, high costs, snake-oil salesmen, contractors and other headaches, praying a bailout (appreciation) will put them into the black in the end.
    Making the middle class overpay for owning is the biggest scam our generation will ever live. And it is doing it willingly.

  8. @lol: I don’t disagree with relationship between owning and renting. I think at those levels, for the average property, its close.

  9. There was a pretty big spring bounce last year
    Considering March 2009 is the nadir thus far, and all sorts of programs kicked in later on that spring, I don’t think you can call that a typical seasonal bounce.

  10. And still… February 2010 sales (327) are still under 2007 levels (375), that is THREE years ago. The fat lady hasn’t definitely sung yet.
    But definitely agree with SFREs comment. Desirable, nicely priced properties sell quickly. Just was in 2 open houses last week in Nob Hill and SOMA for 500k condos. Both south-facing units, lots of light and parking. They are today under contract. Less than two weeks being shown. In contrast, 901 Bush has some 500k units that have no parking, are small and have no walk-in closets and are facing north. They have been offering them for a year and a half now… (though only a year at 500k, but still…)

  11. Owning IS cheaper than renting if you look at long run trends.
    If you were to buy a house prior to 2000 then your mortgage payments would have been far less than comparable rent. Factor in the asset appreciation factor and it is cheaper.
    If someone were to buy a house today, it is unlikely to appreciate in the next few years. Then again, housing was never meant to be an investment.
    I am not a real estate agent nor a homeowner but I have a few coworkers purchase homes and I believe they made the right decision.

  12. “As always, the better places sold fast, the less desirable are taking more time.”
    That is not accurate. 3-5 years ago even total crap “sold fast.” Your observation is a sign of a weak market, not a strong one. It is when mediocre places, then crummy places, start selling quickly that we’ll know we are moving out of a buyers’ market. Not even close yet.

  13. @A.T.: The better places always sell faster than crappy places. That is not to say that crap didn’t sell fast 3-5 year ago. If crappy places sell faster than better places, then its time to sell, since its likely speculation at that point. Right now undesirable place aren’t selling, and that may be a sign of more informed buyers.

  14. If you can’t afford to get into a building (as in, all of the units), then yes, it is more expensive to own than rent in SF. Otherwise, if it’s costing you more to own than rent, you’re doing it wrong.

  15. Brian,
    Are you implying that you should be willing to live in the smallest floor plan in a building if owning that is cheaper than renting the largest unit, all for the “pride of ownership”? If so, why?
    When comparing the cost of owning to renting, you need to compare an EQUIVALENT property in an EQUIVALENT location. And not at random entry points to the market. You can rent until buying will save you money. If that never happens, you come out ahead NOT buying.

  16. Nope, never said nor implied that you should have to live in the smallest unit of a building. My wife and I currently live in a building in the mission, and our unit is the largest of the three in the building (1500 sq ft, the other two are 650ish and 900ish sq ft). Our unit is a 2/2 (with an office) with two in garage parking spots, newly remodeled front bathroom and kitchen.
    After factoring in our mortgage payment, tax benefit, write offs, maintenance costs, repairs, insurance, property tax, vacancy rate (1.3% so far over the last 3 years, all of which was voluntary) so on and so forth, we pay less on an after-tax basis for our unit than we get in rent for our smallest unit. We did not put a substantial down payment toward our purchase price, either.
    There are tons of folks that are following the “current conventional wisdom” and going on and on about how real estate is such a terrible investment these days. I agree that if you buy a SFH, but if you buy a multi-unit building, and compare your costs to what you’d pay for an equivalent unit in an equivalent neighborhood, you can come out WAY ahead.

  17. “Right now undesirable place aren’t selling”
    But the threshold of what is considered “undesirable” has gone way up. Places that are just short of perfect — or are perfect but priced at 2007 prices — are sitting unsold without heavy discounting. Point is that we’re still in a strong buyers’ market.

