Sometimes you just have to laugh at the rampant speculation in Southern California. The above sample is just one of thousands of overpriced homes in Southern California that have benefited simply by being in the Golden State. Forget simple rules such as quality of area, good schools, and growing neighborhoods we are living in a new paradigm! So what if Southern California spans 200 miles to the east and 200 miles to the south, as long as you are in this bull’s-eye you are a champion. Even better if you are in Los Angeles County, Orange County, or San Diego County. It is a thing to witness this unbelievable bubble. If you run a simple query about how much this home would rent for in the area you get the following:
I’ve highlighted the obvious outlier here because this is probably someone that purchased at the top and is trying to recoup some money via renting. As you can see though, this house would probably rent for $1,100 to $1,300 a month. Let us put on our housing math hats and run the numbers for a second. We will assume that someone will buy this place for $450,000 with 20 percent down:
20 percent down = $90,000
PITI on $360,000 at 6.25% = $2,216
Taxes at 1% = $375 a month
Total monthly caring cost =$2,591
Even after tax savings this is way off base by over $1,000 a month; a spread ratio of over 100 percent! Given that owning a home will always cost more than buying but there are many places in the U.S. where you can purchase a home in a metro area for $125,000 to $150,000 and rent it out for $1,250 a month.
Another case example of the true Real Genius of Housing. We salute you Compton for making us proud via voodoo finance math.