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Cost of renting versus buying a house in PA
Original post made
by Midtown resident, Midtown,
on Jan 4, 2010
Can someone please explain why anyone in their right mind buy a house in Palo Alto these days? In our midtown cul-de-sac there are two identical houses - one was put on market for sale and another for rent. Both houses are ranch style late 50-ies, in very similar condition. The original owners no longer could take care of the properties and moved to assisted living senior housing. So one of the identical houses sold for $1.3m and the other rented for $3,300/month. Now please explain me the logic of the buyer - the cost of owning this house (e.g. mortgage payments and property taxes) will be in excess of $8K/month, not to mention the constant need to fix the old house. Why did he not rent a similar one for $3,300/month and invest $5K of difference?? This situtation with real estate prices does not make ANY sense. In central Europe where I come from cost of onwership is less than cost of renting, yet people prefer to rent, noone is willing to overpay so much for the dubious pleasure of future ownership or potential appreciation.
If the buyer just invests the incremental $5k a month that he could have saved by renting a similar house, he would have been saved at least $60K a year. Is he really betting that the house will appreciate by more than $60K a year??? Can someone please explain the logic???