  18. MEDIANS ARE NOT PRICES!!!
    Bdb you say this every month,and I agree..but I ask as I have asked in the past..
    who was saying they were?

  19. Brian,
    OK, I wasn’t sure what you mean by “If you can’t afford to get into a building (as in, all of the units)”.
    That’s good that you found something cash flow positive. That is expected in normal times. These are still not normal times though.
    I’m renting a top floor 1BR in SOMA. The unit below me is for sale. The after tax total cost would be $331.88 more a month to own than to rent(In addition to the $130k downpayment).

  20. Owning IS cheaper than renting if you look at long run trends.
    If you were to buy a house prior to 2000 then your mortgage payments would have been far less than comparable rent. Factor in the asset appreciation factor and it is cheaper.
    If someone were to buy a house today, it is unlikely to appreciate in the next few years. Then again, housing was never meant to be an investment.
    I am not a real estate agent nor a homeowner but I have a few coworkers purchase homes and I believe they made the right decision.

    The first part of your first sentence should read:
    “Owning WAS cheaper than renting…”
    If only we had a time machine.

  21. I agree with anon’s comment-
    owning is cheaper than renting, but over long periods of time, and under monetary policies that remain inflationary. After all, the last 5 years of mortgage payments 25 years from now will have the same nominal cost as they do today, though, with 3% annual inflation, will only have a real cost of about half of today’s payments, which will likely be cheaper than renting. Obviously, in San Francisco, rents are indexed to inflation if you do not move. So, if you act like a homeowner while renting, it remains cheaper longer. At some point, though, owning a home becomes cheaper because of the net equity you will gain (even if the market declines) such that if the net cost of the mortgage and rent payments were equal, you would still come out ahead owning because you now have an asset that has added to your net worth.
    Now, you might say that well, an owner must pay property tax, maintenance, etc, but that is still true for landlords who own buildings. Thus, the premium paid for rent must exceed those additional costs, again over the long term, or no landlord could remain profitable.
    If you constantly re-fi and/or move, then the analysis goes out the window, usually because people continue to buy the most expensive house they can afford and never build any real equity.

  22. “If you constantly re-fi and/or move, then the analysis goes out the window”
    Exactly, and when you are still new to your career, you need the flexible mobility.
    Now, comparing the nominal value of your mortgage payment 25 years into the future is not meaningful, unless you add up all the money you paid in addition to fair rental value for the first 10 years or so after you buy the place.

  23. One aspect often overlooked in the rent versus buy equation is that if you buy a home and live in it for 30 years, you own the home outright. With renting, you pay forever. Good luck leaving your lease contract to your children when you die. After 30 years of home ownership you then effectively start saving those payments.
    The Rent Vs Buy arguments are always short sighted and typically make sense to “renters” who for the most part are renters by way of situation and not choice. Renters in SF and NYC, London, Paris, etc. are generally renting due to the high costs of owning. That is, it’s not a situational decision (i.e., school, job, etc..) The high cost of ownership in prime metro areas has existed in prime markets for long time. Sure SF wasn’t always this case but the city has evolved to a point where it is legitimately a prime area.
    Renting certainly is the right, and more economical / practical choice for many individuals, but there are certainly situations where it makes sense to consider buying a home even if the short term R-v-B equation is more rent-friendly.

  24. “there are certainly situations where it makes sense to consider buying a home even if the short term R-v-B equation is more rent-friendly.”
    Like what? You can leave the money you save renting to your children too…
    When it is cheaper to rent, that is a sign of a bubble that will deflate. Absolutely the wrong time to buy.
    It can’t by definition be cheaper to rent forever. Landlords would eventually all go broke.

  25. “It can’t by definition be cheaper to rent forever. Landlords would eventually all go broke.”
    True, but it doesn’t mean to cost to buy will go down. It may mean the cost to rent will go up.

