20% annualized for 11 years? Your home price went up 7.5 times in that time?

You must have a million dollar home by now (bought for ~$135,000?). Nice.

Heh. that housemath 2.0 is pretty good, except it doesn’t count maintenance costs, unless I missed that. Plugging in my numbers came right out to paying my current rent, allowing a generous alternative 10% return on the downpayment if invested and assuming just 2% appreciation in the house.

I found Housemath very helpful — I also used a 2% appreciation and found it made a lot more sense to buy either of the two houses I’m considering than to continue to pay rent.
I particularly found the information in the Details tab helpful, specifically the Bottom Line number of how much more or less valuable my investment would be than if I had not purchased. This allows me to add in how much rent I would have paid over the same time period and come up with a much better idea of the profit/loss.
Even at 0% appreciation and selling after only 5 years, I just about break even. If nothing else, I know I’m looking at the right sort of properties in my house hunt, and that’s good to know.

Admittedly, math is not my strong point. We purchased in 1995 for $315,000, at the height of the market it was appraised at $1.1mil, and now it would sell for about $950k. So we have tripled or made 300% in 13 years. So I think the “annualized” thing threw me off, giving a false impression that we had made more than we really have. Nonetheless, the programs were interesting to run.

MD Account, you might want to plug in a -10% appreciation rate and see where that gets you in 5 years… oh, wait, it won’t accept negative appreciation. Homes always go up, right? But California home prices are down roughly 30%.
You could buy a $600000 home and have it drop in value $180000; hows that compare with your rent?
The last time home prices dropped like this, it took about 7 years to return to the same values as the peak. (90 to 97 roughly) and the home prices were no where near as out of whack as they got this time.

Tripling your money in 13 years = 8.9% annualized.

Not shabby, certainly, but not double-digits. Taking out the R.E. commission, and you’d net about 8.5% annualized.

Again, a very nice return on something you live in. I would count on that return flattening out over the next 5-10 years, but you’re way ahead of the game.

Red, I’m flattered that you think my income capable of that sort of purchase. I’m a first-time homebuyer up in Vallejo, where I went when Oakland rents went crazy. Solano County got hit early and hard, and on the low end of the market there’s not much room left for prices to fall. Of the two homes I’m considering, one is a TIC for $209K and the other is a full ownership deal for $220K.

Both houses are in excellent condition and in reasonable neighborhoods; one is a short sale the other an estate sale. In other words, in both cases the owners can’t sit out a bad market and are getting pulled down by the overall implosion.

I’m in my mid-40s and a lifetime renter. I’ve saved up some money and am not looking for a quick return. I ran the math on a 5 year sale as a conservative test; I have no plans to sell early and could well be in the house I buy for the rest of my life. I admit to the assumption that what goes down in CA will eventually go up, and I’m willing to wait decades if need be.

In my case, just being in the right house will cost less each month than what I’m paying in rent for a similar sort of home. If, at the end of a lifetime of ownership I make money on the sale, it’s a nice bonus.

For some of us, housing is about a stable roof over our heads for a price we can afford. And when you’re climbing into the bottom of a bad market, the odds are good that in time the only place to go is up.

I attended the panel discussion at the Commonwealth Club tonite. Fairly disappointing overall. Just as I expected, both Joske Thompson (realtor) and Joseph Perkins (Pres/CEO of HBANC) were absolutely worthless. Nothing to support or substantiate their “always a good time to buy” cheerleading. Unbelievable, yet believable. Tom Davidoff was the smartest guy on the panel, and had the most realistic expectations for what is happening and what will be happening. The Financial Planner wasn’t bad, but he was all over the map too. I am sure Adam, as intelligent as he is, would have loved to join in the discussion more that he was able to as moderator.

Overall, interesting discussion, but not worth the $20 ticket and $3 bart ticket I spent to get there.

That realtor was amazingly pathetic and laughable. You really had to be there!

I’ve always heard such good things about the Commonwealth events, I had hoped it would be a good fit for our readers. It saddens me to hear that it wasn’t so. I would expect a realtor on the panel, but one that has taken off the rose-colored glasses and not spouting the company (NAR) line. Sorry about that David.

Hard to give HouseMath too much credibility given it won’t allow you to enter negative appreciation and doesn’t take into account hoa, maintenance, insurance and, I think (?), loss of interest on any down payment.

Oh, no apologies needed Susan. I saw it on socketsite and since Adam was moderating I thought it might be better than it turned out. It was still enjoyable to go. I just thought I might have heard some better info from supposedly “well informed” people… not that I included the realtor in that category!
As I said, the asst prof from UC Berkeley was the sharpest tool in the shed by far.

If you want to model negative appreciation, you might as well not buy–if you think R.E. is going to be down in the timeframe you’ll be owning, why bother? It’ll always be better to rent, unless your rent is truly astronomical and your return on invested funds (down payment) is truly miniscule.

If, on the other hand, you think (as I do) that over the 5-10 years you’ll likely (hopefully) be owning your joint you’ll get at least 0% appreciation, it’s a pretty good calculator. It does take into account HOA, btw, but I’ll agree the lack of insurance&maintenance is a negative. You can estimate that by folding it into your prop taxes though.

MD Account:
In Solano County you might indeed find a home that has dropped enough to be worth buying. But be aware, those areas increased far more than the areas closest to SF, and thus had much further to drop. Looking at the area, I do see a lot of places for less than $130 a square foot, with prices below previous sales in 2002; amazing. Just a quick look and I found a number of places down more than 50%.
So maybe much of the froth has been wrung out there; but don’t believe you have to rush into buying or get caught in a bidding war. Take your time and be sure you really have found the place
you want to spend a minimum of 5 years.
I bought during the last boom - 1987 - and watched the prices zoom up, then watched them slide down. I rented out rooms to be able to make the payments. I watched some friends give the keys back to the bank: some lost jobs, got divorced, got transfered. Each discovered they could not afford to sell the house, they did not have the money to bring to the closing.

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