Buying a house deemed more expensive than renting

The Economist (my favorite source for global news) has a good writeup on the worldwide inflation in house prices. In particular, they point out that renting in the Bay Area is now vastly cheaper than buying for most reasonable assumptions of future appreciation:

The figures look even more striking in the San Francisco Bay Area, where it is possible to rent an $800,000 house for $2,000 a month. Making the same assumptions about rents and house prices, but also deducting tax relief on a fixed-rate mortgage and adding property taxes, a buyer would pay $120,000 more over seven years than if he had rented. House prices in San Francisco would need to rise by at least 4% a year (2% in real terms) for it to prove cheaper to buy a house. Since 1950 American house prices in real terms have risen by an annual average of just over 1%. To expect them to rise faster from their current dizzy heights smacks of irrational exuberance, to say the least.

My view on this is that it is basically unwise for anyone to overextend themselves in this market just to get into ownership. That being said, the Bay Area has actually not risen in value as much as most parts of the US -- especially in the South Bay, where unstable employment situations have been holding down appreciation. I'm pretty sure houses here will keep most of their value if the bubble deflates elsewhere, and that there is room for further appreciation here if the tech employment situation starts a stronger recovery. Barring some serious reform in local control of building, there will never be enough supply to meet demand. But if I owned a multi-million-dollar house and wanted to maximize my investment, I'd seriously consider getting out of the market and renting.

Summer

Spent the afternoon cleaning the pool and sweeping the deck of pine detritus. This has been neglected for weeks as other developments occupied my time; and the algae is starting to grow under the increasing sunshine and warmth. I wore skimpy shorts and got a start on my tan, and even so I was sweating out there. The pool filter's pressure gauge shows it needs cleaning again, a one-hour job which involves a lot of kneeling and spraying with the high-pressure hose nozzle, so I get all wet doing it. I'll reserve that for the end of the week.

A tree service is scheduled to come Friday and remove a lot of the Monterey pine tree that overhangs the pool. They were hired by the owners of the tree (which is rooted next door) but will need to do some work from this side. So I'll be cleaning the deck again after that.

I have a long list of housecleaning chores. I've set them up as tasks in Outlook so I can be reminded of the many things Mike used to do that I now need to handle.

Recent reading

( You Only Live Twice )

I've been neglecting my usual book plugging. Here's some of the better stuff I've read so far this year:

( The Best of Winter 2005 )