  26. Normally for long term (greater than 10 years) holds, owning is cheaper than renting. To ensure this you had to aggressively pay down your balance in the at least the first 5 years hence paying more than equivalent rent in the initial period. But that was during normal times.
    The bubble put a kink in that ownership scheme. Many buyers really stretched using exotic neg-am loans and could not afford to pay down the balance. People who bought in 2004-9 might have to hold for two decades to break even. Even this year’s batch of buyers might need to think in terms of a 20 year horizon.

  27. Ask the Japanese if buying in 1990 was a good idea.
    Ask a SF renter if locking in 1990’s rent was a good idea.
    That’s my point: Buying has partly become a lottery ticket for future appreciation. People are considering it as 50% home / 50% investment for retirement planning / inflation insurance.
    Renting is simply spending money to live in a place. No strings attached, though many in SF have been in their units 15+years thanks to cheap controlled rent, killing the theory behind “putting down roots”.

  28. “It can’t by definition be cheaper to rent forever. Landlords would eventually all go broke.”
    Most rentals are in non-condo multi-unit buildings. Check sfarmls.com and you will see that those buildings sell for significantly lower $/sq.ft. compared to SFHs or condos. The effects of rent control has been baked into the prices (of both property groups)

  29. http://www.nytimes.com/interactive/business/buy-rent-calculator.html#
    Plug in some numbers into the above calculator. Be sure to click on the Advanced Settings.
    In many of my own scenarios, I end up with the result “Buying is never better than renting over 30 years if:…”
    The big “if” consist of two variables that are impossible to predict (in the case of rent-controlled properties, only one is unpredictable): home appreciation, and rent increases.
    Unfortunately, there is no field for “pride of ownership,” so some will find this calculator to be worthless.

  30. I think the rent control discount from market rate might be exaggerated: I know several renters who have been in their units for 10+ years (one over 20 years) and although their rent is relatively cheap, it’s not as cheap as I expected, my guess is due to capital improvement and other “pass throughs” but I don’t know a lot about the topic.
    One has a very large 1 bedroom that he pays about $1800 a month for with no parking just north of the projects along Gough. Another has a two bedroom in an awful part of the Mission that her family has rented for 20+ years (possibly going back to the 1980’s) with no parking for $2400.

  31. One aspect often overlooked in the rent versus buy equation is that if you buy a home and live in it for 30 years, you own the home outright.
    Your ROI on an unleveraged (paid off) home isn’t going to be all that great; you’ve gotten rid of the PI part, but you still have to pay TI (taxes, insurance) plus maintenance on a home that me be much larger than you need. That said, it’s a nice conservative investment for when you’re older, and that’s the reason it’s part of my retirement strategy. Plus, in CA, taxes are mitigated by Prop 13 (and can be passed on to future generations). For an active investor (LMRiM?), though, renting could be a wiser choice in the long run.

  32. anon, wow those rent controlled apartments are a lot more expensive than I had expected!
    Both renting and owning have their charms. Renting leaves a lot of the responsibilities for the property in the owner’s hands and that is nice. But owning gives you stability. I know all about tenant protections, but yadayadayada fighting for your rights takes time and aggravation.
    I don’t think this debate will ever be resolved, so let’s listen to the bay area’s coolest, freakiest, mostest resident, Sly Stone, and say, “different strokes for different folks.” Say it every day people.

  33. With rent controlled properties, it’s always different. My wife and I have a nice 1 BDR in a great building in a great location in the Marina for a little over $1400 a month. Unless some kind of lifestyle change came along, I can’t see us leaving this place. We simply can’t afford to buy around here.

  34. Here is another perspective from the Today Show…
    If only Al Roker and the Today Show gang could get the Charlestons right. They discussed Charleston, WV as being #5 on their list, but the footage was clearly Charleston, SC.

  35. The real wild card in owning vs renting in SF is the possibility of a major earthquake. In the case of a large quake, if the rental building is damaged, the renter can just move somewhere else – possibly into a hotel or across the bay if immediate replacement rental is not available. A $100,000 condo assessment or house repair would set a owner back by a decade if not force him/her to bail from the property…

  36. Pretty much everything they said about SF was cherrypicking from MSA here, cherrypicking about SF proper there. They got the outskirts = most of the foreclosures so far thing right, the difficulty to build, the unemployment number was older, the relative lack of foreclosures compared with other large cities thing was interesting. I don’t know. A mixed bag in general. At least they didn’t depict San Francisco, Mexico, in the images.

  37. Renting in general is considered to increase mobility. It’s a great way to live in different parts of the city. Rent control, however, really puts on a damper on that advantage. If you lived at the same place for more than several years, you would be at a big financial disadvantage to move. Typically buying and selling property is always done at market rate, whatever it is at the moment. I am not saying that ownership is for everyone. I do disagree with the statement that renting is a better choice for everyone.
    You are also not considering retirement into the equation. When I retire I certainly wouldn’t want to still rent. I would want my place to be paid for and use retirement money for other necessities.

  38. You are also not considering retirement into the equation. When I retire I certainly wouldn’t want to still rent. I would want my place to be paid for and use retirement money for other necessities.
    The point is that in many instances (just run numbers in the NYT rent v. buy app), you will have more liquid assets when you reach retirement if you rented for less and invested (a) the differential and (b) the foregone down payment reasonably. So the place isn’t “paid for” but you have more money to pay for it and more left over in the end for “other necessities” anyway.
    Obviously this is going to be case-specific and will depend significantly on house appreciation versus appreciation of other investment assets, etc. But current rent/buy ratios in SF make it fairly likely that you’d be better off renting (if rent-controlled) than buying, even 30 years later and in retirement.

  39. @Shza: What about in a non-rent controlled scenario? For example, I posted in a different post that a 2/2 is asking $3600 in a building where a similar 2/2 is selling (asking) $679k. If someone has 30% to put down, they are at parity to the rental price (including tax, insurance, and HOA).
    I am going to assume the tax benefits equal out to any income you may make in a CD, for example.
    In this situation, what would you recommend, given that (a) parity is reached, (b) much (but not all) risk is priced into selling prices, and (c) the place is a reasonable place and at a good price point (most people can’t afford the $1mil type places typically listed here on socketsite. There are numerous examples of this, this just being the most recent because its a recent post on SocketSite

  40. wow.
    the actual DQ article looks like it could have been written by me. I’m not sure if I should feel flattered/justified, or mark it as a contrary indicator and start thinking about becoming a RE bull.
    January and February are often atypical and don’t serve as good barometers
    how many times have I said that on SS????
    Or this:
    “Whether prices will firm, or remain firm, will depend largely on three factors: The market’s response as the government reduces its housing stimulus, the economy’s ability to gain traction, and the decisions that lenders and borrowers will make in countless distress cases.
    (although I think the market’s response to government is by far the most important factor right now)
    They then go on to talk about the massive increase in FHA loans now in use in the Bay Area, and the reduction in ARMs in use.
    overall:
    clearly DataQuick understands that market analysis is difficult since we have so much unprecedented govt interference (or assistance) in the market causing massive distortions.
    People who are calling this latest RE report “strong” either didn’t understand the report, or they have normalized the absolutely terrible results from last year. This year looks good only in relation to the Armageddon that was last 2 years. IMO we have years left of this muddling.
    I still see no reason why SF (or US) RE would have any significant real appreciation in the next few years. I’ll stick to my outlook that I made in 2007- the pressure will persist on RE until Dec 2011… about 2 more years.
    That said, given all the govt intervention and the zombification of the banking industry and the lack of resolve to make the needed structural changes in our economy, current RE pressure could easily go on for many years beyond that. Our leaders clearly chose the Japanese path, if we’re lucky we’ll get their results IMO. if we’re not, it’ll suck for us all.

  41. I’m going to go out on a limb here and call a bottom, using one extremely unscientific indicator: the SS Comment Indicator.
    In 2001, nobody dared argue the “rent vs. buy” (RVB) because you simply had to get on the housing escalator of forever be priced out of the market.
    As we reached bubbly heights, people really began to argue RVB and many (logically) concluded that it made no sense to buy.
    As the bubble deflated, RVB took a backseat because the bears were proven right. The bulls were getting the clocks cleaned. Renters ruled the day.
    As I read this thread, the RVB debate is clearly back in vogue. Ipso facto, we have passed the bottom…
    Ok, that was kind of a joke but I do want to point out some stats that are often ignored in the SF-version of RVB. It is ALWAYS more expensive to buy here INITIALLY, and historically ALWAYS has been. This is true of all desirable cities.
    If you’re really trying to use RVB to make a personal decision, I would encourage people to consider the following from Forbes last month:
    Take San Francisco. To live here has always required a hefty bump in monthly costs from renting; it’s normally an incredible 296% more expensive to buy than lease a home, and the city’s residents know this. That’s why 42% of them stick to renting. Even though in the third quarter of 2009 the premium was still in the triple digits–233%–it had shrunk by 63 percentage points from the above 15-year average. As with the other cities we’ve highlighted, you’re not getting nearly as good a deal by renting as you might have just a few years ago.
    In no way am I endorsing the R-crowd or the B-crowd; just pointing out some stats…

  42. ex-sfer….I had that same “contrarian” impulse reading the DQ analysis. And indeed, it does sound like it was written by you.

  43. It is ALWAYS more expensive to buy here INITIALLY, and historically ALWAYS has been. This is true of all desirable cities.
    My original point exactly. Also, the argument that RVB can’t be true due to the fact the landlord owners would go broke if false. Most rental stock is owned with very low cost basis and the quality of these units are almost always below par since there is minimal incentive to increase quality since these places are renting at premium prices already. The reality is that if you want a 3 bedroom with parking and outdoor space, you know, the type of place that any normal small family would require; you’re looking at a minimum of $5k per month and that is going to get you a place that is sub-standard in terms of quality and location. To get a really nice place with those criteria you’re looking at 6-7k unless you want to live in non-prime locations. Then you could probably do it for 4-5k. Just run the 3bd search on CL for any part of town and look at the average rents.
    The concept of locking in a rent controlled apartment is also a bad argument. Many landlords sold and OMId / Ellis’d the tenants during the bubble years and cashed out. And most renters housing requirements change over the years which pretty much means that you’re going to be swapping out every 5-10 years.
    Those waiting for RVB to make economic sense in SF will be waiting a long time. I’m not suggesting that we’re going to see housing increase or that now is a good time to buy, but I am definitely suggesting that SF has evolved as a city in terms of how its real estate is valued vis-a-vis rental stock. The rental stock here is subpar in terms of quality and the city is seeing its older homes renovated to modern stock like never before and this disparity will continue to grow as rentals continue to be maintained at minimum quality levels. Normally, there would be incentive for landlords to upgrade the rental stock to command a higher rent, but at 4-5k/mo most homes aren’t going to rent for much more so why bother making a 100k upgrade?
    It’s really an interesting situation that is largely driven by Prop13 and rent control. Prop 13 is evil and should be phased out / grandfathered over 15-20 years.

  44. “It is ALWAYS more expensive to buy here INITIALLY, and historically ALWAYS has been. This is true of all desirable cities.”
    “Dave,” this is simply false. When we bought our place in 2000 we were ahead in the RvB analysis from the get-go. We paid about $400 less/mo than comparable rent for our 2BR flat. Friends who had bought a few years earlier were WAY ahead from the date of purchase. The “buyer’s premium” is a recent phenomenon. It is backwards — caused by free, no-down money, and we’re now only about half-way back to normal. And that is why it is guaranteed that the RE market will continue to be soft until prices have fallen quite a bit further.

  45. @A.T. With that being said, there are good values out there now, and if you can find one at 2000 prices, you end up in the same situation you are in now (i.e. ahead). Its a matter of being picky. If you buy a $900k place at the Infinity, you will never be out ahead, because that is today’s pricing. If you find something that is 2000 pricing, you have a better chance, hence my example above with 246 2nd Street.

  46. SFRE, your argument requires 30% down and no opportunity cost, locking in a zero percent interest rate on hundreds of thousands of dollars for the next 30 years.
    What you are really arguing is that real estate prices will fall 30% if rents manage to stay level.

  47. I’m saying that the opportunity cost, such as a CD interest rate, is about equal to tax savings.
    As for the 30% down, I assume someone has been renting, and has saved up enough cash to put 30% down.

  48. …so in the example I used, the opportunity cost of the 30% down is balanced against any potential return on investing the money in Stocks, CDs, etc. And I think you are sort of saying the same thing, correct?

  49. “Dave,” this is simply false. When we bought our place in 2000 we were ahead in the RvB analysis from the get-go. We paid about $400 less/mo than comparable rent for our 2BR flat.
    Do you mind giving us a breakdown of costs? Are you including PITI and maintenance? What about opportunity cost on your downpayment, at least at CD rates? I think that Dave and Forbes are right, that a true apples to apples comparison has SF buying always being more than renting, at least all the way back to the 70s.
    When we initially purchased a two unit building in 2002, I thought that we were paying comparable costs to renting as well, but that was before I started having to do thinks like get the house painted. Maintenance costs on these older homes are at least 1% of purchase price yearly.

  50. NVJ, agreed 100%. Provisioning a few 1000s to maintain a victorian is just realistic. Think a couple of 10,000s a year. These costs usually gets shoved in the back of the brain because they most often happen at buying (renovation) or at selling (always sell pretty). When spread over the time of ownership they end up eating up amounts in the range of property taxes.
    Also, citing CD rates as a proxy for opportunity costs is just not very realistic. CD rates are propped low because banks are getting free cash at the government counter. They won’t need our cash until they do. And when that happens, expect CD rates to get back to where they belong: 5%+.
    There we have it in a nutshell: Low cost of financing artificially lowers ownership costs which in turn props RE prices up. Safe alternative (to RE) investments are artificially making RE buying look an interesting proposition. At 5%, a 400K downpayment will cost you 1666/month in opportunity cost. At 1% CD, that’s 333/month. The balance tilts towards buying at the clip of 1333/month.
    Did anyone say free market? Wait until the subsidies die off…

  51. NVJ, I’m using round numbers because I’ve given out info on where I live and I’m not going to “out” myself. We paid $340,000 for our 2BR 1.5 Ba with 10% down and a 10% second at 6.2% blended. It’s nice, better than most rentals, but not a showplace. We refinanced both loans into a 5.5% loan in 2004. At purchase, we paid $2200/mo (inc. property taxes); since the refi we pay $2070. HOA is $200/mo, which basically covers insurance. At purchase, about $350/mo went to principal, and we saved about $400/mo on taxes. So about $1650/mo plus water/trash, or 400-500 less than rentals at that time (I know — we were looking at rentals).
    In the last 10 years we have replaced the roof — $12,000 split with our neighbor. And we painted the interior — did it ourselves for about $500. I’ve fixed a toilet and replaced the shower head. Probably another $1000 in total maintenance with landscaping etc. We’ll need to paint the outside within a few years. Another 8-10 thousand.
    Use whatever you want for the opportunity cost of the down payment. We came out ahead from the get-go. A few years later our place had probably gone up in value by $250,000. Would no longer make sense to buy vs. rent. Probably back down a little since then, and still probably would not make sense to buy it today. Our tax deduction is now lower but the monthly nut going to principal is higher.
    We’re starting to look because my wife wants a bigger place, but no hurry. When I point out how much less cash we’ll have every month if we buy up at today’s prices, she feels better about waiting a bit.

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